'Team Korea' Rift: KHNP and KEPCO Enter International Arbitration Over Barakah Nuclear Plant

Arbitration Becomes Inevitable After Failed Settlement
Dispute Centers on Responsibility for Over 1 Trillion Won in Additional Costs

Korea Hydro & Nuclear Power (KHNP) has filed for international arbitration against its parent company, Korea Electric Power Corporation (KEPCO), over the issue of settling additional construction costs related to the Barakah Nuclear Power Plant project in the United Arab Emirates (UAE). The project, a symbol of Korean nuclear exports and a joint 'Team Korea' initiative, has escalated into an international dispute following internal conflicts.

According to the power industry on May 8, KHNP submitted a request for arbitration to the London Court of International Arbitration (LCIA) against KEPCO the previous day. The arbitration seeks the settlement of approximately $1 billion (about 1.4 trillion won) in additional construction costs incurred during the construction of the Barakah nuclear power plant.

KEPCO won the contract for the Barakah nuclear power plant project in the UAE in 2009 for about 20 trillion won, and with the commercial operation of the fourth and final reactor last year, the project has entered its final settlement phase. While KEPCO, as the main contractor, oversaw the entire project, KHNP was responsible for the actual construction and operational support of the nuclear power plant.

The two sides engaged in negotiations for several months over the additional costs, but ultimately failed to reach an agreement. KHNP maintains that it cannot bear the financial burden caused by construction delays and design changes on its own and insists that, under the contract between the independent entities, KEPCO should settle the costs. On the other hand, KEPCO has maintained its position that settlement with the UAE client takes precedence and that internal settlement should be discussed only afterward.

KHNP is concerned that, if it fails to recover these costs, it could face not only accounting losses but also legal issues related to breach of fiduciary duty. If the amount demanded by KHNP is reflected, there is a possibility that KEPCO's cumulative profit margin from the Barakah project could turn negative. According to KEPCO's financial statements, the cumulative profit margin for the project fell from 1.97% at the end of 2023 to 0.32% at the end of 2024.

Regarding this matter, KEPCO stated, "We have continued negotiations to find a solution through discussions between the two companies, but have not reached a final agreement," adding, "Even if arbitration proceeds, we will keep the door open for dialogue and negotiation and seek a reasonable resolution." However, specific details and issues related to the arbitration were not disclosed due to confidentiality clauses in the contract.