Korea Midland Power Co. Ltd.

The stable outlook on KOMIPO reflects the outlook on KEPCO, given that the rating on KOMIPO is based on the company's core subsidiary status to KEPCO group. The buffer on KOMIPO's SACP is limited due to the company's weakened profitability and growing debt. However, the rating remains equalized to that on the parent. We may lower the rating on KOMIPO if we lower the rating on KEPCO. We would downgrade KEPCO if we lower the sovereign credit rating on Korea. A weakening of KEPCO's role as a policy arm of, or in its link to, the government could also lead to a downgrade. We may also lower our rating on KOMIPO if the company's relationship with KEPCO weakens significantly, potentially

...Rating equalized with that on parent. We expect Korea Midland Power Co. Ltd. (KOMIPO) to remain a core subsidiary of Korea Electric Power Corp. (KEPCO; ##/Stable/A-1+), given the integral nature of power generation in KEPCO's role of providing a stable supply of electricity to the country. KOMIPO accounts for around 10% of the nation's power generation volume. Meanwhile, we equalize the ratings on KEPCO with that on the government of South Korea (##/Stable/A-1+) due to its special public status of implementing the government's electricity policy. Profitability to remain weak, but gradually rebound from 2019. We estimate the company's margins remained under pressure in 2018 due to unfavorable wholesale electricity prices, which were not fully adjusted to compensate for the high coal costs. However, we expect KOMIPO's profitability to gradually recover from 2019, largely tracking KEPCO's profitability, given the profit-sharing between KEPCO and power generation subsidiaries (gencos). We estimate...

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