Power company merger could change South Korea bond rates and supply

South Korea is considering merging its five state-run power companies into one entity.

The companies could become a wholly owned subsidiary of Korea Electric Power Corp.

(KEPCO) or a government-funded corporation, but the legal form has not been decided.

Seven of eight merger bills filed by November 10 propose a new corporation, while the government is prioritising a KEPCO subsidiary.

The choice could affect how the new entity’s bonds are classified and priced; becoming a corporation would not automatically make its bonds special government-backed securities or guarantee an AAA rating.

The five companies accounted for 35% of AAA-rated company bond issuance from January to October 2026, and about 70% of net issuance in that market.

Combining them could change bond supply and how much investors can hold from a single issuer, though the market impact is not yet clear.

The government aims to pass a special law during the year’s regular parliamentary session, and lawmakers must still review and vote on it.