Korea Electric Power (KEP) - 2026 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The consolidated operating income for 2025 was KRW 13,524.8 billion, with revenue increasing by 4.3% to KRW 97,434.5 billion [5] - Power sales rose by 4.6% to KRW 93,004.6 billion, while overseas business and other revenue decreased by 1.8% to KRW 4,429.9 billion [5] - Cost of goods sold and SG&A decreased by 1.3% to KRW 83,909.7 billion, and fuel costs decreased by 13.8% to KRW 19,436.4 billion [5] - Net income for 2025 was KRW 8,737.2 billion [6] Business Line Data and Key Metrics Changes - The annual power sales volume was 549.4 terawatt-hours, reflecting a 0.1% decrease year-over-year due to economic downturn and decreased industrial demand [8] - The generation mix for 2025 showed an increase in the capacity factor of nuclear power, while the contribution from LNG decreased due to reduced installed capacity [12] Market Data and Key Metrics Changes - Fuel prices for bituminous coal were around $105.7 per ton, and LNG prices were KRW 980,000 per ton, with SMP at KRW 112.7 per kilowatt hour [10] - The expected capacity factors for 2026 are projected to be mid to high 80% for nuclear power, mid 40% for coal, and early to mid 20% for LNG [12] Company Strategy and Development Direction - The company is focusing on increasing the contribution of nuclear power in the generation mix while managing costs associated with greenhouse gas emissions and nuclear site recovery [25] - There is an ongoing effort to streamline the Korean nuclear power generation export strategy, with collaboration from the Ministry of Industry [52] Management Comments on Operating Environment and Future Outlook - Management noted that the economic growth rate and number of operating days are expected to increase in 2026, leading to a slight increase in total sales volume [8] - The company anticipates that the capacity factor for nuclear power will improve in 2026 due to maintenance and the addition of new power plants [26] Other Important Information - The annual RPS expense on a consolidated basis was KRW 3,989.7 billion, and total borrowings as of Q4 2025 were KRW 129.8 trillion [14] - The dividend payout ratio decreased from 16.5% to 13.65%, but the absolute amount of dividends paid out increased due to a significant rise in standalone net income [39] Q&A Session Summary Question: Contribution of nuclear power generation and unexpected costs - The analyst from LS Securities inquired about the unexpected increase in other costs related to nuclear power generation and the contribution of nuclear power in Q4 2025 [22] - Management responded that provisions for greenhouse gas emissions and nuclear site recovery increased, impacting costs, and the capacity factor for nuclear power is expected to be mid-high 80% annually [25][26] Question: Comparison of operating income and before-tax profit - An analyst from Meritz Securities asked about the reasons behind the stronger before-tax profit compared to operating income and the expected adjustment coefficient for Q1 2026 [29] - Management explained that standalone profits appear stronger due to costs associated with subsidiaries not reflected in standalone numbers, and the adjustment coefficient for 2026 is expected to be slightly higher than in 2025 [32][36] Question: Provisional liabilities and coal price impacts - An analyst from Hana Securities asked about provisional liabilities related to used nuclear fuel and the expected cost impact from the end of a grace period for coal prices [42] - Management indicated that provisional liabilities for nuclear site recovery increased, while used nuclear fuel liabilities decreased, and they could not disclose specific estimates for coal price impacts [43][44] Question: Nuclear power generation export strategy and bond issuance - An analyst inquired about the status of the nuclear power generation export strategy and the bond issuance limit [50] - Management confirmed that the Ministry of Industry is involved in developing the export strategy and that negotiations regarding bond issuance are ongoing, with final numbers to be calculated post-dividend finalization [52][55]