Temporary shutdown of coal-fired power plants to cut KEPCO’s cash flow

SEOUL-- The temporary shutdown of eight coal-fired power plants in South Korea is expected to lower the operating cash flow of state-run electricity monopoly Korea Electric Power Corp. (KEPCO), according to a recent report by Moody's ratings agency on Saturday.

The shutdown, which began on Thursday for one month, will push KEPCO to increase its reliance on more expensive gas-fueled power generation, the report said.

The shutdown was a follow-up to President Moon Jae-in's order to stop the operations of coal-fired plants aged 30 years or older to help fight against air pollution. Starting next year, the coal-powered plants will be shut down for four months.

Moody's expected the shutdown to eat into KEPCO's operational funds by as much as 70 billion won (US$62.4 million) this year with numbers to rise to 400 billion won annually starting next year.

The shutdown is credit negative for KEPCO, but the company should still generate an appropriate level of operating cash flow unless oil prices jump, Moody's said.

"We expect that KEPCO's credit metrics will only modestly deteriorate over the next one to two years because we expect the company to continue generating adequate levels of operating cash flow under our crude oil price assumptions of $45 per barrel in 2017 and $50 in 2018," it said.

"Therefore, we expect KEPCO to avoid excessive reliance on debt to fund its capital expenditures and investments," it said.

Source: Yonhap News Agency

You may also like...