As the ongoing 350 billion USD investment agreement between South Korea and the United States progresses, South Korea's major financial dynasties are considering joining forces to acquire a stake in the US nuclear power giant Westinghouse Electric, in order to gain a share in the next round of US nuclear power construction.
According to a report by South Korean newspaper ‘Daily Economic’ on October 14th, companies such as SK, Samsung, Hyundai Engineering & Construction, and Doosan Energy are discussing the formation of a private investment consortium. They plan to invest up to 4 trillion Korean won (approximately 2.8 billion US dollars) to acquire 5% to 10% of the shares of Westinghouse Electric, an American nuclear power design company. The related investments will be included within the South Korean-American nuclear power cooperation framework led by the South Korean government.
According to reports, SK Group is considering participating as a major investor. Samsung C&T, Hyundai Construction, Doosan Energy and other companies are evaluating investment plans worth several trillion won. At present, the final investment amounts and participation methods have not been determined.
Behind this plan lies pressure from South Korean government's commitment to invest heavily in the United States.
In previous South Korean-US economic and trade negotiations, South Korea promised to invest $350 billion in the United States. The US side agreed to reduce the relevant tariff rates applied to South Korean goods from 25% to 15%. Of this amount, $150 billion will be used for shipbuilding cooperation, while the remaining $200 billion will be invested in strategic projects such as energy and manufacturing sectors.
According to a report by Reuters on September 21, the South Korean government has confirmed that its first investment project is a gas-fired power plant in Texas, USA, valued at $20 billion. The government is also considering other investment options, such as acquiring a stake in Westinghouse Electric or investing in liquefied natural gas projects in Alaska. However, there are doubts among South Koreans regarding the profitability and financial risks of these projects. Some members of parliament have called for increased scrutiny of these investments.
Nuclear cooperation is an important part of the South Korea-US investment agreement.
On October 1 this year, Westinghouse Electric Company of America announced that South Korea and the United States have established a new nuclear power cooperation framework. South Korea is planned to invest up to $12 billion to support the construction of eight large-scale nuclear reactors in the United States. Six of these reactors will use Westinghouse's AP1000 technology, while the other two reactors will use South Korea's APR1400 technology.
This also means that Korean companies not only need to provide funding for nuclear power construction in the United States, but they also hope to obtain future engineering orders through their investments.
According to a report by the South Korean newspaper 'Seoul Economy' on October 14, one of the key reasons for the South Korean government to encourage private enterprises to participate in acquiring Shimizu's shares is to reduce the financial burden on state-owned enterprises such as the Korea Electric Power Corporation and Korea Hydro & Nuclear Power. Based on the investment banking industry's valuation of Shimizu Electric at a maximum of $30 billion, even with certain equity acquisition discounts, obtaining a 10% stake would still require approximately 4 trillion Korean won.
For Korean companies involved in the investment, this is also a business strategy.
In recent years, SK has been continuously investing in the nuclear power industry. In 2022, SK Corporation and SK Innovation invested $250 million in Terra Power, an American nuclear power company supported by Bill Gates, becoming its major shareholders. If SK successfully acquires Westinghouse, its nuclear power business will expand from small modular reactors to large nuclear power plants.
Samsung C&T and Hyundai E&C hope to gain design, procurement, and construction contracts for nuclear power projects in the United States. Doosan Energy focuses on supplying core equipment such as reactors and steam generators.
The expansion of the U.S. nuclear power market also provides a commercial rationale for this investment. The Trump administration proposed in May last year to increase the U.S.’s nuclear power capacity from about 100 gigawatts to 400 gigawatts by 2050, in order to meet the growing electricity demands of artificial intelligence data centers and other industries.
However, investment prospects do not mean that returns are guaranteed.
According to a report by the South Korean magazine Money Today on October 15, the South Korean government has been negotiating with the US side regarding the specific conditions for obtaining a 5% to 10% stake in Westinghouse Electric. The arrangements have not yet been finalized. South Korean nuclear industry experts warn that for national-level projects involving substantial capital investments, full coordination between the government and companies is necessary, and careful evaluation of actual returns should be carried out.
For South Korea, acquiring a stake in Westinghouse Electric is not only a step towards fulfilling its investment commitments with the United States, but also an opportunity to enter the US nuclear market. However, as the multi-billion-dollar investment plan in the US gradually comes into effect, how to balance diplomatic and trade pressures, the financial burdens of state-owned enterprises, and the commercial returns of private companies will remain a challenge that the South Korean government must face.
