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Kepco to raise electricity prices as total debt soars past W200tr

By Jo He-rim

Published : May 16, 2024 - 15:53

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Korea Electric Power Corp. Chief Executive Officer Kim Dong-cheol speaks at a press conference at the KEPCO headquarters in Sejong Government Complex on Thursday. (KEPCO) Korea Electric Power Corp. Chief Executive Officer Kim Dong-cheol speaks at a press conference at the KEPCO headquarters in Sejong Government Complex on Thursday. (KEPCO)

Despite self-rescue efforts, a hike in electricity prices is inevitable, the Korea Electric Power Corp. Chief Executive Officer Kim Dong-cheol said Thursday.

Explaining how the company was able to reduce its snowballing debt through all-out efforts, including a massive personnel restructuring, Kim noted that Korea's electricity prices are far lower than other countries.

"The cost of purchasing electricity surged from 2021, but we could not shift the burden into electricity prices, and this led to serious losses for the company," Kim said.

"It is impossible to maintain the company's operation with the issued bonds. Raising the electricity price by a minimum amount is inevitable. We will take all possible measures to reduce the increase amount."

In the wake of the global energy crisis, KEPCO went almost bankrupt in 2023, with its total debt reaching 203 trillion won ($151 billion).

The state-backed company issued about 80 trillion won in bonds to help plug its mounting losses. But the bonds issued amounted to five times more than the company's capital and reserves, 17.5 trillion won, exceeding the limit.

To lower the debt-to-capital ratio, the company received interim dividends amounting to 3.2 trillion won from its affiliates, including Korea Hydro & Nuclear Power Co., for the first time since 2001.

In an effort to improve profit, KEPCO raised the industrial electricity price for larger companies last November and announced plans to sell off its assets.

Kim also highlighted that, in 2023, Korea's home electricity prices were half that of Australia, and 70 percent cheaper than prices in Britain.

"In times of energy crisis, KEPCO has been playing the role of a breakwater, absorbing most of the potential damages that can hit industries and the national economy," Kim said.

The price of electricity in Korea is 149.8 won per kilowatt-hour while Japan sells electricity at 318.3 won per KWh. Australia's electricity price is 311.8 won per KWh, Italy's is 335.4 won and Britain's is 504.3 won.

In 2022 and 2023, KEPCO was able to earn 7.9 trillion won, which accounts for 5 percent of the total sales in those years, by selling off assets and through business restructuring. The company also carried out its biggest personnel restructuring since 2001, laying off 496 employees and reducing the size of the headquarters by 20 percent.

During those two years, the company also saved 7.1 trillion won through tax benefits and other policy support, Kim explained.

"Our financial circumstance is improving from our recent measures to increase the electricity price and the cooling down of global power prices, since the fourth quarter of 2023. But self-rescue efforts are not enough to get rid of the massive accumulated debt," Kim said.

In 2020, the company's consolidated operating profit was 4.1 trillion won. From 2021, the company has continued to see consolidated operating losses, of 5.8 trillion won in 2021, 32.7 trillion won in 2022, and 4.5 trillion won in 2023.

While the consolidated interest cost was 2 trillion won in 2020, the figure increased to reach 4.5 trillion won by 2023.

"We are carrying out 10 tasks until 2025 to reduce the price, and we expect to cut costs by about 2 trillion won in 2024," Kim said.

Japan plans to raise the electricity price for homes by 17.3 percent in 2024 and end government subsidies.

Taiwan has also raised electricity prices for homes and small businesses by an average of 3 to 5 percent, and by an average of 12.7 percent for industrial uses in April this year. The Taiwan Power Co. also suffered from operating losses of 18.2 trillion won in 2022 and 2023, after the company froze the electricity price for four years since April 2018.