South Korea to merge five power generators, combine oil and gas firms in sweeping energy overhaul

The government plans to merge five power generation subsidiaries of Korea Electric Power Corporation — Korea East-West Power, Korea Western Power, Korea Midland Power, Korea Southern Power and Korea South-East Power — into a single entity tentatively named Korea Power. Korea National Oil Corporation and Korea Gas Corporation will be combined into a new body tentatively called the Energy Resources Corporation, while Korea Coal Corporation will be dissolved.

The consolidation is designed to pool fragmented investment, research and development, and fuel and maintenance procurement across agencies to achieve economies of scale and strengthen energy security and renewable energy transition capabilities. However, concerns have been raised that merging the power generators could weaken competition in the electricity market, and that absorbing the financially troubled oil corporation into Korea Gas Corporation could damage the gas company's own financial health.

According to the Ministry of Economy and Finance on Thursday, the five power companies — Korea East-West Power, Korea South-East Power, Korea Midland Power, Korea Western Power and Korea Southern Power — will be consolidated into Korea Power.

The five companies were spun off from the power generation sector in April 2001 to introduce competition into the electricity market, and have since independently pursued facility construction and operation, fuel procurement, and renewable energy and R&D activities.

The ministry said the merger was necessary to accelerate the energy transition — including the early achievement of 100 GW of renewable energy by 2030 — to address climate change, strengthen energy security and ensure stable power supply for large-scale projects. It added that restructuring the governance of the power generation sector was also needed to boost negotiating power and competitiveness in overseas business.

The government expects the consolidation to improve the management framework for public institutions overseeing national infrastructure such as energy and ports, helping the country respond to energy security challenges and supply chain disruptions. Merging the five companies into one, it said, would secure the capacity to lead the shift toward renewable energy and a just transition, and enable a coordinated response to carbon neutrality goals.

The five power companies currently invest a combined 50 billion won ($36.5 million) a year in R&D and 200 billion won in renewable energy construction projects on a fragmented, company-by-company basis. The ministry said consolidation would improve profitability through a unified financial structure that expands investment capacity, enables joint procurement of fuel and maintenance materials, and eliminates redundant staffing.

Under the single-entity structure, the merged company's headquarters would include a renewable energy division handling large-scale projects such as offshore wind, and a just transition division overseeing the phase-out of coal power. Three to four regional renewable energy divisions covering solar and onshore wind would also be established.

Korea National Oil Corporation and Korea Gas Corporation will also be merged to build an integrated energy security framework and optimize national energy supply and demand. The government cited the need to respond to supply chain crises stemming from geopolitical risks and to develop a unified national strategy for oil and gas.

The combined entity is expected to strengthen international negotiating power with oil-producing nations and global energy companies through economies of scale. Integrated management of oil and natural gas, as seen in other major countries, would allow the merged company to secure a more favorable position in bidding and negotiations for overseas oil fields, the ministry said.

Under the merger plan, Korea National Oil Corporation's strategic oil stockpiling and limited oil exploration and development functions would be transferred to the combined entity, while its retail restructuring functions — including the budget fuel station network — would be transferred to the Korea Petroleum Management Institute.

Previous attempts to merge the two companies have repeatedly failed. The idea of combining Korea National Oil Corporation and Korea Gas Corporation first surfaced during the Park Geun-hye administration in 2016, when the Ministry of Trade, Industry and Energy hired a foreign consulting firm to develop a merger plan, only for it to fall through. The Moon Jae-in administration also formed a second TF to pursue the merger but again failed.

The biggest obstacle has been the oil corporation's financial structure, with debts alone reaching 20 trillion won. Korea Gas Corporation, listed on the KOSPI, opposed the merger on the grounds that it could hurt its share price. The oil corporation, for its part, argued against the merger by claiming that its strategic oil stockpiling operations could be sidelined within a combined entity.

The government is designing a structure to ease shareholder resistance from Korea Gas Corporation during the merger process. As of the end of June last year, Korea National Oil Corporation's total equity stood at negative 1.09 trillion won, meaning it is in a state of complete capital impairment, with total borrowings reaching 16.1 trillion won. There are serious concerns that if Korea Gas Corporation — which only began improving its financial structure in 2024 — absorbs such a deeply troubled company, its own finances could deteriorate significantly.

Korea Coal Corporation will be liquidated after completing the closure of all its mines, with its remaining functions restructured to align with the shift toward renewable energy. Following the coal rationalization policy introduced in 1989, government measures including production cuts and price ceilings forced the company to sell coal below cost for decades. The last of its mines, the Dogye mine in Samcheok, closed in June 2025, ending all mining operations.

Persistent deficits driven by falling coal demand pushed the company's debt to 2.59 trillion won in 2025. With no separate business operations beyond residual matters such as litigation and debt refinancing, the company has been incurring annual interest expenses of more than 75 billion won, prompting calls for restructuring. The government said it would secure funding to settle Korea Coal Corporation's debts through consultations among related ministries, then pursue prompt liquidation through amendments to the Korea Coal Corporation Act and other relevant laws.