KEPCO to Announce This Week's Earnings... Concerns Over Record Quarterly Loss Exceeding 6 Trillion Won

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Dongwoo Lee] Korea Electric Power Corporation (KEPCO) is expected to announce its Q1 earnings on the 13th, amid concerns that it will record the largest quarterly loss in its history. This is due to soaring prices of raw materials for electricity production, such as international oil prices caused by the prolonged Ukraine war, while the normalization of electricity rates has been delayed.

According to financial information analysis firm FnGuide on the 8th, KEPCO's Q1 operating profit consensus is estimated at a negative 5.7289 trillion KRW. This would be the largest quarterly loss ever, comparable to last year's total operating loss of 5.8601 trillion KRW. Compared to an operating profit of 571.6 billion KRW in the same period last year, the deficit has ballooned significantly within a year.

KEPCO's deficit management began in Q2 last year (April-June) with an operating loss of 764.8 billion KRW. As signs of the Russia-Ukraine war intensified in the second half of the year, raw material prices surged, causing the Q4 (October-December) deficit to soar to 4.7303 trillion KRW.

This was due to the sharp increase in the System Marginal Price (SMP), the wholesale electricity price at which KEPCO purchases electricity from power plants, driven by rising raw material costs needed for electricity production. Currently, KEPCO's domestic power purchase cost for LNG (liquefied natural gas), its base power source, in Q1 this year totaled 9.9477 trillion KRW, up 112.0% from 4.6923 trillion KRW in the same period last year. The SMP, which was 76.35 KRW per kWh in April last year, surpassed 200 KRW per kWh for the first time since the power wholesale market opened in 2001, reaching 202.11 KRW last month.

The problem is that despite the sharp rise in SMP prices, the government has delayed normalizing electricity rates to stabilize prices, deepening KEPCO's deficit structure. As of February this year, KEPCO's electricity sales price was 115.2 KRW per kWh, resulting in a loss of 82.12 KRW per kWh sold during the same period.

The new government also anticipates that KEPCO's deficit will reach a record high this year and has begun seeking support measures.

Lee Chang-yang, nominee for Minister of Trade, Industry and Energy, stated in a written response submitted to the National Assembly's Industry, Trade, and Small and Medium Enterprises Committee, "KEPCO's deficit is expected to be around 20 trillion KRW this year. To address KEPCO's deficit issue, while strengthening self-help efforts, the government must also devise multifaceted support measures at the pan-government level, including tax support and power market system improvements."

An industry insider said, "Analysis suggests that the electricity sales price needs to be raised by at least 35 KRW to normalize KEPCO's management. However, considering the difficulty of a substantial increase due to concerns about inflation affecting the low-income economy, significant government support is urgently needed."

[Image source=Yonhap News]

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