The new chief executive of the Korea Electric Power Corp. vowed on Monday to improve the company’s financial structure as a primary goal for his three-year term.

Kim Joong-kyum, a former head of Hyundai Engineering & Construction Co., took office at the state-run utility a month ago.

“Financial soundness is the most urgent matter at this point,” Kim told reporters at a meeting in Gwacheon, Gyeonggi Province.

“KEPCO has run up a total loss of 6 trillion won ($5.26 billion) over the last three years. Even with an August hike in electricity prices, this year’s loss has already reached 2 trillion so far.”

KEPCO, which is listed on the Korea Exchange, has been on the horns of a dilemma between mushrooming debt and its responsibility as a public enterprise in sole charge of electricity supplies.

According to data by the Ministry of Knowledge Economy, KEPCO has 33.4 trillion won in debt as of 2010, up more than 60 percent from 20.6 trillion won in 2006. That translates to a debt-to-equity ratio of 81 percent, versus 48 percent five years ago.

KEPCO shares have dipped more than 26 percent this year, more than double the clip of decline in the benchmark KOSPI index.

A group of 13 KEPCO stakeholders filed a lawsuit against former company president Kim Ssang-su in August, seeking 2.8 trillion won in damages over what the plaintiffs claimed was his “failure to adequately increase electricity costs.”

In the same month, the government raised electricity rates by 6 percent for commercial use and 2 percent for households. But it still faces a long road to clearing its deficits, KEPCO claims, given spiraling raw material prices.

The current electricity tariff takes up about 90 percent of production costs, new KEPCO leader Kim noted.

“The country’s current energy consumption structure is distorted,” he said, adding that coal costs spiked 77.8 percent from 2007 while energy prices rose just 19.8 percent.

To prop up investor confidence and the firm’s exchequer, Kim said he plans to cut expenditures internally and financial costs.

“Financial stability plays a pivotal role in bids for overseas projects,” he said. “We will expand overseas business as a means to generate profits and offset revenue losses at home.”

By Shin Hyon-hee (heeshin@heraldcorp.com)