SK Group's participation in the Westinghouse stake purchase can be read as a strategy to build a form of vertical integration in the artificial intelligence industry. The group has already secured considerable competitiveness across the entire value chain, from AI data center construction to memory chips, power and energy. By moving into the nuclear reactor industry after small modular reactors, it could become a company holding the pressure points of the AI industry as a whole.
SK is playing a leading role in the strategic investor consortium formed to acquire the Westinghouse stake, business sources said on the 14th. The consortium had initially been expected to center on seven or eight major engineering, procurement and construction companies able to take part directly or indirectly in building large reactors, including Samsung C&T, Hyundai Engineering & Construction, Doosan Enerbility and GS E&C. SK has now joined them. Some observers say its role will go beyond simply putting up capital to matching the other companies' investments and thereby enlarging the pool of funds.
South Korea and the United States earlier agreed through investment talks to Project Power, a $120 billion plan to build eight large nuclear reactors in the U.S. Six of them will use Westinghouse's AP1000 design and two will use Korea's APR1400. KEPCO and Korea Hydro & Nuclear Power had agreed separately with Westinghouse last year not to enter the U.S. market, but the two governments have now carved out an exception limited to projects funded by Korean investment in the U.S.
Expectations in the nuclear industry have risen further because the Korean side will be able to secure 5% to 10% of Westinghouse when the company goes public. While that falls short of the 10%-plus holding needed to take a full seat at the board table, it has been seen as significant for opening a path to participation in Westinghouse's management.
"For Westinghouse, which is weak on construction capability, taking Korea on as a strategic investor was the only way to maximize its corporate value," an industry official said. "For now the rights would amount to little more than voting at shareholder meetings, but if the stake is raised later, Korea will be able to have a say in how Westinghouse is run." Along with the stake, the official said, the chances of supplying core equipment for large reactor projects in the U.S. grow, and depending on circumstances a path could open to resolving the intellectual property issues that have tied down Korea's nuclear industry to Westinghouse.
Given those stakes, several companies, mainly in the nuclear sector, have been interested in acquiring Westinghouse shares. The government decided to form a consortium centered on private companies rather than heavily indebted state-owned enterprises such as KEPCO. According to the Ministry of Trade, Industry and Energy, the Korean consortium will be able to buy shares equal to its agreed stake at a 10% discount to the offering price when Westinghouse lists. "After the announcement of the U.S. investment package, we informed companies of the outcome of the stake acquisition talks," a ministry official said. "The Korean investment group will proceed with the share purchase centered on KEPCO and the companies that have expressed interest."
Brookfield and Cameco, Westinghouse's major shareholders, recently filed preliminary documents with the U.S. Securities and Exchange Commission targeting a valuation of $50 billion. The market expects Westinghouse to be worth more than $30 billion. If the Korean stake is set at 10%, that would mean buying shares worth about $3 billion to $5 billion (roughly 4 trillion to 6.7 trillion won) for $2.7 billion to $4.5 billion (roughly 3.3 trillion to 6 trillion won).
SK had shown strong interest in the energy business even before the Westinghouse deal. In 2022, it invested $250 million in TerraPower, the U.S. small modular reactor company chaired by Bill Gates, becoming a major shareholder. In August this year, SK Innovation signed a term sheet with TerraPower to jointly pursue SMR projects. TerraPower is ahead in non-light-water SMRs built around sodium-cooled fast reactors that use salt, a market SK entered early.
If TerraPower leads in salt-based non-light-water SMRs, Korea's innovative SMR, or i-SMR, is competitive in the light-water category. Because Korea's nuclear industry, led by Korea Hydro & Nuclear Power, specializes in building large pressurized light-water reactors, it can also take the lead in producing scaled-down light-water SMRs. Which model will dominate the market remains uncertain, and SK has diversified its portfolio by making strategic investments in both.
Cooperation with Westinghouse is essential for any light-water SMR business in particular. Under the agreement that KEPCO and Korea Hydro & Nuclear Power signed with Westinghouse, the U.S. company can exercise intellectual property rights over Korea's light-water SMRs as well. "If we have to obtain U.S. approval and licensing every time we export an SMR, our competitiveness will inevitably fall behind other models," an industry official said. "Being able to take part in Westinghouse's management would help ease that difficulty."