Samsung and SK hynix push KEPCO's 25 trillion won grid bill back onto the bond market

The offer had a price. KEPCO would have paid a rate above the yield on two-year treasury bonds and settled it by deducting principal and interest from the two companies' electricity bills every six months ^[7]. Its own two-year notes cleared at 4.00% last month, three-year paper at 4.22% and five-year at 4.41% ^[8]. The reports do not state the treasury yield, so the saving on the table was the spread between what KEPCO pays the bond market and what it would have paid a customer.

The interest saving probably mattered less than the fact that prepayments do not consume the issuance cap. The statutory ceiling applies to bond issuance, and prepaid electricity charges are not bonds, so 25 trillion won of customer money would have paid for transmission lines and substations without consuming any of the cap ^[27]. "We are not considering an extension of the five- to six-times expansion, and we are weighing various options to make financing workable within the existing two-times limit," a KEPCO official said ^[14].

Set the refused sum against the borrowing it was meant to replace. KEPCO sold 12.21 trillion won of its own bonds in the eight months to the end of August ^[9], an annual run rate near 18.3 trillion, which makes 25 trillion about sixteen months of issuance ^[23]. Operations cannot cover it. LS Securities forecasts 18.192 trillion won of operating cash flow this year against 18.931 trillion of spending on tangible and intangible assets ^[10], so capital expenditure runs at 104% of the cash the business generates and the gap is 739 billion won ^[24].

Divide the request by five and Samsung paid about 4 trillion won for electricity last year, SK hynix about 1 trillion ^[25]. The two customers' combined annual power bill is roughly a fifth larger than KEPCO's yearly interest cost ^[28]. Both agreed with the aim of accelerating power infrastructure but judged that paying five years at once was too heavy a burden, with memory earnings strong now and the volatility of the chip industry making a five-year assumption hard, according to sources cited by Sedaily ^[17]. They also weighed the commitment against the market outlook and their own investment plans ^[33].

Both accounts come from Sedaily and are sourced to business and industry people. A KEPCO official confirmed the outcome: "It is true that Samsung Electronics and SK hynix communicated their refusal of our proposal" ^[15].

Sedaily reports that further electricity rate increases are difficult to push through, and that unless KEPCO raises rates or secures large amounts of outside capital its reliance on KEPCO bonds and other debt could increase ^[18]. I would expect an equity injection or an industrial tariff rise before 2028 on that reading. Against it: KEPCO is profitable ^[19], a profitable year adds to reserves, and if operating cash flow grows faster than capital spending then prepayment was only a convenience. The utility said it had not proposed prepayment to any company other than Samsung and SK hynix ^[3], so no second set of prefunders is being tested. "KEPCO expected that securing prepayments from Samsung Electronics and SK hynix would let it cut additional corporate bond issuance while funding grid construction, but the refusals leave it having to look for new funding options," an industry official said ^[16].