韩国政府拟整合油气公企，韩国天然气公社或面临吸收石油公社债务压力

The merger of Korea Gas Corporation (036460) and Korea National Oil Corporation has been on the table since the Park Geun-hye administration. Because oil and gas are often found together during drilling, officials have viewed a merger as a way to improve efficiency in resource development. Concerns remain, however, that the combined entity's financial health could deteriorate as Korea Gas Corporation absorbs the oil company's accumulated bad assets.
Under the government's plan to overhaul the functions of state-run institutions, announced on the 3rd, Korea Gas Corporation and Korea National Oil Corporation will be merged into a new entity tentatively named Korea Energy Resources Corporation. The oil company's stockpiling operations and its limited oil exploration and development functions will be transferred to the new corporation, while functions related to improving distribution structures, such as the discount gas station program, will go to the Korea Petroleum Quality and Distribution Authority.
An official at the Ministry of Trade, Industry and Energy said few advanced economies operate separate state-run oil and gas companies, adding that combining the two institutions makes sense from a resource development standpoint. The reasoning is that synergy could emerge by pairing Korea Gas Corporation's international clout and financial capacity — the company directly supplies a substantial share of the liquefied natural gas consumed in the country — with the oil company's accumulated experience in resource development. The Korea Mine Rehabilitation and Mineral Resources Corporation, which had initially been floated as a third party to the merger, will be left in place, reflecting a judgment that combining it would bring no benefit because extraction and exploration methods for minerals differ greatly from those for oil and gas.
The problem is that the new Korea Energy Resources Corporation could stumble on its financial structure from the outset. Korea National Oil Corporation had accumulated more than 20 trillion won in debt as of the end of last year, leaving it with liabilities exceeding assets — a state of complete insolvency.
Korea Gas Corporation is currently posting relatively stable operating profits, but its uncollected receivables still stood at 14.178 trillion won as of the first half of this year. If mounting geopolitical uncertainty in the Middle East sends global LNG prices swinging, operating profit could turn to a loss at any time.
Korea Gas Corporation's status as a listed company is another point of contention. A government official said that unlike the power generation companies under KEPCO (015760), Korea Gas Corporation has individual shareholders, and warned that overcoming shareholder resistance would not be easy if the company had to take on the oil company's troubled structure as is.
The five state-run power generation companies — Korea South-East Power, Korea Midland Power, Korea Western Power, Korea Southern Power and Korea East-West Power — which were split off in 2001 on the premise of KEPCO's phased privatization, will be brought back together. With KEPCO holding 100% of their stakes as it does now, the government concluded that the originally intended goal of efficiency through competition was not being achieved, and opted instead for economies of scale. The industry ministry said research and development costs of around 50 billion won a year and renewable energy construction projects worth about 200 billion won a year are being scattered across the individual generators, and that management and administrative support organizations are heavily duplicated, in explaining the rationale for merging the five into a new entity tentatively named Korea Power.
The combined entity will house a renewable energy division dedicated to large-scale projects such as offshore wind, along with a just transition division to handle the phase-out of coal-fired generation. In addition, renewable energy divisions tasked with driving the regional expansion of renewables will be set up at three to four locations nationwide. The move appears to take into account that the headquarters of the five generators are currently spread across Busan, Ulsan, Jinju in South Gyeongsang Province, Taean in South Chungcheong Province and Boryeong in South Chungcheong Province. With competition among local governments to host the headquarters intensifying ahead of the merger, the plan is to create several substantial divisions and distribute them across the country.
Meanwhile, Korea Coal Corporation will move ahead in earnest with liquidation, given that all of its mines have closed following the shutdown of the Dogye mine in Samcheok, Gangwon Province, in June last year. In addition, the Korea Energy Agency, the Korea Energy Foundation and the Korea Energy Information and Culture Agency, which perform similar functions, will be consolidated into the Korea Energy Agency. The Nakdonggang National Institute of Biological Resources and the Honam National Institute of Biological Resources, both under the Ministry of Climate, Energy and Environment, will also be absorbed into the National Institute of Ecology.