Nuclear Parts Makers Suffer from Phaseout

Most companies that make parts for nuclear power plants are in financial difficulties due to the government's phaseout of nuclear energy, according to a poll by the Korea Federation of SMEs.

The federation polled 85 companies in South Gyeongsang Province, where Korea's oldest Gori No. 1 reactor was shut down in 2017, and nearly all of them said they are in dire straits.

SAS, which manufactures shells for nuclear power plants, has applied for bankruptcy protection, and staff numbers dropped from 300 to just 90. Yet SAS' technology is the best in Korea and the company accounts for the biggest share of the market here.

It invested over W60 billion to expand its production facilities when the shutdown hit, and now it is at risk of being put up for sale (US$1=W1,187). CEO Park Hyun-chul said, "I saw Korea rise to the top of the world in terms of nuclear technology over the last 30 years and never imagined the industry would crumble so fast."

Kyungsung Precision Machinery in Busan succeeded in making a dozen key components of nuclear reactors with home-grown technology and saw sales rise to W10 billion at one point. But now staff have dwindled from over 100 to around 25 and revenues halved to result in net losses.

All of this happened in the two years since the government announced the nuclear phaseout. "We were once touted as the leaders of modernization but were thrown aside like old shoes," said Sung Nam-hyun, an executive at Kyungsung.

When the Park Geun-hye administration announced plans to bolster nuclear power, one parts company in Changwon took out bank loans to boost production capacity, and now it faces bankruptcy.

Park Sang-duk at Seoul National University said, "A string of nuclear part makers have gone bankrupt this year, and along with them went decades worth of technological knowhow. Soon Korea will no longer be able to build nuclear plants with its own technology, and it will cost an astronomical amount of money to recover the losses."

According to the Korea Atomic Industrial Forum, the revenues of Korea's nuclear industry grew fourfold from 1997 until 2017. But in 2017 they plunged 13 percent to W24 trillion.

The government plans to shut down six nuclear reactors, which is estimated to cost W27 trillion in lost revenues or a year's worth for the entire nuclear power industry. More than 90 percent of nuclear parts manufacturers are small or mid-sized enterprises. The government says it will help them shift to other fields, but that will be tough given the hefty loans many of them took out to expand production facilities.

One parts maker in Busan that applied for government help to shift its line of business ended up losing W2 billion in personnel costs alone. "The government thinks it will be easy for us to shift into other fields, but I stand to lose decades of experience and knowhow."

The collapsing support structure poses real risks to the safety of existing nuclear plants. Jeong Yong-hoon at the Korea Advanced Institute of Science and Technology said, "Bankruptcies of nuclear parts companies are bad news for plant safety and operations."