Inflation likely to continue as KEPCO's losses snowball

• Published date: 26 February 2023
• Publication title: The Korea Times

Snowballing debts at state-run energy companies are raising doubts over the government's forecast that inflation will continue to cool off and the country's economy will rebound in the second half of this year.

Among the companies that announced 2022 earnings data last week, Korea Electric Power Corp. (KEPCO) said it posted a record operating loss of 32.6 trillion won ($25.02 billion) last year.

The operating loss at KEPCO, the country's sole power distributor, more than quintupled year-on-year, which adds to its debt-to-equity ratio that was estimated to have surpassed 400 percent as of 2022.

KOGAS, which is responsible for Korea's nationwide gas distribution network, said its operating profit surged 56.2 percent year-on-year to 103.8 trillion won. But its accounts receivable, the amount of money that customers owe a company for products or services, prompted its debt-to-equity ratio to rise 190 percentage points year-on-year to 643 percent.

"Such snowballing debts of the two major energy firms are worrisome with regard to the fight against inflation," said Hanyang University economics professor Ha Joon-kyung.

He noted that the government may be tempted to hike electricity and gas prices to cap such debts, which would spell a failure in its plan to ease inflation.

The government forecast inflation, although it remains in the 5-percent range, will be eased to the 4-percent range in the first half and lowered to its target goal of mid-3 percent by the...