South Korea's state-run utility KEPCO has recently proposed an unprecedented scheme to Samsung Electronics and SK Hynix: the two companies would collectively prepay electricity fees totaling 25 trillion won (approximately $18.4 billion) for the next five years, with the raised funds earmarked specifically for building transmission and distribution networks for semiconductor clusters in Yongin, Gyeonggi Province, and the Honam region.

Under KEPCO's proposal, Samsung Electronics would prepay 20 trillion won, while SK Hynix would prepay 5 trillion won. The amounts are calculated based on the two companies' actual 2025 electricity payments of 4.1 trillion won and 900 billion won respectively, projected over the five-year period from 2027 to 2031. The payments would be settled in installments over approximately one year, after which actual monthly electricity bills would be deducted from the prepaid balance. For any remaining undeducted amount, KEPCO would pay interest at a rate higher than the current two-year government bond yield (approximately 3.722%). The interest would likely be settled by offsetting against electricity bills every six months rather than paid in cash.

Grid Investment Needs and Financial Pressure

The early completion of the Yongin semiconductor cluster and the construction of the new Honam cluster are estimated to generate additional power demand of up to 20.6 gigawatts, while surrounding AI data centers will require another 7.9 gigawatts. KEPCO originally planned to invest 72.8 trillion won in grid construction before 2038, but as project scales continue to expand, the funding gap keeps widening. Meanwhile, KEPCO's debt had reached 210.7 trillion won by the end of June, with interest expenses alone hitting 2.1 trillion won in the first half of the year. Moreover, a special measure temporarily raising the bond issuance ceiling is set to expire at the end of 2027, forcing KEPCO to explore new financing channels beyond traditional debt issuance.

However, KEPCO has made it clear that specific details—including corporate willingness to participate, interest rate levels, prepayment amounts, and duration—have yet to be finalized. Both companies are currently evaluating the proposal.

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