El-Dabaa nuclear project could be in doubt due to sanctions

Economy

Published: 03 Mar. 2022, 17:44 Updated: 03 Mar. 2022, 19:21

El-Dabaa nuclear project could be in doubt due to sanctions

Korea Hydro & Nuclear Power, a subsidiary of Korea Electric Power Corp., was selected as the sole bidder for "turbine islands" in the El-Dabaa project, which will be Egypt's first nuclear power plant. [KOREA HYDRO & NUCLEAR POWER]

A nuclear power project in Egypt with Korean participation is facing uncertainty, as the Russian government, the main source of the project's financing, has been hit with major economic sanctions imposed by the United States and its allies.

In 2017, Atomstroyexport (ASE), a subsidiary of Russian state-owned energy company Rosatom, was designated by the Egyptian Nuclear Power Plants Authority (NPPA) as the builder of Egypt's first nuclear power plant, at El-Dabaa.

Korea Hydro & Nuclear Power (KHNP), a subsidiary Korea Electric Power Corp., was selected as the sole bidder for El-Dabaa's "turbine islands" in January. This will be Korea's biggest overseas nuclear power project since the $20-billion Barakah nuclear power plant deal in the United Arab Emirates was signed in 2009.

A rendering of nuclear reactors at El-Dabaa Nuclear Power Plant in Egypt [KOREA HYDRO & NUCLEAR POWER]

A turbine island houses a turbine and electricity generator.

In the $30-billion El-Dabaa project, ASE will build four reactors rated at 1.2 gigawatts, while KHNP will construct the main and auxiliary buildings of turbine islands.

KHNP announced Wednesday that it is currently negotiating with the Russian company to sign the deal in April.

The project hit an unexpected snag as the world's largest economies, including the United States, the European Union and Britain, placed major sanctions on Russia over its invasion of Ukraine.

The El-Dabaa nuclear power plant project itself is not subject to economic sanctions, since the Egyptian government, not the Russian company, will be the owner of the project.

The problem is not the contractor, but the source of financing.

The El-Dabaa project is funded by the Russian government with a loan. The loan will be repaid with profit from El-Dabaa after its first unit starts commercial operation in 2028.

Western countries halted transactions with some Russian banks and removed them from the SWIFT system — the Society for Worldwide Interbank Financial Telecommunications, a messaging service connecting more than 11,000 financial institutions — and the Russian government's financing capacity has been significantly undermined.

The Russian ruble has fallen more than 20 percent against the dollar since the start of February, trading at about 106 Wednesday.

If the Russian government's finances weaken significantly, it might not be able to fund the project. Subcontractors such as KHNP won't be able to get paid.

BY KIM NAM-JUN [shin.hanee@joongang.co.kr]