By Melissa Pistilli-Exclusive to Uranium Investing News
As the world looks to alternative energy supplies, the nuclear energy sector is getting a lot of attention. The ?nuclear renaissance? as some in the industry call it has sparked a race amongst energy-hungry Asian nations to procure reliable uranium fuel supplies around the globe.
?Uranium in particular stands to benefit from the nuclear renaissance, in our view, which appears to be kicking into high gear,? says Bart Jaworski, analyst at Raymond James.
Japan, which obtains 65 per cent of its energy from nuclear power, has found itself competing with its neighbours not only for uranium deposits but also for international nuclear power plant contracts. State-owned Korea Electric Power Corp. (KEPCO)-led nuclear energy consortium recently beat out the Japanese competition for a $20 billion deal with the United Arab Emirates (UAE).
If Japan wishes to compete with emerging nuclear leaders like South Korea it will need to rethink the way it does business.
Asia: Center of the Nuclear Universe
Asia is quickly becoming the epicenter of global nuclear power investment. China, India, Japan and South Korea are already home to well-established nuclear energy programs and other Asian nations including Indonesia, Thailand and Vietnam are looking to start their own.
Asia?s utilities companies are now rushing to secure fuel supplies buy purchasing stakes in uranium mining firms around the globe. Acquiring interests in uranium mines not only secures supply, but helps to shield utilities companies from future price hikes.
South Korea?s ambitious plans include raising its uranium self-sufficiency ratio from 6.7 per cent this year to 25 per cent by 2016 and to 50 per cent by 2030 as the world?s fourth-largest oil importer looks to reduce its dependence on foreign crude.
?We have to purchase uranium worth 10 trillion won ($8.5 billion). If we could secure 50 per cent of the uranium need, then we are to have another business unit worth 5 trillion won,? said KEPCO CEO Kim Ssang-soo.
Japan is also aggressively hunting uranium on a global scale to power its 54 reactors and the 10 more it plans to bring on line over the next decade.
In 2006, Sumitomo Corp and Kansai Electric purchased a 25 per cent stake and 10 per cent stake, respectively, in APPAK, a subsidiary of Kazatomprom, which controls the West Mynkuduk uranium mine in Kazakhstan. The mine goes into production this year.
Marubeni Corp, Tokyo Electric and Chubu Electric entered into an agreement with Kazatomprom over the Kharassan-1 and Kharassan-2 uranium deposits in Kazakhstan in 2007.
In 2008, Mitsubishi Corp bought an interest in the Kintyre deposit in Western Australia along with Canadian uranium producer Cameco and last year, the company joined France?s Areva-led uranium exploration projects in Mongolia.
Mitsui & Co acquired interest in the Honeymoon uranium mine along with Canadian-based Uranium One in 2008 and now has its sights set on uranium projects in Africa and Canada. In 2009, Itochu Corp announced it, too, is looking at Australian uranium plays.
Private Companies Compete with State-Owned Utilities
But, Japanese private utilities firms have some stiff competition especially when it comes to state-backed utilities companies looking to secure uranium and nuclear contracts, especially Korean companies.
South Korea currently operates 20 nuclear power stations and plans to build eight more by 2016. Its state-run KEPCO is on a tear, picking up uranium interests around the world and landing big money nuclear power plant contracts.
?KEPCO aims to secure up to 50 per cent of the nation?s uranium demand from its own-developed foreign mines by 2020,? said CEO Ssang-soo.
The Korean firm acquired a 17 per cent interest in Canadian-based Denison Mines last July. Recently, KEPCO teamed up with France?s Areva SA, the world?s fourth-largest uranium producer, to develop global uranium projects, including the Imouraren mine in Niger which contains the world?s second-largest uranium deposits.
There are also rumours circulating that a consortium of South Korean companies headed by KEPCO may be making a bid for a 15 per cent stake in Extract Resources? R?ssing South uranium mine in Namibia, which some expect to become the world?s second biggest uranium mine within five years.
UAE Bid Highlights Shift in Nuclear Power Plant Export Contracts
Last December, KEPCO beat out several nuclear power groups, including Japanese and French firms, to win a $20 billion contract to build four nuclear plants in the UAE. KEPCO?s win, reports The Denki Shimbun (The Electric Daily News), represents a shift in the nuclear power export business from plant vendors to electric power companies.
The need for post-construction maintenance, personnel training and fuel supply proposals in international nuclear power contracts is giving electric utilities, who are much more likely to possess the needed know-how, the advantage over plant vendors.
While low cost and top sales activity have been noted as major factors in the winning bid, The Electric Daily also points out that the South Korean ?winning strategy? was placing the utilities company as the team lead. ?The Korean group exploited the utility?s know how in a proposal that incorporated management support over 60 years including operation, maintenance, and fuel supply in addition to covering the 10 year construction period,? said the news report. The Japanese group could not match the Korean 60-year operating guarantee.
KEPCO plans to further expand its global reach beyond its domestic market. According to CEO Ssang-soo, the company has ?set a new vision . . . to become a global company with (accumulative) revenue of $76 billion? over the next decade. KEPCO is reportedly in talks with at least five other countries to build nuclear plants.
On Tuesday, the Export-Import Bank of Korea announced it will provide around US$ 9 billion in funding to Korean companies working on international nuclear plant construction projects.
Private Japanese companies wishing to compete with their South Korean counterparts will continue to face challenges when it comes to global nuclear power contract bids.
While Japanese plant vendors and government officials are calling for more leadership from electric utilities in the export of nuclear power plants, the problem lies in the capital backing utilities companies like KEPCO receive from their national governments. ?Thus, the situation differs greatly for Japanese utilities,? explains The Electric Daily report, ?which have to take risks as private companies. Greater support by the government will be essential in order for the utilities to be able to take a leading role.?
EXT Price at posting:
$6.99 Sentiment: Hold Disclosure: Held
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