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209489
Mon, 09/26/2011 - 14:32
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https://oananews.org//node/209489
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S. Korea's measures toward blackout likely to affect KEPCO negatively
By Kim Young-gyo
HONG KONG, Sept. 26 (Yonhap) -- South Korea's response to the recent nationwide blackout will likely affect Korea Electric Power Corp. (KEPCO) negatively, Moody's Investors Service said Monday.
On Sept. 15, power outages were reported in Seoul and neighboring regions, with an estimated 1.62 million households across the country experiencing temporary blackouts. Following the incident, the South Korean Ministry of Knowledge and Economy announced a series of measures aimed at preventing a recurrence of nationwide blackouts.
"The ministry's response to the nationwide blackout is credit negative for Korea Electric Power Corporation because the proposed measures force KEPCO to expedite its capital expenditure program, regardless of market conditions and the company's leverage," said Mic Kang, vice president at Moody's.
Moody's said increasing capital expenditure to enhance power supply capacity with little flexibility for adjustments in scope or timing would raise KEPCO's already high level of leverage over the next two to three years, particularly as the absence of an automatic mechanism to pass higher costs on to customers limits its ability to recover costs and ultimately earn a proper return on investment.
The blackouts took place as the country's electricity reserve fell to as low as 6 percent of overall demand, far below the 7 percent rate that is considered the minimum safety margin.
The Ministry of Knowledge said it would raise South Korea's reserve margin to at least 14 percent through the expansion of power-generation facilities by 2014, strengthen the utility's accuracy in forecasting power demand, while encouraging efficiency in the public's power consumption, and improve KEPCO's risk-management system with respect to power supply.
The global credit appraiser expected KEPCO would have to take on more leverage in order to raise its capital expenditure from current levels.
"High fuel costs and an inability to pass all rising costs to consumers have already weakened its financial metrics," said Kang.
"Moreover, the recent blackout is likely to have made KEPCO liable for damage claims from affected businesses and individuals."
HONG KONG, Sept. 26 (Yonhap) -- South Korea's response to the recent nationwide blackout will likely affect Korea Electric Power Corp. (KEPCO) negatively, Moody's Investors Service said Monday.
On Sept. 15, power outages were reported in Seoul and neighboring regions, with an estimated 1.62 million households across the country experiencing temporary blackouts. Following the incident, the South Korean Ministry of Knowledge and Economy announced a series of measures aimed at preventing a recurrence of nationwide blackouts.
"The ministry's response to the nationwide blackout is credit negative for Korea Electric Power Corporation because the proposed measures force KEPCO to expedite its capital expenditure program, regardless of market conditions and the company's leverage," said Mic Kang, vice president at Moody's.
Moody's said increasing capital expenditure to enhance power supply capacity with little flexibility for adjustments in scope or timing would raise KEPCO's already high level of leverage over the next two to three years, particularly as the absence of an automatic mechanism to pass higher costs on to customers limits its ability to recover costs and ultimately earn a proper return on investment.
The blackouts took place as the country's electricity reserve fell to as low as 6 percent of overall demand, far below the 7 percent rate that is considered the minimum safety margin.
The Ministry of Knowledge said it would raise South Korea's reserve margin to at least 14 percent through the expansion of power-generation facilities by 2014, strengthen the utility's accuracy in forecasting power demand, while encouraging efficiency in the public's power consumption, and improve KEPCO's risk-management system with respect to power supply.
The global credit appraiser expected KEPCO would have to take on more leverage in order to raise its capital expenditure from current levels.
"High fuel costs and an inability to pass all rising costs to consumers have already weakened its financial metrics," said Kang.
"Moreover, the recent blackout is likely to have made KEPCO liable for damage claims from affected businesses and individuals."
