Kepco's debt sales increase as company's losses rise

Korea Electric Power Corp. (Kepco) has been sharply increasing debt sales this year as the utility company remains deep in the red amid surging costs and the freeze in electricity rates, sources said Thursday.

Kepco carried out a demand forecasting session for its issuance of $800 million of dollar-denominated bonds — $500 million in three-year bonds and $300 million in five-year bonds.

The envisioned debt sale is nearly 8.91 times oversubscribed, showing foreign investors trust in the Korean government's firm will to support the state company despite its huge deficits, according to the sources.

The flotation of dollar debt is also expected to broaden Kepco's funding sources, thus reducing its dependence on the sale of bonds denominated in the Korean currency, they added.

In late May, Standard & Poor's Global Ratings (S&P) cut Kepco's credit rating to "BB+" from "BBB-" but retained its final long-term rating at "AA" in light of the possibility of state support.

Kepco's debt sales have been on the rise in recent years, excluding 2020. Its bond issuance rose to 7.5 trillion won ($5.98 billion) in 2019 from 6.9 trillion won a year earlier but dropped to 3.5 trillion won in 2020 before again soaring to 10.4 trillion won in 2021.

In the first five months of this year, Kepco sold more than 12 trillion won worth of bonds.

The spike in Kepco's debt sales come as the company has not been able to pass on rapidly rising costs to consumers due to the government's rate freeze meant to help cut the public's living costs.

Stung by surging costs, Kepco reported an operating loss of 7.79 trillion won in the January-March period alone, much higher than a loss of 5.86 trillion won for all of 2021.

Stock market analysts have forecast the utility company's full-year losses to reach as much as 23 trillion won in 2022.

Yonhap