KEPCO to Expand Corporate Bond Issuance Limit... Plans to Amend KEPCO Act Within the Year

Interim Report on Financial Restructuring
Continued Deficit Management Using Corporate Bonds
Plan to Expand Private Bond Limit Within the Year
Cumulative Corporate Bonds at 51 Trillion as of May

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Dongwoo Lee] Korea Electric Power Corporation (KEPCO) plans to expand its bond issuance limit through amendments to the Korea Electric Power Corporation Act within this year to secure stable operating funds, following its record-breaking largest deficit in the first quarter of this year.

On the 16th, KEPCO disclosed interim results of a restructuring effort worth a total of 6 trillion won to improve its financial structure. It explained that it sold assets worth 130 billion won, including equity stakes and real estate, by this month, and deferred and reduced its budget by 1.3 trillion won.

Notably, the plan to expand the corporate bond issuance limit to secure operating funds stands out. According to Article 16 of the Korea Electric Power Corporation Act, "The limit on bond issuance shall not exceed twice the sum of the corporation's capital and reserves." As of the end of last year, KEPCO's combined capital and reserves amounted to 45.8928 trillion won, theoretically allowing it to issue corporate bonds worth up to 91.7855 trillion won, which is twice that amount.

As of last month (on a separate basis), KEPCO's accumulated corporate bond amount totaled 51.5 trillion won. The problem is that net losses directly lead to reserve losses, so if the deficit continues, the bond issuance limit could steadily decrease as well.

KEPCO emphasized, "We will push for amendments to the KEPCO Act within this year to increase the bond issuance limit and preemptively block legal violation risks." The industry expects the bond issuance limit to increase by at least 2 to 3 times, concluding that even if deficit management continues for the time being, the burden can be minimized. According to the Korea Financial Investment Association, as of the 14th, the 3-year bond yield for KEPCO bonds (KEPCO bonds) is 4.109% per annum.

Additionally, KEPCO will establish a dedicated organization for financial structure improvement (tentatively named the Emergency Management Promotion Office) to promote asset sales, and will pursue joint purchases of thermal coal and expand direct imports of liquefied natural gas (LNG) to reduce fuel costs. Furthermore, projects such as new construction and expansion of office buildings and indoor substations will be deferred. By reducing operating expenses, KEPCO achieved cost savings of 700 billion won.

KEPCO recorded an operating loss of 7.7869 trillion won in the first quarter alone this year, about 2 trillion won more than last year's total deficit of 5.8601 trillion won.

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