Korea Electric Power Corporation (KEPCO) and Korea Hydro & Nuclear Power (KHNP) have reportedly been experiencing conflicts over the expense settlement issue regarding the Barakah nuclear power plant, which they secured in the United Arab Emirates (UAE) in 2009. The total construction cost has increased by more than 1 trillion won compared to the estimated amount at the time of the contract, leading to an inability to bridge differences on how to share these expenses.
According to the nuclear power industry on the 24th, KEPCO and KHNP are in discussions regarding the final settlement of the construction expenses for the Barakah nuclear power plant. KHNP demanded that KEPCO settle additional expenses at the end of last year; however, KEPCO rejected this request. Both parties are reportedly preparing for a legal dispute by hiring their own legal representatives, considering the possibility that negotiations may fail.
Led by KEPCO, 'Team Korea' signed a construction contract with the Emirates Nuclear Energy Corporation (ENEC) for the Barakah nuclear power plant in 2009 for approximately 20 trillion won. The Barakah nuclear power plant, which consists of four units, marked the first overseas project secured by Korea. The plant has sequentially completed its construction and started commercial operations with the last unit, Unit 4, beginning operations last year.
The issue lies in the fact that the actual construction costs of the Barakah nuclear power plant have significantly increased compared to the initial plan. KHNP filed a 'claim' at the end of last year demanding KEPCO settle additional expenses, and industry observers estimate that this amount could reach the trillion won level. The fact that KEPCO recently presented an estimated consultation fee of approximately $14 million (around 20 billion won) to the legal representatives it hired serves as a basis for the prediction that the dispute's scale will exceed at least 1 trillion won.
KEPCO is currently facing a serious financial crisis, with total debt exceeding 200 trillion won. KHNP is also likely to incur significant losses if it does not receive a settlement for the additional expenses, and there is a high possibility that the management will bear legal responsibility for breach of trust.
A KEPCO official stated, 'KEPCO is fulfilling the role of project manager to ensure that partner companies can carry out their work smoothly as the main contractor of the Barakah nuclear power plant project,' and noted, 'partner companies have applied through KEPCO to the UAE ordering party for requirements when issues arise regarding the contract.' He emphasized, 'The international arbitration that KHNP intends to initiate will not help at all in securing additional nuclear power projects for Team Korea, which is facing a renaissance in the nuclear power sector.'
However, considering that KHNP is a 100% subsidiary of KEPCO and that both sides need to tightly cooperate for securing additional nuclear power projects in the global market, there is an outlook that this conflict will not escalate into an international dispute, according to the nuclear power industry and the Ministry of Trade, Industry and Energy.
A KEPCO representative also stated, 'We are continuously trying to resolve the issue through dialogue and negotiation with KHNP.'