State-run power firm strives to reduce deficit during CEO Kim’s first year via exports


Korea Electric Power Co. has vowed to achieve financial soundness by making greater profits from the global power market while keeping power rates affordable.

To meet its vision for 2025, the state-run power company is pushing to increase sales to 150 trillion won ($134 billion) and its overseas business to up to 50 percent of total operations. Currently KEPCO’s overseas sales make up only 3 percent of the total.

For the past year, KEPCO president and CEO Kim Joong-kyum has sought to expand the company’s overseas business portfolio, traveling to 67 related entities in 17 countries after he took office as president. The company secured 12 overseas orders for 2012 and 28 for 2013.

KEPCO’s construction project of a 5,600-megawatt nuclear power plant in the United Arab Emirates is under way. The company is participating in 13 power-generating projects in seven countries.

Earlier in September 2011, CEO Kim said in his inaugural speech that a state-run power business “should exist for the public good of the nation and national growth,” 

“While supplying high-quality electrical power to the nation, the company must make sure that it does not allow financial deficit in overseas business,” Kim said.

The company’s domestic operation is difficult to expand at this time as demand for power transmission and sales are limited due to sluggish economic growth, the CEO said.

The firm is also participating in 10 ongoing resource development projects from four countries, six engineering, procurement and construction projects for power transmission and 12 consulting projects.

New sources of growth such as wind power, microgrids and ROMM are some of the markets KEPCO seeks to pioneer for exports.

Since 2008, companies and private consumers in Korea have enjoyed relatively low electricity rates, a result of the government’s efforts to curb price rises that has led to the power company’s massive operating deficit.

Under the state’s regulations, the power company was forced to purchase electricity from power-generating companies and resell it to customers at even lower prices. The regulation includes a series of additional reasons ― “Future investment opportunity cost,” “protection of generating companies from net deficit” and others ― as a defense for keeping the power charges lower than the market price.

Although these power-generating companies are subsidiary companies of KEPCO, they have been managed independently from KEPCO since 2011 as commercialized state companies.

For KEPCO, the purchase price is affected by changes in international fuel prices, whereas the selling price is suppressed by the state.

After four years of the continued debt march under the unreasonable power exchange system, KEPCO announced a disastrous accumulative deficit of 10.9 trillion won ($9.8 billion).

According to its 2012 first-half financial report, the company marked a six-month operating loss of 4.35 trillion won, with about 53.6 percent increase on-year, as of July 27, 2012. The net deficit hiked by about 48.3 percent at 2.90 trillion won.

To turn away from further snowballing of the deficit, the power company is seeking constructive change in the current power exchange system, concentrating on tightening its belts for reasonable management.

By Chung Joo-won (joowonc@heraldcorp.com)