KOGAS to bump up LNG price amid snowballing debt

Korea Gas Corp. (KOGAS) President and CEO Choi Yeon-hye speaks during a press conference in Sejong, Wednesday. Courtesy of KOGAS

Korea Gas Corp. (KOGAS) will hike the price of liquefied natural gas (LNG) it imports this year to stop its debt from snowballing beyond the current 13 trillion won ($9.5 billion) level and guarantee a stable supply, company CEO Choi Yeon-hye said Wednesday.

The state utility's debt as of the first quarter this year is 13.5 trillion won, which resulted from receivable gas bills issued to households and businesses. It relies heavily on loans to invest in its supply infrastructure and clears them with collected bill payments in 20 to 30 years.

Choi said during a press conference in Sejong that such financial management makes the company's financial condition "innately vulnerable."

KOGAS' debt ratio remains at 250 percent to 300 percent during normal operation.

Choi said that if the company doesn't raise the rate of 19.44 won per megajoule (MJ) as of this month, the debt will soar to 14 trillion won by the end of the year.

KOGAS' debt generates a daily interest cost of 4.7 billion won. Choi said that the higher the cost keeps growing, the higher the burden customers will have to bear.

She added such financial delinquency also puts the country's global reliability at risk, making it more difficult for the Korean government to import the natural resource.

"The Russian invasion of Ukraine and military conflict in the Middle East are destabilizing the oil price and exchange rates and raising risks," Choi said. "In such a global setting, we must improve our financial standing by resolving the debt fast."

She said the price hike, once approved by the Ministry of Economy and Finance, will have to be executed as early as this summer before the country's demand for LNG spikes in winter.

"We hoped we could raise the price this month, but the finance ministry froze it," Choi said. "Last year, we raised the LNG price by 5 percent, or 1.04 won per MJ, but that only allowed us to pay back some 500 billion won. If we raise the price by 27 won per MJ, we can clear the debt within a year. But that plan hasn't been finalized yet."