South Korean utility behemoth, Korea Electric Power Corporation (KEP), recorded net loss of KRW3.08 trillion (USD$2.77 billion) in 2012 compared with a net loss of KRW3.29 trillion (USD$2.96 billion) in 2011. This was primarily due to higher fuel costs and power purchase costs.
In full year 2012, operating revenues went up 13.7% year over year to KRW49.42 trillion (USD$44.46 billion). The sale of electricity, the principal component of operating revenues, increased 13.5% to KRW45.98 trillion (USD$41.36 billion). Other revenues rose 16.6% year over year to KRW3.44 trillion (USD$3.10 billion).
Operating expenses grew 13.0% to KRW50.24 trillion (USD$45.19 billion), of which power purchase costs increased 32.4% to KRW9.80 trillion (USD$8.82 billion). Fuel cost rose 11.0% year over year to KRW23.82 trillion (USD$21.43 billion). Overall operating loss shrunk 19.8% year over year to KRW818 billion (USD$0.74 million).
Korea Electric Power is an integrated electric utility engaged in the generation, transmission and distribution of electricity in South Korea. The company along with its generation subsidiaries owns approximately 88.4% of the total electricity generating capacity in Korea.
Korea Electric Power is the dominant player in Korea’s electricity sector. It continues to be well-positioned to capitalize on growth opportunities in this market and to benefit from the industry restructuring initiatives of the Korean government. Higher electricity tariff rates, higher electricity volume sales, an improving overseas business and a recent regulatory approval for the fuel cost pass-through mechanism will all add to the growth story. However, this would be offset by escalating fuel costs, increased price of purchased power and uncertainty surrounding pending regulatory cases.
Korea Electric Power currently carries a Zacks Rank #2 (Buy). Investors can also consider other stocks such as Pike Electric Corporation (PIKE), Brookfield Infrastructure Partners L.P. (BIP) and Otter Tail Corporation (OTTR) , all carrying a Zacks Rank #1 (Strong Buy).
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