By Lee Kyung-min 
KEPCO CEO Cheong Seung-il
Korea Electric Power Corp. (KEPCO) posted a 5.86 trillion won ($4.8 billion) operating loss last year, crippled by a freeze in electricity rates despite surging global oil and coal prices, the state-run utility company said Thursday.
In 2020, the firm posted a 4 trillion won operating profit. Last year's figure is the largest loss since 2008 when its operating losses reached 2.79 trillion won amid a spike in oil prices in the aftermath of the global financial crisis. It also exceeded the market consensus of around 4 trillion won in operating losses by a wide margin.
Sales rose to 60.57 trillion won, up 3.4 percent from a year earlier, led by increased sales of electricity. However, operating costs rose faster to 66.43 trillion won, due mostly to increased fuel prices. Net loss amounted to over 5 trillion.
Sales of electricity climbed 4.7 percent last year, driven by an increase in the average operating rate of the manufacturing industry.
However, the increase meant steeper losses, since the electricity rate was not raised correspondingly to reflect a spike in the price of oil. This was why the more electricity they sold, the sharper their losses were.
Further denting the corporate profit was a government policy to freeze the electricity rate in the second and third quarters of last year, a relief measure enacted to help the country weather the COVID-19 pandemic and rising inflation. The rate freeze will be effective until the first quarter of this year.
The policy limited the increase in profit from electricity sales to 1.47 trillion won, up 2.7 percent, year-on-year.
Market analysts say that KEPCO's operating losses will continue this year, given elevated uncertainty in the commodity market brought on by the escalating Russia-Ukraine crisis.
"West Texas Intermediate hovers at around $71 per barrel and Newcastle bituminous coal traded at $146 per ton, adding to the burden of higher production and raw materials costs," NH Investment & Securities said in a report.
Continued losses are inevitable before the second quarter of this year, when the electricity rate hike will come into the picture, it added.
"Raw material costs are feared to rise faster than electricity rate increases, especially given the Ukraine crisis," the brokerage said.
Hyundai Motor Securities said in a report that the state-run energy firm will not be able to see an operating profit until after 2023.
"Previous market consensus long maintained that the level of global oil prices would stay elevated throughout the first half of this year, but KEPCO has yet to raise the electricity rate," the report said. "The more global commodity prices soar, the more deteriorated the firm's balance sheets will become."
