The new Trade, Industry and Energy Minister Bang Moon-kyu. [Courtesy of Ministry of Trade, Industry and Energy]
South Korea’s public energy companies struggling with chronic losses are expected to undergo intensive restructuring under the new Trade, Industry and Energy Minister Bang Moon-kyu and Korea Electric Power Corp. (KEPCO) Chief Executive Officer Kim Dong-cheol.
According to an analysis by Maeil Business Newspaper on documents obtained from the office of Representative Yang Geum-hee on Wednesday, only 20.7 percent, or 42 restructuring plans, have been completed as of the end of July, out of 203 action plans that include asset sales.
Of the 161 plans that have not yet been carried out, 41.9 percent did not even begin to be implemented.
The Korea Mine Rehabilitation and Mineral Resources Corp. (KOMIR) had the highest incompletion rate at 74.1 percent, followed by Korea Coal Corp. (KCC) at 66.7 percent, Korea District Heating Corp. (KDHC) at 62.5 percent, Korea Gas Corp. (KOGAS) at 52.9 percent, and Korea National Oil Corp. (KNOC) at 52.6 percent.
The figures suggest that these companies have been slow to restructure.
The 13 public energy companies had submitted their plans for asset efficiency implementation to the Ministry of Economy and Finance in the second half of last year.
The move came in response to President Yoon Suk Yeol’s directive in June last year to intensify reforms in the public sector as he condemned public enterprises for their lax management.
Among the major energy utilities, KOGAS is one of the slowest performers in the restructuring effort.
The company has announced a total of 17 asset efficiency action plans, but none of them have been fully implemented to date. The number of those that did not even begin reached nine, more than 50 percent.
The public gas company is struggling even more with growing management difficulties as the failure to raise gas prices in time has led to a significant increase in receivables.
The receivables are expected to swell to 13 trillion won ($9.8 billion) this year on rising international energy prices.
The company’s subsidiaries are also in the red.
As of last year, 16 out of 21 KOGAS subsidiaries were unprofitable due to losses or capital impairment. Additionally, of the 14 companies it has invested in, seven are in the red and one suffers capital impairment. Its overseas business is struggling as well. KOGAS currently has 27 overseas projects, where it has invested a total of 54 trillion won, but has only recovered 5.6 trillion won so far.
[Courtesy of KEPCO]
KEPCO also submitted 46 asset efficiency plans to the Finance Ministry last year, which included disposing of non-core properties such as regional offices, residential buildings, and substation sites, as well as golf and resort memberships.
However, only 18 plans, or 39.1 percent, have been completed. Thirteen of them, or 28 percent, have yet to begin the implementation.
Accordingly, the restructuring efforts at public energy companies are likely to be accelerated with Bang and Kim taking office.
“KEPCO has been complacent with the shield of being a public company, the safety net of government guarantees, and the superior position of being a monopoly operator,” Kim said in his inaugural speech. “If KEPCO only focuses on dodging the bullet without sober reflection in the face of an unprecedented crisis, the crisis will continue and KEPCO will have no future.”
He also unveiled plans to “drastically reduce the enlarged headquarters organization and promote the centralization and expansion of regional offices,” and “innovate personnel based on ability and performance” while presenting a bold compensation system that matches the private sector level.
In a written question and answer submitted to the National Assembly prior to his personnel hearing, Bang also stated that KEPCO needs a management overhaul, including high-intensity restructuring through examining of organization and manpower, in addition to asset sales and revenue structure reorganization.
By Song Gwang-sup and Choi Jieun
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]