KEPCO's '25 Trillion Won Self-Rescue Plan' Stalls with Headquarters Sale and Lease

Two Months After Announcing Financial Improvement Plan
Art Center Lease to Be Fully Promoted in the Second Half of This Year

Korea Electric Power Corporation (KEPCO) announced a 'financial improvement plan' worth more than 25 trillion won, focusing on real estate sales and leasing, to achieve early business normalization. However, more than two months have passed since the announcement, and no concrete results have been achieved, leaving the plan stagnant.

According to the 'Status and Plans for Leasing KEPCO Art Center and 10 Office Buildings' submitted by KEPCO to Yang Geum-hee, a member of the People Power Party, on the 17th, none of the 11 assets scheduled for lease have been leased yet. KEPCO has only stated plans to lease them in the 'second half of this year.'

Earlier, on May 12, KEPCO announced a challenging financial improvement plan exceeding 25 trillion won, expanding the existing 20.1 trillion won fiscal soundness plan by 5.6 trillion won to achieve early business normalization. At that time, KEPCO set the principle of 'selling all sellable real estate' and promised to prioritize leasing the KEPCO Art Center (3 floors) located at a key transportation hub in Gangnam, Seoul, and 10 other office buildings including the Seodaegu and Uljin branches, while continuously identifying additional leasing assets.

However, regarding the leasing plan for these assets, KEPCO explained, "We plan to finalize the desired lease price after detailed reviews such as appraisal implementation," and "In the case of the Art Center, we plan to announce the lease after rearranging office spaces." Although two months have passed since KEPCO announced its intention to proceed with leasing, the plan remains at the planning stage.

The Nam Seoul Headquarters located in Yeouido, a representative asset in the metropolitan area, is also unlikely to be sold within this year. The land area of the Nam Seoul Headquarters near the LG Twin Towers in Yeouido exceeds 9,900㎡. After KEPCO's decision to sell, on the 24th of the same month, the Seoul Metropolitan Government announced the 'Yeouido Financial Center District Unit Plan,' which includes the Nam Seoul Headquarters site. This urban management plan is expected to be finalized by the end of this year. KEPCO plans to begin the sale process in earnest, including relocating (undergrounding) the substation located at the Nam Seoul Headquarters.

The return of wage increases has also not yet proceeded. KEPCO announced its self-help efforts, stating, "This year as well, we have decided to return the wage increases of employees to take a responsible stance in overcoming the unprecedented financial crisis and to share the pain with the public." To share the burden with the public, KEPCO and its power group companies decided to return all wage increases for employees at grade 2 and above, and KEPCO additionally decided to return 50% of the wage increases for grade 3 employees. Furthermore, to encourage participation from all employees, KEPCO officially requested the labor union to join in returning the wage increases. However, the union has not yet been persuaded. KEPCO plans to decide on the return of wage increases through an agreement with the union by the end of this year.

KEPCO received a failing grade (D) in last year's management evaluation and was not given any performance bonuses. From the employees' perspective, they are now in a position where they must return wage increases after not receiving performance bonuses, which amounted to about 6 million won per employee last year. Previously, in 2014, KEPCO also attempted to implement wage returns by employees, but due to union opposition, only executives and senior staff returned their wages.

An industry insider said, "If KEPCO's self-help efforts are delayed, the resolution of accumulated deficits will also be delayed accordingly," adding, "Ultimately, if asset sales, leasing, and employee wage returns do not proceed properly, it will be difficult for KEPCO to avoid criticism that it set an overly ambitious self-help plan under pressure from the government and the ruling party from the start."

(Photo) [Image source=Yonhap News]

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