KEPCO's reissuance of bonds feared to impact debt market

The logo of state-run Korea Electric Power Corp. (KEPCO) is seen outside its headquarters in Naju, South Jeolla Province, in this undated file photo. Yonhap By Yi Whan-woo Korea Electric Power Corp.

(KEPCO) is issuing bonds again following a nine-month hiatus, prompting speculation that it may hinder the efforts of private companies to raise money in the debt market. The country’s sole electricity supplier, KEPCO has a triple A rating in the bond market despite its snowballing losses, because the government guarantees recurring interest payments and returns of the principal at the date of maturity. Under the circumstances, KEPCO had temporarily halted bond issuances in September 2023, due to concerns that large volumes of its popular bonds could result in liquidity crises at private companies with lower credit ratings.



KEPCO then reissued bonds beginning in June, with the volume surpassing 4 trillion won so far, including 1 trillion won in June and 1.9 trillion won July. Korea Capital Market Institute (KCMI) assessed that KEPCO’s measure is aimed at redeeming cumulative losses worth over 43 trillion won from 2021 to 2023.

Before the nine-month hiatus, KEPCO was issuing more than 27 trillion won worth of bonds to make up for a record annual loss of 32 trillion won in 2022. “KEPCO’s high rating gives it an advantage over other companies in attracting investors in the bond market,” KCMI said. "Less competent peers may suffer from a credit crunch in the worst circumstances," it added.

It urged the government to overhaul rules concerning state-run corporate bonds “to ensure they do not disrupt private companies when raising money.” Meanwhile, some industry sources deemed that KEPCO will take into account the adverse effect of its bonds on the market and that it will be prudent in determining the volume of newly issued bonds..