[Alpha Biz=(Chicago) Reporter Kim Jisun] Korea Electric Power Corp., which has been unable to issue corporate bonds due to a serious financial crisis, sought to receive up to 4 trillion won in interim dividends from its subsidiaries, including Korea Hydro & Nuclear Power Co., but reportedly lowered its interim dividend target to 3.5 trillion won after its subsidiaries were reluctant.

According to the power industry on the 18th, KEPCO has lowered its interim dividend target from up to 4 trillion won to 3.5 trillion won in the process of unofficial consultations with six power generation subsidiaries, including Korea Hydro & Nuclear Power Co., Korea East-West Power Co., Korea South-East Power Co., Korea Southern Power Co., Korea Midland Power Co. and Korea Western Power Co.

The subsidiaries reportedly agreed on the need for "pain sharing" to improve the financial deterioration of the parent company during the consultation process, but expressed reluctance to unprecedented large-scale interim dividends in light of each company's current financial situation.

KHNP, which is said to be required to pay more than 1 trillion won in interim dividends, suffered an operating loss of 163.1 billion won in the first to third quarters of this year.

Based on consolidated financial statements at the end of September, the addition of both KHNP's cash and cashable assets barely exceeds KRW 1 trillion.

Much of this money should be spent on operating expenses such as construction of nuclear power plants, fuel purchase costs, and current expenses, and even if all of these are spent on interim dividends, it falls short of the level required by KEPCO.

Until now, power generation subsidiaries such as KHNP have paid regular dividends to KEPCO once a year based on the previous year's performance. KEPCO holds a 100% stake in these six companies.

It is the first time that KEPCO has demanded interim dividends, and the level of dividend demand is unprecedentedly high.

The KRW 3.5 trillion KEPCO hopes to receive is 38 times the total dividend of KRW 90.4 billion received from six companies, including KHNP, last year.

In 2016, when annual dividends were the highest in the past decade, dividends from six companies amounted to 94.4 billion won, less than 1 trillion won.

If interim dividends are decided as requested by KEPCO, subsidiaries that do not have such cashable assets will eventually have to issue more corporate bonds or raise additional funds by borrowing from the financial sector.

 

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