Korea Electric Power Corporation (KEP) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed outlook. While KEPCO shows positive financial performance with increased revenue and profit, concerns arise from the trend of direct power purchasing reducing sales, limited tariff increase room, and lack of clarity on U.S. market entry. The Q&A reveals uncertainties around tariff adjustments and fuel price outlook. These factors, alongside the absence of market cap data, suggest a neutral sentiment, with potential minor fluctuations in stock price.
Key Financial Performance
Consolidated Operating Profit KRW 5,889.5 trillion for the first half of 2025. This includes revenue of KRW 46,174.1 trillion, up by 5.5% year-over-year, driven by a 5.9% increase in electricity sales revenue (KRW 4.157 trillion). Other revenue, including publicly listed business income, decreased by 2.1% to KRW 2.016 trillion.
Cost of Sales and SG&A Expenses KRW 40,284.6 trillion, down by 2.3% year-over-year. Fuel cost decreased by 14.6% to KRW 9.252 trillion, while power purchase cost increased by 1.1% to KRW 17,357.8 trillion due to fuel price changes. Depreciation expenses rose by 4.4% to KRW 5.878 trillion.
Interest Expense KRW 2,211.3 trillion, down by KRW 72.8 billion from the same period last year.
Net Cost for the Period KRW 3,538.1 trillion for the first half of 2025.
Electricity Sales Volume 28.4 terawatt hours for the first half of 2025, down 0.05% year-over-year due to reduced industrial sales caused by sluggish exports.
Fuel Prices Bituminous coal price was $103.1 per ton, and LNG price was approximately KRW 1.05 million per tonne for the first half of 2025.
System Marginal Price (SMP) KRW 118.9 per kilowatt hour for the first half of 2025.
RPS Costs KRW 1,958.9 trillion on a consolidated basis and KRW 2,176 trillion on a separate basis for the first half of 2025.
Borrowings KRW 131.9 trillion on a consolidated basis and KRW 86.5 trillion on a separate basis for the first half of 2025.
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Operating Highlights
New Power Plant Introduction: The generation mix for nuclear increased due to the introduction of a new power plant and higher utilization rates.
Electricity Sales Volume: Electricity sales volume in the first half of 2025 reached 28.4 terawatt hours, down 0.05% year-over-year due to reduced industrial sales caused by sluggish exports.
Revenue Growth: Revenue increased by 5.5% year-over-year to KRW 46,174.1 trillion, with electricity sales revenue up by 5.9%.
Cost Management: Cost of sales and SG&A expenses decreased by 2.3%, with fuel costs down by 14.6%.
Generation Mix: Nuclear generation mix increased, while coal and LNG generation mix decreased due to lower utilization and capacity adjustments.
Economic Growth Impact: Electricity sales are projected to decline slightly for the full year 2025 due to a downward adjustment in economic growth rate and a downturn in the manufacturing sector.
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Risk or Challenges
Electricity Sales Volume: Electricity sales volume in the first half of 2025 decreased by 0.05% year-over-year due to reduced industrial sales caused by sluggish exports. For the full year 2025, sales are projected to decline further due to a downward adjustment in the economic growth rate and a downturn in the manufacturing sector.
Fuel Costs and Power Purchase Costs: Fuel costs decreased by 14.6%, but power purchase costs increased by 1.1%, driven by changes in fuel prices. This indicates potential volatility in operational costs due to fluctuating fuel prices.
Interest Expense: Interest expense amounted to KRW 2,211.3 trillion, which, although slightly reduced from the previous year, remains a significant financial burden.
Generation Mix: The generation mix for nuclear energy increased due to a new power plant and higher utilization rates, but is expected to decline for the full year 2025. Coal generation is expected to remain stable, while LNG generation is projected to decrease slightly. This shift in generation mix could impact operational efficiency and costs.
RPS Costs: Renewable Portfolio Standard (RPS) costs were KRW 1,958.9 trillion on a consolidated basis in the first half of 2025, representing a significant expense.
Borrowings: Borrowings stood at KRW 131.9 trillion on a consolidated basis, indicating a high level of debt that could pose financial risks.
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Guidance & Outlook
Electricity Sales Outlook: Electricity sales volume for the full year 2025 is projected to decrease slightly due to the impact of a downward adjustment in the economic growth rate and a downturn in the manufacturing sector.
Fuel Price and SMP Trend: Bituminous coal price is expected to remain around $103.1 per ton, LNG price approximately KRW 1.05 million per tonne, and the system marginal price (SMP) around KRW 118.9 per kilowatt hour.
Generation Mix Projections: For the full year 2025, nuclear generation is expected to decrease, coal generation is expected to remain stable, and LNG generation is expected to decrease slightly. Expected utilization rates are mid-80% for nuclear, upper 40% for coal, and mid-20% for LNG.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What is KEPCO's view on the trend of companies directly purchasing power from the power exchange and its impact?
A:KEPCO acknowledged the trend of companies like LG Chemical purchasing power directly from the power exchange, which will exclude them from KEPCO's sales and cost of sales. KEPCO has agreed with the Korea Power Exchange to improve the direct power purchasing system by extending the mandatory transaction period from 1 year to 3 years and imposing welfare costs and DR settlement on direct purchasers.
Q:What is KEPCO's stance on raising tariffs to address financial deficits?
A:KEPCO recognizes the need to raise tariffs to ease financial deficits but noted limited room for further industrial tariff increases. They are reviewing potential tariff increases for non-industrial sectors and will consult with the government for adjustments.
Q:What preparations has KEPCO made for entering the U.S. nuclear power market?
A:KEPCO is reviewing the potential entry into the U.S. nuclear power market, which plans to increase nuclear capacity from 100 GW to 400 GW by 2050. However, KEPCO did not disclose specific preparations or details.
Q:Why was the SMP level lower than expected in August, and what is KEPCO's outlook?
A:The lower-than-expected SMP level in August was due to higher demand in July caused by unexpected cheap rates and lower-than-anticipated demand in August due to summer vacations and weather. KEPCO also noted changes in the curtailment method by KPX as a factor.
Q:What is KEPCO's outlook for the utilization rate in the second half of the year?
A:KEPCO expects a mid-80% utilization rate for nuclear, upper 40% for coal, and mid-20% for LNG.
Q:What is KEPCO's position on the progressive tariff system?
A:KEPCO has maintained the progressive tariff system since 2019, expanding intervals in July and August to ease public burden. They do not see significant changes in its impact compared to last year.
Q:Is KEPCO considering raising tariffs for residential or other sectors?
A:KEPCO acknowledges the need to raise tariffs in other sectors but has not decided on specific sectors, levels, or timing. They will work with the government to implement adjustments.
Q:What is KEPCO's plan for a regionally differentiated tariff system?
A:KEPCO plans to introduce a regionally differentiated retail tariff system by 2026 and is conducting research and consultations with the government. They aim to gather stakeholder opinions by the first half of next year.
Q:What caused the rise in the settlement unit price for nuclear power?
A:KEPCO deferred answering this question and did not provide details during the session.
Q:What are the adjusted coefficients for coal-fired power plants and other segments?
A:The adjusted coefficients for nuclear and coal-fired power plants remained unchanged in the first and second quarters. KEPCO will reassess them to maintain financial health and consult with the government.
Q:Will KEPCO introduce both wholesale and retail tariff systems simultaneously?
A:KEPCO plans to introduce the retail tariff system by 2026, while the wholesale system, led by KPX, is expected to be introduced by 2025.
Q:What are the RPS-related costs on a consolidated and separate basis?
A:The RPS-related costs are KRW 1,168.3 trillion on a consolidated basis and KRW 1,191.7 trillion on a separate basis. Greenhouse gas emission costs are already reflected in power purchase costs.
Q:What is KEPCO's fuel price outlook for coal and LNG in the second half of the year?
A:KEPCO did not provide specific details on the fuel price outlook for coal and LNG during the session.
Q:What is KEPCO's dividend policy and the government's stance on it?
A:The government targets a 40% dividend payout ratio for KEPCO. KEPCO has not been notified of changes to this policy but will consider financial needs and shareholder value in future decisions.
Q:How was last year's dividend payout ratio of 15% decided?
A:The Ministry of Economy and Finance decided the 15% dividend payout ratio. KEPCO requested consideration of its financial situation and investment needs during consultations.
Q:What is KEPCO's view on KHNP's expanding role?
A:KEPCO has not officially reviewed the possibility of an IPO for KHNP or its expanding role.
Q:Can KEPCO adjust the settlement coefficient to align consolidated and separate net income for dividends?
A:KEPCO stated that the settlement coefficient is based on cost assessment and regulations, unrelated to dividend payout ratios.
Q:Review of Unclear Management Responses
A:KEPCO avoided providing specific details on their preparations for entering the U.S. nuclear power market, the rise in the settlement unit price for nuclear power, and the fuel price outlook for coal and LNG in the second half of the year.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Co Ltd
Corporate Participant
Daishin Securities
Division Conference
Division Jong
Division Kyeong
Division Minho
Division Sung
ET evening
English afternoon
Eom Corporate
Eom Senior
Eugene Investment
Finance IR
General Manager
Hur Daishin
Hwa Sung
Hwang Eugene
Hyun Hwang
Hyun Ryu
IFRS figure
IR Korea
IR Taeseop
Ltd Research
Manager IR
Research Division
SMP
Securities Co
Taeseop Eom
coil
mix utilization
period
KEP Transcript
Korea Electric Power Corporation (KEP) Q4 2025 Earnings Call Transcript
Unknown2-26
The earnings call summary and Q&A reveal several concerning factors: operating income underperformed expectations, provisions related to greenhouse gas emissions and nuclear site recovery increased significantly, and management avoided clear answers on several key issues. Additionally, the dividend payout ratio decreased, and there were no notable positive catalysts like new partnerships or strong guidance. The lack of clarity and the financial underperformance suggest a negative sentiment, likely leading to a stock price decline in the range of -2% to -8%.
Korea Electric Power Corporation (KEP) Q2 2025 Earnings Call Transcript
Unknown8-12
The earnings call presents a mixed outlook. While KEPCO shows positive financial performance with increased revenue and profit, concerns arise from the trend of direct power purchasing reducing sales, limited tariff increase room, and lack of clarity on U.S. market entry. The Q&A reveals uncertainties around tariff adjustments and fuel price outlook. These factors, alongside the absence of market cap data, suggest a neutral sentiment, with potential minor fluctuations in stock price.
Korea Electric Power Corporation (KEP) Q1 2025 Earnings Call Transcript
Unknown5-14
The earnings call presents a mixed picture: revenue and operating profit have increased, but there are concerns about high borrowing levels and lack of clarity on debt repayment plans. The Q&A revealed management's avoidance of certain questions, adding uncertainty. Positive aspects include reduced costs and increased non-operating profit. However, the absence of a share buyback program and unresolved transmission issues offset these positives. Overall, the sentiment is neutral due to balanced positive and negative factors.
Korea Electric Power Corporation (KEP) Q3 2024 Earnings Call Transcript
Unknown11-18
The earnings call indicates mixed signals: strong operating profit and sales growth, but significant borrowing and rising interest expenses pose risks. The lack of a share buyback or dividend program, coupled with regulatory costs, adds uncertainty. The Q&A revealed limited guidance on future costs and unclear responses, affecting sentiment. Overall, financial performance is solid, but risks and lack of clear positive catalysts suggest a neutral stock price movement over the next two weeks.
KEP Report
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