Reformed KEPCO Looks Abroad for Growth
CEO Kim’s Strong Overhaul Beginning to Bear Fruit
By Kim Hyun-cheol
The Korea Electric Power Corp. (KEPCO) is undergoing unprecedented changes.
For example, its personnel reshuffle followed one-day reviews to eliminate room for any outside interference and ensure those who deserved promotions received them
This and other moves to break away from old undesirable practices are led by Kim Ssang-soo, the former LG Electronics CEO, who took the helm of the state-run entity last August.
Kim's reform is sweeping.
Currently some 150 task-force teams are in charge of reforming the organization under the "tear down and redesign (TDR)" management program, which Kim introduced upon his inauguration to deal with the long-overdue renovation. Kim took this program from his LG days, making it the core competence for KEPCO.
The outcomes of the reform measures are now seen in various parts of its policies. A rule that all reports should not exceed three pages in length saved KEPCO 11.3 billion won last year.
Such ideas from the TDR teams saved some 111.7 billion won in total last year. But Kim is looking to ultimately change something bigger: its manpower.
Leading the nation's largest state-run firm with assets of 65 trillion won ($52.2 billion), Kim is unconventional in his approach, obviously bringing strengths from the private sector to the state-run company.
In a way, he is a missionary chosen by the Korean government. "It took substantial efforts to persuade him to take the job, but we believe it was worth it," an official at the Ministry of Knowledge Economy said on condition of anonymity.
Upon taking the leadership, Kim set off on a large-scale personnel reshuffle. He cut nearly 6,000 jobs within the first six months at KEPCO, and also introduced a new capability-oriented personnel system, in an attempt to streamline the organization.
Now through one-third of his term, Kim is setting his goals higher.
KEPCO disclosed its long-term development vision last month at its 48th anniversary, where it was announced that it aims to expand its overseas sales to 27 trillion won by 2020, from 500 billion won last year. Through the growth abroad, the company expects to become one of the world's five biggest electric firms within 11 years.
"(KEPCO) will achieve the ambitious goal by improving cooperation and mutual confidence between management and labor," Kim said. "We will build electric power infrastructure and networks across the globe."
Growth in foreign markets is one of KEPCO's ultimate goals. A company is supposed to grow by 10 percent annually, but it is not achievable in the domestic market only, according to Kim, and that's why the company needs to set its sight abroad.
To this end, KEPCO plans to get its overseas offshoots operating independently, and also aims to improve overseas resources development so that changes in fuel prices in global markets will influence the domestic electricity prices less.
It also set a goal of lifting self-development rates for soft coals and uranium to above 30 percent by 2012. Currently, the company produces only 7.2 percent of the soft coals it uses from its overseas mines, and none of the uranium.
KEPCO expects to double its manpower to 91,000 through mergers and acquisitions with overseas electric power companies. Under the scheme, its total asset volume is expected to more than double to 204 trillion won.
It is also pushing its boundaries to explore new energy resources, while advancing into such new projects as carbon emission rights and electric power information technology.
KEPCO plans to invest 2.5 trillion won in seven "green technologies," including integrated coal gasification combined cycle, smart grids and electric vehicle-recharging infrastructure. Also, it expects to add some 10 billion won in sales by 2020 by diversifying its businesses to the design and supply of facilities.
To make a better entry into overseas markets, the company will lower the portion of thermal power to overseas sales by more than half and raise sales of nuclear, hydraulic and renewable energies.
Achievements are already visible in such efforts. Last month, KEPCO won a $2.5-billion construction project to build a fuel oil power plant in Saudi Arabia. In the Rabigh project, the company will construct a 1,204-megawatt plant in a build-operate-ownership system, in which it will recoup investment by operating the plant for the next 20 years after construction.
Earlier this year, the company led a consortium that won another $2.5-billion deal to build and operate a coal-fired power plant in Kazakhstan.
Still, the company has a long way to go in spite of all those aggressive changes.
KEPCO suffered a 2.8-trillion-won deficit last year, for the first time in the electric giant's history amid the global economic downturn. It managed to enter into the black in the second quarter of this year.
But the company is still positive on its future outlook.
"Business circumstances were turbulent throughout last year at home and abroad, so it's still a bit too early to judge our performance," a KEPCO spokesman said. "Our reform is still going on strong, and it won't be long before it makes some change in the company's showings to come."