Bloomberg News

Korea Electric Says Fuel Price Drop Improves Outlook

April 27, 2009

Korea Electric Power Corp. (KEP:US), South Korea’s biggest electricity producer, said falling fuel prices and a possible power price increase have improved the company’s earnings outlook.

The company, also known as Kepco, will see its foreign- exchange loss narrow and its fuel costs drop after the South Korean currency strengthened, Lee Jang Pyo, head of the treasury division, told investors on a conference call today.

“Kepco posted a huge loss in the first quarter but the outlook isn’t gloomy,” he said.

The won has gained 14 percent against the dollar in the past two months to become Asia’s best performing currency because of speculation that government stimulus will revive an economy on the brink of recession. Korea Electric expects coal prices to average $89 a metric ton this year including shipping costs. The utility paid $92 a ton in 2008, according to Samsung Securities Co.

Korea Electric swung to a 882.2 billion-won ($656 million) loss in the first quarter after the weaker won inflated the cost of importing fuels and a slowing economy cut power demand.

Shares of the utility fell 2.1 percent to close at 25,750 won. Korea Electric has dropped 13 percent this year, compared with the 19 percent gain in the benchmark Kospi (KOSPI) index.

Coal Prices

The company has secured 40.8 million tons of coal, or 59 percent of its annual coal needs, at $93.50 a ton, Lee said. Average prices for the rest of its requirements may fall to $75 a ton, according to Lee. Coal accounts for 46 percent of its fuel bill.

Korea Electric needs an increase in electricity prices to narrow its loss, Lee said. The state-controlled company may post a loss of between 2 trillion won and 2.9 trillion won this year if the government fails to approve a power price increase, Chief Executive Officer Kim Ssang Su said last week.

The company wants the government to raise power charges by 9 percent this year, Kimtold lawmakers.

Electricity prices were raised by 4.5 percent in November, the first increase since January 2007. That failed to cover the more than 28 percent jump in fuel costs last year.

“We have been under pressure for a long time to raise power prices,” Lee Youn Ho, the minister for knowledge economy, said April 15. “When there are signs that the country’s economy has bottomed out, we are set to raise prices.”

For Related News and Information:

To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net.

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.


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Companies Mentioned

  • KEP
    (Korea Electric Power Corp)
    • $21.56 USD
    • -0.01
    • -0.05%
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