KEPCO (KEP) Spreads AI Grid Capex Over Years to Meet Bond Cap

Korea Electric Power Corporation (KEP) told investors on August 12, 2026 that the generation and grid investment required by Korea's fast-tracked AI and semiconductor projects will be spread across multiple quarters and years, because the utility has to bring its corporate bond issuance down to two times capital and reserves [1]. It is so far the only company to disclose this constraint directly.

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A bond ceiling, not connection demand, now paces Korea's grid work

KEPCO is Korea's transmission and distribution monopoly. It buys almost all of the country's generated power and resells it to end users at government-approved tariffs, and it tenders essentially all new domestic transmission lines, substations and high-voltage direct current (HVDC) links — the technology used to move large volumes of power over long distances. It funds that construction mainly by issuing corporate bonds, and the KEPCO Act caps outstanding bonds at a multiple of share capital and reserves. The five-times allowance runs only to December 31, 2027, after which the ceiling reverts to two times, and in February 2026 management put the actual ratio at just over three times [2]. In 2026 the Korean government designated a semiconductor cluster, AI data centres and physical AI as three fast-tracked national projects [3]. Those loads need power and grid connections, and the supporting generation and transmission fall to KEPCO.

The change sits on the funding side. The only builder has to clear bond headroom first, so how much work it can release no longer tracks only the load queued up for connection. The direct way to grow capital and reserves is profit, and its profit comes from government-approved tariffs. That ties the timing of grid orders to the cost of industrial power. SK Telecom has announced plans for an AI data centre of up to 15GW in Ulsan [4]; the connection and supporting generation obligation lands on KEPCO, whose answer is to spread the spending out rather than commit it up front [1].

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From three times to two: the timetable and the price management named

An analyst on the call asked directly where the money for the national projects would come from. Management answered that the full amount is not needed at once, that the company faces the challenge of cutting bond issuance to two times capital, and that it will build a mid-to-long-term capex plan, distribute the total across multiple quarters and years, and manage existing funds strictly [1]. No specific funding plan was disclosed. Six months earlier, on February 26, 2026, management said that once the dividend was settled by the board and shareholders the multiple would come in at just over three times [2] — a real distance from two times, and not something a single accounting adjustment closes.

The other half of the answer is the tariff. Management said a tariff increase would be very helpful in working through accumulated operating losses and meeting the bond issuance requirement, though inflation and the broader macro picture have to be weighed; a regional differentiated tariff will go to public hearing in the second half, be finalised and introduced by year end, and move alongside reform of the regional wholesale power pricing mechanism [1]. The same call reported first-half power sales of 266.7 TWh, down 0.6% year over year on weaker industrial demand, and consolidated borrowings of KRW 133.3 trillion [1]. The pressure to shrink bond issuance is present now; the volume from AI load is not.

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Order timing and industrial power prices share one constraint

Domestic grid equipment orders will follow the pace at which KEPCO frees up bond headroom. Awarded transmission, HVDC and substation work does not disappear, but the point at which it converts to revenue can move out, which is a different thing from losing the order. On the consumption side, the route to larger capital and reserves runs through tariffs, so the per-kilowatt-hour cost paid by industrial and data-centre users is on an upward path — and the higher it goes, the better the economics of building generation on site and bypassing the grid.

Only KEPCO has disclosed any of this directly. No supplier has confirmed a delayed order on its own account, no tariff decision has been made, and neither the pace of the deleveraging nor the size of any increase exists yet as a number. Two things are trackable from here: how the ratio of outstanding bonds to capital and reserves moves from just over three times toward two, and whether the regional and corporate differentiated tariff is actually introduced by the end of 2026 [1][2].

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Companies exposed to this change

• Taihan Cable & Solution (001440.KS): A cable maker that won a section of KEPCO's East Coast-to-East Seoul HVDC Phase 2 project and has borrowed heavily for subsea cable capacity and an installation fleet; the release date of its domestic orders sits inside exactly the capex being spread across years.
• Iljin Electric (103590.KS): A power equipment maker that took another section of the same HVDC tender and guides to more Korean demand from data centres and renewables; it is one of the few in this group to publish the domestic-versus-overseas split of its backlog, which makes it useful for watching the pace of domestic orders.
• SK Gas (018670.KS): Holds a majority stake in the Ulsan GPS gas-fired generation project and, through SK Multi Utility, supplies SK Telecom's Ulsan AI data centre at a lower price than KEPCO; every tariff increase and every deferred connection widens the gap that makes bypassing the grid worthwhile.

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Sources

[1] Drillr - Korea Electric Power Corporation (KEP) - 2026-08-12 - FY2026 first-half earnings call

"It does not necessarily mean we need the full amount upfront at once. At the same time, we do face the challenge of reducing the bond issuance amount to two times of capital. So I think we need to take a balanced approach. We need to develop a mid-long-term CapEx plan and calculate the total CapEx amount that may be necessary for these projects. and try to distribute that across multiple quarters and years and also have strict management approach towards the management of funds that we already have."

[2] Drillr - Korea Electric Power Corporation (KEP) - 2026-02-26 - FY2025 Q4 earnings call

[3] AAStocks - Korea's Ministry of Economy and Finance eases regulation for three mega-projects in semiconductors, physical AI and AI data centres - 2026-08-13 - news report - https://www.aastocks.com/tc/stocks/news/aafn-con/NOW.1537976/latest-news/AAFN

[4] PR Newswire - SK Telecom pursues 15GW AI data center buildout in Ulsan - 2026-07-05 - company announcement - https://www.prnewswire.com/news-releases/sk-telecom-pursues-15gw-ai-data-center-buildout-aiming-to-become-asias-ai-infrastructure-hub-302817963.html

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