[Click eStock] A 1.7 Trillion Deficit Beyond Concerns... Is It Only a Korea Electric Power Corporation Issue?

Fuel and Electricity Purchase Costs Decreased but Operating Losses Soared
Expectations on Electricity Rate Reform and Long-term Power Supply Plan

[Asia Economy Reporter Minwoo Lee] Korea Electric Power Corporation (KEPCO) recorded an operating loss approaching 1.7 trillion KRW in the fourth quarter of last year alone. Despite reducing costs due to a decline in raw material prices, it is analyzed that the company suffered damage from an excessive nuclear power reduction policy.

On the 2nd, Korea Investment & Securities diagnosed KEPCO's poor performance last year in this way. Earlier, KEPCO announced that its sales in the fourth quarter of last year were 14.8611 trillion KRW, down 2% compared to the same period last year. Both electricity sales volume and overseas performance slightly decreased. However, costs decreased more than the sales decline. As raw material prices and System Marginal Price (SMP) fell, fuel costs and electricity purchase costs dropped by 12% and 9%, respectively. Nevertheless, other operating expenses surged, resulting in an operating loss of 1.6674 trillion KRW. Costs such as 600 billion KRW for carbon emission permits, 170 billion KRW for nuclear power post-processing provisions, and 240 billion KRW for labor costs increased, expanding the operating deficit by 900 billion KRW compared to the same period last year. Accordingly, the annual operating loss widened to 1.3566 trillion KRW, and the debt ratio rose by 26 percentage points (P) from the previous year to 187%.

Behind this poor performance lies the risk of energy policy. The nuclear power utilization rate in the fourth quarter of last year was 60%, down 13%P from the same period last year. This is the lowest since the first quarter of 2018. Woo Kyowoon, a researcher at Korea Investment & Securities, explained, "In light of the energy policy direction, there is still significant safety uncertainty regarding units such as Hanbit 3 and 4, so it is difficult to be optimistic about the rebound in nuclear power operation rates this year." He added, "Coal power generation must continue to be reduced to lower carbon emissions and fine dust, and environmental-related costs such as carbon emission permits and Renewable Portfolio Standards (RPS) are expected to increase gradually." Although crude oil and coal prices have stabilized downward, and a return to profitability is expected this year, the fundamental problems of energy policy and the electricity tariff system's irrationality remain.

Korea Investment & Securities maintained its investment opinion of 'Buy' on KEPCO with a target price of 38,000 KRW. The closing price on the 28th was 21,300 KRW. Researcher Choi said, "The social responsibilities that Korea Electric Power Corporation must bear, such as energy transition and regularization of irregular workers, are increasing." He added, "Conversely, considering the profit and loss statement, unless the regulatory environment changes, there is no alternative now, so attention should be paid to the electricity tariff reform plan to be outlined in the first half of the year and the 9th Basic Plan for Electricity Supply and Demand."

This content was produced with the assistance of AI translation services.