Samsung Electronics and SK hynix are said to have rejected Korea Electric Power Corporation's proposal for an "advance payment of 25 trillion won in five years of electricity bills." Even as the industry continues to post record results amid a global semiconductor boom, the judgment was that it is difficult to pre-spend such a massive expense on the assumption that this favorable trend will last five years in a market with high uncertainty.
According to the industry on the 14th, Samsung Electronics and SK hynix, after internal review, determined it would be difficult to accept KEPCO's proposal and conveyed that decision to KEPCO.
As the government leads the construction of an 800 trillion won Honam semiconductor cluster as part of the "Korea three mega projects," KEPCO proposed that Samsung Electronics and SK hynix make advance payments of 20 trillion won and 5 trillion won, respectively, for electricity charges, on the grounds that prepayment would help build the power infrastructure for Yongin and the Honam semiconductor cluster. This corresponds to five years of the electricity bills the two companies paid last year.
KEPCO had said it would prioritize investment of the prepaid electricity charges in the "national backbone power grid supply." It also reportedly proposed applying interest higher than the two-year Treasury bond yield to the prepaid amount and deducting electricity charges on a semiannual basis. From KEPCO's perspective, it saw this as an opportunity to secure funds for power grid investment while reducing the burden of issuing new corporate bonds.
However, during the internal review at the corporations, the emphasis was reportedly on minimizing management uncertainty. The concern was that paying a massive electricity bill at once would burden mid- to long-term management strategy. Factors considered included that, as of the end of June this year, KEPCO's total debt stood at 210.7 trillion won, with daily interest alone at 11.5 billion won, and that the special measure expanding the corporate bond issuance limit is set to expire at the end of next year. As a result, KEPCO is now struggling to find funding measures needed for large-scale power grid investment.