What is the bond issue about?

Korea Electric Power Corporation (KEPCO) faces a potential shortfall in its bond issuance capacity. According to the National Assembly Budget Office, if a special exemption expires at the end of next year as scheduled, the company's outstanding bonds would exceed the legal limit by roughly 19.2 trillion won.

The exemption was introduced in 2022, when the Russia-Ukraine war pushed up energy prices and KEPCO's losses piled up. It allowed bond issuance up to five times capital and reserves. From 2028, the cap returns to twice that amount.

Why is the limit a problem?

| Item | Amount | |---|---| | Bond limit at end of next year (2x basis) | 56.8 trillion won | | Projected outstanding bonds | 76 trillion won | | Excess | about 19.2 trillion won |

Closing the gap would require large profits to build reserves. However, rising LNG prices amid the Middle East war that began earlier this year could slow earnings recovery. Securities forecasts compiled by Yonhap Infomax put KEPCO's Q3 operating profit at 2.7 trillion won, down 52.29% year on year, with the fourth quarter expected to be even weaker.

Why are electricity rates in focus?

Residential and general electricity rates have been frozen for a long time to ease inflation pressure, while industrial rates were excluded. KEPCO CEO Kim Dong-cheol told a National Assembly audit on October 19 that some minimum rate increase should be discussed with the government. Power grid investment is also rising, with the 2038 plan totaling 72.8 trillion won.

KEPCO reportedly asked Samsung Electronics and SK hynix to prepay five years of electricity bills, about 25 trillion won, but both companies declined. Shinhan Investment analysts said postponing the normalization of the bond limit is the realistic option for now.

For international fans

KEPCO is the state-run company that supplies electricity across South Korea. Its finances affect household electricity bills, so any rate decision would be felt by residents and businesses alike.