April 26, 2024

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[THE INVESTOR] Lawmakers of the ruling Democratic Party of Korea claimed on Oct. 20 that South Korea’s state-run Korea Electric Power Corporation omitted key clauses in its contract last year to operate nuclear reactors in the United Arab Emirates.

Rep. Kim Byung-kwan said that based on the board of directors’ meeting minutes he received from Kepco, the company yielded many of its previous positions in sealing a deal with UAE counterpart Emirates Nuclear Energy Corporation last year.

The electricity provider has coalesced with the UAE counterpart to found Barakah One Company and Nawah Energy Company to fund and operate four reactors under construction in what would become UAE’s first nuclear power station, Barakah nuclear power plant.

Kim said that the contract failed to secure due operating rights, leaving the company vulnerable in a case of legal conflict. 

According to the deal, in case of a legal dispute, representatives of Kepco and ENEC must go to arbitration in Abu Dhabi, capital of UAE, in line with UAE‘s new rule introduced in 2013.

Kepco’s board of directors in 2012 had made a consensus to go through an arbitration by the third party in London. The article on Kepco‘s sovereign immunity was also removed in the 2016 deal, in contrast to the 2012 Kepco board’s agreement, the lawmaker said, while also claiming that the target return rate from investment was lowered from initial 16.0 percent to 10.5 percent.

Moreover, the Kepco is required to renew contract after 10 years to continue operating and managing the newly-founded firms in the UAE, according to the report. This comes in contrast with the initial announcement by Kepco in 2016 that the firm has the rights to run the reactors for at least 60 years and reap a combined $49.4 billion in profit for the six decades. 

Kepco, which holds 18 percent of the firms, cannot exceed the share ratio, unlike the board’s agreement, according to the claim.

The contract, which had for years been in deadlock, was clinched five months after the then Deputy Prime Minister Yoo Il-ho made a state visit to the UAE for an economic cooperative meeting.

Kepco in response released a statement that said the counterpart had demanded lowering the target return ratio as part of the condition to joining the investment project, and that the final ratio is still higher than the average. 

It also said that it was the local government’s principle of applying UAE laws in relation to the venue of arbitration concerning state-led projects but that Kepco has secured neutrality by specifying they will refer to the rules of International Chamber of Commerce. It also refuted that the clause of banning excess of 18 percent shares is irrelevant to investment risk. 

By Son Ji-hyoung/The Korea Herald (consnow@heraldcorp.com)