Korea Electric Power (KEP)

What Moves the Stock

1. 01Government electricity tariff adjustment decisions - quarterly reviews by Ministry of Trade can swing margins 200-300 basis points
2. 02Global LNG and coal prices - KEPCO imports 100% of fossil fuels, with 40-50% of generation from coal/LNG creating direct P&L exposure to commodity volatility
3. 03Nuclear fleet capacity factor - 24 reactors representing 23.3GW must maintain 80%+ utilization to preserve cost structure; unplanned outages add $50-100M monthly in replacement power costs
4. 04Korean won exchange rate versus USD - fuel imports denominated in dollars create 15-20% earnings sensitivity to 10% FX moves
5. 05Industrial electricity demand growth - semiconductor fabs (Samsung, SK Hynix) and steel mills drive 35% of volume; capex cycles directly impact utilization
6. 06Residential electricity sales (~30-35% of revenue) - regulated tariffs with seasonal adjustment mechanisms
7. 07Industrial/commercial electricity sales (~55-60% of revenue) - volume-sensitive to manufacturing activity, particularly semiconductors and steel
8. 08Transmission and distribution fees (~5-10% of revenue) - regulated return on asset base

KEP Chart

My Notes

• value/special situations - The 193% one-year return and 0.4x sales valuation attracts deep value investors betting on continued tariff…
• Rising rates negatively impact KEPCO through two channels: (1) higher financing costs on $80-90B equivalent debt burden…
• Watch on earnings: JKM (Japan-Korea LNG spot price) - directly impacts 25-30% of generation costs with 1-2 month lag, Newcastle coal futures (Australian thermal coal) - determines 20-25% of fuel costs for coal fleet, Korean won per US dollar exchange rate - 10% depreciation adds $800M-1.2B annual fuel import costs.