Korean brokerage suggests KEPCO to raise electricity rates to reduce losses

Korea Electric Power Corp. headquarters in Seoul and electricity meters [Photos by Park Hyung-ki]

South Korea’s state utility Korea Electric Power Corp. (KEPCO) must raise electricity rates to reduce its losses that are projected to reach more than 52 trillion won ($39.4 billion) by the end of this year, according to a securities firm on Friday.

In a stock report, Kwon Deok-min, a researcher at Shinyoung Securities Co., estimated that KEPCO’s accumulated losses between 2021 and 2023 will reach 52.3 trillion won by December this year. In 2021 and 2022, KEPCO logged an accumulated loss of 38.5 trillion won.

“A hike in the electricity rate, along with cost reduction efforts, will only resolve the issue of mounting losses,” Kwon said. “KEPCO will be able to swing to a profit next year if it raises the rate in a timely manner.”

The brokerage firm maintained the “buy” opinion of the state utility stock but revised down its target price to 27,000 won per share from 29,000 won.

Kwon noted that KEPCO has increased its bond issuance from June last year as it has no other way to steadily supply power than selling bonds amid a freeze in public utility fees and mounting losses.

Korea Gas Corp. also posted 9 trillion won in the outstanding amount of charges in 2022, the highest in a decade, raising its debt ratio to 500 percent, Kwon said.

“Containing inflation is necessary but reasonable hikes in energy bills are imperative to ensure a reliable energy supply,” Kwon said.