Kepco's operating losses snowball beyond control

Power supply situation shown on a monitor at one of Kepco's office in Seoul in early August. Kepco reported a record loss in the first half due to rising cost in the first half. [YONAHP]

Korea Electric Power Corp.’s operating loss in the first half topped 14 trillion won ($10.7 billion), a record, as the power distributor struggles with rising costs and a cap on electricity bills.

The first half loss is almost triple its record yearly operating loss in 2021, which was 5.9 trillion won.

According to Kepco on Friday, the operating loss in the second quarter was 6.5 trillion won, a 756.5 percent increase from a year earlier.

Combined with the 7.8 trillion-won first quarter loss, a record at the time, the total first half operating loss amounted to 14.3 trillion won.

That represents a 7,537 percent increase over the 187.3 billion-won loss a year earlier.

Kepco's net loss in the second quarter was 4.8 trillion won, a 630.5 percent increase compared to a year earlier.

The total net loss in the first half of this year amounted to 10.7 trillion won, up 1,858.2 percent year-on-year.

Kepco’s revenue grew 14.2 percent year-on-year to 15.5 trillion won in the second quarter and 11.5 percent year-on-year for the first half at 32 trillion won.

The record losses were mostly caused by higher energy prices. A weaker Korean won against the greenback hurt as well.

In the first half of the year, operating costs amounted to 46.3 trillion won, a 60 percent increase year-on-year.

The power company said costs of fuel rose 95.9 percent year-on-year. Liquefied natural gas prices surged 132.7 percent year-on-year while bituminous coal prices were up 221.7 percent.

Power purchases Kepco made from private power plants such as GS EPS have more than doubled from 9.3 trillion won a year ago to nearly 19 trillion won.

Energy purchased by the private sector accounted for 32.6 percent of Kepco's total energy in the first half.

Kepco has been asking to raise electricity bills but a succession of governments have said no.

One month after coming into office in May, the Yoon Suk-yeol government expanded the range of adjustments that can be made on quarterly changes to electricity bills from 3 won per kilowatt-hour to 5 won.

And starting last month, the maximum 5 won per kilowatt-hour adjustment was applied.

The recent stabilizing of international energy prices is also expected to ease the losses.

The government is expected to allow higher electricity bills going forward. For two consecutive months, consumer prices have risen more than 6 percent year-on-year.

Recent heavy rains are expected to lead to higher fruit and vegetable prices.

Minister of Trade, Industry and Energy Lee Chang-yang recently told reporters that the government will have no other choice but to raise electric bills as Kepco's losses will likely continue for the rest of the year.

Lee said as global energy prices rose, the costs of producing energy was inevitably higher.

He said the government will minimize the hikes as much as possible.

Kepco said it was taking steps to reduce its losses, including increasing power supplied from nuclear and renewable energy.

The power company also said it has sold properties, folded overseas business and cut investments.

In the second half, Kepco said it will sell a 14.77 percent stake it has in Kepco E&C.

The sales is expected to help the power company raise 400 billion won.

Additionally, it will continue to try to sell a coal-fired power plant in Cebu within this year.

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