Kepco vows to generate $13.7 billion in cuts

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Kepco vows to generate $13.7 billion in cuts

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Korea Electric Power Corp., the country’s electricity monopoly, has announced a plan to cut its debt by 14.7 trillion won ($13.7 billion) by 2017, the company’s largest-ever debt reduction scheme.

The plan is aimed at lowering Kepco’s debt ratio to 145 percent, from 186 percent at the end of last year.

Kepco, the country’s biggest state-run company, unveiled the deficit-reduction blueprint after the government last Friday disclosed to the public a target of 42 trillion won in reductions over four years for 18 public institutions.

According to Kepco, the debt-reduction plan is concentrated on five areas: reducing ongoing business units, trimming production costs, selling assets, generating additional profit from assets and improved financial management.

About 3 trillion won will be shed by restructuring ongoing businesses, Kepco said.

The company said it will refrain from making any new investment projects overseas, while at the same time reinforcing existing projects. And it pledged to keep contributing to job creation by pushing new ICT energy integrated projects, including a future energy storage system.

The largest reduction - 5.3 trillion won - will come from the sales of assets.

Domestically, the company will sell shares in its two power generation-related affiliates, Kepco E&C and Kepco KPS, while retaining the minimum number of shares - about 51 percent - necessary to maintain management rights.

Kepco said it also will divest itself of shares of subsidiaries that are less relevant to electricity generation, such as Kepco Industrial Development, which mainly does maintenance of electricity meters. Its 8.8 percent stake in LG U+, the country’s third-largest mobile carrier, will be also sold, Kepco said.

Kepco will sell property located in posh city areas, including its headquarters in Samseong-dong, southern Seoul.

At the same time, the company will sell some overseas projects, including 49 percent of shares in its Australian Bylong coal mine drilling project, of which it is the sole owner.

About 4.2 trillion won will be saved by reducing production costs, mostly personnel and business management expenses. Kepco plans to save at least 10 percent of current personnel costs by cutting back on incentives and salary increases.

None of the plans will be pursued at a cost to the public, the company stressed. In a report to the government last week, Kepco initially included a proposal to increase electricity prices by about 2 trillion won, but the government rejected it.

“The 2 trillion won utility price increase proposal was based on the projected amount considering inflation rate from last year. So we excluded the proposal from this debt-reduction package,” an official from Kepco said. “As of now, we can’t really tell whether or not we will make another electricity fee increase this year.”

BY KIM JI-YOON [jiyoon.kim@joongang.co.kr]


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