Paolo Danese talks to the general counsel at POSCO Energy JiHyung (Ji) Kim about the current state of the Korean energy market and the prospects for future growth
Please describe your role at POSCO Energy
I oversee the legal issues that arise from operation of the company and am also involved in transactions of the company. In addition I handle the negotiation stages of major contracts and take part in the negotiation itself in addition to checking up on legal issues and compliance.
What has been your recent experience covering traditional power and renewable projects? What are the trends?
The main driver for growth is the acquisition of assets. The manufacturing side is growing as well and is a key function of the business. Historically, we have also been the largest IPP (independent power producer) in Korea. There also continues to be growth overseas and in renewables.
How badly has the macro-economic situation affected local investments, domestically and regionally?
It certainly has an impact on us. Given the scale of national economies and the long turnaround time, there are risks with each project.
As a key industry player operating cross-border, which recent regulatory changes have affected you in the jurisdictions you function in?
We try to keep up with main changes in law, which affect our existing assets. We follow updates affecting both projects under construction and for areas of future interest, as any regulatory changes have an impact on our cash flow. For example the change that made for the enforcement of contracts between Indonesia parties to be written in Indonesian not English was an issue. A Government’s stance on compliance issues also has an impact.
How advanced is Korea’s regulation for power projects? How would you compare it the US or European standards?
There were major changes in the regulations for the power business around 2000, two government terms ago, a big wave of new regulations came in. There has been an attempt to privatise industry, right now it is largely monopolised by the government owned entities. It is driven by opportunities, for example the potential to generate electricity in Latin America, but it is a highly politicised area. Government strategy is an area where Korea is much more controlled compared to Europe.
What are the main issues you find when it comes to sourcing financing?
It is not so hard to get financing for our projects. There are so many sources of capital and the harder part is to choose where to invest, finding suitable projects and profitable projects. Earlier, around 2000, we were struggling for funding, but now it is the opposite.
In your recent experience, what have been the legal issues that represent a major risk to the success of specific projects? Are some types of energy deals more risky than others?
There are companies in Indonesia that we want to invest in and working with Government is a challenge. With the central Government there is a level of unknown risk and it is hard to quantify the risks when compared to doing business in more developed countries. But that’s common, political risk is an issue in several countries not only in Indonesia.
In Europe we do not have many projects. There is some work to be done in the US, but our main focus should be in the challenging jurisdictions.
What are the legal developments you would like to see and in what jurisdictions?
Uncertainty is a big issue for legality and it is a region wide risk, how law will change or be enforced in court if it will be enforced at all.
In some countries bribery is a real issue. International firms operating in Jakarta they cannot win the litigation cases they are handling now because of this very reason.
There are FCPA issues as well, as our parent company is a listed company we have higher internal standards to abide by.
How do you choose external counsel?
Generally, it is a pure bidding process, we receive multiple proposals from outside and we have a list of firms that we ask to submit bids. We do look at qualification and experience in those areas in past transactions. We also check directories and ask around for people in specific jurisdictions. We ask lawyers that are involved, for example if we work in Saudi Arabia we have to find out from sources who are the local players that can be trusted.
The circle of our panel firms changes depends on the kind of business and the place you are doing business and who the counterparties are, if it is Government of country A, you want to use law firms that have experience with negotiating with the Government.
What are the prospects for the industry? What are you expecting for 2014?
On the Korean side there has been a slow down. The driving force behind overseas investment was by the state owned enterprises but they are now not as free to move as in the past. They won’t be as active in investing outside. It will definitely slow in terms of total volume. It really depends on capacity and money.
JiHyung (Ji) Kim
Ji Hyung (“Ji”) Kim is General Counsel at POSCO Energy, the first and largest independent power producer (“IPP”) in Korea.
At POSCO Energy, her group is actively involved in giving advice on a variety of legal issues in developing, financing, constructing and operating power projects and renewable energy projects in Korea and challenging overseas jurisdictions. Her group also regularly advises on various legal and IP related issues in the fuel cell industry in licensing and other various technology transfer transactions and R&D projects. Before Ji joined POSCO Energy, she was a senior legal counsel of POSCO Engineering & Construction where she advised on multiple EPC (engineering, procurement and construction) projects in various countries.
She was also an in house legal counsel advising on various legal issues of the pharmaceutical industry in Korea and the US for other Korean conglomerate companies such as CJ, and LG Life Sciences, whose “FACTIVE” was the first FDA approved new drug developed by a Korean company. Ji received her BA in English Literature from Yonsei University, MA in Anthropology from SUNY at Buffalo, and JD from Rutgers University School of Law at Newark. She is admitted to practice law in New Jersey. Ji is a working mother with three children and an active member of In House Counsel Forum (IHCF) in Korea where she sits on energy/construction subcommittee as a co-chair.