About 10 individual shareholders of Korea Electric Power Corp. (KEPCO) staged a rally in front of the company’s branch in Gangnam-gu, Seoul, on May 20, letting off steam about the state-run power distributor's operating losses caused by the government’s nuclear phase-out policy and the resultant share price downturn. They said they would file a civil and criminal suit against KEPCO’s management. It is the first time in seven years that the company’s minority shareholders claimed that the management committed a breach of trust.
In fact, KEPCO failed to distribute dividends to its shareholders last year as the firm swung to a loss in six years. KEPCO’s share price peaked at 63,600 won (US$53.22) in 2016, but declined to 43,150 won (US$36.11) on May 10, 2017, when President Moon Jae-in took office and then to 25,400 won (US$21.26) on May 20, 2019. Despite KEPCO’s large operating loss, the government and the company’s management say they have no intention of raising electricity rates by 2022. KEPCO is highly likely to record an operating loss this year for two years in a row.
“KEPCO posted a profit of 12 trillion won (US$10.04 billion) a year during the Park Geun-hye government but recorded a loss of 1 trillion won (US$836.82 million) last year. The biggest reason for this is the present government’s plan to phase out of nuclear power. But the government is resorting to all kinds of excuses and trying to weasel out of its responsibilities,” said Jang Byeong-cheon, head of a KEPCO minority shareholders’ group, during a press conference on May 20. He added, “KEPCO still say that it would spend 500 billion won (US$418.41 million) on establishing the KEPCO Institute of Technology in Naju, South Jeolla Province. The company also furnished 80 billion won (US$66.95 million) to the organizing committee of the PyeongChang Olympic Winter Games, though it was in a loss. It is right to contribute to society when a company makes a profit but KEPCO is a loss-making company and is not in a position to spend money on projects that are not related with its business.”
These individual shareholders stressed the need to raise electricity rates and asked the government to stop easing the residential progressive electricity pricing that would continue into this year. They said, “The burden on the people is growing due to electricity rates which are set below the production cost. KEPCO needs to readjust electricity rates to a realistic level that can make up for the loss.” One of the minority shareholders also said, “KEPCO is posting astronomical losses but the government refuses to raise electricity rates until 2022. The present government is trying to avoid sensitive issues and shift the responsibility to the next government, showing an irresponsible attitude.”
The individual stockholders mentioned the possibility of foreign shareholders taking legal action against KEPCO and the World Trade Organization punishing KEPCO for unfair trade practices. The government’s nuclear phase-out policy has raised the possibility of foreign shareholders’ taking legal action against KEPCO. They could file a suit against KEPCO’s management for a breach of duty for following government policies that worsen the company’s performance, such as the nuclear phase-out policy and relaxation of the progressive tariff system. KEPCO is listed on the NASDAQ, with foreign stock ownership reaching 30 percent.