Bidding closes Tuesday; contract runs through end of next year

Kim & Chang-Hanyoung, Bae Kim & Lee-Deloitte, Yulchon-Samil PwC among consortiums competing

Combined with Climate Ministry's separate study, total advisory spending nears 14 billion won

The headquarters of Korea South-East Power (KOEN) [Newsis]
The headquarters of Korea South-East Power (KOEN) [Newsis]

Three major law firm-accounting firm consortiums are quietly competing for a 13.7 billion won ($10.3 million) advisory contract to support the merger of five state-owned power generation companies under Korea Electric Power Corporation — Korea South-East Power, Korea Midland Power, Korea Western Power, Korea Southern Power and Korea East-West Power.

According to industry and legal sources, the five companies jointly issued a tender for an "advisory and support services contract for the integration of five state power generation companies," with bidding closing Tuesday. Korea South-East Power, which has been handling merger-related planning work this year, is the issuing agency.

The contract is expected to run approximately 13 months from the signing date through December next year. The budget stands at 13.67 billion won before value-added tax, or 12.42 billion won excluding VAT, to be shared equally among the five companies.

The contract is the largest advisory tender yet related to the power company merger. Three consortiums are expected to submit bids: Kim & Chang paired with Hanyoung Accounting Firm, Bae Kim & Lee with Deloitte, and Yulchon with Samil PwC. Samil KPMG is understood to have withdrawn from the competition due to a conflict of interest, as it is currently providing financial management consulting to Korea Electric Power Corporation and other power group affiliates.

The networks of former government officials now working at major law firms and accounting firms are also drawing attention in the bidding race. Former officials from the Ministry of Economy and Finance, the Ministry of Climate, Environment and Energy, and the Ministry of Trade, Industry and Resources are active at the competing firms, and some observers suggest their connections could influence the outcome.

The tender has also intensified debate over whether the costs being committed to the five-company merger are appropriate. The Ministry of Climate, Environment and Energy had already spent about 300 million won commissioning Samil PwC to study integration options, and the new advisory contract for establishing the merged entity is set at roughly 13.7 billion won — bringing the combined advisory spending to around 14 billion won.

Critics note that when the cost of constructing a new headquarters for the merged entity is added on top, the overall fiscal burden from the integration process could be substantial.

South Gyeongsang Province recently estimated the cost of building a new headquarters at more than 300 billion won as part of its own study on the social costs of the government's plan to consolidate the five power companies. That figure covers only direct construction costs — design, engineering and supervision fees — and does not include land acquisition. Analysts say the actual cost could climb further once land purchases are factored in.

The government, for its part, maintains that merging the five companies will streamline overlapping organizations and reduce costs over the long term. It is pushing to establish a unified entity called "Korea Power" in October next year as a wholly owned subsidiary of Korea Electric Power Corporation. The plan calls for consolidating dispersed organizations and workforces, cutting costs through joint procurement of fuel and materials, and concentrating investment capacity to drive the energy transition — including expanding renewable energy and phasing out coal-fired generation.

An official from the power integration task force defended the 13.7 billion won contract, saying it "is not an excessive amount given that it covers not only legal, administrative, accounting and tax advisory services and related administrative work, but also support for enacting special legislation and handling the transfer of rights and authority for domestic and overseas investment projects." The official added that the broad scope of the contract — which must account for the five companies' overseas power generation businesses — makes a larger budget unavoidable.


oskymoon@heraldcorp.com