Original Korean article: The Public
The government has decided to merge five Gencos under Korea Electric Power Corporation—Korea South-East Power, Korea Midland Power, Korea Western Power, Korea Southern Power, and Korea East-West Power—into a single company tentatively called Korea Generation. This reverses course 25 years after the government split Korea Electric Power Corporation's generation division in 2001 to raise efficiency through competition.
The stated rationale for this merger is economies of scale. However, with the creation of a mega-sized public enterprise employing over 14,000 workers, there is concern that without accompanying organizational and workforce restructuring, the inefficiencies of five separate companies could simply be transferred into one massive organization.
Consolidating Scattered Investment and Workforce for Renewable Energy Transition
The largest advantage of merging the five Gencos into one is the concentration of investment and workforce.
Currently, the five Gencos each execute roughly 50 billion won annually in research and development spending and 200 billion won in renewable energy project budgets. They pursue similar projects separately. Merging into one company would make it easier to pool funds and technical personnel to pursue offshore wind and large-scale renewable energy projects.
Joint procurement of fuel and power plant maintenance materials could also strengthen price negotiating power. Consolidating headquarters functions—planning, human resources, finance, procurement, and research and development—that each of the five companies maintains separately could reduce redundant costs.
Workforce issues arising from coal power plant closures would also become relatively easier to address. Currently, when a coal power plant closes at one Genco, that company must redeploy its workforce internally. Under a merged entity, the scope for job transitions to renewable energy or other power plants would expand.
Samil Accounting Firm, which reviewed the restructuring plan at government request, assessed that a single legal entity structure would be advantageous for consistently pursuing long-term, high-risk energy transition projects and absorbing employment shocks from coal power plant closures.
A 14,000-Person Mega Public Enterprise and Concerns Over Monopoly and Mismanagement
The largest weakness of the merger is that the organization becomes too large.
As of this year, the combined workforce of the five Gencos totals 14,431 employees. This would make it the third-largest public enterprise by headcount, after Korail and Korea Electric Power Corporation.
If the five companies merge while retaining most existing organizational structures and personnel, the merger's efficiency gains could be substantially diminished. If only the president position is consolidated and the five existing Gencos essentially remain as five divisions, the savings in administrative and personnel costs would be limited.
There is also the problem of further reduced competition. The government split the Gencos in 2001 to raise efficiency through competition. In practice, Korea Electric Power Corporation was the sole power purchaser and Gencos received cost recovery, so many observers concluded that competition among Gencos did not function properly.
However, merging into one does not automatically raise efficiency. Rather, if a single mega public enterprise emerges in the domestic power generation market, competitive benchmarks disappear and pressure for cost reduction or management innovation could weaken.
Samil Accounting Firm identified as drawbacks of single-entity consolidation the obstruction of fair competition in the power generation market and the possibility of mismanagement by a public enterprise without competitors.
Some argue that Gencos should be consolidated into two rather than one. Professor Cho Young-sang of Yonsei University proposed in April that the appropriate scale for domestic Gencos is annual generation of roughly 100 TWh. Given that the five Gencos' 2024 generation totaled 196.7 TWh, analysis suggests two companies would be appropriate.
Success Hinges on Eliminating Redundant Organizations, Not Just Changing the Name
Observers assess that the merger's success ultimately depends not on how many companies are consolidated but on how the organization is restructured afterward.
The government presented as an example a structure with four divisions—renewable energy, just transition, safety technology, and planning management—under the merged Genco, plus three to four regional renewable energy divisions. However, the location of headquarters and the extent to which existing structures of the five Gencos will be retained remain undecided.
In particular, if the five existing headquarters are maintained while organizational structures and personnel are largely preserved, the merger could amount to little more than a name change. Conversely, if redundant organizations are substantially reduced, there is potential for stronger pushback from unions and local communities.
Whether the capital and workforce secured through the merger can actually be concentrated on renewable energy and power grid investment is also critical. At the same time, new management evaluation and oversight mechanisms are needed to prevent monopoly and mismanagement by a mega public enterprise.
Ultimately, this Genco merger cannot have as its goal the act of combining five into one. The success of this restructuring of public generation enterprises after 25 years will be determined by how much redundant function is eliminated and how much the economies of scale created by the merger are applied to energy transition.
KWI developer profile — KEPCO
2 projects in Korea totalling 500 MW. Compiled from the KWI database. Not part of the source article.
Hanlim Offshore Wind
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Southwest Offshore Wind Phase 2
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Project data: KWI database — Electricity Business Licence records, EIA filings (ME2021C006), Electricity Regulatory Commission minutes, and pre-EBL permit filings.
KWI data — Genco equity participation
Gigawatts held via equity stake across active offshore wind projects. A project may span several gencos. Compiled from the KWI database. Not part of the source article.
Gencos take minority equity rather than 100% ownership, so these figures overlap with one another; combined genco pipeline ≈ 14.36 GW. Source: KWI database — Electricity Business Licence records and project filings.
