Korea Electric Power Corporation (KEPCO) and Korea Hydro & Nuclear Power (KHNP) and other domestic energy public enterprises are struggling with overseas renewable energy projects that cost hundreds of billions of won in order to follow the 'phase-out of nuclear energy and expand renewable energy' policy of the Moon Jae-in administration. There are concerns that the lack of prior preparation and local verification processes has hindered quick achievement of results within the term.
According to the public institution management information system Alio on the 9th, KHNP, a subsidiary of KEPCO, has invested in a wind farm in Texas, USA, which is in a state of capital erosion. This is because a record cold wave hit Texas in 2021, causing significant losses as wind turbines could not operate.
KHNP established KAS INVESTMENT 1 and 2 to invest in the U.S. wind farm, contributing 23.437 billion won and 23.343 billion won, respectively, but as of last year, the book values had decreased to 6.078 billion won and 6.039 billion won. Last year, KAS INVESTMENT 1 and 2 posted a net loss of 98 billion won. A KHNP official said, 'Although it's in a capital erosion state, the power plant is operating.'
In 2021, KHNP invested in solar power projects in Chile and hydroelectric power projects in Pakistan. Both corporations reported a net loss of 60 million won and 180 million won last year, respectively. That same year, a company was established for a solar power project in Spain, but it was liquidated the following year after the project development was canceled.
Another KEPCO subsidiary, Korea South-East Power (KOEN), invested in a solar power project in Chile, which reported a net loss of 5.4111 billion won last year. Korea Midland Power (KOMIPO) invested in a solar power project in Concho Valley, USA, in September 2021, which recorded a net loss of 4.773 billion won last year.
KEPCO also suffered losses after investing in several overseas renewable energy projects. It acquired the Aramosa solar power plant in Colorado, USA, for about $34 million (approximately 47.2 billion won) in 2017, but is estimated to have lost $26 million (approximately 36.2 billion won) upon liquidation in 2023. Initially, the project was expected to last 25 years, but actual power generation was low, making normal operation impossible.
KEPCO entered the wind power project in Gansu Province, China, but is experiencing financial deterioration due to reduced wind speeds and transmission constraints. The acquisition cost of the Gansu Province corporation was 18.746 billion won, but the book value as of last year had decreased to 7.822 billion won.
During the Moon Jae-in administration, it is said that public enterprises followed the 'renewable drive' government code without considering local policies or environmental changes, focusing solely on profitability in their investments. A person involved in investing in overseas business sites with energy public enterprises and consortiums noted, 'Once we find a project, we executed investments within a month. The energy policy environments in Korea and overseas are completely different, yet we only looked at return on investment (ROI) and internal rate of return (IRR). In the end, we often did not know about local policy changes and consequently faced losses.'
There are also concerns that the push for renewable project investments was hastily pursued as it was reflected in personnel evaluations. Additionally, it has been noted that overseas investments increased to alleviate personnel bottlenecks. Another energy industry official remarked, 'To be promoted in public enterprises, it was important to have a record of investment rather than successful projects. There were no promotion opportunities in Korea, so some might have opted for overseas subsidiaries. These factors are intertwined, leading to investments being made without proper review.'