Korea's wholesale power prices to be slashed amidst spike in capacity

Power generators brace for margin pressures.

Moody's Investors Service says that the growth in Korea's power capacity will hurt gas-reliant generators, but will help Korea Electric Power Corporation (KEPCO, A1 stable).

"Increasing power reserve margins and new baseload power plants will heighten competition among power generating companies, and will as a result reduce wholesale power prices," says Mic Kang, a Moody's Vice President and Senior Analyst.

"In particular, pressure on profit margins will be the highest for independent power producers over the next two to three years, given that they run mostly gas-fired generators," adds Kang. Kang was speaking on Moody's just-released special report titled, "Growth in Korea's Power Supply Will Create Pressure for Independent Power Producers." The report was authored by Kang.

Moody's expects power reserve margins in Korea to surpass 15% in 2015-16, as generation capacity additions outpace electricity demand growth. In addition, new coal and nuclear power plants will likely displace more expensive natural gas- and oil-fired units over the next two to three years.

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