The government decided to launch an integrated power generation company combining five state-run generation companies in October next year. Because the integrated company's headquarters will be newly built rather than using any of the existing headquarters buildings, competition among local governments to host it is expected to intensify.
The Ministry of Climate, Energy and Environment on the 4th held a roundtable at the Korea Electric Power Corporation Namseoul Headquarters in Yeongdeungpo District, Seoul, and released additional details of the plan to integrate the five state-run generation companies. A day earlier, the government said it would merge the five KEPCO subsidiaries into a single corporation tentatively named "Korea Generation."
The ministry said a study commissioned to Samil PwC found that integration into a single corporation was the most suitable option in terms of "strengthening execution of the energy transition and a just transition" and "management efficiency." The combined generation capacity of the five companies is 53 GW (gigawatts); once integrated, it would rank 14th in the world, or 8th excluding Chinese companies.
The ministry presented a timeline to complete corporate registration for the integrated company and appoint executives in September next year, and officially launch it on Oct. 1. The proposed structure would place four divisions—renewable energy, just transition, safety technology, and planning/management—under the headquarters, with three to four regional renewable energy headquarters and a thermal power generation headquarters operating separately under it.
Currently, each of the five companies has a CEO and an auditor, and there are 10 standing directors in total. Under the government's plan, the integrated company would have one CEO and one auditor, and the number of standing directors would shrink to four, who would be the headquarters division heads.
Headquarters staff at the integrated company is projected to total a little over 1,800, a decrease of about 600 compared with the current combined headquarters headcount of the five companies (a little over 2,400). The plan is to reassign the 600 reduced positions across the regional renewable energy headquarters.
Regional thermal power headquarters will remain as they are, considering "stable plant operations and safety." As coal-fired power is phased out, personnel will be redeployed and, where necessary, converted to the renewable energy headquarters.
Regarding the integrated company's headquarters, one of the top concerns for local governments, the government said the current headquarters buildings of the five companies cannot be used. Each existing headquarters building can accommodate about 500 people, which it deemed too small to house the integrated company's headquarters.
Accordingly, the integrated company's headquarters will be newly built, and its location will be decided in connection with the second public institution transfer policy after comprehensively considering the current locations of power public enterprises, the impact on a just transition, and residential and working conditions. The five companies' headquarters are in Boryung and Taean in South Chungcheong Province, Jinju in South Gyeongsang Province, Busan, and Ulsan.
Like the current generation companies, the integrated company will be a subsidiary in which KEPCO holds 100% equity. The government expects that integration will centralize currently separate fuel procurement and facility investment, reducing costs.
It also expects to achieve "economies of scale" by integrating development of renewable generation facilities and energy storage systems (ESS) on a large scale, which could reduce upward pressure on electricity bills stemming from the energy transition.
The government will also push to exempt the integration from the Korea Fair Trade Commission's corporate merger review. The current Fair Trade Act does not provide merger review criteria or exceptions tailored to public enterprises.
Electricity has a large impact on the economy, and there are concerns that combining the five companies into one could hinder competition in the generation market by creating a market-dominant operator. In this context, the policy to exempt the plan from a corporate merger review is likely to spark controversy.
Previously, President Lee Jae-myung said, "In the public sector, national public enterprises are fundamentally monopolies," noting that merger review criteria that take into account the public nature of public enterprises are needed.
The government will seek to enact a special law during this year's regular National Assembly session that includes grounds for exempting corporate merger reviews. The special law is also expected to include provisions establishing the integrated company, deeming approvals for permits related to the power generation business, succession of the existing companies' rights, obligations, and employment contracts, streamlined merger procedures, and reduced taxes.
The ministry will form and operate this month a "task force for integrating state-run generation corporations," chaired by the second vice minister. Once the special law is enacted and an integration promotion committee is created, it will take over the task force's duties.