Kepco suffers record operating loss of 5.8 trillion won

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Kepco suffers record operating loss of 5.8 trillion won

An electronic board at a Kepco branch in Jung District, central Seoul, shows the electricity supply-demand situation on Feb. 15. [YONHAP]

An electronic board at a Kepco branch in Jung District, central Seoul, shows the electricity supply-demand situation on Feb. 15. [YONHAP]

 
 
 
Korea Electric Power Corp. (Kepco), posted a net loss of 5.25 trillion won ($4.36 billion) last year due to raw material price hikes, the company announced.
 
Despite a 3.4 percent increase in revenue to 60.6 trillion won in 2021, the state-run utility reported a net loss of 5.25 trillion won compared to the previous year's net profit of 2.1 trillion won, and a record operating loss of 5.8 trillion, compared to the previous year’s operating profit of 4.8 trillion won. The company's biggest operating loss previously was 2.8 trillion won in 2008, when crude prices skyrocketed in the wake of the global financial meltdown. 
 
Soaring fuel costs were the primary cause for the losses. 
 
Prices of crude oil, liquefied natural gas (LNG) and coal – raw materials for energy generation – all jumped last year, mostly due to a rise in demand driven by the post-pandemic economic recovery. Analysts partly attributed the price hike in LNG to the shutdown of nuclear generation facilities by the government.
 
Kepco spent a total of 66.4 trillion won in operating expenses last year, up 22 percent from the previous year.
 
The state-owned company couldn’t raise the electricity price due to government resistance, despite rising international fuel prices.
 
A cost-based billing system that went into effect in January 2021 was suspended in the second quarter, as the government tried to tame inflation. Electricity bills stayed frozen through the second and third quarters of 2021, until an increase of 3 won per kilowatt-hour was approved in the fourth quarter, the first increase since November 2013. A family that consumed 350 kilowatt-hours a month paid an additional 1,050 won per month after the 3 won increase.
 
Utility bills are set to go up twice this year, a combined 5.6 percent rise from last year’s, which will translate into an additional 1,950 won per month for a family of four.
 
Kepco's operating loss significantly outstripped the market consensus of 5.1-trillion-won compiled by FnGuide.
 
The outlook remains grim as international prices rise might outpace scheduled hikes in electricity rates. FnGuide estimated that the company's operating loss will hit nearly 11 trillion won this year.
 
“A massive deficit is inevitable before the second quarter when a price increase is slated, and global inflation is rising at a steeper pace than the electricity rate increase,” said Meritz Securities in a January report.
 
“If the annual electricity pricing plan remains as it is and the crude oil price stays at the $80 level, the operating loss will exceed 10 trillion won this year.”
 
If conflict between Ukraine and Russia pushes up the global crude price, the operating loss will be even more.
 
“The financial risk is expected to grow due to cost hikes,” said a spokesperson for Kepco.
 
 

BY SOHN HAE-YONG [shin.hanee@joongang.co.kr]
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