South Korean utility behemoth -
Korea Electric Power Corporation
(
KEP
) - in the first quarter of 2012 digested an operating loss of KRW
105 billion (USD $0.09 billion), compared with an operating loss of
KRW 476 billion (USD $0.41 billion) in the first quarter of 2011.
The company continues to register operating losses mainly due to
increases in operating expenses, such as fuel cost and power
purchase cost, which were not fully offset by increases in
operating revenues related to increases in power sales revenues
from tariff hikes, and increases in power sales volume. Fuel costs
and power purchase costs went up 16.6% and 41.0% respectively, year
over year.
Operating revenues went up by 23.2% year over year to KRW 13.30
trillion (USD $11.41 billion). Electricity sale - the principal
source of operating revenues - increased 20.9% to KRW 12.45
trillion (USD $10.68 billion). This increase was attributable
mainly to a 12.2% increase in electricity unit tariff, and 2.5%
power sales volume growth. Power sales volume was driven by
increase in demand from the industrial sector, as well as
regulatory recognition of account receivables related to the fuel
cost adjustment.
Operating expenses grew 18.8% to KRW 13.62 trillion (USD $11.68
billion), of which power purchase costs increased 41.0% to KRW 2.85
trillion (USD $2.44 billion) and fuel costs rose 16.6% to KRW 6.93
trillion (USD $5.94 billion). The rise in fuel costs was primarily
due to a 0.6% increase in power generation, and a 15.9% hike in
unit cost of feedstock such as coal and LNG. Purchased power cost
rise is attributable to a 21.7% increase in unit cost of purchased
power and 15.9% hike in purchased power volume due to rising power
demand. Overall, the company reported a net loss of KRW 513 billion
(USD $0.44 billion) in the first quarter of 2012, versus a net loss
of KRW 544 billion (USD $0.47 billion) in the same period of
2011.
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 however the quantitative Zacks #4
Rank (Sell) indicates clear directional pressure on the shares. 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
Ameren Corporation
(
AEE
).
AMEREN CORP (AEE): Free Stock Analysis Report
ATLANTIC PWR CP (AT): Free Stock Analysis
Report
KOREA ELEC PWR (KEP): Free Stock Analysis
Report
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