South Korean utility major Korea Electric Power Corporation (KEP Quick QuoteKEP - Free Report) reported second-quarter 2016 net income of KRW 1,768 billion ($1.516.9 million), up 31.7% from KRW 1,342 billion in the year-ago quarter.

During the quarter, the company’s revenues, however, dropped 2.9% year over year to KRW 13,275 billion ($11,390 million).

The company’s operating income surged 29.5% to KRW 2,705 billion from KRW 2,088 billion in the year-ago quarter.

1H 2016 Results

Korea Electric Power’s first-half revenues grew by only 0.6%. However, its consolidated operating profits rose 45.8% to KRW6.3 trillion in the first half of 2016 from KRW4.3 trillion in the first half of 2015. This was mainly driven by reduction in fuel costs and electricity purchase costs. This includes an 18% year-on-year drop in generation fuel costs, a 15% decline in the cost of purchasing electricity from independent power producers, and a near-absence of tariff cuts since Jun 2015.

Lower prices for coal and liquefied natural gas (“LNG”) and higher generation volume from less costly nuclear reactors and coal-fired power plants mainly helped in reducing costs.

Financials

The company’s debt dropped to around KRW 56 trillion as of Jun 30, 2016, from KRW 59 trillion at 2015 end, attributable to its robust operating performance and cash flows from operations.

Korea Electric Power is an integrated electric utility engaged in the generation, transmission and distribution of electricity in South Korea. The company is a dominant player in Korea’s electricity sector. It is poised to capitalize on the growth opportunities in this market and benefit from the industry restructuring initiatives of the Korean government. It generated around 83% of the power consumed in Korea through six wholly owned generation companies in 2015.

Zacks Rank & Key Picks

Korea Electric Power sports a Zacks Rank #1 (Strong Buy). Other well-ranked players in the utility sector are CMS Energy Corp. (CMS Quick QuoteCMS - Free Report) , DTE Energy Company (DTE Quick QuoteDTE - Free Report) and NiSource Inc. (NI Quick QuoteNI - Free Report) , all carrying a Zacks Rank #2 (Buy).

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