KEPCO crippled with biggest loss vs. private generators cheering boon

Korea Electric Power Corp. building [Courtesy of KEPCO]

South Korea’s state utility Korea Electric Power Corp. (KEPCO) is estimated to report record loss this year amid soaring energy purchasing cost, but private power generation companies of big business groups that sell fuel to KEPCO are expected to enjoy record profits this year.

According to industry sources and the Financial Supervisory Service on Friday, six power generation firms under SK, GS, POSCO and Samchully earned combined 1.52 trillion won ($1.15 billion) in operating profit from January to September, nearly 1.9 times larger than their combined operating profit a year ago.

GS EPS reported the largest 496.6 billion won in operating profit for the first nine months, GS Power 250.2 billion won, Paju Energy Service 249.9 billion won, SK E&S 228.6 billion won, POSCO Energy 206.3 billion won, and S-Power 46.5 billion won. Among them, SK E&S’s operating profit more than tripled on year.

The private power firms mostly produce electricity with liquefied natural gas (LNG). LNG prices however have soared due to worsening geopolitical risks since the Russia-Ukraine war this year, leading to a rapid rise in the wholesale prices offered from the generators or the purchasing cost borne by KEPCO. This is why KEPCO’s cumulative operating loss up to the third quarter this year amounted to 21.83 trillion won, exceeding the full-year loss of 5.85 trillion won last year.

Private generators affiliated with big business groups however are enjoying an unprecedented boon with direct imports of LNG at discount prices.

KEPCO’s energy subsidiaries also posted much improvement in their operating profit in the January-September period against the previous year, except for the Korea Midland Power Co. with a cumulative operating loss of 4.5 billion won.

The Korean government is now seeking to enable KEPCO to cap power purchasing prices also from private generators every month from Dec. 1. The gist is to apply a temporary upper limit price for one month when the three-month average system marginal price (SMP) exceeds 10 percent of the monthly SMP in the past decade.

The Ministry of Trade, Industry and Energy, instead, will compensate for losses of power generators when their actual fuel costs exceed the upper-limit price. The regulatory measure will be reviewed by the Office for Government Policy Coordination, Prime Minister’s Secretariat on the day.