What Are the Four Key Issues Behind the Breakdown of Subcontract Negotiations for the Czech Nuclear Project?
Subcontract negotiations for the main equipment installation contract for the new Dukovany nuclear power plant in the Czech Republic between Korea Hydro & Nuclear Power (KHNP) and the construction consortium of Daewoo E&C and Doosan Enerbility (hereinafter the consortium) have finally broken down after 1 year and 6 months. On October 29, 2026, KHNP ended the contract negotiations and moved to replace the consortium. The two sides are locked in a dispute over who bears responsibility for the collapse of the deal.
The biggest point of conflict is the contract method. Under a lump-sum fixed-price contract, the total construction cost is set before work begins, and the contractor bears the risk of any subsequent rise in material costs or increase in workload. By contrast, a unit-price contract sets only unit prices per item, with actual quantities settled later.
KHNP argues that the consortium itself proposed the lump-sum fixed-price contract during the initial bidding in 2022 and agreed to it, and that this method was applied under the international standard for construction contracts (FIDIC) as well as at domestic nuclear plants and the Barakah nuclear plant in the United Arab Emirates (UAE). Since contracts with KEPCO E&C, Doosan Enerbility, and other Team Korea partners were already concluded on a lump-sum fixed-price basis, making an exception only for the construction contract would leave KHNP fully exposed to the risk of rising project costs. KHNP also said it had asked the consortium to include contingency reserves in its price calculation during the initial bidding.
The consortium counters this argument. Its key point is that the Czech nuclear plant is the world's first construction of the APR1000 reactor model. Unlike the UAE plant, which is based on the APR1400 with multiple reference plants, even the basic design has yet to be completed, resulting in high variability in construction quantities. Forcing a construction subcontractor with no design authority to bear the risk of design changes also violates the FIDIC Red Book, the international standard contract terms, the consortium argued. It added that during bidding KHNP had asked it to exclude contingency reserves from its estimate, promising to reflect them uniformly, only to change its position later. During negotiations, KHNP also demanded a reduction in unit prices while keeping the total contract amount unchanged even as it presented increased quantities, the consortium said.
Tensions also ran high over the flow-down clause controversy and disputes over construction capabilities. In large overseas construction projects, the lead EPC contractor typically includes flow-down clauses that pass down the obligations of the main contract signed with the client to subcontract agreements. KHNP said it sought to reflect the basic obligations in the construction field within the construction contract to ensure consistency with its duties and responsibilities under the main contract, but the consortium refused. KHNP maintains that there was no unfair transfer of risk, as it verified the trillions of won in additional work identified after the final bidding through an external expert review and proposed an increase in construction costs accordingly.
The consortium pushed back, arguing that it was coerced into accepting 'poison pill clauses,' such as one holding the consortium responsible if it failed to detect KHNP's design errors, and another denying compensation for indirect costs even if construction was delayed because the client failed to acquire the site on time. The consortium also countered that the proposed increase for additional work fell far short of 40 percent of the actual estimated cost.
KHNP said it negotiated for 15 months after the signing of the main contract, holding two meetings with the CEOs, 78 working-level meetings, and 11 dispute resolution committee sessions. The consortium protested that KHNP only presented a new proposal from its management on October 7 and then unilaterally set October 29—just three weeks later—as the deadline. Three weeks was an impossible timeframe to review the regulatory and licensing risks of the European nuclear market, and KHNP refused its request to extend the negotiation deadline to the end of the year, the consortium said.
