Korea's debt-ridden public enterprises likely to go under aggressive restructuring

[Graphics by Lee Eun-joo and Song Ji-yoon]

The South Korean government has asked state-run companies to submit a complete list of their assets, signaling the state-led rigorous restructuring of debt-ridden public enterprises.

According to Alio, a public institution business information open system, on Wednesday, seven state-owned companies are heavily indebted with a debt ratio of 200 percent or higher as of 2021. They are Korea Rural Community Corporation with 494 percent, Korea Gas Corporation (KOGAS) 378 percent, Korea Railroad Corporation (KORAIL) 287 percent, and Korea District Heating Engineering 257 percent. Korea Coal Corporation, Korea Mine Rehabilitation and Mineral Resources Corporation, and Korea National Oil Corporation are in complete capital erosion.

The interest coverage ratio of 18 firms, including Kangwon Land, Korea Racing Authority, and Korea Broadcast Advertising Corporation, is also below 1, meaning that they are not able to pay interest payment with operating income. They are also subject to government-led restructuring.

Enterprises under the government watch list have been asked to report investment equity presumably to be advised to sell poor overseas assets. Korea Asset Management Corp. will likely step in to help cash-strapped state firms sell their assets.

Debt-ridden state firms cannot provide proper services while wasting taxpayers’ money, said Park Chun-sup, secretary general at Korean Sport & Olympic Committee, who was in charge of this year’s public enterprise management evaluation, urging public enterprises to come up with innovative business mind to provide sound services to the people.

Some state-invested enterprises have already kicked off the process to sell assets to improve their financial health.

Korea Electric Power Corp. (KEPCO) is reviewing the sale of its stake in Gemeng International Energy, a joint venture set up with Shanxi International Electricity Group (SIEG) and Deutsche Bank in 2007 that operates a coal-fired power plant in Shanxi, China. KEPCO is the second-largest shareholder with a 34 percent stake in the JV.

KEPCO also plans to complete the sale of its coal-fired power plant in Cebu, the Philippines, by the end of this year and other overseas coal mines owned by its power generating subsidiaries.

The new Korean government under President Yoon Suk-yeol has warned of aggressive reforms in state-run companies after reviewing their financial soundness to pick ones that need state-led restructuring.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]