Government support and international collaborations bolster investor confidence in the nuclear energy sector
Category: Business
Doosan Energy's prospects have brightened significantly following the South Korean government's recent announcement to include small modular reactors (SMRs) and micro modular reactors (MMRs) as national strategic technologies. This designation, revealed on August 3, 2026, means that companies involved in these sectors will benefit from substantial tax incentives, potentially transforming the financial outlook for Doosan Energy, a leading player in the SMR manufacturing space.
The Ministry of Economy and Finance's tax reform plan has introduced a new framework for supporting the SMR and MMR industries. Under the new guidelines, companies can receive tax deductions of 30-50% on research and development (R&D) expenditures and 15-30% on facility investments. This move aims to bolster energy security and meet the growing demand for future energy solutions, as articulated by Deputy Prime Minister and Minister of Economy and Finance, Koo Yun-cheol, during the announcement.
Doosan Energy, recognized for its advanced SMR capabilities, has already begun construction on a dedicated SMR manufacturing facility in Changwon, investing approximately 800 billion KRW. This facility is expected to produce 20 units annually from March 2026 to June 2031. As part of its strategy, Doosan has secured key material contracts with U.S.-based X-Energy and is collaborating with New Scale Power and TerraPower on innovative SMR projects. The government’s tax incentives are anticipated to play a role in accelerating Doosan's international contract responses.
Investor confidence in Doosan Energy has surged, with stock prices rising by 5.32% to 71,300 KRW as of August 4, 2026, partly due to the favorable tax reforms and the anticipated visit of Bill Gates, founder of TerraPower. Analysts believe that discussions between Gates and South Korean officials could address energy demands driven by the expansion of AI data centers and semiconductor clusters. The potential for new contracts, particularly with Czech nuclear projects and SMR equipment supply, is seen as a promising avenue for growth.
As the third quarter earnings report approaches, market observers are eager to assess how these tax incentives will impact Doosan's financial strategies. The upcoming discussions on the Tax Special Cases Limitation Act and its implementation will be key to determining the specific applications and management standards for SMR R&D and facility investment tax deductions. The uncertainty surrounding the commercialization of the SMR technology remains a variable, as the industry is still in its pre-commercialization stage.
Industry experts note that the increase in electricity demand due to the rise of AI data centers has heightened the importance of SMRs. Yet, there are concerns about the timing of financial returns on the substantial investments required for these technologies. As of the end of the first quarter of 2026, Doosan's net borrowings had increased to 3.516 trillion KRW, up 788 billion KRW from the previous year, underscoring the financial pressures associated with initial investments in SMR technology.
In the second quarter, Doosan reported sales of 4.7248 trillion KRW and an operating profit of 314.2 billion KRW, marking increases of 11% and 35% respectively compared to the previous quarter. The net profit attributable to the parent company's shareholders soared to 157.6 billion KRW, a staggering 200-fold increase from the previous quarter. Cumulatively, the first half of 2026 saw revenues of 8.9859 trillion KRW and an operating profit of 547.8 billion KRW, with net profits up 155% year-on-year.
Doosan Energy's backlog of orders in the energy sector reached 26.3509 trillion KRW by the end of the first half, representing an increase of approximately 2.1 trillion KRW from the previous quarter. The company expressed confidence in achieving its annual order guidance of 13.3 trillion KRW, driven by major projects, including those in the Czech Republic.
Nonetheless, a potential challenge hangs as the UK government’s push for domestic sourcing of key nuclear components could affect Doosan's role in the Rolls-Royce SMR project. The UK government is currently engaged in discussions to prioritize local suppliers, which could alter the supply chain dynamics for Doosan, who has been designated as a strategic supplier for Rolls-Royce's SMR initiative.
As the UK seeks to bolster its energy security and manufacturing competitiveness, the implications for Doosan Energy could be substantial. Nevertheless, analysts believe that the UK's localization efforts may not immediately diminish Doosan's involvement, especially as the Rolls-Royce SMR initiative is set to expand beyond the UK into broader European markets.
In this complex environment, Doosan must navigate the balance between leveraging government support and addressing potential challenges from international supply chain pressures. As the company pushes forward with its SMR production capabilities, the outcome of these developments will be closely monitored by investors and industry stakeholders alike.
As the third quarter earnings report approaches, the market will look for signs of how effectively Doosan can utilize these tax incentives to alleviate its financial burdens and strengthen its position in the SMR value chain. The interplay between government support and the realities of market demand will be a decisive factor in shaping the future of Doosan Energy and the broader nuclear energy sector.
In the coming months, the specifics of the tax reform implementation and its impact on Doosan's financial health will be a focal point for investors, especially as the company seeks to fulfill its ambitious production targets and respond to the increasing demand for SMR technologies in a rapidly changing energy market.