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Kepco Rallies to 29-Month High on Tariff Increase: Seoul Mover

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Jan. 10 (Bloomberg) -- Korea Electric Power Corp., which supplies all of South Korea’s electricity, rose to a 29-month high in Seoul trading after raising power tariffs.

The state-controlled monopoly distributor known as Kepco climbed 3.6 percent to 32,800 won at the close on the Korea Exchange, the highest level since July 30, 2010.

South Korea will raise electricity prices by an average 4 percent starting next week, the second increase in five months, the Knowledge Economy Ministry said yesterday. The country’s power consumption surged to a record on Jan. 3 and reduced the country’s capacity reserve buffer below the 10 percent minimum.

“The tariff increase will accelerate the company’s earnings turnaround,” Kim Dae Sung, an analyst at Hyundai Securities Co., said in a report today. The company may post 5.1 trillion won ($4.8 billion) in operating profit in 2013, compared with an estimated loss last year, said Kim, who raised his share-price estimate by 18 percent to 39,000 won.

Kepco had posted losses as government controls on prices to curb inflation prevented it from passing on higher costs to users. Credit Suisse Group AG raised its stock rating to outperform, the equivalent of buy, while Korea Investment & Securities Co., Samsung Securities Co. and LIG Investment & Securities Co. increased their share-price estimates.

Kepco Chief Executive Officer Cho Hwan Eik said in his new year speech to employees that the utility should increase electricity prices to forestall a power crisis. Cho was appointed on Dec. 17 after a struggle between the government and his predecessor Kim Joong Kyum over raising prices led to his resignation in November, before the end of his term.

To contact the reporters on this story: Sangim Han in Seoul at sihan@bloomberg.net Saeromi Shin in Seoul at sshin15@bloomberg.net

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Darren Boey at dboey@bloomberg.net

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