KEPCO Sounds Warning on Financial Normalization Amid LNG Price Surge
Korea Electric Power Corp. (KEPCO), the country's largest power utility, posted an operating profit of ₩4.91 trillion ($3.5 billion) in the first half of this year, but its financial normalization is under threat due to rising fuel costs triggered by the Middle East war.
The conflict has driven up liquefied natural gas (LNG) prices, which are reflected in domestic generation costs with a typical lag of four to five months. KEPCO's power generation subsidiaries spent ₩10.14 trillion ($7.2 billion) on fuel in the first half, an 8.8% increase from a year earlier.
The System Marginal Price (SMP), which tracks the wholesale price of electricity, exceeded ₩150 per kWh for six consecutive days starting August 3rd. KEPCO's annual average break-even SMP is around ₩146 per kWh, and when it exceeds this threshold, the company incurs losses on every unit of electricity it purchases and sells.