Kepco head steps down amid ballooning debt, political pressure

Cheong Seung-il, Kepco CEO, during an internal convention held at the state-run utility company's headquarters in Naju, South Jeolla, on Friday. Cheong offered to resign that day. [YONHAP]

The head of Korea Electric Power Corporation (Kepco), the debt-ridden state-run utility company, stepped down from the post amid mounting political pressures over the company's ballooning deficit.

Kepco CEO Cheong Seung-il, who took on the role in 2021, offered to resign on Friday following criticism from President Yoon Suk Yeol’s People Power Party lawmakers over the company’s stacking debt and alleged moral hazards.

The resignation comes as the utility company posted yet another loss worth tens of billions of dollars for the January-March period, staying in red for the eighth consecutive quarter.

“I'm resigning from the CEO post from today,” Cheong said in a statement, adding that “Kepco will operate under an emergency management system for a while, led by executive members of the company.”

"I am very sorry for the burden that the electricity rate issue is putting on everyone," Cheong apologized.

That day, Kepco announced a 25-trillion-won ($18.8 billion) restructuring plan to restore its fiscal soundness that would run through 2026. The announcement was made during an internal convention held at the company's headquarters in Naju, South Jeolla.

The measures include cutting the salaries of employees and unloading assets.

“It's a relief that Kepco could announce its self-rescue plan, which will be the first step toward adjusting the electricity rate,” Cheong said.

Lawmakers have been demanding Kepco come up with a plan to address its skyrocketing deficits, which were driven up by high fuel prices last year, before hiking the electricity rate.

In Korea, electricity rates are announced before the beginning of every quarter through negotiations between lawmakers and the government. This time around, an agreement on the scale of the rate increase for the second quarter failed to be reached, delaying the announcement.

In its latest plan, the utility provider promised to cut costs by delaying facility construction projects and investments and by reducing operating expenses, while working with the government to reform the current market system to cut spending on purchasing electricity.

Moreover, the money-losing company will sell its office building in Yeouido, western Seoul, one of its most valuable assets in the greater Seoul area, under the principle of “monetizing every property that can be sold.”

Kepco’s executives and employees ranked Grade 2 and higher will not get raises or merit bonuses this year, and Grade-3 employees will have to hand in half of their raises, according to the company.

The additional money coming from the forfeited portion of raises will be used to support the socially vulnerable.

Kepco's move is driven by big losses.

On Friday, the company posted a net loss of 4.91 trillion won in the first quarter, down 17.1 percent compared to the previous year.

The figure was bigger than the estimated loss of 3.94 trillion won compiled by FnGuide.

Operating loss came in at 6.18 trillion won, compared to 7.79 trillion won during the same period last year. This figure is also bigger than the analyst forecast of 5.3 trillion won.

Sales rose 31.2 percent on year to 21.59 trillion won.

Last year, Kepco posted a record operating deficit of 32.7 trillion won and a net loss of 24.4 trillion won due to soaring fuel prices.

Korea Gas Corporation (Kogas), the state-owned gas supplier, also came up with a 15.4-trillion-won plan on Friday, as the company has also been drowning in losses.

Its plan includes freezing wages and cutting expenses through operation automation.

Kogas reported a record accounts receivable totaling 11.6 trillion won on Thursday, a steep increase from 8.8 trillion won at the end of last year.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]