Korea Electric Power Corp. (KEP:US), supplier of almost all the country’s electricity, posted a quarterly loss that exceeded analyst estimates after fuel costs surged while government-controlled tariffs remained unchanged.
The utility had a loss of 814.8 billion won ($675 million) in the three months ended June 30, compared with a profit of 239.8 billion won a year earlier, according to a regulatory filing today. The median estimate of eight analysts in a Bloomberg survey was for a deficit of 528.5 billion won.
The government has kept power tariffs unchanged since June last year to control inflation. Fuel expenses in the second quarter jumped 34 percent from a year earlier as the cost of importing natural gas, which accounts for about 46 percent of total raw-material spending, more than doubled during the period, according to Eugene Investment & Securities Co.
“LNG costs may be the biggest reason for the loss,” said Kim Seung Woo, an analyst at Samsung Securities Co in Seoul. “While sales were higher, earnings for Korea Electric were reduced without a price hike.”
Revenue gained 13.5 percent to 8.36 trillion won in the second quarter from a year earlier. By volume, sales increased 7.7 percent as demand for electricity from computer-chip producers and automakers rose, according to Eugene Investment.
Shares of the utility rose 0.3 percent to 32,000 won in Seoul trading as of 12:03 p.m. local time. The benchmark Kospi (KOSPI) index dropped 0.4 percent. Korea Electric has declined 5.9 percent this year.
“Korea Electric needs to raise power prices by 8 percent by next year to turn profitable,” Kim said. “The bad earnings in the quarter will push the government to allow a price hike in the second half of this year.”
The energy ministry has said it may allow state-run utilities to increase gas and power prices as early as the second half. Korea Electric raised charges by an average 3.9 percent in June last year, the first increase since November 2008.
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