Good morning, and good evening. First of all, thank you all for joining this conference call. Now we will begin the conference of the fiscal year 2022 third quarter earnings results by KEPCO. This conference will start with a presentation followed by a divisional Q&A session. If you have a question, please press asterisk one on your phone during the Q&A. Now we shall commence the presentation on the fiscal year 2022 third quarter earnings results by KEPCO.
Good afternoon, this is Eunji Lee, Head of IR team KEPCO. On behalf of KEPCO, I would like to thank you all for participating in today's conference call to announce the earnings results for the third quarter of 2022. Today's call will be proceeded in both Korean and English. We'll begin with a brief presentation on the earnings results, which will be followed by a Q&A session. Please note that the financial information to be disclosed today is on a preliminary, unaudited, and consolidated basis in accordance with the Korean International Financial Reporting Standards. Any comparison will be on a year-on-year basis between last year and this year. Business strategies, plans, financial estimates and other forward-looking statements included in today's call are based on our current expectations and plans. Please be noted that such statements may involve certain risks and uncertainties. Now, Ms.
Eunji Lee, Senior IR Manager, will begin with an overview of earnings result for the third quarter of 2022, first in Korean and repeat in English.
Now we will provide the overview in English, starting with the operating income. In the third quarter of 2022, KEPCO recorded an operating loss of KRW 21.8 trillion. To take a closer look, operating revenues increased by 14.7% to KRW 51.8 trillion year-on-year. Power sales revenue rose by 12.8%, KRW 48 trillion, while revenues from overseas and other businesses increased by 44.9% to KRW 3.8 trillion. Moving on to main operating costs, cost of goods sold and selling, general, and administrative expenses increased by 59.1%, KRW 73.6 trillion. Fuel costs were hiked by 79.9% to KRW 24.3 trillion, due to rapid increase in LNG and coal prices. Next, purchased power costs surged by 100.5% to KRW 30.1 trillion.
This was due to larger purchased power volume from the independent power producers and high unit price of purchased power. Depreciation costs rose by 4.1% to KRW 8.1 trillion, due to the increase in depreciable assets resulting from the completion of facilities. Now let me explain KEPCO's non-operating segment. The net financial loss was KRW 2.3 trillion, increased loss by KRW 0.9 trillion from the last year. As a result of the foregoing, we reported a calculated consolidated net loss of KRW 16.6 trillion, which is a KRW 15 trillion decrease from KRW 1.6 trillion of consolidated net loss in the previous year. That concludes the overview. At this point in time, we'd like to briefly share some information related to the earnings results.
[Foreign language].
First, we'd like to give you some key information related to power sales. Power sales in the third quarter of this year due to rising demand for the usage of air conditioning and cooling, as well as improved exports of the Korean companies. It rose by 3% compared to the same period last year. Taking this into account, if we look at the yearly figure for 2022, we expect it to rise by 3%.
[Foreign language].
Moving on to the fuel cost, fuel unit cost. In the third quarter, reflecting the international fuel price trends, the unit cost for fuel for coal was roughly KRW 290,000 per ton, while for LNG the cost was roughly KRW 1.56 million per ton. Bearing these international fuel cost trends in mind, on an annual basis, our assumption for coal unit price for the year would be somewhere around the upper KRW 200,000 levels per ton. This is excluding associated cost for unloading at docks. For LNG, we expect it to be somewhere around the mid-million KRW levels per ton.
[Foreign language].
Moving on to information about the generation mix for Q3. Compared to the same quarter for the previous year, the portion taken up by nuclear generation has increased while the coal contribution has decreased. On an annual basis compared to the previous year, that is 2021, we expect the contribution of nuclear in the total generation mix to grow while coal and LNG will slightly drop.
[Foreign language].
Moving on to RPS and ETS related expenses. In the third quarter, the recorded costs for these are as follows. The RPS expenses on a consolidated basis reported KRW 970 billion, and on a non-consolidated basis, KRW 1.2 trillion. For ETS related costs on a consolidated basis, it recorded minus KRW 8 billion and for non-consolidated - KRW 1 billion.
[Foreign language].
This concludes the summary of key management indicators.
[Foreign language] . Now let us move on to the Q&A session. Since we will proceed the session in both Korean and English, please make your questions and answers brief and clear. Thank you.
[Foreign language].
Now Q&A session will begin. Please press asterisk one if you have any questions. For cancellation, please press asterisk two on your phone.
[Foreign language].
The first question will be given by Moon Kyung-won from Meritz Securities. Please go ahead.
[Foreign language].
The first question I'd like to ask is related to sales of assets. According to what was given as information ahead of time, it seems that there are plans for sales of assets totaling up to about KRW 6 trillion. I'd like to ask about the timing related to these sales, as well as how far those plans have been implemented. The second question is related to interest costs, interest expenses. It seems to be quite notable in the figures that came out as results for this quarter. I would like to ask if the reason behind this increase is due to the increase in debt or were there any other factors involved? The last question I'd like to ask is about the increase of nuclear portion within the generation mix.
Is this due to the entering into operation or increase of operation of Shin Hanul 1, or is there any other factor that was involved? I'd like to ask for some plans moving forward about this area as well. Yes, allow me to answer your first question. Indeed, there are some midterm plans that have been established quite recently in order to improve our financial status, given the current challenging environment. Among those plans are sales of non-core assets, including some facilities overseas as well as real estate assets that we own. The plans have been set with a timeline of up to 2026. However, we will be coming up with more detailed, shorter- term or midterm plans, but once they become more concrete, we will share that information with you at that given time.
Answering your third question ahead of time is related to the increase in the proportion of nuclear in the overall generation mix. Indeed, for this third quarter, that ratio has been increased, and that is due to the utilization rate increase of nuclear power plants within KEPCO. If we look at the figures for last year, that is to say, for the third quarter of 2021, utilization rate of the nuclear power plants was 69.7%, whereas this year for the third quarter it has grown to 82.4%. As for the Shin Hanul 1 plant, as you have asked about, indeed it is in the process of doing test operations right now, and we expect commercial operation to launch within the year.
We do not have an exact timeline to share with you at this point in time, but we will do so moving forward. Yes, allow me to answer the second question. For the increase of interest related expenses for the third quarter. The main reason behind that is the growth of borrowings. Next question, please. Currently, there are no participants with questions. Please press asterisk one to give your question. The following question is by Moon Kyung-won from Meritz Securities. Please go ahead.
Yes. This is Moon Kyung-won. Since there seems to be no questions, I would like to ask one more. Recently, there have been a lot of articles coming out regarding fund supply. During this winter period, are you thinking that we will be able to get through this winter well with alternative financing methods such as bond issuance or bank loans?
Yes. Since there doesn't seem to be any other questions from other entities at this moment, I'd like to ask one more question. Recently, we have read some articles related to financing options for KEPCO, and I believe that your plans are to raise capital during the winter period through issuance of KEPCO bonds or borrowings from banks. So are these the main plans or do you have any other long- term options that you are looking into for financing? Indeed, as you have mentioned, we are witnessing a growth of borrowings at KEPCO and other measures that we are looking into are striving to achieve the amendment of the KEPCO law so that we can actually do more issuances and also increase borrowings from banks. We are looking into diversification of lending sources for these debts.
Next question, please. Currently, there are no participants with questions. Please press asterisk one to give your question. The following question is by Kim Dong-ha from Kyung Investment Assets. Please go ahead.
Yes, my question is a little bit related to the previous question, I think, but I would like to ask for further elaboration if possible. It was mentioned earlier that financing will be pursued on KEPCO's side by additional issuances of bonds or also increasing the level of borrowings from banks. However, I believe that the situation may not be that favorable because even in the case of eliminating the ceiling or cap in order to issue more, I think in previous cases, for example, in October, there was a situation where it really didn't reach full capacity. Also if you look at the situation of the commercial banks currently, I think the size of the lending that they can provide is not that excessive as well. Given that as a backdrop, do you have any other financing plans that have been set up?
Additionally, if you could elaborate a bit more on the repayment schedule for 2023 and what plans you have in mind to pay back those loans that are coming up with the 2023 maturity deadline. Yes, allow me to answer that question. As mentioned earlier, our basic approach is to make sure that we do not have any financing related issues arising by taking measures to increase the level of issuances that we can go and undertake, as well as diversification of sources of financing at the same time. One more thing that we want to additionally mention is the fact that we have already taken measures in place to make sure that we do not have those types of liquidity issues that may arise by adjusting the power purchase related payment schedule.
All of these efforts will be in line with the overarching plan that we have in place for financial consolidation. This will include strengthening our financial status as well as achieving mobilization of tariffs that reflect more correctly the costs involved. Related to your specific question about the repayment schedule for 2023, we will.
Next question. The following question is by Park Gwang-rae from Shinhan Investment & Securities. Please go ahead.
[Foreign language].
Thank you. I'd like to ask the question related to the SMP cap system that was mentioned in the press about being implemented for a temporary basis. I understand that the current discussions are looking at an implementation for about a three-month period. If you could elaborate and explain a little bit what this will entail and what is included in the overall plan, that would be helpful for our understanding. Also, when we had the conference call in May, I think there was some information about the initial version of the draft of this plan that was introduced, and at that time, there was some mention about the economic effects and benefits that can be seen on a monthly basis once this is implemented.
Taking that into consideration, could you elaborate on what kind of effects or, results you expect to see if the system is implemented at this point in time?
[Foreign language].
Thank you very much for that question. I believe that what you were referring to in terms of the information provided in May was related to what was given as information by the Ministry of Trade, Industry and Energy back at that period. At the time, the ministry announced that it had plans to pursue this type of a system to be implemented, and they had to go through some process of collecting information as well as opinions from the relevant parties. According to the recent reports in the media, it is my understanding that the government is still going through a review of how this scheme will be established and also implemented, and therefore, they are still in the review process and coordinating the details of what will be included.
At this point in time, that plan is currently under review and being assessed as a regulation. In terms of when it will be implemented and the details included in it has not been fully decided yet, I believe. That is my understanding. As for your question about what kind of economic effects this will have, at this point in time, it is very difficult to make predictions due to the fact that, of course, it will set the cap or the limit, the upper limit on the SMP. However, due to the fluctuations we see in the market related to fuel costs and other economic elements, it is difficult for us to give you those types of figures at this point in time.
[Foreign language].
Next question, please.
[Foreign language].
The following question is by Lee Jong-hyung from Kiwoom Securities. Please go ahead.
[Foreign language].
Yes, I have a question related to tariffs. Recently in October, there was also a rate increase which has been implemented separately and differently for various areas. According to the stories that we see in the media, there are some discussions or talks about another possible increase of 40-51 levels. I think given these types of movements, it's very confusing for us to understand what the clear picture about those tariff system is because there was one introduced and announced back in the end of 2020. Since then, there have been many changes and talks and discussions about these changes that seem to be rumored here and there.
I would like to ask, related to the tariffs, what are the current discussions underway with the government?
Yes, allow me to answer that question. As you have rightly mentioned, at the end of 2020 we did announce an amendment of the tariff system, and that is still being implemented to this day. We had two unique elements that were introduced during that revision at the end of 2020, which is the fuel cost adjusted tariff system, as well as the introduction of the climate related charges. The climate related charges have been separately announced at regular intervals. Also for the fuel cost related re-tariff, that is always reflecting the changes in the standard fuel cost. On a quarterly basis, we do calculations for what that will be. Those are the current systems that are under operation right now.
It is true that due to the drastic rise of fuel costs, we have had to adjust to the rising costs involved for our organization. Therefore there are elements in place for us to have a tariff hike. In terms of the speed of that hike and what the range is going to be, that is always due to discussions with the government. Since all of these elements are subject to discussions with the government, we will do our utmost to have close communications with the government to be able to correctly reflect the appropriate signals that are in the market for any increases of cost. Next question, please. Currently, there are no participants with questions. Please press asterisk one to give your question. The following question is by Kim Dong-ha from Kyung Investment Assets. Please go ahead.
If I'd like to ask an additional question related to the previous question about tariffs. According to the reference data that was given a while back, I believe that my understanding is you have your quarterly fuel costs and also you derive and calculate the standard fuel cost that will be the basis for your further calculations for tariff. I know that you mentioned earlier that there are further discussions that need to take place with the government, but may I understand that until a new announcement for amendment of the system is notified for us, are we correct in assuming that all of your calculations will be based upon the previous system that you have announced?
Well, related to any changes in the standard fuel cost, we are in close communication with the government, and we will continue to do so for the remaining period of the second half. Next question, please. Currently, there are no participants with questions. Please press asterisk one to give your question.
Thank you very much. It seems that there are no further questions. We will wrap up the Q&A session here. KEPCO would like to conclude the earnings release conference call. Thank you again for your participation today. Thank you.
This concludes the fiscal year 2022 third quarter.