For the new president of Korea Hydro & Nuclear Power Co. (KHNP), who will be appointed early next year, resolving the "family feud" with its parent company, Korea Electric Power Corporation (KEPCO), appears to be the first urgent task. KEPCO and KHNP are in international arbitration over the settlement of construction costs for the Barakah nuclear power plant in the United Arab Emirates (UAE), and they are facing criticism that only law firms are fattening their pockets, with legal expense alone reaching tens of billions of won.
According to the energy industry on the 26th, KHNP's executive recommendation committee narrowed the field to five final candidates through final interviews on the 16th: former KEPCO KPS Co. (KPS) President Kim Beom-nyeon (former KHNP head of the power generation division); former Korea South-East Power President Kim Hoe-cheon (former KEPCO executive vice president); former KHNP head of the technology division Lee Jong-ho; Korea Association for Radiation Application Chairman Cho Byung-ok (former KHNP head of the quality and safety division); and former KHNP executive vice president for technology Jeon Hwi-su.
The committee has delivered the final candidate list to the Ministry of Economy and Finance's public institutions management committee. After identity checks and deliberation and resolution by the committee, recommendation by the Minister, and approval by the president, the new president will be finally appointed. In the industry, there is an expectation that the appointment could be completed as early as next month, or by February at the latest.
A senior official at the Ministry of Trade, Industry and Energy recently said regarding the construction cost settlement lawsuit between KEPCO and KHNP, "Once the new president is appointed, we plan to set up a meeting as soon as possible to resolve the issue."
KEPCO and KHNP failed to find common ground over the settlement of an additional $1 billion (about 1.4 trillion won) in construction costs incurred during the building of the UAE Barakah nuclear power plant and filed for arbitration with the London Court of International Arbitration (LCIA) in May.
The UAE Barakah nuclear power plant consists of four units and was the first overseas nuclear project Korea won in 2009. The contract was signed at about 20 trillion won, and the project concluded as all four units entered commercial operation in 2023. KEPCO participated as the main contractor, and KHNP took part as a partner providing commissioning and operation support services (OSS).
The UAE Barakah nuclear power plant initially aimed for completion in 2020, but after multiple design changes, the schedule was pushed back to 2024, generating an additional $1 billion in construction costs. After the project ended, the two sides discussed the final settlement, including the additional construction costs, but ultimately failed to reach an agreement. KHNP argues that KEPCO, the main contractor, must settle the additional construction costs, while KEPCO counters that settlement from the client must come first.
The Ministry of Trade, Industry and Energy is considering bringing the heads of the two organizations back to the negotiating table to mediate. In Oct., Minister Kim Jung-kwan said at a National Assembly audit regarding the dispute between KEPCO and KHNP, "Something that should never have happened has occurred," adding, "We are working on whether a single method would be better and how to structure the governance of KEPCO and KHNP."
KEPCO President Kim Dong-cheol's term runs through Sept. next year. Therefore, the ministry believes there will be sufficient time for both sides to negotiate after the new KHNP president is appointed. If the parties reach an agreement while international arbitration is underway, they can withdraw the arbitration filing.
With massive legal expense outlays and concerns about leaks of confidential information, a prolonged dispute is unfavorable to both sides. KEPCO has earmarked about 14 billion won for law firm Peter & Kim in this case, and KHNP has set aside 22.8 billion won for Kim & Chang. The planned litigation expense so far totals 36.8 billion won, and if arbitration drags on, additional expense could be budgeted. There are also concerns that key technologies related to the UAE project have been leaked overseas in the process of submitting various materials to law firms and consulting firms.