"Aftermath of Electricity Rate Freeze: KEPCO Finally Turns to Deficit... Q2 Operating Loss of 764.8 Billion Won"

Operating Loss of 764.8 Billion Won in Q2, Returning to Deficit After 6 Quarters
Fuel Cost Increased Due to High Oil Prices... Operating Expenses Surge as Electricity Rates Frozen in Q2 and Q3

[Sejong=Asia Economy Reporter Kwon Haeyoung] Korea Electric Power Corporation (KEPCO) recorded an operating loss close to 800 billion won in the second quarter of this year, marking a return to deficit after six quarters since the fourth quarter of 2019. Despite the rise in fuel costs due to high oil prices, KEPCO was hit hard in its performance as the government’s price control prevented electricity rate hikes in the second and third quarters of this year.

KEPCO announced on the 13th that its consolidated operating loss in the second quarter was 764.8 billion won, turning to a deficit compared to the same period last year (operating profit of 389.8 billion won). Sales in the second quarter increased by 3.4% year-on-year to 13.5189 trillion won, while net loss turned to 673.9 billion won.

For the first half of the year, an operating loss of 193.2 billion won was recorded. Compared to a year ago, operating profit shrank by 1.0136 trillion won, turning into a deficit. First-half sales were recorded at 28.5942 trillion won, up 1.5% from the same period last year.

KEPCO’s performance deteriorated because, although fuel and power purchase costs increased due to soaring oil prices, electricity rates could not be raised, worsening profitability. Due to increased electricity sales volume in the first half, KEPCO’s sales rose by 425.8 billion won compared to a year ago, but operating expenses increased by 1.4421 trillion won due to higher fuel and power purchase costs.

Looking at electricity sales revenue, power sales volume increased by 3.8% due to factors such as an increase in the average operating rate of the manufacturing industry. However, as a measure to stabilize citizens’ lives amid the prolonged COVID-19 pandemic, the fuel cost adjustment rate was actually lowered by 3 won per kWh, resulting in electricity sales revenue increasing by only 276.6 billion won.

On the other hand, cost burdens grew. Fuel costs for subsidiaries increased by 272.5 billion won, and power purchase costs from private power producers rose by 1.0143 trillion won. This was due to increased LNG power generation caused by the implementation of the coal power generation cap system to reduce greenhouse gases and increased power demand, as well as the Renewable Portfolio Standard (RPS) obligation rate rising from the previous 7% to 9%, increasing KEPCO’s cost burden. Other operating expenses increased by 155.3 billion won due to depreciation expenses from the acquisition of power generation and transmission/distribution facilities.

KEPCO stated, "As the impact of rising fuel prices is expected to be fully reflected in the future, KEPCO and its power group companies will suppress the unit cost of power supply to within 3% annually through intensive management efficiency. We will strengthen efforts to create new revenue and improve profits by expanding overseas renewable energy projects, developing new energy business models, and developing core carbon-neutral technologies, thereby laying the foundation for sustainable growth."

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