[Click eStock] "Kepco Leading Green New Deal, 3Q Operating Profit to Exceed 2 Trillion Won"

Leading Stocks in the Green New Deal... More Benefits than Harms
"Passage of the Electricity Business Act Amendment and Prior Reform of the Electricity Tariff System Are Essential"

[Asia Economy Reporter Minwoo Lee] It is forecasted that Korea Electric Power Corporation's (KEPCO) operating profit for the third quarter of this year will exceed 2 trillion won. It is expected to play a leading role and grow in the government's Green New Deal policy going forward.

On the 3rd, NH Investment & Securities projected that KEPCO will achieve sales of 15.535 trillion won and an operating profit of 2.089 trillion won in the third quarter of this year. While sales decreased by 2.3% compared to the same period last year, operating profit increased by 75%. It is judged that KEPCO will benefit more than suffer as a company leading the government's Green New Deal policy.

However, the passage of the Electricity Business Act amendment and the introduction of a power purchase cost linkage system were cited as prerequisites. Minjae Lee, a researcher at NH Investment & Securities, analyzed, "In the case of solar power generation, the target was achieved with private sector-led distribution from 3 gigawatts (GW) in 2016 to 14 GW as of June this year over the past three years, but wind power generation is at 1.5 GW, which is low compared to the target," adding, "Large-scale wind power complexes need to be developed offshore, but site selection, permit promotion, and large-scale investment attraction have not proceeded as planned."

The solution to this is considered to be KEPCO's participation in offshore wind power projects through a separate corporation established by amending the Electricity Business Act. However, this requires additional borrowing of more than 3 trillion won annually, and KEPCO's financial structure currently lacks the capacity to execute large-scale investments. Therefore, it is analyzed that the introduction of a power purchase cost linkage system to reform the electricity tariff structure is necessary to accumulate stable profits.

Currently, a power purchase cost linkage system linked to oil prices but with a capped increase factor is being discussed. Opponents of electricity tariff system reform, as in 2018, claim it is due to the nuclear phase-out policy. However, nuclear power generation capacity will be maintained until 2030 with the introduction of four new nuclear reactors, so it is not a reason for tariff increases. Also, the generation cost of renewable energy has become similar to that of coal power, so it cannot be a direct cause for increases. The researcher said, "Even if the power purchase cost linkage system is introduced immediately, the possibility of direct increases is limited," and predicted, "Electricity tariff system reform will proceed in a way that adjusts unnecessary tariff benefits and unreasonable parts."

Against this background, NH Investment & Securities maintained a 'Buy' investment opinion and a target price of 26,000 won for KEPCO. The closing price on the previous day was 21,150 won.

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