Changyoung Ji – Senior IR Manager Bon-Woo Koo – EVP and COO

Yoo Deok-sang – Dongbu Securities Co. Ltd Pierre Lau – Citi Shin Ji Yoon – KTB Investment & Securities Bum Sujin – Samsung Securities Josh Bae – UBS

Good morning and good evening. First of all thank you all for joining this conference call and now we will begin the conference of the Fiscal Year 2013 Fourth Quarter Earnings Results by KEPCO. This conference will start with a detailed presentation followed by a brief Q&A session. (Operator Instructions). Now we shall connect the presentation on the fiscal year 2013 fourth quarter earnings result by KEPCO.

Good afternoon, this is [Chang-Keun Shin], Vice President and Treasurer of KEPCO. On behalf of KEPCO I would like to thank you all for participating in today’s conference call to announce earnings results for the fiscal year of 2013. We will begin with a brief presentation of the earnings result, which will be followed by a Q&A session. Today’s call will be presented in both Korean and English. Please note that the financial information to be disclosed today is on a preliminary, unaudited, and unconsolidated basis in accordance with KIFRS. Any comparison will be on a year-on-year basis between 2012 and 2013. Business, strategies, plans, financial estimates, and other forward-looking statements included in today’s call will be made based on our current expectations and plans. Please be noted that such statements may involve certain risks and uncertainties. Now Senior IR Manager, Mr. Changyoung Ji will begin with an overview of earnings results of the fiscal year of 2013, first in Korean and repeated in English.

Now we will provide you with overview in English, starting with operating income. In the fiscal year of 2013 KEPCO reported a net operating income of KRW1.52 trillion. Taking a closely look, operating revenues increased 9.3% to KRW54.38 trillion. This was attributable mainly to a 9.1% increase in power sales revenue, totaling in KRW50.17 trillion and 12.1% increase in revenue from the overseas business amounting to KRW2.39 trillion. Moving on to main operating cost, COGS, SG&A expenses increased 4.5% to KRW52.53 trillion. Fuel cost increased 1.6% to KRW24.20 trillion. Power generation affected by the low power demand decreased 0.1% and unit cost of fuel declined by 2.6%. Slight increase of total fuel cost was mainly due to the reclassification of account receivables on the fuel cost of 2012. Meanwhile purchased power cost increased 15.6% to KRW11.33 trillion, while unit cost of purchase declined 8.5% purchase volume increased 12.1% and the reclassification of account receivable on the purchase power cost of 2012 and recent purchase cost increase. Depreciation cost rose 5.6% to KRW6.55 trillion mainly due to the newly constructed substations and power plants such as Incheon Unit 3, Shin-Kori unit 2, in-Onsan unit 1, Pyeongtaek unit 5 and 6, and Ulsan unit 7 and 8. Now let me explain KEPCO’s non-operating statements. Net financial loss stood at KRW2.30 trillion in 2013 which was worsened by KRW362 billion. This was mainly due to the reduction of Korean won appreciation against U.S. dollar resulting in the FX translations gain. As a result of the foregoing we finally recorded a consolidated net income of KRW185 billion in the fiscal year of 2013 which was the first turnaround in the past six years, since 2007. This concludes the overview of KEPCO earnings results for the fiscal year 2013. Now let me move on to the Q&A session. Q&A session will be hosted by Mr. Bon-Woo Koo. Bon-Woo Koo: This is Bon-Woo Koo. I am joined with our IR committee members in charge of major business areas at KEPCO. We are prepared to take any questions. Since we will proceed in both Korean and English all Q&A’s will be translated. Please ensure your questions and answers are brief and clear. Please begin.

Now Q&A session will begin. (Operator Instructions). Our first question will be given by Mr. Yoo Deok-sang from Dongbu Securities. Please go ahead sir. Yoo Deok-sang – Dongbu Securities Co. Ltd: I am Yoo Deok-sang from Dongbu Securities. I have three questions. The first is regarding the corporate tax related item on the bottom of the sheet. We see that it has been relatively low compared to previous years. I would like to ask how this was taken in to consideration in the overall counting and is this a rare occasional event or is this something that can be accepted in the future as well? Secondly, if you look at the item regarding equity income and loss of affiliate it seems to be reported as KRW 47.7 billion could you give us the breakdown of what that is composed of? And the third question is could you explain including the amount for the induction plant for the year 2014?

So regarding the corporate tax related question I would like to respond. If you look at the corporate tax cost for the year 2013 it is at KRW482.2 billion. This was mostly done by changing the method of tax reporting that we have included in order to make certain that the deferred amount coming in from the 2008 period could be taken into consideration.

As I mentioned earlier by applying a different tax policy what we were able to do is take in the deferred tax asset and thereby lowering the corporate tax cost by KRW 418.8 billion. So in the end ultimately it came to a tax refund type of an effect. And additionally this is something that has happened in 2013 in order to offset what was created in 2008. So this was a one-time effect.

If I look at your question regarding equity income and loss of affiliates the size of the equity loss of affiliates was KRW166.5 billion and the major factor behind that was first of all the [inaudible] gas with a loss of KRW 26.8 billion and overseas [plants] which recorded loss of KRW 54.4 billion.

Yes, I better answer your third question regarding investment plans for 2014. As you probably know KEPCO usually has very conservative forecast for investments. For this year we expect the investment size to be about KRW 19 trillion but as you probably know in terms of the investment executed on an average basis it’s relatively at around 75% to 80% of the original planned amount. So we expect that for this year the actual investment that will be executed will amount to something between KRW 14 trillion to KRW 15 trillion one. For your reference if you look at what happened last year for 2013 the original plan was KRW 18 trillion to KRW 19 trillion investments for the year but if you look at the actual amount that we executed, it was 15 trillion.

The following question will be given by [Jajou Shek from USE]. Please go ahead.

Yes, hi. Thank you for the opportunity. I have three questions. First is on the earnings results, if you could please share with us what drove the increase in the operating cost items, the commissions and the R&D expense last year, that would be very helpful? Second is on the nuclear utilization rate, based on the file you circulated the utilization rate was 75.5% in 2013. What are your expectations for this year? Thirdly if you could please remind us of your dividend policy, you turned to a slight positive net profit in 2013. Does this mean you will resume paying out a dividend based on 2013 net income or should we wait for 2014 when you generate a more substantial earnings, or is dividend not a priority for the management at this stage given the focus on de-leveraging? Thank you.

Yes, I’d like to answer your first question on the increased items, including the operating cost. As you can see fuel cost and purchased power cost have both increased. For maintenance related cost it have increased 2.3% compared to the previous year recording KRW 33.8 billion. For the commissions it was recorded at KRW 102.1 billion and for the development cost it was an increase of 14.5% compared to the previous year recording KRW 73.1 billion. Additionally regarding the decommissioning cost for NPP, for the previous year it was KRW 670 billion and for the year 2013 it was KRW 181.4 billion.

I would like to add to your second question on the nuclear utilization rate. As you have mentioned for the 2013 year it was 75.5% and our forecast or expectation for 2014 is 87.5%.

And I would like to answer your last question regarding the dividend policy, the program that we have made in 2013 and whether we are going to link these two dividend payouts we are currently in discussion with the government which is the largest shareholder of KEPCO and therefore we are currently in the [very early] stage.

Yes, hi, thank you. Just on the first question could you please share with us any details on what drove the higher commissions and the higher R&D expenses?

I apologize but I do not have the exact details and figures with me right now. We will get back to you via email regarding that question.

Okay, thank you.

The following question is by Mr. Pierre from Citibank. Please go head sir. Pierre Lau – Citi: Hi, hello, good afternoon. This is Pierre Lau from Citigroup. I have three questions. The first one is about your nuclear power unit. You have three nuclear power units in suspended in operation at the moment. Would you have what is the [component] regarding [inaudible] of those mixes? This is question one. Question two is 2013, you have a net profit so what is your expectation of more than five to seven in 2014? And lastly, the third question what do you think of your fuel cost look in 2014? Thank you.

Yes, I would like to answer your first question on the operation or re-operation of the suspended three nuclear power units. On January 2, 2014 the KINS has approved the safety for re-operating of the three units and therefore they are back in operations. Regarding your second question despite the fact that we have had two tariff increases in 2013 we believe the related cost increases that are expected for 2014 will make it inevitable for us to go ahead with additional tariff increases. We do not have specific plans that have been established as of yet. However we will continue to have discussions with the government regarding finding a more appropriate and rational tariff reflecting also the consumer price increase as well as the overall economic situation. If I try to answer your third question regarding forecast or outlook for fuel cost for the year 2014 for the Genco we expect that in total the fuel cost will be at around KRW21.57 trillion. Pierre Lau – Citi: So regarding the KRW21.57 trillion of the cost would you mind – have both the unit coal, unit oil, unit LNG cost and also your exchange rate assumption? Thank you.

Yes, I’d like to give you additional information and the breakdown of our fuel cost breakdown forecast by the fuel type. First of all for coal, we expect unit cost to be KRW 102,501 per tonne; for LNG, the unit cost is KRW 1,022001 per tonne and for oil KRW768 per liter and the exchange rate that we have taken into the assumption is KRW1060 to the dollar.

Are there additional questions? Pierre Lau – Citi: No, thank you.

The following question is given by Mr. [Tu Itau] from IM Investment and Securities. Please go ahead sir.

There are three questions. First of all regarding the corporate tax that was reflected in 2013 but that went back to 2008, do you expect any similar change that will take place that will have an effect for the 2014 results from what you have accumulated in the 2009 period? The second question is would you tell us about the decommissioning cost for NPPs that you expect for 2014 and 2015? And the last question is you mentioned earlier about the increases in the fuel cost as well as the purchased power cost. Could you tell us a little bit more about what changes have been made in the sub-item in these two areas?

I’d like to answer your first question regarding the accumulated loss amount from the 2009 period whether that will have an effect on the corporate tax area for 2014 onward. Well what we have calculated at the end of our calculations for 2013 was that the accumulated losses that have been seen from the 2009 period totaled up to KRW10.68 trillion. However we believe taking into consideration the plans for 2014 as well as our mid to long-term financial plans for 2017 period we believe that the actual tax related effect will not be seen because of the fact that compared to the accumulated loss up the actual financial results will be much higher. So we do not expect similar type of tax refund effect to take place in 2014.

I’d like to answer your second question regarding our forecast for decommissioning cost for nuclear power plant. For the year 2014, we expect that to be at KRW277 billion. However on thing to note is the fact that for this year we expect the decommissioning unit cost to be readjusted and therefore the actual figure may be changed in the future. In 2012 we have had a reclassification of the accounts receivable on the fuel cost because some of the accounts receivable that was supposed to be included in the revenue was actually reflected in the fuel cost and the purchased power cost.

The following question is given by Mr. Shin Ji Yoon from KTB Investment & Securities. Please go ahead, sir. Shin Ji Yoon – KTB Investment & Securities: Yes I have two questions. The first one is a set of questions regarding the UAE business and the revenue coming from that. Please elaborate for us what the fourth quarter revenue for the UAE business was, what the revenue was for the total year and what your forecast for UAE business revenue is for 2014? The second question is regarding tariff increase, I know that you have already answered about the basic principal of tax increases being possible for this year as well. However if you take into consideration the fact that fuel cost is decreasing and also the fact that the operating profit is increasing for KEPCO. We believe that the operating profit for the company could be increased up to KRW 5 trillion to KRW 6 trillion for the next year and this does not seem to provide a logical background for having another tariff increase. So whether it is from the perspective of fare – or what other type of logic you may have, what would be the logic that supports the possibility of additional tariff increase today?

If I try to respond on your question for UAE business revenue for 2013 the fourth quarter revenue figure is KRW 475 million as for forecast of revenue for 2014 we still do not have any of those figures yet.

I would like to answer your second question regarding the tariff increase. As I mentioned earlier if I may add more on what we discussed earlier currently we do not have any specific plans about tariff increase. However it will be in discussion with government because the final establishment of a tariff increase plan will be depending on what our final results calculations will be and after looking into what additional cost factors can be expected for the future. So there are several things that need to be clarified and identified before we go into any specific plans for the tariff increase. But as you have mentioned it is true that with the tariff increases that have been conducted the situation financially has been improved compared to the previous years. However nevertheless we expect some changes to take place this year including the energy taxation regulation that may incur additional cost increase though there is still the possibility of discussing with the government about possible tariff increases.

The following question is by Mr. [Ta Hun Dong] from Chemical Energy Investment Management. Please go ahead sir.

Yes, I have two questions, first of all is do you have any forecast for P&L for 2014? And secondly regarding nuclear area it seems that even Japan which had already announced many plans for closing down all of their nuclear facilities there seems to be some changes of movement going on where the Governor of the Prefecture who had been a proponent of re-opening or re-operating nuclear facilities has been elected. So do you believe that on a global basis nuclear is once again on the rise or is still on the downward trend?

Yes, I would like to answer your first question regarding forecast for 2014 was since we only have the output of the earnings result for 2013 very recently we are still going through re-calculation and we do not have the actual forecast figures as of yet.

Now I would like to answer your second question regarding policies or movements that we see for the nuclear power. As you know since the Fukushima accident in Japan there has been quite a bit of controversy and discussion about the safety of nuclear power facilities and some countries have gone into a policy review regarding nuclear power. However since even at a global level there is not a visible or viable alternative to nuclear energy at this point in time so we do not expect to see a major change in the nuclear power mindset on a global basis and similarly the Korean government and KEPCO we are still maintaining the same types of policies.

Currently there are three participants waiting with their questions. The following question is by Mr. [Yang Ji-hwan] from Daishin Securities. Please go head sir.

Yes, first of all I would like to congratulate you on making the turnaround in 2008. And I have three questions that I would like to ask. First one is do you have any forecast for demand for this year, 2014? And the second question is regarding the forecast of fuel cost it seems that on the unit price level they do not seem to be very different from our forecast. However the overall total sum seems to be lower than what we have in mind. So maybe it was a difference in the purchased power cost which may be a discrepancy from what we had in our view. So could you elaborate on the purchase power cost-related forecast for 2014? And last question, the third question is what forecast do you have for operating rate of utilization rate of the coal-fired power plant?

Yes I would like to answer your first question regarding the – forecast regarding demand growth. For 2014 we expect the sales volume to increase by about 3.3% recording 490.5 billion kilowatt per hour and the assumption that we took in as GDP growth rate is 3.5% GDP growth.

Regarding your second question we do not have specific forecast for purchased power cost as of yet. As soon as we get the updated statistics we will get them to you.

And also for your third question regarding the utilization rate of the coal-fired power plant we do not have specific figures that we have set as the forecast yet. However for your reference the figure for 2013 was 93.8%. So we expect that it will be quite similar this year unless there are dramatic changes that may occur that we do not foresee.

The following question is by Ms. Bum Sujin from Samsung Securities. Please go ahead ma’am. Bum Sujin – Samsung Securities: Yes, I have three questions, first of all regarding the fuel cost that you have mentioned at KRW 21.57 trillion, has the coal related taxation that started from July, has that new tax been reflected in that figure is my first question? The second question is when do you expect the newly constructed nuclear power plant and an additional coal-fired power plant to actually enter into operation? And third question what is the forecast you have for the 2014 R&D purchase cost?

To answer your first question the fuel cost forecast that we had given you earlier that does not take into consideration coal tax. Considering your second question of the new nuclear power plant and the timeline of the operation of the new power plant as you know this timeline has been delayed due to the changing of the control cable that has been going on. So it is difficult to give you an exact date of when these will be entering into operation. We can only say that we have a larger timeframe of end of 2014 to mid-2015 we expect it to be somewhere around that period of time, but of course that timing is subject to changes or alterations in the future as well. For the Yeongheung coal-fired power plant that will be in June and December.

I would like to answer your third question regarding RAC purchase cost forecast for this year. Well in 2013 the mandatory amount was actually 2.5%. However that has been increased to 3% so we expect the overall figure to be increased, that is true. However if you look at what happened last year for REC purchase and also for overall cost of RPS it was originally expected to be KRW 500 billion however after actual execution we saw that the figure was only about KRW 200 billion. Some of those have been deferred and in some cases we did not have to completely fulfill the amount. So although we expect it to be for 2014 KRW 700 billion the actual cost that will be incurred after execution maybe lower than that.

The following question is by Mr. Yoo Deok-sang from Dongbu Securities. Please go ahead, sir. Yoo Deok-sang – Dongbu Securities Co. Ltd: Yes, I’d like to ask two additional questions just to clarify my understanding. First of all you mentioned about the utilization rate of nuclear to be 87.5%, is it correct? And if so this would mean that there would be almost full operation and full utilization of plants. What is the reason behind that? Is that because there were already a lot of maintenance activities in the previous year, so that for this year you do not have much plant maintenance operations? The second question is for Yeongheung, with that coming online we believe that the base load is quite strengthened for KEPCO and this would lead me to believe that the proportion taken up by LNG power generation will become lower in the future. So would you agree that my understanding is correct in that the purchase power-related dependency in the mid to long term for KEPCO will continue to decrease?

I’d like to answer your first question regarding utilization rate for nuclear power plant. It is, as you have mentioned and as we have earlier answered 87.5% for nuclear and this is due to the fact that compared to the year 2013 this year in 2014 the number of planned maintenance days is much lower.

I would like to answer your second question regarding the purchased power proportion. While in 2013 and 2014 period there are many high efficiency IPP type of private sector plants coming into the market and therefore the ratio is actually it’s actually going to increase quite a bit from 13% to 17%. However after the 2016 and 2017 timeframe we believe that with the entry of our new coal-fired power plants coming into operation the proportion of purchased power based on LNG will be reduced in the mid and long-term. Yoo Deok-sang – Dongbu Securities Co. Ltd: Additionally I would like to ask about the BP realization rate for LNG in KEPCO, what is that figure?

I think we will have to get back to you after confirming. Thank you.

Currently there are three participants are waiting with their questions. The following question is by Mr. Pierre Lau from Citibank. Please go head sir. Pierre Lau – Citi: Hello can you hear me?

Sure go ahead sir. Pierre Lau – Citi: Hi, the first follow up question is could you let us know the update expected commissioning day of your new nuclear power plant to start operation in 2014, and ‘15? The second question is what is your expected power generation mix in 2014 in terms of fuel type? Thank you.

Yes, regarding your first question about the commissioning state of the new nuclear power plant as was mentioned earlier in the previous question for Shin-Kori unit 3 and unit 4 we expect them to enter into operations in second half of 2014 or first half of 2015. Unfortunately we are not able to give you an exact date as of yet as that period that we are forecasting maybe subject to change later on as well.

: Pierre Lau – Citi: Okay. And how about commissioning day of Shin-Wolsong number two?

Shin-Wolsong you mean the commissioning date? Pierre Lau – Citi: Yes.

For Shin-Wolsong number two, the commissioning date is July of this year. Pierre Lau – Citi: Okay. Thank you.

The following question is by Mr. Josh Bae from UBS. Please go ahead, sir. Josh Bae – UBS: Yes. Thank you. Just a follow-up question regarding your comment about the high efficiency new LNG power plants by the IPPs. Is it correct to understand that with these new plants coming online it’s cheaper to buy from these new plants compared to the existing LNG and heavy oil plants of your Gencos?

Yes, that is correct because when you look at the new LNG facilities coming into the market their generation efficiencies the higher even though they are using the same fuel, LNG. Therefore this means that we will be able to purchase at a lower cost. Josh Bae – UBS: Thank you.

The following question is by Mr. Shin Ji-Yoon from KTB Investment & Securities. Please go ahead sir. Shin Ji Yoon – KTB Investment & Securities: I think my question would be similar to what was previously asked by others but let me just confirm. If you say that the IPP portion of the purchased power using LNG facilities will be increased for the near-term does that mean that KEPCO’s own LNG generation proportion will be lower?

Yes, we still have to take into consideration what new LNG facilities will be entered into the base load generation and we will also have to see just how much contribution will be made by the new nuclear facilities coming online. However in principal we expect that our own LNG generation portion will be decreased as you have said in your question. Shin Ji Yoon – KTB Investment & Securities:

The following question is by Mr. [Yang Ji-hwan from Daishin Securities]. Please go ahead sir.

Yes, I have a simple question you mentioned about the forecast the utilization rate of nuclear power plant on a year basis would you happen to have those figures by quarter?

Yes, I’d like to give you those figures by each quarter: the first quarter, 87.2%; second quarter, 86.4%; third quarter, 90.7%; fourth quarter, 85.9%.

We would like to entertain one more question. Currently there are no participants with questions. (Operator Instructions). The last question is given by Ms. Bum Sujin from Samsung Securities. Please go ahead ma’am. Bum Sujin – Samsung Securities: Yes, I’d like to ask one additional question. You mentioned about with the new private sector genco coming in that have more effective facilities; you expect the cost to be lower. In that case do you have any internal guidelines for the SNP for 2014?

Yes well for 2013 the SNP was KRW 152.1 and what we forecast for 2014 is in the KRW141, the early 140s.

We will conclude this conference call. Once again thank you.