South Korean utility behemoth -
Korea Electric Power Corporation
) - in the third quarter of 2012 registered an operating income
of KRW 1.98 trillion (USD $1.82 billion), compared with an
operating income of KRW 1.42 trillion (USD $1.31 billion) in the
third quarter of 2011. Tariff hikes and increases in power sales
volumes drove power sales revenue, which in turn resulted in
higher operating revenue and profits.
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Operating revenues went up by 17.1% year over year to KRW 13.72
trillion (USD $12.62 billion). Electricity sale - the principal
source of operating revenues - increased 17.6% to KRW 12.99
trillion (USD $11.94 billion). This increase was attributable
mainly to increase in electricity unit tariff, and power sales
volume growth. Power sales volume was driven by increase in
Operating expenses rose 14.7% to KRW 11.90 trillion (USD $10.94
billion), of which power purchase costs increased 35.1% to KRW
2.27 trillion (USD $2.08 billion) and fuel costs rose 15.2% to
KRW 5.78 trillion (USD $5.31 billion). The rise in fuel costs was
primarily due to increase in power generation volume, and rising
cost of feed stocks.
Overall, the company reported a net income of KRW 956 billion
(USD $0.88 billion) in the third quarter of 2012, versus net
income of KRW 293 billion (USD $0.27 billion) in the same period
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 88.4% of the total electricity generating
capacity in Korea. In 2011, the company sold approximately 455
billion kilowatt-hours of electricity.
We maintain our long-term Neutral recommendation on Korea
Electric Power. In the near term, the quantitative Zacks #3 Rank
(Hold) indicates no directional pressure on the shares. We would
over the near term advise investors to focus on the company's
Zacks #1 Rank peers who have a Strong Buy recommendation such as
Pike Electric Corporation
Westar Energy, Inc.