In the Global Decarbonization Trend... Power Generation Five Companies Ultimately Rebid for Stake in Indonesian Mine

Half of the 20% Stake Held by the Five Power Companies Is Up for Sale
Profits Increase Due to Rising Coal Prices, but 'Negative Perception of Coal Business' Remains an Obstacle

Korea Southern Power and four other power generation companies are resuming the sale of their stakes in Indonesian coal mines. Although the sale was attempted in May this year, the bidding deadline was extended once but no buyer was found, leading to a new bidding announcement. There are mixed expectations, with concerns that it will be difficult to find buyers due to the stigma associated with acquiring coal mine stakes amid the global coal phase-out trend, while others expect the sale to proceed soon given the high profitability.

According to Alio, a public institution management information disclosure system, on the 18th, Korea Midland Power announced a re-bid for the sale of shares in PT Bayan Resources TBK, a thermal coal company based in Indonesia, on the 16th.

Korea Southern Power, Korea East-West Power, Korea Midland Power, Korea Western Power, and Korea South-East Power, all subsidiaries of Korea Electric Power Corporation (KEPCO), each hold 4% of PT Bayan Resources shares, totaling 20%. The current sale targets half of their holdings, which is 10%.

This stake sale is being promoted as part of the 'New Government Public Institution Innovation Guidelines' announced by the government in July last year. PT Bayan Resources is a major listed company in Indonesia, producing over 30 million tons of coal annually through 21 mining concessions in the Kalimantan region. KEPCO acquired a 20% stake in Bayan in 2010 and transferred the shares to its five power generation subsidiaries in 2017 to focus on power generation business.

The plan to sell Indonesian mine stakes was also scrutinized during last year's National Assembly audit. At that time, Kim Kyung-man, a member of the National Assembly's Industry, Trade, Small and Medium Enterprises Committee from the Democratic Party, criticized it as "selling a golden egg-laying asset." According to Representative Kim, the five power generation companies earned a net profit of 10.2536 trillion won from these stakes over the past three years (2019?2021).

The power industry believes that profits have likely increased further due to the recent sharp rise in coal prices. According to the Ministry of Trade, Industry and Energy, the price of thermal coal for power generation (based on Newcastle, Australia) surged to $452.81 per ton in September last year.

Despite this profit increase, the failure of the first Indonesian mine stake sale is seen by the power industry as influenced by concerns about the coal industry. A power company official said, "Acquiring coal mine stakes risks being stigmatized as a company going against the global coal phase-out trend," adding, "While it is urgent to resolve the parent company KEPCO’s massive deficit, selling at a low price could mean having to bear responsibility for it someday, so power companies are facing a difficult dilemma."

Meanwhile, KEPCO recorded an operating loss of 8.45 trillion won in the first half of this year. This was due to an increase in operating expenses by 3.3711 trillion won, driven by rising fuel and power purchase costs. KEPCO has posted operating losses for nine consecutive quarters since the second quarter of 2021, with cumulative deficits reaching approximately 47.5 trillion won.

(Photo)

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