Samsung and SK hynix Reject KEPCO Proposal to Prepay Five Years of Electricity Bills

South Korea's two largest chipmakers, Samsung Electronics and SK hynix, have rejected a proposal from the state run Korea Electric Power Corp. (KEPCO) to prepay five years of electricity bills. The proposal requested that Samsung pay 20 trillion won and SK hynix pay 5 trillion won in advance, totaling 25 trillion won. These amounts were based on the companies' electricity payments from the previous year.

Industry sources stated that the chipmakers reached this decision after internal reviews. The companies expressed concerns about committing such large sums of cash upfront due to uncertainty regarding the long term semiconductor cycle and the sustainability of the current artificial intelligence boom. Additionally, the companies sought to maintain financial flexibility for investments in production capacity and advanced chips.

KEPCO intended to use the funds to invest in the national power grid and accelerate infrastructure for semiconductor clusters in the Honam region and Yongin. To incentivize the deal, KEPCO reportedly offered an interest rate higher than the yield on two year government bonds, with interest applied against bills every six months. The proposal would have reduced KEPCO's reliance on bond issuance. As of the end of June, KEPCO's total debt was 210.7 trillion won, with daily interest expenses of approximately 11.5 billion won.