[Exclusive] Coal Corporation Forced into 'Decarbonization'... Closure of Research Institute with '60 Years of History'

Coal Corporation Closes Internal Research Institute Last Month After 60 Years Since 1962 Establishment
Quality Analysis Functions Transferred to Production Team... Coal R&D Completely Terminated
Fully Capital-Deficient Since 2004... 2016 Announced Production and Workforce Reduction Plans
Internal Staff Reduced by 500 in Last 5 Years... 111 More to Be Cut This Year
Government Announces Strong Reforms for Public Institutions... Overseas Assets Likely to Be Sold Off One After Another

Korea Coal Corporation Union Tentatively Agrees to Gradual Early Closure of Three Coal Mines
(Taebaek·Samcheok=Yonhap News) Reporter Bae Yeon-ho = The Korea Coal Corporation Labor Union announced on the 3rd that it has tentatively agreed to the gradual early closure of coal mines in phases during the labor-management-government council meeting held at the Korea Coal Corporation headquarters in Wonju on March 2. The plan includes the closure of Hwasun Mining Site in Jeonnam by the end of 2023, Jangseong Mining Site in Taebaek by the end of 2024, and Dogye Mining Site in Samcheok by the end of 2025. The photo shows the Korea Coal Corporation Jangseong Mining Site. 2022.3.3
Photo by Bae Yeon-ho
byh@yna.co.kr
(End)

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[Asia Economy Sejong=Reporter Lee Jun-hyung] Korea Coal Corporation has closed its internal research institute with a 60-year history. This decision was made based on the judgment that the research institute can no longer function properly due to the decline of the coal industry following the carbon neutrality policy. The restructuring efforts underway to improve the financially distressed structure of Korea Coal Corporation also influenced this decision. As the government is intensifying the sale of public institution assets deemed unnecessary, the restructuring of public enterprises including Korea Coal Corporation, Korea Electric Power Corporation (KEPCO), and Korea Gas Corporation is expected to accelerate.

According to related ministries on the 8th, Korea Coal Corporation completely terminated the operations of its internal research institute at the end of last month. The coal quality analysis function of the research institute was transferred to the production team. Research and development (R&D) related to coal mining methods and tunneling methods previously handled by the research institute will no longer be conducted. A Korea Coal Corporation official stated, "The role of the research institute has been continuously reduced due to the 'coal industry rationalization (decarbonization)' policy," adding, "Although it is regrettable to close the research institute, it is a reality we have to accept."

The Korea Coal Corporation research institute started as the 'Thermal Management Research Institute' established in 1962. Since then, it underwent several reorganizations including becoming the Technology Research Institute and Technology Training Center, finally settling into its current organization in 2006. The research institute has been recognized for leading technological development in the coal industry and contributing to domestic industrial advancement over the past 60 years.

Intensive Restructuring Amid ‘Decarbonization’ Impact

The closure of the 60-year-old research institute by Korea Coal Corporation is due to the decline of the coal industry. The coal industry has been steadily shrinking as the government strengthens decarbonization policies aligned with the carbon neutrality agenda. According to the Ministry of Trade, Industry and Energy, domestic coal production decreased from 2.094 million tons in 2012 to 898,000 tons last year, shrinking by more than half over the past decade. Korea Coal Corporation’s coal production dropped 56.28% from 908,000 tons in 2017 to 397,000 tons last year.

The intensive restructuring of Korea Coal Corporation is also closely related to the research institute’s closure. Since 2004, Korea Coal Corporation has not escaped complete capital erosion. In 2016, it announced a phased plan for production and workforce reduction, cutting about 100 employees annually. The number of employees decreased from 1,251 in 2017 to 755 last year, a reduction of 496. Korea Coal Corporation plans to reduce an additional 111 employees this year.

The problem is that despite such restructuring, Korea Coal Corporation’s financial structure continues to deteriorate daily. As of last year, the corporation’s debt stood at 2.2585 trillion won, increasing by more than 500 billion won over the past five years. During the same period, the deficit widened from 51.4 billion won to 104 billion won, more than doubling.

New business development is also facing difficulties. This is because there are limits to new businesses that can be found based on the coal industry structure. With annual workforce reductions of about 100 employees and tight fiscal management, it is pointed out that bold investments in new businesses to overcome capital erosion are difficult to implement.

The production site of the Mongol Hotgor coal mine, the only overseas project of Korea Coal Corporation.
[Photo by Asia Economy DB]

Possibility of Accelerating Sale of Mongolian Coal Mine

There is also speculation that Korea Coal Corporation may speed up the sale of its only overseas project, the Mongolian coal mine. This is because the government previously designated 14 public enterprises, including Korea Coal Corporation, as ‘financially at-risk institutions’ and announced intensive reforms. The government reaffirmed the asset sale policy for public institutions at the ‘2022 National Fiscal Strategy Meeting’ held on the 7th. A Korea Coal Corporation official said, "There is no internally set target date for the sale of the Mongolian coal mine," adding, "If a good buyer appears, we can sell it anytime."

There are also expectations that public enterprises may engage in a ‘relay sale’ of overseas assets. Initially, resource public enterprises such as Korea National Oil Corporation and Korea Gas Corporation were designated as financially at-risk institutions largely due to the purchase of overseas assets worth trillions of won as part of resource diplomacy during the Lee Myung-bak administration. It is said that there is no more effective way to improve financial soundness than restructuring overseas projects. This is why attention is focused on the ‘five-year fiscal soundness plans’ that the 14 financially at-risk institutions must submit to the government by the end of this month.

There are already quite a few overseas assets undergoing sale procedures. KEPCO plans to sell the Cebu power plant in the Philippines and the Boulder 3 solar power plant in the United States within this year. KEPCO is also considering selling the Shanxi Province coal-fired power plant in China, its largest overseas project to date. Korea National Oil Corporation recently intensified the sale process of the Canadian oil development company ‘Harvest,’ and Korea Gas Corporation decided at its board meeting in May to sell all its 15% stake in the Kranggan gas field development project in Indonesia.

Professor Kang Cheon-gu of the Department of Energy Resources Engineering at Inha University said, "With the surge in energy prices such as oil and gas, global coal demand is rising again," adding, "From the perspective of energy security, the sale of overseas assets that produce critical minerals needs to be reconsidered."