Blocking Barakah Disputes... Reducing Conflicts and Strengthening 'Team Korea' Competitiveness

KEPCO and KHNP Locked in Arbitration Over Construction Costs
Push to Unify Export System Amid Criticism of "Family Feud"
Joint Project Development to Expand; Restoring Overseas Trust Is Key

The government's decision to unify the Team Korea nuclear power plant export channel is aimed at reducing unnecessary conflicts, competition, and legal disputes caused by a dual system, while also enhancing competitiveness in securing orders in the global nuclear power market.

The government began efforts to unify the nuclear power plant export system after Korea Electric Power Corporation (KEPCO) and Korea Hydro & Nuclear Power Co. (KHNP) became embroiled in a legal dispute over additional project costs for the Barakah nuclear power plant in the United Arab Emirates (UAE). The UAE Barakah nuclear power plant, which has a project value of 2.26 trillion won and was the first nuclear project secured by Team Korea in 2009, became the subject of an internal conflict between KEPCO and KHNP over additional construction costs. KHNP argued that, due to an extended construction period and rising labor and material costs, KEPCO—as the main contractor—should pay the additional construction costs, which amount to 1 billion dollars (approximately 1.4 trillion won). KEPCO countered that it could only pay after being reimbursed by the UAE. As a result, in May of last year, KHNP filed for international arbitration against KEPCO. This family feud between the parent company and its subsidiary drew criticism from the National Assembly and elsewhere, and the arbitration case was transferred from the London Court of International Arbitration (LCIA) to the Korean Commercial Arbitration Board (KCAB).

If KEPCO and KHNP specify both companies as "joint main contractors" in their business cooperation agreement, it would have the effect of preventing future disputes. In addition, if country-based divisions are eliminated, KEPCO and KHNP will be able to jointly develop projects. Until now, nuclear exports were exclusively handled by KEPCO, but since 2016, KEPCO and KHNP have divided regions for project bids. KEPCO has been responsible for areas where Korean-type nuclear plants can be directly adopted, such as the United States, UAE, and Vietnam, while KHNP has overseen regions requiring design modifications, including the Czech Republic, Romania, and the Philippines.

However, this reorganization is not a fundamental overhaul of the nuclear power industry system. There is widespread opinion that, beyond the issues between KEPCO and KHNP, the integration system involving Korea Electric Power Corporation Engineering & Construction Company (KEPCO E&C), Korea Nuclear Fuel, and KEPCO KPS also requires revision. Last year, the National Future Strategy Institute at Seoul National University recommended in a report on "Policy Advice for Enhancing Future Competitiveness in Nuclear Power" that the establishment of a Nuclear Power Generation Corporation would be necessary to align the governance and business structures of public nuclear industry companies and unify the nuclear export system. Lee Jongho, principal researcher at the Nuclear Policy Center at Seoul National University and co-author of the report, stated, "Since establishing a Nuclear Power Generation Corporation would require separate legislation through political consensus, an interim step could be to create an intermediate holding company that oversees nuclear power generation businesses, which could be done with a resolution by the KEPCO board of directors." He added, "If corporatization or an intermediate holding company is pursued, it would strengthen the control tower function for nuclear projects, enable swift decisions on new businesses, and facilitate timely mid- to long-term nuclear industry policy formulation, thus allowing adaptation to future markets."

This content was produced with the assistance of AI translation services.