Kim Dong-cheol, KEPCO President, "Facing Limits of Massive Deficits... Minimum Rate Adjustment Needed"

16th Press Conference
"Cumulative Deficit of 43 Trillion Won... Must Resolve Over 10 Trillion Won Annually Until the End of 2027"
Without Rate Hikes, 'Investment in Power Grid' Is Difficult

Kim Dong-cheol, President of Korea Electric Power Corporation (KEPCO), stated on the 16th, "As a last resort, the normalization of electricity rates at a minimum level is absolutely necessary, and I earnestly appeal to the government authorities."

At a press briefing held at a restaurant in Sejong City on the same day, President Kim said, "I must inform you that KEPCO has reached the limit where it can no longer bear the large-scale accumulated deficit through its efforts alone."

Kim Dong-cheol, President of Korea Electric Power Corporation, is answering questions at a press conference held on the 16th.

KEPCO is facing a large-scale deficit due to a negative margin structure where the selling price does not meet the purchase strategy price. President Kim emphasized, "Although we achieved operating profits of 1.3 trillion won and net income of 600 billion won in the first quarter of this year, marking three consecutive quarters of profit, recent financial uncertainties are increasing again due to high oil prices caused by Middle East risks and a high exchange rate in the high 1300 won range. Furthermore, the extraordinary measure of interim dividends from subsidiaries implemented at the end of last year, which was unprecedented since the company's founding, has been exhausted."

KEPCO had been covering the massive deficits caused by the long-term negative margin structure through bond issuance, but faced a risk of default due to exceeding the issuance limit (five times the sum of capital and reserves) at the end of 2023. Consequently, for the first time since its establishment, KEPCO implemented an interim dividend of 3.2 trillion won from its subsidiaries. As a result, the bond issuance multiple decreased from 5.5 times to 4.5 times, maintaining it within the 5 times limit.

President Kim expressed concern, saying, "We will work with the government to prepare effective support measures for energy-vulnerable groups such as small business owners and low-income households, who will bear increased burdens due to electricity rate normalization. If rate normalization is not achieved, securing funds required for massive investments in power grids to meet the surging electricity demand and essential power facility investments to prevent blackouts and failures will become even more difficult."

He refrained from specifying the exact rate increase. President Kim said, "To eliminate the accumulated deficit of 43 trillion won by the end of 2027, it is necessary to reduce it by more than 10 trillion won annually, which means a significant increase in electricity rates is required. KEPCO will also propose (the specific rate increase) to the government, but since the government authorities make the decision, it is difficult to discuss it here."

At the briefing, KEPCO also explained plans for "timely expansion of the national power grid and stable operation of the power system" and "promotion of new energy technologies and new business." President Kim said, "KEPCO will continue to pursue power grid construction innovation measures to proactively prepare for the explosive increase in electricity demand, including the world's largest semiconductor cluster to be established by 2042. Additionally, we will actively promote new energy technologies and new businesses, such as high-efficiency future power grid innovation using direct current distribution, to seize new opportunities in the global market, where cumulative investments of 12 quadrillion won are expected by 2040."