Debt-ridden Kepco pushes for further electricity rate hikes

Industry

Published: 04 Oct. 2023, 16:48 Updated: 04 Oct. 2023, 17:07

Debt-ridden Kepco pushes for further electricity rate hikes

Kim Dong-cheol, the newly appointed CEO of the Korea Electric Power Corporation (Kepco), speaks during a press event in Sejong on Wednesday. [KEPCO]

Recent electricity rate hikes of nearly 40 percent are still insufficient for Korea’s sole power distributor to handle its mounting debts worth hundreds of billion dollars, said the newly appointed chief of the Korea Electric Power Corporation (Kepco), calling for further hikes.

“Without increasing the electricity rate, Kepco’s financial situation is bound to deteriorate, and we would inevitably hit the limit in issuing corporate bonds as well — ultimately leading to a halt in operations,” said Kim Dong-cheol, CEO of the state-run utility Kepco, during a press meeting held Wednesday in Sejong.

“And that would eventually result in a total collapse of Korea’s power supply chain ecosystem,” said Kim.

Weighed down by fuel price hikes over the past two years, Kepco accumulated operating deficits of 47 trillion won ($34.5 billion) from 2021 to the first half of this year, with debts exceeding 200 trillion won as of the second quarter.

The money-losing company is currently spending approximately 11 billion won a day in interest expenses.

“If the electricity rate were adjusted as initially planned, the price would have been increased by 45.3 won per kilowatt-hour [in line with the baseline fuel cost], yet the actual increase fell short of that,” said Kim, adding that it should be increased by an additional 25.9 won by the end of the year to meet the target.

There have been five rate hikes since April last year, which pushed up prices by 40.4 won per kilowatt-hour, or 39.6 percent. In the previous quarter, however, the rate remained unchanged, as steep hikes over the past year have put a strain on household finances amid high commodity prices.

In Korea, electricity rates are normally announced before the beginning of every quarter through negotiations between lawmakers and the government. But the decision for the fourth quarter is still pending and might be delayed further, similar to the previous quarter, as the government drags its feet on the issue.

“Kepco will also proceed with bone-crunching management reform and internal restructuring to bring out understanding and cooperation from the public,” promised Kim.

Another measure to further cut down expenses will soon be announced, he added, following two previous restructuring plans.

In May, Kepco announced a 25-trillion-won restructuring plan that would run through 2026 to restore its fiscal soundness. So far it has cut down and saved a combined 9.4 trillion won as part of its restructuring effort.

Kim, a former four-term lawmaker, was appointed as the head of the debt-ridden state utility on Sept. 19. The CEO is the first politician to be named the Kepco chief since the company was established in 1961.

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