Merger of 5 state power firms to lead public institution overhaul

As the government moves to reduce the number of public institutions by 109, the merger of five state-owned power companies is expected to move forward first. Unlike more than 80 percent of the consolidation targets, which require legislative amendments, the power company merger can proceed without any separate law changes.

A government official said at a background briefing at Government Complex Sejong on Friday that "more than 80 percent of the targeted institutions require legislative amendments," adding that "in the case of the power companies, it can formally be done right away under the current framework."

The government has set target timelines for consolidating individual institutions, but officials said the actual schedule for those requiring legislation will depend on when the National Assembly acts. Institutions that do not require separate legal changes can begin follow-up procedures immediately.

In Thursday's announcement, the government stated its principle of "closely communicating and consulting with the National Assembly for the swift enactment or revision of laws needed for the functional reform, while immediately consolidating institutions that require no separate procedures." The five power companies slated for merger — Korea South-East Power (KOEN), Korea Midland Power, Korea Western Power, Korea Southern Power and Korea East-West Power — are to be combined into a single entity tentatively named "Korea Power."

Through the overhaul, the government plans to reduce the total number of managed institutions by 109, or about 20 percent. In calculating the reduction ratio, the government used a base figure of 524 institutions — encompassing not only currently designated public institutions but also entities that meet the criteria for designation yet have not been formally designated.

"There are about 60 small institutions with fewer than 40 employees, and there are also subsidiaries handling simple outsourced tasks," a government official said. "All of these were included in the base figure." If the plan proceeds as announced, the number of managed institutions will fall from 524 to 415. However, not all of these institutions are designated public institutions, so the actual number of designated public institutions may vary depending on future designation procedures.

The government also said this functional reform differs in character from past public institution restructurings, which focused on cutting headcount and costs. "The defining catchphrase of previous public institution reforms was 'the party is over,' but ours is nothing like that," an official said. "This started from the recognition that convergent and preemptive reform is needed to respond to the AI transformation and the normalization of compound crises."

Accordingly, staff headcounts — excluding executives — will be maintained throughout the consolidation process, with employment continuity guaranteed. Overlapping personnel will be reassigned, while demand for workers in AI and new technology fields will be expanded to ensure new hiring does not decline. "Cost reduction itself is not a major goal," the official said.

Existing regional organizations are expected to be largely preserved after consolidation. The government cited Korea Gas Corporation in Daegu and Korea National Oil Corporation in Ulsan as examples, saying that even after a merger, existing organizations could be divided into headquarters and regional offices to maintain their functions. Consolidation will not automatically lead to the sale of existing buildings or the relocation of institutions; decisions on relocation will be made separately in connection with the government's public institution relocation policy.

Hiring of local talent will be maintained through recruitment at the branch level. "In the case of the power companies, if the headquarters is placed in one location, there is the question of how to handle local talent recruitment — we will take measures through branch-level hiring to ensure there is no problem," the official said. Regional tax revenue issues will be reviewed further once the specific organizational structure is determined.

Potential conflicts with unions during the consolidation process will be addressed through two-track consultations. One track involves labor-government talks at the federation level, with participation from the Ministry of Economy and Finance, the Ministry of Employment and Labor, the Federation of Korean Trade Unions and the Korean Confederation of Trade Unions (KCTU) — a process that has already taken place five times. The other track consists of consultations between each competent ministry and the unions of individual institutions. The government said it would continue communicating with unions as it develops implementation plans and detailed roadmaps for each institution.