Gas Corporation's Outstanding Receivables Increase by 3 Trillion Won in Q1... "Due to Gas Price Freeze"

At the end of last year: 8.5856 trillion KRW → At the end of Q1: 11.6143 trillion KRW
Interest expenses increased by 247 billion KRW, adding to the burden

Korea Gas Corporation (KOGAS) has reportedly accumulated an additional 3 trillion won in unpaid city gas bills in the first quarter of this year alone.

As of the end of the first quarter this year, KOGAS announced on the 11th that the unpaid city gas bills amounted to 11.6143 trillion won, an increase of 3.0287 trillion won from 8.5856 trillion won at the end of last year.

The total unpaid bills, combining city gas and power generation unpaid amounts, rose by 2.2712 trillion won from 12.0207 trillion won at the end of last year to 14.2919 trillion won. Unpaid bills refer to the amount of natural gas import payments that have not been recovered through gas fees.

KOGAS adopts a method where if natural gas purchased for 10 billion won is sold for 5 billion won, the deficit of 5 billion won is initially classified as an asset similar to 'accounts receivable' and later recovered through gas fee increases. KOGAS's unpaid city gas bills were in the 600 billion won range at the end of 2020 but have surged amid the rapid rise in international gas prices, increasing to 8.5 trillion won at the end of last year and 11.6 trillion won in the first quarter of this year.

Korea Gas Corporation
Photo by Yonhap News

In a separately released press statement, KOGAS pointed to the 'impact of the city gas fee freeze' as the reason for the 3 trillion won increase in unpaid city gas bills in the first quarter. The government froze gas fees this year to ease the burden on citizens amid the aftermath of the 'heating cost bomb' crisis last winter. Due to the surge in unpaid bills and increased borrowings, KOGAS's interest expenses in the first quarter rose by 247 billion won compared to the same period last year.

On a consolidated basis, KOGAS's operating profit for the first quarter of this year was preliminarily estimated at 588.4 billion won, down 35.5% from the same period last year. This operating profit fell 43.2% short of the market forecast of 1.0362 trillion won compiled by Yonhap Infomax. Sales increased by 28.3% year-on-year to 17.9299 trillion won. Net profit dropped 81.1% to 139.4 billion won.

The reason KOGAS posted an operating profit despite accumulating large unpaid bills is an accounting illusion caused by recognizing unpaid bills, which are future revenues not yet realized, as income in advance. If general accounting standards that do not apply unpaid bills were used, KOGAS would have recorded a loss equivalent to the amount of unpaid bills in the first quarter.

The government and ruling party plan to raise electricity rates in the second quarter soon, along with increasing the gas fees that were frozen this year.

Similarly, delayed cost reflection in electricity is causing Korea Electric Power Corporation (KEPCO) to face increasing operating losses. As KEPCO prepares to announce its first-quarter earnings on the 12th, the market expects it to have accumulated additional operating losses in the 5 trillion won range. KEPCO posted losses of 5.8 trillion won and 32.6 trillion won in 2021 and 2022, respectively.

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