Korea Electric Power Corporation Faces Rising Debt Amid Profits

Korea Electric Power Corporation (KEPCO) and Korea Gas Corporation continue to report operating profits, but they face significant challenges in achieving financial stability. The rising fuel prices from the Middle East are expected to have a substantial impact on their second-half performance, coupled with increased demand for investment in power infrastructure.

Concerns are growing that delays in financial recovery could lead to reduced investment in essential infrastructure, resulting in a sharp increase in rates in the future. Experts suggest that while costs should be gradually and predictably reflected in rates, support for vulnerable populations should be primarily designed around government finances.


According to KEPCO, its consolidated revenue for the first half of the year reached 46.3173 trillion won, with an operating profit of 4.9127 trillion won. This represents a decrease of 976.8 billion won, or 16.6%, compared to the same period last year. The net profit also fell by 21.0% to 2.7965 trillion won.

Considering that the consolidated operating profit for the first quarter was 3.7842 trillion won, the second quarter's operating profit dropped to 1.1285 trillion won. Although the selling price remained similar at 167.6 won per kilowatt-hour, electricity sales volume decreased by 0.6%, and the price of international thermal coal rose by 24.3%, leading to increased fuel costs. Fuel expenses for the first half totaled 10.1429 trillion won, an increase of 817.7 billion won, or 8.8%, from the previous year.

Despite the profits, KEPCO's debt has increased. As of the end of the first half, its consolidated debt stood at 210.7 trillion won, up by 5.1 trillion won from the end of last year. Borrowings also rose from 129.8 trillion won to 133.3 trillion won during the same period, with average daily interest costs reaching 11.5 billion won. The accumulated losses from the previous Russia-Ukraine conflict continue to pose challenges, making it difficult to reduce debt solely through profits.

Korea Gas Corporation faces similar issues. Its consolidated operating profit for the first half was 1.5853 trillion won, a 28.0% increase from the previous year, but its revenue fell by 5.2% to 19.3102 trillion won. By the end of the first half, total unpaid bills reached 14.1782 trillion won, an increase of 434 billion won, or 0.3%, from the end of last year. While unpaid bills for residential use decreased compared to last year, they increased from the previous quarter.

Concerns are mounting that financial burdens may grow in the second half. Following the Middle East conflict, international oil prices surged by 61.0%, rising from an average of $64.9 per barrel to $104.5. Additionally, the won-dollar exchange rate increased by 3.1%. With electricity prices frozen in the third quarter and limited cost reflection for residential gas prices, the delayed impact of rising fuel prices and exchange rates could exacerbate the financial strain on energy public enterprises.

The demand for large-scale investments also adds to the burden. Significant funding is required to timely establish transmission and transformation networks necessary for AI data centers, semiconductor clusters, and the expansion of renewable energy. KEPCO has managed to save 600 billion won through investment efficiency measures by adjusting project priorities in the first half, but the essential investment demand for national power grid expansion is expected to continue to rise.


To reduce debt while securing funding for power grid investments, experts argue that it is necessary to reflect network costs in pricing. The National Assembly's Future Research Institute previously analyzed that the lack of proper reflection of costs and supply-demand conditions in electricity pricing has led to the loss of price signals, contributing to KEPCO's accumulated debt and investment delays. They proposed a pricing system that incorporates costs, climate and environmental expenses, and network costs, along with the establishment of an independent regulatory commission. The International Energy Agency (IEA) also recommended the establishment of an independent regulatory body and a transparent market-based pricing system in its evaluation of South Korea's energy policy last year.

Currently, support for vulnerable groups is provided through energy vouchers funded by the government and welfare discounts directly applied by energy suppliers. Experts emphasize the need for targeted support for vulnerable populations based on government finances, rather than gradually reflecting costs in pricing.

Professor Cho Hong-jong of Dankook University stated, "The current system does not reflect costs at all. We need to shift to a cost-based pricing system where retail rates adjust according to cost fluctuations. This will create incentives to develop cheaper energy sources. Vulnerable groups can be supported through voucher issuance."

Professor Kim Dae-jung of Sejong University added, "Electricity prices should be adjusted gradually and predictably, reflecting fuel costs, international energy prices, and KEPCO's financial situation, rather than being suppressed for political reasons. Sudden increases could burden low-income households, so adjustments should be made gradually, with support for vulnerable groups through fiscal policy being preferable."