×

Kepco's First-Quarter Profit Rises on Tariffs, Beats Forecasts

Power monopoly Korea Electric Power posted on Thursday a better-than-expected rise in quarterly profit on tariff hikes and lower fuel costs.

Kepco reported a net profit of 775.3 billion won (US$833.8 million) in the quarter to March 31, up from a year-earlier 732.3 billion won profit. The results were well above a Reuters forecast for a 585 billion won profit.

"Kepco's net profit rose on weakening fuel costs and tariff hikes, outweighing a gain in coal prices and KEPCO's higher dependency on expensive LNG in the first quarter," said Lee Jae-won, analyst at TongYang Investment Bank.

The government allowed Kepco to raise power prices by 2.1% from Jan. 15, the first increase since December 2005.

Oil prices remained relatively stable during the first quarter, and analysts expect that stability to continue in the second quarter and raw material prices to fall.

The utility's sales in the first quarter were 7.16 trillion won, up from 6.79 trillion won a year earlier, but fell short of the 7.24 trillion won Reuters consensus forecast from seven analysts.

LNG usage grew by 21.6% in the first quarter compared with a year ago, while coal prices, one of the main sources to generate power by KEPCO, grew 13.8 percent in the same period, said Choi Ji-hae of Hanhwa Securities.

Analysts say prices of liquefied natural gas (LNG) dropped from an all-time peak in January of $60.38 a barrel on Japanese quotes but the weakening pace is slower than expected.

"LNG prices are expected to fall from April to July, which is the peak season for LNG due to high air-conditioning use," said Choi.

Fuel costs usually make up a third of KEPCO's operating expenses. Shares in Kepco, which has a market value of $27.6 billion, fell about 11.44% in the first quarter, underperforming the wider market's 1.26% gain.