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| A man looks at electricity meters set up in a building in downtown Seoul, Friday. Newsis |
By Lee Yeon-woo
Shares of Korea Electric Power Corp. (KEPCO) and Korea Gas Corp. (KOGAS) continued to decline despite the government's decision to increase electricity and gas fees.
Analysts said the stocks are continuing to fall as the extent of the rate increase did not meet shareholders' expectations, making it difficult to anticipate significant earnings improvements at the state-run utilities for the time being.
According to the Korea Exchange, KEPCO shares ended at 18,680 won ($13.96), Tuesday, down 3.11 percent compared to the previous session. KOGAS stocks also declined 1.15 percent to close at 25,850 won.
The stock prices of both state-run utilities decreased for two consecutive sessions, following the government's announcement, Monday, of an 8 won per kilowatt hour (kWh) increase in power rates and a 1.04 won per megajoule (MJ) rise in gas fees.
After the announcement, institutional investors, who had previously snapped up KEPCO shares, shifted to net selling positions. Similarly, KOGAS witnessed selloffs by both foreign and institutional investors.
Market watchers viewed that the latest fare hikes will not be sufficient for KEPCO and KOGAS to recover from their mounting losses.
"Given the cumulative deficit of 44.7 trillion won since 2021, it is necessary to further increase electricity fares to restore financial stability. However, it is difficult to anticipate significant adjustments in electricity fares due to the government's passive approach, the upcoming general election, and the approaching summer peak season, which leads to increased electricity consumption," said Jung Hye-jung, an analyst at KB Securities.
"KOGAS is estimated to require an increase of more than 3 won per MJ is necessary to prevent uncollected payments," said Moon Kyeong-won, an analyst at Meritz Securities. Uncollected payments refer to the amount of natural gas imports that KOGAS failed to pay using money collected from gas fees.
"Even if the increased rates are implemented in the future, there is still a likelihood of the uncollected payments persisting," the analyst added.
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