State-run companies will take a series of measures to cut their debt-to-equity ratios, the government said Monday, which will likely cause enormous pain not only on their part but also for the economy and general public.
According to a report entailing the fiscal policies of 41 state-owned, state-run companies each with more than 2 trillion won ($1.8 billion) in assets, the companies will take a wide range of debt-reduction measures next year that include issuance of new shares and sales of assets, as well as increasing rates for public services.
The report, compiled by the Ministry of Strategy and Finance, is the first of its kind as the government seeks to make such public entities more financially sound. The report was submitted to the National Assembly for consideration on Monday.
Some of the planned measures are expected to place serious burdens on the economy as a whole, particularly a hike in public service rates, such as the price of electricity or state-controlled natural gas for households, leading to additional burdens on residents.
The government said in its report that it plans to "gradually increase public service fees to the level where all production costs can be recovered."
Currently underrated fees include the electricity price, which currently recoups less than 90 percent of production costs despite three rate hikes in less than two years that resulted in an overall rate increase of more than 14 percent.
According to the report, the state-run Korea Electric Power Corp. (KEPCO) will develop its real estate properties to transform them into return-generating assets while also selling stakes in its affiliates, which include KEPCO Engineering & Construction Co. and KEPCO Plant Service & Engineering Co.
Korea National Oil Corp., also plans to sell its stakes in what it calls "marginal assets," which include overseas oil mines, along with its stake in its affiliate Daehan (Korea) Oil Pipeline Corp.
Such sales of liquid and fixed assets will likely end up being an one-time-only remedy for the public corporations that are ridden with billions of dollars in debt.
The combined debt of all 41 public corporations in the report is expected to rise from 485 trillion won this year to 532 trillion won in 2013, with their combined debt-to-equity ratio also increasing from 222 percent to 234 percent. (Yonhap)