Lawmakers of the ruling Democratic Party of Korea said Friday that South Korea’s state-run Korea Electric Power Corp. omitted key clauses in its contract last year to operate nuclear reactors in the United Arab Emirates.
Rep. Kim Byung-kwan said that based on the board of directors’ meeting minutes he received from Kepco, the company conceded many of its previous positions in sealing a deal with its UAE counterpart Emirates Nuclear Energy Corp. last year.
The electricity provider has coalesced with its UAE counterpart to found Barakah One Co. and Nawah Energy Co. to fund and operate four reactors under construction in what would become UAE’s first nuclear power station, Barakah nuclear power plant. Kepco and ENEC aim to start operating the reactors in 2018.
Kim said the contract failed to secure due operating rights, leaving the company vulnerable in the case of legal conflict.
According to the deal, in a legal dispute, representatives of Kepco and ENEC must go to arbitration in Abu Dhabi, the capital of UAE, in line with the UAE’s rule introduced in 2013.
Kepco’s board of directors in 2012 had come to a consensus to go through arbitration by a third party in London. The article on Kepco’s sovereign immunity was also removed from the 2016 deal, which existed in the Kepco board’s 2012 agreement, the lawmaker said, while also noting that the target return rate from investment was lowered from the initial 16 percent to 10.5 percent.
Moreover, Kepco is required to renew the contract after 10 years to continue operating and managing the newly founded firms in the UAE, according to the report. This comes in contrast with the initial announcement by Kepco in 2016 that the firm had the rights to run the reactors for at least 60 years and reap a combined $49.4 billion in profit for six decades.
Kepco, which holds 18 percent of the firms, cannot exceed the share ratio, unlike the board’s agreement, according to the claim.
In resonse, Kepco released a statement that said its counterpart had demanded lowering the target return ratio as part of a condition to joining the investment project, and that the final ratio is still higher than the average.
It also said that it was the local government’s principle of applying UAE laws in relation to the venue of arbitration concerning state-led projects but that Kepco has secured neutrality by specifying it will refer to rules of the International Chamber of Commerce. It also refuted that the clause of banning excess of 18 percent shares is irrelevant to investment risk.
The deal, which had for years been in deadlock, was clinched five months after then-Deputy Prime Minister Yoo Il-ho made a state visit to the UAE for an economic cooperative meeting.
By Son Ji-hyoung