Wen government’s ‘nuclear phase out’ boomerang, KEPCO loses 8 trillion… sell everything that makes money

Plan to raise KRW 6 trillion by selling subsidiaries’ shares and real estate
Raise the need for a 40% increase in electricity rates
It will be difficult to get out of the financial crisis in the short term

Korea Electric Power Corporation announced on the 13th that it was tentatively counted as an operating loss of 7.786 trillion won in the first quarter of this year on a consolidated basis, which turned into a loss compared to the same period last year (operating profit 565.6 billion won). The photo shows the Seoul headquarters of Korea Electric Power Corporation in Jung-gu, Seoul. [연합뉴스]

KEPCO has decided to raise 6 trillion won by selling real estate, such as the Uijeongbu substation site, and overseas coal power plants under operation and construction, including stakes in subsidiaries. KEPCO, which recorded a loss of close to 8 trillion won in the first quarter, said it would sell assets that could be used as money, and came up with a self-help measure. They also decided to freeze the quota until the financial situation normalizes.

On the afternoon of the 18th, the presidents of electric power group companies such as KEPCO and power generation subsidiaries held the ‘Emergency Response Committee’ at the KEPCO Art Center in Seocho-gu, Seoul and made this announcement.

KEPCO previously announced that it recorded a consolidated operating loss of 7.786 trillion won in the first quarter of this year. It is the biggest loss ever. Compared to the operating loss of 5,860.1 billion won in 2021 and 1.276.5 trillion won in 2019, you can guess how big the loss was in the first quarter. In the future, KEPCO decided to promote emergency measures such as high-intensity self-rescue efforts and management innovation by each company, centering on the non-captain of power group companies. The results will also be checked periodically.

KEPCO plans to raise about 6 trillion won through the sale of equity shares (800 billion won), real estate sales (700 billion won), overseas business restructuring (1.9 trillion won), and austerity management (2.6 trillion won). 11 companies including Korea Hydro & Nuclear Power, South-East Power, Korea Midland Power, Western Power, East-West Power, Southern Power, Korea Electric Power Technology, KEPCO KPS, KEPCO Nuclear Fuel, and KEPCO KDN attended the meeting.

Some are pointing out that this is the result of KEPCO’s failure to properly raise electricity rates during the Moon Jae-in administration. The international economic crisis triggered by the prolonged war in Russia and Ukraine and the sharp rise in global fuel prices are the main causes of KEPCO’s deficit, but This is because rates were frozen and losses increased.

Electricity rates are composed of standard fuel cost, fuel cost adjustment rate, climate environment rate, etc. According to the fuel cost index system, the fuel cost adjustment fee can be adjusted up to ±3 won per kwh (kilowatt hour) compared to the previous quarter and up to ±5 won per year compared to the previous quarter according to the fuel cost increase. Based on this, KEPCO requested the government to increase the fuel cost adjustment fee from December 2020, but the government only increased it by 3 won in September last year.

Even after the global economic crisis deepened due to the Russian invasion of Ukraine and international oil prices soared, electricity rates have been withheld due to inflation concerns. In the end, this decision came as a crisis for KEPCO.

On the other hand, countries around the world are increasing electricity rates one after another. According to KEPCO, Spain raised electricity rates by 51% last year, before the outbreak of the Russian-Ukraine war, according to KEPCO. Italy (31.6%) and the UK (18.8%) also raised rates significantly. The European Union (EU) said in the second half of last year that electricity rates in all countries except for two member countries rose compared to the previous year.

KEPCO explained, “Electricity rate sellers are facing a serious financial crisis due to a surge in fuel costs.

The problem is that there is no way to reverse this situation in a short time. The Yun Seok-yeol administration is also emphasizing a cost-based policy that reflects the soaring fuel cost in electricity rates, but is hesitant to raise the electricity rate excessively due to severe inflation. Minister of Trade, Industry and Energy Lee Chang-yang said at a recent parliamentary personnel hearing that “we will partially reduce the burden of increasing electricity rates by expanding nuclear power generation,” but it is analyzed that there is a limit considering that it takes a short period of time to build an additional nuclear power plant.

Kang Dong-jin, a researcher at Hyundai Motor Securities, said in the report, “As fossil energy prices continue to climb high, adjustments are not likely to be easy for the time being. He said, “This year’s operating loss could expand to 23.5 trillion won,” he said.

By Lee Byung-hee, staff reporter yi.byeonghee@joongang.co.kr

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