KEPCO Posts KRW 2.8 Trillion Net Income in H1 2026 as Nuclear Capacity Concerns Persist
South Korea's state utility navigates nuclear maintenance delays and rising fuel costs while facing pressure to meet bond issuance targets by 2027.
Financial Performance
Korea Electric Power Corporation (KEPCO) reported consolidated net income of KRW 2,796.5 billion for the first half of 2026, with operating income reaching KRW 4,912.7 billion (earnings call, 2026-08-12). Revenue increased 0.3% year-over-year to KRW 46,317.3 billion, though power sales declined 0.4% to KRW 43,964.1 billion.
Cost pressures remained evident, with fuel costs rising 8.8% to KRW 10,142.9 billion. However, the company benefited from a KRW 132.2 billion decrease in interest expense to KRW 2,079.1 billion. Power sales volume fell 0.6% to 266.7 terawatt hours "due to a decrease in industrial demand caused by economic slowdown" (earnings call, 2026-08-12).
Nuclear Generation Challenges
KEPCO's nuclear capacity factor emerged as a key concern during the call. The company has experienced declining nuclear contribution to its generation mix for four consecutive quarters. When questioned about achieving full-year targets, management acknowledged "there has been some issues in the prolonged preventive maintenance of some of the nuclear power generation unit" (earnings call, 2026-08-12).
The company expects nuclear capacity factors in the "low to mid-80%" range for 2026, with coal at "low to mid-50%" and LNG at "low to mid-20%" (earnings call, 2026-08-12). Management indicated that adding Unit 3 to the grid and implementing "preventive maintenance in existing nuclear power plants in a more timely manner" should help stabilize nuclear generation in the second half.
Rising Spot Market Prices
System marginal prices (SMP) have increased notably in recent months. While second-quarter 2026 SMP was lower year-over-year, July 2026 SMP reached KRW 133 per kilowatt hour compared to KRW 121 in July 2025. August showed even sharper increases, with SMP reaching KRW 151 to date versus KRW 117 for the full month in August 2025 (earnings call, 2026-08-12).
Management attributed the increase primarily to "the increase of international fuel costs" with a time lag effect beginning to impact July and August figures (earnings call, 2026-08-12).
Debt and Tariff Outlook
Consolidated borrowings stood at KRW 133.3 trillion as of the first half, with standalone debt at KRW 84.8 trillion. The company faces pressure to reduce its bond-to-capital ratio to 2x by end of 2027, down from current levels.
When asked about potential tariff increases, management noted that while rate hikes "will be very helpful" to address accumulated losses and meet bond requirements, multiple factors including "inflation and overall macroeconomic situation" must be considered (earnings call, 2026-08-12). The company is "discussing with the government to try to achieve the tariff hike in the future."
Additionally, KEPCO indicated that a regional differentiated pricing system is under development, with a public hearing planned for the second half and potential implementation by year-end.
Capital Requirements
Looking ahead, KEPCO acknowledged substantial capital needs for government-announced infrastructure projects but emphasized these are "mid- to long-term projects" that don't require immediate funding (earnings call, 2026-08-12). Management plans to "distribute that across multiple quarters and years" while maintaining strict fund management to meet debt ratio targets.
This article was generated by MarginX from the earnings call on 2026-08-12. It is not investment advice.