KEPCO achieved an annual operating profit of 4 trillion won last year and succeeded in turning into a surplus after three years. As the extent of the decline in fuel prices increased due to the spread of Corona 19, the cost of purchasing fuel was greatly reduced, and it was thanks to promoting management efficiency such as efforts to reduce power supply costs.
The Korea Electric Power Corporation announced on the 19th that last year, consolidated sales were estimated at 58.66 trillion won and operating profit was estimated at 4.11 trillion won. Operating profit turned to a surplus following 2018 (loss of 2 trillion won) and 2019 (loss of 1.3 trillion won).
Although sales revenue decreased due to Corona… Fuel and power purchase costs have been further reduced.
The fact that the low oil price situation continued throughout the last year due to the corona is the main factor in the good performance. Fuel costs for power generation subsidiaries decreased by 3.5 trillion won compared to the previous year due to falling oil and coal prices. The cost of purchasing electricity for private power generation companies decreased by 2.5 trillion won due to the large drop in liquefied natural gas (LNG) and oil prices, even though the purchase volume increased by 2.0%. This means that it saved 6 trillion won in fuel and electricity purchase costs.
As the corona spread and the rainy season prolonged, the electricity sales revenue last year decreased by 200 billion won. Electricity sales fell 2.2% year-on-year due to shrinking consumption. However, it was better than the previous year, which decreased by 900 billion won. Other revenues also decreased by 400 billion won as the overseas construction sector was almost completed.
The intensive pursuit of management efficiency was also helpful in improving performance. Last year, KEPCO reduced power supply expenses such as facility management, depreciation, labor, and sales and management expenses by about 470 billion won.
Power supply costs account for about 37% of operating expenses, apart from fuel and power purchase costs. The rate of increase in power supply costs over the past five years is 5.9%, and applying this ratio is expected to increase the cost of about 1.15 trillion won last year. However, KEPCO kept the cost increase rate within 3.5% and suppressed it to within about 680 billion won increase from the previous year.
In addition, it succeeded in reducing interest expenses by 51.4 billion won (2.1%) compared to the previous year by discovering new sources of low interest rate and strengthening the management of borrowings.
“Minimize power supply cost”… KEPCO is tightening the belt
KEPCO plans to implement a high-strength management efficiency strategy again this year. Along with the reorganization of the electricity rate system, the company plans to continue its efforts to improve profits by strengthening efforts to minimize power supply costs.
This is through the efficiency of facility management based on new technology, minimization of commissioned work using internal manpower, reduction of facility repair costs, and strict cost execution standards. We will continue to invest in power grids to expand new and renewable energy and implement carbon neutrality.
KEPCO said, “In the future, we plan to manage the growth rate of electricity supply cost (cost per unit) per 1 kilowatt-hour (kWh) of sales volume of KEPCO and Electric Power Group companies to within 3% per year by 2024.”
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To this end, the company has formed a task force for power supply costs (TF) from the beginning of the year to improve efficiency and improve profits by intensively checking and responding to financial issues.
KEPCO said, “We plan to expand this to power generation subsidiaries and form a group company council to manage power supply costs in the power generation sector.” “We share efficiency goals to check performance regularly, and through the Management Innovation Committee, where external experts participate, We will monitor the overall cost reduction efforts.”