Korea Electric Power - Earnings Call - Q1 2023

Transcript

Speaker 0

Good morning and good evening. First of all, thank you all for joining this conference call. And now we will begin the conference of the fiscal year twenty twenty three first quarter's earnings results by Kepco. This conference will start with a presentation followed by a divisional Q and A session. Now we shall commence the presentation on the fiscal year twenty twenty three first quarter earnings results by Kepco.

Speaker 1

Good afternoon. This is Nam Young Zhang, Head of Financial and IR team. On behalf of Kepco, I would like to thank you all for participating in today's conference call to announce earnings results for the 2023. Today's call will be proceeded in both Korean and English. We will begin with a brief presentation followed by a Q and 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.

Chosu Cheon, IR Manager IR General Manager will begin with an overview of earnings results for the 2023 in Korean and English.

Speaker 2

Now we will provide the overview in English starting with operating income. In 2023, Kekko recorded an operating loss of 6,200,000,000,000.0. To take a closer look, operating revenues increased by 31% to KRW 21,600,000,000,000.0 year on year basis. Power sales revenue rose by 32% to trillion, while revenues from overseas and other businesses increased by 23% to KRW1.3 trillion. Moving on the main operating cost.

Cost of goods sold and SG and A expenses increased by 15% to KRW 27,800,000,000,000.0. Fuel cost was hiked by 19% to KRW 9,100,000,000,000.0 due to continuous impact from the rapid increase in LNG and coal price. Next, purchase power cost also surged by 15% to KRW 12,200,000,000,000.0 due to increase the fuel price. Depreciation cost increased by 4% to trillion mainly due to newly constructed facilities and power plant. Now let me explain Keckos non operating segment.

The net financial loss was increased by KRW0.4 trillion to KRW1 trillion, which is mainly due to raise the interest rate and debt amount. As a result of the foregoing, we recorded a consolidated net loss of trillion. This is end of overview of Kekko's earnings results for the 2023.

Speaker 1

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 2023, fuel unit cost has recorded KRW 270,000 per tonne for coal and KRW 1,900,000.0 per tonne for LNG, excluding unloading cost, driven by the surge in international fuel price increase year on year. On generation mix by Gencos, for Q1, the nuclear power plant utilization has dropped to 8.2% year on year, but the overall generation mix has increased driven by completion of maintenance of new power plants, nuclear power plants, Jinhua No.

1 and Hanoi No. Four. As for coal, the plant maintenance days has increased year on year, which decreased overall utilization to 54.8%. On an annual basis, we believe that the nuclear power plant utilization is expected to go up year on year. And as new nuclear power plant is expected to be completed, the overall general 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-eighty percent level. And for core, we expect to remain at mid-fifty percent level. Next is on the RPS and ETS cost. In Q1, RPS cost on a consolidated basis is 508,900,000,000.0.

And on a stand alone basis, it's KRW 646,700,000,000.0. ETS costs reached to KRW 26,200,000,000.0 on a consolidated basis and KRW 77,700,000,000.0 on a stand alone basis. This concludes brief update on overall business environment. We will now move on to the Q and A session. I am joined with our IR team or community members in charge of major businesses in Kepco.

We are prepared to accommodate any of your questions. Since the Q and A session will be carried out in Korean both Korean and English, Please make your questions and answers brief and clear.

Speaker 3

The first question will be given by Mr. Yu jae hyun of Unida Asset Securities. Please go ahead, sir.

Speaker 1

This is Yu Joon. Could you tell us a bit about the overall power purchase price, unit cost purchase price for power? And if you can share the overall outlook, that will 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 a plan to turnaround 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 KRW200000 level per tonne. And for LNG, it will be around at KRW1.9 million per tonne. For the fuel cost outlook, we can see that the overall coal price and oil price is on a declining trajectory since it's 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 S and P price, the average S and P price for last year was KRW 185.5 on average. And for Q1, it's KRW 237.01. Also on your second question for our turnaround plan and its impact on our P and L is something that we are unable to calculate at this stage and quantify at the moment. We'll move on to the next question.

Speaker 3

Currently, is no participant with questions. Please press star one to give your questions. The following question is by Mr. Kim Dong of QM Asset Management. Please go ahead, sir.

Speaker 1

I would like to ask about the impact of S and P Sealing for Q1. I'm aware that the impact has been minimal, but would still like to understand whether it has an impact in Q1. First of all, on the contingent settlement for Q1, the in January, the S and P average price was 208 KRW 48.01, but the ceiling for the land electricity power price was JPY 160.01 for January. For February, the price was JPY 254 for S and P price. And for the actual ceiling for the electricity use on land was KRW 161.51.

In May, although we did qualify to apply the ceiling, we were unable to execute on it, but it did help us in alleviating our cost burden. But in order to understand its impact, we'll probably need to wait until the second half of the year to understand the overall impact.

Speaker 3

We'll move on to the next question. Currently, there is no participant with questions. Currently, there is no participant with questions. Please press star one to give your question. The next question will be given by Mr.

Ryu Jahan of Mediaset Securities. Please go ahead, sir.

Speaker 1

It seems that the overall plan to increase electricity tariff is now available and developed. And based on that, if you can mention and give us some guide line on it, could you mention about the overall CapEx direction and also the size of the financing that is required? So it would be great if the management team can mention about the overall direction and whether or not there will be some changes. So in year 2023, Q1, we have executed 3,600,000,000,000.0 in CapEx, and this is 85% of execution rate compared to overall plan. In 2023, on an annual basis, we plan to execute KRW 6,900,000,000,000.0.

And in 2024, the CapEx level will remain at similar level as 2023 through our direct investment plan. But this will be also based on the overall approval and change of plan and which may be subject to some changes in the future. On the overall direction for financing for Kepco business, as you know that there are increasing concern over massive issuing of Kepco bond. So this year, we are trying to reduce the overall issuance of Kepco bond. And as an alternative plan, we are considering borrowing from financial institutions as well as issuing CPs to diversify our funding source.

We'll move on to the next question.

Speaker 3

Currently, there is no participant waiting with the questions.

Speaker 1

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

Speaker 3

This concludes the fiscal year twenty twenty three first quarter earnings results by Kepco. Thank you for the participation.

Speaker 0

Hi.