Korea Electric Power Corporation: 2023 Form 20-F Summary
Business context and reporting period
KEPCO filed its annual report on Form 20-F on April 30, 2024, for the fiscal year ended December 31, 2023. The filing presents consolidated IFRS financial statements in Korean won. KEPCO is a government-controlled, integrated electric utility that transmits and distributes substantially all electricity in Korea and owns six generation subsidiaries. The Government and Korea Development Bank together owned 51.1% of common shares at year-end.
- Electricity sold: 545,966 GWh, down 0.4% year over year.
- Generation capacity owned by KEPCO and its subsidiaries: 83,235 MW across 794 units; total Korean generation-capacity share was approximately 57.6%.
- Independent power producers supplied 33.4% of Korean generation in 2023.
Key financial metrics
| KRW billions, except percentages | 2022 | 2023 | Change |
|---|---|---|---|
| Sales | 70,546 | 87,476 | +24.0% |
| Cost of sales | 100,904 | 89,700 | -11.1% |
| Gross loss | (30,358) | (2,223) | Improved |
| Gross margin | (43.0%) | (2.5%) | +40.5 percentage points |
| Operating loss | (32,241) | (4,245) | Improved |
| Operating margin | (45.7%) | (4.9%) | +40.8 percentage points |
| Loss for the year | (24,429) | (4,716) | Improved |
| Net margin | (34.6%) | (5.4%) | +29.2 percentage points |
| Net cash from operating activities | (23,478) | 1,522 | Turned positive |
| Net cash used in investing activities | (14,954) | (13,074) | Lower outflow |
| Net cash from financing activities | 38,998 | 12,662 | Lower inflow |
| Cash and cash equivalents | 3,235 | 4,343 | +34.3% |
| Total equity | 42,000 | 37,265 | -11.3% |
Sales of electricity increased 24.2% to KRW 85,940 billion as the average unit sales price rose 26.8% to KRW 152.80 per kWh, offsetting the modest volume decline. Power-purchase costs fell 8.8% to KRW 38,304 billion and raw-material costs fell 22.1% to KRW 27,136 billion, primarily reflecting lower fuel prices. Depreciation increased 4.9% to KRW 11,294 billion, while net finance expense increased 34.6% to KRW 3,922 billion.
Total borrowings and debt securities rose from KRW 120,605 billion to KRW 133,632 billion. Total long-term debt, including the current portion and excluding original issue discounts and premiums, was KRW 123,163 billion. Current financial liabilities increased to KRW 41,140 billion, and net working capital remained negative at KRW 31,712 billion. Available credit facilities totaled KRW 10,619 billion and US$1,782 million at year-end; approximately US$11 billion remained available under aggregate global medium-term note programs.
Material changes versus the prior comparable period
- Revenue and margins improved substantially because tariff increases coincided with lower fuel and power-purchase costs.
- The Government-approved Usage Charge increased by KRW 11.4 per kWh in January 2023 and KRW 8.0 per kWh in May 2023; large-scale industrial rates increased further in November 2023.
- The fuel-cost adjusted charge remained at a KRW 5.0 per kWh increment through the second quarter of 2024, despite formula-based decreases calculated for the fourth quarter of 2023 and first and second quarters of 2024.
- Operating cash flow recovered from a KRW 23,478 billion outflow in 2022 to a KRW 1,522 billion inflow in 2023.
- KEPCO sold 14.77% of KEPCO Engineering & Construction shares in December 2023, reducing its ownership to 51.0%.
- KEPCO and its subsidiaries paid no dividends for fiscal 2023 on a separate-company basis, consistent with fiscal 2022.
Guidance, outlook, commentary and risks
Management’s medium-term strategy for 2024–2028 emphasizes financial stabilization, power-supply reliability, clean-energy growth, new energy businesses and management innovation. The Government’s 2024 policy direction called for utility-rate freezes during the first half of 2024, creating uncertainty over the timing and extent of further tariff recovery.
- Budgeted capital expenditures are KRW 18,257 billion for 2024, KRW 19,881 billion for 2025 and KRW 19,484 billion for 2026, versus KRW 15,518 billion in 2023.
- The Tenth Basic Plan targets higher nuclear and renewable capacity, conversion or retirement of older coal units, and expanded LNG, hydrogen and ammonia-related generation through 2036.
- Key earnings sensitivities disclosed by management: a 1% electricity-rate increase would raise pre-tax income by approximately KRW 830 billion; a 1% increase in fuel prices would reduce pre-tax income by approximately KRW 266 billion; a 10% Won depreciation would increase estimated foreign-exchange translation losses by approximately KRW 1,828 billion; and a 1 percentage-point increase in interest rates would reduce pre-tax income by approximately KRW 125 billion.
- Principal risks include regulated tariffs that may not fully or promptly recover fuel costs, fuel and power-purchase price volatility, Won depreciation, refinancing and liquidity pressure, higher interest expense, environmental and carbon-compliance costs, nuclear operating and licensing risks, cybersecurity incidents, community opposition, labor claims, independent power competition and Russia-related sanctions.
- At December 31, 2023, KEPCO and subsidiaries were defendants in 666 lawsuits with aggregate claims of KRW 805 billion and plaintiffs in 268 lawsuits with claims of KRW 572 billion. Provisions for litigation totaled KRW 177 billion; management did not expect the aggregate outcomes to materially impair liquidity or financial position.
- Material unusual items include a KRW 16,035 million reversal of intangible-asset impairment, a KRW 6,331 million PP&E impairment related to a Taean incident, and a KRW 10,700 million impairment of Guam Ukudu construction-in-progress. The filing also identifies ongoing uncertainty regarding the Gangneung hydroelectric plant suspension and rights to facilities in the Gaeseong Industrial District.
Most important facts for investors to verify
- Whether future tariff approvals and the fuel-cost pass-through mechanism will be sufficient to eliminate cumulative deficits and restore positive operating margins.
- The maturity and refinancing plan for the approximately KRW 50,879 billion of borrowings and debt securities contractually due within one year, including interest payments.
- Liquidity headroom after planned capital expenditures, fuel purchases, guarantees and other contractual commitments totaling approximately KRW 174,023 billion.
- The sensitivity of cash flow and debt service to fuel prices, exchange rates and interest rates, particularly given the 14.8% foreign-currency share of long-term debt before swaps.
- The recoverability of transmission and distribution PP&E, which had a KRW 179,876 billion carrying value and no impairment charge in 2023 despite continued operating losses; the impairment assessment depends on projected sales volumes, tariffs, power-purchase costs and discount rates.
- Progress on nuclear-life extensions, Shin-Hanul Units 3 and 4, new nuclear construction, coal-to-LNG conversions and renewable-energy investment.
- Potential cash outflows from ordinary-wage litigation, guarantees, environmental obligations, decommissioning and spent-fuel provisions.
- The extent and financial impact of Russia-related fuel procurement and any new sanctions or supply disruptions.