KEPCO seeks asset sales in Jordan to address massive loss

[Photo by Han Joo-hyung]

Korea Electric Power Corp. (KEPCO), which is currently facing a staggering loss of 45 trillion won ($34.87 billion), is seeking to sell its assets in the Jordanian gas complex and wind power generation projects worth 1.9 trillion won as part of a comprehensive restructuring of its overseas operations this year.

According to sources on Wednesday, KEPCO has been in the process of selecting financial advisors for the sale of its stakes in the 373-megawatt Al Qatrana gas-fired power plant and the 89.1-MW Fujeij wind power plant since last month.

KEPCO currently holds an 80 percent stake in Al Qatrana and a 100 percent stake in Fujeij. Under the plan, KEPCO intends to sell 29-45 percent of its stake in Al Qatrana and 40 percent of its stake in Fujeij, which is expected to bring it about 100 billion won based on the acquisition cost.

“Through the asset sales, we aim to reduce fossil fuel-based power generation assets, recover investment costs early, and improve KEPCO’s financial soundness by realizing gains from the divestment,” said an KEPCO official. This move is part of the company’s aggressive financial stabilization plan, as it has been struggling with substantial accumulated losses due to its failure to raise electricity rates in a timely manner.

KEPCO also decided to freeze electricity rates in the third quarter, despite having raised them twice earlier this year. The company said that the fuel adjustment surcharge, which is used to calculate the cost of electricity purchased from power generators, will remain at the current rate of 5 won per kilowatt-hour (kWh) for the third quarter.

The system marginal price (SMP), which serves as the reference price for electricity procurement, has been rapidly declining in recent months. According to the Korea Power Exchange, the SMP for last month was 143.64 won per kWh. Although it slightly increased from May last year, it dropped by about 40 percent versus January this year. The monthly SMP recorded 253.56 won in February, 215.9 won in March and 164.86 won in April, indicating a downward trend with each passing month.

Considering the tendency for the SMP to follow international oil prices with a lag of about six months, it is expected that the SMP in the second half of this year could fall further amid the recent weakness in global oil prices.

Some analysts forecast that if KEPCO’s rigorous self-rescue measures proceed as planned, the company may be able to swing to an operating profit as early as the third and fourth quarters of this year with the continued decline in international oil prices.