"Can't Even Complain"... Development Public Enterprises Also Sigh Over Debt Management

[Asia Economy Sejong=Reporter Dongwoo Lee] It has been revealed that the scale of corporate bonds issued this year by power generation public enterprises, subsidiaries of Korea Electric Power Corporation (KEPCO), has approached 80% of the issuance limit. This means that KEPCO's 'debt management' due to soaring fuel costs is extending to the power generation public enterprises as well. As the scale of corporate bond issuance continues to increase, concerns about the deterioration of financial structure are also growing.

According to the energy industry on the 15th, five public power generation companies (Namdong, Seobu, Nambu, Jungbu, and Dongseo Power Generation) have issued a total of 3.23 trillion won in corporate bonds from the beginning of this year until last month. This is 77.6% of the combined corporate bond issuance limit for the five power generation companies this year (4.16 trillion won). On average, each power generation company issued about 640 billion won, or approximately 58 billion won per month, in corporate bonds. Among them, Dongseo Power Generation borrowed 810 billion won in corporate bonds until last month, with an issuance ratio of 81% compared to this year's issuance limit (1 trillion won), the highest among the five. This was followed by Namdong Power Generation (650 billion won) at 80.2%, Jungbu Power Generation (560 billion won) at 80.0%, Nambu Power Generation (510 billion won) at 78.4%, and Seobu Power Generation (700 billion won) at 70.0%.

The purpose of corporate bond issuance has also expanded recently from power plant construction and maturity bond repayment to securing operating funds. Corporate bonds issued for operating funds by Namdong, Jungbu, and Nambu Power Generation in the third quarter of this year totaled about 300 billion won. As liquidity decreased in the second half of the year, funds were raised through bonds to cover costs such as purchasing power generation fuel.

The background for the expansion of corporate bond issuance by power generation public enterprises this year lies in the sharp rise in the price of bituminous coal, a power generation fuel, and the failure to properly preserve power generation costs due to KEPCO's deteriorating management. According to the Ministry of Trade, Industry and Energy, Australian coal rose from $179.68 per ton on January 4 this year to 389.86 won at the end of last month, an increase of 2.1 times. The proportion of bituminous coal purchases by power generation public enterprises is about 60%, doubling the burden of fuel purchases this year. Moreover, KEPCO has not been able to fully compensate power generation costs in line with the increased fuel costs. Until now, power generation public enterprises have been compensated for power generation costs by applying the 'settlement adjustment factor' to the electricity purchase price from KEPCO on an annual and quarterly basis, receiving a surcharge rate, but recently, as KEPCO's deficit has snowballed, even this has become difficult.

As the issuance of bonds by power generation public enterprises increases, concerns about the deterioration of financial structure are also growing. As of the third quarter of this year, Jungbu Power Generation has the highest debt ratio among power generation public enterprises at 237%. The government has designated KEPCO and five power generation public enterprises as 'financial risk institutions' this year. Although power generation public enterprises have started financial soundness efforts such as cost reduction, if KEPCO's deficit management continues until next year, the effect of financial improvement is expected to be limited. A power generation public enterprise official said, "The settlement adjustment factor this month is practically close to zero (0), making it difficult to fully recover the System Marginal Price (SMP)," adding, "Due to KEPCO's massive deficit, it is even difficult to voice dissatisfaction with the management situation."

Old Power Plant Pyeongtaek 1 Combined Cycle to Halt Operations from the 31st
(Pyeongtaek=Yonhap News) Reporter Hong Gi-won = Korea Western Power announced that the aging power plant Pyeongtaek 1 Combined Cycle, completed in the early 1990s, will stop electricity production from the 31st. The photo shows the Pyeongtaek 1 Combined Cycle power plant on the 31st. 2017.12.31
xanadu@yna.co.kr
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