[Edaily Reporter Kim Hyung-wook] The government has decided to move forward with merging the five state-owned power generation companies—Korea South-East Power, Korea South Power, Korea East-West Power, Korea West Power, and Korea Central Power—into a single legal entity. This will create a massive state-owned power generation company with a workforce of 13,000 that accounts for about half of the country’s total power generation.
On the 18th, the Ministry of Climate, Energy, and Environment held an interim briefing session titled “Study on the New Roles of Strategic Public Enterprises in the Energy Transition” at the KEPCO Art Center in Seoul and released the interim results of a research project conducted by Samil Accounting Firm, which included these details.
The Lee Jae-myung administration commissioned Samil Accounting Firm in February of this year to conduct a study on plans to merge the five power generation companies as part of its efforts to consolidate public institutions. The aim was to merge the five power generation companies—which were spun off from #Korea Electric Power Corporation (KEPCO) in 2001 to liberalize the electricity market—into one or two to three entities, thereby strengthening the capacity for an energy transition centered on renewable energy.
The study concluded that while the current system of five power generation companies is suitable for operations centered on coal and gas-fired power generation, it has limitations when it comes to phasing out coal-fired power, expanding renewable energy, and the resulting workforce transition and securing grid flexibility. The assessment is that, to smoothly advance projects requiring long-term investments in the trillions of won—such as offshore wind power—it is better for these companies to merge into a single entity rather than for public enterprises to pursue them separately. Additionally, the report noted that consolidating the five companies into one would promote overall organizational efficiency by reducing the number of executives and preventing duplicate investment in research and development (R&D).
The report also cited major examples of companies that opted for consolidation during the energy transition, such as Denmark’s Ørsted—which emerged as a global renewable energy developer following the 2006 merger of six energy companies—as well as Japan’s JERA, China’s CHN Energy, and France’s EDF.
Samil Accounting Firm noted that while it had considered options such as operating two to three companies per region or establishing multiple subsidiaries under a consolidated holding company, it presented these as options two and three, citing concerns that they could weaken the ability to execute the energy transition compared to the single-company consolidation plan. The firm also reviewed proposals to establish specialized companies for each power generation type—such as setting up a separate Renewable Energy Corporation—but effectively ruled them out after considering investment capacity and the challenge of retraining personnel following the phase-out of thermal power generation.
Concerns regarding the single-entity merger also remain. The report noted that the launch of a single, massive state-owned power generation corporation could weaken fair competition within the power generation market and could potentially lead to issues such as lax management or moral hazard internally. This underscores the need to establish institutional checks and balances to prevent adverse effects prior to the reorganization. Another concern is the significant economic impact that the headquarters of the current five power generation public corporations have on the local economies of their respective cities (Ulsan, Busan, Jinju, Boryeong, and Taean).
Based on the interim report released today, the Ministry of Climate Change plans to finalize and implement the final proposal in July after gathering input from experts and stakeholders.
Kim Seong-hwan, Minister of Climate Change, stated, “The restructuring of state-run power generation companies is not merely a merger or consolidation of companies, but a reorganization into a competitive business structure to respond agilely to the era’s trend of a major energy transition.” He added, “We will push forward with innovation so that all state-run energy companies can lead the changes of the times and fulfill their public responsibilities.”
