Korea Hydro & Nuclear Power (KHNP) has reported a construction loss provision of 1.2 trillion won ($1.2 billion) for the El Dabaa nuclear power project in Egypt, which it had previously promoted as a $3.3 billion success. Critics have pointed out that the company failed to manage risks adequately during the early stages of the project, signing contracts without finalized designs and quantities, making it difficult to recover additional costs.
During a parliamentary audit on October 12, KHNP President Kim Hoe-cheon stated, "We set aside 1.2 trillion won last year" regarding the El Dabaa project.
The El Dabaa project was awarded to KHNP in August 2022 for approximately 3.3 trillion won. At the time, the government actively promoted it as a significant achievement for domestic nuclear companies expanding overseas. However, as the project progressed, concerns about potential losses grew, raising questions about the adequacy of the initial feasibility studies and risk management.
Democratic Party lawmaker Kim Won-ki presented internal audit documents, highlighting several issues during the contract signing process. He noted that KHNP entered into a fixed-price contract without confirmed designs and quantities, indicating that the company was aware of the challenges in recovering additional costs if construction quantities increased.
Concerns were also raised regarding the cost estimation process. Kim claimed that KHNP used design data from domestic nuclear projects that differed from the actual Russian nuclear designs, failing to adequately account for the risks of increased project costs to meet the client's price demands.
Additionally, the contract's terms did not sufficiently address inflation following the Russia-Ukraine war. Kim pointed out that although the price was agreed upon in October 2021, the contract was signed in February 2022, shortly after the war began, without reflecting the subsequent price increases.
He further criticized the management for hastening the contract signing despite warnings from staff about the risks, suggesting that the push for securing contracts may have overshadowed proper risk assessment.
There were also allegations that the risk reporting system failed to function effectively after the contract was signed. Despite rising equipment costs and increased project risks, relevant information was not reported to management in a timely manner.
While Kim Hoe-cheon explained that the contract was signed before his tenure, he expressed regret over the situation. He added that since taking office, he has implemented institutional measures, including a risk management committee, to prevent similar issues from recurring.
* This article has been translated by AI.
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