Samsung and SK hynix push KEPCO's 25 trillion won grid bill back onto the bond market
The two chipmakers turned down a request to pay five years of power bills upfront, leaving the grid buildout to bonds KEPCO sold at 4.00% to 4.41% last month, with its statutory issuance ceiling tightening at the end of 2027.
The Investor · Invest desk
What happened
- Samsung Electronics and SK hynix told KEPCO they could not join a plan to prepay 25 trillion won of electricity charges, about 20 trillion won from Samsung and 5 trillion won from SK hynix, or five years of bills.
- Under the terms offered, KEPCO would have paid interest above the two-year treasury yield and deducted principal and interest from the companies' bills every six months, making them long-term lenders repaid in power.
- The money was to advance transmission and substation work for the Yongin and Honam chip clusters and AI data centres; LS Securities puts the three projects' combined power need at 39.7 gigawatts.
- KEPCO's total debt stood at 210.7 trillion won at the end of June, with interest costs running at about 11.5 billion won a day.
- The waiver that lets KEPCO issue bonds up to five times its capital and reserves, or six times in urgent cases, expires at the end of 2027, and the utility has said it will not seek an extension.
Why it matters
- What it limits constraint Once the two-times ceiling returns, every won of retained profit or new paid-in capital buys two won of bond capacity, so the pace of the grid programme tracks KEPCO's equity base.
- What it costs cost Funding the same 25 trillion won with bonds at last month's 4.00% two-year yield costs about 1 trillion won a year in interest, roughly a quarter of what KEPCO already pays, and ratepayers or the state fund it.
- Who's exposed exposure Advancing grid work for the chip clusters now waits on KEPCO's own borrowing capacity, so fab and data-centre power timetables are exposed to a balance sheet the two largest users declined to fund.
- What doesn't add up contradiction The two reports measure KEPCO's leverage differently, and 4.20 trillion won of annual interest against 130 trillion won of borrowings implies about 3.2% while the same interest against 210.7 trillion won implies about 2.0%, which changes how much a refinancing wave at 4.00% to 4.41% costs.
Next story · Invest · 14h ago
Carmakers, defense and biotech outpace chips in KOSPI's 2.05% reboundConfirmed3 publishers
The offer had a price. KEPCO would have paid a rate above the yield on two-year treasury bonds and settled it by deducting principal and interest from the two companies' electricity bills every six months [5]. Its own two-year notes cleared at 4.00% last month, three-year paper at 4.22% and five-year at 4.41% [12]. The reports do not state the treasury yield, so the saving on the table was the spread between what KEPCO pays the bond market and what it would have paid a customer.
The interest saving probably mattered less than the fact that prepayments do not consume the issuance cap. The statutory ceiling applies to bond issuance, and prepaid electricity charges are not bonds, so 25 trillion won of customer money would have paid for transmission lines and substations without consuming any of the cap [29]. "We are not considering an extension of the five- to six-times expansion, and we are weighing various options to make financing workable within the existing two-times limit," a KEPCO official said [8].
Set the refused sum against the borrowing it was meant to replace. KEPCO sold 12.21 trillion won of its own bonds in the eight months to the end of August [17], an annual run rate near 18.3 trillion, which makes 25 trillion about sixteen months of issuance [25]. Operations cannot cover it. LS Securities forecasts 18.192 trillion won of operating cash flow this year against 18.931 trillion of spending on tangible and intangible assets [18], so capital expenditure runs at 104% of the cash the business generates and the gap is 739 billion won [26].
Divide the request by five and Samsung paid about 4 trillion won for electricity last year, SK hynix about 1 trillion [27]. The two customers' combined annual power bill is roughly a fifth larger than KEPCO's yearly interest cost [23]. Both agreed with the aim of accelerating power infrastructure but judged that paying five years at once was too heavy a burden, with memory earnings strong now and the volatility of the chip industry making a five-year assumption hard, according to sources cited by Sedaily [9]. They also weighed the commitment against the market outlook and their own investment plans [10].
Both accounts come from Sedaily and are sourced to business and industry people. A KEPCO official confirmed the outcome: "It is true that Samsung Electronics and SK hynix communicated their refusal of our proposal" [4].
Sedaily reports that further electricity rate increases are difficult to push through, and that unless KEPCO raises rates or secures large amounts of outside capital its reliance on KEPCO bonds and other debt could increase [15]. I would expect an equity injection or an industrial tariff rise before 2028 on that reading. Against it: KEPCO is profitable [19], a profitable year adds to reserves, and if operating cash flow grows faster than capital spending then prepayment was only a convenience. The utility said it had not proposed prepayment to any company other than Samsung and SK hynix [3], so no second set of prefunders is being tested. "KEPCO expected that securing prepayments from Samsung Electronics and SK hynix would let it cut additional corporate bond issuance while funding grid construction, but the refusals leave it having to look for new funding options," an industry official said [14].
What to watch
- KEPCO's 2027 issuance plan, and whether it fits inside the two-times ceiling without an electricity rate increase.
- Any move to inject paid-in capital, sell assets, or otherwise bring in outside capital ahead of the waiver's expiry.
- A revised prepayment offer on a term shorter than five years, which the chipmakers said was the burden they could not carry.
Information, not investment advice. This story is general information about companies and markets, drawn from cited reporting. It is not a recommendation to buy, sell or hold any security; check the cited sources before acting.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence68
- Adoption
- Not scored
- Hype gap+12
- Incentives62
- Confidence70
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
Samsung Electronics and SK hynix have declined Korea Electric Power Corp.'s request to prepay 25 trillion won in electricity bills, adding uncertainty to how the utility will fund its power grid investments.
- [2]
KEPCO had been pursuing a plan to collect five years' worth of electricity bills upfront, about 20 trillion won from Samsung Electronics and about 5 trillion won from SK hynix, based on the charges the two companies paid last year.
- [3]
KEPCO said it had not proposed prepayment to any companies other than the two.
- [4]
"It is true that Samsung Electronics and SK hynix communicated their refusal of our proposal," a KEPCO official said.
- [5]
KEPCO would apply an interest rate above the yield on two-year treasury bonds to the prepayments, then deduct principal and interest from electricity bills due every six months; in effect the chipmakers would lend long-term funds to KEPCO and recover them through future power charges.
- [6]
KEPCO's total debt stood at 210.7 trillion won as of the end of June this year, with daily interest costs of about 11.5 billion won.
- [7]
In principle the ceiling on KEPCO bond issuance is twice the sum of its paid-in capital and reserves, but after the 2022 losses the law governing KEPCO was amended to temporarily allow up to five times that amount, or six times in urgent cases, through the end of 2027, after which the two-times ceiling applies again.
- [8]
"We are not considering an extension of the five- to six-times expansion, and we are weighing various options to make financing workable within the existing two-times limit," a KEPCO official said.
- [9]
Samsung Electronics and SK hynix agreed with the aim of accelerating power infrastructure but judged that paying five years of costs at once would be too heavy a burden, according to sources; earnings and cash generation at both have improved sharply on strong memory demand, but the volatility of the chip industry makes it hard to assume the current upturn will last another five years.
- [10]
The two chipmakers concluded that committing tens of trillions of won at once would be difficult given the outlook for the market and their investment plans.
- [11]
KEPCO planned to channel the prepaid charges first into expanding the national backbone power grid, allowing it to move up investment in transmission and substation networks in areas expected to see large power demand, including the Yongin semiconductor cluster.
- [12]
KEPCO bond issuance yields last month were 4.00% for two-year notes, 4.22% for three-year notes and 4.41% for five-year notes.
- [13]
KEPCO's total borrowings are estimated at around 130 trillion won by the end of this year.
- [14]
"KEPCO expected that securing prepayments from Samsung Electronics and SK hynix would let it cut additional corporate bond issuance while funding grid construction, but the refusals leave it having to look for new funding options," an industry official said.
- [15]
With further electricity rate increases difficult to push through, unless KEPCO raises rates or secures large amounts of outside capital its reliance on KEPCO bonds and other borrowing could increase.
- [16]
LS Securities estimated the power needed for the three megaprojects at a combined 39.7 gigawatts: 15 GW for the Yongin semiconductor cluster, 18.4 GW for AI data centers and 6.3 GW for the Honam semiconductor cluster.
- [17]
KEPCO issued 12.21 trillion won of KEPCO bonds through the end of August this year.
- [18]
LS Securities forecast KEPCO's operating cash flow at 18.192 trillion won this year, against expected spending on tangible and intangible assets of 18.931 trillion won.
- [19]
KEPCO is profitable, but its own cash alone is barely enough to cover the growing investment.
- [20]
An annual interest cost of about 4.20 trillion won against roughly 130 trillion won of total borrowings implies an average rate of about 3.2%.
- [21]
The same 4.20 trillion won of annual interest measured against 210.7 trillion won of total debt implies an average rate of about 2.0%, so the two reported balance-sheet figures give materially different implied costs of funds.
- [22]
Raising 25 trillion won in bonds at last month's 4.00% two-year yield costs about 1 trillion won a year in interest, roughly a quarter of KEPCO's current annual interest bill.
- [23]
The two chipmakers' combined annual electricity payments of about 5 trillion won are roughly a fifth larger than KEPCO's yearly interest cost of about 4.20 trillion won.
- [24]
Interest of about 11.5 billion won a day is about 4.20 trillion won a year.
- [25]
Bond sales of 12.21 trillion won in eight months annualise to about 18.3 trillion won, making the refused 25 trillion won roughly sixteen months of issuance.
- [26]
Capital spending of 18.931 trillion won against 18.192 trillion won of operating cash flow is 104% of cash generated, a gap of 739 billion won.
- [27]
Dividing the requested prepayments by five implies Samsung paid about 4 trillion won and SK hynix about 1 trillion won in electricity charges last year.
- [28]
Under a two-times ceiling, each additional won of paid-in capital or reserves adds two won of KEPCO bond issuance capacity.
- [29]
The statutory ceiling applies to KEPCO bond issuance, and prepaid electricity charges are not bonds, so 25 trillion won of customer prefunding would have paid for transmission lines and substations without consuming any of the cap.
Sources
2 independent publishers whose own reporting we read for this story.
- cryptobriefing.comSamsung, SK Hynix reject KEPCO’s $17B prepayment proposal for power grids
1 article · September 13, 2026
- en.sedaily.comSamsung, SK Reject KEPCO's 25 Trillion Won Prepayment Request
3 articles · September 14, 2026
Topics and entities
Topics
- South Korean semiconductor industry
- AI Data Center Power Demand
- Power grid financing
- State utility debt