Korea Electric Power Corporation (KEPCO) recorded an operating loss exceeding 6 trillion won in the first quarter of this year. Although the loss margin decreased compared to the first quarter of last year, the cumulative deficit approached 40 trillion won. KEPCO has continued its deficit streak for eight consecutive months since posting a loss in the second quarter of 2021.
KEPCO announced on the 12th that its first-quarter operating loss was 6.1776 trillion won, a decrease of 1.6093 trillion won (20.7%) compared to the previous year (7.7869 trillion won). During the same period, sales increased by 31.2% to 21.594 trillion won, and operating expenses rose by 14.5% to 27.7716 trillion won.
The reduction in KEPCO's first-quarter deficit this year was due to a significant increase in sales, including electricity rate hikes, despite rising operating costs such as power purchase expenses. KEPCO explained that operating expenses increased by 3.5206 trillion won due to higher fuel and power purchase costs, but sales increased by 5.1299 trillion won due to electricity rate hikes, resulting in a reduced deficit compared to last year.
However, the first-quarter operating loss exceeding the initial securities market consensus (-5.299 trillion won) by about 1 trillion won is problematic. This is because the loss margin actually widened despite the implementation of the electricity wholesale price (SMP) cap system at the end of last year. KEPCO posted deficits of 5.8 trillion won in 2021 and 32.6 trillion won in 2022 on an annual basis. Including last year's operating loss, KEPCO's cumulative deficit approaches approximately 40 trillion won. KEPCO has recorded losses for eight consecutive quarters since posting a 752.9 billion won deficit in the second quarter of 2021.
KEPCO analyzed this by stating, "The prolonged impact of last year's sharp rise in fuel prices increased subsidiary fuel costs, and the SMP rose by more than 30%." According to KEPCO, subsidiary fuel costs in the first quarter increased by 1.4346 trillion won compared to the same period last year, and power purchase costs from private power producers rose by 1.5882 trillion won. Additionally, depreciation expenses increased by 497.8 billion won due to the acquisition of power generation and transmission/distribution facilities, which also added to the burden.
As operating losses increase, the issuance of corporate bonds is also rising. The cumulative corporate bonds issued by KEPCO up to last month totaled 77.153 trillion won, reaching 73.7% of KEPCO's corporate bond issuance limit (104.6 trillion won). This year, KEPCO newly issued 9.55 trillion won in corporate bonds up to last month. Last year's corporate bond interest was 1.4 trillion won, and this year it is expected to increase to 3 trillion won.
On the same day, KEPCO announced a historic financial recovery plan exceeding 25 trillion won to overcome the financial crisis early. The plan includes accelerating self-help efforts such as additional asset sales, organizational and personnel innovation, and wage returns. Furthermore, as early as next week, the government and ruling party are expected to announce an electricity rate hike plan for the second quarter of this year. Regarding electricity rates, the government and energy industry are strongly considering an increase of around 7 won per kWh (kilowatt-hour). If the rate is set at 7 won per kWh, the electricity bill for a four-person household using an average of 307 kWh per month (residential low voltage) is expected to rise to 59,740 won, about 2,440 won more than the current rate of 57,300 won.
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