Homeplus operating stores face repeated electricity bill defaults, power cutoff risk

Korea Electric Power says operating stores have repeatedly defaulted on about two months' worth of electricity bills

Power can be cut after three months of arrears; 37 closed stores face near-certain cutoffs

A notice of pending electricity supply suspension posted on the entrance of a Homeplus store in Goyang, Gyeonggi Province. [Yonhap]

Homeplus stores that remain open have repeatedly defaulted on electricity bills even as the retailer undergoes court receivership, raising fears that power cutoffs — already a reality at some closed locations — could spread to operating stores as well.

According to the office of People Power Party lawmaker Kim Wi-sang, a member of the National Assembly's Climate, Energy, Environment and Labor Committee, Korea Electric Power Corporation (KEPCO) said it had repeatedly urged Homeplus and individual tenants at stores nationwide to pay their bills and warned of possible power cutoffs to encourage voluntary payment. "However, Homeplus has not fulfilled the public-interest debt repayment plan it submitted when filing for court receivership approval, and is repeatedly defaulting on approximately two months' worth of electricity bills even at stores that are currently operating," KEPCO said.

Under KEPCO's electricity supply terms, the utility may terminate a supply contract and cut power when a customer defaults for three or more months due to reasons within the customer's control. Monthly electricity bills at individual Homeplus operating stores average around 50 million won ($37,200).

The defaults stem from a sustained drop in sales since Homeplus reopened on Aug. 13. Falling revenue has delayed payments to suppliers, which has reduced product availability and driven away customers, creating a vicious cycle. Employees did not receive half of their August wages or their September and October salaries, and November pay is also uncertain.

Power cutoffs at operating stores pose a direct threat to hypermarket operations, since a store cannot function without electricity. Concerns are growing that the financial damage already accumulated could spread in a domino effect. A store operator at one of Homeplus's operating locations in Seoul said the company has been paying bills once every two months — just enough to avoid a cutoff — to maintain the status quo. "I'm anxious that we could suddenly find ourselves in the same situation as the closed stores," the operator said.

Of the 37 closed Homeplus stores, more than 10 have already received cutoff notices from KEPCO for unpaid electricity bills. Power has already been cut at the Jinjeop and Paju Unjeong locations.

Cutoffs at closed stores are expected to continue. KEPCO said Homeplus had notified it that the company would not pay electricity bills for stores that have ceased operations, and that arrears at some locations have exceeded three months. "Indefinitely deferring power cutoffs while Homeplus's electricity bill defaults drag on is not fair to other customers who pay their bills faithfully," KEPCO said, adding that mounting unpaid receivables could ultimately become a burden on ordinary electricity consumers.

The year-end period looms as a critical juncture for Homeplus. Industry observers say the company will struggle to sustain its deficit-ridden operations unless sales recover dramatically or the outlines of ongoing negotiations to sell its business units and real estate assets become clear by then. "If no genuine prospective buyer emerges by year-end, there is a strong likelihood that the rehabilitation process will run into serious trouble," one industry official said.

Lawmaker Kim said the livelihoods of small store operators should be protected as much as possible from the turmoil of the corporate rehabilitation process. "KEPCO also needs to look at this from multiple angles to find ways to minimize and remedy the damage on the ground," Kim said.

A Homeplus store in Seoul sits nearly empty. [Yonhap]

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