[Why&next] Energy Public Enterprises Hastening Asset Sales

Energy public institutions are rushing to sell assets. They are lowering the prices of idle assets that have not sold despite multiple attempts and putting them on the market. This is interpreted as an effort to speed up asset efficiency by selling or leasing at reduced prices following pressure from the Yoon Seok-yeol administration to sell real estate as part of public institution innovation measures.

According to Alio, a public institution management information disclosure system, on the 19th, Korea Southern Power Co. (KOSPO) recently passed a resolution at its board meeting to reduce the planned sale price of idle assets by 10%. At the 8th board meeting held at the end of last month, KOSPO decided to lower the planned sale prices by 10% for one company housing and four land parcels that had been auctioned off more than twice.

A KOSPO official explained, "This is part of the sale of unnecessary assets according to the 'Public Institution Innovation Guidelines' announced by the government in July last year," adding, "The reduction plan for the planned price was approved through the board of directors in accordance with the contract office regulations for public enterprises and quasi-governmental institutions."

Real estate listed for court auction automatically lowers the starting auction price, i.e., the minimum bid price, when it fails to sell. Although it varies by region, apartments in Seoul are reduced by 20%. Korea Asset Management Corporation (KAMCO) reduces the minimum bid price by 10% each time a public auction of seized tax delinquent properties or national assets fails. However, for general assets of public institutions, lowering the minimum bid price requires board approval.

With KOSPO lowering the planned sale price by 10%, the minimum bid price for the Ulsan Maeam-dong factory site (995㎡), which failed to sell nine times, dropped from 615 million KRW to 553.5 million KRW. The minimum bid price for the Busan company housing (47.8㎡), which failed five times, also decreased to 152.1 million KRW. The three forest land parcels in Susan-ri, Jeju (19,137㎡) can now be won with bids exceeding 267.03 million KRW. The minimum bid prices for five properties, including four land parcels and one company housing, fell from 1.0807 billion KRW to 972.63 million KRW. KOSPO plans to conduct bidding for these properties from the 20th to 21st and will decide on further price reductions through the board if they fail to sell.

According to Onbid, operated by Korea Asset Management Corporation (KAMCO), Korea Electrical Safety Corporation also reduced the minimum price by 10%, from 1.51396 billion KRW to 1.36256 billion KRW, after several failed attempts to sell the office facility in Nohyeong-dong, Jeju (land 90.96㎡, building 719.93㎡), which has been on sale since February this year. The bidding for this property is ongoing until the 22nd.

Korea Electric Power Corporation (KEPCO) lowered the minimum bid prices for rental properties. KEPCO listed the third floor (244.7㎡) of the four-story Seodaegu branch annex in Bisan-dong, Daegu, for rent in February this year. However, after three failed bids, KEPCO reduced the minimum bid price from 18.4 million KRW to 16.56 million KRW starting from the fourth bid. The fifth bid is currently underway. Additionally, the rental price for part of the first floor of the Seosuwon branch in Gyeonggi was reduced from 14.52 million KRW to 13.07 million KRW. For the fourth floor (847㎡) of the Gwangmyeong branch, the minimum bid price was set at 71.28 million KRW, 10% lower than the appraised value (79.2 million KRW), from the first bid.

Public institutions are cutting prices to sell or lease because the progress of asset efficiency is slow. The government is focusing on public institution innovation measures such as ▲organizational and workforce efficiency ▲asset efficiency ▲welfare improvement ▲budget efficiency. However, according to the Ministry of Economy and Finance, the scale of asset efficiency plans for 2022-2023 is 6.8 trillion KRW, but as of the end of March this year, the actual performance is only 20.6%, or 1.4 trillion KRW.

A real estate industry official said, "Due to the real estate downturn, public institutions are also facing difficulties in asset efficiency such as real estate sales," adding, "The price is determined by the respective public institution, and the government cannot say 'sell even at a loss,' but as seen in some public institutions, it is necessary to flexibly set the minimum bid price according to the number of failed auctions and market conditions."