KEPCO's KRW 25 Trillion Power Bill Prepayment Plan Faces Pushback from Samsung Electronics & SK Hynix

Korea Electric Power Corporation (KEPCO / 한국전력공사) proposed that Samsung Electronics (三星電子) and SK hynix (SK 海力士) prepay approximately KRW 25 trillion (US$18 billion) in electricity bills covering the next 5 years, aiming to secure funding for large-scale transmission and substation infrastructure while reducing reliance on KEPCO bond issuance. The proposed amounts were about KRW 20 trillion for Samsung Electronics and KRW 5 trillion for SK Hynix, based on their electricity payments last year.

However, both semiconductor companies have rejected the proposal after internal reviews, citing concerns over their future semiconductor business conditions and investment plans. Differences over the interest rate applied to the prepaid funds also reportedly contributed to the decision. KEPCO proposed an interest rate above that of two-year Korean Treasury bonds, with the interest credited against electricity bills on a semiannual basis, while the companies reportedly sought a return at least comparable to KEPCO bonds.

KEPCO intended to use the prepaid funds to accelerate transmission and substation construction for semiconductor clusters in Yongin and the Honam region, as well as AI data centers. The initiative comes amid mounting financial pressure; KEPCO's consolidated debt reached KRW 210.7 trillion at the end of June, with interest expenses averaging approximately KRW 11.5 billion per day. Meanwhile, a temporary measure allowing KEPCO to issue bonds up to five times its combined capital and reserves is scheduled to expire at the end of 2027, potentially tightening its financing capacity from 2028.

The rejection leaves KEPCO facing continued pressure to diversify funding sources for its expanding grid investment needs. The company has argued that reducing bond issuance could ease its financial burden and prevent KEPCO bonds from absorbing excessive liquidity in the corporate bond market. However, with the proposed KRW 25 trillion prepayment now off the table, KEPCO will need to rely more heavily on its own resources, government support and debt financing to fund the power infrastructure required by Korea's rapidly growing semiconductor and AI industries.

Source: 한겨레 (Hankyoreh)｜월요신문
Compilation & Ttranslation: EnergyOMNI