KEPCO reports record quarterly loss as nuclear power plays catch up

Korea Electric Power

13/05/2022 07:05

By Joyce Lee
    SEOUL, May 13 (Reuters) - South Korea's state-run power
utility Korea Electric Power Corp (KEPCO) reported a record
quarterly loss on sharply higher fuel import costs, raising
concerns about its balance sheet and increasing the chance of a
capital infusion from the government. 
    President Yoon Suk-yeol's administration plans to build new
nuclear reactors to reduce the country's reliance on coal and
natural gas, but unless the public's electricity bills are hiked
drastically in line with generation fuel costs, the government
may have to infuse liquidity into the utility, analysts said. 
    KEPCO reported on Friday 7.8 trillion won ($6.1 billion) in
consolidated January-March operating losses, a record quarterly
loss. Revenue was 16.5 trillion won.
    "The only way to improve business performance is to raise
electricity rates ... Excluding lifting electricity rates, there
is no remaining means to stabilise KEPCO's financial state other
than capital increase," said Yoo Jae-sun, an analyst at Hana
Financial Investment, in a note.
    "In the case of a share issuance, the government will have
to take on more than half of the capital increase."
    Resource-poor South Korea imports most of its energy. Coal
produced 32.8% of its power as of February, with natural gas at
28.1%, nuclear 28.8%, and renewables 8.6%, according to
provisional KEPCO data. 
    Global energy prices have skyrocketed. In April, the prices
of Australian bituminous coal used by South Korea for power rose
280% from a year ago while gas climbed 189%. 
    KEPCO's fuel costs and power purchases from other generators
jumped 34% to 41 trillion won in 2021.
    However, the public's electricity payments, fixed by the
government, have remained largely the same. KEPCO said it sold
electricity to manufacturing firms at an average of 105.5 won
per kilowatt-hour in 2021, versus 107.4 won in 2020. 
    Keeping electricity bills level provides a competitive edge
for global manufacturers like Samsung and Hyundai, and defends
the disposable income for Korean households as inflation drives
other prices up, but KEPCO has been left holding the bag.
    "It's nerve-wracking," said a source at KEPCO, who declined
to be identified as they are not authorised to speak to the
media. "We're just looking to the government to keep us safe."
    Analysts' outlooks on KEPCO's annual losses this year have
more than doubled since the beginning of the year because
"energy prices continue to rise, but electricity prices have not
been raised," said Kim Soo-yeon, an analyst at Hanwha Investment
& Securities. 
    Yoon plans to increase nuclear's portion of power generation
through 2030 by resuming the construction of two reactors and
extending the operation of aging reactors, thereby "reasonably
reducing" coal and liquefied natural gas (LNG) power generation.
    Nuclear power is South Korea's cheapest power source,
costing 67.99 won per kilowatt-hour versus coal's 155.05 won,
LNG's 247.48 won and alternative energy's 203.33 won in
February. 
    South Korea has 24 nuclear power reactors and four under
construction. Two due to restart construction may do so in 2025,
newspaper Kookmin Ilbo reported on Thursday citing a transition
team document. 
    The presidential office said no details have been fixed. 
    While more operational nuclear reactors would help KEPCO,
that would not be able to erase all of its losses, analysts
said.  
    "We estimate at least 15 new nuclear power plants should
have been already completed and in operation" for KEPCO to fully
make up for expected losses this year, said Hana Financial's
Yoo. 
    Yoon's administration plans to raise electricity bills more
in line with fuel costs. But, analysts are unsure how big the
hikes will actually be under Yoon, who won the March
presidential election by the smallest margin in South Korea's
democratic history.  urn:newsml:reuters.com:*:nL3N2WO0RO
    
($1 = 1,282.7200 won)

 (Reporting by Joyce Lee; Editing by Christian Schmollinger)
 ((joyce.lee@tr.com;))