Korea Western Power Korea Western Power Investor Presentation - - PowerPoint PPT Presentation

Strictly Confidential

Korea Western Power

June 2014 Strictly Confidential

Investor Presentation

Korea Western Power

Disclaimer

This presentation material is being presented to you solely for your information only and may not be taken away by you and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose. This presentation material does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities

• f Korea Western Power Co., Ltd. (“KOWEPO” or the “Company”) in the United States or any jurisdiction in which such offer
• r solicitation or sale would be unlawful. Securities may not be offered or sold within the United States or to U.S. persons

absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended, and the rules and regulations thereunder. Any public offering of securities to be made in the United States will be made by means of a prospectus, which will contain detailed information about the company making the offer and its management and financial

• statements. The Company does not intend to register any securities in the United States, and no public offering of securities

will be made in the United States or in any other jurisdiction where such an offering is restricted or prohibited. Neither any part of this presentation nor any information or statement contained therein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. Any decision to purchase securities in the context of the offering of securities, if any, should be made solely on the basis of information contained in a published prospectus or other offering circular issued by the Company in connection with such an offering. This presentation material has been prepared by the Company, solely for the use at this presentation and has not been independently verified. No representations or warranties, express or implied, are made as to, and no reliance should be placed

• n, the accuracy, fairness or completeness of the information presented or contained in this presentation. Neither the

Company nor any of its affiliates, advisers or representatives accepts any responsibility whatsoever for any loss or damage arising from any information presented or contained in this presentation material. Unless otherwise stated, the information presented or contained in this presentation material is current as of the date hereof and is subject to change without notice and its accuracy is not guaranteed. Neither the Company nor any of its affiliates, advisers or representatives make any undertaking to update any such information subsequent to the date hereof. This presentation material should not be construed as legal, tax, investment or other advice. Certain information and statements made in this presentation contain “forward-looking statements”. Such forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “considering,” “depends,” “estimate,” “expect,” “intend,” “plan,” “planning,” “planned,” “project,” “trend,” and similar expressions. All forward-looking statements are the Company’s current expectation of future events and are subject to a number of factors that could cause actual results to differ materially from those described in the forward-looking statements. Caution should be taken with respect to such statements and you should not place undue reliance on any such forward-looking statements. Certain industry and market data in this presentation was obtained from various trade associations, and the Company has not verified such data with independent sources. Accordingly, the Company makes no representations as to the accuracy or completeness of that data, and such data involves risks and uncertainties and is subject to change based on various factors. This communication is being distributed in the United States solely to QIBs, as defined in Rule 144A under the Securities Act, and outside the United States solely to non-US persons as defined under Regulation S. This presentation material is being presented to you solely for your information only and may not be taken away by you and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose. This presentation material does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities

• f Korea Western Power Co., Ltd. (“KOWEPO” or the “Company”) in the United States or any jurisdiction in which such offer
• r solicitation or sale would be unlawful. Securities may not be offered or sold within the United States or to U.S. persons

absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended, and the rules and regulations thereunder. Any public offering of securities to be made in the United States will be made by means of a prospectus, which will contain detailed information about the company making the offer and its management and financial

• statements. The Company does not intend to register any securities in the United States, and no public offering of securities

will be made in the United States or in any other jurisdiction where such an offering is restricted or prohibited. Neither any part of this presentation nor any information or statement contained therein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. Any decision to purchase securities in the context of the offering of securities, if any, should be made solely on the basis of information contained in a published prospectus or other offering circular issued by the Company in connection with such an offering. This presentation material has been prepared by the Company, solely for the use at this presentation and has not been independently verified. No representations or warranties, express or implied, are made as to, and no reliance should be placed

• n, the accuracy, fairness or completeness of the information presented or contained in this presentation. Neither the

Company nor any of its affiliates, advisers or representatives accepts any responsibility whatsoever for any loss or damage arising from any information presented or contained in this presentation material. Unless otherwise stated, the information presented or contained in this presentation material is current as of the date hereof and is subject to change without notice and its accuracy is not guaranteed. Neither the Company nor any of its affiliates, advisers or representatives make any undertaking to update any such information subsequent to the date hereof. This presentation material should not be construed as legal, tax, investment or other advice. Certain information and statements made in this presentation contain “forward-looking statements”. Such forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “considering,” “depends,” “estimate,” “expect,” “intend,” “plan,” “planning,” “planned,” “project,” “trend,” and similar expressions. All forward-looking statements are the Company’s current expectation of future events and are subject to a number of factors that could cause actual results to differ materially from those described in the forward-looking statements. Caution should be taken with respect to such statements and you should not place undue reliance on any such forward-looking statements. Certain industry and market data in this presentation was obtained from various trade associations, and the Company has not verified such data with independent sources. Accordingly, the Company makes no representations as to the accuracy or completeness of that data, and such data involves risks and uncertainties and is subject to change based on various factors. This communication is being distributed in the United States solely to QIBs, as defined in Rule 144A under the Securities Act, and outside the United States solely to non-US persons as defined under Regulation S.

1

This presentation material is being presented to you solely for your information only and may not be taken away by you and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose. This presentation material does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities

• f Korea Western Power Co., Ltd. (“KOWEPO” or the “Company”) in the United States or any jurisdiction in which such offer
• r solicitation or sale would be unlawful. Securities may not be offered or sold within the United States or to U.S. persons

absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended, and the rules and regulations thereunder. Any public offering of securities to be made in the United States will be made by means of a prospectus, which will contain detailed information about the company making the offer and its management and financial

• statements. The Company does not intend to register any securities in the United States, and no public offering of securities

will be made in the United States or in any other jurisdiction where such an offering is restricted or prohibited. Neither any part of this presentation nor any information or statement contained therein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. Any decision to purchase securities in the context of the offering of securities, if any, should be made solely on the basis of information contained in a published prospectus or other offering circular issued by the Company in connection with such an offering. This presentation material has been prepared by the Company, solely for the use at this presentation and has not been independently verified. No representations or warranties, express or implied, are made as to, and no reliance should be placed

• n, the accuracy, fairness or completeness of the information presented or contained in this presentation. Neither the

Company nor any of its affiliates, advisers or representatives accepts any responsibility whatsoever for any loss or damage arising from any information presented or contained in this presentation material. Unless otherwise stated, the information presented or contained in this presentation material is current as of the date hereof and is subject to change without notice and its accuracy is not guaranteed. Neither the Company nor any of its affiliates, advisers or representatives make any undertaking to update any such information subsequent to the date hereof. This presentation material should not be construed as legal, tax, investment or other advice. Certain information and statements made in this presentation contain “forward-looking statements”. Such forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “considering,” “depends,” “estimate,” “expect,” “intend,” “plan,” “planning,” “planned,” “project,” “trend,” and similar expressions. All forward-looking statements are the Company’s current expectation of future events and are subject to a number of factors that could cause actual results to differ materially from those described in the forward-looking statements. Caution should be taken with respect to such statements and you should not place undue reliance on any such forward-looking statements. Certain industry and market data in this presentation was obtained from various trade associations, and the Company has not verified such data with independent sources. Accordingly, the Company makes no representations as to the accuracy or completeness of that data, and such data involves risks and uncertainties and is subject to change based on various factors. This communication is being distributed in the United States solely to QIBs, as defined in Rule 144A under the Securities Act, and outside the United States solely to non-US persons as defined under Regulation S.

Table of contents

Section 1 Company Overview 3 Section 2 Regulatory Environment & Industry 8 Section 3 Operation Overview 14 Section 4 Financial Management 21 Appendix Financial Statements 26

2

Section 1

Company Overview

Section 1

Company Overview

A

Company Name Korea Western Power Co. Ltd.

B

Establishment Date April 2, 2001 (spun off from KEPCO)

C

Ownership 100% owned by KEPCO (51% owned by the Korean government)

D

Number of Employees 1,974

E

Assets KRW 7,293 bn

F

Sales KRW 1,521 bn

4 G

Capacity of Equipment 8,909 MW, 8 Power plants with 57 units

H

Electricity Sales 14,014 GWh

I

Credit Rating A1 Stable (Moody’s) / A+ Stable (S&P)

Source: Company data (as of 1Q 2014)

4

• As of March 2014, Coal, B.C. Oil, LNG and others accounts for 44.9%, 15.7%, 33.7%, 5.7% respectively in terms of
• perating generation capacity

Power Plants Portfolio

Generation Capacity by Fuel Type Location of Plant Complex

Base Load Intermediate Load Peak Load Taean T/P (4,000 MW) 4,000MW Seoincheon C/C (1,800 MW) Gunsan C/C (718.4 MW) 1,400MW

Coal LNG BC Oil Taean Pyeongtaek Gunsan Seoincheon Hydro Solar Metropolitan Area Power Plant Region Sejong

3,509.3MW Others:

Taean, Gunsan, Samryangjin, Sejong Solar, Taean Hydro, Youngam Solar (510.9 MW)

Seoul & Gyeonggi-do Ansan 5

Base Load Intermediate Load Peak Load Source: Company data (as of 1Q 2014)

Note: T/P denotes “Thermal Power Plant”, C/C denotes “Combined Cycle”

Pyeongtaek T/P (1,400 MW) Seoincheon C/C (1,800 MW) Pyeongtaek C/C (480 MW)

Gunsan

Coal B.C. Oil LNG

Samryangjin Youngam

5

EWP 12,902 10.3% KHNP 37,848 30.1% Others 15,174 12.1% KOWEPO 14,014 11.2% KOSEP 15,249 12.1% KOSPO 16,117 12.8% KOMIPO 14,297 11.4% KOWEPO 8,909 10.2% KOSEP 8,227 9.5% KOMIPO 8,934 10.3% KOSPO 9,200 10.6% EWP 9,343 10.7% KHNP 26,039 29.9% Others 16,323 18.8%

KOWEPO’s Market Position – 1Q 2014

Market Share by Sales Volume Market Share by Generation Capacity

(Unit : MW) (Unit : GWh)

EWP 12,902 10.3% KHNP 37,848 30.1% Others 15,174 12.1% KOWEPO 14,014 11.2% KOSEP 15,249 12.1% KOSPO 16,117 12.8% KOMIPO 14,297 11.4% KOWEPO 8,909 10.2% KOSEP 8,227 9.5% KOMIPO 8,934 10.3% KOSPO 9,200 10.6% EWP 9,343 10.7% KHNP 26,039 29.9% Others 16,323 18.8%

6

EWP 12,902 10.3% KHNP 37,848 30.1% Others 15,174 12.1% KOWEPO 14,014 11.2% KOSEP 15,249 12.1% KOSPO 16,117 12.8% KOMIPO 14,297 11.4% KOWEPO 8,909 10.2% KOSEP 8,227 9.5% KOMIPO 8,934 10.3% KOSPO 9,200 10.6% EWP 9,343 10.7% KHNP 26,039 29.9% Others 16,323 18.8%

Total Generation Capacity 86,975 MW Total Electricity Sales 125,593 GWh

Source: FSS, DART Filing (as of 1Q 2014)

6

Investment Highlights

Solid Financial Profile

• Continuous cash flows from operations
• EBITDA : KRW196bn (1Q 2014)
• Balanced and flexible debt portfolio –

Well-diversified maturity profile

• Strong interest coverage (EBITDA/Net

interest expense: 5.80x)

• Cancelled privatization plans for Gencos
• Market-oriented public enterprise
• Application of the cost-reflecting

pricing mechanism

Supportive Regulatory Environment Cost- Effective Operations

• Continuous cash flows from operations
• EBITDA : KRW196bn (1Q 2014)
• Balanced and flexible debt portfolio –

Well-diversified maturity profile

• Strong interest coverage (EBITDA/Net

interest expense: 5.80x)

• Constantly growing power consumption
• 11.2% of the sales volume share for

domestic power market in 1Q 2014

• Strengthening competitiveness

through domestic & overseas investment

7

Industry Dynamics & Market Position

• Increasing Capacity Factor
• Expanding Capacity Factor with 75.5% in

1Q 2014

• Long-term and medium-term raw material

contracts

• Constantly growing power consumption
• 11.2% of the sales volume share for

domestic power market in 1Q 2014

• Strengthening competitiveness

through domestic & overseas investment

7

Section 2

Regulatory Environment & Industry

Section 2

Domestic Power Industry Structure

Public Corporation Act Electricity Business Law Basic Plan for Energy Development Environmental Policy Law

Strong Government Support

Assets: 157.04 Revenues: 14.77

Transmission & Distribution Holding 100% Ownership of Gencos

51% Ownership 100% Ownership

Korean Government

KEPCO Gencos

9

87.9% market share of sales volume

Assets: 7.29 Revenues: 1.52

Thermal & Renewable

Assets: 47.84 Revenues: 2.47

Nuclear & Hydro

KHNP

Assets: 8.76 Revenues: 1.20

Thermal & Renewable

KOSEP

Assets: 6.46 Revenues: 1.59

Thermal & Renewable

KOMIPO

Assets: 8.06 Revenues: 1.83

Thermal & Renewable

KOSPO

Assets: 7.68 Revenues: 1.33

Thermal & Renewable

EWP KOWEPO 11.2% Sales Volume Share

(Unit: KRW trillion) Source: FSS (Financial Supervisory Service in Korea) (as of 1Q 2014), “2013 Statistics of Electric Power in Korea”, KEPCO (May 2014 edition)

Gencos

9

Latest Power Industry Operating Environment

• MOCIE *

announced restructuring plan for power industry

* MOCIE: Ministry of Commerce, Industry and Energy (currently renamed as MOTIE (Ministry of Trade, Industry & Energy)

The power industry restructuring plan delayed and the former privatization plan for Gencos cancelled

• Initiation of

KOSEP privatization

• IPO of KOSEP was

delayed

• Introduction of vesting

contracts for Gencos deferred

• Wholesale competition was

put on hold

• Gencos were designated

as market-oriented public enterprises

*TWBP= Two Way Bidding Pool

1999 2000 2002 2001 2003 2004 2005 2007 2008 2006 2009 2010 2011 2013

• MOCIE *

announced restructuring plan for power industry

• Incorporation of

generation companies

• Cost-based pool

bidding (“CBP”) mechanism

• Initiation of

KOSEP privatization

• IPO of KOSEP was

delayed

• Plan to separate KEPCO’s distribution sector was

halted due to substantial risk and uncertain benefits from the separation plan

• Implementation of TWBP* was suspended
• Introduction of vesting

contracts for Gencos deferred

• Wholesale competition was

put on hold

• Gencos were designated

as market-oriented public enterprises

• Privatization plan for

Gencos indefinitely suspended

10

Update on Gencos Privatization and Consolidation Plan

• Incorporation of

generation companies

• Cost-based pool

bidding (“CBP”) mechanism

• Plan to separate KEPCO’s distribution sector was

halted due to substantial risk and uncertain benefits from the separation plan

• Implementation of TWBP* was suspended
• Privatization plan for KEPCO and its Gencos was indefinitely suspended in July 2008
• Gencos have been designated as market oriented public firms by government to create a more efficient management

structure and enhance their competitiveness in 2011

10

Nationwide Power Consumption

Electricity Demand Forecast

• Power consumption has continued to rise on the back of strong economic growth at an average rate of 5.6% per

annum from 2000 to 2013

• Power consumption is expected to grow at an average rate of 3.3% per annum from 2014 to 2027

History of Power Consumption

505 526 547 569 590 611 631 652 672 693 713 733 752 771

300 400 500 600 700 800 2014 2020 2027

Power consumption (Unit: TWh) 240 258 278 294 312 332 349 369 385 394 434 455 467 485 8.8% 4.0% 7.2% 2.8% 4.6% 4.0% 5.2% 5.1% 2.3% 0.3% 6.2% 3.6% 2.0% 3.0%

• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 100 150 200 250 300 350 400 450 500 550

2000 2006 2013

Power consumption GDP growth rate (Unit: TWh)

11

Source: “Statistics of Electric Power in Korea”, KEPCO / The Bank of Korea (as of 2014) / “Electricity Supply and Demand Basic Plan #6”, MKE (as of 2013) 505 526 547 569 590 611 631 652 672 693 713 733 752 771

300 400 500 600 700 800 2014 2020 2027

Power consumption 240 258 278 294 312 332 349 369 385 394 434 455 467 485 8.8% 4.0% 7.2% 2.8% 4.6% 4.0% 5.2% 5.1% 2.3% 0.3% 6.2% 3.6% 2.0% 3.0%

• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 100 150 200 250 300 350 400 450 500 550

2000 2006 2013

Power consumption GDP growth rate

11

• SMP (System Marginal Price)

ü SMP represents the power market price (KRW/kwh) payment made on a trading hourly basis to the company’s supplied electricity ü The most expensive plant price where power demand and supply meet

• Power Price in the Market

ü Variable cost + [System marginal price – Variable cost] x Adjusted coefficient

Electricity Pricing Mechanism

• SMP (System Marginal Price)

ü SMP represents the power market price (KRW/kwh) payment made on a trading hourly basis to the company’s supplied electricity ü The most expensive plant price where power demand and supply meet

• Power Price in the Market

ü Variable cost + [System marginal price – Variable cost] x Adjusted coefficient

Historical trend of SMP

151.61 135.23 154.13 143.89 148.95 142.35 152.83 162.74 130 135 140 145 150 155 160 165 170 2013-Aug 2013-Sep 2013-Oct 2013-Nov 2013-Dec 2014-Jan 2014-Feb 2014-Mar

Average

(Unit: KRW / KWh)

12

Source: Company data

12

151.61 135.23 154.13 143.89 148.95 142.35 152.83 162.74 130 135 140 145 150 155 160 165 170 2013-Aug 2013-Sep 2013-Oct 2013-Nov 2013-Dec 2014-Jan 2014-Feb 2014-Mar

Average

Electricity Pricing Mechanism

KOWEPO continues to enjoy 100% fuel cost pass through pricing mechanism

• Application of The Adjusted Coefficient of System Marginal Price (“SMP”)

ü KOWEPO can pass through 100% of its fuel cost through the energy price ü Electricity Generation Cost Evaluation Committee annually determines The Adjusted Coefficient

• Adjusted Coefficient was readjusted with slight increase in December 2013 and effective from January 2014

Price type Price Remarks Capacity Payment (CP) KRW 7.69/kwh § CP can be adjusted in accordance with region, season and time (’12: KRW 7.73/kwh à ’13: KRW 7.80/kwh à ’14: KRW 7.69/kwh) Energy Adjustment Price (Energy Price) [Max {(SMP-Fuel Cost), 0} x The Adjusted Coefficient + Fuel Cost] § Adjusted Coefficient (effective from January 2014) ü Nuclear (light-water reactor): 0.3170 (←0.0450) ü Nuclear (heavy-water reactor) : 0.3298 (←0.0450) ü Coal : 0.1565 (←0.0001) ü B.C. Oil / Gas: 0.3281 (←0.0001) ü Others/General : 0.2610 (←0.0001)

Power Price Comparison

13

Introduction of “The Adjusted Coefficient of SMP” will motivate Gencos to construct base load power plants and lead to fair competition among Gencos. It will increase the efficiency of the power market by stimulating cost reduction

Energy Adjustment Price (Energy Price) [Max {(SMP-Fuel Cost), 0} x The Adjusted Coefficient + Fuel Cost] § Adjusted Coefficient (effective from January 2014) ü Nuclear (light-water reactor): 0.3170 (←0.0450) ü Nuclear (heavy-water reactor) : 0.3298 (←0.0450) ü Coal : 0.1565 (←0.0001) ü B.C. Oil / Gas: 0.3281 (←0.0001) ü Others/General : 0.2610 (←0.0001) Source: Korea Power Exchange Website (as of 1Q 2014)

13

Section 3

Operation Overview

Section 3

KOWEPO operates 57 generation units with total generation capacity of 8,909MW

Power Plant Facilities in Operation

Power Plant Type Fuel Type Number of Units Capacity (MW) Sales (Gwh) Capacity Factor (%) Thermal Bituminous 8 4,000 8,323 100.9 Taean Thermal Bituminous 8 4,000 8,323 100.9 Solar

• 2

0.67 0.18 12.4 Small Hydro

• 1

2.20 1.04 21.8 Pyeongtaek Thermal BC Oil 4 1,400 843 28.9 Combined Cycle LNG 7 964 316 15.4 Seoincheon Combined Cycle LNG 16 1,800 3,100 81.1 Gunsan Combined Cycle LNG 3 718.4 1,423 93.3 Solar

• 1

0.26 0.08 13.9 Samryangjin Solar

• 2

3 0.89 13.8 15

Source: Company data (as of 1Q 2014)

Samryangjin Solar

• 2

3 0.89 13.8 Sejong Solar

• 5

4.93 1.30 12.2 Youngyam Solar

• 1

13.3 4.16 14.5 Gyeonggi Solar

• 7

2.5 0.72 13.3 TOTAL 57 8,909 14,014 75.5

15

Operational Strength

74.5% 76.0% 76.2% 80.0% 75.5% 30% 40% 50% 60% 70% 80% 90% 2011 2012 2013 1Q 2013 1Q 2014

Increasing Historical Capacity Factor Capacity Factor (KOWEPO vs. Peers)

75.5% 88.5% 77.3% 81.3% 68.7% 50% 60% 70% 80% 90% 100% KOSEP KOMIPO KOSPO EWP 74.5% 76.0% 76.2% 80.0% 75.5% 30% 40% 50% 60% 70% 80% 90% 2011 2012 2013 1Q 2013 1Q 2014 75.5% 88.5% 77.3% 81.3% 68.7% 50% 60% 70% 80% 90% 100% KOSEP KOMIPO KOSPO EWP 16

16

74.5% 76.0% 76.2% 80.0% 75.5% 30% 40% 50% 60% 70% 80% 90% 2011 2012 2013 1Q 2013 1Q 2014

Source: Company data (as of 1Q 2014)

75.5% 88.5% 77.3% 81.3% 68.7% 50% 60% 70% 80% 90% 100% KOSEP KOMIPO KOSPO EWP

Source: Company data (as of 1Q 2014)

Cost Efficiency

50 50 54 55 148 204 223 215 129 143 159 176 50 100 150 200 250 2011 2012 2013 1Q 2014 Coal Heavy Oil Combined(LNG)

Fuel Cost

(Unit: KRW / kWh)

• Fuel costs account for 86.1% of production

costs

• Long-term supply contracts assure adequate

supply of the raw materials

• Hedging risks by adjusting portion of long-

term contracts with market volatility Coal LNG

Coal 27.5% LNG 64.2% B.C. Oil 8.4%

Chart Title

Fuel Cost Composition

50 50 54 55 148 204 223 215 129 143 159 176 50 100 150 200 250 2011 2012 2013 1Q 2014 Coal Heavy Oil Combined(LNG)

• Fuel costs account for 86.1% of production

costs

• Long-term supply contracts assure adequate

supply of the raw materials

• Hedging risks by adjusting portion of long-

term contracts with market volatility

1,514 1,433 509 136 500 1,000 1,500 2,000 Indonesia Australia North America ⑵ Russia

Major Suppliers of Coal

(Unit: Kiloton)

Total 3,592 kilotons

Coal

Long-term 91% Short-term 9%

LNG

Long-term 100%

(1)

17

Coal 27.5% LNG 64.2% B.C. Oil 8.4%

Chart Title

Source: Company data (as of 1Q 2014)

1,514 1,433 509 136 500 1,000 1,500 2,000 Indonesia Australia North America ⑵ Russia

Total 3,592 kilotons

Note: ⑴ Represents fuel costs other than that required to generate electricity, such as fuel required to start up the generating units ⑵ Canada and U.S. 17

New Business - Domestic

• KOWEPO plans to maintain its strong market position and superb operating performance promoting growth with new

plant constructions and new business Power Plant Type Generation Capacity Construction Period Remarks New Plant

October 2012 ~December 2016

• Largest unit capacity in Korea
• Lowest fuel cost

Taean #9, #10 Thermal 2,100MW October 2012 ~December 2016

• Largest unit capacity in Korea
• Lowest fuel cost

Taean IGCC IGCC 380MW November 2011 ~November 2015

• Integrated Gasification Combined Cycle
• Clean energy source securing by utilizing Bituminous and meeting

RPS standard Pyeongtaek 2nd Combined Cycle 946.5MW July 2012 ~October 2014

• Emergency power plant to prepare exponential increase in demand

in summer of 2013 (GT construction completed in July 2013)

• Constructing high efficiency eco-friendly LNG plant for

maximizing the rate of return

Equity Investment

Dongducheon Combined Cycle 1,880MW June 2012 ~December 2014

• Increase Capacity Factor and maximize profit with High performing

large capacity plant

• Consortium with Samsung E&C, Hyundai Development Company
• KOWEPO to be in charge of construction management operation

and maintenance

• Project Financing

18

Source: Company data (as of 1Q 2014) Dongducheon Combined Cycle 1,880MW June 2012 ~December 2014

• Increase Capacity Factor and maximize profit with High performing

large capacity plant

• Consortium with Samsung E&C, Hyundai Development Company
• KOWEPO to be in charge of construction management operation

and maintenance

• Project Financing

Garolim Tidal 520MW November 2014 ~February 2021

• Consortium with Posco E&C, Daewoo E&C, Lotte E&C
• KOWEPO to be in charge of construction management, operation

and maintenance

• World’s largest tidal plant

18

New Business - Overseas

Power Plant Type Generation Capacity Remarks Equity Investment

• KOWEPO plans to diversify its revenue through overseas expansion by leveraging its proven experience in operating

and maintaining power plants

• Project financing as a key funding source to minimize financial risk

Equity Investment

India Maharashtra C/C 388MW

• Consortium with PPIL (construction started in January 2012 /

expected to complete in October 2014)

• Build, Own, Operate & O&M

Laos Xe-Namnoi Hydro 410MW

• Consortium with SK E&C, Ratchaburi (Thailand), LHSE (Laos)
• Build, Own, Transfer (BOT)
• Under PPA Negotiation
• Project Financing
• KOWEPO to be in charge of operation and maintenance
• PPA contract with Thailand and Laos
• Financing completed in November 2013 and started construction

19

Source: Company data (as of 1Q 2014)

• Consortium with SK E&C, Ratchaburi (Thailand), LHSE (Laos)
• Build, Own, Transfer (BOT)
• Under PPA Negotiation
• Project Financing
• KOWEPO to be in charge of operation and maintenance
• PPA contract with Thailand and Laos
• Financing completed in November 2013 and started construction

19

Capital Expenditure Schedule

Capital Expenditure Plan

(Unit: KRW billion) 1,770.9 1,180.0 508.6 179.4 299.9 236.9 228.7 234.9 70.6 40.1 13.0 14.0

• 500.0

1,000.0 1,500.0 2,000.0 2,500.0 2014 2015 2016 2017 Expansion Maintenance Others

2,141.4

1,770.9 1,180.0 508.6 179.4 299.9 236.9 228.7 234.9 70.6 40.1 13.0 14.0

• 500.0

1,000.0 1,500.0 2,000.0 2,500.0 2014 2015 2016 2017 Expansion Maintenance Others

2,141.4 1,457.0 750.3 428.4

20

Source: Company data (as of 1Q 2014)

20

1,770.9 1,180.0 508.6 179.4 299.9 236.9 228.7 234.9 70.6 40.1 13.0 14.0

• 500.0

1,000.0 1,500.0 2,000.0 2,500.0 2014 2015 2016 2017 Expansion Maintenance Others

Section 4

Financial Management

Section 4

Capital Structure

Capital Structure

Assets

• KRW 7,293 bn
• Non-Current Assets/Total

Assets Ratio : 82.2%

5,287 5,840 7,154 7,293 2,335 2,618 4,013 4,132 2,952 3,222 3,141 3,161 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2011 2012 2013 1Q 2014 (KRW billion) Total Assets Total Liability Total Shareholders' Equity

Liability Shareholders Equity Sales

• KRW 4,132 bn
• KRW 3,161 bn
• wholly owned by KEPCO
• KRW 1,521 bn

5,287 5,840 7,154 7,293 2,335 2,618 4,013 4,132 2,952 3,222 3,141 3,161 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2011 2012 2013 1Q 2014 (KRW billion) Total Assets Total Liability Total Shareholders' Equity

22

Sales EBITDA

• KRW 196 bn
• Net Income : KRW 51 bn

Source: FSS (Financial Supervisory Service in Korea) (as of 1Q 2014)

Note: Financial data based on consolidated K-IFRS accounting standard

(1) (2) (2)

5,287 5,840 7,154 7,293 2,335 2,618 4,013 4,132 2,952 3,222 3,141 3,161 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2011 2012 2013 1Q 2014 (KRW billion) Total Assets Total Liability Total Shareholders' Equity 22

Revenue

Financial Performance (1)

(KRW billion)

5,208 5,967 5,761 1,487 1,521 2,000 4,000 6,000 2011 2012 2013 1Q 2013 1Q 2014

EBITDA

(KRW billion)

503 603 565 177 196 200 400 600 800 2011 2012 2013 1Q 2013 1Q 2014 5,208 5,967 5,761 1,487 1,521 2,000 4,000 6,000 2011 2012 2013 1Q 2013 1Q 2014 50.0 55.7 99.4 60.0 99.3 27.9 30.7 43.6 32.2 43.1 20 40 60 80 100 2011 2012 2013 1Q 2013 1Q 2014

Leverage

(%)

503 603 565 177 196 200 400 600 800 2011 2012 2013 1Q 2013 1Q 2014

2.2 3.1 2.0 6.1 2.9 4.7 4.3 7.2 15.6 21.1 2 4 6 8 10 12 14 16 18 20 22 24 2011 2012 2013 1Q 2013 1Q 2014

Interest Coverage

(Times)

23

Source: Company data (as of 1Q 2014)

23 Note: 1. Debt consists of the sum of debentures (net of discount) and long-term borrowings (including current position) and short-term borrowing 2. Equity equals total shareholder’s equity 3. EBITDA is defined as earnings before interest expense, income taxes and depreciation and amortization.

50.0 55.7 99.4 60.0 99.3 27.9 30.7 43.6 32.2 43.1 20 40 60 80 100 2011 2012 2013 1Q 2013 1Q 2014 Debt(1)/Equity(2) Debt(1)/Capital

2.2 3.1 2.0 6.1 2.9 4.7 4.3 7.2 15.6 21.1 2 4 6 8 10 12 14 16 18 20 22 24 2011 2012 2013 1Q 2013 1Q 2014

EBIT/Gross Interest Expense Debt/EBITDA(3)

Financial Performance (2)

EBITDA(1) / Revenue Debt(2) / Equity(3) EBITDA(1) / Net Interest Expense

5.8 12.6 8.7 6.1 9.1 4 8 12 16

KOWEPOKOSEP KOMIPO KOSPO EWP

99.3 93.5 86.8 99.8 91.1 80.0 90.0 100.0 110.0

KOSEP KOMIPO KOSPO EWP (%) (Times) (%)

12.9 30.3 12.3 8.8 17.3 4 8 12 16 20 24 28 32

KOSEP KOMIPO KOSPO EWP

5.8 12.6 8.7 6.1 9.1 4 8 12 16

KOWEPOKOSEP KOMIPO KOSPO EWP

99.3 93.5 86.8 99.8 91.1 80.0 90.0 100.0 110.0

KOSEP KOMIPO KOSPO EWP

12.9 30.3 12.3 8.8 17.3 4 8 12 16 20 24 28 32

KOSEP KOMIPO KOSPO EWP

24

24 Note: 1. EBITDA is defined as earnings before interest expense, income taxes and depreciation and amortization. 2. Debt consists of the sum of debentures (net of discount) and long-term borrowings (including current position) and short-term borrowing 3. Equity equals total shareholder’s equity

Source: FSS, DART Filing (as of 1Q 2014)

5.8 12.6 8.7 6.1 9.1 4 8 12 16

KOWEPOKOSEP KOMIPO KOSPO EWP

99.3 93.5 86.8 99.8 91.1 80.0 90.0 100.0 110.0

KOSEP KOMIPO KOSPO EWP

12.9 30.3 12.3 8.8 17.3 4 8 12 16 20 24 28 32

KOSEP KOMIPO KOSPO EWP

(KRW billion)

Debt Profile

Debt Maturity Profile Local vs. Foreign Currency

Foreign 46.9% (KRW 1,487.3 bn) (1) (1) (2) 80.3 100.4 404.2 570.4 897.2 237.1 881.2

100 200 300 400 500 600 700 800 900 1,000 2014 2015 2016 2017 2018 2019 2020

Fixed vs. Floating Rate Debt

Local 53.1% (KRW 1,683.4 bn) Source: Bloomberg data (as of 1Q 2014) (1) Floating 0.1% (KRW 3.4bn) 80.3 100.4 404.2 570.4 897.2 237.1 881.2

100 200 300 400 500 600 700 800 900 1,000 2014 2015 2016 2017 2018 2019 2020 25

Note: 1. Debt consists of the sum of debentures (excluding amortization of discount) and long-term borrowings (including current position). 2. Foreign currency debt portion is based on the net amount swapped into KRW 25

Source: Company data (as of 1Q 2014) Fixed 99.9% (KRW 3,167.3 bn) 80.3 100.4 404.2 570.4 897.2 237.1 881.2

100 200 300 400 500 600 700 800 900 1,000 2014 2015 2016 2017 2018 2019 2020~

Source: Bloomberg data (as of 1Q 2014)

Debt Reduction Policy

<Guideline>

• Reduce over KRW 1.5 trillion of debt by 2017

(30% of KRW 5 trillion which is the increased debt amount from 2012 to 2017) <Self-effort>

• Our target self-effort ratio of 155% in 2017 will enable KOWEPO to exceed the guideline by KRW 5.5 billion by end
• f 2017

Type 2014 2015 2016 2017 Debt Amount Outlook 5,555.6 6,587.0 7,076.1 7,750.4 Guideline 4,674.3 5,396.3 5,738.6 6,210.7 Self-efforts 5,167.3 6,016.8 6,185.0 6,205.2

(Unit: KRW billion)

KOWEPO’s Plans to Downscale Debt

81% 128% 160% 174% 171% 170% 153% 166% 160% 138% 149% 148% 155% 2012 2013 2014 2015 2016 2017

Outlook Self-effort Guideline

<Guideline>

• Reduce over KRW 1.5 trillion of debt by 2017

(30% of KRW 5 trillion which is the increased debt amount from 2012 to 2017) <Self-effort>

• Our target self-effort ratio of 155% in 2017 will enable KOWEPO to exceed the guideline by KRW 5.5 billion by end
• f 2017

26

26

81% 128% 160% 174% 171% 170% 153% 166% 160% 138% 149% 148% 155% 2012 2013 2014 2015 2016 2017

Outlook Self-effort Guideline

Source: Company data (as of 1Q 2014)

Note: Total Liabilities / Total Shareholders’ Equity

Appendix

Financial Statement

Appendix

Financial Statements

Income Statement

2010 2011 2012 2013 1Q 2013 1Q 2014 Sales 4,572 5,208 5,967 5,761 1,487 1,521 Cost of Sales 4,277 5,030 5,717 5,576 1,383 1,428

(Unit: KRW billion)

Cost of Sales 4,277 5,030 5,717 5,576 1,383 1,428 Gross Profit 295 178 251 185 104 93 SG&A 39 55 60 65 15 10 Operating Net Income 256 123 190 120 90 83 Other Operating Income 4.4 5.0 3.6 3.1 0.8 1.1 Other Operating Expense 0.9 10.3 1.1 1.4 0.5 0.1 Other Income 15 2 2.6 10.4 (3) 4 Financial Income 47 13 75 35 29 23 Financial Expense 81 64 114 94 44 43 Share in Loss of Joint Ventures and Associates (2.5) (1.5) (4.9) 1.4 0.7 (0.6) 28 Income From Continuing Operations Before Income Tax 239 67 151 75 73 68 Income Tax Expense From Continuing Operations 55 25 46 (20) 16 18 Net Income From Continuing Operations 185 42 105 95 58 50 Net Income From Discontinued Operations 34

• Net Income

218 42 105 95 58 50

28 Decimal Difference adjusted Note: Financial data based on consolidated K-IFRS accounting standard

Financial Statements

Balance Sheet

2010 2011 2012 2013 1Q 2013 1Q 2014 Assets Current Assets 1,348 1,182 1,280 1,343 1,331 1,295

(Unit: KRW billion)

Current Assets 1,348 1,182 1,280 1,343 1,331 1,295 Non-Current Assets 4,040 4,105 4,560 5,811 4,667 5,998 Total Assets 5,388 5,287 5,840 7,154 5,998 7,293 Liabilities Current Liabilities 995 938 797 684 900 894 Non-Current Liabilities 1,137 1,397 1,821 3,329 1,878 3,238 Total Liabilities 2,132 2,335 2,618 4,013 2,778 4,132 Stockholders’ Equity Capital Stock 1,443 1,192 1,192 1,192 1,192 1,192 29 Capital Stock 1,443 1,192 1,192 1,192 1,192 1,192 Capital Surplus 22 3 201 85 204 88 Retained Earnings 1,791 1,757 1,829 1,864 1,825 1,881 Total Stockholders’ Equity 3,256 2,952 3,222 3,141 3,221 3,161 Total Liabilities and Stockholders’ Equity 5,388 5,287 5,840 7,154 5,999 7,293

29 Decimal difference adjusted Note: Financial data based on consolidated K-IFRS accounting standard

Financial Statements

Cash Flow Statement

2010 2011 2012 2013 1Q 2013 1Q 2014 Cash Flows from Operating Activities Net Income 218 42 105 95 58 50

(Unit: KRW billion)

Net Income 218 42 105 95 58 50 Non-cash Income & Expenses 546 478 498 487 138 171 Changes in Assets and Liabilities (52) (167) (50) (134) (139) 84 Other (88) (76) (39) 18 25 51 Net Cash Provided by Operating Activities 624 277 514 375 40 299 Cash Flows from Investing Activities Purchase of Fixed Asset (506) (452) (791) (1,606) (189) (320) Other, Net (12) 11 (60) 20 8 11 Net Cash Used in Investing Activities (518) (441) (851) (1,586) (181) (309) Cash Flows from Financing Activities 30 Cash Flows from Financing Activities Cash Inflows 968 721 1,269 2,064 108

• Cash Outflows

(1,061) (422) (808) (753) (1) (2) Net Cash Used in Financing Activities (93) 299 461 1,311 107 (2) Cash and Cash Equiv. at End of Period 153 285 409 503 374 491

30 Decimal Difference adjusted Note: Financial data based on consolidated K-IFRS accounting standard

Thank You Thank You Thank You Thank You