[THE INVESTOR] The stock-listing of six power generation affiliates of state-run Korea Electric Power Co. that the government proposed Tuesday may face difficulties mainly due to insufficient investor interest, market watchers said. 

“Despite the government’s expected strong push in the latter part of this year, partial public stock offering of a state-run company is likely to face little interest from investors,” said Yoon Hee-do, a stock market analyst from Korea Investment & Securities.

The targeted six power generation companies, fully owned by the nation’s top utility giant, include Korea Hydro & Nuclear Power, Korea South-East Power, Korea Midland Power, Korea Western Power, Korea Southern Power and Korea East-West Power. 

The stock listing of KEPCO’s power generation units was proposed as a part of the government’s efforts to improve the financial health of state-run energy companies, to enhance their operational transparency and to raise capital for investment in new energy businesses. 

While announcing the policy direction on the stock-listing plan for eight energy companies, including KEPCO’s six power generation units, the government made it clear that it would continue its control those public energy companies by maintaining its 51 percent stake in them, concerned over public opposition against privatization of a public company.

The “mixed” ownership structure to raise competitiveness of state-run energy companies was developed based on lessons learned from the failure of privatization of KEPCO’s key units in the early 2000s.

A big gap in pricing a share between the market and the government and KEPCO would be another stumbling block to hinder the stock listing of KEPCO’s power generation affiliates.

“Similar to previous cases, the price gap between the two parties could raise the issue of the discounted sale of public companies,” Yoon said.

Despite lingering doubts over the stock-listing of KEPCO’s power generation units, market watchers predict the government might push for listing shares of Korea South-East Power on the stock market in the latter part of this year as the first case. The power company, which depends on coal-powered power generation, is financially healthier than the other sister firms.

“Regarding the stock-listing issue, the company waits for the direction of the parent company,” a company spokesperson said. KEPCO also said it has yet to start any procedure to push for a stock listing of its six units.

Besides the stock listing plan, for the reform of public companies in the energy sector, the government announced downsizing plans for Korea Coal Corp. and Korea Resources Corp., which will remove some 3,500 jobs and minimize overseas natural resource development business.

By Seo Jee-yeon (jyseo@heraldcorp.com)