Text Fwd: S.Korea found to loan $10B for UAE power plant

* Image source: Hankyoreh
A basic model of the nuclear power plant order from the United Arab Emirates. (Photo by Lee Jong-keun)

Hankyoreh
S.Korea found to loan $10B for UAE power plant
: The deal has been criticized for including a UAE troop dispatch and for its lower valuation at under half the announced $40 billion
Lee Soon-hyuk　
Posted on : Feb.1,2011 14:15 KST
　　　

A news program has belatedly exposed the fact that the South Korean government agreed to provide a loan covering approximately half the construction costs for the exportation of a nuclear power plant to the United Arab Emirates. While the government explained that this was part of ordinary power plant export financing, controversy has been flaring up as this revelation couples with previous controversies over inflation of the order amount and the deployment of troops to the UAE as a condition for receiving the order.

A Jan. 30 episode of the MBC program “News Magazine 2580” revealed that in the process of signing a contract with the UAE for the power plant export in December 2009, the South Korean government agreed to provide a loan for approximately $10 billion (around 12 trillion Won) of the total order amount of $18.6 billion through Korea Eximbank. In addition, the program reported that the repayment period was set at 28 years, and that the transaction generates a loss due to the fact that South Korea, which has a lower credit rating than the UAE, has to borrow the money at high interest rates and lend it at low interest rates.

The program also reported that the construction has encountered setbacks, including a delay in the groundbreaking ceremony from its originally scheduled date in late 2010, as the government has encountered difficulties coming up with the promised $10 billion loan.

In response, the Ministry of Knowledge Economy and Korea Electric Power Corporation produced explanatory data Monday with the argument that export finance support for overseas orders of nuclear and other power plants is standard international practice.

“The conditions, including the size and interest rate of the loan, will be established through future discussions with the UAE, but the interest rate has to follow Organisation for Economic Co-operation and Development (OECD) guidelines, so there is no possibility of our side suffering a loss,” they explained.

“It is true that [the UAE] proposed financing, and the South Korean government responded by saying it would provide up to $10 billion,” said Bae Won-hak, head of KEPCO’s UAE power plant project team. “But the project financing according to the contract is not an important element determining the success or failure of the construction, and the payment is coming in appropriately now according to the degree of progress in the construction, so there is no problem whatsoever in the progress of the construction.”


Regarding the OECD guidelines, an official with the Korea Eximbank public relations office said, “This loan is subject to the terms of the Sector Understanding on Export Credits for Nuclear Power Plants of the OECD, of which South Korea is a member nation, and it specifies that the period of repayment for nuclear power plant export financing can be up to 18 years, while the interest rate is set at the U.S. treasury bond yield, with a margin included that takes into account factors such as the period and credit rating.”

“In terms of the specific loan period and amount, we will have to have discussions, but there will be no reverse margin,” the official added.

However, the Internet and Twitter were buzzing with criticisms of the government in the wake of the episode’s airing.

One person with the ID “Patriamea” wrote, “I was stupefied when I saw the report... there needs to be a parliamentary inquiry right away!”

Another person “HongAhn” wrote, “We need a recall!”

Opposition parties also applied pressure on the government, with Democratic Party floor leader Park Jie-won saying, “An enormous deceit has been brought to light.”

In a statement Monday, Energy Justice Actions said, “Since the time of the order, the United Arab Emirates nuclear power plant export has been the subject of various controversies about under-the-table agreements regarding the amount of the order and military cooperation, and the truth has come out, with the order amount turning out to be $18.6 billion rather than $40 billion, and the military cooperation taking the form of last year’s dispatch of special forces soldiers.”

“As the loan for the construction costs marks an extreme even amid these controversies, the National Assembly needs to open a parliamentary inquiry and thoroughly investigate all of the allegations,” the statement continued.


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