Government to Adjust Nuclear Export Leadership... No Fixed Roles for KEPCO and KHNP

Change of Lead Organization for Significant Shifts in Security, Ordering Country Requirements, Finance, Technology, or IP

Flexible Export Structure Tailored to Each Project

The government has established a system allowing the lead organization between Korea Electric Power Corporation (KEPCO) and Korea Hydro & Nuclear Power Co., Ltd. (KHNP) to be changed in overseas nuclear power plant projects if there are significant changes in the ordering country's requirements, international relations, or national security. In May, the government reorganized the nuclear export system—assigning external negotiations and finance to KEPCO and construction and operation to KHNP. This latest move introduces a mechanism to alter the leading entity according to financial, technical, or diplomatic conditions specific to each project. Amid ongoing discussions about entering the U.S. nuclear power market and possible investment in Westinghouse, both of which represent a shift from the traditional structure of nuclear power exports, experts see this as creating an institutional foundation to flexibly organize the export lineup based on the characteristics of each ordering country and project.

'KEPCO-Finance·KHNP-Construction' Is Not Fixed

According to the Ministry of Trade, Industry, and Energy on August 26, the government established and promulgated the “Guidelines on Cooperation and Promotion System for Overseas Nuclear Power Projects between Korea Electric Power Corporation and Its Subsidiaries” on August 10. The guidelines clarify the scope of responsibilities between KEPCO and its subsidiaries for overseas nuclear projects, aiming to prevent excessive competition and inefficiency between institutions and to secure integrated export capabilities within the nuclear power industry.

The main point is that the Minister of Trade, Industry, and Energy has been granted authority to change the lead entity for individual overseas nuclear power projects. If there are significant changes regarding participation or implementation of projects—including ▲ the impact of international relations and national security, ▲ the ordering country's requirements, ▲ funding and risk response capacity, ▲ technical and operational capacity, or ▲ contractual and intellectual property issues relating to nuclear power exports—the Minister may change the lead organization for that project upon review by the Nuclear Power Export Strategy Council.

This is a measure allowing the division of roles established for KEPCO and KHNP in May not to be rigidly applied to every overseas nuclear power project, but to be adjustable based on the circumstances of each project. At that time, the government abolished the system where KEPCO and KHNP divided the market by country and transitioned to a unified “K-Nuclear One Team” approach, centered on joint project development and joint contracting. Basic roles were divided such that KEPCO handles external negotiations and investment/finance, while KHNP focuses on construction and operation.

With these new guidelines, the government will be able to adjust the response system in case unforeseen diplomatic, trade, or contract issues arise during the nuclear power export process, without being bound by the existing division of roles.

Speculation Over Westinghouse Investment...Complex Nuclear Export Calculations

The recent speculation about investment in American nuclear company Westinghouse is considered an example of the increasingly complex structure of overseas nuclear projects. Although the Ministry of Trade, Industry, and Energy officially denied the idea of Korea-U.S. joint investment to acquire a stake in Westinghouse, various investment structures linking participation in U.S. nuclear plant construction with acquiring a stake in Westinghouse continue to be discussed in the industry.

Especially, Westinghouse is closely linked to intellectual property rights in the export of Korean nuclear power technology. KEPCO and KHNP had a dispute with Westinghouse over nuclear technology, which was settled in January last year. Amid recent speculation about equity investment, some analysts suggest that sharing interests with Westinghouse could provide leverage for both expansion into the U.S. nuclear market and negotiations over existing intellectual property and export control issues. However, others point out that it is necessary to thoroughly assess the scale of investment, financial burden, and actual rights Korean companies would secure.

In such a business environment, the criteria for changing the lead organization, as included in the latest guidelines, could be actively used in real bidding strategies. The guidelines specify not only funding and risk-response capabilities but also nuclear power export contracts and intellectual property rights as standards for determining changes in the lead entity. Additionally, the ordering country's requirements and the impact of international relations or national security are also included. The government recognizes overseas nuclear power exports as projects combining finance/investment, technology, diplomacy, and security, not merely as construction projects, thereby enabling tailored response systems for each project.

However, procedural safeguards have also been put in place to prevent the government from arbitrarily changing the lead institution. The Minister of Trade, Industry, and Energy must review proposed changes through the Nuclear Power Export Strategy Council and must gather opinions in advance from KEPCO and its subsidiaries. An external legal opinion must be attached, and the reason for the change and expected timing must be communicated in writing to the relevant organizations in advance. KEPCO and its subsidiaries must be provided an opportunity to submit their opinions.

Explicit Exceptions for KHNP Solo Lead

Exceptions have also been clarified where KHNP may independently lead the entire project. If recognized by the Minister, KHNP may oversee project development, contracting, implementation, and even lead equity investment in cases where ▲ it is an overseas small modular reactor (i-SMR) project, ▲ it is a follow-up project to a contract already signed or a nuclear project already under construction or operation by KHNP in the host country, or ▲ KHNP has already entered into a project participation agreement with the ordering country's government or ordering party.

However, such exceptions for existing contracts/agreements are limited to those concluded before the issuance date of the guidelines, August 10. While continuity of existing KHNP projects is acknowledged, new projects going forward are expected to be subject to the new system of joint project development and division of roles between KEPCO and KHNP.

Should disagreements arise between KEPCO and its subsidiaries, an adjustment request can be made to the Minister of Trade, Industry, and Energy, who may then recommend adjustments concerning the business method, lead organization, or participation structure. While such recommendations are not legally binding, the ministry will coordinate with the Ministry of Economy and Finance to incorporate implementation of these guidelines and collaboration performance between institutions as separate indicators in the performance evaluation of public organizations, using an incentive/deduction system.

An official in the nuclear power industry commented, "Overseas nuclear projects can see their circumstances change at any time depending on the policies and financial conditions of the ordering country, as well as international relations. It may be difficult to maintain an initial division of roles to the end," adding, "The explicit procedures for changing the lead institution help reduce unnecessary conflict between KEPCO and KHNP under such circumstances and provide a foundation for the government to make timely adjustments."

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