South Korea’s fossil power plant businesses are on alert after President Moon Jae-in ordered to close down aged coal-fired plants and suspend new construction as part of his campaign promise to combat fine dust and air pollution.
The government said it will consider suspending coal-fired power plants less than 10 percent into construction, a move that could cost operators SK Gas and Posco Energy millions of dollars, said industry sources.
A total of eight coal-fired power plants are in the early stages of construction with a processing rate of 10 percent or lower, according to energy industry sources on Tuesday. They include Dangjin Eco Power Unit 1 & 2 led by SK Gas and Samcheok POS Power Unit 1 & 2 led by Posco Energy.
In November 2014, SK Gas and other investors jointly acquired a 60 percent in Dongbu Power Dangjin Corporation from Korea Development Bank and Dongbu Construction for 201 billion won ($179 million). SK Gas contributed about 150 billion won for a 45 percent interest. After the acquisition, the power plant operator was renamed into Dangjin Eco Power and integrated into SK Gas Group as a subsidiary in December 2014. In December 2015, Dangjin Eco Power acquired an additional 6 percent stake from Korea East-West Power.
SK Gas’ investment alone is at risk of losing more than 200 billion won should the project go under.
Posco Energy is at greater risk. Posco Energy jumped into the market of coal-based power generation in September 2014 by acquiring Tongyang Power for 431.1 billion won. The investment was made based on the then government’s future power supply plan which included ongoing operations of fossil fuel power plants. The company spent about 500 billion won in addition to the acquisition to prepare for its entry into the market.
POS Power newly established by Posco Energy for the business submitted to the government an application for construction approval of Samcheok POS Power Unit 1 and 2 last month. No physical construction has begun but the company claims it is already into 10 percent based on the entire processing rate if calculated from September 2014.
By Moon Ji-woong
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]