🚨 Nuclear Power Plant Export Governance

Today Korean Social News for Beginners | 2025.10.26

0️⃣ KEPCO-KHNP Conflict and Unification Discussion, Overseas Contract System Reform

📌 "Let's manage nuclear exports from one place" - Industry Minister suggests unified governance

💬 During a National Assembly audit, Industry Minister Kim Jung-kwan announced that the government is considering unifying the governance of nuclear power plant exports. This comes as the settlement dispute between KEPCO and KHNP over the UAE Barakah nuclear power plant project has dragged on, highlighting the need to clarify who is responsible from contract winning to operations for overseas nuclear projects. Currently, there is a dual structure where KEPCO manages overall business operations and contracts, while KHNP handles construction and operations. However, conflicts keep happening over cost sharing and contract management. The government is even considering legal reforms to redesign the organizational system to strengthen export competitiveness, while also negotiating a $350 billion investment structure with the United States.

💡 Summary

• Nuclear power plant export governance is the organizational and institutional system that manages the entire process from winning contracts to operations for overseas nuclear projects.
• The Barakah project settlement dispute between KEPCO and KHNP has revealed problems with role division.
• The government is considering governance reform to unify the export management entity.

1️⃣ Definition

Nuclear power plant export governance means the organizational system and rules about who decides and coordinates the entire process of overseas nuclear power plant projects - from finding opportunities, winning contracts, financing, construction and operations, to settlement and dispute resolution. Simply put, it's the framework that decides who manages the business of building nuclear power plants overseas, how they cooperate, and who takes responsibility when problems arise.

Korea's nuclear power plant exports have operated through a parent-subsidiary company structure, where Korea Electric Power Corporation (KEPCO) handles overall business management and contracts, while Korea Hydro & Nuclear Power (KHNP) handles actual construction and operations. However, as cost sharing and responsibility become unclear in large projects, conflicts keep happening, raising the need for governance reform.

💡 Why is this important?

• Nuclear power plant exports are national infrastructure projects worth tens of trillions of won.
• Without a clear responsibility system, it's hard to build trust with overseas clients.
• Consistent responses and quick decision-making are essential in international competition.
• Conflicts between public corporations directly affect the country's image and contract competitiveness.

2️⃣ Current Governance Problems and Conflict Background

📕 Limitations of the KEPCO-KHNP Dual Structure

• Unclear role division causes conflicts. Main problems include:

  • KEPCO, as the parent company, handles overseas business contracts and overall project management.
  • KHNP, as the subsidiary, performs actual nuclear plant construction, commissioning, and operations.
  • There's insufficient agreement in advance on who pays when contract changes or additional costs occur.
  • Decision-making authority and responsibility are unclear, making quick responses difficult.

• The Barakah project settlement dispute is a typical example. Key developments include:

  • The UAE Barakah nuclear plant won in 2009 was Korea's first overseas nuclear export project.
  • Process delays and design changes caused trillions of won in additional costs.
  • KEPCO demanded cost sharing from KHNP, but KHNP argued it wasn't their contractual responsibility.
  • Eventually, both companies entered international arbitration, escalating into a public conflict.

📕 Concerns About Declining Overseas Contract Competitiveness

• Trust at home and abroad is falling. Main problems include:

  • Media coverage of disputes between public corporations has damaged Korea's nuclear industry image.
  • Overseas clients see internal conflicts in their contract partners as a risk factor.
  • Technical document management and security issues have also been raised, creating doubts about reliability.
  • These instability factors can work against Korea in new contract competitions like in Czech Republic.

• Decision-making delays reduce business efficiency. Main concerns include:

  • It takes a long time for KEPCO and KHNP to coordinate their positions.
  • Inability to respond quickly to overseas clients' requests can lead to unfavorable contract terms.
  • Energy is wasted resolving internal conflicts, reducing responsiveness compared to competitor nations.
  • The structure makes it difficult to make strategic national-level decisions.

💡 Major Problems with Current Governance

1. Unclear responsibility: Conflicts over cost and risk sharing due to separation of contract entity and execution entity
2. Decision-making delays: Difficulty in quick responses during coordination between the two companies
3. Declining trust: Damage to domestic and international trust with overseas clients due to public conflicts
4. Weakened competitiveness: Disadvantage in international competition due to lack of consistent negotiation window
5. Legal dispute costs: Enormous costs and time spent resolving internal conflicts including international arbitration

3️⃣ Unified Governance Reform Direction and Tasks

✅ Government's Unification Review Direction

• Plans to unify the export management entity are being discussed. Main content includes:

  • A plan to concentrate overall authority for overseas nuclear projects in either KEPCO or KHNP.
  • A structure where one entity takes complete responsibility from contract signing through construction, operations, to settlement.
  • The goal is to simplify decision-making lines to increase external negotiating power.
  • It can eliminate sources of internal conflict and clarify responsibility.

• Legal reforms and organizational restructuring are needed. Main tasks include:

  • Amendments to related laws such as the Electric Business Act and Korea Electric Power Corporation Act may be necessary.
  • KEPCO's and KHNP's charters and business scopes need to be redefined.
  • Procedures for transferring responsibility for existing contracts and ongoing projects must be established.
  • Internal resistance due to organizational integration or personnel redeployment must be managed.

✅ Expected Effects and Concerns of Unification

• Strengthened competitiveness and improved efficiency can be expected. Main effects include:

  • Providing overseas clients with a clear negotiation window can increase trust.
  • Faster decision-making allows quick responses to market changes and client demands.
  • Costs and time spent resolving internal conflicts can be saved.
  • National-level strategic nuclear export policies can be pursued consistently.

• There are also challenges to solve during unification. Main concerns include:

  • There may be significant internal disagreement depending on whether to integrate into KEPCO or KHNP.
  • Legal disputes may arise during the process of sorting out responsibility relationships in existing contracts.
  • Difficulties are expected in personnel placement and organizational culture integration during mergers.
  • Rapid reforms can cause confusion in ongoing projects, requiring a phased approach.

✅ Connection with Korea-US Investment Negotiations

• Investment negotiations with the US are also connected to governance. Main content includes:
  • Discussions are underway about a $350 billion investment structure with the United States.
  • Clear nuclear export entities are needed for smooth financial and technical cooperation with the US side.
  • Issues include minimizing foreign exchange market impact and adjusting the ratio of investment to loans.
  • Governance unification can be a factor that strengthens Korea's position in negotiations with the US.

4️⃣ Related Terms Explained

🔎 Electric Business Act

• The Electric Business Act is the basic law of the power industry.
  • The Electric Business Act is a law that defines the rights and duties of businesses related to electricity production, transmission and distribution, and sales. It specifies the business scope, safety standards, and public responsibilities of power public corporations like KEPCO and KHNP.
  • Overseas nuclear projects are also subject to this law and its lower regulations. First, management responsibility and accounting/settlement standards for electric businesses are determined according to laws. Second, there are information disclosure and government reporting obligations even when conducting overseas business. Third, business scope and authority distribution must be legally clarified to prevent disputes.
  • Legal reforms to the Electric Business Act may be needed to reform nuclear export governance. Plans are being considered to clearly define KEPCO's and KHNP's overseas business authority and responsibilities in laws, and to institutionalize internal arbitration procedures and dispute resolution mechanisms.

🔎 Korea Electric Power Corporation Act and Public Institutions Management Act

• These are laws that regulate KEPCO's establishment and operations.
  • The Korea Electric Power Corporation Act is a special law that defines KEPCO's establishment purpose, business scope, and governance structure. The Public Institutions Management Act regulates control systems such as board of directors, audits, and management evaluations for public corporations including KEPCO.
  • Amendments to these laws or charter changes are needed when reforming nuclear export governance. First, if KEPCO manages overseas business, the legal basis must be clarified. Second, if explicitly delegating construction and operations authority to KHNP, or conversely unifying into KHNP, the relationship with parent company KEPCO must be redefined.
  • As public institutions, KEPCO and KHNP receive government management evaluations and National Assembly audits. Since overseas business performance and risk management are reflected in management evaluation indicators, governance reform affects overall public corporation management.

🔎 Barakah Project

• This is Korea's first overseas nuclear export case.
  • The Barakah Project is a nuclear power plant construction business exported to the UAE (United Arab Emirates) in 2009, with a contract to build and operate a total of 4 nuclear reactors. It was a large-scale project worth about 20 trillion won and a symbolic achievement of Korea's nuclear industry.
  • However, additional costs of trillions of won occurred due to process delays and design changes, and conflict arose over whether KEPCO or KHNP should bear these costs. First, KEPCO argued that costs increased due to KHNP's poor construction management. Second, KHNP countered that contract conditions were unclear and KEPCO's instruction changes were the cause.
  • Eventually, both companies entered international arbitration procedures, exposing internal conflicts in Korea's nuclear industry to international society. The Barakah case shows the importance of clear contract structures and dispute prevention procedures.

🔎 EPC Contract

• This is a construction contract method that integrates design, procurement, and construction.
  • EPC (Engineering, Procurement, Construction) is a method where one contractor performs design, material procurement, and construction all together. It is often used in complex and large-scale projects like nuclear power plants.
  • In nuclear exports, the EPC contractor is responsible for the entire construction, and the client receives the completed facility. First, the contractor is responsible from design to completion, so risk management is important. Second, the contractor may have to bear the burden when costs increase or schedules are delayed, making accurate cost estimation essential.
  • In Korea's nuclear export structure, KEPCO often became the EPC contract entity while KHNP handled actual construction. When responsibility becomes unclear in this process, conflicts like Barakah occur. Clear role division and internal contract systems are needed.

5️⃣ Frequently Asked Questions (FAQ)

Q: Which will manage nuclear exports - KEPCO or KHNP?

A: Not yet decided, the government is considering various options.

• Currently, both KEPCO-led and KHNP-led options are being discussed. First, the KEPCO-led option has the parent company handle overall business management and financing, with KHNP participating as a technical and construction partner. The advantage is KEPCO's strong financial capacity and government connections, while the disadvantage is that technical expertise is concentrated in KHNP. Second, the KHNP-led option gives overall responsibility to KHNP, the actual entity for nuclear construction and operations. The advantage is high technical expertise and execution capability, while the disadvantage is that it may lack KEPCO's financial scale and government negotiating power.
• The government is carefully considering even the possibility of legal reforms. Organizational integration or role redistribution involves much internal resistance and legal issues, so it will take time. What's important is that whatever method is chosen, it clarifies responsibility and creates a structure that gives trust to overseas clients.

Q: Will governance unification actually help nuclear exports?

A: A clear responsibility system helps strengthen competitiveness, but the implementation process is important.

• The biggest advantage of unification is faster decision-making and improved external trust. First, overseas clients judge that negotiations are faster and dispute risk is lower when the contract partner is a single window. Second, without internal conflicts, project execution is smooth and cost management is efficient. Third, national-level strategic nuclear export policies can be pursued consistently. In fact, major nuclear exporting countries like France's EDF and Russia's Rosatom have single-entity management structures.
• However, unification is not a cure-all. If confusion arises during organizational integration or existing expertise is damaged, competitiveness may actually decline. Also, there are many practical challenges such as differences in organizational culture between KEPCO and KHNP, personnel placement issues, and transfer of existing contracts. Therefore, the key is not simply merging organizations, but backing up clear role division and responsibility systems with laws and institutions.

Q: What impact does this have on individual investors or ordinary citizens?

A: Direct impact is not large, but it's worth paying attention from the perspective of public corporation management and national competitiveness.

• Nuclear export governance is mainly an organizational and management issue for KEPCO and KHNP, but there are various indirect impacts. First, since KEPCO is a listed company, management efficiency and overseas business performance can affect stock prices. If governance reform is successful, it's positive in the long term, and if confusion continues, it can be negative. Second, nuclear exports are an industry that makes a big contribution to the national economy. If exports increase, it leads to job creation and technological development, benefiting all citizens. Third, inefficiency and conflicts in public corporations can eventually return as a burden on citizens. Losses may be covered by taxes or connected to electricity rate increases.
• Ordinary citizens need to pay attention not to nuclear export governance reform itself, but to whether this leads to strengthened national competitiveness and improved public corporation efficiency. This is because the government and public corporations overcoming internal conflicts and achieving results in the global market benefits us all in the long term.

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