State plans first public energy IPO in 7 years

The Korean government will publicly list eight of its state-run energy companies by 2020, the Ministry of Strategy and Finance said Wednesday.

The first two companies, Korea South-East Power and Korea East-West Power, aim to make an initial public offering within the first half of the year.

“We plan to select and complete the contract of the managing company within this month, and after the Korea Exchange [the country’s sole stock market operator] completes its preliminary evaluation [of the two companies], we plan on applying for the IPO in early May,” said Jo Kyu-hong, a deputy finance minister.

Jo stressed that the IPO does not mean privatization of the energy companies. He said the government will continue to keep its majority stake of 51 percent or more in these companies while selling shares of 20 to 30 percent.

Eight of the energy companies’ debt-to-capital ratio is around 124 percent, a relatively safe level according to the ministry. The companies are seeking financial investment in several long-term projects.

“We need to cut back on carbon emissions by 25 percent, which will need roughly 40 billion won through 2018,” the deputy minster said. “And from 2018 onward, we need to change environmental facilities, which will cost 40 billion won [$33 million] or so. We plan to improve the balance sheet through the IPO while securing finances needed for new projects.”

If the initial public offering goes as planned, it will be the first IPO for a state-run energy company in seven years. The first was the Korea Electric Power Corporation (Kepco) in 1989. The Korea Gas Corporation followed suit in 1999. Two Kepco affiliates started publicly trading in 2007 and 2009, and the following year, the Korea District Heating Corporation was listed on the stock market.

According to local market experts, Mirae Asset Daewoo is likely to be chosen as the main company managing Korea South-East Power’s IPO. It is currently negotiating with Samsung Securities as a co-manager.

The IPO price is expected to be between 30,000 won and 50,000 won per share.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]