SEOUL, July 14 (Reuters) - South Korea’s state-run energy companies need to review investments in loss-making overseas projects that have accrued billions of dollars of debt and consider potential disposals, the country’s audit board said on Tuesday.
Asia’s fourth-largest economy is heavily dependent on costly energy imports that fuelled inflation and prompted a rapid expansion in overseas investment to develop oil and gas reserves during former president Lee Myung-bak’s term in office.
However, heavy losses have brought the loss-making investments under the scrutiny of South Korean authorities, leading to a number of asset sales.
Tuesday’s statement by the Board of Audit and Inspection said its interim audit results showed that 35.8 trillion Korean won ($31.36 billion) had been poured into a total of 169 overseas development projects by three state-run companies, mainly since 2008, though investment started in 1984.
The audit board said that investments by Korea National Oil Corp, Korea Gas Corp and Korea Resources Corp brought a total of 12.8 trillion won of losses between 2008 and 2014, which is 9.7 trillion won higher than initially projected.
“Each public firm has failed to set up a re-evaluating system of their existing assets and only focused on expanding by raising debts and increasing borrowing from the government,” the audit board said.
“They need to set up action plans re-evaluating their assets with profit analysis models.”
The board also noted that the three companies now plan to invest a further 24.5 trillion won between 2015 and 2019 in 48 existing projects, which is likely to double their borrowing to 9.7 trillion won.
The final conclusion of the board’s audit is expected to be disclosed soon, the statement added. ($1 = 1,141.5900 won) (Reporting by Meeyoung Cho; Editing by David Goodman)