SEOUL — South Korea’s ambitious push to build the Dukovani nuclear power plant in the Czech Republic has hit a roadblock following the breakdown of initial construction contract negotiations. While Korea Hydro & Nuclear Power (KHNP) aims to select a new builder by July next year, domestic industry insiders argue that the fundamental contracting model must be thoroughly reexamined.

The core controversy centers on the use of a Lump-Sum contract. Because the project involves the APR1000 reactor—a first-of-its-kind design with no prior construction history—neither the final design nor exact material volumes are fully established. Critics warn that locking in a fixed total cost under such uncertain conditions places an unsustainable financial burden on the construction partner.

Emergency Government Meeting and Re-bidding Plans

In response to the stalled talks, South Korea’s Ministry of Trade, Industry and Energy (MOTIE) held an emergency inspection meeting on December 2 chaired by Vice Minister Park Dong-il. Officials reviewed KHNP's new contractor selection timeline, scheduling, and strategic execution plans. The government remains committed to key milestones, including submitting a construction permit application in April, initiating site preparation in January 2029, and breaking ground in November of the same year.

KHNP maintains that a Lump-Sum approach is essential for strict budget control. Under this model, the total project cost is finalized before construction begins, meaning the contractor absorbs any subsequent cost overruns driven by rising material prices or volume increases. While advantageous for project owners, the framework exposes builders to severe risks when design changes are frequent.

The Clash Over Risk Distribution: KHNP vs. Daewoo E&C

The breakdown in talks between KHNP and Daewoo E&C largely stemmed from sharp disagreements over risk allocation.

KHNP's Position: KHNP asserts that the construction consortium proposed the Lump-Sum structure during the initial bidding phase in 2022. The company notes that this approach aligns with International Federation of Consulting Engineers (FIDIC) standards and was successfully utilized for domestic nuclear projects as well as the Barakah nuclear plant in the United Arab Emirates (UAE).
Daewoo E&C's Position: Daewoo counters that the Czech project differs fundamentally from previous exports. Unlike the Barakah plant—which was based on the mature APR1400 reactor with existing reference plants—the Czech project lacks even a finalized basic design, creating immense volatility in construction volumes. Daewoo argued that forcing a subcontractor without design authority to shoulder the financial risks of design modifications violates basic FIDIC principles.
Industry experts note that KHNP itself is already experiencing financial fallout from Lump-Sum agreements, having accumulated approximately 1.2 trillion won in construction loss provisions, primarily from the El Dabaa nuclear project in Egypt.

Industry Warnings and Alternative Solutions

Energy and construction specialists caution that unless risk-sharing terms are reformed, KHNP may struggle to attract a replacement contractor.

Yoo Seung-hoon, a professor of Future Energy Convergence at Seoul National University of Science and Technology, pointed out that enforcing a rigid Lump-Sum model amid rising post-bid inflation is impractical. He emphasized that future nuclear exports must incorporate flexibility clauses to adjust construction costs in response to inflation.

Other industry representatives highlighted that international builders have grown increasingly cautious following heavy overseas losses in the Middle East and Southeast Asia over the past decade. With limited historical data for South Korea's first entry into the Czech market, unexpected expenditures remain a major threat.

Construction experts suggest that alternative frameworks, such as unit-price contracts or volume-reconciliation methods, should be considered when scopes are unclear, allowing total costs to be fixed only after detailed designs are finalized. As the global nuclear industry watches how Seoul navigates this dispute, experts urge policymakers to reevaluate the risk-sharing structure to protect project viability and maintain international trust.

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