Korean state power suppliers' debt issues snowball amid soaring coal costs

[Photo by MK DB]

Public power generators under Korea Electric Power Corp. (KEPCO) are pouring out debt to keep up operation amid surging production cost and capped selling price and are forced to sell their stakes in coal mines at cheap prices in spite of soaring coal prices to raise fast cash.

Korea South-East Power, Korea Midland Power, and Korea Southern Power issued a total of 310 billion won ($217 million) worth bonds during the July-September – tripled from monthly average of 100 billion won worth - to raise operational funds unlike the previous years when bonds were issued to refinance debt.

Korea Western Power and Korea East•West Power did not issue new debt during the second half.

Bituminous coal currently accounts for an average of more than 60 percent of the total fuel purchases of power firms. As of the end of last year, Korea East•West Power had the highest share with 60.4 percent, followed by Western Power with 57.5 percent, Southern Power 50.1 percent, and Midland Power 48 percent, signaling that the surge in bituminous coal prices will hit power firms hard.

On top of the ongoing Russia-Ukraine War, India has also mass purchased bituminous coal which has further impacted its global supply and demand.

Since solar farms can generate less energy during the winter months, coal-based generation would be relied more in the coming months. Usage of solar power generators in May reached 22 percent and fell to 10.5 percent last December.

The five state firms are expected to spend around 10.1640 trillion won on bituminous coal purchases during the second half, up 63.5 percent from the same period last year. As of the first half, the debt ratio of Southern Power was the highest out of the five state power firms at 241 percent.

According to the Trade Ministry, as of September 30, the price of bituminous coal was $414 per ton, a 120 percent increase from the previous year’s $188 during the same period.

The country’s holdings in overseas mines could come handy at such times.

The Korea Mine Rehabilitation & Mineral Resources (KOMIR), along with POSCO International, owns a 7.5 percent stake in the Narrabri coal mine in Australia which produces 6 million tons of coal annually as well as a stake in the Wyong coal mine, also in Australia.

KOMIR, however, has begun the sale of these two coal mines as a part of coal phase-out policy.

“Korea’s stake in the coal mines is likely to be transferred to other stakeholders of the mines such as Japan and China,” said a senior official at one of the state power firms. In that case, Korea’s energy security may become weaker than other countries, the official added.

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