UAE NUCLEAR TENDER MOVES FULL SPEED AHEAD

C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 000491

NOFORN
SIPDIS

DEPARTMENT FOR ISN/NESS, EEB/CBA AND NEA/ARP
NSC FOR JOST
COMMERCE FOR ITA

E.O. 12958: 05/13/2019
TAGS: ENRG KNNP PGOV ECON ETRD AE
SUBJECT: UAE NUCLEAR TENDER MOVES FULL SPEED AHEAD

CLASSIFIED BY AMBASSADOR RICHARD G. OLSON FOR REASONS 1.4 B AND D

REFS: A) ABU DHABI 157
B) 08 ABU DHABI 1432


1. (C/NF) Summary: On May 6, Emirates Nuclear Energy Corporation
(ENEC) invited three international consortia to bid on a nuclear
power plant tender valued at over USD 20 billion. Bids are due by
July 3, and two consortia will be chosen to enter into formal
negotiations by July 27. Officials hope the US-UAE 123 Agreement
will move to Congress well in advance of the July 3 deadline, to
ensure US firms are competitive bidders. Finalization of other
bilateral nuclear agreements (with South Korea and Japan),IAEA
conventions and domestic laws are on schedule. End Summary.


2. (C/NF) Sticking to its planned project timeline (outlined in Ref
A),on May 6 Emirates Nuclear Energy Corporation (ENEC) invited three
of six international consortia who submitted requests for
qualification to bid on the nuclear tender: GE/Hitachi/Excelon
(US/Japan/US),Areva/Bechtel/Gas de France (GDF) (France/US/France),
and KEPCO (Korea). Each consortium of a nuclear steam supply system
(NSSS) provider, engineering, procurement and construction (EPC)
contractor, and operator must respond to the invitation to tender by
July 3. ENEC plans to further reduce the field to two consortia by
July 27. Negotiations will continue until August 24, with the
winning group expected to sign the plant construction and operation
contracts on September 15.


3. (C/NF) Executive Affairs Authority Director of Economic Affairs
David Scott told EconOff on May 14 that ENEC has not missed any of
its project timeline targets. Rather than delaying implementation,
ENEC hopes to take advantage of the declines in construction costs
caused by the global economic downturn. While some development
projects have been delayed, UAE industrial power consumption rose in
2008, leading officials to conclude power demand forecasts may be
higher than expected.

THE ROLE OF THE 123
--------------


4. (C/NF) Scott said that the UAE hopes the initial 30 day
Congressional committee review of the 123 Agreement completed by July
3, or soon after, in order to determine if a consortium with US
participants should make the July 27 downselect. (Note: Section 123
of the Atomic Energy Act divides the 90 day Congressional review into
two periods: 30 days with House and Senate foreign affairs committees
and 60 days with the full Congress. End Note.) As 45 percent of the
final selection is based on technical considerations, including
ability to deliver, US firms would be significantly disadvantaged if
ENEC could not determine the likelihood of 123 implementation. Thus,
if the 123 does not reach the Hill shortly, Scott said it would be
very tough for any US participant to make the July 27 downselect.


5. (C/NF) If a US bidder made the July 27 downselect, and ultimately
won the tender, Scott noted the firm could sill face significant
commercial exposure related to the 123. If the agreement was not
approved by the September 15 target contract signing, a US bidder
would have to begin work (in order to meet the ENEC timeline) and
expend funds based on a contingency contract. Scott noted that
firms' commercial interests naturally could lead to changes in
consortium composition, e.g., US firms could be dropped by their
foreign partners if the latter determined the 123 status created too
much political risk the US bidder could not deliver.

OTHER BILATERAL AGREEMENTS
--------------


6. (C/NF) Turning to the status of other bilateral agreements, Scott
said the UAEG was satisfied the Japanese government was committed to
concluding a peaceful use agreement for nuclear energy, provided the
US-UAE agreement was finalized. Scott opined, as Japanese officials
have confirmed, that Japan was unlikely to move ahead if the US
agreement was not approved. Scott noted that an agreement with South
Korea was expected to be signed during the planned visit of the South
Korean Prime Minister to the UAE in June. (Note: An agreement with
France was completed in January 2008. End Note.)

LEGAL PROGRESS
--------------


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7. (C/NF) Scott said the UAE is making progress on a number of
nuclear laws and agreements. The UAE is now consulting with the IAEA
on technical translation issues related to the nuclear law. Scott
said three IAEA conventions (Convention on Nuclear Safety, Joint
Convention on the Safety of Spent Fuel Management, and Amendment to
the Convention on the Physical Protection) are under final legal
review and should be completed in June.
OLSON