Korea’s 14 public firms projected to log $5 bn in losses this year

Korea Electric Power Corp. (KEPCO) headquarters in Naju, South Jeolla Province. [Photo by Yonhap]

Fourteen troubled public enterprises, including Korea Electric Power Corp. (KEPCO) and Korea Railroad Corp. (KORAIL), are projected to see their combined losses mount to nearly 7 trillion won ($5.2 billion) this year, a report showed Monday.

According to a report submitted by the Ministry of Economy and Finance to the National Assembly, 14 troubled public enterprises are projected to log a net operating loss of 6.7 trillion won this year.

Nine out of 14 public enterprises that are categorized as financially risk institutions that are managed directly by the government for their weak profitability and vulnerable financial structure are expected to incur net losses this year.

Among them, KEPCO is projected to post the largest amount of losses as it struggles with an operating loss due to rising energy prices and soaring system marginal price (SMP).

The KEPCO is projected to post a net loss of 6.4 trillion won this year and 177.4 billion won next year, following 25.3 trillion won in losses last year.

The state-run utility firm is projected to swing to a profit in 2025 but losses may persist until 2027 in the advent of a steady rise in the exchange rate and energy prices.

Three out of KEPCO’s five subsidiaries are projected to post net losses this year - Korea Western Power Co., Korea Southern Power Co., and Korea South-East Power Co.

The country’s state-run railway operator KORAIL is projected to post a net loss of 392.9 billion won this year and 539.5 billion won next year on factors that worsen its financial sheet such as delayed recovery in transportation demand and rising borrowing costs.

Other state-run enterprises, such as the Korea District Heating Corp, the Korea Coal Corp, and the Korea Petroleum Corp, are all projected to see net losses this year.

Among the vast majority, the interest compensation ratio, which gauges companies’ capacity to cover debt payments, is expected to fall below 1, indicating that their earnings are insufficient to pay even the interest. The Korea National Oil Corp. and the Korea Gas Corp. were the only two that saw the ratio at above 1.

The government, in the meantime, plans to implement a series of measures to enhance the financial soundness of vulnerable enterprises such as asset sales and portfolio streamlining.