Kepco suffers record operating loss of 5.8 trillion won

Korea Electric Power Corp. (Kepco) posted a net loss of 5.25 trillion won ($4.36 billion) last year due to rising commodity prices, the company said.

Despite a 3.4% increase in revenue to 60.6 trillion won in 2021, the utility reported a net loss of 5.25 trillion won from the previous year’s net profit of 2.1 trillion won, and a record operating loss of 5.8 trillion, compared to the previous year’s operating profit of 4.8 trillion won. The company’s biggest operating loss was previously 2.8 trillion won in 2008, when crude prices soared in the wake of the global financial crisis.

Soaring fuel prices were the main cause of the losses.

Prices for crude oil, liquefied natural gas (LNG) and coal – feedstocks for power generation – all jumped last year, mainly due to an increase in demand driven by the post economic recovery. -pandemic. Analysts have partly attributed the rise in LNG prices to the government’s shutdown of nuclear generation facilities.

Kepco spent a total of 66.4 trillion won on operating expenses last year, up 22 percent from a year earlier.

The state-owned company was unable to raise the price of electricity due to government resistance, despite rising international fuel prices.

A cost-based charging system that came into effect in January 2021 was suspended in the second quarter as the government tried to rein in inflation. Electricity bills remained frozen through the second and third quarters of 2021, until an increase of 3 won per kilowatt hour was approved in the fourth quarter, the first increase since November 2013. A family that used 350 kilowatt hours per month paid extra. 1,050 won per month after the 3 won increase.

Utility bills are expected to rise twice this year, a combined increase of 5.6 percent from last year, which will translate to an additional 1,950 won per month for a family of four.

Kepco’s operating loss far exceeded the market consensus of 5.1 trillion won compiled by FnGuide.

The outlook remains bleak as rising international prices could outpace expected increases in electricity tariffs. FnGuide estimated that the company’s operating loss will reach nearly 11 trillion won this year.

“A massive deficit is inevitable before the second quarter, when a price increase is expected, and global inflation is rising at a faster rate than the increase in electricity prices,” Meritz Securities said in a report. of January.

“If the annual electricity pricing plan remains as it is and the price of crude oil stays at the $80 level, the operating loss will exceed 10 trillion won this year.”

If the conflict between Ukraine and Russia pushes up the world price of crude, the operating loss will be even greater.

“Financial risk is expected to increase due to rising costs,” a Kepco spokesperson said.

BY SOHN HAE-YONG [[email protected]]