Korea Electric Power Corporation is expected to post a record performance, with operating profit nearing 15 trillion won on a consolidation basis last year.
According to the securities industry on the 18th, Korea Electric Power Corporation's operating profit in the fourth quarter of last year is expected to come in at the 3.4 trillion won level, up more than 40% from a year earlier.
Full-year operating profit is forecast to reach the 14.9 trillion won level, up about 78% from a year earlier. In that case, it would be a record high, surpassing 12.0015 trillion won in 2016. Revenue over the same period was projected to rise about 4.6% to 97.7275 trillion won.
The main reasons for operating profit growing faster than revenue include stabilized international fuel prices and the resulting drop in the system marginal price (SMP; power purchase price), as well as electricity rate hikes that continued in recent years.
Choi Gyu-heon, senior researcher at Shinhan Investment & Securities, projected additional declines in average annual energy prices and SMP, and said KEPCO's operating profit on a consolidation basis would reach 19.7 trillion won this year.
However, the industry views the recent improvement as closer to a recovery from deficits. KEPCO failed to raise electricity rates in a timely manner between 2021 and 2023, when international energy prices surged due to the Russia-Ukraine war, and supplied power at prices below cost, recording a massive cumulative deficit of 47.8 trillion won during that period.
Afterward, with rate hikes coinciding with stabilized fuel prices, KEPCO posted about 2 trillion won in operating profit in the third quarter of 2023, returning to the black after 10 quarters. Profitability has been improving since, but it will likely take considerable time to resolve the deficit exceeding 47 trillion won.
The financial burden is also heavy. As of the end of June last year, KEPCO's total liabilities on a consolidation basis amounted to about 206.2 trillion won. In interest expense alone, it spent about 12 billion won per day, totaling 3.2794 trillion won, in the first through third quarters of last year.
Large-scale transmission and distribution network investments are also planned to meet growing power demand. According to the 11th Basic Plan for Long-term Electricity Supply and Demand (2024–2038), about 113 trillion won will be invested in transmission and distribution facilities.
Industry says electricity rates are a heavy burden. Since 2022, industrial electricity rates have risen about 70% over seven rounds, and in particular, only industrial rates were raised in Nov. 2023 and Oct. 2024 while dwelling rates were frozen. Currently, the industrial electricity rate is 185.5 won per kWh (kilowatt-hour), far more expensive than dwelling (149.6 won) and general (168.9 won) rates. Among member countries of the Organisation for Economic Co-operation and Development (OECD), it is rare to find cases where industrial electricity rates are higher than dwelling rates.
KEPCO says the recent improvement in results is a process of recouping cost increases that occurred during the past energy crisis phase. Industry argues that, even now, a rational system should be established so electricity rates can operate according to market principles.
KEPCO is reviewing a system overhaul to strengthen cost pass-through. Through time-of-use and seasonal pricing, it plans to reduce the burden of industrial electricity rates during daytime hours.
KEPCO is scheduled to announce results around the 26th.