Korea Electric Power - Earnings Call - Q3 2025
November 13, 2025
Transcript
Operator (participant)
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 2025 Third Quarter Earnings Result by KEPCO. This conference will start with a presentation, followed by a divisional Q&A session. If you have a question, please press asterisk one on your phone during the Q&A. Now, we shall commence the presentation on the Fiscal Year 2025 Third Quarter Earnings Result by KEPCO.
Jeong-taek Lee (Head of the Finance Team)
[Foreign language]
Good afternoon. I am Jeong-taek Lee, Head of the Finance Team at Korea Electric Power Corporation. We sincerely thank you all for joining us for our KEPCO's Q3 2025 earnings conference call despite your busy schedule.
[Foreign language]
Today's conference call will be conducted in both Korean and English, and after a brief earnings presentation, we will proceed to a Q&A session.
[Foreign language]
The figures presented today are preliminary, based on IFRS consolidated standard, and all comparisons are made year over year unless otherwise stated. Please also note that any management plans, targets, and estimated financial figures mentioned during the call reflect our current outlook and are subject to uncertainty and investment risk.
[Foreign language]
We now present the Q3 2025 profit and loss details in Korean, and then provide the same content in English.
Yang Si-young (Head of the IR Team)
[Foreign language]
Good afternoon. This is Yang Si-young, Head of the IR Team. Let us begin by reviewing the operating profit. The consolidated operating profit for Q3 of 2025 is KRW 11 trillion 541.4 billion.
[Foreign language]
If you look into the details, sales revenue was KRW 73 trillion 746.5 billion, up by 5.5%. Of this, electricity sales revenue posted KRW 70 trillion 631.6 billion, accounting for 5.9%, and other revenue, including overseas business income recorded KRW 3 trillion 114.9 billion, down by 0.9%.
[Foreign language]
Cost of sales and SG&A expenses total KRW 62 trillion 205.1 billion, down by 2.7%. Among these, fuel cost is KRW 14 trillion 826 billion, down by 16%, and power purchase cost is KRW 26 trillion 606.3 billion, down by 0.8%, affected by fuel price changes.
[Foreign language]
Depreciation expenses came to KRW 834.4 billion, increasing by 3.5%.
[Foreign language]
Among the non-operating items, interest expenses down YOY by KRW 143.5 billion to post KRW 3 trillion 279.4 billion.
[Foreign language]
Based on the factors mentioned, Q3 2025 consolidated operating profit was KRW 11 trillion 541.4 billion, and net profit for the period was KRW 7 trillion 328.1 billion.
Eom Tae-seop (Senior IR Manager of the IR Team)
[Foreign language]
Good afternoon. This is Eom Tae-seop, Senior IR Manager of the IR Team. I will now go over the key points of interest. First, on electricity sales, performance, and outlook. Electricity sales volume in Q3 reached 419.9 TWh, up 0.4% YOY due to mostly the summer heat wave, among other factors. For the full year of 2025, we project sales to go down slightly due to the impact of lower economic growth rate and also the impact of the downturn in the manufacturing sector.
[Foreign language]
Next, let me cover the fuel price by type and the SMP trend. In Q3 of 2025, the bituminous coal price based on Australian coal was around $105.0 per ton, while LNG based on JKM was approximately KRW 1.01 million per ton. Additionally, the SMP was around 118.21 per kWh.
[Foreign language]
Looking at the generation mix of KEPCO's GenCos, our generation mix for nuclear went up due to the entry into operation of new nuclear power plants. As for coal, generation mix is maintained with no major changes in generation capacity and utilization rate, while LNG decreased slightly from decreased generation capacity and increased base load generation. For the full year of 2025, we expect that the nuclear generation will increase and coal is expected to decrease, while the LNG mix is expected to be maintained. Expected utilization rate by generation source for 2025 for nuclear is at the mid-to-high 80% range, coal mid-40% range, and LNG mid-to-high 20% range.
[Foreign language]
Now, let me touch upon the RPS-related cost. In Q3 of 2025, the RPS costs were KRW 2 trillion 876.1 billion on a consolidated basis and KRW 3 trillion 469.4 billion on a separate basis.
[Foreign language]
Finally, to go over the funding status, as of Q3 of 2025, borrowings did add KRW 130.5 trillion on a consolidated basis and KRW 86.1 trillion on a separate basis.
[Foreign language]
We now move on to the Q&A session. Since we're providing consecutive interpretation, we would appreciate it if you can keep your questions and answers brief. We now begin the Q&A session.
Operator (participant)
[Foreign language]
Now, Q&A session will begin. Please press asterisk one if you have any questions. For cancellation, please press asterisk two on your phone.
[Foreign language]
The first question will be given by Hwang Sunghyun from Eugene Investment & Securities. Please go ahead.
Hwang Sunghyun (Analyst)
[Foreign language]
[Foreign language]
Yes. My name is Hwang Sunghyun from Eugene Securities. Thank you very much for giving me this opportunity to ask questions, and congratulations on your good results. I have a brief lead for questions. The first has to do with your short-term corporate funds. When rolling over these securities, is there any impact because of the volatility in the interest rate? And my second question has to do with the localized marginal pricing. So can you explain further about whether the wholesale and the retail pricing will be introduced simultaneously and the point in time in which this new system will be introduced? My third question has to do with the direct purchase transaction system. So it is expected that this will go up to 50% by 2030. And what would be your responses with regards to the GenCo settlement?
With regards to my fourth question, this has to do with the Energy Highway. It is expected that greater room will be given to the private sector players to increase their investment, and this will be applied to issues of settlement as well as others. Can you provide more details about this matter?
[Foreign language]
With regards to your first question about any impact or issues regarding the rollover of short-term corporate debt, with regards to the volatility and interest rates related to the sovereign bonds or the treasury bonds, we have read news reports that there is very close monitoring undertaken by the government part, and we are also closely monitoring the situation as well. As of yet, no special signs are being detected, but we will be working closely with the relevant government authorities as well as looking closely into the market developments and ensure that proactive responses are made when it is possible.
Eom Tae-seop (Senior IR Manager of the IR Team)
[Foreign language]
With regards to the second question about the localized marginal pricing, so by May of 2024, it has been decided that within the year 2025, the wholesale system will be introduced, and that by 2026, the retail system will be introduced. After that announcement, there has been no further announcement that has been made, and we will be completing the research that has been commissioned to outside organizations regarding this issue by the month of February of next year, and more detailed plans will be devised by next year.
[Foreign language]
Thirdly, with regards to your question on the emission trading scheme, on the 10th of November, the fourth plan period ETS has been announced and finalized, and it is expected that for the GenCos, they will be subjected to 10%-50% of the paid allocation. With regards to this, we will make sure that these charges are fully reflected in our environmental charges, and we will continue to maintain close consultations with the government authorities.
[Foreign language]
With regards to your last question about the possible private sector investment into the Energy Highway, what has been finalized as of present is that for the West Coast Energy Highway, private sector investment will be allowed. However, that is something that has already been included and reflected in the 10th Basic Plan for Electricity Supply and Demand, and there has been no further official announcements made about any additional private sector investments since then. But once discussions become initiated about the 12th Basic Plan on Electricity Supply and Demand, it may be reviewed. However, as of yet, no official discussion is underway.
[Foreign language]
Now, we see the next question.
Operator (participant)
[Foreign language]
The following question is by Moon Kyeongwon from Meritz Securities. Please go ahead.
Moon Kyeongwon (Equity Analyst)
[Foreign language]
Yes, I'm Moon Kyeongwon from Meritz Securities. Thank you very much for giving me this opportunity to ask my questions. So I have two questions. My first question is, I would presume that you are having discussions with the relevant government authorities about the additional increases in the electricity tariffs. So there may, I do presume that there are many factors and many grounds for raising the tariffs. What, in your view, would be the strongest basis for further increases in the tariffs? Would it be your debt levels, or would it be the need to invest further in grid expansion? So can you answer that question? And my second question has to do with the adjusted coefficient.
So has there ever been a case where in the second quarter or the third quarter you have actually raised the adjusted coefficient, and do you have any plans of changing the adjusted coefficient till the end of this year?
[Foreign language]
With regards to the electricity tariffs, with expansion of the use of renewable energy and also to supply stable electricity for the advanced industries in this country, there is a need to make further investments into our power grid. And so yes, it is necessary to raise the tariffs in order to raise the funds to finance these investments. In addition, in order to achieve the greenhouse gas reduction targets that are set by the government, this will lead to additional costs, and this is all prospective to further reinforce the need to raise our tariffs. So in principle, there is a need to adjust the tariffs so that it reasonably or adequately reflects the cost involved.
[Foreign language]
Let me take your second question. With regards to the adjusted coefficient, there has been already one change to the adjusted coefficient made in the third quarter, and whether we will engage in an additional change to the adjusted coefficient is something that we will need to determine through consultations with the relevant authorities.
Eom Tae-seop (Senior IR Manager of the IR Team)
[Foreign language]
We now receive the next question.
Operator (participant)
[Foreign language]
Currently, there are no participant questions. Please press asterisk one to give your question.
[Foreign language]
The following question is by Heo Min-ho from Daishin Securities. Please go ahead.
Heo Min-ho (Analyst)
[Foreign language]
This is Heo Min-ho from Daishin Securities. So if you look at the news in the year 2026, a lot of the nuclear power plants are expected to go through scheduled maintenance, and that it's possible to make up for the gap through renewable energy. So can you give us an outlook for the utilization rate for the nuclear power generation for 2026? And also my second question has to do with the HVDC. When do you expect that the preliminary or first round of construction, first phase construction completion and the operation of this HVDC project to be? And if that happens, do you expect an increase in the utilization rate of the coal-fired power plants and the nuclear power generation? And also another question has to do with your entry into the United States nuclear power market.
Is there any updates that you can provide to the analysts and investors?
[Foreign language]
So let me answer your question about the scheduled maintenance for nuclear power for 2026. Let us verify the actual schedule and get back to you at a later date.
Eom Tae-seop (Senior IR Manager of the IR Team)
[Foreign language]
Let me take your second question about the transmission capacity constraints that are occurring in the East Coast area. At present, construction is underway for the HVDC project, and the first phase of the project is expected to be completed by October of 2026, and the second phase of the construction is expected to be completed by December of 2027. Once the HVDC project is completed, then it will be providing an additional 4 gigawatts of transmission capacity, which we do believe is sufficient to address the 7.8 gigawatts of constraint that we are currently experiencing.
[Foreign language]
Let me answer your third question. As you are well aware, the Trump administration in the United States has announced a policy to increase nuclear power generation within the United States, and they are looking forward to cooperating with KEPCO and Team Korea in this area. We are looking into various options in how we can participate in the U.S. nuclear market, and we will be looking at the various risk factors that are involved and continue the review of this matter.
[Foreign language]
We will receive the next question.
Operator (participant)
[Foreign language]
The following question is by Yoo Jae-sun from Hana Securities. Please go ahead.
Eom Tae-seop (Senior IR Manager of the IR Team)
[Foreign language]
Yoo Jae-sun (Analyst)
[Foreign language]
Eom Tae-seop (Senior IR Manager of the IR Team)
[Foreign language]
Yoo Jae-sun (Analyst)
[Foreign language]
Yoo Jae-sun from Hana Securities, I have three questions. So I have a very good disclosure about the physical delay in the HVDC project. What about the substation issue? Has that been resolved? That's my first question. And my second question has to do with the exchange rate volatility. So how much of exchange rate hedging is incorporated into your fuel cost? That is my second question. And you said that the utilization rate for the nuclear power generation is in the mid-80% range. When was that established? When we look at the website of KHNP, the plan overall is set at 79% or so. So I would like to know when these plans were established. And so do these numbers perhaps include a possibility that those reactor units that have been suspended operation, like Kori Unit 2, that they will be back into operation perhaps?
Is that possibility included in those numbers that you have established?
Eom Tae-seop (Senior IR Manager of the IR Team)
[Foreign language]
With regards to your first question about the HVDC project in the East Coast, with regards to the licensing and permit issue of the substation that you have mentioned, as of now yet the licensing process has not been completed. It is based on the assumption that all the licensing and permit will come through that the first phase of the construction will be completed on October 2026.
[Foreign language]
Let me touch upon the exchange rate issue that you have raised in your second question. With regards to the LNG that we procure from KOGAS, on a monthly basis we settle on an average settle the price based on the average exchange rate.
[Foreign language]
As we have mentioned during our presentation for the four-year nuclear power utilization rate, we expect that it will be around mid- to high-80% range.
[Foreign language]
We'll receive the next question.
Operator (participant)
[Foreign language]
The following question is by Yu SeungWon from NH Investment & Securities. Please go ahead.
Yu SeungWon (Equity Research Associate)
[Foreign language]
Eom Tae-seop (Senior IR Manager of the IR Team)
[Foreign language]
Yu SeungWon (Equity Research Associate)
[Foreign language]
Eom Tae-seop (Senior IR Manager of the IR Team)
[Foreign language]
[Foreign language]
Okay. So I'm Yu SeungWon from NH Securities. Let me answer your question. So based on the agreement between Korea and United States, we now have to go ahead with the enrichment and reprocessing of uranium. So would there be any role to be played by KEPCO or KHNP in this, or if not, who will be involved in this task? And my second question has to do with the procuring of the uranium. Which countries and during which period and what share would be procured? That is my second question.
Jeong-taek Lee (Head of the Finance Team)
[Foreign language]
First, let me take your question about the nuclear agreement between Korea and United States. Up until now, it has not been allowed for Korea to engage in uranium enrichment within Korea. However, we are looking forward to this situation being resolved based on the recent agreement. However, going forward, the exact details of how this will be brought about is something that has not yet been finally determined.
Eom Tae-seop (Senior IR Manager of the IR Team)
[Foreign language]
Next question about the procurement of the uranium. So in the case of KHNP, uranium is being procured through various long-term agreements spanning from anywhere from five years to 10 years. And also these agreements include the option to adjust the volume that is procured depending on uranium price trends. They can adjust the timing of the purchase, and this is how they are actually managing or controlling for the fuel cost. However, the percentage taken up by uranium in the overall fuel cost of KHNP is not that high, and they do have sufficient inventory built up.
Yu SeungWon (Equity Research Associate)
[Foreign language]
Eom Tae-seop (Senior IR Manager of the IR Team)
[Foreign language]
Yu SeungWon (Equity Research Associate)
[Foreign language]
So can I ask a further question? Yes, you may go ahead. The question is, if we are allowed to have a role in the reprocessing or enrichment of uranium, do you have any candidate companies that you have in mind for this role?
Eom Tae-seop (Senior IR Manager of the IR Team)
[Foreign Language]
As of now, the uranium is being imported by KHNP, and the fuel rod is the responsibility of KEPCO NF. Going forward, we're as of yet not in the know of the exact details.
[Foreign language]
We'll receive the next question.
Operator (participant)
[Foreign language]
The following question is by Heo Min-ho from Daishin Securities. Please go ahead.
Heo Min-ho (Analyst)
[Foreign language]
So this is Heo Min-ho from Daishin Securities. I have two additional questions. So first, with regards to East Coast HVDC project, you said that the provisional construction phase of the construction is October of 2026. So when the first phase of this completed, would it be possible to link up or connect to the transmission system and resolve the transmission through the 4G network that is provided? Or because HVDC requires commissioning, would it take several months or more from that point on until commercial operation is possible? Oh, and also I have another question. You mentioned during one of your answers that you have once adjusted the adjusted coefficient in the third quarter. So did it go up or down? And what was the magnitude of the adjustment? That is my second question.
Yang Si-young (Head of the IR Team)
[Foreign language]
Let me take your question about the HVDC project. The first phase of the project and the second phase of the project will each provide four gigawatts in additional capacity for transmission. Once the first phase of the project is completed, then from Shin Hanul to Shin Gapyeong, our understanding is that immediately once the project is completed, four gigawatts of additional capacity will be provided into the transmission system.
[Foreign language]
So let me take your question about the change in the adjusted coefficient, the magnitude of the change. In the case of the coal, there were no changes, and for the nuclear power generation, there was a slight decline.
Eom Tae-seop (Senior IR Manager of the IR Team)
[Foreign language]
We'll receive the next question.
Operator (participant)
[Foreign language]
The following question is by Lee Seung-woo from JP Morgan. Please go ahead.
[Foreign language]
So this is Lee Seung-woo from JP Morgan. I have two questions. You said that there was a monthly settlement with KOGAS based on the average exchange rate. Does that mean that you have an open position or that you are hedging for an exchange rate to some degree? That's my first question. And my second question is that you said that the utilization rate of the coal-fired had gone up. Do you think that this generation mix will continue, or is there any possibility of the coal-fired utilization rate coming down going forward?
Eom Tae-seop (Senior IR Manager of the IR Team)
[Foreign language]
Let me take your question about the foreign exchange rate. In the case of KEPCO, for the most part, yes, we are exposed. We have an open position to the foreign exchange rate.
[Foreign language]
Let me take your second question about the coal-fired generation utilization rate. So this is related not only to the temperature conditions but also the policies of the government. So we will continue to ensure that a reasonable generation mix is maintained through consultation with the relevant government authorities.
[Foreign language]
We'll receive the next question.
Operator (participant)
[Foreign language]
The following question is by Park Yu Shin from HSBC. Please go ahead.
Park Yu Shin (Equity Research Analyst)
[Foreign language]
This is Park Yu Shin from HSBC. I have two questions. With regards to the nuclear power, aside from the United States and Europe, you also have bidding projects in Asia as well as the Middle East. Can you provide an update on those projects? My second question has to do with the shareholder return. Can you communicate to the extent that is possible about the future directions for the shareholder return policy of KEPCO?
Yang Si-young (Head of the IR Team)
[Foreign language]
Let me take your first question about the overseas nuclear power projects. For the Asian market, we are carrying out activities to win nuclear power plant orders in Vietnam. And in the case of the Middle East, we have participated in the bidding process of a nuclear power plant project in Saudi Arabia. However, the bidding is in process, so we're not in a position to disclose any further details. We ask for your understanding.
[Foreign language]
Let me take your second question about the shareholder return. So the most important aspect of shareholder return would be, of course, the dividend policy. And the dividend policy would take into consideration the net profit of that year. And also it is determined through the dividend quantitative body in MOEF. So we're not in a position at present to disclose any size of the dividends.
Eom Tae-seop (Senior IR Manager of the IR Team)
[Foreign language]
We'll receive the next question.
Operator (participant)
[Foreign language]
Currently, there are no participants with questions. Please press asterisk one to give your question.
[Foreign language]
Once again, if you have a question, please press asterisk and 1.
[Foreign language]
That's the.