Korea Electric Power - Q1 2023

Transcript

Operator (participant)

Good morning and good evening. First of all, thank you all for joining this conference call. Now we will begin the conference of the fiscal year 2023 first quarters earnings results by KEPCO. This conference will start with a presentation followed by a divisional Q&A session. If you have a question, please press star one on your phone during the Q&A. Now we shall commence the presentation on the fiscal year 2023 first quarter earnings results by KEPCO.

Jang Nam-yong (Head of Financial and IR Team)

Good afternoon. This is Nam Yong Jang, Head of Financial and IR Team.

Operator (participant)

On behalf of KEPCO, I would like to thank you all for participating in today's conference call to announce earnings results for the first quarter of 2023. Today's call will be proceeded in both Korean and English. We will begin with a brief presentation followed by a Q&A session. Please note that the financial information to be disclosed today is on a preliminary, unaudited, and consolidated basis in accordance with Korean IFRS. Any comparison will be on a year-on-year basis between last year and this year. Business strategies, plans and financial estimates and other forward-looking statements included in today's call are based on our current expectations and plans. Please be noted that such statements may involve certain risks and uncertainties. Now, Mr. Cheon Chul-soo, IR General Manager will begin with an overview of earnings results for the first quarter of 2023 in Korean and English.

Cheon Chul-soo (Senior Manager)

We will provide the overview in English, starting with operating income. In 1st quarter of 2023, KEPCO recorded an operating loss of KRW 6.2 trillion. To take a closer look, operating revenues increased by 31% to KRW 21.6 trillion year-on-year basis. Power sales revenue rose by 32% to KRW 20.3 trillion, while revenues from overseas and other businesses increased by 23% to KRW 1.3 trillion. Moving on the main operating cost. Cost of goods sold and SG&A expenses increased by 15% to KRW 27.8 trillion. Fuel cost was hiked by 19% to KRW 9.1 trillion due to continuous impact from the rapid increase in LNG and coal price. Next, purchase power cost also surged by 15% to KRW 12.2 trillion due to increased fuel price.

Depreciation cost increased by 4% to KRW 2.8 trillion, mainly due to newly constructed facilities and power plants. Now let me explain KEPCO's non-operating segment. The net financial loss was increased by KRW 0.4 trillion to KRW 1 trillion, which is mainly due to raised interest rate and debt amount. As a result of the foregoing, we recorded a consolidated net loss of KRW 4.9 trillion. This is end of overview of KEPCO's earnings results for the first quarter of 2023.

Speaker 5

2023 1분기 연료비 단가는 전년도 국제 연료 가격 상승의 여파로 석탄은 톤당 약 KRW 270,000, LNG는 톤당 약 KRW 1,900,000을 기록하였습니다. 전력그룹사 발전믹스를 살펴보면 1분기의 경우 전년 동기 대비 원전 이용률은 80.2%로 하락하였으나 신규 원전 신한울 1호기와 한빛 4호기의 정비 완료에 따라 원전 발전 비중은 증가하였습니다. 석탄의 경우 전년 동기 대비 예방 정비 일수 증가에 따라 이용률은 54.8%로 하락하였습니다. 연간으로는 전년과 대비하여 원전 이용률 상승 전망과 하반기 신규 원전 준공 예정에 따라 원전 발전이 증가하는 한편, 석탄과 LNG 비중은 소폭 감소 또는 유사할 것으로 예상됩니다. 연간 발전원별 발전 이용률 전망은 원전은 80% 중반, 석탄은 50% 후반을 전망하고 있습니다. 이어서 RPS와 ETS 관련 비용에 대해 말씀드리겠습니다. 1분기 RPS 비용은 연결 기준 KRW 508.9 billion, 별도 기준 KRW 646.7 billion을 기록하였습니다. ETS 비용은 연결 기준 KRW 26.2 billion, 별도 기준 KRW 77.7 billion을 기록하였습니다. 이것으로 주요 경영 여건에 대한 간략한 설명을 마치겠습니다.

Operator (participant)

Good afternoon. Let me please give you a brief update on the key business factors. First of all, on fuel unit cost by fuel source. In Q1 of 2023, fuel unit cost has recorded KRW 270,000 per ton for coal and KRW 1.9 million per ton for LNG, excluding unloading cost, driven by the surge in international fuel price increase year-on-year. On generation mix by gencos for Q1, nuclear power plant utilization has dropped to 8.2% year-on-year. The overall generation mix has increased, driven by completion of maintenance of new power plant, nuclear power plants, Shin Hanul 1 and Hanbit number 4. As for coal, the plant maintenance days has increased year-on-year, which decreased overall utilization to 54.8%.

Jang Nam-yong (Head of Financial and IR Team)

On an annual basis, we believe that the nuclear power plant utilization is expected to go up year on year. As new nuclear power plant is expected to be completed, the overall gen mix for nuclear power plant will go up. However, coal and LNG mix is expected to slightly go down or remain at the similar level as the previous year. On the overall utilization rate by generation on an annual basis, we believe the nuclear power plant will remain at mid 80% level. For coal, we expect to remain at mid 50% level. Next is on the RPS and ETS cost. In Q1, RPS cost on a consolidated basis is KRW 508.9 billion, and on a standalone basis, it's KRW 646.7 billion.

ETS costs reached KRW 26.2 billion on a consolidated basis and KRW 77.7 billion on a standalone basis. This concludes brief update on overall business environment.

Speaker 5

이어서 질의응답 시간을 갖도록 하겠습니다. 지금 이 자리에는 회사 주요 부문 담당 IR 실무 요원들이 함께 참석하고 계시니 궁금하신 사항은 자유롭게 질문하시기 바랍니다. 구형은 순차 통역으로 진행되므로 질문과 답변을 간단하고 분명히 해주시면 감사하겠습니다. 그럼 이제 질문을 시작해 주시기 바랍니다.

Jang Nam-yong (Head of Financial and IR Team)

We will now move on to the Q&A session. I am joined with our IR team, community members in charge of major businesses in KEPCO. We are prepared to accommodate any of your questions. Since the Q&A session will be carried out in Korean, both Korean and English, please make your questions and answers brief and clear.

Operator (participant)

그럼 지금부터 질의응답을 시작하겠습니다. 질문이 있으신 분들은 전화기 버튼의 별표와 일 번을 눌러주십시오. 신청하신 질문을 취소하시려면 별표와 이 번을 눌러주시면 됩니다. Now Q&A session will begin. Please press star one if you have any questions. For cancellation, please press star two on your phone. 처음으로 질문해 주실 분은 미래에셋증권의 유재현 님입니다. 질문해 주십시오. The first question will be given by Mr. Yoo Jae-hyun of Mirae Asset Securities. Please go ahead, sir.

Yoo Jae-hyun (Analyst)

네, 안녕하세요. Yoo Jae-hyun입니다. 저희 그, 구입 전력비 단가 조금 구체적으로 말씀해 주실 수 있는 부분이 있으면 숫자를 좀 말씀해 주면 좋겠고요, 전망은 좀 최근에 좀 떨어지고 있는 것 같은데 저희 내부 전망은 어떤지 그 첫 번째 질문이고요. 이번에 두 번째는 자구책 뭐 발표하셨는데 실질적으로 저희 손익에 미치는 영향이 있다면 어느 정도인지, 가이던스 주실 부분 있으면 말씀해 주십시오.

Jang Nam-yong (Head of Financial and IR Team)

This is Yoo Jae-hyun. Good afternoon. Could you tell us a bit about the overall power purchase price, unit cost purchase price for power? If you can share the overall outlook, that would be great. We can see that the overall unit cost is going slightly declining, but we would like to understand the internal outlook on the unit power purchase cost. Second is on your turnaround plan. You have recently announced the plan to turn around the business. Could you give us some guideline on how this will impact your overall profit? First, to answer your first question on the unit fuel cost. In Q1, we expect the coal price to be at late KRW 200,000 level per ton.

For LNG, it will be around at KRW 1.9 million per ton. For the fuel cost outlook, we can see that the overall coal price and oil price is on a declining trajectory since early on this year. But to have an outlook throughout the whole year, we regret to say that we are unable to provide the outlook for the unit fuel cost at this point in time. On an SMP price, the average SMP price for last year was KRW 185.5 on average. For Q1, it's KRW 237.0.

On your second question for our turnaround plan and its impact on our PNL is something that we are unable to calculate at this stage and quantify at the moment. We'll move on to the next question. Currently, there is no participant with questions. Please press star one to give your questions. The following question is by Mr. Kim Dong Ha of Kim Asset Management. Please go ahead, sir. I would like to ask about the impact of SMP ceiling for Q1. I'm aware that the impact has been minimal, but would still like to understand whether it had an impact in Q1. First of all, on the contingent settlement for Q1. In January, the SMP average price was KRW 248.0.

The ceiling for the land electricity power price was KRW 160.0 for January. For February, the price was KRW 254.0 for SMP price. For the actual ceiling for the electricity used on land was KRW 161.5. In May, although we did qualify to apply the ceiling, we were unable to execute on it. It did help us in alleviating our cost burden. In order to understand its impact.

Speaker 4

Mm-hmm.

Jang Nam-yong (Head of Financial and IR Team)

We probably need to wait until the second half of the year to understand the overall impact. We'll move on to the next question.

Operator (participant)

Currently, there is no participant with questions. Please press star one to give your questions. Once again, if you have a question, please press star and one. Currently, there is no participant with questions. Please press star one to give your question. The next question will be given by Mr. Yoo Jae-hyun of Mirae Asset Securities. Please go ahead, sir.

Jang Nam-yong (Head of Financial and IR Team)

It seems that the overall plan to increase electricity tariff is now available and developed. Based on that, if you can mention and give us some guideline on it, could you mention about the overall CapEx direction and also the size of the financing that is required? It would be great if the management team can mention about the overall direction or and whether or not there will be some changes. In year 2023 Q1, we have executed KRW 3.6 trillion in CapEx, and this is 85% of execution rate compared to overall plan. In 2023, on an annual basis, we plan to execute KRW 6.9 trillion.

In 2024, the CapEx level will remain at similar level as 2023 through our direct investment plan. This will be also based on the overall approval and change of plan, and which may be subject to some changes in the future.

Operator (participant)

On the overall direction for financing for KEPCO business, as you know that there are increasing concern over massive issuing of KEPCO bond. This year we're trying to reduce the overall issuance of KEPCO bond. As an alternative plan, we are considering borrowing from financial institutions as well as issuing CPs to diversify our funding source.

Jang Nam-yong (Head of Financial and IR Team)

We'll move on to the next question.

Operator (participant)

Currently, there is no participant waiting with the questions. Please press star and one to give your question. Once again, if you have a question, please press star and one.

Jang Nam-yong (Head of Financial and IR Team)

If there are no further questions, we would now like to conclude our conference call. I would like to thank everyone for taking the time out of their busy schedule to attend today's call. With this, we now conclude our Q1 earnings conference call. Thank you.

Operator (participant)

This concludes the fiscal year 23 first quarter's earnings results by KEPCO. Thank you for the participation.