72.8 Trillion Won Grid Investment Puts Pressure on Electricity Rate Hikes
Korea Electric Power Corp.'s (KEPCO) proposal for 25 trillion won in advance electricity payments from Samsung Electronics and SK Hynix has fallen through after both companies refused, deepening the utility's funding burden. Estimates show that when the special provision allowing expanded bond issuance expires at the end of 2027, KEPCO's outstanding bonds will exceed its statutory limit by 19 trillion won.
According to KEPCO and the National Assembly Budget Office on the 24th, the special provision permitting bond issuance up to five times the sum of KEPCO's capital and reserves will end in late 2027. Without separate legislation, the limit will revert to twice that sum starting in 2028. Based on KEPCO's 2026–2030 mid- to long-term financial management plan, the Budget Office projects the combined capital and reserves at the end of 2027 at 28.4177 trillion won. Under the twice-over rule, the bond issuance ceiling would be capped at 56.8354 trillion won. Outstanding bonds at that point are expected to reach 76.0489 trillion won — 19.2135 trillion won above the statutory limit. As of the first half of this year, outstanding bonds already stood at 71.5 trillion won.
KEPCO reportedly offered interest on the advance payments above the yield on two-year government bonds, with the amounts to be deducted from future electricity bills. The plan was to use the funds secured upfront to reduce bond issuance pressure and finance power grid construction. However, the two companies declined the proposal, citing the burden of deploying large sums of capital at once. At a National Assembly audit on the 12th, Kim Jae-gun, KEPCO's vice president for power systems, explained that the advance payment proposal was a measure to lower the bond issuance ratio.
Regardless of the failed deal, grid investment needs have grown. Under KEPCO's 11th long-term transmission and substation facility plan, investment required through 2038 stands at 72.8 trillion won, up 16.3 trillion won from the previous plan. The plan includes expanding transmission lines and substations to reliably supply power to the Yongin semiconductor cluster and artificial intelligence (AI) data centers, among others.
Earnings forecasts for KEPCO have also emerged. According to brokerage consensus, third-quarter operating profit this year is projected at 2.6966 trillion won, down 52.29 percent from a year earlier. Analysts expect the company to post an operating profit of 82.3 billion won and a net loss of 493 billion won in the fourth quarter.
At a National Assembly audit by the Climate, Energy, Environment and Labor Committee on the 19th, KEPCO President Kim Dong-chul said that financing grid investment through external borrowing alone would be difficult, and that the government should discuss a minimal electricity rate increase. However, Kim said there have been no concrete discussions with the government on a rate hike, and drew the line at saying that increases in residential and industrial rates had not been decided.
To cope with the shrinking bond issuance limit, KEPCO is considering self-help measures and general borrowing, with an extension of the special provision also being floated as an option. Analysts Kim Sang-in and Cha Ju-hee of Shinhan Investment Corp. assessed that, in the absence of a plan for large-scale bond repayments or capital increases, delaying the point at which the statutory limit reverts to twice the base amount is a realistic alternative.
