Korea Electric Power Narrows Q2 Loss - Analyst Blog


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South Korean utility major, Korea Electric Power Corporation ( KEP ) recorded a net loss of KRW 1.59 trillion (US$1.43 billion) in second quarter 2013 compared with a net loss of KRW 1.77 trillion (US$1.59 billion) in the year-ago period. The company narrowed down its losses as it raised its electricity prices along with lower fuel cost realization.

During the second quarter, operating revenues increased 15.9% year over year to KRW 11.68 trillion (US$10.51 billion). Overall operating loss amounted to KRW 1.09 trillion (US$0.98 billion), narrowing from an operating loss of KRW 2.06 trillion (US$1.85 billion) in the comparable prior- year quarter. Korea Electric increased power prices by an average 4% in January after a 4.9% gain in August last year as fuel costs surged.

During the first half of 2013, total operating revenue increased 10.7% year over year to KRW 25.48 trillion (US$22.93 billion). The sale of electricity, the principal component of operating revenues, increased 11.2% to KRW 23.72 trillion (US$21.35 billion). Other revenues from the overseas business increased 5.4% year over year to KRW 1.08 trillion (US$9 million).

On the cost arena, over the six-month period, purchased power cost was up 8.2%, while unit cost of fuel declined 6.9% and fuel cost was down 2.2%. Overall operating loss narrowed to KRW 436 billion (US$0.39 million) from an operating loss of KRW 2.30 trillion (US$2.07 billion) in the comparable six-month period in 2012.

Korea Electric Power is an integrated electric utility engaged in the generation, transmission and distribution of electricity in South Korea. The company is the dominant player in Korea's electricity sector. It continues to be well-positioned to capitalize on growth opportunities in this market and to benefit from the industry restructuring initiatives of the Korean government.

Higher electricity tariff rates, higher electricity volume sales and an improving overseas business will all add to the growth story. However, this would be offset by increased price of purchased power and uncertainty surrounding pending regulatory cases.

Korea Electric Power currently carries a Zacks Rank #4 (Sell). Investors can consider these well-placed stocks like Huaneng Power International, Inc. ( HNP ), UNS Energy Corporation ( UNS ) and Alliant Energy Corporation ( LNT ). While Huaneng Power and UNS Energy carry a Zacks Rank #1 (Strong Buy), Alliant Energy holds a Zacks Rank #2 (Buy).

HUANENG POWER (HNP): Free Stock Analysis Report

KOREA ELEC PWR (KEP): Free Stock Analysis Report

ALLIANT ENGY CP (LNT): Free Stock Analysis Report

UNS ENERGY CORP (UNS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
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