Published : 2013-02-22 09:30
Updated : 2013-02-22 09:30
State-run power company Korea Electric Power Corp. (KEPCO) is facing the worst debt problems among public organizations due to government regulations, a report said Friday.
The report by the Korea Institute of Public Finance classify public organizations in four categories in terms of financial stability -- very dangerous, dangerous, cautious and safe -- and said that KEPCO's financial status is "very dangerous" given its current debt problems.
KEPCO received the worst grading as its debt came to 50.3 trillion won (US$46.2 billion) as of 2011, which is the second largest among public agencies.
Its interest coverage ratio has also stayed in negative terrain since 2008, which means that it cannot even generate enough operating profit to pay back interest on borrowings.
The report attributed KEPCO's dire debt situations to the government's heavy regulations on raising electricity rates.
The state-run power company has to receive government approval before raising electricity prices. It has been reportedly under pressure not to increase rates despite rising production costs, as the government fears that a hike could end up driving the overall consumer prices.
"KEPCO's debt problems are because of regulations on electricity rates," the report said. "The price that users have to pay is being transferred to the public company as (the government) lowers electricity rates in order to keep inflation under control."
The report also gave the "very dangerous" gradings to Korea Coal Corp. and Korea Railroad.
Meanwhile, the land and housing developer LH Corp. holds 130.5 trillion won in debt, the largest among public agencies. But the report gave the company only a "dangerous" grading, saying that its interest-paying capacity is relatively stronger than other companies. (Yonhap News)