Strong Buy on Korea Electric Power - Analyst Blog

By Zacks Equity Research,

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On Jan 14, 2014, Zacks Investment Research upgraded South Korean utility major, Korea Electric Power Corporation ( KEP ) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Korea Electric Power 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. It has an installed capacity of 68,848 megawatt (MW), or 88.8% of South Korea's installed generating capacity, and the entire transmission-cum-distribution capacity.

Its growth story will be bolstered by higher electricity tariff rates, higher electricity volume sales, an improving overseas business and a recent regulatory approval for the fuel cost pass-through mechanism.

Recently, South Korea said that it will increase electricity prices and impose taxes on the use of thermal coal in power plants. This move is essential to balance the country's rising power demand and the supply scenario. In Nov 2013, Korea Electric Power was allowed to lift electricity rates by an average 5.4%. The previous rise took place in Jan 2013 of around 4.0%.

South Korea has the sixth-largest installed capacity of nuclear power in the world. Currently, 23 reactors generate one third of South Korea's electricity and it has five more under construction. This comprised 29.8% of South Korea's total electrical generation capacity in 2012. The plan, reaffirmed in mid 2011, is to provide 59% of electricity from 40 units by 2030.

The company is also proactive with 99 overseas projects in a wide range of areas, including nuclear power, hydro and thermoelectric power, transmission and distribution, renewable energy, and resource development.

We believe these strong fundamentals have led to the rank upgrade.

Other Stocks to Consider

Apart from Korea Electric Power, one can also look at better-ranked players in the electric utility sector like Wisconsin Energy Corp. ( WEC ), National Grid plc ( NGG ) and NRG Yield, Inc. ( NYLD ). All the stocks sport a Zacks Rank #1 (Strong Buy).

KOREA ELEC PWR (KEP): Free Stock Analysis Report

NATL GRID -ADR (NGG): Free Stock Analysis Report

NRG YIELD INC-A (NYLD): Free Stock Analysis Report

WISC ENERGY CP (WEC): Free Stock Analysis Report

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Zacks Investment Research

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
Referenced Stocks: KEP , NGG , NYLD , WEC

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