Oct. 13, 2009 (The Korea Times) -- By Kim Tong-hyung
Staff Reporter
Poor judgment and lack of business savvy have a number of state-run enterprises blowing their money on foreign investment projects, lawmakers claimed Tuesday.
According to data gathered by the National Assembly Knowledge Economy Committee, Korean state-run firms have had either a feast or famine with their recent investment projects in neighboring Asian countries and elsewhere.
The Korea Electric Power Corporation (NYSE:KEP) (KEPCO) had success in some projects in the Philippines and Lebanon, but failed in a fossil-fuel power generation business in China.
The price spike in coal meant that KEPCO's losses in operating its coal-fired power plant in Shanxi, China, topped $53 million. KEPCO also lost around 18.7 billion won in operating a combined-cycle power plant in China's Henan Province, and ended up selling off the facility in October last year.
The company lost 1.1 billion won from a project to build another power plant in Henan, which never gained approval from the Chinese government.
Failures have clearly outnumbered successes in KEPCO's overseas ventures in the past few years.
The company has signed a total of 52 memoranda of understanding (MOUs) over foreign development projects since 2004, but only seven of the projects are so far generating profit, the National Assembly said.
The overseas blunder by the Korea Gas Corporation (KOGAS) is perhaps more embarrassing. KOGAS in August last year announced a plan to invest in the gas fields in Block A-7 off the Myanmar coast to produce natural gas, only to back off later and burn $7.6 million in the process.
This had critics wondering whether KOGAS had sufficient information about the potential of the Myanmar gas fields or properly studied the feasibility of the project.
The Korea Resources Corporation relied on the help of a Korean-Chinese businessman in attempting to develop an iron ore field in Dandong, China, only to see him disappear after the project went awry.
Despite the mixed results from their overseas adventures, state-run companies are continuing to bet aggressively on foreign development projects, with their revenue growth stalled on the domestic market.
The companies even formed an organization earlier this year to share information and collaborate on finding lucrative business opportunities abroad.
More recently, the Korea Coal Corporation (KOCOAL) recently announced a plan to participate in the developing of coal mines in China, while the Korea Rural Community Corporation (KRC) is pursuing agricultural and natural resources development projects in Tanzania, Laos, Senegal and Mongolia.
