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Monday, Nov 02, 2009 The United Arab Emirates is setting up an investment vehicle to take stakes in the global nuclear industry as it prepares to award a contract to develop the first civilian nuclear plants in the Arab world. The Emirates Nuclear Energy Corporation(Enec) is expected to be formally established within weeks. It will oversee the development of the nuclear programme and act as a government investment arm by making strategic investments in the sector, domestically and internationally. The government hopes an agreement with the US will be finalised shortly, which would allow civilian nuclear trade with the UAE. Similar deals have been reached with France and Korea. The Gulf state is then expected to award contracts - estimated to be worth about $20bn (€13bn, £12bn) - for the construction of the first nuclear power plants, which could produce between 4,000MW and 5,500MW of electricity by 2020. The project is being led and funded by Abu Dhabi, the UAE's capital, which is spending hundreds of billions of dollars to develop the emirate and diversify its economy. Three different consortia are thought to be competing for the nuclear contract. These include one led by France's Areva, another headed by General Electric of the US and a South Korean team that includes Korea Electric Power Corporation and Hyundai Engineering & Construction. Areva has already been talking with Middle East investors about the possibility of selling a minority stake. Abu Dhabi's Mubadala,correct a state investment vehicle, last year announced a target of becoming a top 10 investor in GE, with which it has also agreed to an $8bn joint venture to set up a commercial finance entity in Abu Dhabi modelled on GE Capital. An official familiar with the UAE's tendering process insisted that there is no connection between the awarding of the primary contract for the design and construction of the plants and the possibility of Enec then taking a stake in the successful bidding companies. "Such an investment was never a condition or criterion in the bidding process," the official said. Analysts in the UAE, however, said it would be in keeping with Abu Dhabi's strategy to take stakes in companies that were involved in building its new industries. "Abu Dhabi wants stakes in companies to have influence in the industry and ensure that it gets all the technology transfers," said one banker. Abu Dhabi has already been actively attracting new industries to the emirate through joint ventures and equity acquisitions in international companies. The idea is for it to tap into foreign expertise and technology through strategic partnerships and build up its presence in the targeted sectors. For example, Mubadala has stakes in Italian and Swiss aircraft manufacturers, as well as an agreement with EADS to manufacture components for Airbus, as it attempts to develop an aerospace industry. Numerous other Middle East countries have stated their own ambition to develop civilian nuclear programmes to meet rising energy demand as populations and economies expand but also partly as a response to neighbouring Iran's nuclear programme. But the UAE, an important US ally, is the only state to move ahead with concrete plans. Its programme is considered by Washington to be a model for others to follow as it has pledged to forgo any domestic enrichment or reprocessing - technologies that can lead to nuclear weapons capability. In October, it issued a law prohibiting domestic uranium enrichment. Danny Sebright, president of the US-UAE business council, said the US would not stand in the way of Abu Dhabi buying stakes in companies involved in the nuclear project, as long as they were not controlling interests. By Andrew England in Abu Dhabi, Roula Khalaf in Beirut and Jennifer Thompson in London © Copyright The Financial Times Ltd 2009. Privacy policy.
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