Losses Mount at Korea Electric - Analyst Blog
August 17 2011 - 2:12PM
Zacks
South Korean utility behemoth – Korea Electric Power
Corporation (KEP), in the first half of 2011 witnessed a
six fold rise in its net operating loss to KRW1.30 trillion
(USD$1.22 billion), compared to a net operating loss of KRW178
billion (USD$0.17 billion) in the first half of 2010.
This was primarily due to increased fuel costs and higher power
purchase costs which went up 18.5% and 44.8% respectively compared
to the first half of 2010.
Operating revenues went up by 12.0% year over year to KRW19.92
trillion (USD$18.60 billion). Electricity sale - the principal
source of operating revenues, increased 10.1% to KRW18.81 trillion
(USD$17.57 billion). The increase was primarily due to the average
tariff increase of 3.5% in August 2010, as well as 6.7% growth in
power volume sold.
Power volume sold rose mainly due to substantial growth in
demand for electric heating and increased demand from the
industrial sector as a result of economic recovery.
Operating expenses grew 17.9% to KRW21.58 trillion (USD$20.15
billion), of which power purchase costs increased 44.8% to KRW3.66
trillion (USD$3.42 billion) and fuel costs rose 18.5% to KRW10.77
trillion (USD$10.05 billion). The rise in fuel costs was due to a
3.3% increase in power generation due to rising power demand and a
14.8% jump in unit cost of fuel such as coal and LNG.
Overall, the company reported a net loss of KRW1.61 trillion
(USD$1.50 billion) in the first half of 2011, versus a net loss of
KRW1.05 trillion (USD$0.98 billion) in the same period of 2010.
Korea Electric Power is an integrated electric utility engaged
in the generation, transmission and distribution of electricity in
South Korea. The company along with its generation subsidiaries
owns approximately 86.2% of the total electricity generating
capacity in Korea.
We maintain our Neutral recommendation on Korea Electric Power
with a quantitative Zacks #3 Rank (Hold), indicating no clear
directional pressure on the shares over the near term. In the near
term, we would advise investors to focus on the company’s Zacks #2
Rank peers who have a Buy recommendation such as Atlantic
Power Corporation (AT) and Consolidated Edison
Inc. (ED).
ATLANTIC PWR CP (AT): Free Stock Analysis Report
CONSOL EDISON (ED): Free Stock Analysis Report
KOREA ELEC PWR (KEP): Free Stock Analysis Report
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