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KEPCO seeks 10% hike in electricity bill

Nov. 21, 2011 - 17:03 By Korea Herald
The government is set to again face the dilemma of how to balance between price stability and public enterprise debts as the country’s sole electricity provider is pushing to increase rates by 10 percent starting next month.

The Korea Electric Power Corp.’s board of directors has recently agreed on the hike, said Cho In-kook, the company’s chief operating and financial officer, Monday. The plan needs approval from the Ministry of Knowledge Economy.

The envisioned plan targets energy-intensive large corporations, he noted. It calls to freeze tariffs for households and agricultural use, and a moderate raise for small and medium-sized businesses. 
(Yonhap News)

The decision is seen as a measure to ensure stable power supplies this winter and restore financial soundness at KEPCO, which is listed on Seoul’s KOSPI and the New York Stock Exchange.

Chief executive Kim Joong-kyum pledged to prop up the company’s balance sheet when he took the helm last month.

“Financial stability is the most urgent task at this point,” Kim told reporters, adding that the current electricity tariff makes up about 90 percent of production costs.

“The country’s current energy consumption structure is distorted.”

KEPCO shares rose 2.34 percent after news reports to close at 24,100 won Monday.

The company said it has been struggling to put itself on a sound financial and commercial footing since 2008 chiefly due to cheap electricity charges relative to spiraling raw material prices.

Reluctant to impose sharp increases amid inflationary pressure, the government hiked tariffs by 6 percent for commercial use and 2 percent for households. KEPCO has insisted on a 15 percent level to compensate its deficits.

KEPCO has run up a net loss of 6.1 trillion won ($5.35 billion) in three years, a third of which this year alone.

Ministry data shows the company has 33.4 trillion won in debt as of 2010, which makes a debt-to-equity ratio of 81 percent, versus 48 percent in 2006.

KEPCO stocks plunged more than 26 percent this year, more than double the clip of decline in the benchmark KOSPI index.

A group of 13 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 September, KEPCO came under fire over nationwide brownouts as an unseasonable heat wave pushed up power demand beyond capacity.

Faced with another possible electricity crunch this winter, the utility is striving to secure sufficient reserves and put a cap on demand.

The ministry said that electricity consumption by the nation’s industrial sector soared 9.1 percent last month from a year ago on the back of upbeat manufacturing exports, marking the 29th consecutive month of on-year rise.

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