KEPCO bids for removal or hike in debt ceiling as it faces default crisis next year

[Photo by MK DB]

[Photo by MK DB]

Korea Electric Power Corporation (KEPCO) is bidding for a removal in debt ceiling as the state power monopoly has already used up its credit limit and may go default or become unable to afford power to supply the country next year.

According to the data from KEPCO obtained by ruling People Power Party (PPP) Rep. Koo Ja-geun, KEPCO estimated its outstanding bonds would reach 70 trillion won ($48.6 billion) by the year end, compared with 38.1 trillion won ($26.5 billion) in the previous year.

Debt ceiling of the public utility firm is set at twice the equity capital and reserves. Due to shrinking of earnings and reserve amid snowballed deficit from operation under spike in fuel prices and capped power rates, the cap on debt ceiling would shrivel to 29.4 trillion won this year from 91.8 trillion won of last year. The company has already far exceeded its debt ceiling.

The ceiling next year under current KEPCO law should further sink as KEPCO is facing an operating loss of near 30 trillion won this year.

During the first half, electricity was purchased at 169 won per kilowatt-hour (kWh) and sold at 110 won per kWh, resulting in a loss of 59 won per kWh and an operating loss of 14.3 trillion won.

If KEPCO is unable to raise funds from bond sales, it would be forced to default on its debt obligations. It has raised 90 percent of its capital by issuing debts to keep up money-losing operation. Debt added 28.5 trillion won on year to pile up to 165.8 trillion won at the end of June.

The state utility firm is bidding for a revision in the KEPCO Act to remove the cap or increase it to eight times the equity capital plus reserve.

Meanwhile, KEPCO under streamlining pressure is said to be shedding assets overly cheap to raise capital as fast as possible.

KEPCO is seeking to secure 500 billion won from the sale of 27 real estate properties including its high-value real estate assets in Seoul and Jeju at 32 billion won in total. But rushed sale amid slump in the property market is expected to cause KEPCO a loss of more than 170 billion won.

“KEPCO’s decision to sell its real estate properties at a loss to solve its capital erosion will only harm public assets,” said main opposition Democratic Party (DP) Rep. Chung Il-young.

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