Korea Electric Still in Red - Analyst Blog
May 18 2012 - 4:00AM
Zacks
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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