The first collective action since the founding of the corporation
2.4 trillion in profit, but accounts receivable 9 trillion
Recording surplus on financial statements ‘optical illusion’
Minority shareholders demand dividends as before
“We need to change the way accounts receivables are accounted for”
Minority shareholders decided to file a class action lawsuit after KOGAS decided to pay no dividend despite recording an operating profit of over 2.4 trillion won last year. It is the first time since the foundation of the corporation that minority shareholders have moved to file a class action lawsuit against KOGAS.
According to the coalition of minority shareholders of KOGAS on the 26th, on the 24th, when KOGAS disclosed its business performance, they urged the corporation to file a lawsuit against city gas retailers such as Samchully to return receivables and collect debts. Then, it was announced that if the corporation does not step forward, it will file a shareholder representative lawsuit (class action) against the directors and auditors of the corporation after 30 days in accordance with the commercial law for neglect of accounts receivable. It means that the corporation, which imports gas and supplies it wholesale, must collect charges for the gas it has already supplied to retailers to settle receivables.
KOGAS has been distributing up to 40% of its net profit to shareholders. KOGAS’ operating profit and net profit on a consolidated basis last year were KRW 2,463.4 billion and KRW 1,497 billion. It increased by 99% and 55%, respectively, compared to the previous year.
However, as the ‘heating cost bomb’ issue emerged this winter, the company decided to pay no dividend, citing financial structure improvement. Authorities are adhering to the non-dividend principle, saying that the corporation cannot pay dividends just because it made profits according to its financial statements in a state of debt and capital erosion. An official from the Ministry of Strategy and Finance, who decides whether to pay dividends for public corporations, said, “The gas corporation made an accounting profit due to a sharp increase in ‘accounts receivable’, but its debt increased. We plan to use the profits to improve the company’s financial structure,” he said.
In fact, KOGAS is applying a ‘unique accounting method’ on the premise that sales losses are classified as receivables, one of non-financial assets, and the government clears up operating losses later. As a result, even if there is a deficit, it is recorded as a surplus in the financial statements. In fact, receivables from the construction increased from 1.8 trillion won in 2021 to 8.6 trillion won at the end of last year, and are expected to reach 12 trillion won in the first quarter of this year. The increase in receivables is due to the fact that civil use (for housing and business) is being supplied below cost for reasons such as reducing the burden on the common people.
As the loss was treated as accounts receivable, the debt to make up for it also increased sharply. Last year, the corporation’s consolidated liabilities were KRW 52.142 trillion, up 50.5% from the previous year. Its market capitalization is less than 3 trillion won, and it is virtually in a state of capital erosion. Nevertheless, dividends were paid whenever there was a profit on the financial statements. Previously, dividends of 234.1 billion won were paid out on the grounds of a net profit of 965.4 billion won even though receivables reached 1.7656 trillion won in 2021. Experts point out that receivable accounting methods need to be improved.
As of the end of September last year, there were 65,979 minority shareholders in the corporation. The number of shares they hold is 27,005,834, which is 31.5% of the total issued shares (85,826,950 shares).
Reporters Kim So-ra, Sejong Lee Yeong-jun, and Kang Ju-ri from Seoul
