By Nam Hyun-woo
Korea Electric Power Corp. (KEPCO) is losing its momentum in making key decisions regarding its profitability, as the state-run power distributor has suspended its decisions on power rates and a large overseas investment project.
KEPCO held a board meeting Friday afternoon and decided to push its plan on altering the electrical power charge rating system for the country to the second half of the year. KEPCO initially announced it would institute a new rating system by the end of November if it had received government approval by June 30.
The new rating system reportedly contains details on abolishing several discounts on households using less than 200 kilowatt-hours a month, on and off- peak fees and seasonal fees.
The new system has been widely viewed as KEPCO's bid to improve its revenue from power distribution, in order to address its mounting losses. Last year, the company posted 1.28 trillion won in operating loss, up from 208 billion won in 2018.
There has been heated debate on KEPCO's charges, as experts opined that KEPCO will suffer "chronic losses" unless there is an improvement in its current power charge rating system. KEPCO CEO Kim Jong-kap also has expressed his opinion on the necessity of the new rating system, stating that the cost of energy to consumers is cheaper than the cost of production.
KEPCO's effort to refurbish the rating system, however, failed to pick up momentum, as the domestic industry hit hard from the COVID-19 pandemic and liquidity drains from businesses.
Plunging global oil prices also weakened KEPCO's drive for new rating system, as it helped the company to cut expenses and post a surprising operating profit of 430.55 billion won ($357.6 million) in the first quarter.
Analysts said, however, this could end up being a one-off event.
"Following the government policy of encouraging eco-friendly power sources, KEPCO is seeing rising costs in emission trading and obligations for renewable energies," NH Investment & Securities analyst Lee Min-jae said. "Even if the global oil prices remain at a low level, KEPCO is bound to suffer chronic losses after 2022, unless there is a reform in its rating system."
During Friday's board meeting, KEPCO also postponed a decision on whether it will invest into a coal-fired power plant project in Indonesia.
KEPCO has been tapped into the $3.5 billion project, which is building the Jawa 9 and 10, coal-fired plants near Jakarta since last year.
Earlier this month, the Korea Development Institute (KDI) approved KEPCO's $51 million investment into the project, even though the institute calculated the investment would cause a $7 million loss for KEPCO. In Korea, a project worth more than 50 billion won by a public institution is required to pass a KDI feasibility study.
KEPCO also failed to reach a conclusion on this investment, following ardent opposition from politicians and environmental civic groups in and outside of Korea, questioning the feasibility of this project.
Some investors in KEPCO also expressed their doubts, with Blackrock sent a letter asking KEPCO to reveal its "strategic reasons" for pursuing the Indonesian and a similar power plant project in Vietnam.
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| Korea Electric Power Corp. CEO Kim Jong-kap |
Korea Electric Power Corp. (KEPCO) is losing its momentum in making key decisions regarding its profitability, as the state-run power distributor has suspended its decisions on power rates and a large overseas investment project.
KEPCO held a board meeting Friday afternoon and decided to push its plan on altering the electrical power charge rating system for the country to the second half of the year. KEPCO initially announced it would institute a new rating system by the end of November if it had received government approval by June 30.
The new rating system reportedly contains details on abolishing several discounts on households using less than 200 kilowatt-hours a month, on and off- peak fees and seasonal fees.
The new system has been widely viewed as KEPCO's bid to improve its revenue from power distribution, in order to address its mounting losses. Last year, the company posted 1.28 trillion won in operating loss, up from 208 billion won in 2018.
There has been heated debate on KEPCO's charges, as experts opined that KEPCO will suffer "chronic losses" unless there is an improvement in its current power charge rating system. KEPCO CEO Kim Jong-kap also has expressed his opinion on the necessity of the new rating system, stating that the cost of energy to consumers is cheaper than the cost of production.
KEPCO's effort to refurbish the rating system, however, failed to pick up momentum, as the domestic industry hit hard from the COVID-19 pandemic and liquidity drains from businesses.
Plunging global oil prices also weakened KEPCO's drive for new rating system, as it helped the company to cut expenses and post a surprising operating profit of 430.55 billion won ($357.6 million) in the first quarter.
Analysts said, however, this could end up being a one-off event.
"Following the government policy of encouraging eco-friendly power sources, KEPCO is seeing rising costs in emission trading and obligations for renewable energies," NH Investment & Securities analyst Lee Min-jae said. "Even if the global oil prices remain at a low level, KEPCO is bound to suffer chronic losses after 2022, unless there is a reform in its rating system."
During Friday's board meeting, KEPCO also postponed a decision on whether it will invest into a coal-fired power plant project in Indonesia.
KEPCO has been tapped into the $3.5 billion project, which is building the Jawa 9 and 10, coal-fired plants near Jakarta since last year.
Earlier this month, the Korea Development Institute (KDI) approved KEPCO's $51 million investment into the project, even though the institute calculated the investment would cause a $7 million loss for KEPCO. In Korea, a project worth more than 50 billion won by a public institution is required to pass a KDI feasibility study.
KEPCO also failed to reach a conclusion on this investment, following ardent opposition from politicians and environmental civic groups in and outside of Korea, questioning the feasibility of this project.
Some investors in KEPCO also expressed their doubts, with Blackrock sent a letter asking KEPCO to reveal its "strategic reasons" for pursuing the Indonesian and a similar power plant project in Vietnam.
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| Civic group members hold banners in front of the Embassy of Korea in Indonesia, Friday, denouncing Korea Electric Power Corp.'s investment plan into a project of building two thermal power plants near Jakarta. Courtesy of Solutions for Our Climate |
