Three generation subsidiaries of Korea Electric Power Corporation sold all of their equity in an Australian coal mine that had yielded tens of billions of won in dividends every year. The decision was reportedly made to help reduce Korea Electric Power Corporation's massive liability and align with the government's coal phaseout policy.
According to the power generation industry on Feb. 4, Korea Western Power Co. (WP), Korea Southern Power Co. (KOSPO), and Korea South-East Power Co. (KOEN) sold all of their equity, each holding 1.25%, in the Moolarben coal mine in Australia to Yancoal, the mine's operator, at the end of last year. The value of the 1.25% equity was set at 28.1 billion won.
Korea Midland Power Co. (KOMIPO), which had the same equity, has not sold yet because detailed terms did not match, according to reports. Korea Midland Power plans to sell the equity as soon as possible after additional negotiations with Yancoal.
The generation subsidiaries first invested in the Moolarben coal mine in 2008. At the time, a consortium made up of KEPCO, its subsidiaries, and the Korea Mine Rehabilitation and Mineral Resources Corporation (KOMIR) bought 10% equity. KEPCO and four subsidiaries split the equity, taking 1% each.
In 2016, under the government's restructuring plan for energy public corporations, KEPCO sold 0.25% each of its Moolarben mine equity to the four generation subsidiaries. The rationale was that KEPCO should focus only on operating the power grid, while subsidiaries should manage fuel-related investments.
The Moolarben mine has been a "cash cow" asset that delivered solid profits to the generation subsidiaries. The mine is the third largest in New South Wales, Australia, producing about 21 million to 24 million tons (t) of coal annually. It yields high-quality bituminous coal with low ash (material left after coal is fully burned) and high calorific value, and its abundant reserves allow stable production through 2040.
Through their Moolarben mine equity, the generation subsidiaries have received tens of billions of won in dividends every year. When coal prices surged from 2022 to 2023, the dividend scale reached hundreds of billions of won. The initial investment was fully recovered from dividends alone.
KEPCO, the parent company, is seeking self-rescue measures to address a liability reaching 205 trillion won as of the end of 2024. The generation subsidiaries are also attempting to sell their Moolarben mine equity under their own financial soundness plans.
As profits at the generation subsidiaries increase, the dividends KEPCO can receive also rise. In 2023, KEPCO requested interim dividends totaling 3.2 trillion won from its six subsidiaries, and the subsidiaries held board meetings to establish the basis for the dividends at the time.
The government's coal phaseout stance was also said to have influenced the decision to sell the coal mine equity. The government plans to gradually shut down 40 coal-fired power plants operated by public power corporations by 2038. Earning revenue from overseas coal mine investments runs counter to the goals the government is pursuing as it transitions into renewable energy generation corporations.
Still, there are internal voices at KEPCO subsidiaries expressing regret over this equity sale. An official at a generation company said, "Since 2022, KEPCO has pursued a plan to reduce liability by selling the assets of generation subsidiaries," and added, "Selling even prime assets that guarantee steady high returns every year could, in the long term, do more harm than good."
KEPCO drew a line, saying the sale of generation subsidiaries' assets is unrelated to KEPCO's liability repayment. A KEPCO official said, "Generation subsidiaries operate independently under the principles of autonomy and responsibility, and KEPCO does not get involved in the sale of subsidiary assets."