Korea Electric Power - Earnings Call - H2 2022
February 24, 2023
Transcript
Speaker 0
Good morning and good evening. First of all, thank you all for joining this conference call. And now we're beginning the conference of the Fiscal Year twenty twenty two Fourth Quarter Earnings Results by KEVCO. This conference will start with a presentation followed by a divisional Q and session. Now we shall commence the presentation on the fiscal year twenty twenty two Fourth Quarter Earnings Results by Kepco.
Speaker 1
Good afternoon. This is Namyun Chang, Head of Finance and IR team of Capco. On behalf of Capco, I would like to thank all of you for participating in today's conference call to announce earnings results for 2022. Today's call will be presented in both Korean and English, Beginning with a brief presentation on the earnings results, Q and A session will be followed. Please note that the financial information disclosed today is on a preliminary unaudited and consolidated basis in accordance with K IFRS.
Any comparison will be on a year on year basis between last year and this year. Business strategist, plan, financial estimates and other forward looking statements included in today's call are based on our current expectations and plan. Please be noted that such statements may involve certain risks and uncertainties. Now IR manager, Mr. Choi Soo Jeon, will begin with an overview of earnings results for 2022, first in Korean and repeat in English.
Speaker 2
Now we'll provide the overview in English, starting with operating income. In 2022, Kekko recorded an operating loss of KRW 30,600,000,000,000.0. To take a closer look, operating revenue increased by 70% to KRW 71,300,000,000,000.0 year on year. Power sales revenue rose by 15% to trillion, while revenue per offices and other business increased by 51 to KRW5.1 trillion. Moving on to the main operating cost.
Cost of goods sold and SG and A expenses increased by 56% to KRW103.9 trillion. Fuel cost was hiked by 78% to KRW34.7 trillion due to rapid increase in LNG and coal prices. Next, purchased power costs surged by 94% to KRW 41,900,000,000,000.0. This was due to larger purchased power volume from the independent power producers and higher unit prices of purchased power. Depreciation costs increased by 4% KRW 10 point to KRW 8,000,000,000,000, mainly due to newly constructed facilities and power plant.
Now let me explain Kicker's non operating segment. The net financial loss was KRW2.9 trillion, increased the loss by KRW1.1 trillion from the last year. As a result of full going, we recorded a consolidated net loss of KRW24.4 trillion, which is a KRW19.2 trillion increase from KRW5.2 trillion of consolidated net loss in the previous year. This is the end of our review of the Kekko's earnings results for 2022.
Speaker 3
Good afternoon. This is IR Manager, Won Kitto. I would like to briefly go over a few items related to earnings. First, on sales outlook. Electric sales volume in 2022 grew 2.7% year on year, driven by domestic economic recovery.
In 2023, consumption is expected to decline due to slow global growth and trade as well as high interest and high oil and oil price and high inflation, which will limit sales volume growth at a low level. Next is on fuel unit cost by fuel source. Unit fuel cost in 02/2008, KRW per tonne for coal and KRW 1,540,000 per tonne for LNG, excluding unloading cost as the fuel price rise globally. Generation mix by Gencos in 2022 for nuclear power plants saw increased volume from higher utilization electricity demand. Coal went down slightly from plant maintenance days, mainly environmental equipment upgrade of Yangheng 1 And 2 and same for LNG due to increased nuclear utilization.
Nuclear power plant generation is expected to go up as new plants are introduced, for example, scenario number one and two, along with increased utilization, while coal and LNG is expected to have increased generation capacity from newly introduced plants, but generation volume remains to be determined as cap on coal generation is applied. Generation mix outlook for 2023 is expected at mid-eighty percent level for nuclear. And for coal, it will be similar to the previous year and mid-twenty percent level for LNG. Next is on RPS and EPS related costs. In 2022, RPS cost has increased as the REC mandate increased from 9% in the previous year to 12.5%.
And on a consolidated basis, the RPS cost is KRW 3,016,000,000,000.000. And on a stand alone basis, it's KRW 3,708,100,000,000.0000. For EPS cost, on a consolidated basis, the cost is 493,400,000,000.0. And on a stand alone basis, it's KRW 53,100,000,000.0. This concludes our briefing on the key business environment.
Now we will move on to
Speaker 0
the Q and A session.
Speaker 3
We are joined by our IR committee members in charge of major business areas at KETCO, and we are ready to accommodate questions that you will have. Since we are preceding the question session in both Korean and English, please make your questions and answers brief and clear.
Speaker 0
Now, 20 session will begin. Please press asterisk one if you have any question. For cancellation, please press asterisk two on your phone. Currently, there are no participants with question. Please press asterisk one to give your question.
The first question the first question will be given by Hwang Sung Yeon from using Investment Securities. Please go ahead.
Speaker 3
Good afternoon. I have a question on the impact of S and P cap that started since December. I would like to understand the impact on the financial balance sheet and also how much would the impact would be for the first quarter? Could you please share your prospects? Further question, since the surge of the fuel prices since December, in order to protect the consumers, we have implemented the emergency cap on the S and P price.
If you look at the S and P price on average from December and January time period, it has ranged from KRW $2.50 to KRW $2.61 per unit. And the cap that was applied was KRW 161 for land power cost. Of course, this cap cannot be applied for three consecutive months, so this number will not be applied starting in March. So the optimal level of the cost will be determined, but this is expected to fluctuate depending on the international fuel cost range. So the impact of this cap can be only determined once we have the first half of the number ready for 2023.
Speaker 0
The following question is by Aram from Citi. Please go ahead.
Speaker 4
Hi. My name is Eir from Citi Research. So I would like to ask about your oil or any guidance regarding on the Unicore LNG and oil cost assumption for the 2023. Yes.
Speaker 3
Just to comment on that first, the recent energy price is very difficult to predict due to uncertainties of the market. With that in mind, I would like to add the following price outlook. Sorry, so it's very uncertain for us to predict. So that is to be determined depending on the recent market trend.
Speaker 0
Currently, there are no participants. Your question please press asterisk one to give your question. The following question is by Kim Dong from Kyung Investment Asset Management. Please go ahead.
Speaker 3
So I have two questions. The first question is on the progress to date for the construction of Shinhanou 3 And 4. I believe the completion is expected at 2000 and '33 and '38, respectively, for this nuclear power plant. So what is the current update on the progress? The second question is on the size and interest rate of Kepco bond as of January.
And what is your current utilization for the nuclear power plant? In regard on your question on Shinhanno 3 And 4, we are currently following up on the government approval of the nuclear power plant. So we will actually follow-up with you offline on the current update. So on the size and interest rate of PEPCO bond for January, we'll follow-up with you offline after this conference call and give you the data separately.
Speaker 0
Currently, are no participants with question. Please press asterisk command to give your question.
Speaker 3
On your second question regarding our utilization outlook for nuclear power plant for this year is expected at mid-eighty percent level. We are ready to accommodate. Next question?
Speaker 0
The following question is by Kim Doong from QM Investment Asset Management. Please go ahead.
Speaker 3
I have a follow-up question. For LNG price, there will be some lag to reflect that price change in the on the S and P. So the price is going down. And internally, what's your view on reflection of this decline in price on the S and P price? If you could also tie that answer to the bituminous coal price as well because that is the lagging index, and it will be great to understand when that will be reflected on the S and P.
The reflection of the actual price on S and P will be different depending on the source of the fuel. For LNG, usually, the lagging period would be six months. And for spot, it will be about three months. And for bituminous coal, it will be different based on the purchasing source of the bituminous coal. For Newcastle coal, it will be around six months to be reflected on the price.
And for Australian coal, it would be five months. And for Indonesia, it's earlier than that, but it's at this point, it's difficult to confirm how earlier that would be.
Speaker 0
Following question is by Yimin Jae from NH Investment Securities. Please go ahead.
Speaker 3
I have two questions. First is on how much buffer do we have to issue corporate bonds since the 2022? And second question is what are some of the overseas nuclear power plant that we are currently proceeding at the moment? As of 2021, based on the capital act, we can issue 2x the capital that we can utilize and the buffer that we had was up to KRW 92,000,000,000,000. As of last year, 2022, it is KRW 70,000,000,000,000.
And with the amendment to KEPCO Act, we can issue 6x as high as our corporate bond, and the final amount could be determined once KEPCO finalizes on its final financial closure. At the moment, currently, Kepco is pursuing overseas nuclear power plant in United Kingdom as well as Turkey. And we are currently pursuing two more nuclear power plant project in Saudi Arabia.
Speaker 0
Currently, there are no participants. Your question please press ask to risk one to give your question. The following question is by Yimin Jae from NH Investment Securities. Please go ahead.
Speaker 3
So if I may ask one more question. You will probably pursue to increase the tariff in the remainder of the quarters. And I would like to understand which line items you will be leveraging to reflect this increased tariff? For 2022, we are going to make efforts to rationalize the tariff electricity tariff system in a phased manner. At the moment, the line items or items that will be used is not determined yet, but we will be working closely with the government to reflect that and the final tariff.
Speaker 0
The following question is from using Investment Securities. Please go ahead.
Speaker 3
I have a question on the increased other cost, and it has gone up by more than KRW1 trillion. It will be nice to understand the line item that was involved in driving up this other cost line items compared to previous year or on a quarter to quarter basis. So most of the line items that was causing the increase of other operating cost higher up is the line item of other materials cost. And this is largely the overall acquisition cost of new projects for a combined power plant for our Gencos.
Speaker 0
Currently, there are no participants to question. Please press asterisk one to give your question. The following question is by Park Kwang Le from Shinhan Investment Securities. Please go ahead.
Speaker 3
I may have missed this in your previous briefing, but for the last year's fourth quarter, could you share with us your power purchase volume and as well as power purchase cost? As for the purchase volume in 02/2022, it's 571 terawatts for the whole year. This is the number combined for both Genco's and IPPs. And for purchase cost, it's KRW 41,170,000,000,000.00. KRW 19,000,000,000,000, up by 22,000,000,000,000 won.
Speaker 0
Currently, are no participants. Once again, if you have a question, please press asterisk and one.
Speaker 3
If there are no further questions, we would now like to conclude our earnings conference call. Thank you for your participation.
Speaker 0
This completes the fiscal year twenty twenty two fourth quarter earnings by Capco. Thank you for your participation.