Energy corporations Samchully has entered an emergency management regime. It judged that profitability and its business structure are under growing strain as uncertainty in energy supply and demand stemming from the protracted Middle East war coincides with the government's policy to expand renewable energy.
According to the energy industry on the 22nd, Samchully has operated an emergency management regime since the 1st of this month.
Samchully's core business is a city gas retail operation that supplies city gas received from Korea Gas Corporation (KOGAS) to areas in Gyeonggi Province and Incheon. As of last year, this business was the main revenue source, accounting for 3.6207 trillion won, or about 68%, of the company's total sales of 5.2754 trillion won.
The direct backdrop to Samchully's move to emergency management is geopolitical uncertainty in the Middle East. Korea's dependence on energy imports is high, so if the war drags on, it is highly likely to face higher import prices for liquefied natural gas (LNG) and instability in supply and demand. This leads to higher city gas costs, exerting pressure on Samchully's profitability.
Shifts in the government's energy policy are a mid- to long-term risk for Samchully. Recently, the Ministry of Climate, Energy and Environment announced an "energy great transition promotion plan" to increase the share of renewable generation, such as solar and wind, from the current roughly 11% to more than 20% by 2030. The expansion of renewables is likely to reduce dependence on LNG in the power generation process.
City gas is a fossil fuel based on natural gas. It emits carbon dioxide (CO₂) in the combustion process, but because emissions are relatively lower than coal or oil, it is classified as "low-carbon energy." However, it is not considered renewable energy. The stronger the carbon neutrality policy becomes, the more structurally inevitable the downward pressure on city gas demand will be.
Results are also showing a slowing trend. Samchully posted sales of 5.2754 trillion won and operating profit of 159.6 billion won last year. Compared with 2023 sales of 5.664 trillion won and operating profit of 174.4 billion won, they fell 6.9% and 8.4%, respectively. With both sales and profit declining, a slowdown in profitability is becoming evident.
Accordingly, Samchully has begun emergency management focused on expense cuts and energy saving. It first moved to reduce fixed costs, including actively encouraging use of the in-house cafeteria at its Yeouido, Seoul, headquarters. It also launched a companywide energy-saving campaign, including implementing a 5-day rotation restriction on commuting vehicles, maintaining appropriate indoor temperatures, and expanding videoconferences.
It is also pushing into eco-friendly energy fields such as the fuel cell business and carbon credit development, and is strengthening non-energy businesses such as dining, lifestyle culture, and asset management. This is seen as a strategy to diversify revenue sources in preparation for potential declines in city gas demand amid strengthened carbon neutrality policies and the expansion of renewables.
An energy industry official said, "Samchully is focusing in the short term on emergency management centered on expense reductions and energy efficiency in response to energy supply and demand instability originating in the Middle East," and added, "In the mid to long term, it is moving to diversify its businesses and shift to an eco-friendly portfolio to respond to the expansion of renewables and the electrification trend."