As executives and employees of major domestic power equipment manufacturers have been indicted on bid-rigging charges, concerns are growing that Korea Electric Power Corporation's power grid expansion project, which will require about 73 trillion won, could face setbacks. Because KEPCO restricts bidding by companies punished for collusion, if the manufacturers under suspicion are convicted, it will be difficult to receive critical power equipment on time.
According to legal sources on Jan. 25, the Fair Trade Investigation Division of the Seoul Central District Prosecutors' Office detained and indicted four executives and employees from four power equipment manufacturers—Hyosung Heavy Industries, Hyundai Electric, LS Electric, and Iljin Electric—on Jan. 20 on charges of violating the Monopoly Regulation and Fair Trade Act.
They are accused of agreeing in advance to allocate volumes and sharing bid prices, among other things, to collude in 145 bids for gas-insulated switchgear (GIS) ordered by KEPCO from March 2015 to September 2022. The Korea Fair Trade Commission uncovered this in Dec. 2024, imposed a penalty surcharge of a little over 39 billion won on 10 companies involved in the collusion, and referred six companies to the prosecution for violating the Fair Trade Act.
If the convictions of executives and employees of the power equipment manufacturers identified by the court are finalized, these companies could be blocked from winning future projects ordered by KEPCO.
Based on the Enforcement Rules of the National Contract Act, KEPCO restricts eligibility to participate in bids for a minimum of six months to a maximum of two years when a conviction for collusion is finalized. A company that led the collusion and won the bid faces a two-year sanction, a company that led but did not win faces one year, and a company that only participated in the collusion faces six months.
According to the Korea Fair Trade Commission (FTC) and the prosecution, all companies that took part in collusion in the gas-insulated switchgear bids ordered by KEPCO succeeded in winning contracts. Therefore, if their 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 are convicted, KEPCO's power grid expansion project will inevitably be hindered. To supply additional power needed for the Yongin semiconductor cluster and the industrial complexes in Gumi, North Gyeongsang, and Saemangeum, North Jeolla, KEPCO is pushing 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 765-kilovolt (kV), 345 kV, and 154 kV substations and substations for high-voltage direct current (HVDC), and to construct an additional 391 substations by 2028. The goal is also to increase transmission lines to 11,655 circuit-kilometers (C-km), up 32.7% from the current level, by 2030.
If major power equipment manufacturers indicted on collusion charges are convicted, it will be extremely difficult to find companies to replace them. In Korea, there are only four companies capable of producing extra-high-voltage transformers of 154 kilovolts (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 colluding an opportunity to respond to orders for equipment needed in the grid expansion project. The industry believes KEPCO is likely to place as many orders as possible before any convictions are handed down, or move quickly with the project while the case proceeds to the Supreme Court.
A power industry official said, "Even if the opportunity 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 better, so the damage to power equipment manufacturers will not be significant." The official added, "Rather, KEPCO, which must expand the grid quickly, and corporations and industrial complexes that need more power will suffer greater harm."
A KEPCO official said, "We are well aware of the concerns of stakeholders at home and abroad stemming from this collusion," adding, "We will do our best to ensure the timely supply of the national backbone power grid."