Korea Electric Power Corp. has proposed that Samsung Electronics (005930.KS) and SK hynix (000660.KS) prepay 25 trillion won ($18.1 billion) in electricity bills covering the next five years. The utility wants to pull forward future power revenue to build transmission networks for semiconductor clusters in Yongin and the Honam region while reducing its bond issuance.
KEPCO offered Samsung Electronics a prepayment of 20 trillion won and SK hynix 5 trillion won, according to the utility and power industry officials on the 3rd. The figures were calculated over the five years from 2027 to 2031, based on what the two companies paid last year — 4.1 trillion won for Samsung Electronics and 900 billion won for SK hynix.
The prepayment scheme itself already exists. Customers pay bills in advance and KEPCO pays interest depending on how long the money is held. Prepayments totaled about 390 billion won last year, most of it from state agencies. KEPCO is reviewing whether to expand the program, previously used as a payment convenience, into a funding source for grid investment tied to large power consumers.
Under the plan now being discussed, the two companies would pay the prepayment in installments over roughly one year, and KEPCO would deduct monthly electricity charges from the outstanding balance. Options under consideration for the remaining balance include paying interest every six months or discounting future electricity bills.
The interest rate under review would be higher than the two-year government bond yield and similar to or below the yield on two-year KEPCO bonds. The structure would let KEPCO raise money more cheaply than through its own bonds while giving the companies a better return than government debt. For the chipmakers, it would put idle cash to work while reducing the risk of delays in the grid construction their new plants require.
The prepayments would fund transmission and substation networks supplying the semiconductor industrial complexes in Yongin and the Honam region. Additional power demand from the early completion of the Yongin cluster and the new Honam cluster is estimated at 20.6 gigawatts, with regional artificial intelligence data centers accounting for another 7.9 gigawatts. KEPCO had originally planned to invest 72.8 trillion won in the grid through 2038, but the expansion of related projects has left it needing more funding.
KEPCO's thin financial cushion is another reason it is pushing to expand the scheme. Consolidated operating profit came to 4.91 trillion won in the first half, but debt rose to 210.7 trillion won at the end of June from 205.6 trillion won at the end of last year. Interest expenses alone reached 2.1 trillion won in the first half.
A special measure that temporarily raised KEPCO's bond issuance ceiling also expires at the end of 2027. With the limit reverting from 2028 to twice the combined total of capital and reserves, the utility needs funding sources beyond its own bonds to keep investing in the grid.
The 25 trillion won is close to a quarter of KEPCO's annual revenue. First-half revenue was 46.32 trillion won. If the prepayment is deducted evenly over five years, about 5 trillion won in electricity charges would come out of the balance each year from 2027. Based on recent revenue, that amounts to securing cash equal to roughly 5% of annual sales up front.
Because prepayments are recognized as revenue only when power is actually supplied, KEPCO's revenue and profit would not rise immediately. Instead, the utility could channel electricity charges it would otherwise collect later into grid construction and cut its bond issuance by that amount.
KEPCO said it has proposed the scheme to large power consumers including Samsung Electronics and SK hynix, adding that the companies' participation, the interest rate and the size and duration of any prepayment have not been decided.
