Kepco asks Samsung and SK hynix to pay electricity bills five years in advance
In South Korea, state energy company Korea Electric Power Corp. (Kepco) has proposed that Samsung Electronics and SK hynix pay their electricity bills approximately five years in advance. The total potential amount of prepayments is 25 trillion won, Korea Herald reports. Negotiations are ongoing, and no final decisions have yet been made on the companies’ participation, amounts, term or interest rate.
Under Kepco’s proposal, Samsung Electronics would pay 20 trillion won and SK hynix 5 trillion won. The calculation is based on their electricity spending last year: 4.1 trillion won for Samsung and 900 billion won for SK hynix. Kepco plans to deduct payments from the advance balance each month and accrue interest on unused funds.
Debt and bond limits
At the end of June, Kepco’s accumulated debt reached 210.7 trillion won, while its daily interest expenses amounted to about 11.5 billion won. The company purchases electricity from producers and operates most of the country’s electricity transmission, distribution and retail supply networks, but it cannot raise tariffs independently without government approval.
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After substantial losses during the energy crisis, the government temporarily raised Kepco’s statutory bond issuance limit from twice to five times the amount of its capital and reserves. This easing will remain in effect until the end of 2027. As of June 30, the company had 71.5 trillion won in outstanding bonds, while after the lower limit is restored, the permissible level, based on an estimate using the company’s capital, will be about 50 trillion won.
Power grid financing
Kepco needs about 100 trillion won to expand the power grid amid the construction of energy-intensive semiconductor clusters. According to Hana Securities, investments in transmission lines and substations under Korea’s latest power development plan could reach 124.3 trillion won.
If the entire 25 trillion won prepayment is used to repay bonds, their outstanding amount would decline to approximately 46.5 trillion won. At the same time, such a scheme would cover only part of the needs for strengthening the power grid. Kepco says bringing electricity tariffs closer to the actual cost of supply is a long-term task.
