Government Activates Emergency Management System for Czech Nuclear Plant as KHNP-Daewoo E&C Dispute Intensifies

"Construction costs account for 7-11 percentage points more of total project costs," KHNP says, trading blame with Daewoo E&C
Competitive bidding planned for new contractor; government to manage project schedule directly

With negotiations over the construction contract for the Dukovany nuclear power plant project in the Czech Republic ending in a final breakdown, the government is activating an emergency management system led by the minister and vice minister. The government is stepping in to manage the project schedule directly after a prolonged dispute over construction costs and contract terms between Korea Hydro & Nuclear Power (KHNP) and the consortium of Daewoo Engineering & Construction and Doosan Enerbility. In particular, the dispute over responsibility between the two sides is intensifying, with KHNP citing the contractor’s demands to change contract terms and its allegedly excessive construction cost estimates as the reasons the negotiations collapsed.

According to the Ministry of Trade, Industry and Energy on Nov. 2, Minister Kim Jeong-kwan decided to activate an emergency management system led by the minister and vice minister in response to the end of negotiations on the construction contract for the Dukovany nuclear power plant on Oct. 29. The move is intended to minimize project delays resulting from replacing the contractor and maintain confidence in “On Time, On Budget” construction, a key competitive strength of South Korea’s nuclear industry.

Going forward, the ministry will alternate weekly between the “Team Korea Czech Nuclear Project Progress Review Meeting,” chaired by the minister, and the “KHNP Implementation Plan Review Meeting,” chaired by the vice minister. KHNP and participating companies will share progress and key issues, while the government directly reviews any measures needed.

The first meeting was held this morning, chaired by Vice Minister Park Dong-il. Discussions focused on measures for carrying out key tasks following the end of negotiations on the existing construction contract; the process and timeline for selecting a new contractor; plans to meet key construction milestones; and plans to implement follow-up measures related to the construction contract.

The government plans to develop measures to keep key milestones on schedule, including applying for a construction permit in April 2027, beginning site preparation in January 2029, and starting construction in November of the same year. Since a new contractor must be selected and a contract signed following the breakdown in negotiations with the existing contractor, the government aims to ensure the subsequent procedures do not affect the overall project schedule.

Meanwhile, KHNP maintains that the collapse of negotiations with the existing consortium was unavoidable. According to KHNP, the two sides held 91 rounds of discussions over approximately 15 months after signing the main contract for the Czech nuclear power plant project, but failed to bridge their differences over the contract structure and construction costs.

The sharpest disagreement concerned how construction costs would be calculated. KHNP said Daewoo Engineering & Construction initially proposed a fixed lump-sum contract during the first bidding process in 2022, but sought to change to a quantity-based settlement method at the final bidding stage in 2024. KHNP said the contractor continued to seek changes to the contract terms after winning the project in June 2025, including requesting that costs be settled after detailed design was completed.

KHNP said the construction costs sought by Daewoo Engineering & Construction accounted for a share of the total project cost that was approximately 7 to 11 percentage points higher than in domestic and overseas nuclear power plant construction projects. When it failed to reach an agreement with the contractor on construction costs during the final bidding in April 2024, KHNP submitted its bid using its own cost estimate. KHNP maintains that accepting the contractor’s demands as they were could have driven the bid price excessively high and weakened its competitiveness.

The contractor, on the other hand, claimed that KHNP had pressured it to cut unit prices to keep the total contract amount unchanged despite increases in construction quantities, and had tried to shift responsibility for design errors and construction delays onto it. KHNP countered that it had proposed a compromise that would have accounted for expected increases in construction quantities in the contract price in advance and allowed settlement based on actual costs for most civil engineering work, but the contractor rejected it.

KHNP also cited the risk of design delays resulting from the prolonged negotiations as a factor behind ending the contract. It said that, with the submission of design documents expected to be delayed by several months due to issues managing local subcontractors in the Czech Republic, it was difficult to extend negotiations further. KHNP plans to switch the process for selecting a new contractor from a negotiated contract to competitive bidding and review the construction costs and contract terms again.

Minister Kim Jeong-kwan said, “South Korea’s nuclear industry is competitive because the capabilities of individual companies come together as ‘Team Spirit.’ We must build an even stronger Team Korea in preparation for the many nuclear export opportunities ahead.” He added, “For the time being, the minister and vice minister will directly operate the emergency management system, review project issues every week and take any necessary measures.”

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