Korea Electric Power Corp. has incurred a deficit of more than 1 trillion won (about 848 million U.S. dollars) this year due to a spike in fuel cost caused by soaring international oil price. If the company turns from a surplus last year to a deficit next year, it will be under mounting pressure to hike the power utility price.
KEPCO said it has posted an operating profit of minus 1.1298 trillion won (about 960 million dollars) in the first nine months of the year, down 4.2824 trillion won (3.63 billion dollars) during the same period of last year. On a quarterly basis, the power monopoly incurred deficits for two consecutive quarters in the second quarter (minus 764.8 billion won or minus 648 million dollars) and the third quarter (minus 936.6 billion won or minus 794 million dollars).
KEPCO saw its overall electricity sale increase 4.6 percent for the nine months due to rising average operating rate in the manufacturing sector. However, revenue gains from electricity sale grew just 1.9 percent (808.2 billion won or 685 million dollars) because international oil prices soared this year, while the government froze the power utility price to curb soaring inflation among other reasons.
The rising portion of renewable energy in its power supply has also affected KEPCO’s deteriorating profitability. KEPCO reduced the supply of electricity from coal and increased that from liquified natural gas, which is more costly, to help achieve the “carbon neutrality by 2050” initiative. The company also increased the portion of electricity that it is obliged to supply from renewable energy sources from 7 percent to 9 percent from this year. It also increased investment in facilities for renewable energy generation and power transmission, which helped elevated its sales costs.
KEPCO is poised to a post massive deficit in the fourth quarter of the year as well. “KEPCO’s consolidated operating profit in the fourth quarter will likely be a deficit of more than 3 trillion won (2.54 billion dollars) due to soaring international oil and coal prices,” Moon Gyeong-won, a researcher at Meritz Securities, said in a research report. “If the international crude prices remain between 80 and 85 dollars through the first half of next year, KEPCO will inevitably incur a massive deficit of more than 6 trillion won (5.087 billion dollars) in 2022.” The company saw its operating profit turning from a deficit of 1.2765 trillion won (1.08 billion dollars) in 2019 to 4.0862 trillion won (3.46 billion dollars) last year.
With KEPCO’s finances deteriorating, the company will likely be under increasing pressure to raise power utility prices. “If there is any cause a hike (of power utility price), we will consult with the government,” KEPCO CEO Chung Seung-il said at a press meeting on Wednesday. “We will need to improve policy and institutions to ensure that the price of power utility is determined by reflecting in phases the power generation cost and an appropriate level of compensation.”
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