The South Korean government will make new capital injections into KEPCO and the Korea Water Resources Corporation to secure the electricity and water needed for three mega-projects in areas such as semiconductors and artificial intelligence. The plan aims to accelerate the construction of advanced-industry facilities by shoring up the capital of state-owned enterprises.
The ruling Democratic Party and the Ministry of Planning and Budget held a party-government meeting on the 2027 budget at the National Assembly on the 25th, agreeing to concentrate spending on the three mega-projects and the AI sector.
Rep. Chung Tae-ho, the Democratic Party's secretary on the National Assembly's Special Committee on Budget and Accounts, said the party would create a dedicated semiconductor account to provide integrated support toward making Korea a semiconductor powerhouse. He added that the government would inject capital into KEPCO and the water corporation to secure electricity and water. The government has drawn up a super-sized budget with total spending exceeding 800 trillion won next year.
If the government injects capital into KEPCO and the water corporation, the financial soundness of both agencies is expected to improve considerably. As of the end of June this year, KEPCO's debt on a consolidated basis stood at about 210.7 trillion won, with a debt ratio above 400%. Under current law, KEPCO may temporarily issue corporate bonds worth up to five times the combined total of its capital and reserves until the end of next year. As capital is expanded through the government injection, its capacity to issue corporate bonds will grow accordingly. While the water corporation is in better financial shape than KEPCO, a series of large-scale industrial-water investments could highlight the need to expand its capital. The government injection is expected to act as a safeguard that absorbs the financial burden of future investment.
An industry source in the semiconductor sector said the move showed the government's determination to move even faster on building the infrastructure most needed for a fabrication plant in the Honam region and for AI data centers. The party and government did not, however, disclose the total spending scale of next year's budget or the specific amount of the capital injections into KEPCO and the water corporation.
President Lee Jae-myung reiterated his commitment to expansionary fiscal policy at a Cabinet meeting held at the presidential office that day, saying that now is not the time to make the mistake of getting bogged down in managing near-term fiscal figures.
