KEPCO sinks deeper in red in Q1 due to higher global fuel costs

2019.05.15 09:19:15

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South Korea’s state utility firm Korea Electric Power Corp. (KEPCO) saw its operating loss widen from a year ago in the first quarter tanking to its worst-ever result for the quarter due to higher global fuel costs taking a heavy toll on the company upping reliance on eco-friendly renewable energy sources.

KEPCO said in a regulatory filing on Tuesday that its consolidated operating loss for the January-March period was 629.9 billion won ($530.7 million), widening from the 127.6 billion won loss in the same period a year ago, and the worst for the first quarter. The result came far below the market estimate of a loss in the 300 billion won range.

Net loss also widened from 250.5 billion won to 761.2 billion won over the same period on revenue of 15.2 trillion won, down 2.9 percent from a year ago.

Shares of KEPCO ended 1.1 percent lower on Tuesday at 26,850 won.

KEPCO said that its poor results partly owed to a 1.4 percent on-year fall in electricity sales in the first quarter due to the relatively mild winter weather this year. In result, it incurred 300 billion won loss in electricity sales.

But softer electricity demand helped it save power purchase from private power plants by 0.7 percent. The completion of maintenance works at unclear power plants also helped the country’s nuclear power use recover to the previous level, while a cut in coal-powered electricity generation by its power subsidiaries led it to save fuel costs by 7.7 percent, or about 400 billion won on year.

However, such a cost saving was not enough to offset a dent from the surge in international fuel prices last year. KEPCO’s overall power purchase cost soared by 700 billion won, or up 13.7 percent on year in the first quarter, due to a rise in international fuel costs, in particular those of liquefied natural gas (LNG). The country has been increasing its reliance on LNG and other renewables following the government’s policy to phase out nuclear power, which is a cheaper energy source than LNG.

As of the third quarter last year, the price of Dubai crude surged 47.1 percent on year to $74.3 a barrel. LNG prices, which are set based on international oil prices, were also up 13.4 percent on year to 870,000 won per ton in the first quarter of this year. It generally takes about five months for international oil prices to be reflected in LNG prices.

KEPCO denied reports that losses widened due to President Moon Jae-in’s energy initiative to move away from nuclear energy to environmentally-friendly sources. The utility firm noted its losses widened although the country’s nuclear power usage was up 20.9 percentage points to 75.8 percent in the January-March period from a year earlier.

As the company’s losses have consecutively ballooned, it is expected to face greater pressure to up electricity charges.

By Lim Sung-hyun and Lee Eun-joo

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