[Market Focus] Will Rates Rise After Commercial Act Amendment?... KEPCO and KOGAS Rally

On July 4, shares of Korea Electric Power Corporation (KEPCO) and Korea Gas Corporation (KOGAS) are showing strong performance. This is due to expectations that the management policies of listed state-owned enterprises could change following the amendment of the Commercial Act.

As of 9:35 a.m. on this day, KEPCO is trading at 38,150 won, up 2,250 won (6.27%) from the previous trading day.

At the same time, KOGAS is trading at 47,100 won, up 3,300 won (7.53%) from the previous trading day.

This appears to be due to the passage of the Commercial Act amendment. Despite accumulating deficits, the two energy state-owned enterprises have supplied electricity and gas below cost in line with government policy direction.

KEPCO has accumulated operating losses totaling 30.9 trillion won over the four years since 2021. KOGAS has 14.1 trillion won in unpaid receivables for city gas, known as civilian-use uncollected receivables, due to government control of rates.

With the amendment of the Commercial Act, the duty of directors to act in good faith will be expanded from the company to shareholders. Previously, the focus was on supplying affordable energy to the public by providing it below cost, but there are now expectations that, considering profitability and shareholder value, energy rates may be raised in the future.