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Korea Electric Falls on Nuclear Reactor Shutdowns: Seoul Mover

Korea Electric Falls on Nuclear Reactor Shutdowns
The No. 4 reactor building stands at Korea Hydro & Nuclear Power Co.'s Kori nuclear power plant as ships sail past in Busan. Photographer: SeongJoon Cho/Bloomberg

May 29 (Bloomberg) -- Korea Electric Power Corp. fell to the lowest in five months in Seoul trading after South Korea’s government ordered the shutdown of two nuclear reactors found to be using components whose safety certificates were faked.

Korea Electric, parent of nuclear operator Korea Hydro & Nuclear Power Co., slid 5.1 percent to 27,200 won at the close on the Korea Exchange, the lowest level since Dec. 13. Analysts at Daishin Securities Co. and Shinyoung Securities Co. cut their share-price estimates to 40,000 won and 35,000 won respectively, citing prospects the shutdowns would hurt operating profit.

The Shin-Kori No. 2 and Shin-Wolsong No. 1 reactors will be shut for about four months to replace control cables supplied under fake quality warranties, the Energy Ministry said yesterday. The government also ordered the replacement of cables at the Shin-Kori No. 1 reactor, which is already shut for regular maintenance, and at the new Shin-Wolsong No. 2 plant, which is in review before commencing operations.

“Considering that it will take at least four months to restart operations at the three suspended nuclear reactors, the company’s operating profit for this year is estimated to be cut by 20 percent, or 700b won ($620 million), negatively impacting profit figures in the second and third quarter,” Yang Ji Hwan, an analyst at Daishin, said by phone today.

South Korea’s nuclear regulator began its investigation in April following information from a whistle-blower, according to the ministry. An earlier probe into faked certificates led to the suspension of two reactors in November. Korea Hydro Chief Executive Officer Kim Kyun Seop said at the time he would resign once the certificates “mess” was fixed.

South Korea, which depends on nuclear energy for more than 30 percent of its electricity, may face “unprecedented” power shortages during the summer because of the halts, Vice Minister for Energy Han Jin Hyun told reporters yesterday. The decision will mean 10 of South Korea’s 23 reactors are off-line, according to Korea Hydro.

Expectations that the power price that Korea Electric pays to private generators may increase as a result of the shutdowns boosted other electricity-related companies today, Choi Ji Hwan, an analyst at NH Investment & Securities Co., said by phone. SK Holdings gained 4.4 percent while GS Holdings rose 0.9 percent, compared with a 0.8 percent gain in the benchmark Kospi index.

To contact the reporters on this story: Sharon Cho in Seoul at ccho28@bloomberg.net; Shinhye Kang in Seoul at skang24@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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