Korea Electric Power Advances on Hopes for Earnings Recovery

By Kwanwoo Jun

Korea Electric Power shares rose Tuesday as lower electricity-purchase costs in South Korea raised hopes for an earnings recovery.

Shares of the South Korean state utility rose 4.7% to close at 19,980 won ($15.31), notching their sharpest daily percentage gain in more than seven months, according to FactSet.

The stock benchmark Kospi edged down 0.81 point, or 0.03%, to 2581.39 for the day.

Expectations for Korean Electric Power to narrow losses and eventually post an earnings turnaround grew Tuesday after data showed that South Korea's wholesale power price, at which the state utility purchases electricity from private power suppliers, fell below the retail price for the first time in 19 months in May.

Increases in the wholesale electricity price, known as the system marginal price in South Korea, had been partially blamed for aggravating losses at the company. Higher fuel-purchase costs and suppressed tariff increases were also blamed for keeping the company in the red for nearly two years since the second quarter of 2021.

Korea Power Exchange data showed Tuesday that the SMP was KRW143.6 per kilowatt-hour in May, lower than the country's estimated retail power price of KRW154.6 per kWh. The state utility supplies electricity to households and other consumers at the retail price, which should help ease the company's cost burden and reduce losses.

Shinhan Securities analysts K.R. Park and M.W. Choi said in a recent research note that Korea Electric Power's operating loss should narrow for the second quarter on recently increased tariffs and lower fuel-purchase costs. The market focus is now on whether the company can swing to a profit in the second half, they said.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

June 27, 2023 04:23 ET (08:23 GMT)

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