Korea Electric Power Corp. (KEPCO) has decided to dispose of its 8.6 percent stake in LG U+ and a 29 percent interest in Korea Electric Power Industrial Development Corp. (KEPID).
The decision is part of KEPCO’s efforts to reduce its debt ratio by 14.7 trillion won to 143 percent in three years.
KEPCO plans to sell off all its holdings in the two companies within this year. The Korean utility giant also plans to dispose of all holdings in excess of 51 percent stake in its subsidiaries KEPCO E&C and KEPCO KPS, while still retaining management rights. The excess holdings of the two subsidiaries will be sold off during next year. KEPCO has already secured 230 billion won by auctioning off a 7 percent stake in KEPCO E&C and a 4 percent interest in KEPCO KPS.
On Feb. 2, KEPCO announced a package of self-rescue steps to cut its debt ratio to 143 percent by 2017, two percentage points lower than recommended by the government. KEPCO’s self-rescue steps may be construed as its determination to set an example for other public entities in line with one of the Park Geun-hye government’s policy goals, which is to reduce the debt ratio of public enterprises.
KEPCO’s debt ratio reduction plan calls for securing 3 trillion won through the restructuring of its business portfolios; disposing of assets worth 5.3 trillion won; securing 4.2 trillion won in cost reductions; saving 1.9 trillion won in interest payments; and yielding 300 billion won in profits.
KEPCO decided to secure 1.4 trillion won, 500 billion won more than originally planned, by disposing of its holdings in LG U+ and other assets. KEPCO’s sales of foreign resources development projects will be given priority to Korean investors due to fears of a national asset drain or the undervaluing of the assets when sold. Wee Guk, chief of KEPCO’s Financial Policy Team, said his company will consider auctioning off its assets to Korean pension funds, private equity funds, and SME$ consortia.
KEPCO’s biggest asset on the block is the KEPCO headquarters building site in Samseong-dong, Seoul, on which KEPCO is now consulting with the government. Among the assets KEPCO plans to put on the block are KEPCO’s Gangnam branch office building site in Yangjae-dong, Seouo, and combined-cycle power plant sites in Anyang and Bucheon, both in Gyeonggi-do.
A KEPCO official said the company, which chalked up 238.3 billion won in profit last year for the first time in years, is forecast to post 2.2 trillion won in net profit in 2017, and will see its debt ratio start a downward curve, dropping from a peak of 145 percent this year to 143 percent in 2017.
KEPCO President Cho Hwan-eik (photo: courtesy of KEPCO)
KEPCO’s Diversifying of Overseas Market Entry and Business Portfolio
KEPCO President Cho Hwan-eik said his company is stepping on the gas to expand its presence in overseas power generation markets and energy businesses. He said unlike domestic businesses focusing on public interests, all overseas business operations are focused on profit-taking.
Cho went on to say that KEPCO is diversifying its overseas projects, now centered around Southeast Asia, to the Middle East, Africa, and South America, as well as expanding its business arenas to resources development and consulting services for power transmission and distribution on top of power generation.
He stressed preparations for ushering in the era of electric vehicles. “The widespread supply of electric vehicles will likely have a huge impact on the energy sector,” the KEPCO president said. Assuming that days are to come when the electricity charged with electric vehicles with cheaper overnight electricity charges are resold to KEPCO, he reckoned on the fact the supply of 1 million EV units will have an impact of securing 1,000MW of electricity, equivalent to the generation capacity of a nuclear power unit. He added that KEPCO will consider its entry into the EV charging business.
