Korea Electric Power Corp (KEP) 2023 Q1 法說會逐字稿

[Interpreted] 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 2023 First Quarter earnings results by KEPCO. (Operator Instructions)

Now we shall commence the presentation on the fiscal year 2023 First Quarter earnings results by KEPCO.

[Interpreted] Good afternoon. This is (inaudible), 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 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. (inaudible), IR Manager -- IR General Manager, will begin with an overview of earnings results for the first quarter of 2023 in Korean and English.

[Interpreted] Now we will provide the overview in English starting with operating income. In first 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 for overseas and other businesses increased by 23% to KRW 1.3 trillion.

Moving on to main operating costs. 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 direct increase in LNG and coal price. Next, purchased 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 nonoperating segment. The net financial loss was increased by KRW 0.4 trillion to KRW1 trillion, which is mainly due to raised in 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 2023.

[Interpreted] Good afternoon. Let me give you a brief update on the business factors. First of all, on full units by fuel source. Q1 of 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, 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, Shin-Hanul #1 and Hanbit #4. As for coal, the planned maintenance stage 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 a 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. And 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 stand-alone basis, it's KRW 646.7 billion. ETS costs reached to KRW 26.2 billion on a consolidated basis and KRW 77.7 billion on a stand-alone basis. This concludes a brief update on overall business environment.

[Interpreted] We will now move on to the Q&A session. I am joined with our IR team of committee team 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 a -- both Korean and English. Please make your questions and answers brief and clear.

[Interpreted] (Operator Instructions) The first question will be given by Mr. Ryu Jae-Hyun, Mirae Asset Securities.

[Interpreted] 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 would be great. We can see that the overall unit cost is slightly declining, but we would like to understand the internal outlook on the unit purchase cost. Second is on your turnaround plan. You have recently announced a plan to turnaround in the business. Could you give us some guideline on how this will impact your overall profit?

[Interpreted] First, to answer your first question on the unit fuel cost. In Q1, we expect the coal price to be at later KRW 200,000 level per ton. And for LNG, it will be around 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 it's early on this year. But to have an outlook throughout the whole year, we were great to say that we are unable to provide the outlook for the unit fuel cost at this point in time.

[Interpreted] On an SMP price or the average SMP price for last year was KRW 185.5 on average. And for Q1, it's KRW 237.01.

[Interpreted] Also on your second question for our turnaround plan and its impact on our P&L is something that we are unable to calculate at this stage and quantify at the moment.

[Interpreted] We'll move on to the next question.

[Interpreted] Currently, there is no participant with questions. (Operator Instructions) The following question is by Mr. Kim (inaudible) of Kim Asset Management.

[Interpreted] I would like to ask about the impact of SMP ceiling for Q1. I'm aware that the impact has been minimal, but I would still like to understand whether it had an impact in Q1?

[Interpreted] First of all, on the contingent settlement for Q1, in January, the SMP average price was KRW 248.01, but the -- a ceiling for the land electricity power price was KRW 160.01 for January. For February, the price was KRW 254.0 for SMP price. And for the actual ceiling for the electricity use on land was KRW 161.5. In May, although we did qualify to apply the ceilings, 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 will probably need to wait until the second half of the year to understand the overall impact.

[Interpreted] We'll move on to the next question.

[Interpreted] Currently, there is no participant with questions. (Operator Instructions) Currently, there is no participant with questions. (Operator Instructions) The next question will be given by Mr. Ryu Jae-Hyun of Mirae Asset Securities.

[Interpreted] 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 guideline on it, could you mention about the overall CapEx direction and also the size of the financing that is required? So it will be great if the management team can mention about the overall direction and whether or not there will be some changes.

[Interpreted] So 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. And in 2024, the CapEx level will remain at a similar level as 2023, through our direct investment plan. But this will be also based on the overall approval and change of plan 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 our for 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.

[Interpreted] We'll move on to the next question.

[Interpreted] Currently, there is no participant waiting with the questions. (Operator Instructions)

[Interpreted] 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. And with this, we now conclude our Q1 earnings conference call. Thank you.

[Interpreted] This concludes the fiscal year 2023 1st quarter's earnings results by KEPCO. Thank you for the participation.