State-run Korea Electric Power Corp. (KEPCO) raked in 4.4 trillion won ($3.87 billion) in operating profit for the third quarter, moving closer to report a record annual operating profit this year benefiting from electricity surcharge billing system amid unprecedentedly lengthy hot summer and fall in raw material costs.

KEPCO said in a regulatory filing Thursday that its operating profit rose 1.9 percent to 4.4 trillion won in the three months ended September from the same period last year, coming nearly in line with market estimates of 4.6 trillion won. Sales gained 3.1 percent on year to 15.9 trillion won.

Net income, however, sank 68.3 percent on year to 2.9 trillion won, reflecting one-off factors. Last year, the company reported a big gain in its bottom line after it received 10.55 trillion won, the payment for the headquarters property in southern Seoul it sold to Hyundai Motor Co. in September 2014.

The company said it benefited from the fall in raw material costs like oil and coal. But most analysts agreed that what helped most was the progressive electric tariff system for households.

The country’s current electricity rate progressively increases based on six stages. For example, a household pays 60.7 won per kilowatt for the first 100 kilowatts in a month, but the price rises to 125.9 won if it consumes between 100 and 200 kilowatts. The price could jump 11.7 times from the minimum rate if the consumption exceeds 200 kilowatts.

In unprecedentedly lengthy heat waves hitting the country this summer, the electricity bills of households skyrocketed under the current electricity billing system, which largely benefited the state-run utility firm.

Reflecting gains from high electricity bills, KEPCO’s operating profit margin in the third quarter reached 27.7 percent, more than twice that of Samsung Electronics (10.9 percent).

Industry watchers predict that the utility firm would post a fresh-high operating profit for the full year, as it has already raked in 10.7 trillion won in the first nine months this year. The company reported a record high operating profit of 11.3 trillion won last year. Despite its solid performance, shares of the country’s second largest bellwether by market capitalization remained weak. The stock price dipped nearly 21 percent from 61,300 won to 48,700 won between end-July to this Thursday, respectively. Market analysts said its sluggish stock movement was due to a recent rebound in international oil prices that is expected to increase costs and lingering uncertainties over an overhaul in the current electricity billing system.

The government has been seeking changes in the progressive surcharge rate system that was institutionalized in 1970s during oil crisis to save energy at households to allow more leeway in power use at industrial sites. But it has not been able to come up with a new tariff system yet.

Market observers said that there is still room for a rise in KEPCO stocks, citing its low price book-value ratio (PBR) that currently stands at 0.47.

KEPCO stocks closed at 47,350 won on Friday, down 2.77 percent, or 1,350 won, from the previous session.

By Lee Yong-gun

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