KEPCO’s heavy reliance on coal and gas exposed it to the 2022 energy crisis, resulting in operating losses of up to USD 26 billion, a debt-to-equity ratio exceeding 600%, and record bond issuance that accounted for over 20% of Korea’s corporate bond market.

Although profitability improved in 2024–2025 following electricity tariff increases, KEPCO remains vulnerable to fuel price volatility, exchange-rate fluctuations, and the risk of breaching statutory bond issuance limits.

KEPCO’s recent earnings recovery has been driven primarily by higher industrial electricity tariffs rather than structural improvements.

Industrial electricity sales are declining as companies increasingly procure electricity through alternative channels, including power purchase agreements (PPAs), undermining KEPCO’s long-term revenue base.

The current power market structure creates a significant imbalance: while KEPCO accumulated USD 29 billion in operating losses between 2021 and 2025, state-owned generators and private power producers continued to earn substantial profits and improve their financial conditions.

Over the same period, Thermal GENCOs earned cumulative operating profits of USD 4.85 billion, KHNP earned USD 4.72 billion, and major private gas-fired generators earned USD 5.36 billion.

While KEPCO’s debt burden rose sharply, the debt-to-equity ratios of generators improved significantly, indicating that financial risks are disproportionately concentrated on KEPCO.

Recent increases in oil prices, LNG prices, and exchange rates suggest KEPCO’s financial performance could be significantly weaker than its downside projections.

Under a downside scenario, KEPCO’s bond issuance ratio could remain around 250% after 2027, exceeding the statutory limit even after the temporary expansion of bond issuance capacity expires.

The Korean government should closely monitor KEPCO’s statutory bond issuance risk and its implications for financial market stability.

Beyond electricity tariff adjustments, policymakers should reform power market rules and compensation mechanisms that currently allow generators to remain profitable while concentrating debt burdens on KEPCO.

Structural reforms are needed to reduce fossil fuel dependence, improve KEPCO’s financial sustainability, and support Korea’s energy transition.

KEPCO’s recurring debt crises highlight the unsustainability of a fossil fuel-dependent electricity system and the growing financial risks associated with relying on government-backed borrowing to absorb energy price shocks.