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Issuer Credit Research

Issuer Flash: Korea Midland Power Co., Ltd.

Issuer: Korea Midland Power | Document: Issuer Flash | Date: 2026-09-03 | Event: Q2 2026 Results

Report date: 2026-09-03 Event date: 2026-08-31 Event title: 2Q 2026 Consolidated Financial Statements

1. Flash Conclusion

Korea Midland Power Co., Ltd. ("KOMIPO") reported a material deterioration in its official 2Q 2026 consolidated financial statements. Revenue for the first half was broadly flat year on year, but the company moved from a KRW23.9bn operating profit in 1H2025 to a KRW139.3bn operating loss in 1H2026, with a KRW131.7bn net loss. The second quarter accounted for most of the weakening: a KRW211.3bn operating loss and a KRW159.8bn net loss, compared with losses of KRW78.4bn and KRW60.7bn respectively in 2Q2025.

The result weakens KOMIPO's standalone earnings and liquidity cushion relative to the position described in the May 2026 issuer summary and 1Q flash. Operating cash flow remained positive, but investment outflows exceeded it substantially, and financing inflows were necessary to maintain cash. Current financial liabilities increased to KRW2.819tn at end-June, while cash and current financial assets totalled about KRW449.7bn. This reinforces the importance of continued bond-market access, short-term funding and the support-inclusive strength associated with the company's KEPCO ownership and role in Korea's electricity system.

The disclosure does not by itself change the established view that KOMIPO is a KEPCO-owned government-related generation subsidiary with strong institutional support factors. It does, however, make the gap between that support-inclusive profile and the standalone financial position more consequential. This flash does not infer that KEPCO or the Republic of Korea guarantees KOMIPO debt; individual bond protections remain unverified. It also does not attribute the loss to fuel, settlement, tariff or foreign-exchange factors because the extracted statement package does not provide a sufficient decomposition.

2. Results and Earnings Deterioration

The official statements show 1H2026 revenue of KRW2,667.5bn, modestly above KRW2,633.7bn in 1H2025. Cost of sales increased faster, however, producing a KRW55.6bn gross loss against a KRW108.1bn gross profit in the prior-year period. Selling, general and administrative expenses were broadly stable at KRW83.7bn. The result was an operating loss of KRW139.3bn, compared with a KRW23.9bn operating profit a year earlier. Net loss was KRW131.7bn, compared with a KRW14.6bn net loss in 1H2025.

KRW bn, consolidated 2Q 2026 2Q 2025 1H 2026 1H 2025 Credit reading
Revenue 1,092.5 1,088.3 2,667.5 2,633.7 Revenue was nearly flat, so the earnings deterioration was not offset by top-line growth.
Operating profit/(loss) (211.3) (78.4) (139.3) 23.9 The second-quarter loss reversed the modest first-quarter operating profit reported in May.
Net profit/(loss) (159.8) (60.7) (131.7) (14.6) Financial and other items did not offset the operating setback.
Operating cash flow n.a. n.a. 182.8 146.3 Positive operating cash flow persisted, but it was low relative to investment needs.

The timing is important. The 1Q2026 flash reported KRW72.0bn operating profit and KRW28.0bn net income. The official second-quarter income statement therefore shows a sharp sequential reversal rather than a gradual continuation of first-quarter conditions. The statements include higher cost of sales, foreign-exchange and financial line items, but this flash does not assign a causal ranking among fuel costs, dispatch/settlement effects, foreign exchange or other variables without the underlying explanatory notes and operational data.

3. Cash Flow, Liquidity and Funding

At 2026-06-30, total assets were KRW15.073tn, total liabilities KRW10.210tn and equity KRW4.862tn, compared with KRW14.849tn, KRW9.422tn and KRW5.427tn respectively at end-2025. The balance-sheet movement therefore included an increase in liabilities and a reduction in equity, also affected by other comprehensive income. Current assets of KRW2.073tn were below current liabilities of KRW3.617tn.

The most credit-relevant current-liability item is financial liabilities of KRW2.819tn, up from KRW1.844tn at end-2025. This consisted mainly of KRW1.188tn of short-term borrowings and KRW1.585tn of current bonds. Cash and cash equivalents were KRW174.8bn and current financial assets were KRW274.9bn. Those balances alone do not cover current financial liabilities, leaving KOMIPO reliant on operating inflows, refinancing and funding-market access in the normal course of business.

Cash flow confirms this reliance. 1H2026 operating cash flow was KRW182.8bn, while investing cash outflow was KRW711.4bn, including KRW529.0bn of construction-in-progress additions. Financing cash inflow was KRW574.5bn. The statement reports KRW770.0bn of bond issuance and a KRW368.7bn net increase in short-term borrowings, alongside KRW380.0bn of current-bond repayments and KRW153.3bn of dividends paid. Cash and cash equivalents increased by KRW53.7bn to KRW174.8bn after these funding flows.

The positive operating cash flow is a mitigant, but the reported funding flows and short-term liability position make uninterrupted refinancing important to the financial profile. The official statements do not disclose the availability of committed bank lines in the extracted material, and they are not a substitute for security-specific maturity, covenant or guarantee analysis.

4. Credit Read-Through and What To Watch Next

The results increase the urgency of monitoring standalone earnings recovery and liquidity, but the event is not enough to recast KOMIPO as a purely standalone utility. The company's 100% KEPCO ownership, institutional power-sales framework and role in Korea's electricity supply remain important support factors. Those factors should be distinguished from an explicit legal payment obligation to bondholders. No such guarantee was confirmed in the materials used for this flash.

For the next update, investors should seek: (1) the operational and market drivers behind the second-quarter cost increase and operating loss, including fuel, power-market settlement and foreign-exchange effects; (2) third-quarter profitability and cash conversion; (3) a current debt-maturity ladder, committed liquidity lines and funding plan; and (4) the scale, timing and funding implications of construction-in-progress and other generation-transition investment. Current rating-agency reports and bond-specific guarantee, ranking and covenant terms should be reviewed before relying on support assumptions for an individual security.

5. Sources