Bloomberg News

Korea Electric Fuel Costs Climb 26% on Energy Prices

May 12, 2006

Korea Electric Power Corp. (015760), the biggest supplier in Asia's third-largest economy, said fuel costs rose 26 percent in the first quarter as global prices of oil and liquefied natural gas surged.

The utility and its six power-generating units spent 2.7 trillion won ($2.9 billion) on fuel in the three months, up from 2.2 trillion won a year earlier, the Seoul-based company said in a filing to the Korean stock exchange today.

The cost of importing oil, liquefied natural gas and coal outstripped gains from the first power-price increases in five years in the first quarter. Net income fell to 732 billion won in the three months ended March 31, the company said yesterday, missing analysts' estimates of 1.1 trillion won.

First-quarter operating profit, including its six power- generating units, fell 26 percent to 1 trillion won, today's statement said. That's also lower than the 1.4 trillion won median estimate of seven analysts. Operating profit at parent Korea Electric plunged 85 percent to 63 billion won.

The higher fuel costs pushed up the price of electricity Korea Electric had to buy from its power generating units by 18 percent in the first quarter, leading to a 34 percent drop in net income.

LNG accounted for 42 percent of Korea Electric's fuel costs last year and coal 35 percent, CLSA Asia-Pacific Markets said in an April 27 report. Bunker C oil followed with 10 percent and nuclear fuel costs accounted for 8.8 percent, it said.

LNG prices in the first quarter rose 44 percent from a year earlier, while Dubai crude oil prices, an Asian benchmark, rose 40 percent, Korea Electric said in a statement yesterday. Crude oil in New York has risen 44 percent in the past year, reaching a record $75.35 per barrel on April 21 and 24.

The company's stock fell 1,250 won, or 2.8 percent, to 43,400 won at the market's 3 p.m. close in Seoul. The stock has declined 4.3 percent in the past two days.

Korea Electric's fuel bill may erode earnings for the rest of the year because the government is unlikely to add to December's 1.9 percent average power-price increase. Record oil and natural gas costs eroded Korea Electric's profit last year, prompting the government in December to increase power tariffs for the first time since 2000.

To contact the reporter on this story: Meeyoung Song in Seoul at msong2@bloomberg.net.

To contact the editor responsible for this story: Reinie Booysen at rbooysen@bloomberg.net


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