KEPCO "Two Consecutive Years of Losses Not Due to Nuclear Phase-Out"...3Q Operating Profit 2.3 Trillion Won

Fuel Cost Drop Leads to 3.9 Trillion KRW Decrease in Power Purchase Expenses... Nuclear Power Utilization Rate Down 0.7%p YoY
KEPCO Self-Assessment: "Fuel Costs Impact More Than Nuclear Phase-Out"
Electricity Tariff System Reform Suggested... From "Effort" in Q2 to "Promotion" in Q3

[Asia Economy Reporter Moon Chaeseok] "This proves that the deficits of Korea Electric Power Corporation (KEPCO) in 2018 and last year were due to high oil prices, and the claim that 'the government's nuclear phase-out policy, which reduced nuclear power plant operations, is the cause of KEPCO's deficits' is unfounded."

KEPCO made this self-assessment after posting a profit in the third quarter. Since profits were made despite a lower nuclear power utilization rate, the claim that the government's nuclear phase-out policy caused poor performance was directly refuted as incorrect.

KEPCO announced on the 12th that its consolidated operating profit for the third quarter increased by 88.2% year-on-year to 2.3322 trillion won. This amount is 7.4% less than the securities market consensus estimate of 2.5198 trillion won.

Following profits of 430.6 billion won in the first quarter and 389.8 billion won in the second quarter, KEPCO posted profits for three consecutive quarters. Even in 2018 and last year, when it was mired in deficits, the third quarter results recorded profits in the trillion-won range, and this year’s third quarter also showed strong performance.

Third quarter sales amounted to 15.7113 trillion won, down 1.3% compared to the same period last year. The cumulative operating profit from the first to third quarter was 3.1526 trillion won, with sales totaling 43.877 trillion won.

KEPCO: "2018 and 2019 Deficits Due to High Oil Prices, Not Nuclear Phase-Out"

Korea Hydro & Nuclear Power, a power generation subsidiary of Korea Electric Power Corporation, announced that it plans to hold a public hearing for residents on the draft of the final decommissioning plan on the 30th of last month. The public hearing will begin on the 20th. (Photo by Korea Hydro & Nuclear Power)

KEPCO’s nuclear power utilization rate from the first to third quarter was 73.8%, down 0.7 percentage points from 74.5% during the same period last year.

KEPCO argued that the fact it posted profits despite a lower nuclear utilization rate proves that the deficits over the past two years were caused by high oil prices, not the government’s nuclear phase-out policy.

A KEPCO official explained, "Nuclear plant operations were at a level similar to the previous year, but the reduction in fuel and power purchase costs due to low oil prices significantly contributed to improved performance."

He added, "This proves that the claim that 'the government's nuclear phase-out policy, which reduced nuclear plant operations, is the cause of KEPCO's deficits' is baseless."

Regarding power purchase costs, purchases from private power producers increased by 1.1%, but due to the drop in oil prices, costs decreased by 1.6 trillion won compared to the same period last year.

Indication of Electricity Rate Reform... From 'Effort' in Q2 to 'Promotion' in Q3

Jong-gap Kim, President of Korea Electric Power Corporation. (Photo by Korea Electric Power Corporation)

KEPCO announced it will present an electricity rate reform plan at two board meetings by the end of the year.

In the Q2 earnings announcement last August, KEPCO said it would "make efforts to rationally reform the electricity rate system," but in the Q3 announcement, the tone was raised to "promote rational reform of the electricity rate system."

A KEPCO official declared, "Since the company's management environment is structurally vulnerable to international oil prices and exchange rate fluctuations, we aim to promote a rational electricity rate system reform to enhance transparency and predictability in rate determination."

On the previous day, KEPCO CEO Kim Jong-gap emphasized, "Recently, the President personally mentioned the need to establish a 'power supply system that reflects climate and environmental costs,' and now South Korea can no longer delay a future-oriented electricity rate system."

This was stated during a greeting at a forum on 'Electricity Rate System Establishment Measures' hosted by the office of Democratic Party lawmaker Lee Jang-seop and the Korea Electric Association at the National Assembly.

'Strong Q3 Performance Thanks to Ice Cream Sales'... This Year Thanks to Low Oil Prices

Generally, the third quarter is a period when KEPCO’s performance improves due to increased electricity consumption and sales revenue. The phrase "strong performance thanks to ice cream sales" is often used.

This year, despite a 2.5% decrease in electricity sales compared to previous years due to prolonged monsoon season and the resurgence of COVID-19, performance increased.

The drop in oil prices led to a 3.9 trillion won reduction in fuel costs for power generation subsidiaries and power purchase costs from private power producers, boosting performance.

KEPCO’s fuel costs decreased by 2.3 trillion won year-on-year due to lower prices of fuels such as bituminous coal and liquefied natural gas (LNG).

However, sales decreased by 0.5% to 28.1657 trillion won compared to the same period last year. The reduction in coal-fired power generation, which has a low generation cost, acted as a limiting factor on performance.

Monsoon and COVID-19 Impact... Electricity Sales Volume Declines

[Image source=Yonhap News]

Due to the prolonged monsoon season and the resurgence of COVID-19 following the August 15 Liberation Day rallies, consumption contracted, resulting in a 2.5% decline in electricity sales volume. Consequently, electricity sales revenue decreased by 400 billion won.

Industrial use dropped by 4.2%, general use by 2.2%, and educational use by 13.6%. Residential use increased by 5% due to more telecommuting, and agricultural use rose by 0.4%. Essential operating costs related to power supply, such as depreciation and maintenance expenses, increased by 700 billion won compared to the same period last year.

Meanwhile, KEPCO announced that since the beginning of the year, it has formed a 'Group Financial Improvement Task Force (TF)' to focus on reducing fuel costs and addressing internal and external financial issues. Through this, it has improved the efficiency of power supply cost execution across the group and continuously pursued profit improvement.

Additionally, KEPCO stated it will accelerate ESG (Environmental, Social, and Governance) responsible management by ▲ promoting grid investments for expanding new and renewable energy and achieving carbon neutrality ▲ developing overseas projects centered on low-carbon and eco-friendly initiatives ▲ securing funding to expand investments in new and renewable energy ▲ improving sustainability report publication (since 2005).

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