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(LEAD) KEPCO shares sink over cut in energy bills amid heat wave

All News 16:10 August 07, 2018

(ATTN: UPDATES with latest details in paras 1-6)

SEOUL, Aug. 7 (Yonhap) -- The state-run Korea Electric Power Corp. (KEPCO) has seen its share price plunge in recent trading sessions over a series of bad news, including the government's planned cut in electricity bills over a blistering heat wave, analysts said Tuesday.

Shares of KEPCO slipped 1.93 percent to finish at 30,450 won (US$27.1), this year's lowest, after Seoul announced measures to cut electricity prices for July and August, and expand discounts for lower-income families and households with infants. Over the past five sessions, the share price dived 7.02 percent.

The Ministry of Trade, Industry and Energy said KEPCO agreed to temporarily upgrade the ceiling of the first two stages of the progressive tariffs of residential power use for July and August, and expand discounts on lower-income families and households with infants.

The ministry said the measure is expected to help 15.12 million households save about 276.1 billion won in energy costs during the peak summer season, which means less profits for the state utility firm.

KEPCO shouldered costs for lowering electricity prices in the summers of 2015 and 2016 when it had ample liquidity, but this year's discount bodes ill for the company that posted operating losses for two consecutive quarters.

The firm logged 127.6 billion won of operating losses in the first quarter of the year due to a rise in raw material prices and the low operation rate of nuclear reactors.

The firm's share prices has already been affected by the news that KEPCO lost its status of the preferred bidder to acquire a 100 percent stake in the NuGen project that Toshiba Corp. holds. The 21 trillion-won project is meant to build a nuclear power plant in Britain.

Such a change came as Britain decided to mull the adoption of a regulated asset base model for the project, and the Seoul government is pushing to hold talks with the European nation and the Japanese firm to continue the project "in a way that serves the interests of all parties," officials said.

In addition to such developments, KEPCO shares have been hurt as one of its affiliates, the Korea South-East Power Co., has been under investigation for its suspected violation of U.N. Security Council sanctions by importing coal from North Korea.

"Investors appear to fret about the recent events' impacts on its bottom line at a time when the market overall has shown a weak flow," said Kang Sung-jin, an expert at KB Securities.

"But market watchers are forecasting a limited impact on its overall earnings if the past serves as a guide," he added, noting that the temporary cut in the power rates during the summer season of 2015 caused the unit price of electricity to inch down a mere 0.2 percent.

(LEAD) KEPCO shares sink over cut in energy bills amid heat wave - 1


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