[Click eStock] "Korea Electric Power, Expected Deficit Over 15 Trillion This Year... Rate Hike Inevitable"

by Hwang Yoonju

Published 20 Apr.2022 08:05(KST)

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] Ebest Investment & Securities maintained its 'Buy' rating and target price of 26,000 KRW for Korea Electric Power Corporation (KEPCO) on the 20th, stating that the first-quarter deficit is larger than expected and the annual operating loss forecast is also significantly increasing.

Researcher Na Min-sik of Ebest Investment & Securities said, "First-quarter sales are expected to be 16.607 trillion KRW compared to the same period last year, with an operating loss of 7.0603 trillion KRW, turning to a deficit."

Researcher Na added, "The absolute size of the first-quarter deficit is at a record level," and lowered the 2022 annual operating profit estimate by 71.2%.

Researcher Na projected KEPCO's 2022 sales to increase by 8.6% year-on-year to 65.7772 trillion KRW, with an operating loss of 15.4461 trillion KRW.

He explained, "While increases in thermal coal, natural gas, and oil prices, which are key variables determining operating profit, were reflected in the estimated results, the electricity rate hike was not factored into the performance."

For the 2022 electricity sales price, a 5.1% increase from the previous year to 114 KRW/kWh was forecasted, and the electricity production cost was expected to rise by 19% to 137 KRW/kWh.

[Image source=Yonhap News]

Researcher Na diagnosed that the possibility of an electricity rate hike is high. He pointed out, "The 2022 ROE is estimated at -24.1%, and if the current situation continues, full capital erosion will occur in four years." He explained that there is no solution other than raising electricity rates in line with rising raw material prices.

Researcher Na cited as grounds for the electricity rate hike "historically, electricity rates have increased following rises in the wholesale electricity price (SMP), and in March this year, the SMP reached 192 KRW/kWh, the highest in 10 years."

He added, "Electricity rates have not been raised for 10 years," and "pressure to increase electricity rates has accumulated."