Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
KOEN in hot seat over 'wasted' coal project
Korea South-East Power Company's coal power plant in Incheon / Korea Times file
By Nam Hyun-woo
By Nam Hyun-woo
Former Korea South-East Power Company CEO Jang Do-soo
Korea South-East Power Company (KOEN), a subsidiary power company of the state-run Korea Electric Power Corp. (KEPCO), is under criticism for “wasting” 40.7 billion won ($35.96 million) in an unfeasible coal project.
According to Rep. Lee Hoon of the Democratic Party of Korea, Friday, KOEN allegedly manipulated the results of a feasibility study on a coal drying project by downsizing its cost.
The project, proposed by Hankook Technology, was aimed at upgrading low-quality coal containing moisture by drying it. KOEN inked the deal with the company at 26 billion won in 2013.
According to Lee, however, the benefit-cost ratio of the project was estimated at 0.61, which means its incremental cost is greater than its estimated benefits, but KOEN downsized the project cost to 14 billion won to have the indicator hover over 1. After the signing the deal, KOEN increased the downsized cost by 9.4 billion won.
Lee also said the power company manipulated the coal-drying facility's test results, using assumed data instead of actual data collected from testing, to claim successful results.
As a result, the project incurred a 40.7 billion won loss, including operating loss, maintaining costs and other expenses, the lawmaker said, with the facility's operating ratio remaining at 10 percent currently.
“Also, the operator of the facility should be decided with bidding, but then-KOEN CEO Jang Do-soo used it influence to change it into a private deal to give the operating rights to Hankook Technology, which is a violation of related laws,” Lee said.
Sparking controversy further, Jang left his position in September 2013 and was appointed as the head of Pyunghwa Engineering Consultations, which later became a contractor for Hankook Technology.
“KOEN's coal-drying project is plagued with corruption, breach of trust and unfair favoritism for a certain company,” Lee said. “The prosecution should find out all illegalities through a thorough investigation.”
Over the move, the Ministry of Trade, Industry and Energy launched an audit of KOEN and said it requested the prosecution to investigate seven former and incumbent KOEN officials, as well as ordering the power company to censure those involved.
“It is true we have received an audit from the ministry, but we have no other comments on the matter,” a KOEN official said.
A Hankook Technology official said it is true it has been engaging in such a project with KOEN, but the company also suffered a 10 billion won loss because it discounted the costs for the project.