Controversial Czech nuclear plant: “KHNP raises the volume and cuts unit prices; the government should mediate renegotiations”

[Financial News] Daewoo Construction’s labor union directly rebutted Korea Hydro & Nuclear Power’s (KHNP) explanation regarding negotiations on the construction contract for the Dukovany nuclear power plant in the Czech Republic, saying KHNP had demanded what amounted to a cut in unit prices rather than an increase in construction costs.
On the 12th, Daewoo Construction’s labor union issued a further rebuttal to KHNP’s 10-point explanatory statement in a press release. The union claimed, “KHNP’s explanation distorts the facts and abuses its monopolistic advantage as a public corporation to unilaterally pass losses and risks on to a private construction contractor.”
The union first took issue with the contract terms proposed by KHNP. KHNP explained that the terms were intended to increase the contract price to reflect the projected rise in construction volume and reduce the contractor’s risk burden.
The union countered that it was “a modified unit-price reduction proposal that kept the total contract amount fixed while raising the baseline contract volume to 125% of the bid level and demanding a corresponding cut in unit prices.” In short, the union said, it was an unfair contract that forced a private company to carry out construction at a loss.
The union also raised concerns about KHNP’s claim that there had been “an objective review by a third-party institution.” In its press release, the union said, “If KHNP’s claim is true, it should transparently disclose to the public which third-party institution was involved, as well as the specific scope of work commissioned and the verification criteria.” It went on to denounce as “an abuse of its superior position as a public corporation” KHNP’s demand that others blindly accept undisclosed information without making the verification findings public.
The union also criticized KHNP’s application of international contract standards, saying that unit-price contracts are the basic principle for construction contracts carried out according to the client’s design, but that KHNP had imposed a fixed-price, lump-sum system that placed all the risk on the contractor.
The negotiation process is also controversial. The union claimed, “We held around 90 rounds of working-level negotiations over 15 months, but KHNP unilaterally presented onerous revised terms on the 7th of last month, rendering the progress made in earlier negotiations meaningless.” It also pointed out that the construction consortium submitted a final revised proposal on the 29th of last month, accepting the risk of losses amounting to hundreds of billions of won, but KHNP announced the breakdown of negotiations about 30 minutes later.
A union official urged, “The new bidding process KHNP is planning, which will take nine months, will cause delays to the construction schedule and drive up costs under the same risk structure.” The official added, “The government must stop KHNP from unilaterally pushing ahead with a new tender and immediately establish a renegotiation process based on fair risk-sharing.”
[email protected] Lee Jong-bae Reporter