'No Escape' Korea District Heating Corporation Reports Record 350 Billion KRW Deficit to Ministry of Economy and Finance

LNG Price for Cogeneration in First Half at 1,068.6 Won... Up 84%
Brokerage Consensus Expects Operating Loss Exceeding Approximately 40 Billion Won

Korea District Heating Corporation

[Asia Economy Sejong=Reporter Dongwoo Lee] Korea District Heating Corporation (KDHC) has projected its largest-ever operating loss of 350 billion KRW by the end of this year. This is due to the sharp surge in liquefied natural gas (LNG) prices, the main raw material for heat supply. Although KDHC has taken measures to improve its financial health in line with the government's policy to strengthen public institutions' financial soundness, critics say these are only temporary fixes and insufficient to escape the deficit structure.

According to the power industry on the 3rd, KDHC reported to the Ministry of Economy and Finance at the end of last month that it expects an operating loss of 343.3 billion KRW (consolidated basis) this year as part of its mid- to long-term financial stabilization plan. This is a significant revision from its own earlier forecast of an annual operating profit of about 8 billion KRW just six months ago. The revised loss estimate exceeds the securities industry's forecast of KDHC's total deficit this year (306.8 billion KRW) by about 40 billion KRW.

The reason behind KDHC's worst performance outlook this year is that the price of LNG, the main raw material for heat supply, has nearly doubled within a year. Last year, the price of LNG for combined heat and power generation rose 84.0%, from 580.5 KRW per liter to 1,068.6 KRW in the first half of this year.

KDHC's LNG purchase ratio accounts for 78.6% of its total fuel, mostly procured from Korea Gas Corporation and city gas companies. Due to the rise in LNG prices, KDHC recorded an operating loss of 220.4 billion KRW in just the first half of this year. Its annual debt ratio is also expected to increase from 257.5% last year to 360.4% this year.

The problem is that if the global interest rate hikes and energy price increases continue ahead of the full-scale heating demand this winter, KDHC's deficit structure could become prolonged. KDHC has posted losses for five consecutive quarters from the second quarter of last year through the first half of this year.

As part of its self-help measures, KDHC is considering selling the Future Development Institute, an education and research complex located in Giheung-gu, Yongin-si, Gyeonggi Province. However, unless practical alternatives such as heating fee increases are supported, the prevailing view is that the deficit structure will continue into next year.

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