[Click eStock] "Korea Electric Power Corporation, Fuel Cost Increase of 38 Won Needed to Improve Deficit"

Shinyoung Securities Report

[Asia Economy Reporter Minji Lee] Shin Young Securities maintained a neutral investment opinion and a target price of 23,000 KRW for Korea Electric Power Corporation (KEPCO) on the 21st.

Amid the government's delay in announcing the fuel cost adjustment rate for the third quarter, it is expected to be finalized and announced within this week. Although the fuel cost linkage system started in the first quarter of last year, price increases occurred in only 2 out of 6 quarters. The reasons cited for the postponement of increases were inflation rates, public stability, and COVID-19.

Researcher Deokmin Kwon of Shin Young Securities stated, “As energy prices continue to rise, financial soundness is deteriorating, so there are many factors to consider. Increasing the fuel cost adjustment rate by 3 KRW will not be enough to reduce the deficit, but it is an important time to gradually resolve uncertainties regarding the implementation of the fuel cost linkage system.”

KEPCO recorded a record operating loss of 7.8 trillion KRW in the first quarter of this year. It is estimated to record an operating loss of 21 trillion KRW for the year. Although funding of up to approximately 90 trillion KRW is possible this year, it is expected that funding will not proceed smoothly next year. To strengthen financial soundness, KEPCO plans to secure 6 trillion KRW through real estate sales, subsidiary equity sales, and management efficiency improvements.

The SMP cap system was targeted to be implemented next month but appears to be delayed due to opposition from private power generation companies. The electricity rate decision structure involves KEPCO submitting to the government, the government consulting with the Ministry of Economy and Finance, and then the Electricity Committee deliberating before the decision is made.

The annual nuclear power utilization rate this year is expected to be in the high 70% range, considering planned preventive maintenance and routine maintenance. Researcher Kwon explained, “The utilization rate will gradually increase,” adding, “To normalize finances, an electricity rate increase of about 38 KRW/kWh will be necessary at minimum.”

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