Anticipating a Massive Surplus
Korea Electric Power Corp. (KEPCO) is expected to switch to a large surplus in three years, driven by record-low oil prices.
Hyundai Motor Securities predicted KEPCO's first quarter operating profit will hit 488.1 billion won, while Hana Financial Investment estimated it to reach 567.2 billion won. KEPCO will swing to a surplus from a deficit a year ago. Its annual profit is expected to exceed 3 trillion won in 2020, a significant recovery from operating deficits in the past two years — 208.0 billion won in 2018 and 1,277 billion won in 2019.
However, the full-fledged benefits of falling oil prices are expected to start to come out from the second half of this year. “The import price of liquefied natural gas (LNG) is expected to follow the moves of oil prices four to five months later,” said Kang Dong-jin, a researcher at Hyundai Motor Securities. “The drop in oil prices will lead to a sharp drop in domestic LNG prices in July and August, which will lead to a drop in the system marginal price (SMPs) and fuel costs.”
Hyundai Motor Securities forecast that the annual SMP will improve by more than 15 won per ㎾h. Analysts say that if the SMP falls by 10 won per ㎾h, the annual electricity purchase cost can drop by 1.2 trillion won.