[Exclusive] President Lee Questions Split of Five Power Generation Companies... Board of Audit and Inspection to Conduct Special Audit

To Be Conducted in the First Half After Deliberation and Resolution
Likely to Examine Appropriateness and Side Effects of Excessive Competition
Move Seen as Laying the Groundwork for Consolidation and Justification

Unit 1 of the Taean Thermal Power Plant in Chungnam, which has been a key pillar in South Korea's power supply for 30 years and 6 months since June 1, 1995, ended its power generation mission on December 31, 2025. On the far right are the turbine and chimney of Taean Thermal Power Plant Unit 1. 2025.12.31 Provided by Korea Western Power Co., Ltd. Yonhap News Agency. Photo by Yonhap News Agency

The Board of Audit and Inspection plans to conduct a special audit of Korea Electric Power Corporation's five power generation subsidiaries in the first half of this year. As the government is currently pushing for the consolidation and merger of state-owned power generation companies, there is speculation that this special audit is intended to strengthen the rationale and justification for the restructuring.

A senior official from the Board of Audit and Inspection told The Asia Business Daily on the 26th, "We are planning to conduct a special audit of the five power generation subsidiaries," adding, "It is scheduled to take place in the first half of this year." Another official explained, "We are currently establishing the annual audit plan," and added, "It will be finalized soon after deliberation and resolution by the Audit Committee."

It is unusual for the Board of Audit and Inspection to conduct such a large-scale special audit focused solely on power generation public enterprises. In the past, the Board has audited power generation companies, but these audits were often conducted in an integrated manner in connection with the government's energy policies, such as overseas projects or nuclear power.

It is reported that the Board of Audit and Inspection plans to focus this special audit on identifying problems with the current five-company power generation system. The audit is expected to examine whether the five-company structure is appropriate, and whether excessive competition has resulted in industrial accidents or unfair treatment of workers at partner companies.

The power industry believes that this special audit by the Board of Audit and Inspection is closely related to the ongoing discussion about consolidating the five power generation companies.

Previously, President Lee Jaemyung stated at the 'National Fiscal Savings Meeting' in August of last year, "There are so many public institutions that I can't even count them," and instructed, "We need to consolidate and merge them. Do it on a large scale." Subsequently, a task force for the consolidation and merger of public institutions was formed, led by Presidential Chief of Staff Kang Hoonshik.

Later, during a work report from the Ministry of Climate, Energy and Environment and its affiliated agencies in December of last year, President Lee remarked, "Looking at what each power generation subsidiary does, I wondered, 'Why were these divided up?'" As a result, the consolidation of the five power generation companies is now seen as a foregone conclusion.

The power generation subsidiaries were established when the power generation division of Korea Electric Power Corporation was split into five thermal power generation companies (Korea Western Power, Korea Southern Power, Korea South-East Power, Korea Midland Power, and Korea East-West Power) and one hydro and nuclear power company (Korea Hydro & Nuclear Power), as part of the government's restructuring of the power generation industry. The electricity produced by these companies is sold to Korea Electric Power Corporation through the Korea Power Exchange, which was also established for this purpose.

As a result, Korea Electric Power Corporation is now only responsible for transmission, transformation, distribution, and sales. The government's initial plan was to gradually split off the distribution and wholesale/retail functions of Korea Electric Power Corporation, privatize them, and transition to a competitive system. However, due to opposition from labor unions, the split of the distribution sector was delayed, and ultimately, the privatization plan was halted.

When Minister of Climate Kim Sunghwan explained in a work report that "privatization was halted after a large-scale blackout in California," President Lee responded skeptically, "We stopped partway, and now we just have five CEOs."

Except for Korea Hydro & Nuclear Power, the five power generation subsidiaries were evenly divided at the time of the split, centered around five major thermal power plants (Samcheonpo, Boryeong, Hadong, Taean, Dangjin), taking into account asset and workforce size. The power plants owned by each company are spread throughout the country. In reality, the company names do not reflect any meaningful regional distinction.

The problem is that as the number of coal-fired power plants decreases, the distinction between the roles of the five power generation companies has become increasingly unclear. The government plans to completely phase out coal-fired power plants by 2040. Accordingly, the five power generation companies are restructuring their businesses to focus on renewable energy. Renewable energy projects are also being pursued nationwide, regardless of region.

During the work report, President Lee also raised concerns that dividing the five power generation companies and making them compete may have led to worsening working conditions or industrial accidents for partner company employees. He pointed out that these problems have arisen as the power generation companies outsourced their main office work in an effort to cut costs. President Lee emphasized, "I hope that splitting up the power generation companies does not worsen working conditions." It is expected that this issue will also be examined in the special audit by the Board of Audit and Inspection.

The Ministry of Climate is also preparing a restructuring plan for the five power generation companies. At a press conference last month, Minister Kim stated, "We will quickly review the best way to restructure the power generation public enterprises and Korea Electric Power Corporation's subsidiaries," adding, "We need to finalize the restructuring plan before the 12th Basic Plan for Electricity Supply and Demand is confirmed." The leading proposal is to merge the five power generation companies into a new entity called 'Korea Power Generation Corporation.'

In this regard, the Power Industry Policy Division of the Ministry of Climate commissioned a research project on January 12 titled "A Study on the New Roles of Power Generation Public Enterprises in the Energy Transition Era." Through this research, the Ministry of Climate plans to review the new roles and restructuring directions for power generation public enterprises, detailed implementation procedures, and the impact that restructuring the power generation public enterprise system would have on the stability of the power industry, the electricity market, local communities, and worker employment.