"Humiliation or National Interest? Korea to Pay $1 Billion to U.S. Firm for Each Nuclear Export [Digging Energy]"

Provision of Work and Services to Westinghouse for 50 Years
Agreement Reportedly Reached
Domestic Companies Likely to Lose Share
"An Inevitable Measure to Strengthen Korea-U.S. Nuclear Cooperation," Some Say

Exterior view of the Dukovany Nuclear Power Plant in the Czech Republic

It has been revealed that when South Korea exports nuclear power plants, it must provide approximately 1 trillion KRW worth of goods and services per unit to Westinghouse in the United States over the next 50 years, and pay a technology usage fee of 240 billion KRW per unit. Additionally, it is reported that when exporting Small Modular Reactors (SMRs) in the future, South Korea will need to undergo verification by Westinghouse. While some criticize this as a humiliating contract, others argue it was an inevitable measure for nuclear export cooperation with the United States.

According to the nuclear industry on August 19, Korea Hydro & Nuclear Power (KHNP), Korea Electric Power Corporation (KEPCO), and Westinghouse reached an agreement last January to sign a contract for the purchase of goods and services worth $650 million (approximately 900 billion KRW) per nuclear unit exported by Korea, and to pay a technology usage fee of $175 million (approximately 240 billion KRW) per unit. The contract period is reportedly set at 50 years.

At that time, KHNP and KEPCO were negotiating with Westinghouse to resolve an intellectual property dispute ahead of the final contract for the new Dukovany nuclear power plant in the Czech Republic, and these terms were included in the agreement.

Both parties did not disclose the specific details due to a mutual non-disclosure agreement. However, the nuclear industry had previously speculated that the agreement would include provisions for royalties and work worth trillions of KRW.

K-Nuclear Power Yields Work to Westinghouse

After losing out to Team Korea in the Czech nuclear project bid, Westinghouse argued that the latest Korean nuclear reactor APR1400, which KHNP and KEPCO planned to supply to the Czech Republic, was based on its original technology and attempted to block the project. In addition to legal action, Westinghouse did not cooperate with export controls by the U.S. Department of Energy.

According to the Nuclear Suppliers Group (NSG) guidelines established in 1978, when South Korea exports or transfers nuclear power plants based on U.S. original technology overseas, it must obtain approval from the U.S. government. The application to the U.S. government must be made by Westinghouse, a U.S. company. As a result, without resolving the intellectual property issue with Westinghouse, South Korea could not export nuclear power plants.

In January, KHNP and KEPCO reached an agreement with Westinghouse on intellectual property, resolving this obstacle. Subsequently, Team Korea signed the final contract with the Czech Republic in June to build two Dukovany nuclear power units.

Westinghouse had also secured a significant portion of the work during the construction of the Barakah nuclear power plant in the United Arab Emirates (UAE), citing intellectual property infringement.

According to the Business Cooperation Agreement (BCA) signed between KEPCO and Westinghouse in 2010, Westinghouse was specified to supply all of the reactor coolant pumps (RCP) and main control and instrumentation systems (MMIS), 50% of the reactor vessel internals (RVI) and control element drive mechanisms (CEDM), and 50% of the fuel rods for the Barakah project.

At that time, Westinghouse reportedly supplied equipment worth $2 billion. The turbine generators for Barakah Units 1 to 4 were also supplied by Toshiba, then the parent company of Westinghouse.

After the construction of the UAE Barakah nuclear plant, South Korea succeeded in localizing a significant portion of components such as the reactor coolant pump and MMIS. However, due to the recent intellectual property agreement with Westinghouse, South Korea is now in a position where it must use Westinghouse parts for future nuclear exports.

The $650 million worth of work per unit promised by KHNP and KEPCO to Westinghouse reportedly includes key components such as MMIS and the Nuclear Steam Supply System (NSS). Westinghouse is also guaranteed fuel supply rights: 100% for nuclear plants built in the Czech Republic and Saudi Arabia, and 50% in other regions.

Some critics argue that South Korea rushed to export nuclear power plants and ended up signing a humiliating contract.

South Korea signed a contract to build two Dukovany nuclear units in the Czech Republic for about 26 trillion KRW, with a construction cost of 13 trillion KRW per unit. During this process, the Czech government required a localization rate of 60%. Considering that Westinghouse will supply equipment worth 1 trillion KRW, the actual share for Korean companies amounts to only about 4 trillion KRW per unit. This is seen as disappointing, as the share for domestic companies has been reduced.

"Concessions Inevitable for Korea-U.S. Nuclear Export Cooperation"

On the other hand, some believe that such concessions were unavoidable for future cooperation with the U.S. in the nuclear industry.

South Korea began its nuclear technology independence in 1987 with the construction of the Yeonggwang Units 3 and 4 (now Hanbit Units 3 and 4) nuclear power plants. Korea built its own reactors by transferring pressurized water reactor technology from Combustion Engineering (CE) in the United States.

CE was later acquired by ABB-CE and then by Westinghouse. This is why Korean nuclear technology is not free from Westinghouse’s intellectual property claims. It is uncertain how long intellectual property litigation with Westinghouse will continue, and there is no guarantee of victory. Even within the domestic nuclear industry, there is debate over whether Korea possesses the "original technology."

In contrast, Westinghouse enjoys strong support from the U.S. government. Amid the recent global "nuclear renaissance," the United States is attempting to revive its nuclear industry, and Westinghouse is likely to play a central role.

President Donald Trump set a goal through an executive order last May to quadruple the U.S. nuclear capacity from the current 97 gigawatts (GW) to 400 GW by 2050. As a first step, the U.S. plans to begin construction of ten large 1,000-megawatt (MW) reactors by 2030.

The U.S. nuclear industry has nearly collapsed since the Three Mile Island accident, making it difficult for Westinghouse to monopolize all nuclear construction. The Korean nuclear industry hopes for cooperation with Westinghouse for this reason. In May, Hyundai Engineering & Construction signed a strategic agreement with Westinghouse for global business cooperation, and the two companies are working together on nuclear projects in Europe, including Finland and Slovenia.

Just before the agreement between KHNP and Westinghouse was reached last January, South Korea and the U.S. also signed an "Interagency Agreement on Principles for Nuclear Export and Cooperation," which included strengthening export control cooperation between the two countries by establishing an information-sharing system for the transfer of civilian nuclear technology to third countries.

A senior official in the domestic nuclear industry pointed out, "We need to consider whether it is in the national interest to keep delaying with intellectual property disputes with Westinghouse, or to make some concessions and jointly pioneer the global nuclear market with the United States."

"No Concerns of IP Infringement for SMRs"

The "global agreement" signed by KHNP, KEPCO, and Westinghouse also includes a condition that if a Korean company independently develops and exports next-generation reactors such as SMRs, it must pass Westinghouse’s technology independence verification.

The i-SMR Technology Development Project Group, composed of KHNP, Korea Atomic Energy Research Institute, and KEPCO Engineering & Construction, is developing a light water SMR using its own technology.

Westinghouse intends to determine whether Korean-developed SMRs fall under its own technology, as they are being developed by downsizing existing large reactors based on Westinghouse’s original technology. If there is disagreement over the results of Westinghouse’s verification, a third-party institution based in the United States will be selected to verify technology independence.

However, the domestic nuclear industry believes there is little cause for concern. An official from the i-SMR Technology Development Project Group explained, "From the design stage, we have thoroughly analyzed patents to verify whether we are infringing on any U.S. or other foreign patents."