[Exclusive] KEPCO Holds Power Plant CEOs Meeting... Public Disclosure of Real Estate for Sale

On the 18th at KEPCO Art Center
Announcement on Real Estate Asset Sales
Former 'Jeju Office and Housing Sale in Progress'
Q1 Operating Loss Nears 8 Trillion Won
Some Say "Insufficient for Financial Structure Improvement"
Urgent Need to Normalize Industrial Power Supply

Korea Electric Power Corporation (KEPCO), which recorded a record operating loss of about 8 trillion won in the first quarter of this year, will disclose the direction of asset sales, including real estate, together with the presidents of five power generation group companies and Korea Hydro & Nuclear Power. KEPCO, which has entered an emergency management system, has taken measures to normalize management by prioritizing the disposal of sellable real estate, but there are voices saying that it is insufficient to improve the financial structure.

According to the industry on the 17th, KEPCO will hold a meeting of power company presidents at 2 p.m. on the 18th at the KEPCO Art Center in Yangjae-dong, Seoul, and will specifically announce real estate and subsidiary shares to be sold in the future. To this end, KEPCO is reportedly forming an emergency countermeasure committee with its power generation subsidiaries and is in the final stages of coordinating sellable assets.

The main sales targets are expected to be idle real estate and land, including company housing owned by KEPCO. According to the public asset disposal system Onbid, as of this day, KEPCO has a total of 13 real estate properties either currently being sold or prepared for bidding, worth about 140 billion won.

KEPCO resumed bidding yesterday after four failed attempts for the land and building of the Jeju Headquarters (former Jeju Power Branch Office) located in Ido-dong, Jeju (appraised value: 3.38116 billion won). Also, the Samyang Company housing complex of the Jeju Headquarters located on Wondang-ro, Jeju (land 2,360㎡, building 996.48㎡) was put up for sale with a minimum bid price of 4.2514 billion won. In addition, KEPCO is conducting bids for the disposal of about 10 company housing units it owns, including the Gunsan Branch housing complex (1.654 billion won), as well as in Uljin and Uiseong-gun in Gyeongbuk Province, and Donghae City in Gangwon Province.

The largest property currently is the remaining site of the substation of the Northern Gyeonggi Headquarters located in Yonghyeon-dong, Uijeongbu City (land 54,313㎡), with a minimum bid price of about 128 billion won. This is idle land left after the relocation of the substation was completed following the agreement between Uijeongbu City and KEPCO in 2007, and the sale was decided at the board meeting in March this year. Besides real estate and land, KEPCO is also selling scrap transformers owned by the Busan-Ulsan Headquarters with a minimum bid price of 454 million won.

Plans to sell subsidiary shares other than real estate are also expected to be disclosed. As of March this year, KEPCO has invested about 2.97 trillion won in a total of 27 companies. This includes five public power plants such as Korea South-East Power Co., Ltd. (KEPCO’s shareholding: 297.6 billion won), as well as Korea Hydro & Nuclear Power and Korea Electric Power Technology, which mainly handles nuclear power plant design. KEPCO plans to proceed with sales through lead managers for listed companies and will prioritize valuation for unlisted companies.

Some point out that if KEPCO’s management structure, which incurs losses the more it sells, is not fundamentally improved, measures to secure funds through asset sales may end up as a temporary fix. KEPCO’s new corporate bond issuance this year is approaching 12 trillion won as of mid-April. This surpasses the total corporate bonds issued by KEPCO last year (10.43 trillion won) in just four months, meaning corporate bonds are increasing by about 3 trillion won per month.

Professor Kim Sang-bong of the Department of Economics at Hansung University said, "There may be limits to covering large-scale deficits through asset sales," adding, "It is urgent to normalize electricity rates in the mid to long term, especially the rates for industrial power."