KEPCO (015760.KS) Q1 2026: ₩3.78T Op Profit Holds, Debt Ratio Falls to 401%
The V-shaped recovery is now a steady state — but an April industrial tariff cut is the next test.
Source: Q1 2026 Quarterly Report — Filed 2026-05-15 with DART | Consolidated Financial Statements | Unit: ₩ billions
Korea Electric Power Corporation's first-quarter 2026 consolidated results answered the question that has hung over the utility since its 2024 turnaround: this profitability is not a one-off. Operating profit landed at ₩3.78 trillion, essentially flat against the ₩3.75 trillion booked in Q1 2025 but nearly three times the ₩1.30 trillion of Q1 2024. More importantly, the debt-to-equity ratio compressed from 480% a year ago to 401% at quarter-end, while total financial debt actually shrank for the first time in years, falling from ₩129.93 trillion at year-end 2025 to ₩128.33 trillion. The one clear cloud: the average -₩15.4/kWh tariff cut for industrial-B customers that took effect on April 16 will begin pressuring revenue from Q2 onward.
Balance Sheet
Asset Composition
| Item | YE 2025 (₩ tn) | 2026.3 (₩ tn) | Change |
|---|---|---|---|
| Cash and cash equivalents | 2.24 | 2.01 | -10.1% |
| Trade and other receivables | 12.62 | 11.68 | -7.4% |
| Inventories | 10.15 | 10.03 | -1.2% |
| Property, plant & equipment | 187.75 | 189.55 | +1.0% |
| Intangible assets (ex-goodwill) | 1.00 | 1.02 | +2.4% |
| Total assets | 254.93 | 257.79 | +1.1% |
| Retained earnings | 28.50 | 30.08 | +5.5% |
| Total equity | 49.32 | 51.41 | +4.2% |
Property, plant and equipment of ₩189.55 trillion accounts for 73.5% of total assets, the signature footprint of a transmission-and-generation utility. PP&E grew by another ₩1.79 trillion during the quarter alone. The 10-K-equivalent narrative documents that KEPCO's parent entity has multiple large HVDC transmission projects running concurrently: the East Coast–Shin-Gapyeong HVDC converter station, the Saemangeum–Seo-Hwaseong HVDC link, and the East Coast #2–East Seoul HVDC corridor (combined budget of ₩1.31 trillion). Construction-in-progress at the parent alone now stands at ₩15.87 trillion. The ₩938 billion decline in trade receivables, meanwhile, points to improved collections during the quarter and is consistent with the strong operating cash flow.
Retained earnings rose by ₩1.58 trillion to ₩30.08 trillion. With quarterly net income of ₩2.52 trillion and minority-interest attribution of roughly ₩26 billion, the residual move reflects ordinary OCI and dividend leakage. Paid-in capital (₩3.21 trillion) and additional paid-in capital (₩1.57 trillion) were both unchanged — no share issuance, no treasury activity, a clean equity quarter. The decisive picture is that equity grew 4.2% while debt grew only 0.4%, dragging the debt ratio from 416.9% to 401.4%. Stepped back further, the same ratio stood at 479.7% a year ago (debt ₩206.80 trillion / equity ₩43.11 trillion), meaning 78 percentage points of leverage have been worked off in twelve months as cumulative 2024 profits and successive 2025–2026 surpluses have layered on top of each other.
Debt Structure — Financial Debt Turns the Corner
| Liability Item | YE 2025 (₩ tn) | 2026.3 (₩ tn) | Change |
|---|---|---|---|
| Current financial liabilities | 45.94 | 48.31 | +5.2% |
| Non-current financial liabilities | 84.00 | 80.01 | -4.7% |
| Total financial debt | 129.93 | 128.33 | -1.2% |
| Trade and other payables | 8.62 | 10.05 | +16.6% |
| Long-term trade payables | 4.03 | 4.03 | -0.0% |
| Current non-financial liabilities | 6.81 | 6.99 | +2.7% |
| Non-current non-financial liabilities | 13.73 | 14.11 | +2.8% |
| Total liabilities | 205.60 | 206.38 | +0.4% |
The most consequential line in this quarter's balance sheet is the ₩1.60 trillion reduction in total financial debt (borrowings, bonds, and finance leases). During the 2022–2023 loss accumulation period, KEPCO issued so many electric utility bonds that breaching the statutory issuance cap (five times equity) became a real concern. That trajectory has now reversed on a quarterly basis. Within the split, current financial liabilities did rise by ₩2.37 trillion to ₩48.31 trillion, but this overwhelmingly reflects reclassification of bonds approaching maturity rather than fresh borrowing. The financing cash flow swung from +₩0.36 trillion a year ago to -₩2.46 trillion this quarter, directly confirming the move into net repayment mode. On the operating-liability side, trade payables rose by ₩1.43 trillion to ₩10.05 trillion — consistent with timing of fuel and purchased-power settlements with the generation subsidiaries.
Capital Quality
Paid-in capital of ₩4.78 trillion (₩3.21 trillion common + ₩1.57 trillion APIC) compares against retained earnings of ₩30.08 trillion — earned capital now stands at 6.3 times paid-in capital. That ratio looks healthy in isolation, but the wider context is that KEPCO ran very large operating losses in 2022–2023, and even at the current run-rate of roughly ₩2.5 trillion in quarterly earnings, restoring retained earnings to pre-loss-cycle levels will require many more quarters of profitability.
Income Statement
Core Profitability Metrics
| Item | Q1 2024 (₩ tn) | Q1 2025 (₩ tn) | Q1 2026 (₩ tn) | 24→26 Δ |
|---|---|---|---|---|
| Revenue | 23.29 | 24.22 | 24.40 | +4.7% |
| Cost of sales | n/a | 19.76 | 19.90 | — |
| Gross profit | — | 4.47 | 4.50 | — |
| SG&A | — | 0.71 | 0.72 | +0.4% |
| Operating profit | 1.30 | 3.75 | 3.78 | +191.2% |
| Operating margin | 5.6% | 15.5% | 15.5% | — |
| Finance income | — | 0.41 | 1.30 | — |
| Finance costs | — | 1.23 | 2.08 | — |
| Pre-tax profit | 0.74 | 3.23 | 3.40 | +359.5% |
| Net income | 0.60 | 2.36 | 2.52 | +322.7% |
| Net margin | 2.6% | 9.7% | 10.3% | — |
| EPS attributable to owners (₩) | — | 3,627 | 3,883 | +7.1% |
Revenue rose 0.7% from ₩24.22 trillion to ₩24.40 trillion. Cost of sales rose by the same 0.7%, leaving the gross margin unchanged at 18.5%. SG&A barely moved, from ₩713 billion to ₩716 billion. The reason operating profit was effectively flat at +0.8% is that both pricing and volumes have now spent close to a full year in a steady state. The industrial-B average tariff moved from ₩168.17/kWh in 2024 to ₩181.90 in 2025 and ₩183.65 in Q1 2026 — the highest level in years, but stable. KEPCO's average purchased-power price ran at ₩134.42/kWh in Q1 2026, leaving the roughly ₩49/kWh spread intact.
Below the operating line, finance income jumped from ₩413 billion to ₩1.30 trillion (+214%) and finance costs rose from ₩1.23 trillion to ₩2.08 trillion (+69%). Net financial loss improved modestly from -₩818 billion to -₩781 billion. The surge in finance income reflects foreign exchange translation gains during a weak-won quarter combined with currency-swap valuation gains (the disclosed currency-swap mark-to-market gains include ₩324.9 billion at Korea Hydro & Nuclear Power alone, per its subsidiary report), with the spike in finance costs being the mirror image of the same currency moves. The real reason net income grew 6.7% — faster than the 0.8% operating gain — is the net effect of these FX-driven swap revaluations combined with an effective tax rate (25.8%, ₩876 billion tax expense) almost identical to the prior year.
Cost Leverage — Fixed vs Variable
KEPCO's consolidated cost of sales of ₩19.90 trillion blends three different cost types: (i) purchased-power payments to the generation subsidiaries, which behave like variable costs because they track fuel prices; (ii) depreciation and labor at those same generation subsidiaries, which are fixed; and (iii) transmission and distribution operating expenses, which are also fixed. The cost-of-sales-to-revenue ratio came in at 81.6% in both Q1 2025 and Q1 2026 — identical — implying that fuel costs were unusually quiescent across the period. The SG&A-to-revenue ratio likewise held at 2.9%. The stability of this quarter's margin is therefore best understood as "cost volatility took a breather while the prior tariff hikes continued to flow through" rather than as evidence of structural earnings power. Calm on both the pricing and fuel sides was the precondition.
Segment revenues sum to ₩36.15 trillion before ₩11.75 trillion of intersegment eliminations, leaving ₩24.40 trillion of external revenue. The electricity sales segment (the KEPCO parent) accounts for the overwhelming majority. Nuclear (KHNP) contributes 1.1% of external sales, the five thermal generation subsidiaries combined 2.3%, and other businesses (engineering, maintenance, fuel, ICT) 1.4%. The segment mix is essentially identical to a year ago.
Cash Flow
| Item | Q1 2025 (₩ tn) | Q1 2026 (₩ tn) | Change |
|---|---|---|---|
| Operating cash flow | 6.75 | 7.31 | +8.2% |
| Cash generated from operations | — | 9.11 | — |
| Investing cash flow | -7.06 | -5.10 | Narrowed |
| PP&E additions (capex) | 3.77 | 4.19 | +11.2% |
| Intangible additions | 0.02 | 0.03 | +79.9% |
| Financing cash flow | +0.36 | -2.46 | Borrow → repay |
| Period-end cash | 2.44 | 2.01 | -17.7% |
Operating cash flow of ₩7.31 trillion came in at 2.90 times quarterly net income. For a capital-intensive utility where PP&E makes up 73% of the asset base and quarterly depreciation runs in the high ₩3 trillion range, OCF significantly above net income is the norm — but the 2.90× quality-of-earnings ratio is a slight improvement on the 2.86× recorded in Q1 2025, with the ₩938 billion of receivable collections doing some of the work. Stripping out the ₩4.19 trillion of maintenance-and-growth capex (up 11.2% year-on-year), free cash flow lands at ₩3.12 trillion — positive. Set against the ₩2.98 trillion FCF generated in Q1 2025, the takeaway is that the company sustained the prior year's cash-generation profile and then chose to redirect the surplus toward debt reduction.
Investing cash flow narrowed from -₩7.06 trillion to -₩5.10 trillion, and financing flipped from +₩0.36 trillion to -₩2.46 trillion — a perfectly mirrored reversal. The capital allocation priority has shifted from "fund expansion with new borrowing" to "repay existing debt while sustaining core transmission investment." That said, period-end cash dipped again from ₩2.24 trillion to ₩2.01 trillion, which leaves only modest working-capital headroom if operating cash flow were to wobble for even a single quarter.
Key Findings
Tariff mechanics and policy exposure dictate margin destiny. The Q1 2026 fuel-cost adjustment surcharge was held at +₩5.0/kWh, identical to the previous quarter. The company explicitly cited "delayed recovery of cumulative losses and the size of unrecovered amounts" as the reason for keeping the surcharge frozen. In other words, although the fuel cost pass-through mechanism formally exists, in practice the adjustment is capped, and that cap means the margin protection it is supposed to provide may not engage if fuel prices spike from here. The larger near-term variable is the average -₩15.4/kWh tariff cut for industrial-B customers that took effect on April 16. Because industrial sales make up a substantial share of external-customer revenue, holding volumes constant from Q2 onward, the annualized revenue impact is potentially significant. A partial offset is the simultaneous introduction of a 50% industrial-B discount on weekend daytime hours (11:00–14:00) during spring and autumn, which is designed to reduce the cost of generation curtailment during oversupply windows.
The HVDC transmission build-out is the engine behind asset growth. On a parent-only basis, several large transmission projects are running in parallel: East Coast–Shin-Gapyeong HVDC (overhead and underground portions combined, roughly ₩2.74 trillion), East Coast #2–East Seoul HVDC (₩1.31 trillion), Saemangeum–Seo-Hwaseong HVDC including converter and transmission line (around ₩2.80 trillion), and the East Coast–East Seoul HVDC converter station (₩1.77 trillion). With cumulative new-transmission capex pressure expected to extend from 2025 out to 2030, free cash flow can only be redirected into meaningful debt paydown if the company can sustain ₩4 trillion-class operating profit quarters for multiple years.
Credit ratings are anchored by quasi-sovereign status. All three domestic rating agencies rate KEPCO bonds AAA, and the international ratings — Moody's Aa2 / S&P AA / Fitch AA- — sit at or within one notch of the Republic of Korea sovereign (currently Moody's Aa2 / S&P AA). The reason no downgrades occurred even during the heavy-loss years is the combination of government ownership of 51.1% (direct stake 18.2% plus Korea Development Bank 32.9%) and the loss-coverage structure embedded in the Korea Electric Power Corporation Act. The credit rating is the key asset that keeps the company's average funding cost close to government-bond levels even with ₩130 trillion of outstanding debt.
Nuclear export momentum is a medium-term off-balance-sheet asset. In December 2025, the KHNP-led "Team Korea" consortium won the Dukovany new nuclear reactor project in the Czech Republic, and Korea Power Engineering Company subsequently signed the nuclear steam supply system design contract. The narrative section also flags ongoing operating-license progress for Shin Hanul Units 3 and 4 and the receipt of an operating license for Saeul Unit 3 in December 2025. Nuclear export revenue currently flows through KEPCO's consolidated P&L only via Korea Power Engineering, KEPCO KPS, and Korea Nuclear Fuel, so its proportional contribution is small today — but it provides a multiple-expansion lever for subsidiary valuations over time.
Contingencies. Within the disclosed scope of the quarterly report excerpt, no material new contingent liabilities were identified. One ancillary observation is that during the 2022–2023 cumulative loss period, the statutory cap on bond issuance (five times equity) under the Korea Electric Power Corporation Act came uncomfortably close to being binding; the equity rebuild has restored substantial headroom under that cap.
Outlook
What grew. Equity expanded from ₩43.1 trillion to ₩51.4 trillion (+19.3%) over twelve months, pulling the debt ratio from 480% down to 401%. With quarterly operating profit settling at ₩3.78 trillion, the data now confirms that the recovery is a normalization trend rather than a one-year bounce. EPS attributable to owners rose 7.1% to ₩3,883, layering the effect of equity accretion on top of operating gains.
What the risks are. First, the April industrial-B tariff cut of -₩15.4/kWh will begin biting revenue from the second quarter. Second, with total financial debt at ₩128.3 trillion, a 100 basis point move in average funding cost would translate directly into roughly ₩1.3 trillion of annual interest expense. Third, the HVDC transmission investment cycle is expected to run through 2030, meaning capex pressure will not subside soon.
Capital allocation. This quarter's stance is unambiguous: net debt repayment combined with sustained core transmission capex. There is no sign of share buybacks, treasury cancellation, or dividend-related movement (paid-in capital and APIC were both unchanged). With 51% government ownership, conventional shareholder-return tools such as buybacks or special dividends are effectively absent, so surplus cash flows by default to debt repayment and balance-sheet repair. If this pattern continues for the next 8–12 quarters, mathematically the debt ratio could enter the 300% range — but that trajectory requires tariff policy, fuel prices, and interest rates to all stay benign, and a meaningful adverse move in any one of the three would disrupt the pace.
Quick Footnote Check
The debt maturity profile splits ₩48.31 trillion of current financial debt (under one year) versus ₩80.01 trillion non-current, putting roughly 37.6% of total financial debt within one year. The generation subsidiaries hold currency swap and forward positions (KHNP alone reported ₩324.9 billion in mark-to-market gains, separate from the parent's positions) entirely as hedges against foreign-currency-denominated borrowings, mostly USD. Aggregate quarterly valuation gains added approximately ₩325 billion of one-off support to earnings. The revenue base is concentrated almost entirely in the electricity sales segment (covering essentially all domestic households and industrial customers); diversification into nuclear export and overseas business remains a small fraction, virtually unchanged from a year ago. Executive compensation, litigation, and other major disclosures fall outside the excerpt scope.
Disclaimer
This report is prepared for informational purposes only based on KEPCO's Q1 2026 quarterly report filed with DART on 2026-05-15 and consolidated financial statement data retrieved via the DART OpenAPI (fs_div=CFS, reprt_code=11013). It does not constitute investment advice. Source: DART Filing System. Prepared 2026-05-24.
