As the government and local authorities accelerate the expansion of offshore wind projects, Chinese capital and equipment suppliers and construction firms are also increasing their presence in South Korea. In particular, as Chinese state-owned enterprises participate in trillion-won-scale megaprojects, concerns are growing about Chinese dependence in the domestic offshore wind industry and questions about project governance structures. This series examines the status of Chinese corporate entry into South Korea, industrial and security risks, and impacts on domestic supply chains, focusing on the cases of Nagwol and Hanbit offshore wind projects. [Editor's note]
The Nagwol offshore wind project in Yeonggwang, Jeollanam-do, which will receive 2.3 trillion won in total project investment, is approaching completion by year-end but remains unable to escape suspicions of de facto control by Chinese enterprises. After Chinese state-owned enterprises participated in the engineering, procurement and construction (EPC) process, issues have emerged involving share pledges connected to overseas investors and management of the company seal, yet it remains controversial how much actual influence Chinese entities exercise in project operations.
According to industry sources on the 20th, Nagwol offshore wind, developed by Myungwoon and implemented by Nagwol Blue Heart, is proceeding with construction targeting completion in December. The project, with a capacity of 364.8 megawatts, will install 64 units of 5.7-megawatt wind turbines in the Nagwol area of Yeonggwang County, Jeollanam-do, and is expected to generate approximately 900 gigawatt-hours of electricity annually upon completion.
Nagwol offshore wind was selected as the successful bidder in the government's wind power fixed-price contract competitive auction in December 2023. The electricity generated over the following 20 years will be sold under long-term contracts, with the total power sales volume over the project period estimated to reach trillions of won.
Three Chinese state enterprises involved from design through construction
Chinese corporate participation became apparent through materials released by Chinese state-owned enterprises and domestic media reports.
Shanxi Electric Power Design Institute, a subsidiary of China Energy Engineering Corporation (CEEC), disclosed in January 2024 that it had concluded an EPC contract for a 365-megawatt offshore wind project in South Korea. Considering the generation capacity and project timeline, this is understood to refer to the Nagwol offshore wind project.
Chinese materials also confirmed that a senior CEEC official visited the Nagwol offshore wind site and received briefings on project plans, progress, budget and other matters.
According to the CEEC website, on December 10 of last year, Zhang Yaxian, a standing committee member of the CEEC Party Committee and chief accounting officer, and his delegation visited the Nagwol offshore wind site. At that time, Shanxi Electric Power Design Institute reported on project plans, operational organization, construction progress and budget, and the delegation toured major work vessels and the substation under construction while discussing project implementation methods.
A research institute affiliated with China Three Gorges Corporation is also understood to have participated in the Nagwol project from 2023 onward. Three Gorges Shanghai Research Institute visited South Korea in November 2023 to conduct work related to design and technical services, and is known to have won a bid for technical services on the Nagwol project in December of that year.
A subsidiary of China Communications Construction Company (CCCC), a Chinese state-owned construction firm, also conducted procurement bidding related to the Nagwol project. CCCC subsidiary Zhongjiao Road and Bridge Huadong Engineering Co., Ltd. posted a notice for "Yeonggwang Nagwol project material procurement bidding" on the Chinese internet in June of last year.
Chinese state-owned enterprises have been confirmed to be involved in the EPC, technical services and materials procurement processes respectively. However, the actual contract amounts of individual enterprises, their share of total construction, and their authority to participate in project decision-making have not been disclosed in detail.
70 percent share pledge controversy and company seal management issues
Alongside Chinese corporate participation, the financing and governance structure of Nagwol offshore wind became controversial.
Nagwol Blue Heart, the project developer, is known to be held 71.8 percent by domestic developer Myungwoon and 28.2 percent by Thai energy company Bigrim Power. Although Myungwoon is the largest shareholder, suspicions have been raised that the share pledge structure connected to overseas investors could affect actual exercise of management rights.
In 2024, a near-pledge set on approximately 70 percent of shares held by Myungwoon became controversial. At that time, some media outlets and industry sources raised suspicions that the overseas investor side could exercise influence over project operations or share disposition through the pledge right.
A near-pledge is a mechanism that allows the pledge holder to exercise rights over shares or other assets provided as collateral if the debt is not repaid. Depending on the pledge holder and contract terms, it can affect management rights, making the actual scope of rights exercise an important point of contention.
The manner in which Myungwoon manages its company seal also became controversial.
According to a November 2024 Kukmin Ilbo report, Myungwoon is known to have used its seal only after verification and confirmation by the law firm Jipyeong, designated as a compliance monitor, before concluding or executing major transactions. At that time, suspicions were also raised that the address of the Seoul Gangnam office where the company seal is kept matches the address of the CEEC Korea office.
The background for why the largest shareholder of the project developer, a domestic enterprise, required confirmation from an external law firm in major transactions, and the actual scope of approval authority became a point of contention.
However, to determine whether the setting of the near-pledge and the company seal management method led to exercise of management rights by Chinese enterprises, it is necessary to confirm the parties to the relevant contracts and their specific authorities.
Chinese side introduces project as Chinese capital initiative; Myungwoon denies control allegations
The manner in which the Chinese side introduced Nagwol offshore wind also fueled suspicions.
In September 2024, China's Belt and Road Initiative Reinsurance Community announced that insurance related to the Nagwol offshore wind project had taken effect.
According to related materials citing the Chinese announcement, Nagwol offshore wind was introduced as the first offshore wind project built by a Chinese capital enterprise in an advanced market and the largest-scale offshore wind project undertaken abroad.
In South Korea it is known as a project led by Myungwoon, but in China it was introduced as an achievement of the country's enterprises in overseas projects. However, additional confirmation is needed as to whether the expression refers to Chinese corporate construction participation or includes investment and ownership structure.
The process of capital formation at Nagwol Blue Heart was also previously subject to prosecution investigation. Nagwol Blue Heart increased its capital from 100 million won to 201 billion won through 14 rounds of capital increases from August 2021 to March 2022, and subsequently reduced it to 45 billion won through paid-in capital reduction in August 2023.
At that time, prosecutors investigated whether Myungwoon acquired new shares in Nagwol Blue Heart and then the funds were loaned back to Myungwoon and reused for new share acquisition. Myungwoon stated that the prosecution concluded the matter with a finding of no charges.
Myungwoon denies suspicions that Chinese corporate participation in the project leads to actual exercise of management rights.
Myungwoon's position is that the participation of overseas enterprises such as CEEC is on the level of EPC and technical cooperation to carry out large-scale offshore wind projects, and that ultimate management rights and decision-making authority rest with the domestic developer.
However, given that Chinese state-owned enterprises have participated in EPC and design and procurement processes and issues have been raised about share pledges connected to overseas investors, questions continue regarding the actual contractual authority of the Chinese side and its influence over project operations.
An industry source said, "The mere fact that a Chinese enterprise participated in EPC or equipment supply cannot be taken to mean that actual control of the project has been transferred," but added, "if financing, pledges and major contract structures are complexly intertwined, there is a need for greater transparency in confirming where ultimate decision-making authority lies."
Original Korean article: Pinpoint News
English brief by Korea Wind Intelligence, koreawindintel.com
KWI developer profile — Myungwoon
2 projects in Korea totalling 705 MW. Compiled from the KWI database. Not part of the source article.
Nagwol Offshore Wind — this article
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Yeonggwang Hanbit Offshore Wind
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Project data: KWI database — Electricity Business Licence records, EIA filings (ME2019C003, ME2024C001), Electricity Regulatory Commission minutes, and pre-EBL permit filings.
