Korea Western Power (KOWEPO) is pushing for the liquidation of its overseas wind power projects in Sweden and Finland. The losses from this liquidation are expected to amount to 48 billion won. Both projects were initiated during the Moon Jae-in administration as part of a policy to expand renewable energy, yet they are criticized for not adequately verifying their commercial viability.
According to the energy industry on the 18th, Korea Western Power held a board meeting the previous day and decided to liquidate the Swedish wind power project. The total investment of 39.2 billion won in the wind power project has been fully regarded as a loss. This project was also pointed out in an Audit Office investigation in February.
Korea Western Power invested 39.2 billion won (25% equity) in a 240 MW onshore wind power project in Sweden in May 2022 with a domestic asset management company. This was five months after Moon Jae-in met with Swedish businessmen in December 2019 and stated, 'We will strengthen cooperation in the renewable energy sector, including wind power.'
The Audit Office's investigation report revealed that Korea Western Power decided to proceed with the project based on a technical due diligence report provided by an external entity and a financial model without actual wind speed data in September 2020. In October of that year, upon sending employees to Sweden for verification, they confirmed that the actual wind speed was 8.7% to 11.7% lower than the values stated in the report, but they proceeded with the investment.
Before Korea Western Power acquired the equity, a contract had been signed to compensate electricity users for any shortfall if the hourly electricity supply capacity was not met. The Audit Office believes that the board made the decision to invest in equity based on service materials that overestimated revenue.
Korea Western Power recently held a corporate risk committee meeting to discuss an exit strategy for a wind power project in Finland in which it had invested 21 billion won in 2021. This project was conducted by Korea Western Power investing 21 billion won in a fund managed by a domestic asset management company, and as the fund's maturity approached, the management company requested liquidation.
According to internal documents from Korea Western Power, of the total investment of 21 billion won, 5.4 billion won has already been treated as a loss, and upon liquidation, it is projected that a maximum loss of 9.2 billion won will occur. A representative from Korea Western Power noted, 'Including the dividends received so far, the total loss could be up to 8.6 billion won.' Currently, this fund has its contract extended by six months. Korea Western Power plans to secure an equity buyer by the end of the year for liquidation.
Industry insiders believe that investments were implemented excessively to align with the government's policy stance at that time. At a Korea Western Power board meeting in April, one attendee noted that regarding the liquidation of the Swedish wind power project, 'We should examine whether there was a company atmosphere that imposed political factors on overseas business development.'
A representative from Korea Western Power remarked, 'The overseas wind power investment was initiated to secure performance early in Europe,' adding, 'However, losses occurred due to an oversupply of power within Europe. We are currently reviewing whether to sell the business and plan to establish an exit strategy to minimize losses.'