Opening New Business Opportunities - Contract with UAE to Operate Nuclear Power Plant2016-08-31Hit:2521
Title: Opening New Business Opportunities - Contract with UAE to Operate Nuclear Power Plant
Korea Hydro and Nuclear Power (KHNP) has signed a contract with the UAE to support and operate a nuclear power plant that is under construction.
KHNP is expected to dispatch a maximum of 400 workers annually (a total of 3,000 workers for the next 10 years) to manage and operate the nuclear power plant. The base contract fee is USD 0.6 billion, with additional financial support of USD 0.32 billion to cover the indirect costs such as housing. The construction business has become a technology- and service-driven high value added from the 1970’s manufacturing based.
This contract is meaningful as it is the first case for Korea to receive financial support for the operating fee. Korea already exported the 4th generation Korean-nuclear-power-plant, which is called APR 1400. KHNP is recognized for its safety, technology, capability, and for its knowledge in operating nuclear power plants.
This contract is also meaningful as it opened new business opportunities in a time of a low economic growth. Traditionally, Korean firms have maintained a price competitive export driven strategy. That is why many experts have already called for the importance of technology and service driven business models from a manufacturing driven business model.
There are many examples in other countries that have already started to make profits by selling a packaged product by integrating service and/or the operation system along with the physical product. For example, Alstom, a French company, and GE’s air-line industry earn profits from service fees by managing a train or airplane engines, respectively. Apple also successfully built a business eco-system by aligning iTunes with its application, which generated a new consumer experience, that successively lead to customer loyalty. Likewise, providing service to consumers by integration with its product can be a successful key to an innovative business model.
A variety of factors need to be aligned in order to create a successful model. The important factors are the value proposition and whether the model is easily imitated.
The value proposition should provide a new solution for consumers by solving their problems, not problems from the perspective of the manufacturer. In fact, the most important competitive point of KHNP and its customer value should be ‘safety’. Although the UAE is rich in fossil fuel, the public has called for sustainable and renewable energy under strict safe guidelines, after the accident in Fukushima, Japan, in 2011.
KHNP made the deal possible for its reputation for safety and for its world’s best capacity level of maintenance under a strict safety bar.
As this is the first contract, and as the duration period has 60 years more to go, there are many business opportunities. Although the Barakah Nuclear Power Plant is Korean-based technology and has the world’s best capacity, which make it difficult for competitors to follow KHNP, it is important to attentively listen to comments about enhancing its low-level technology like waste disposal and fuel supply.