Kepco's Q3 operating profit drops 71% as frozen electricity rates fail to offset fuel cost surge

Korea Electric Power Corporation's third-quarter operating profit fell more than 70 percent from a year earlier, as frozen electricity rates left the utility unable to absorb a sharp rise in fuel costs triggered by the Middle East war.

Kepco disclosed Thursday that its consolidated operating profit for the third quarter came to 1.64 trillion won ($1.23 billion), a preliminary 70.9 percent drop from the same period last year.

Sales fell 2.6 percent year-on-year to 26.85 trillion won, while net profit declined 77.9 percent to 835.9 billion won.

On a standalone basis — excluding subsidiaries — Kepco posted an operating loss of 99 billion won in the third quarter, its first quarterly operating deficit in two years since the third quarter of 2024.

The earnings deterioration stems from surging international energy prices driven by the Middle East war, compounded by the government's decision to keep electricity rates unchanged.

From January through September this year, fuel costs at Kepco's power generation subsidiaries and electricity purchases from private generators rose 3.1 trillion won compared with the same period a year ago.

Yet with electricity rates held flat, revenue from electricity sales actually fell 1.16 trillion won over the same period.

The sharp third-quarter decline pulled Kepco's cumulative operating profit for the first nine months of the year down 43.2 percent year-on-year to 6.56 trillion won.

Kepco said it had managed to sustain 13 consecutive quarters of profitability by activating a crisis management system and pursuing aggressive financial restructuring after the Middle East war began.

The financial burden remains heavy. Fuel cost shocks from the Russia-Ukraine war have left total debt at 209.6 trillion won and borrowings at 132.8 trillion won as of the end of the third quarter.

"The rise in international energy prices is becoming prolonged," Kepco said in a statement. "We plan to continue operating an emergency management regime focused on cost reduction and profitability to secure financial stability."

Analysts say Kepco's own financial improvement efforts are unlikely to be enough to overcome the fallout from the Middle East war.

The utility also faces the need to commit 55 trillion won to power grid construction over the next five years to support three major megaprojects.

Those pressures have fueled calls for an electricity rate increase to help erase Kepco's accumulated deficits and fund grid expansion.

Kepco President Kim Dong-cheol said at a press briefing in Naju, South Jeolla Province, on Nov. 4 that "a minimum adjustment of electricity rates needs to be resolved one way or another through discussions with the government."