KEPCO and Gas Corporation, Major Overhaul of Management Under Moon Jae-in Administration

[Asia Economy Sejong=Reporter Dongwoo Lee] Korea Electric Power Corporation (KEPCO) and Korea Gas Corporation (KOGAS), at the center of controversies over electricity rate hikes and heating cost shocks, are undergoing a major overhaul of their management teams. About 10 internal and external directors appointed during the Moon Jae-in administration, including the second-in-command standing auditor and vice presidents, are set to be replaced. They have all completed their scheduled terms and will step down as soon as the new management is formed. This marks the full-scale replacement of the management teams of the leading energy public enterprises 10 months after the launch of the Yoon Suk-yeol administration in May last year.

According to a comprehensive report from our coverage on the 23rd, KEPCO will hold an extraordinary shareholders' meeting on the 27th to approve the appointment of key standing directors, including the standing auditor, vice president of management, and vice president of safety & business. Among the seven standing directors, including CEO Jeong Seung-il, all three vice presidents will be replaced at this shareholders' meeting. Earlier, KEPCO's executive nomination committee confirmed that Jeon Sang-sang, a former professor of public administration at Konkuk University, was selected as the sole candidate for standing auditor. Candidate Jeon previously ran in the primary for mayor of Chungju City under the Liberty Korea Party, the predecessor of the People Power Party, during the June 13, 2018 local elections. The former standing auditor, Choi Young-ho, who served during the previous administration, stepped down after his farewell ceremony on the 30th of last month.

KEPCO plans to sequentially replace nine of its 14 executives whose terms end or expire within the first half of the year. The new vice presidents replacing Lee Hyun-bin and Lee Jong-hwan, whose terms have ended, are expected to be individuals with extensive in-house experience and strong trust. Additionally, two standing directors (department heads) and six executives, including non-standing directors Park Jong-bae and Bang Soo-ran whose terms have already expired, will also be replaced within the first half of this year.

KOGAS is also ending the short tenure of President Choi Yeon-hye, appointed under the current administration, and executives appointed during the Moon administration. Leading the replacements is Nam Young-joo, standing auditor who served as the civil affairs secretary in the Roh Moo-hyun presidential office in 2006, along with Lee Seung, vice president of management, and Sung Young-gyu, vice president of safety technology. Except for President Choi, all standing directors will be replaced. Among the eight non-standing directors, seven will also see their terms expire by the end of next month. Consequently, 10 out of 12 executives (83.3%) at KOGAS are likely to be replaced within the first half of the year. KOGAS is currently publicly recruiting four positions, including standing auditor, vice president of safety technology, and outside directors, planning to secure new personnel to replace the executives whose terms have ended.

The rush by these two leading energy public enterprises to replace their management is analyzed as a move to distance themselves from the public institution management policies of the previous government. According to the National Assembly Budget Office, the debt scale of 14 public institutions designated as financially risky last year is estimated to have increased by 58.8 trillion won from the previous year, reaching approximately 430.9 trillion won. The government judged that the financial risk level of 14 institutions, including KEPCO, its power generation subsidiaries, and resource public enterprises, has reached a serious level and mandated the establishment of financial soundness plans by 2026.

However, management changes without guaranteed competence could become a variable that increases risk factors. The energy industry consensus is that the candidate for KEPCO's standing auditor lacks any experience related to the power industry. This is why there are opinions that the new management of leading energy public enterprises should prioritize selecting professionals over political considerations. Earlier, at the end of last year, Korea Hydro & Nuclear Power faced significant controversy over professionalism after appointing a lodging business owner as a new outside director.