A 3.4 trillion won Sinan Ui offshore wind project that previously failed to pass a preliminary feasibility study is being revived with power generation company capital contributions reduced to 96.9 billion won, below the preliminary feasibility study threshold. The project is receiving 204 billion won in funding from a government-led Future Energy Fund, which formally exempts it from preliminary feasibility study requirements, but the pursuit of the project without external verification has sparked controversy over a regulatory blind spot.
The project, being developed in waters south of Ui Island in Sinan County, Jeollanam-do, is a 390 megawatt offshore wind farm with 26 units of 15 megawatt wind turbines. It received an Electricity Business License in 2019 and was approved in January of this year as the first funded project of the National Growth Fund.
According to materials obtained through the office of Rep. Lee Heon-seung of the People Power Party, the equity capital structure of the Sinan Ui project consists of Korea Midland Power, a subsidiary of Korea Electric Power Corporation, contributing 96.9 billion won (2.835 percent); the Future Energy Fund contributing 204 billion won (6 percent); and private developers including Hanwha Ocean, SK Eternix and Hyundai E&C combining for 209.6 billion won (6.17 percent).
Revival Two Years After Preliminary Feasibility Study Rejection, With Only Investors Changed
When advanced strategic industry fund loans (22.06 percent), Future Energy Fund loans (10 percent), Korea Development Bank loans (10 percent), and National Growth Fund loans (42.94 percent) are added, policy-oriented funds account for 93.84 percent of total financing.
On the surface, the only public company capital contribution is 96.9 billion won from Korea Midland Power. This falls short of the 100 billion won preliminary feasibility study threshold for public institutions. However, the substance of the Future Energy Fund tells a different story. The fund was established in 2024 by the Financial Services Commission under its plan to expand financial support for climate crisis response and is a dedicated renewable energy fund. The Korea Development Bank serves as the lead institution, and 80 percent of actual funding takes the form of private capital contributions from the five major commercial banks.
In this process, the Korea Development Bank contributed up to 20 percent, lowering the risk weight of commercial bank contributions from 400 percent to 100 percent. Under the Korea Development Bank Act, the bank's net operating losses are covered by the government, so there is a strong case that this fund too represents government finances being deployed.
When Korea Midland Power's direct capital contribution of 96.9 billion won is combined with the Future Energy Fund contribution of 204 billion won, public funds total 300.9 billion won. According to the Act on the Management of Public Institutions and its enforcement decree, projects pursued by power generation companies with total project costs of 200 billion won or more and combined national financial support and public institution burden of 100 billion won or more must undergo a preliminary feasibility study. Yet no preliminary feasibility study was conducted. In response, Korea Midland Power told the representative's office that the Future Energy Fund does not fall under preliminary feasibility study-subject public institutions.
Was this project then entirely unverified? The Sinan Ui project was not always in a preliminary feasibility study blind spot. In 2024, Korea South-East Power planned to contribute 193.2 billion won directly and underwent formal review, but ultimately failed. In the Korea Development Institute review at that time, based on total project costs of 2.611 trillion won, the benefit-cost ratio was 0.57 and the profitability index was 0.97. Both indicators fell below the benchmark of 1, resulting in a determination that economic viability and profitability were poor.
Normally in such cases, the project undergoes business improvement and then revalidation. However, without any business improvement, the capital contribution and financing structure was simply reorganized with Korea South-East Power exiting and Korea Midland Power and the Future Energy Fund participating. Despite total project costs actually increasing to 3.4 trillion won, critics point out that the numbers were adjusted downward only to the preliminary feasibility study threshold to avoid revalidation.
Unverified Wind Income: Government Says It Underwent Review
After the project structure was reorganized, the deliberation process also moved quickly. At the first investment deliberation committee meeting held on January 22, some committee members expressed concern about the possibility of output restrictions due to transmission and distribution issues in the Jeollanam-do and Gwangju region, but the agenda was voted on immediately on the day of submission. The official meeting minutes did not even record the discussion content or the amount of support.
Before the final support decision meeting of the Advanced Strategic Industry Fund Management Deliberation Committee held on January 29, at 9 a.m., the Financial Services Commission had already distributed a press release stating that it had decided to provide long-term loan funding for the 3.4 trillion won Sinan Ui offshore wind power project, one of seven mega-projects in the first phase. The final deliberation meeting itself was held only at 3:30 p.m. that day.
The wind income that the government emphasized in its press release is merely an unconfirmed figure. In materials submitted to the National Growth Fund, the developer projected that by additionally acquiring a community participation Renewable Energy Certificate weighting factor of 0.3, it would generate an additional 497.8 billion won in revenue. However, whether to grant the weighting factor is a matter decided by the Korea Energy Agency after project completion.
Looking at actual financing sources, community participation loans of 136 billion won were provided by KB Financial Group, and the community fund of 100 billion won was provided by the Korea Development Bank. Residents effectively served only as conduits for the loans.
Explanations from relevant institutions diverged. The Korea Development Bank, which serves as the secretariat of the National Growth Fund, stated in August that bank loans can also be considered community participation, while the Korea Energy Agency, which operates the Renewable Portfolio Standard, said that loans executed by commercial banks using residents as conduits are not eligible for community participation Renewable Energy Certificates. Critics point out that uncertain revenue was reflected as confirmed revenue to inflate project viability.
Friction continues over the site and permitting. After substructure installation began in June, a punchthrough phenomenon occurred in which pin piles penetrated excessively into soft seabed ground. Additionally, permitting risks have not been resolved, including the fact that part of the project area overlaps with an air force air defense control radar operating zone. This outlet previously reported exclusively on concerns surrounding an alternative approach in which private developers would directly purchase, operate and own military radar assets, which are security assets.
In response to these controversies, the Financial Services Commission stated that while it is true that the Future Energy Fund was jointly financed by the five major commercial banks and the Korea Development Bank, the structure does not involve loss compensation measures, and that decisions on the form of capital contributions and loans are areas for private judgment based on project viability.
A Ministry of Climate, Energy and Environment official also explained that concerns about output restrictions raised at the investment deliberation committee were reviewed during the examination to confirm that even in the worst-case scenario, there would be no problem with principal repayment. Regarding permitting risks, the official stated that management has continued since the successful bid in the 2023 fixed-price contract auction, and that the Ministry of National Defense agreed on the condition of executing an implementation agreement, with consultations currently underway to complete it within the deadline. The official added that for the 400 billion won guarantee project, it was approved in December of last year and operates through a guarantee structure via the Korea Credit Guarantee Fund, with only 32 billion won of actual MCEE budget deployed.
KWI developer profile — Hanwha Ocean
4 projects in Korea totalling 1,730 MW. Compiled from the KWI database. Not part of the source article.
Sinan Ui Offshore Wind — this article
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ChilHae 1 Offshore Wind
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ChilHae 2 Offshore Wind
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Boryeong Nokdo Offshore Wind
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Project data: KWI database — Electricity Business Licence records, EIA filings (ME2021C012, ME2026C003, ME2026C014), Electricity Regulatory Commission minutes, and pre-EBL permit filings.
Original Korean article: sisajournal.com
