State-run energy enterprises lose 10 trillion won

By Park Hyong-ki

Korean state-run energy enterprises’ overseas investments do not seem to give taxpayers enough bang for their buck.

From 2012 to 2016, they wasted over 10 trillion won by taking miscalculated risks on overseas projects related to energy development, according to CEO Score, a private corporate data analyst, Wednesday.

The biggest money-losing entity through such mishaps was Korea National Oil Corp. (KNOC), whose 26 ventures abroad lost more than 7 trillion won in the same period. Half of KNOC’s overseas ventures face capital erosion.

The analyst compared the growth rate of state-run enterprises’ investments in 175 overseas ventures in 2012 to their book value at the end of 2016.

About 20 percent of those that ventured abroad saw their capital eroded from 2012 to 2016, compared to 13 percent four years earlier.

The steep losses came at the height of former administrations’ drive to accelerate overseas energy resource development and acquisition to increase the country’s self-sufficiency, CEO Score noted.

The 2008-13 Lee Myung-bak administration carried out this policy by mobilizing the country’s state-owned energy enterprises, including Korea Gas Corp. (KOGAS) and Korea Resources Corp. (KORES) to secure resources such as rare metals, in addition to oil and gas.

KOGAS’ overseas venture was the second-biggest money-losing entity, with a loss of 1.7 trillion won, while KORES lost 1.1 trillion won.

Only three, including Korea Electric Power Corp. managed to see their book value increase above the rate of their overseas investments.

Korea’s economy relies on energy imports. At that time, the country had taken the natural course in a global energy race with cash-rich China and Japan.

The overseas entities’ net loss increased 55 times from 36.8 billion won in 2012 to over 2 trillion won in 2016.

Adding to the woes, their aggregate debt amounted to 59 trillion won in 2016, up nearly 74 percent from 86 billion won four years earlier, according to CEO Score.

Without sufficient measures to improve their finances, taxpayers will end up covering their losses, the consultancy said.