Weon-Gun Ko - Vice President Changyoung Ji - Hyangjoo Oh -

Pierre Lau - Citigroup Inc, Research Division Josh J. Bae - UBS Investment Bank, Research Division Heedo Yun - Korea Investment & Securities Co., Ltd., Research Division Jae-Hyun Ryu - KDB Daewoo Securities Co., Ltd., Research Division Young Suk Shin - Morgan Stanley, Research Division Jiyoon Shin - KTB Investment & Securities Co., Ltd., Research Division Minho Hur - Shinhan Investment Corp., Research Division

[Korean] Good morning, and good evening. First of all, thank you, all, for joining this conference call. And now we'll begin the conference of the fiscal year 2015 first quarter earnings results by KEPCO. This conference will start with a presentation, followed by a traditional Q&A session. [Operator Instructions] Now we shall commence the presentation on the fiscal year 2015 first quarter earnings results by KEPCO. Weon-Gun Ko: [Korean] Good afternoon. This is Weon-Gun Ko, 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 first quarter of 2015. [Korean] We will begin with a brief presentation on the earnings results, which will be followed by a Q&A session. Today's call will be presented in both Korean and English. [Korean] Please note that the financial information to be disclosed today is on a preliminary, unaudited and consolidated basis in accordance with K-IFRS. Any comparison would be on a year-on-year basis between 2014 and 2015. 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 such risks and uncertainties. [Korean] Now Senior IR Manager, Mr. Changyoung Ji, will begin with an overview of earnings results of the first quarter of 2015, first, in Korean and repeated in English.

[Korean] Now we will provide the overview in English, starting with operating income. In the first quarter of 2015, KEPCO recorded a net operating income of KRW 2.24 trillion. Taking a closer look, operating revenues increased 2.4% to KRW 15.12 trillion. This was attributable mainly to 12.9% increase in power sales revenue totaling KRW 13.86 trillion and 34% -- 34.2% increase in revenue from the overseas business amounting to KRW 815 billion. Moving on to main operating costs, cost of goods sold. SG&A expense decreased 4.9% to KRW 12.88 trillion. Fuel cost decreased to 24.7% to KRW 4.62 trillion. Power generation, affected by the low power demand, increased 2.9%, and unit cost of fuel declined by 22.5%. Meanwhile, purchased power cost increased 11.6% to KRW 3.66 trillion. Unit cost of purchased power decreased 12.3% because of the decrease of S&P, caused by the increase of new highly efficient power plants, and purchased volume increased 29.0%. Depreciation cost rose 5.1% to KRW 1.77 trillion, mainly due to the newly constructed substations and new facility additions by power plants. Now let me explain KEPCO's nonoperating segment. Net financial loss was KRW 494 billion in the first quarter of 2015, which was improved by KRW 30 billion. As a result of the foregoing, we recorded a consolidated net income of KRW 1.22 trillion in the first quarter of 2015. This concludes the overview of KEPCO's earnings results for the first quarter of 2015. [Korean] Now let me move on to the Q&A sessions. Q&A session will be hosted by Mr. Weon-Gun Ko. Weon-Gun Ko: [Korean] This is Weon-Gun Ko. I'm joined with our IR committee members in charge of major business areas at KEPCO. We are prepared to take any questions. [Korean]

[Korean] [Operator Instructions] [Korean] Currently, 4 participants are waiting with their question. The first question would be given by Pierre Lau from Citibank. Pierre Lau - Citigroup Inc, Research Division: I'm Pierre Lau from Citibank. I have 3 questions. The first one is about your generation mix. In the first quarter, your generation mix had 48% on coal and 35% on nuclear. So what is management guidance for the generation mix in 2015 for the full year? Second question, in the first quarter, your power purchased from IPP was up 29% to 19,000 gigawatt hour. What is management guidance for the full year average amount from IPP? And last question, what is your unit cost LNG and oil cost guidance for 2015 after seeing your first quarter results? [Korean] Weon-Gun Ko: [Korean] To answer your first question, on the full year generation mix for 2015, we are planning to have 11% of LNG, 48% of coal-fired power plant and 38% for nuclear power plant. [Korean] And as for your second question, on the overall power purchased from IPP for the full year 2015, it is expected at 19%. [Korean] And as for your unit cost on fuel, so far, it's KRW 102,101 per ton for coal and KRW 827,000 for LNG. And as for fuel, it's KRW 576.68 per unit -- [Korean] per liter. Pierre Lau - Citigroup Inc, Research Division: Okay. For the second question, that 19%, is it 19% of your energy resales from power purchased? Or do you expect power purchased from IPP to increase by 19% year-on-year? Which one do you refer to? [Korean] Weon-Gun Ko: [Korean] So 19% is [Korean] total mix from overall power purchased by KEPCO in 2015.

[Korean] The following question is by Bae Sung Hoon from UBS. Josh J. Bae - UBS Investment Bank, Research Division: My first question is on your unconsolidated net profit. I see there's a big increase in the net profit due to the higher dividend income. Could you please let us know what the payout ratio of the GENCOs were this year and last year? I asked because of -- because you used the unconsolidated net profit for the dividend payout. So if there's any guidance for this year's unconsolidated net profit, that would also be very helpful. My second question is on the nuclear plants. At the beginning of the year, you guided for 85% nuclear utilization rate for this year. So I'd just like to check if this is still intact. Also, there has been a number of nuclear plants with issues, so I think an update on these plants would be helpful as well. For example, the Hanbit No. 3, when do you expect that to restart? The Wolsong No. 1, there's been government approval, but the plant hasn't restarted yet, so wondering when that plant would restart as well. Also, for the new plants, your presentation is saying that the Shin Wolsong No. 2 is scheduled to start operations in July 2015, but wondering when the Shin Kori No. 3 and No. 4 can start commercial operations. [Korean] Weon-Gun Ko: [Korean] Well, based on the financial accounting here in 2015, our dividend payout ratio for our distributor companies is as follows: As for Korea nuclear power plant, KHNP, it's 39%. And as for 5 other GENCOs, it's 15%. As for KHNP, I'm sorry, it's 30.9%. [Korean] And as for the nuclear power plant utilization rate, the 85% utilization rate is still valid.

[Korean] And as for the each of the nuclear power plants, for Hanbit No. 3 and Wolsong No. 1, it should be commercially operational by end of May or early this June. And as for our Shin Wolsong No. 2, it will go live in July. As for our Shin Kori No. 3, there has been some change there. It will not go live for this year, but it will be in operation together with Shin Kori No. 4 in 2016. Josh J. Bae - UBS Investment Bank, Research Division: If I may just add one more question regarding the electricity tariff discussion with the regulator. I think, last quarter, you mentioned that you expect the discussions to start in June and a potential conclusion will be out some time in June or July. Can I just check if that schedule is still intact? [Korean]

[Korean] Yes, as we have mentioned before, the overall tariff discussion will be in discussion once the total cost, including the cost for half of the business, is calculated in end of July -- June. And once that is settled, together with the overall power sales numbers, we would decide on whether to adjust our power tariff or not.

[Korean] The following question is by Yun Heedo from Korea Investment & Securities. Heedo Yun - Korea Investment & Securities Co., Ltd., Research Division: [Korean] I have 3 questions. First question is, if you look at your overseas business profit, it has gone up significantly compared to the previous quarter by 34%, roughly at -- to KRW 816.3 billion. What has driven this kind of increase in your overseas business? And on second question, if you look at the REC operating [ph] cost, it has gone up year-on-year. But if you look at the quarter-on-quarter number for REC purchase, it has gone down by 21%. What is the reason behind it? And my third question is, this year, we will start the trading of Bunhyao Cap [ph] nationwide. And how do you plan -- or how are you actually processing that on your accounting books? Weon-Gun Ko: [Korean] To answer your first question, on the increase in overseas business performance, is that if you look at the gross profit -- if you look at overall efficiency rate for U.A.E. business, it has climbed up to 34% at the moment. So most of the revenue increase from overseas business is driven by our U.A.E. project.

[Korean] To answer your question on the REC cost, if you look at the overall REC cost, and it's a process of purchase and the trading in the power market, that is usually done some time around May and reflected in the accounting books at the end of the year. So the 2013 numbers have not been reflected and have not been fully reflected in the base effect of our accounting books. Therefore, if you look at the overall REC purchase cost trend, it is going up continuously. However, compared on the accounting books, it does look that it has decreased over on -- during those times. As for the trading rights, we are currently in discussion on how to treat that on our accounting books, and nothing has been confirmed yet. Heedo Yun - Korea Investment & Securities Co., Ltd., Research Division: [Korean] Follow-up question to that. On the emission trading right, you said end of last year that you're expecting about KRW 3 billion into -- add on the accounting book, and it seems that, that has not been processed in your balance sheet yet. When do you believe that, that will actually be reflected on the accounting books?

[Korean] It's KRW 300 billion as of last year for the trading of emission right.

[Korean] We believe the additions around the accounting treatment will come around end of this year. Heedo Yun - Korea Investment & Securities Co., Ltd., Research Division: [Korean] Although maybe it's difficult for you to forecast the number at the moment, is it safe to assume that the numbers will be reflected as lump sum at the end of fourth quarter?

[Korean] As for the emission trading rights, we haven't even decided whether to treat it as an expense or whether to treat it as a liability on our accounting books yet, so it is very difficult for us to comment on the total amount of the trading emission right as well as the accounting line item itself.

[Korean] The following question is by Jae-Hyun Ryu from Daewoo Securities. Jae-Hyun Ryu - KDB Daewoo Securities Co., Ltd., Research Division: [Korean] My first question is, what has driven the increase of other operating expenses for this quarter? And second question is, can you share with us the increase of utilization or use of nuclear power plant by quarter-by-quarter basis for this year? And also, it seems like your equity method has increased, but mainly, I assume, driven by coal gas. But could you elaborate on that trend? And also, last, but not least, it seems that you gained from the headquarter's land sale off -- that's gone through, and you have received about KRW 4 trillion in receivable at the moment. When do you plan to recognize that on your accounting books? Weon-Gun Ko: [Korean] As for your first question, on the nonoperating expense, we have seen a large increase in overseas business revenue, and we also have seen increase in expense according to U.A.E. plant project. Therefore, the increase in equipment and facility cost has added to our nonoperating expense increase. And to answer your second question, on utilization for our power plant, for first quarter, it's 85.1%; for second quarter, 86.7%; third quarter, 82.7%; and for fourth quarter, we are assuming 88.8%. [Korean] As for the equity gain, yes, we are recognizing most of the gain from the coal gas equity, which is at KRW 125 billion on the accounting book. And for other overseas business, there's additional KRW 38 billion gain that we are seeing in the equity side. [Korean] And our gains from the headquarter land sales would finalize in end of September. So we are receiving this gain on 3 phases, and the final 1 will come at end of September, and that is when it will be recognized in our accounting book.

[Korean] The following question is by Young Suk Shin from Morgan Stanley. Young Suk Shin - Morgan Stanley, Research Division: [Korean] I have 3 questions. First question is on your margin -- or the high-margin settlement with the coal gas when it comes to settling your energy source, LNG mainly. I assumed that you have been settling those differences in the second quarter last year, but it seems that it was done already in the first quarter. So what is the impact of that settlement on your accounting book, combining both LNG for your own proprietary usage as well as IPP? And second question, so it seems that according to the GS Holdings' IPP is that there is 1 month lagging effect when it comes to LNG input price versus IPP price sales hikes, and it seems that it was higher than the supply cost -- or the cost of fuel itself for this year. How much of the gap -- how much gap exists for this quarter? Is the second question. And the third question, on the ESS, you're increasing the overall coal efficiencies to save energy. And in doing so, what is your overall road map in terms of your utilization and time line?

[Korean] For your first question and second question, to my regret, we don't have the relevant person here to answer your question, but please allow us to follow up on that question off-line later on. And on your third question, we are currently pursuing ESS project by phase-by-phase, and it's spread out until 2017. And we're approaching that by different phases depending on the status. [Korean] And our current plant capacity is 500 megawatts and 200 megawatts for 2015, 124 megawatts for 2016 and another 124 megawatts for 2017. And we are [going] to convert the coal-fired energy to 100% ESS to have 100% efficiency.

[Korean] The following question is by Jiyoon Shin from KTB Investment Securities. Jiyoon Shin - KTB Investment & Securities Co., Ltd., Research Division: [Korean] I have 2 questions. It seems that your LNG mix is going down by 30%, whereas the IPP is going up, and PPA is going down, whereas general IPP portion is also going up. And you mentioned that IPP mix overall power generation will take up about 19% in your previous comment. Having said that, your first quarter IPP mix was 18%, so it seems like you're expecting that this number currently will expand second quarter and afterwards. I guess the main difference is coming from the difference between KEPCO generations, and IPP is the difference in overall energy cost. But still, 19% seems to be an extremely large number. Do you see this as a structural trend which will likely materialize or stay the same moving forward? On my second question, shifting gears a little bit, it's on the other operating expense. I understand that the expense has gone up due to the U.A.E. project, but could you share with us, if you can, some increase in labor cost or provisioning cost for the nuclear power plant decommissioning, et cetera, so if there are any cost increase driven from those 2 factors? Weon-Gun Ko: [Korean] To answer your first question, recently, we have added highly efficient new LNG generations, and that has driven down S&P price. And we believe the trend of increasing IPP mix in Korea will continue to exist moving forward.

[Korean] And your question regarding other operating -- nonoperating expense, the labor there is not included as part of that nonoperating expense. However, the liability and the composition cost of provisioning for decommissioning cost of nuclear power plant has been added, and the impact of that is about 1.5%. [Korean] One correction here, if you look at our IR material, labor cost is included in other operating expense, and labor cost increase has been 6%.

[Korean] The following question is by Minho Hur from Shinhan Financial Investment. Minho Hur - Shinhan Investment Corp., Research Division: [Korean] First question, it seems that if you look at the GENCOs on the settlement coefficient, it has gone up in January. And usually, you add up 1% or 2% of WAC on top of it. And -- but -- however, if you look at the current level, it has reached its peak -- historical peak at the moment. Historically, you have had higher number in the January, and you have lower that in July. Do you believe this to be the trend of this year, too? Or do you believe it will further drop moving forward? And if you look at your GENCO's coefficient, it's 1 at the moment, and there has been some gap with the IPPs. Do you believe that for when it comes to the high bit IPPs, you would expect the increase of CPs moving forward?

[Korean] To answer your first question, if you look at our settlement adjustment coefficient for 2015, we are reflecting the overall fluctuation of S&P throughout the year. In January, it was KRW 140. On average, it's expected to be KRW 110. That's why in the first quarter of this year, it seems like the IPP has created more profit, higher than ever, but it's something that is temporary. We believe that it will balance off throughout the year as we adjust the coefficient, and it will get lower in the later half of this year in balance with KEPCO's level. As for these CPs, the coefficient is -- has a purpose of adjusting the cost issue between the GENCOs and KEPCO as its headquarter, and it has no relevance with the CPs of private IPP.

[Korean] Currently, there are no participants with questions. [Operator Instructions] [Korean] [Operator Instructions]

[Korean] Weon-Gun Ko: [Korean]

All right. We will conclude this conference call. Once again, thank you for joining us today.

[Korean] This concludes the fiscal year 2015 first quarter earnings results by KEPCO. Thanks for the participation.