Korea Electric Power Corp., South Korea's state-run energy company under pressure to improve its financial health, said Sunday it will reduce its debts by 14.7 trillion won ($13.8 billion) over the next three years .
KEPCO's debt-cutting plan comes as the government is trying to normalize heavily-indebted public organizations. Eighteen state entities, including KEPCO, were put under scrutiny for their mounting debts and ordered to submit detailed blueprints on how they would reduce their liabilities.
The finance ministry said it rejected the plans from five organizations who were told to take more intensive steps. KEPCO's plan was given a go-ahead.
KEPCO said it will keep its debt ratio, or the ratio of total debt to total assets, at 143 percent in 2017. The debt ratio can also be viewed as the proportion of a firm's assets financed by debt.
KEPCO plans to expand its net profit to more than 2 trillion won by 2017. The company posted a net profit of 185.52 billion won last year, swinging to the black for the first time since 2007.
In order to achieve its goals, the company will make efforts, such as business restructuring, asset sales and cost-cutting, it said.
Through business restructuring, including cuts in investment cost in projects both at home and abroad, KEPCO will scale back its debts by 3 trillion won.
It will also raise 5.3 trillion won by selling its assets, including stakes in its subsidiaries such as KEPCO Engineering & Construction Co. and KEPCO Plant Service & Engineering Co. However, the company will hold at least a 51 percent stake in the two companies each to maintain its managerial rights.
Its stakes in other companies, such as Korea Electronic Power Industrial Development Co., a KEPCO unit for power plant maintenance, and LG Uplus Corp., the country's third largest mobile carrier, will be sold in their entirety, the company said.
The energy company, set to relocate its headquarters to Naju, 350 kilometers south of Seoul, late this year, is considering selling the land that houses its current main office in Seoul. The sale of the lot is expected to fetch a minimum of 3 trillion won.
KEPCO said it also plans to save 4.2 trillion won via cost-saving measures and raise 300 billion won by operating profitable businesses, and another 1.9 trillion won through reduced interest payments. (Yonhap)