[Exclusive] 'Deficit Trap' KEPCO Records Record High LNG Purchases of 10 Trillion Won in Q1

LNG Purchase Price Up 114%
SMP 181.5 KRW per 1 kWh

Korea Electric Power Corporation (KEPCO) has been confirmed to have spent 10 trillion won on liquefied natural gas (LNG) power purchases alone up to March this year. This is the largest quarterly amount ever, resulting from the sharp rise in LNG prices due to Russia's invasion of Ukraine and other factors. If energy prices continue to rise as they are now, there is also a forecast that KEPCO's deficit this year could exceed 20 trillion won.

According to data obtained from KEPCO and the Korea Power Exchange on the 25th, the domestic LNG power purchase amount in the first quarter of this year totaled 9.9477 trillion won, a 112.0% surge compared to the same period last year (4.6923 trillion won). This amount is equivalent to half of last year's total LNG power purchase amount (19.9553 trillion won), marking the highest quarterly figure ever recorded.

During the same period, the LNG power transaction volume was 44,608 GWh, similar to last year's 45,001 GWh, meaning that the cost to purchase the same amount of electricity more than doubled. This is because the LNG power purchase unit price soared 114.8% compared to last year (104.27 won), reaching an average of 224.03 won in the first quarter of this year. Compared to the average unit price of fuel oil power purchases (254.65 won) which increased by 32.4% during the same period, the rise in LNG purchase costs has expanded rapidly.

Korea's current main baseload power source is LNG combined cycle power generation. According to KEPCO, the LNG share based on power generation facilities by energy source is the highest at 30.8%. Considering that facilities for coal (27.5%), renewables (19.7%), and nuclear power (17.4%) are also in place, about 60% of electricity is still secured through thermal power generation.

Due to the sharp rise in LNG prices, the system marginal price (SMP), which serves as the basis for wholesale electricity prices, is also estimated to have surged 137.2% year-on-year to an average of 181.50 won per kWh in the first quarter. In other words, as LNG purchase costs increase, KEPCO's operational deficit burden is also growing. According to the securities industry, KEPCO's operating loss in the first quarter of this year is expected to reach about 7 trillion won. This figure surpasses last year's total deficit (5.8601 trillion won) in just one quarter. The financial industry has warned that if this trend continues, KEPCO's deficit this year could approach 20 trillion won.

Professor Jeong In-gyo of the Department of International Trade at Inha University stated, "The rise in international raw material prices triggered by the Ukraine crisis is expected to continue at a high level for a considerable period due to structural supply-demand imbalances."