[2022 National Audit] Korea Electric Power Corporation On-Site Audit Held After 3 Years... Debate Over '30 Trillion' Deficit (Comprehensive)

Jeong Seung-il "Fuel costs hit record high... No way to avoid deficit"
Emphasizes need for 'SMP cap'... Firm on YTN sale plan

Jeong Seung-il, CEO of Korea Electric Power Corporation, answering at the National Assembly audit
(Naju=Yonhap News) Photo by Jo Namsu = Jeong Seung-il, CEO of Korea Electric Power Corporation, is responding to questions at the National Assembly audit held by the Industry, Trade, Energy, Small and Medium Business Committee at the KEPCO headquarters in Naju, Jeollanam-do on the afternoon of October 11, 2022.
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[Asia Economy Sejong=Reporter Lee Jun-hyung] Korea Electric Power Corporation’s (KEPCO) “record-breaking deficit” was put under scrutiny at the on-site National Assembly audit held for the first time in three years. KEPCO cited the surge in international energy prices as the main cause of the massive deficit. KEPCO also confirmed its plan to sell its stake in YTN.

On the 11th, at the National Assembly Industry, Trade, Energy, Small and Medium Business Committee audit held at KEPCO headquarters in Naju, Jeollanam-do, President Jung said, “Today, the SMP has exceeded 270 KRW per kWh, reaching an all-time high,” adding, “Under these circumstances, there is no way to avoid a deficit.” President Jung also noted, “The low utilization rates of base power sources such as nuclear and coal also contributed to KEPCO’s deficit,” and added, “If electricity rates had been adjusted in a timely manner linked to fuel costs, KEPCO’s deficit would have been reduced.”

SMP refers to the price KEPCO pays to power generators for electricity. When electricity rates remain the same, the higher the SMP, the worse KEPCO’s deficit becomes. According to the Korea Power Exchange, SMP temporarily rose to 288.65 KRW per kWh on that day, nearly three times higher than last year’s average SMP of 94.34 KRW.

This is why the government is trying to introduce an SMP cap system that sets an upper limit on SMP. The goal is to minimize KEPCO’s losses by limiting the increase in SMP caused by fluctuations in fuel costs. The Ministry of Trade, Industry and Energy initially planned to implement the SMP cap system starting in August, but the introduction was indefinitely postponed due to opposition from private power producers.

Jung Seung-il: "Need to Introduce SMP Cap System"

There are also calls for KEPCO to actively support the introduction of the SMP cap system. On the same day, Lee Jang-seop, a member of the Democratic Party of Korea, said, “KEPCO’s position on the SMP cap system should be clear,” adding, “Since electricity is a public good, market logic should not be applied.” This is interpreted as a rebuttal to the private power industry’s stance that the SMP cap system is an ‘anti-market measure.’

President Jung also expressed support for the introduction of the SMP cap system. He said, “Exceptional situations require exceptional measures,” but added, “However, some renewable energy operators and combined heat and power operators have concerns.” He continued, “The government is listening to opinions thoroughly and cooperating with related ministries,” and “We are continuously explaining the necessity of the SMP cap system.”

President Jung also mentioned KEPCO’s plan to sell overseas assets. To improve its financial structure, KEPCO plans to dispose of assets worth 1.5447 trillion KRW, including overseas coal power plants. He explained, “We have declared that we will not undertake new overseas coal power projects,” and “This is part of the asset reallocation process for overseas assets.” He added, “We are selecting sale targets after thoroughly reviewing the possibility of sales and other factors,” and “We will do our best to protect businesses related to our core competencies.”

‘Moon Administration’s National Task’ KEPCO University Also Under Scrutiny

Criticism was also raised regarding Korea Energy Engineering University (KEPCO University), which was established with funding from KEPCO as a national task under the Moon Jae-in administration. On the same day, Kim Seong-won, a member of the People Power Party, said, “The excessive funding for KEPCO University has gone too far,” and criticized, “KEPCO has become an ATM for KEPCO University.” He added, “From the planning stage, securing finances for KEPCO University was problematic,” and “With the rapid decline in the balance of the Power Industry Infrastructure Fund, the situation is dire, yet KEPCO is still in a position where it must continue funding.”

However, President Jung stated that financial support for KEPCO University is inevitable. He said, “We have received repeated criticism about whether support is possible given KEPCO’s difficult situation, and we have had many internal discussions,” but added, “However, support should not be reduced.” He emphasized, “The energy sector requires manpower as much as the semiconductor sector,” and “The International Energy Agency expects an investment of 8 quadrillion KRW in the energy sector over the next 20 years, so nurturing talent in this field is important.”

Meanwhile, KEPCO KDN reaffirmed its plan to sell its stake in YTN during the audit. Lee Cheol-kyu, a member of the People Power Party, said, “When a public enterprise holds shares, there is a perception that efficiency and asset value are low, which leads to undervaluation of stock prices,” and urged, “Please proceed with the sale of YTN shares as soon as possible.” In response, Kim Jang-hyun, president of KEPCO KDN, said, “YTN is not related to KEPCO KDN’s core business,” and “We will proceed with the sale of YTN shares.” KEPCO KDN is the largest shareholder of YTN, holding 21.43% of its shares.

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