KEPCO, the Reason Why It Can't Smile Despite a 300 Billion Won Jackpot from Substation Site Sale

[Asia Economy Sejong=Reporter Dongwoo Lee] Korea Electric Power Corporation (KEPCO), which is recording massive operating losses, has reportedly sold the site of the old Uijeongbu substation for about 300 billion KRW earlier this month as part of its self-rescue measures.

According to the power and construction industries on the 10th, KEPCO signed a sales contract on the 3rd with Daewoo Engineering & Construction for the remaining site of the Northern Gyeonggi Headquarters substation located in Yonghyeon-dong, Uijeongbu-si, Gyeonggi Province (land area: 54,313㎡) for 294.57 billion KRW. This amount is more than twice the minimum bid price (128 billion KRW) initially proposed by KEPCO.

The site is idle land left after the relocation of the substation was completed following the 2007 agreement between Uijeongbu City and KEPCO. The sale was decided at the board meeting in March, and Daewoo Engineering & Construction was selected as the preferred negotiator in June to discuss the sale. Daewoo Engineering & Construction is known to plan the development of a residential complex of about 1,000 households on the purchased site.

Along with the sale of the substation site, KEPCO plans to accelerate the disposal of non-core assets. According to the public asset disposal system Onbid, KEPCO has disposed of real estate worth a total of 374.5 billion KRW in the last three months (May 18 to August 9) since announcing its self-rescue plan. During this period, 41 out of 114 real estate bids were successfully awarded.

However, as KEPCO's expected deficit for the second quarter of this year is projected to exceed 5 trillion KRW, there are criticisms that the self-rescue measures have limited impact on actual business normalization. According to financial information company FnGuide, KEPCO's average operating loss on a consolidated basis for the second quarter is estimated at 5.3712 trillion KRW, with the operating loss for the first half of the year expected to reach about 13 trillion KRW.

The problem is that deficit management is inevitable in the second half of this year as well. This is due to a significant increase in electricity purchase costs caused by the surge in international energy prices, while the normalization of electricity rates has been delayed. The system marginal price (SMP), the wholesale price applied when KEPCO purchases electricity from power producers, peaked at 154.42 KRW per kWh in January, rose to 202.11 KRW in April, then decreased, but has risen again to the 200 KRW range this month.

KEPCO plans to secure about 2.5 trillion KRW in funds by selling 14.77% of its subsidiary KEPCO Engineering & Construction shares and by divesting overseas coal mines, but there are concerns about the undervalued sale of core assets. Additional electricity rate hikes are also difficult. Although an additional increase was decided in October following the fuel cost increase in April, the fuel cost adjustment unit price has exhausted the maximum increase for this year.

A securities industry official analyzed, "Due to the rise in raw material costs for power generation worldwide, including liquefied natural gas (LNG), KEPCO's deficit in the second half of this year is expected to reach about 10.98 trillion KRW," adding, "The cumulative annual deficit could increase from 24 trillion KRW to nearly 30 trillion KRW."

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