As executives and employees of major domestic power equipment manufacturers have been indicted on charges of bid rigging, concerns are growing that Korea Electric Power Corporation's power grid expansion project, into which about 73 trillion won will be invested, could face setbacks. Because KEPCO restricts bidding by businesses punished for collusion, if the manufacturers under suspicion are convicted, it will be difficult to receive key power equipment on time.
According to legal sources on the 25th, the Seoul Central District Prosecutors' Office's Fair Trade Investigation Division on the 20th detained and indicted four executives and employees from four power equipment manufacturers—Hyosung Heavy Industries, Hyundai Electric, LS Electric, and Iljin Electric—on charges of violating the Fair Trade Act.
They are accused of agreeing in advance to allocate volumes and sharing bid prices to collude in 145 bids for gas-insulated switchgear (GIS) ordered by KEPCO from March 2015 to September 2022. The Korea Fair Trade Commission detected this in Dec. 2024, imposed a penalty surcharge of a little over 39 billion won on 10 companies that participated in the collusion, and reported six of them to the prosecution for violating the Fair Trade Act.
If the convictions of executives and employees at the power equipment manufacturers caught by the court are finalized, these companies could find themselves blocked from winning future projects ordered by KEPCO.
Based on the Enforcement Rule of the National Contract Act, KEPCO restricts eligibility to participate in bids for at least six months and up to two years if a guilty verdict is finalized for collusion. A contractor that led the collusion and won the bid faces a two-year sanction period; if it led the collusion but did not win, one year; and if it only participated in the collusion, six months.
According to the FTC and the prosecution, all the companies that participated in collusion in the gas-insulated switchgear bids ordered by KEPCO succeeded in winning contracts. Therefore, if convictions are finalized, these companies will be unable to bid on projects ordered by KEPCO for up to two years.
The problem is that if major power equipment manufacturers receive guilty verdicts, KEPCO's power grid expansion project will inevitably be hindered. To supply additional power needed for sites such as the Yongin semiconductor cluster and the industrial complexes in Gumi, North Gyeongsang, and Saemangeum, North Jeolla, KEPCO is pursuing a plan to invest 72.8 trillion won through 2038 to expand the grid.
By 2030, KEPCO plans to build a total of 225 substations, including those for 765 kilovolt (kV), 345 kV, and 154 kV classes and substations for high-voltage direct current (HVDC), and to additionally construct a total of 391 substations by 2028. The goal for transmission lines is to increase to 11,655 circuit-kilometers (C-km, a unit of transmission line length) by 2030, up 32.7% from the current level.
If the major power equipment manufacturers put on trial for collusion are convicted, it will be very difficult to find contractors to replace them. In Korea, only four companies can produce extra-high-voltage transformers of 154 kilovolt (kV) and 250 kV or higher: HD Hyundai Electric, Hyosung Heavy Industries, LS Electric, and Iljin Electric.
In the power industry, there is speculation that KEPCO will ultimately give even the companies caught for collusion a chance to respond to orders for equipment needed for the grid expansion project. The industry view is that KEPCO is likely to place as many orders as possible for required volumes before verdicts are handed down, or to proceed with the project swiftly while cases move up to the Supreme Court.
A power industry official said, "Even if the chance to respond to KEPCO's orders disappears, demand for power equipment in overseas markets such as the United States is high and margins are much higher, so the damage to power equipment manufacturers will not be significant." The official added, "The greater damage will fall on KEPCO, which needs to expand the grid quickly, and on corporations and industrial complexes that need more power."
A KEPCO official said, "We are well aware of the concerns of internal and external stakeholders arising from this collusion," adding, "We will do our utmost to ensure the timely supply of the national backbone power grid."