Kepco implements turnaround plan with price increase, job cuts

Kepco will raise power prices for businesses but freeze rates for households as part of its turnaround plan. Additionally, the state-run utility will sell assets and cut around 2,000 jobs.

Korea Electric Power Corporation's CEO Kim Dong-cheol speaks at a press briefing at the Sejong government complex on Wednesday. [YONHAP]

State-run Korea Electric Power Corporation (Kepco) will raise power prices for big companies, sell core assets and cut around 2,000 workers as part of its turnaround plan.

The indebted electricity supplier announced a set of measures on Wednesday.

The state-run utility will freeze the electricity prices for households and small businesses, taking into consideration their financial burdens from inflation and high interest rates, but will up its bills at 10.6 won ($0.0081) per kilowatt-hour (kWh), or 6.9 percent, on average, for industrial uses from Thursday.

The proportion of corporate clients’ annual electricity usage took up 48.9 percent, or 267,719 gigawatt hours (GWh) out of the total 547,933 GWh in 2022.

Kepco said that the recent price hike will be able to unload a debt of 400 billion won by this year. Annually, the figure amounts to 2.7 trillion won.

“We deeply regret having to worry citizens with the latest hike in electricity rates,” Kepco said in a statement. “We did our best to minimize inevitable costs but are also desperate to overcome this crisis.”

Weighed down by fuel price hikes over the past two years, Kepco accumulated operating deficits of 47 trillion won from 2021 to the first half of this year, with debts exceeding 200 trillion won.

In addition to the 25-trillion-won restructuring plan that would run through 2026, Kepco will sell its stakes and go through a major reshuffle to minimize costs spent on human resources.

The power distributor decided to sell its iconic Human Resource Development Center in Nowon District, northern Seoul, an institute in which all Kepco employees regularly receive training.

“We are selling the property with a heavy heart — we’re precariously hanging at the edge of a cliff in this period of financial stringency,” Kepco said.

The specifics into when they will sell the property has not been decided.

Kepco will also sell its 20 percent stake in the Korea Electric Power Knowledge, Data & Network (Kepco KDN) and its 38 percent stake in the Calatagan solar farm in the Philippines.

The corporation will slash its workforce by more than 2,000 employees. The 488 employees, the extra number of people that Kepco recruited, will be naturally reduced through retirement. It will scale down an additional 700 people by 2026.

Kepco decided to accept voluntary retirement from its employees, although it did not specify the standard or the period. Officials in senior positions will also forgo their pay raise for the next year.

“Kepco’s fiscal crisis started with the spike in global energy prices and it came to a point where the company is at its limit,” Kepco CEP Kim Dong-cheol said. “We will diligently carry out our five-year plan to normalize our finances and do everything within our power to speed up that process to ease the burden on the people.”

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]