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SK Holdings Falls on Power Price Cap Speculation: Seoul Mover

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Jan. 18 (Bloomberg) -- SK Holdings Co., which owns electricity producer SK E&S, tumbled in Seoul trading on speculation a government ceiling on its power selling price to state-utility Korea Electric Power Corp. will erode earnings.

SK Holdings fell 6.1 percent to close at 170,000 won today on the Korea Exchange, its steepest drop since Nov. 10, 2011. Korea Electric rose 1.5 percent to 34,250 won. The key Kospi index gained 0.7 percent.

Korea Electric, which purchases electricity from state and private power generators, has faced increasing operating losses since 2008. The utility will make a proposal on Jan. 28 to a state committee to impose a cap on the price it pays private power producers, the Korea Economic Daily reported today, citing unidentified company and government officials.

“Optimism related to the power generator’s growth momentum was the main driver for SK Holdings’ share gains last year,” Kang Eun Pyo, an analyst at Samsung Securities Co. in Seoul, said by phone today. “The report today is dragging down the parent’s shares.”

SK Holdings dropped 5 percent this year after advancing 48 percent in 2012. The Kospi rose 9.4 percent last year.

SK E&S posted 165 billion won ($156 million) of operating profit in the third quarter, or 17 percent of sales, according to its regulatory filing to the exchange. It had an operating margin of 7 percent in the same period the previous year, according to the filing.

Power purchasing costs accounted for 84 percent of the state utility’s overall expenses last year, according to its e-mailed statement last week.

To contact the reporter on this story: Sangim Han in Seoul at sihan@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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