UPDATE 1-S.Korea says KEPCO, KOGAS to post major 2008 loss

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SEOUL, Sept 8 (Reuters) - State-run Korea Electric Power Corp (015760.KS: Quote, Profile, Research, Stock Buzz) and Korea Gas Corp (036460.KS: Quote, Profile, Research, Stock Buzz) will be unable to pay dividends this year due to expected large-scale losses, South Korea's energy minister said on Monday.

Minister of Knowledge and Economy Lee Youn-ho told lawmakers major losses were inevitable for the energy companies even with government subsidies of over 1 trillion won.

The ministry of Knowledge Economy, which oversees South Korea's energy-related affairs, confirmed a report by local media earlier in the day which cited the minister's comments during a parliamentary session.

The two state-run power firms have been facing steep net losses this year hit by surging fuel costs.

Power monopoly Korea Electric Power had swung to a net loss of 764 billion won in the quarter to June 30 from a net profit of 265.6 billion won last year. [ID:nSEO100284]

Due to the heavy losses, policy makers have been suggesting a hike in electricity rates that the country has kept unchanged since a 2.1 percent increase in early 2007 to help contain inflation pressure.

Shares in KEPCO rose 0.5 percent to 32,000 won by 0244 GMT, while those of KOGAS added the same amount to 80,100 won, both underperforming the wider market's .KS11 4.3 percent gain. (Reporting by Angela Moon; Editing by Keiron Henderson)