Debt of 202 trillion won, KEPCO’s financial crisis continues
“Normalize rates as soon as possible”
Minister of Trade, Industry and Energy Ahn Deok-geun has officially announced a hike in electricity rates. This is interpreted as an inevitable normalization of rates in order to alleviate the financial crisis of Korea Electric Power Corporation (KEPCO), which has accumulated debts exceeding 200 trillion won.
Minister Ahn said at a press conference held in Sejong City on the 26th, “We are trying to normalize electricity rates as soon as possible,” and “The timing is the issue and we are still reviewing it, but we are preparing to do it.” Regarding the timing of the electricity rate increase, he explained, “The heat wave period will have to pass,” and “Once this situation passes, we will adjust the timing as much as possible to normalize it to some extent.”
The timing of the rate increase is interpreted as considering that raising electricity rates at a time when electricity demand is rapidly increasing due to heat waves could increase the burden on vulnerable groups. Minister Ahn said, “I understand that the ruling party is also considering expanding support for vulnerable groups, such as energy vouchers, and raising electricity rates.”
With a total of 45.3 won per kWh (44.1%) in electricity rate increases since 2022, KEPCO has escaped the ‘negative margin structure’ in which it loses money the more electricity it sells since the third quarter of last year (July-September). It has also posted a surplus for four consecutive quarters.
However, the financial crisis due to the accumulated large debt continues. Although international energy prices soared before and after the Russia-Ukraine War, KEPCO supplied electricity cheaper than the cost price from 2021 to 2023, posting a cumulative deficit of 43 trillion won. As of the end of June this year, KEPCO’s consolidated total debt was 202.89 trillion won, an increase of 440 billion won from the end of last year (202.45 trillion won). With over 4 trillion won in interest going out annually, the company is experiencing a vicious cycle of increasing total debt despite operating profits. KEPCO also paid about 2.2 trillion won in interest expenses in the first half of this year.
Meanwhile, Minister Ahn said about the East Sea deep-sea oil and gas field, where a bid for the lead manager to attract overseas investment is currently underway, “We have already secured a budget for the first drilling operation, and we will attract overseas investment for the necessary funds thereafter,” and “The final selection of the lead manager for overseas investment cannot be confirmed, but it will likely be decided soon.” He added, “We will have to discuss with the investment company which location to explore once overseas investment comes in.”
Sejong = Reporter Lee Ho [email protected]
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2024-08-29 00:06:14