[Market Focus] U.S. Royalty Payments? Nuclear Power Stocks Including Doosan Enerbility Weaken

Nuclear power-related stocks, including Doosan Enerbility, showed a collective decline in the domestic stock market on August 19. Investor sentiment has cooled following news that royalties must be paid to the U.S. in connection with the Czech nuclear power plant contract.

As of 1:55 p.m. on this day, Doosan Enerbility's share price was trading at 60,800 won per share, down 6.61% from the previous session. Korea Plant Service & Engineering (KPS) also fell by 7.88% to 50,300 won. Korea Electric Power Technology dropped by 6.82%, and Korea Electric Power Corporation declined by 4.18%. Hanshin Machinery and Woori Technology also recorded declines of around 6% each.

This is interpreted as a result of reports that the agreement ending the intellectual property dispute between Korea Hydro & Nuclear Power, Korea Electric Power Corporation, and U.S.-based Westinghouse includes conditions for verification when exporting next-generation nuclear power plants and the payment of technology usage fees. The agreement reportedly stipulates that KHNP and KEPCO must sign a goods and services purchase contract worth $650 million (about 900 billion won) per unit with Westinghouse when exporting nuclear power plants, and pay a technology usage fee of $175 million (about 240 billion won) per unit.

In the bidding for the new Dukovany nuclear power plant in the Czech Republic, "Team Korea," led by Korea Hydro & Nuclear Power and composed of Doosan Enerbility, Daewoo Engineering & Construction, and Korea Electric Power Technology, was selected as the preferred negotiator, defeating the French Electric Company (EDF). The photo was taken on July 18, 2024, at Doosan Tower, Jung-gu, Seoul. Photo by Kang Jinhyung aymsdream@

Heo Minho, a researcher at Daishin Securities, pointed out in a report released today that this news was already known, stating, "The additional disclosure concerns whether i-SMR's technological independence can be verified, and in the worst-case scenario, there is a possibility that royalties may also have to be paid for i-SMR."

He added, "Given the shortage of nuclear power supply in Western countries, there is some regret that Korea could have negotiated more favorably. However, considering that Korea already requires U.S. approval for nuclear power exports under multilateral and individual agreements, a certain level of this outcome was inevitable." He further noted, "Although overseas exports have become less profitable than domestic nuclear plant construction, the likelihood of U.S. sanctions with each project award has decreased, so it is important to focus on the potential for expanding exports to third countries and entering the U.S. nuclear power market."