Nuclear Phase-out Policy
The suspension of the construction of Shin-Kori 5 and 6, which is the core of the Moon Jae-in government's policy for a nuclear phase-out, came under controversy once again. Less than two weeks have passed since the new administration came up with a roadmap to decide whether or not the government will put the construction on hold via a court of public opinions called “Public Discussion Committee that will last for only three months. This time, the point is whether or not the suspension is lawful.
According to the Industry, Trade and Resources Committee of the National Assembly on July 10, Korea Hydro & Nuclear Power (KHNP) decided to convene the board of directors on July 11 or 12 and resolve to suspend the construction of Shin Kori 5 and 6 during the public discussion period which the government set.
However, while the committee was weighing the schedule for the board meeting, unexpected controversy arose. The main point of the controversy is that the decision to suspend the construction of Shin-Kori 5 and 6, which excluded the Nuclear Safety Commission, may have violated law. The Nuclear Safety Commission that oversees nuclear safety regulations is at the vice ministerial level under the Prime Minister.
Article 17 of the current Nuclear Safety Act strictly stipulates that the Nuclear Safety Commission can call off the construction of nuclear power plants in case of a violation of permit criteria. According to law, the suspension of the construction of Shin-Kori 5 and 6 does not belong to the case set by law and eluded a decision by the commission. This is why consortium companies such as Samsung C&T, SK Engineering & Construction and Doosan Heavy Industries & Construction immediately raised legal justice issues about KHNP's cooperation request letter asking the builders to take necessary measures in preparation for the temporary suspension of the construction.
With respect to the issue, the Ministry of Commerce, Industry and Energy says that there is no problem. The ministry explained that the suspension of the construction of Shin-Kori 5 and 6 was based not on safety-related regulations, but on the government's overall shift in energy policies. Article 4 of the current Energy Law says "Energy suppliers and energy users must actively participate and cooperate with energy policies of the national and local governments." Moreover, since KHNP is a government-run corporation, the cabinet may issue an order to suspend the construction.
When the controversy broke out, KHNP also faltered. An official of KHNP said, "Regarding the schedule of the board, nothing has been decided. Nobody knows whether the next board meeting will be held on July 11, July 12 or another date. Also, it is not decide yet whether or not the next board meeting will deal with the suspension of the construction."
Earlier, the Ministry of Commerce, Industry and Energy sent an official request to KHNP to suspend construction and subsequently, KHNP notified Doosan Heavy Industries & Construction, Samsung C&T and SK E&C of government guidelines. But the builders do not accept the guidelines. They say that there is only a request for cooperation from the government and there is no legal or contractual basis to stop the construction.
Under the current law, the construction of nuclear power plants may cease when there are problems with permission procedures, standards, and safety. On July 10, "If we suspend construction work, it is feared that there will be a great deal of damage and some work is difficult to stop immediately." said a representative of Doosan Heavy Industries & Construction. "We need a concrete consultation on what work must be suspended and how long the construction work will be suspended."
Above all, the government guidelines do not include how to make up for damage caused by the suspension of the construction. Doosan Heavy Industries & Construction signed a contract with KHNP to supply main equipment (reactors, steam generator, power generation turbine, etc.) for Shin-Kori 5 and 6 in 2014. The builder already received 1.17 trillion won (US$1.05 billion), about the half of the contract price. The construction progress stands around 50%. If the construction stops this time, the builder will lose about 1.13 trillion won (US$1.01 billion).
Builders such as Samsung C&T and SK E&C also requested the government to clarify a policy on compensation. "We have been unable to take follow-up measures because there are no clear compensation guidelines for construction workers, equipment, and partners waiting at construction sites," they said. "Please give detailed instructions on site operations including compensation plans." It is estimated that damages by the suspension of the construction will exceed 12 trillion won (US$10.8 billion) by 2029.
Earlier on July 7, KHNP held a board meeting at the UAE Business Center in Seoul and reviewed builders’ cost estimates that occurred when the construction of Shin-Kori 5 and 6 was temporarily suspended. At that time, each company estimated that it would cost 100 billion won (US$90 million) including the cost of labor of 12 billion won (US%10.8 million) if the construction stops for three months. Based on these results, KHNP plans to hold a board meeting again this week and decide whether to suspend or not the construction. KHNP is planning to hold the board meeting first but it is a big challenge for KHNP to make a decision due to huge losses and a big burden of legal liability.