State-owned enterprises (SOEs) in the energy sector will scale down their natural resources development projects abroad so as to respond to the government’s call for improved financial soundness.
According to industry sources, the Korea Electric Power Corporation (KEPCO) is mulling over selling its 9.64 percent or 63 billion won (US$58.5 million) worth of shares in Denise, a Canadian company. It is also considering disposing of its shares in two more uranium development projects.
Likewise, the Korea Gas Corporation (KOGAS) is planning to reduce its shares in the GLNG and other resources development projects in Australia and Canada. The Korea National Oil Corporation (KNOC) is looking to sell some of its idle storage sites abroad and step out of some development projects, too.
Such decisions are based on the pressure imposed by the government. At first, the companies were quite passive about the disposal of the overseas assets. However, the government has pressed them to reduce their debts and they are running out of option now.
“The public-sector organizations will have to sell even their key assets amid the adverse financial conditions as of late,” said Prime Minister Hyun Oh-seok in December last year. Minister of Trade, Industry and Energy Yoon Sang-jik met with the heads of a series of energy-producing SOEs and given a warning to some of them, too.
In the meantime, concerns are rising over the disposal of their overseas assets as well. When the government is in a hurry to sell important assets within a fixed deadline, its bargaining power could be weakened to lead to haphazard contracts. It has already sold major overseas assets of public-sector enterprises at giveaway prices during the IMF bailout back in 1997. If a large volume of assets are put on the market at the same time, the values are likely to fall.
Experts are also advising that more important assets and projects should be distinguished from the rest, examples of the former including the KNOC’s shares in Canadian company Harvest and the AKKAS Gas Field Development Project of KOGAS. These have contributed greatly to Korea’s national resources security and accumulation of resources development expertise. If these are to be for sale, what matters more is to get an adequate price than to sell them fast, even though it takes longer.