[Click eStock] "KEPCO Deficit, SMP Cap Insufficient... KEPCO Bonds Net Issuance to Continue"

[Asia Economy Reporter Hwang Yoon-joo] An analysis has emerged that Korea Electric Power Corporation (KEPCO) will continue its policy of net issuance of KEPCO bonds in the second half of this year. Although the Ministry of Trade, Industry and Energy announced the introduction of a cap on the System Marginal Price (SMP) to reduce KEPCO's operating losses, it is judged that the effect will be minimal.

Kim Junsu, a researcher at Kiwoom Securities, stated, "It is expected that an effective benefit of 142.2 billion KRW per month will occur due to the introduction of SMP regulation, but this is far below KEPCO's average monthly power purchase cost of 7.3 trillion KRW in the first quarter."

Earlier, the Ministry of Trade, Industry and Energy announced an administrative notice on the 'Emergency Settlement Price Cap in the Electricity Market' regulation to offset KEPCO's deficit. By setting a cap on the SMP, the plan is to offset the deficit with the profits of KEPCO's power generation subsidiaries and private power producers who benefit from rising oil prices.

Researcher Kim pointed out, "The expected effective benefit from the regulation is about 142.2 billion KRW per month (as of May), but KEPCO's power purchase cost in the first quarter was around 22 trillion KRW, with a simple average monthly expenditure of 7.3 trillion KRW. Therefore, the effect of the measure will be minimal."

[Image source=Yonhap News]

He analyzed, "Ultimately, a large-scale electricity rate increase proportional to the rise in oil prices is necessary, but since inflation is a national issue at this time, a rate increase that would resolve KEPCO's deficit is unlikely as it could accelerate inflation concerns."

The Bank of Korea last week significantly raised its inflation forecast to 4.5% in its revised economic outlook.

Researcher Kim predicted, "The prevailing forecast is that KEPCO's deficit this year will reach 30 trillion KRW, and consequently, the policy of net issuance of KEPCO bonds to cover operating losses will continue in the second half of the year."

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