South Korean energy merger faces scrutiny over 65 trillion won debt

The South Korean government is pursuing a merger between the Korea Gas Corporation (KOGAS) and the Korea National Oil Corporation (KNOC) to create a unified ‘Energy Resources Corporation.’ The move aims to enhance national energy security and reduce operational redundancies. However, the plan faces significant scrutiny regarding the financial stability of the two entities.

Combined, the two corporations hold approximately 65 trillion won in debt. KOGAS carries roughly 42.8 trillion won in debt, while KNOC is in a state of total capital impairment with approximately 22 trillion won in liabilities. Lawmakers and industry experts have warned that without a clear strategy to address these debts, the merger could result in a combined debt ratio of 600% to 800%, potentially damaging creditworthiness and hindering international investment.

Additional concerns include the protection of shareholder rights, as KOGAS is a listed company with private and foreign investors, unlike the non-listed KNOC. During a recent parliamentary audit, the heads of both corporations stated they had not received detailed implementation plans or prior consultation regarding the merger. Critics argue that a feasibility study and a concrete roadmap for financial restructuring must precede any formal integration.