The South Korean government’s plan to list two public power generators Korea East-West Power Co. and Korea South-East Power Co. on the main local bourse this year may not go through as scheduled due to questions about their profitability and pricing levels.

Last year the government announced an outline to partially privatize eight public utility companies by 2020 through stock listing to help improve their financial health and transparency in management. Its original plan was to list one of the two power-generating units of state utility firm Korea Electric Power Corp. (KEPCO) in the first half and the other in the second half.

But market experts believe the initial public offering (IPO) is very unlikely to go as planned because the government has yet to submit an application for a preliminary (IPO) review for the first in March.

According to sources from the energy and security industries on Monday, the IPO plan has hit a snag because the government, the energy firms and lead managers could not agree on the offering price. At the heart of the problem is the rate-setting standard of KEPCO’s electricity purchase price from its power stations. The rates are controlled by the government to prevent a spike in utility bills, which leads to questioning about their profitability, one industry expert said. Earnings of power generators hinge entirely on utility charges, but the companies do not have any say in setting the prices.

Moreover, the privatization plan on utility firms could be re-examined once a new administration takes office following May 9 presidential election. Liberal candidates leading the polls would be negative towards privatization schemes as they are traditionally favorable to unions.

A government official maintained that the listing plan would be pursued although there is a delay due to some differences.

By Ko Jae-man

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