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Kepco small shareholders rally against losses, share price

May 21,2019
Disgruntled small shareholders of Korea Electric Power Corporation (Kepco) are taking to the streets to demand the state-run utility to recover its profitability and bring up its share price.

Kepco shareholders started protesting Monday afternoon in front of the company’s branch in Seocho District, southern Seoul, begging Kepco President Kim Jong-gap to bring the company back into the black.

The state-controlled utility reported its worst-ever first-quarter operating loss last week, 629.9 billion won, 394 percent more than the first-quarter loss of 127.6 billion won a year earlier.

Kepco shares sank nearly 60 percent from its peak of 63,700 won in May 2016 to 25,550 won by the end of last week. Dividend payments per share steadily decreased from 1,980 won in 2016 to 790 won in 2017. Kepco couldn’t pay dividends last year because it lost money.

The protesting shareholders claim the government bears some of the blame for the losses as the Moon Jae-in administration has vowed to shift away from cheap energy sources such as coal and nuclear power and use more expensive sources like liquefied natural gas.

Kepco’s annual operating profit declined from 12 trillion won in 2016 to 4.9 trillion won in 2017. Last year, Kepco reported an annual operating loss of 208 billion won.

Domestic individual shareholders are believed to own less than 10 percent of the state-run utility company. According to the Financial Supervisory Service, Kepco was 51 percent owned by the central government and the Korea Development Bank as of at the end of March. Some 7.18 percent was held by the National Pension Service, 27.5 percent by foreigners and 14.6 percent by other categories.

Analysts project the losses will continue this year if the government uses less nuclear power as vowed without hiking electricity fees.

The Ministry of Trade, Industry and Energy announced in a draft master plan last month it would raise the production target for renewable energy from the current 7 to 8 percent to 30 to 35 percent of all Korean energy sources by 2040.

The government said it will drastically cut Korea’s dependence on nuclear power and fossil fuels while steadily increasing the production of environmentally friendly energy for sustainable growth.

Trade Minister Sung Yun-mo said in a meeting with reporters Monday that the government is not planning to hike electricity fees due to Kepco’s losses, adding the government will only review possible rate adjustments when “the time is ripe.”

“The issue of Kepco’s losses and the country’s electricity rates should not be dealt with as a whole,” Sung said. “The government didn’t cut rates in the past when Kepco was in the black.”

In 2011, domestic shareholders filed a complaint against the government and Kepco to pay back 7 trillion won in damages for not raising the electricity fees then. The court ruled in favor of Kepco, saying electricity fees were not something that could be determined solely on market grounds.

“If nuclear power plants’ usage rate falls without a hike in electricity fees, Kepco can only rely on falling prices of raw materials like oil and coal for better performance,” said Ryu Jay, an analyst at Mirae Asset Daewoo.

Yet international oil prices are rising. According to Petronet, the price of Dubai crude oil rose from $51.86 per barrel in January to $72.46 by last Friday. Major factors in the rise include U.S. sanctions on major oil producers like Venezuela and Iran.


BY KO JUN-TAE, SUH YOU-JIN, YONHAP [ko.juntae@joongang.co.kr]


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