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A view of the Dukovany nuclear power plant in the Czech Republic. / Courtesy of the Ministry of Land, Infrastructure and Transport

Korea Hydro & Nuclear Power (KHNP) has formally ended contract negotiations with a consortium of Daewoo Engineering & Construction (Daewoo E&C) and Doosan Enerbility that was expected to undertake construction work for the Dukovany nuclear power plant project in the Czech Republic. The failure to resolve differences over construction costs and contract terms means that KHNP must select a new main construction contractor for the 27 trillion won nuclear power export project.

According to KHNP on Oct. 29, the company has decided to terminate negotiations with the Daewoo E&C-Doosan Enerbility consortium over the construction contract for Dukovany Units 5 and 6 and begin preparations for a new tender to select a contractor. The decision follows the failure to reach a final agreement after approximately 15 months of negotiations since KHNP signed the main contract with the Czech project owner in June last year.

The negotiations faced difficulties not only over construction costs but also over the contract structure, scope of work and division of responsibilities. KHNP sought a fixed-price lump-sum contract that would determine construction quantities and the contract price during the basic design stage, while the contractors insisted on additional payments for increased work quantities identified after detailed design.

The two sides had agreed on construction terms for one nuclear reactor during the initial bidding process in 2022 but failed to reach an agreement for the final bid covering two reactors in 2024. KHNP included its own cost estimates in the bid based on previously agreed unit prices and other factors. However, differences remained unresolved despite two meetings between senior executives, 78 working-level meetings and 11 sessions of a dispute resolution committee.

KHNP explained that it had proposed a compromise by increasing construction costs to reflect higher work volumes and postponing the point at which the contract price would be finalized until the basic design approval stage. However, the company maintained that it had been difficult to verify whether the construction costs were reasonable because the contractors had not submitted detailed cost data.

Following the decision to replace the contractor, KHNP has drawn up a tentative plan to hold a preliminary briefing in January next year, issue a tender notice in April and sign a contract with a new contractor in July. Although preliminary site preparation work was originally scheduled to begin in January 2028 and full-scale construction in November 2029, the new contractor will have less time to participate in design and licensing preparations.

KHNP pointed to delays in the existing contractors' management of design subcontractors and submission of deliverables, saying that some stages of the project are already behind schedule. Until a new contractor is selected, KHNP plans to separately commission design work for auxiliary facilities and heavy equipment transportation routes, while directly handling project schedule management and arrangements for temporary accommodation.

Terminating the joint cooperation agreement with the existing consortium will also require a separate procedure. KHNP plans to negotiate the settlement of costs and handover of deliverables but has not ruled out the possibility of legal disputes. The company also intends to allow Daewoo E&C and Doosan Enerbility to participate in the new tender.

KHNP plans to maintain the original project schedule in consultation with the Czech project owner. However, given that the Czech side had originally requested that the construction contract be finalized by the end of September, delays in selecting a new contractor and transferring existing work could cause contractual disputes between Korean companies to develop into broader challenges for project schedule management and additional costs for the Czech nuclear power project.

                                                                                                       Jeong Soon-young