[Click eStock] "Korea Electric Power, Disappointing Electricity Rate Increase Plan"
SK Securities Report
![[Click eStock] "Korea Electric Power, Disappointing Electricity Rate Increase Plan"](http://www.asiae.co.kr/news/img_view.htm?img=2022093010022452966_1664499744.jpg)
[Asia Economy Reporter Minji Lee] SK Securities stated on the 2nd that the investment idea based on expectations of an electricity rate hike for Korea Electric Power Corporation (KEPCO) has dissipated. This is attributed to the first-quarter electricity rate hike proposal falling short of market expectations.
The Ministry of Trade, Industry and Energy announced an increase of 13.1 KRW per kWh in electricity rates for the first quarter of this year. Nam Min-sik, a researcher at SK Securities, said, "This increase is about one-quarter of the rate hike previously advocated by the ministry and is below the stock market's expectations. KEPCO had submitted a proposal to the National Assembly for a 51.6 KRW per kWh increase to return to profitability, and the securities industry expected a 29 KRW per kWh hike."
The electricity sales unit price this year is predicted to be 138 KRW, reflecting a 16 KRW per kWh increase compared to last year. Assuming an average Dubai crude oil price of 85 dollars per barrel, the annual operating deficit for this year is estimated at 1.3 trillion KRW. This is because the electricity rate hike is expected to generate approximately 7.3 trillion KRW in additional annual revenue. Researcher Nam noted, "Considering that last year's annual operating deficit is expected to reach 30 trillion KRW, this year's revenue increase is not a significantly meaningful figure."
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The Ministry plans to assess electricity rates after monitoring international energy price trends following the second quarter of next year. Electricity rates are adjusted annually based on the standard fuel cost and linked quarterly to fuel costs. Since the quarterly fuel cost adjustment has set upper and lower limits, the annual standard fuel cost determines KEPCO's financial structure. Researcher Nam Min-sik analyzed, "Although the ministry announced it would decide on the electricity rate hike magnitude after the second quarter, it is questionable on what basis the rates can be increased."
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