A view of KEPCO headquarters in Naju, Jeollanam-do. (Photo: KEPCO)

Korea Electronic Power Corp. (KEPCO) posted 298.6 billion won in operating loss in the 2nd quarter of 2019, a year-on-year improvement of 388.5 billion won from the 687.1 billion won operating loss in Q2 last year.

The power company announced provisional outcomes of Q2 consolidated financial statement on Aug. 14.

The Q2 operating loss represents an improvement of 331.3 billion won, compared to a 629.9 billion won operating loss for the first quarter of the year.

But cumulative operating loss as of Q2 stood at 928.5 billion won, representing a slight rise over the same period last year. The improvement was attributable to international crude prices in Q3 2018.

International crude oil prices, which are used for LNG supply unit prices for power generation, have a five-month lag compared to international spot prices.

According to KEPCO’s analysis, the main reason for the year-on-year improvement in Q2 operating loss is that KEPCO’s power generation subsidiaries saw fuel costs and purchase prices from the private sector decline 500 billion won due to a jump in nuclear power utilization and a drop in LNG prices for power generation.

But a reduction in coal-fired generation, designed to cope with fine dust, and higher fuel purchase prices led to an operating loss. Q2 2019 electricity sale revenues stood at levels similar to the same quarter the previous year.

The following are the category-by-category details of a reduction in Q2 operating loss.

The nuclear power utilization rate plunged due to a rise in preventive maintenance days, but the figure soared to 82.8 percent during the completion of the preventive maintenance, leading to 300 billion won in a reduction in power companies’ fuel expenses.

Like last year, this year saw coal-fired power generation stand at lower levels due to efforts to reduce fine dust in spring and the halt of the operation of old power plants and the expanding of preventive maintenance.

A safety accident at the Taeahn Thermal Power Complex halted the operation of Taeahn Thermal Power Units 9 & 10, The step was an inevitable one in consideration of public health and safety.

Power companies’ lower power purchase from the private sector and a drop in system marginal price (SMP) following lower LNG prices for power generation, caused by a cut in individual consumption tax led to a 200 billion won decline in power purchase prices.

H2 2019 Outlooks

Given KEPCO generally post higher operating profits in Q3, a rise in power sale revenues such as rising power sales during summer is predicted to have a positive impact on improving the power company’s H2 business performance.