KEPCO Faces Direct Hit from Soaring Energy Prices... 5.8 Trillion Won Deficit Last Year

Operating loss of 5.8601 trillion KRW last year... Sales increased by 2 trillion KRW YoY
Impact of rising energy prices... SMP up 37% in one year
Carbon neutrality costs also a burden... This year's performance outlook remains bleak

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Lee Jun-hyung] Korea Electric Power Corporation (KEPCO) recorded an operating loss close to 6 trillion won last year. This was due to a significant increase in power purchase costs caused by the surge in energy prices.

KEPCO announced on the 24th that its operating loss last year was 5.8601 trillion won. Considering that it recorded an operating profit of 4.0863 trillion won in 2020, this means operating profit decreased by nearly 10 trillion won. Last year's sales amounted to 60.5748 trillion won, an increase of 2.005 trillion won compared to the previous year (58.5693 trillion won). Operating expenses increased by 11.9519 trillion won due to rises in fuel costs and power purchase costs.

The reason KEPCO posted a loss close to 6 trillion won last year is the recent surge in energy prices. Last year, KEPCO's subsidiary fuel costs and private power producers' power purchase costs increased by 4.6136 trillion won and 5.9069 trillion won respectively compared to the previous year. The system marginal price (SMP) that KEPCO pays when purchasing electricity also rose by 37% year-on-year to 94.3 won per kilowatt-hour (kWh). On the other hand, electricity rates decreased by 1.5% year-on-year last year due to the application of fuel cost adjustment charges.

Carbon neutrality also had an impact. KEPCO views the implementation of coal power generation caps to reduce greenhouse gases and the increase in the Renewable Portfolio Standard (RPS) compliance ratio as some of the reasons behind last year's record losses.

The outlook for this year's performance is not optimistic either. Even if electricity rates are raised, the rise in energy prices may outpace the increase. Previously, the government froze electricity rates in the first quarter of this year to stabilize citizens' livelihoods.

In response, KEPCO recently established an 'Emergency Countermeasure Committee for Financial Crisis.' This decision was made based on the assessment that geopolitical risks such as the Ukraine crisis could lead to further increases in energy prices and worsen performance.

A KEPCO official said, "We will pursue cost reduction in power supply, improve facility efficiency, and sell non-core assets," adding, "We will also strengthen efforts to reduce fuel costs such as coal and liquefied natural gas (LNG)."

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