11 September 2013

Korea Times (South Korea): Endless scandals hit nuclear power supplier

Endless scandals hit nuclear power supplier

2013-09-01 13:09

KHNP suffers from grave loss of public credibility

By Kim Da-ye

When the heat wave subsides and preventing a nationwide blackout is no longer a priority, the public will recover their composure and question what made this summer the worst one in history.

Was the heat probably caused by climate change? No. The government’s inability to adjust electricity rates to reasonable levels and the failure to estimate electricity consumption this summer and prepare enough energy sources? Probably, but the rates have been kept that way for many years. Or it is consumers and businesses that squandered electricity because it’s so cheap? To an extent, but citizens did a lot in the past month to prevent a blackout. The responsibility clearly lies with Korea Hydro and Nuclear Power (KHNP), the state-run company that’s responsible for the country’s nuclear plants.

A scandal continues to unfold surrounding the country’s nuclear power plants. Corruption at KHNP has led to nearly a quarter of the country’s 23 nuclear reactors to stop. With few reactors online, concerns over a nationwide blackout loomed. Aside from energy concerns, prosecutors continue to uncover illegal activity that happened between KHNP employees, subcontractors and politicians.

The corruption scandal at KHNP started with mounting safety concerns. Investigators found thousands of substandard parts with fake warranties installed in reactors. Plus, control cables that shut down reactors in the event of an emergency failed safety checks but were still installed in several nuclear reactors with forged safety certificates.

As the investigation continues, the deep ties between KHNP and the industry are being revealed. The Korean media came to name the tightly-knit, insular nuclear community as “the nuclear mafia.”

The scandal now has spilled over onto the political circles with a former vice minister close to former President Lee Myung-bak being investigated over if he was bribed for favor to a subcontractor of KHNP. Some people are referring to the situation as a Korean version of the Watergate scandal that brought down the Nixon administration in the United States as investigators look into possible government ties.

Main players

It’s not the first time KHNP has made headlines. On Jan. 24, the prosecutors uncovered 11 KHNP officials took bribes from subcontractors for various illegal favors. Some officials stole parts from the inventory and gave back to the supplier of the parts that made money from providing KHNP with the same parts. Some chose suppliers that bribed them in biddings.

In May, when investigators found unsafe cables, the Supreme Prosecutors’ office launched a special investigation. The office claims several layers of corruption were revealed as part of their investigation.

The original point of the investigation was to look into the installation process of the substandard control cables, but other concerns soon emerged. The investigation led to a raid at the home of former KHNP CEO Kim Jong-shin on July 5. Kim was later indicted for receiving 130 million won from a waste-water-filtering company.

The headquarters of Hyundai Heavy Industries was also raided. The investigation found that several present and former officials at Hyundai bribed a general manger of KHNP with the last name, Song.

In June, prosecutors found about 600 million won at Song’s home during a raid. It was later revealed that Hyundai officials offered Song 1.7 billion won in total in bribes, of which he collected 1 billion won. The prosecutors are trying to figure out where 400 million won flew into.

The world’s second-largest ship maker supplies parts worth hundreds of billions of won to the large-scale nuclear plants in the United Arab Emirates, which is a consortium Korean companies are building.

In August, another fraud was made public. A senior manager of KHNP took a bribe to help a subcontractor pocket foreign parts, which were assembled into the supplier’s turbine valve actuator. The company boasted about developing a Korean-made turbine valve actuator that led to deals worth 20 billion won.

By late August, Park Ki-chul, the head of the power generation division and vice president at KHNP, was taken into custody for receiving 100 million won from a president of a small company identified with the last name Soh. Soh’s firm allegedly hoped to win a contract for maintenance of a specific nuclear part. He’s the same man who was considered for the CEO position at KHNP in 2010.

In August, four KHNP officials identified as Song, Nam, Shin and Huh were arrested for taking tens of millions of won from suppliers. Soh is suspected of bribing Song to win a maintenance contract and is suspected of being the middleman between Hyundai Heavy Industries and the general manager of KHNP.

Relationships in nuclear industry

According to an independent nuclear energy consultant, nuclear industries across the world are notoriously tightly-knit and Korea is no exception.

“The nuclear industry has its origin in military establishments. Most, if not all of the nuclear programs had a military component at some point, even in countries like Switzerland and Sweden,” Mycle Schneider, a consultant and lead author of The World Nuclear Industry Status Reports said.

“The technology can be used for civil and/or bomb purposes. That makes it extremely difficult to regulate and to control. At the same time, that makes it difficult to govern under democratic rules. The more democratic elements come in, the more difficult for the industry to maintain its supreme position as a highly centralized, government supported and (more or less) controlled industry.”