KEPCO Seeks Advance Bills from Samsung, SK hynix: Why?

Korea Electric Power Corporation (KEPCO) has proposed a plan to Samsung Electronics and SK hynix, offering to prepay their electricity bills over the next five years, totaling 20 trillion won and 5 trillion won, respectively. Negotiations are ongoing to determine the specific conditions of this proposal. KEPCO intends to use the 25 trillion won from these advance payments to fund power grid expansions in the Yongin and Honam semiconductor clusters.

The electricity bills for Samsung Electronics and SK hynix last year were 4.1 trillion won and 900 billion won, respectively, leading to estimates of the future bills. KEPCO already has a system allowing customers to prepay their electricity bills, with the option to earn interest on the advance payments. KEPCO is exploring the possibility of creating a specialized provision to leverage this system as a significant financing tool.

The interest on these prepaid bills is proposed to be higher than the interest on 2-year Treasury bonds. KEPCO is considering paying this interest through semi-annual deductions from electricity bills rather than in cash. However, the specifics of the participation, interest rate, and scale of the prepayment are still under discussion.

The proposal comes amid concerns about KEPCO's deteriorating financial capacity. The company's debt reached 210.7 trillion won by the end of June, with daily interest expenses on this amount amounting to 11.5 billion won. KEPCO believes that the electricity bill prepayment system will benefit both the companies, which require power grid expansion, and KEPCO, which needs investment resources.