By MIN-JEONG LEE
SEOUL -- Korea Midland Power said Monday that it has struck
a $3.4 billion deal with Switzerland's Vitol SA to buy
liquefied natural gas under a long-term contract.
The deal marks the first successful attempt by a Kepco unit
at buying LNG directly from suppliers instead of purchasing
through the country's LNG supplier, Korea Gas Corp.
The power-generating unit of Korea Electric Power Corp.,
known as Komipo, will buy 400,000 tpy of LNG from Vitol from
2015 to 2024, it said in a statement.
The deal with Vitol comes with an option for Komipo to
purchase more than the initially contracted volume, depending
on changes in market prices.
The company didn't disclose price details but said the deal
was signed at a "relatively competitive price" compared with
recent long-term deals signed with other Asian countries.
The 400,000 tons account for approximately 17% of the
company's annual LNG needs.
The deal volume is "quite small," compared with what had
been expected, Woori Investment & Securities analyst Chang
Similar deals from South Korean companies are likely to
happen "slowly," over a long period, while the impact of the
deal on Komipo's earnings will depend on how much cheaper the
LNG is in comparison with Kogas prices, Lee said.
As Komipo doesn't have a LNG terminal, it will use Posco's
terminal, a person familiar with the matter told Dow Jones
South Korea has four LNG terminals in operation, of which
Kogas runs three. Kogas also has a terminal in construction, with four tanks to be
built by 2014.
The government has allowed companies to import LNG for their
own consumption since 2001, but Kepco's power generation units,
including Komipo, have been unable to find a supplier.
Only SK E&S, an affiliate of SK Group, Posco and GS
Caltex buy LNG directly from overseas suppliers, an official at
the commerce ministry's gas division said.
Local companies other than Kogas are still not allowed to
import LNG for trading purposes.
Dow Jones Newswires