By Kwanwoo Jun

Korea Electric Power Corp. shares rallied Tuesday after the company said it would raise electricity tariffs next year on hopes of better earnings.

Shares of the South Korean state utility rose as much as 7.7% to 23,100 won in morning trade. The stock later pared gains to trade 5.3% higher, still outperforming the benchmark Kospi's 0.2% gain in afternoon trade.

Kepco on Monday said utility bills would rise 5.6% in 2022 to reflect higher costs of purchasing fuel and using renewable energy.

Electricity tariffs, whose increases have been suppressed by the Seoul government for most of 2021 to help cool inflation, will rise gradually from March.

NH Investment & Securities analyst Lee Min-jae expects the planned tariff increases to lead to an additional operating profit of more than 3 trillion ($2.53 billion) in 2022. NH Investment & Securities has a buy rating and KRW33,000 target price on the stock.

Kepco has been in the red for two consecutive quarters through September due to subdued tariff increases and higher costs for fuel purchases. Its consolidated operating loss was KRW1.130 trillion for the first nine months of the year, compared with KRW3.153 trillion operating profit for the same period in 2020.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

12-28-21 0115ET