South Korea’s Korea Hydro & Nuclear Power (KHNP) emerged as the preferred bidder for the Dukovany nuclear power plant expansion project in July 2024. This marks a significant win for South Korea, positioning it as a strategic player in Europe’s nuclear power market. The project involves building two APR1000 reactors, each with a capacity of over 1,000 megawatts, and is part of the Czech Republic’s broader energy strategy to increase its reliance on nuclear energy to ensure energy security and reduce carbon emissions.
The Dukovany nuclear plant, which already supplies about 30% of the country’s electricity, is undergoing an expansion as part of Czechia’s long-term plans to achieve energy independence from fossil fuels, particularly following the energy crisis triggered by Russia’s invasion of Ukraine. Prime Minister Petr Fiala has emphasized that nuclear energy is central to Czechia’s energy security goals, and the decision to partner with South Korea reflects the country’s need for a reliable and cost-effective partner capable of delivering on time.
South Korea’s KHNP competed against major players such as France’s EDF and Westinghouse from the United States, both of which also bid for the project. While all three contenders had strong technical capabilities, KHNP’s competitive pricing, track record in nuclear construction, and ability to meet cost and schedule requirements helped secure the contract. This is not South Korea’s first foray into international nuclear projects; it previously successfully delivered the Barakah nuclear plant in the United Arab Emirates, boosting its credentials on the global stage.
However, the success of this project goes beyond its immediate technical challenges. For South Korea, the Dukovany project is seen as a potential stepping stone to further opportunities in Europe. Countries such as Poland, Slovakia, and Slovenia, which are also pursuing nuclear energy as part of their energy transitions, could look to South Korea as a partner the Dukovany project succeeds, it could pave the way for KHNP to secure additional contracts, such as the planned Temelín 3 and 4 reactors, further expanding its presence in Europe’s nuclear market.
Despite this potential, the road ahead remains fraught with challenges. The project’s €16 billion price tag reflects the scale of the investment, and any delays or cost overruns could result in significant financial consequences for South Korea. As past nuclear projects have demonstrated, including those in Finland and the UK, managing such risks will be crucial to ensuring the profitability of this ambitious endeavor
Financing Challenges for Nuclear Projects
While South Korea’s bid for the Dukovany project was successful, the financing of nuclear power plants remains a key obstacle, especially in Eastern Europe. Nuclear projects, due to their sheer size and complexity, require significant upfront capital and involve extended timelines, often leading to cost overruns and delays. As the construction of new reactors typically spans over a decade, securing adequate financing and managing cost control are critical.
In the case of Czechia, the financing issue has been a long-standing concern. Earlier in 2024, Czechia managed to secure state aid approval from the European Commission for the construction of the Dukovany 5 unit, which involved government-backed loans and a contract-for-difference mechanism designed to stabilize revenues. The financing structure ensures that the Czech government would step in if electricity prices fall below a certain level, providing the plant with guaranteed income. However, the same financial arrangement has not yet been confirmed for the additional reactors at Dukovany 6 and Temelín 3 & 4, raising concerns about how these future projects will be funded.
This situation creates an opportunity for South Korea, whose offer to provide loans for the Dukovany 6 and Temelín reactors addresses Czechia’s pressing financing gap. President Petr Pavel acknowledged that South Korea’s proposal to support the financing of these future reactors could serve as a timely solution, potentially unlocking further cooperation in the nuclear energy sector. In essence, South Korea’s offer acts as a lifeline for Czechia, which faces limited financing options due to its economic constraints.
However, financing nuclear projects through long-term loans presents considerable risks for South Korea. Offering loans to support nuclear projects abroad means bearing significant financial exposure. The loans are typically repaid over decades, and there is no guarantee that South Korea will be able to fully recoup its investment, particularly if cost overruns or delays arise, as has been the case with other international nuclear ventures.
For example, in Barakah, South Korea’s first major international nuclear project, KEPCO provided long-term loans through the Korea Export-Import Bank. While the Barakah plant has been operational since 2021, the project’s overall profitability remains unclear due to the long loan repayment terms and the substantial financial commitments KEPCO made. Such long-term exposure could also be problematic for the Dukovany project, where unforeseen costs could spiral and jeopardize the returns for South Korea.
Ultimately, Czechia’s dependence on external financing makes South Korea’s offer appealing, but the long-term risks for South Korea cannot be overlooked. Czechia’s ability to repay loans, manage rising costs, and complete the project on time will determine whether this financing strategy is successful or leads to potential financial losses for South Korea.
South Korea’s Financing Proposal: A Risky Move?
South Korea’s offer to assist in financing not only the Dukovany 5 project but also the potential construction of Dukovany 6 and Temelín 3 & 4 presents a strategic opportunity for Czechia, filling a critical funding gap. However, this move also represents a significant financial gamble for South Korea. Providing loans to fund nuclear projects abroad comes with considerable risks, particularly when dealing with projects of such magnitude and complexity.
President Petr Pavel has emphasized the importance of the Dukovany project, signaling that the success of this initial partnership could open the door to further collaborations, not only in Czechia but also in other Eastern European nations like Poland, Slovakia, and Slovenia, all of which have shown interest in expanding their nuclear energy capabilities. South Korea’s offer to provide financial support through loans for future projects could solidify its position as a nuclear power leader in Eastern Europe, offering both technical expertise and critical financial assistance.
However, such a move is not without its dangers. As seen in past nuclear projects, cost overruns, delays, and unforeseen complications can significantly inflate the final price tag. In Finland’s Olkiluoto 3 project, for example, what was supposed to be a straightforward nuclear construction turned into a €6 billion financial burden for the French nuclear firm Areva, leading to the company’s near-collapse and its eventual acquisition by EDF. Similar cost overruns were experienced in the Hinkley Point C project in the UK, where delays and rising costs placed significant financial pressure on EDF, the main contractor.
By offering loans to fund additional reactors in Czechia, South Korea risks facing similar financial exposure. If the Dukovany and Temelín projects face delays or budgetary issues, South Korea could find itself in a precarious position, bearing a significant portion of the financial burden. While the contract-for-difference mechanism employed in Czechia provides some revenue stability, this mechanism alone may not fully mitigate the risks if construction costs spiral out of control or the project faces regulatory delays.
In addition, offering loans without clear guarantees of return presents another layer of risk. South Korea’s previous experience with the Barakah project in the UAE serves as a precedent. While the Barakah nuclear plant has been successfully built and operational, questions remain about the economic viability of South Korea’s financial commitment, especially given the long loan repayment terms and uncertainties around profitability. Similarly, if the Czech projects experience complications, it could take decades for South Korea to recoup its investment, assuming repayment terms are met as scheduled.
Despite these concerns, the potential benefits of such a partnership cannot be dismissed. South Korea’s financing offer is highly attractive to Czechia, which has faced limited financing options for its nuclear ambitions. By stepping in to provide financial support, South Korea could strengthen its geopolitical influence in Central and Eastern Europe, expand its nuclear industry’s global footprint, and secure future contracts. However, the long-term success of this strategy will depend on the careful management of financial risks and the ability to ensure that the projects proceed on time and within budget.
Risks of Cost Overruns and Delays
One of the most significant challenges facing large-scale nuclear projects, such as the Dukovany 5 and potential future reactors at Dukovany 6 and Temelín, is the risk of cost overruns and construction delays. These issues are not uncommon in the nuclear industry, where unexpected technical challenges, regulatory hurdles, and supply chain disruptions can lead to skyrocketing costs and extended project timelines.
The Olkiluoto 3 project in Finland serves as a prime example of how nuclear construction can go awry. Initially slated for completion in 2009, the plant did not become fully operational until 2022, a delay of over a decade. During this time, the project’s costs ballooned by over €6 billion, causing significant financial strain on the contractor, Areva, which was eventually forced to sell parts of its business to EDF due to the heavy losses incurred. Such delays can have a profound impact on profitability, not only for the contractor but also for the host country, which may face energy supply gaps and rising electricity prices while waiting for the plant to come online.
Similarly, the Hinkley Point C project in the UK has been plagued by delays and escalating costs, with the total price of construction now expected to reach around £26 billion—a significant increase from initial estimates. These cost overruns have placed immense financial pressure on EDF, the lead contractor for the project, and have raised questions about the long-term financial viability of the nuclear plant.
The Dukovany project could face similar risks. Although the Czech government and KHNP have worked to establish strong financial safeguards, such as state-backed loans and a contract-for-difference mechanism to stabilize revenues, these measures do not entirely mitigate the possibility of cost inflation. For example, unforeseen technical challenges or changes in regulatory requirements could lead to project delays, increasing the final costs significantly.
In addition to the technical and financial challenges, supply chain issues could also pose a risk to the project’s timeline. The global supply chain for nuclear components is highly specialized, and any disruptions—whether due to geopolitical tensions, material shortages, or logistical delays—could impact the delivery of critical parts and materials, further driving up costs.
Moreover, the potential legal challenges surrounding intellectual property, particularly from Westinghouse, could create further delays. Westinghouse has already raised concerns over KHNP’s licensing for certain technologies in the Dukovany project, and if the dispute escalates, it could cause further complications and slow down construction.
Given the historical precedents in the nuclear industry and the inherent complexity of these projects, South Korea faces a significant risk of encountering cost overruns and delays that could threaten the overall profitability of the Dukovany project. If these risks are not carefully managed, South Korea could find itself in a precarious financial position, similar to what Areva and EDF experienced with their European projects. Therefore, strict oversight, meticulous project management, and close collaboration with Czech authorities will be critical to ensuring the project’s success.
The Strategic Importance for Eastern Europe
South Korea’s participation in the Dukovany nuclear project is not just a bilateral success between Seoul and Prague—it carries broader implications for Eastern Europe’s energy landscape. The region has been undergoing a significant shift in its energy strategy, driven largely by the European Union’s Green Deal, which has set ambitious goals for carbon neutrality, and by the energy security crisis triggered by Russia’s invasion of Ukraine. Nuclear power is increasingly seen as a reliable alternative to fossil fuels, and countries across Central and Eastern Europe are turning to nuclear energy to secure a stable energy supply.
The Czech Republic, with its long-standing reliance on nuclear power, is at the forefront of this movement. Its ambition to boost nuclear capacity at Dukovany and Temelín is a response to both environmental goals and energy independence. By securing the Dukovany 5 project, South Korea’s KHNP is not only helping Czechia reduce its reliance on fossil fuels but is also positioning itself as a key player in the region’s nuclear future.
Other Eastern European countries, such as Poland, Slovakia, and Slovenia, are watching the development of the Czech nuclear program closely. Poland, for example, has announced ambitious plans to build its first nuclear power plants to reduce its heavy reliance on coal, while Slovakia and Slovenia are exploring options to expand their nuclear capacities. South Korea’s successful handling of the Dukovany project could pave the way for further contracts in these countries, particularly as they seek partners with proven experience in nuclear construction and financing.
Additionally, the geopolitical implications of South Korea’s involvement in Eastern Europe’s nuclear projects cannot be ignored. As the region moves away from Russian energy supplies, the role of foreign partners, especially from outside Europe, becomes increasingly important. South Korea’s involvement provides a counterbalance to Russian influence in the region’s energy market and offers a non-European alternative to traditional nuclear contractors like France’s EDF or Westinghouse from the United States.
Moreover, South Korea’s financial support through loans for future nuclear projects like Dukovany 6 and Temelín 3 & 4demonstrates its long-term commitment to the region. If these loans prove successful, they could set a precedent for similar arrangements in other Eastern European countries, further expanding South Korea’s influence in the region.
The strategic partnership between South Korea and the Czech Republic could serve as a model for other countries in the region, illustrating how successful collaboration in nuclear energy can be both economically beneficial and geopolitically stabilizing. By providing both technical expertise and financial backing, South Korea is positioning itself as a vital partner for Eastern Europe’s energy transition.
Strategic Opportunities vs. Financial Risks
South Korea’s involvement in the Dukovany nuclear project represents a significant strategic and economic opportunity for both Seoul and Prague. The project addresses a critical energy need for the Czech Republic, as it seeks to enhance energy security and reduce dependence on fossil fuels while aligning with the EU Green Deal goals. Success in this partnership could lead to further nuclear collaborations across Eastern Europe, with countries like Poland, Slovenia, and Slovakia closely monitoring developments.
However, for South Korea, the project carries substantial risks, including cost overruns, construction delays, and financial exposure tied to loan agreements. Past challenges with nuclear projects, such as Olkiluoto 3 in Finland and Hinkley Point C in the UK, serve as reminders of the potential financial burdens and complexities associated with large-scale nuclear ventures.
The long-term profitability of South Korea’s involvement in the Dukovany project hinges on effective project management, robust risk mitigation strategies, and sound financial planning. Should the project be completed on time and within budget, South Korea could solidify its standing as a major player in the global nuclear energy market, potentially opening doors to new contracts across Eastern Europe. However, the stakes are high, and the outcome will depend heavily on how well South Korea navigates the challenges of this ambitious endeavor.
