12 trillion won deficit expected this year due to soaring oil prices
“Emergency measures such as gradual rate hikes”
On the 3rd, at the Korea Exchange in Yeongdeungpo-gu, Seoul, an employee is looking at a monitor displaying KEPCO’s stock price. On the 31st of last month, as the government put off raising electricity rates in the first quarter, KEPCO’s share price fell 5.2% between the two trading days. Reporter Do Jun-seok
While the electricity rate hike was delayed, Korea Electric Power Corporation (KEPCO)’s share price fell by 20%, and it was predicted that the rate hike would fall further by nearly 30%. Concerns about KEPCO’s ‘snowball in deficit’ are growing as it is estimated that it will record a deficit of 12 trillion won this year, following last year’s 32 trillion won, and the sharp rise in oil prices due to production cuts in oil-producing countries.
In the stock market on the 3rd, KEPCO finished trading at 17,890 won, down 0.67% from the previous trading day. KEPCO’s share price soared to 22,450 won (December 28) when the government formalized its plan to increase electricity rates at the end of last year.
However, two days later, the Ministry of Trade, Industry and Energy and KEPCO announced that they would increase the electricity rate for the first quarter of this year by 13.1 won per ◇ (kilowatt hour), which is only a quarter of the annual appropriate amount (51.6 won per ◇), and fell 11% on January 2nd. did. On the 31st of last month, as the first quarter electricity rate hike was postponed, KEPCO’s share price fell 4.66%.
Here is not the end. NH Investment & Securities raised its target stock price from 30,000 won to 22,000 won, raising KEPCO’s operating loss this year from 8.6 trillion won to 12.6 trillion won and its debt ratio from 459 percent last year to 690 percent. % lowered.
Lee Min-jae, a researcher at NH Investment & Securities, said, “The only solution to KEPCO’s funding problem is rate hikes, and the opportunity to discuss future hikes is at the end of June and at the end of September. Impressions will not be easy,” he said.
It is also negative that international oil prices, which seemed to be stabilizing downward, are showing signs of rebounding again. The major oil producers of OPEC+, which decided to cut crude oil production by 2 million barrels per day in October of last year, announced on the 2nd (local time) that they would cut an additional 1.16 million barrels per day from next month. As international energy prices skyrocketed due to the Russia-Ukraine war, etc., the electricity wholesale price (SMP, grid limit price), which is the cost of electricity that KEPCO buys from five public power generation companies (Western, Southeast, East-West, Southern, and Midland Power) under KEPCO, soared. As a result, while KEPCO recorded a deficit of 32 trillion won last year, the sales of these five companies soared more than 40% compared to the previous year. An official from KEPCO complained, “When oil prices rise, SMP also rises, so the parent company is in the red and the subsidiaries are in the black.”
Woo Seok-jin, a professor of economics at Myongji University, said, “Even if the rate increase was delayed, it would have to be raised someday, which only increased uncertainty.” It will be difficult to get off,” he said.
Reporter Kim So-ra
