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[Editorial] Unnecessary costs

Moon government’s nuclear phaseout policy imperils key company, parts suppliers

Two state-funded lenders last week decided to provide 1 trillion won ($825 million) in emergency loans to Doosan Heavy Industries & Construction Co., which is experiencing a credit crunch.

Doosan Heavy, the country’s largest power generation equipment maker, suffered a net loss of 495.2 billion won last year. In 2016, it posted an operating profit of 280 billion won.

The company has made self-rescue efforts, including cutting out executives and forcing its 6,700 workers to go on unpaid leave at alternating intervals. But such endeavors fell short, and to ease its financial difficulties it was compelled to seek emergency loans from the Korea Development Bank and the Korea Export-Import Bank.

Borrowing 1 trillion won from the two state-run lenders seems far from a fundamental solution to the financial pinch faced by Doosan Heavy.

As of end-2019, the company was saddled with debts totaling 4.9 trillion won, of which 1.2 trillion won is set to mature within this year.

Doosan Heavy’s predicament is attributable mainly to the policy of President Moon Jae-in‘s administration to phase out nuclear power generation in the country.

In 2017, the Moon government suspended the construction of two nuclear power plants, causing Doosan Heavy, which was supposed to provide key parts, to miss out on 2.5 trillion won. It also scrapped plans to build four other nuclear power plants, erasing about 4.5 trillion won in future revenue for the company.

Critics observe that President Moon has been misled by radical environmentalists and other left-leaning civic activists who exaggerate the danger of nuclear power generation.

It is absurd for the government to push a large, profitable manufacturer with international competitiveness to the brink of bankruptcy with its senseless policy and then spend a large sum of money to keep it afloat.

The nuclear phaseout policy pushed by the Moon administration since it took office in 2017 has resulted in the disruption of what experts describe as the nuclear industry ecosystem.

The number of parts suppliers for Doosan Heavy fell from 325 in 2016 to 219 in 2019, according to data recently released by an opposition lawmaker. The number of new contracts the company signed with parts suppliers plunged from 2,836 to 1,105 over the cited period.

The Korea Electric Power Corp., which provides electricity to factories, offices and households, recorded an operating loss of 1.27 trillion won last year, the second-largest since 2008, when the figure reached 2.8 trillion won. In 2016, the utility firm posted a profit above 10 trillion won.

Kepco has been pushed into the red as the government will not allow it to raise electricity fees when the cost of purchasing electricity is rising sharply, mainly because less electricity is being generated by the cheaper method of nuclear power.

The Moon government’s nuclear phaseout plan goes against the global trend of expanding nuclear power generation, which is cost-effective and instrumental in cutting greenhouse gas emissions to fight climate change.

If not for the misguided policy, Korea’s nuclear industry would have been poised to profit from the increased demand for nuclear plants around the world.

Korea’s third-generation reactors have gained design certification from the US Nuclear Regulatory Commission. Korea is the only country outside the US that has met the strict standards of the commission.

The cost of building a nuclear plant in Korea is just half of that in France and a third of that in the US.

It is nonsense to let the world-class nuclear industry wither by adhering to an ill-conceived policy that lacks economic or scientific logic.

The resumption of construction work on the two nuclear plants, which was suspended in 2017, might be the first step toward redressing this misstep. It would also help the heavily indebted Doosan Heavy get back on track.

But the Moon administration seems adamant about maintaining its nuclear phaseout plan. It recently rejected a petition submitted by about 180 parts suppliers, asking it to resume construction of the two nuclear plants.

The decision to provide emergency loans to Doosan Heavy seems partly motivated by politics. The government wants to pacify voters in the southeastern region, where the company and its contractors are located, in the runup to the April 15 general election.

But without a fundamental policy shift, it will be impossible to sustain Doosan Heavy and the country’s nuclear industry as a whole.
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