Chang-Keun Shin – VP, Treasury Department Cecilia Oh – Senior Manager, IR

[Foreign Language – Korean] [Interpreted] 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 2012 first quarter earnings results by KEPCO. This conference will start with a presentation, followed by a brief Q&A session. (Operator instructions) Now we shall commence the presentation on the fiscal year 2012 first quarter earnings results by KEPCO.

[Foreign Language – Korean] [Interpreted] Good afternoon. This is the Cecilia Oh, senior manager of KEPCO’s IR team. On behalf of KEPCO, I would like to thank you all for participating in today’s conference call. [Foreign Language – Korean] [Interpreted] I will begin with a brief presentation on our earnings results, which will be followed by a Q&A session. Today’s call will be proceeded in both Korean and English. Please note that the financial information that we show today is a preliminary, unaudited, unconsolidated basis in accordance with IFRS. Any comparison will be on a year-on-year basis between the first quarter of 2011 and 2012. 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. [Foreign Language – Korean] [Interpreted] Now let me begin with an overview of our earnings results, first in Korean and repeated in English. [Foreign Language – Korean] [Interpreted] Now we will provide the overview in English starting with operating income. In the first quarter of 2012, KEPCO reported a net operating loss of KRW 105 billion, which improved KRW 370 billion compared to operating loss of KRW 476 billion in 2011. Our continued operating loss was mainly due to increases in operating expenses, such as fuel cost and power purchase cost, which were not fully offset by increases in operating revenues related to increases in power sales revenues from tariff hikes, and increases in power sales volume. Taking a closer look, operating revenue rose 23.2% to KRW 13.3 trillion, power sales revenue increased 20.9% totaling in KRW 12.5 trillion. This increase was attributable mainly to 12.2% increase in unit tariff, 2.5% power sales volume growth, driven by increase in demand from the industrial sector, as well as recognition of account receivables related to the fuel cost adjustment announced. Moving on to main operating costs, COGS, selling and administrative expenses went up 18.8% to KRW 13.6 trillion, of which fuel costs jumped 16.6% to KRW 6.9 trillion, primarily due to 0.6% increase in power generation, affected by increased power demand or a 15.9% hike in unit cost of fuel such as coal and LNG. Meanwhile, purchased power cost surged 41% to KRW 2.9 trillion. Such rise is attributable to 21.7% increase in unit cost of purchased power and 15.9% hike in purchased power volume due to rising power demand. Now let me explain KEPCO’s financial income and expenses in the non-operating segment. Our non-financial loss stood at KRW 428 billion in the first quarter of 2012, which is KRW 151 billion up, compared to KRW 277 billion in 2011. This was mainly due to the income expense, which went up 9.8% to KRW 551 billion in [inaudible], and increase in interest bearing debt, and a decrease in FX gain [ph] and pacified the present decline in FX rate in 2012. We had KRW 66 billion income tax expense, which was KRW 131 billion rise compared to the year before, mainly due to a raise in corporate tax rate and improved net income of our subsidiary. As a result of the foregoing, we recorded consolidated net loss of KRW 538 billion in 2012, with slightly improved by KRW 12 billion, from net loss of KRW 550 billion in 2011. This concludes the overview of KEPCO’s earnings results for the first quarter of 2012. [Foreign Language – Korean] [Interpreted] Now, let me move on to the Q&A session. [Foreign Language – Korean] [Interpreted] I am joined with the IR committee members, in charge of finance, tariff, overseas business et cetera. We are prepared to take any questions. [Foreign Language – Korean] [Interpreted] Since we will proceed in both Korean and English, all the Q&As will be interpreted. Please ensure your questions and answers are brief and clear. [Foreign Language – Korean] [Interpreted] Please begin with your questions.

[Foreign Language – Korean] [Interpreted] :

[Foreign Language – Korean] [Interpreted] The first question will be given by [inaudible]. Please go ahead sir.

[Foreign Language – Korean] [Interpreted] Yes, I have 4 questions. The first one is in the operating losses, the accounts receivables were reflected, or will we have to add-on additionally the accounts receivable to come up with the total operating loss. The second question is can you give us the figures segregated by month from the month of January to March. Third question is specifically for the month of March we see that the S&P prices have been increased, is this possibly due to the interrupted operations of Kori-1 unit and the [inaudible] nuclear power plant unit IV, and that caused the power purchase to be increased in volume, and therefore costing up the price. The fourth question is in terms of sales related costs, could you give us a segregated figure for the sales and administrative costs, SG&A costs?

[Foreign Language – Korean] [Interpreted] Taking the first question, I would like to answer the first question, concerning the operating profits and loss, related to that question, included in that figure is the -- included in the revenue figure, excuse me, are the accounts receivable from the fuel cost adjusted amount. Therefore within the first quarter figures, there is actually KRW 437 billion that is reflected in there. So if we take that out and the loss would be that much bigger. [Foreign Language – Korean] [Interpreted] And for your second question concerning the figures, on a monthly basis, we don’t have that information with us right now. We will get back to you with the information. [Foreign Language – Korean] [Interpreted] And concerning the third question about the rise of S&P prices in the month of May, I would like to answer that question. In March of 2012, the month was much, I would like to make the correction, the S&P price rose by 11% to KRW 177.53. That is an 11% rise versus the previous month. And it is mostly attributable to the increase of the fuel cost involved, as well as the factors mentioned in your question about the various plants and units being interrupted in terms of the operation for maintenance related issue, then therefore that increased the purchase amount of power to 3.3 million kilowatts. [Foreign Language – Korean] [Interpreted] I would like to answer your question regarding the fourth question. [Foreign Language – Korean] [Interpreted] In terms of UAE nuclear power plant related facilities and equipment; in the first quarter of 2012 we had about KRW 345 billion. [Foreign Language – Korean] [Interpreted] And for the benefit and welfare related costs we had about $100 billion, and taxes and duty amounted to KRW 41.1 billion. [Foreign Language – Korean] [Interpreted] Did that answer your question?

[Foreign Language – Korean] [Interpreted] (Operator instructions) The following question is by [inaudible]. Please go ahead sir.

[Foreign Language – Korean] [Interpreted] Yes, I have a few questions. First, what additional maintenance related shutdown events do you expect for the remainder of the year, and secondly out of the total portion of cost that are needed for this year, how much or what percent has been contracted? [Foreign Language – Korean] [Interpreted] I believe that the main portion of your first question is related to nuclear power plants. So I would like to give you the forecast on the usage rate or the operation rate of nuclear power plants for this year. In the first quarter of 2012, it was at 87.4%, but for the second quarter all the way up to the fourth quarter, we expect it to range somewhere between the 83.3% to the 85% range. [Foreign Language – Korean] [Interpreted] And the reason that there has been little bit of a decrease in terms of the operation rate of nuclear power plants compared to the past is that that there have been numerous detailed maintenance related checks, as well as safety related checks that are being continued due to the government policies that are strengthening the safety requirement of nuclear power plants.

[Foreign Language – Korean] [Interpreted] :

[Foreign Language – Korean] [Interpreted] The overall requirement for coal for the whole year of 2012 is 78 billion tons roughly. As of the end of March, we have acquired 65.3% of that total volume on a CFR basis at a price level of around $110. [Foreign Language – Korean] [Interpreted] So, at around $115 range, excuse me.

[Foreign Language – Korean] [Interpreted] The following question is by [inaudible] from Citigroup. Please go ahead sir.

Hi, good afternoon. I have three questions. The first question is in the first quarter, the unit coal cost, unit LNG cost and unit oil cost also cost went up quite sharply, compared to the same period last year. And also for the unit coal and LNG also higher than the first quarter last year. Do you expect second quarter this year, whether the unit coal, LNG and oil cost higher or lower than that in the first quarter, and how much would it be higher or lower in your forecast. That is question number one. The number two is that you mentioned about the lower utilization rate of [inaudible], do you expect to have higher or lower volume of power purchased in the second quarter compared to the first quarter. And the third question is, the power purchase cost would it be higher or lower in the second quarter compared to the first quarter? Thank you.

[Foreign Language – Korean] [Interpreted] I think first of all to answer your question regarding the fuel cost unit price. [Foreign Language – Korean] [Interpreted] The coal unit cost forecasted for the month of April, May and June is to be within the range of 120,201 to 121,501 range. [Foreign Language – Korean] [Interpreted] And as for the LNG unit cost for the same period of April to June, we expect it to fall in the range of KRW 965,000 to 970,000. [Foreign Language – Korean] [Interpreted] Now we would like to answer your question about the second quarter power purchase related forecast. [Foreign Language – Korean] [Interpreted] As a general, I can mention that for the base load related maintenance related activity, they do not take place during the winter and the summer months, but mostly in the spring and the autumn months. Therefore, in the second quarter we expect some increase to take place in terms of our power purchase. Does that answer your question?

Yes. I wanted to follow up two points, one is how many percent do you expect for your power purchase amount in the second quarter compared to the first quarter, and secondly, for the unit oil cost in the second quarter, do you think -- what will be the range in the second quarter?

[Foreign Language – Korean] [Interpreted] First of all answering your question about the unit cost for oil related forecast, the unit here used is KRW per kiloliter, and we expect unit cost for oil to be in the range of KRW 857 to 862 per kiloliter. [Foreign Language – Korean] [Interpreted] Please wait while we confirm one more thing. [Foreign Language – Korean] [Interpreted] Actually the unit used here was KRW per liter. Sorry. [Foreign Language – Korean] [Interpreted] In terms of our forecast for what percentage rise we expect for the second quarter of power purchase, we would need to get back to you because we do not have those figures on hand right now.

Thank you.

[Foreign Language – Korean] [Interpreted] Next question please?

[Foreign Language – Korean] [Interpreted] The following question is by [inaudible]. Please go ahead sir.

[Foreign Language – Korean] [Interpreted] I have 3 questions regarding the cost of power purchased from the IPPs and their related generation cost. It is shown here that they have increased their generation by 24% in terms of the volume, but if you look at the gas consumption of IPPs in the process of generation, that gas consumption has gone up 73%. So, could you give us an explanation on what was the cause of this increase of consumption of gas, and the second question is if they were doing this in order to prepare for an increase in electricity demand and that was the reason behind the increase of gas consumption, then outside of the actual volume that was traded, if they -- are the IPPs, do they have the possibility of getting that cost factor paid through KEPCO, is it -- I don’t know what the details are within the related regulations and laws, but is there a requirement for KEPCO to pay for this cushion. And thirdly, is it possible for the IPP to claim this additional fuel cost through KEPCO?

[Foreign Language – Korean] [Interpreted] There was an additional question from the side of KEPCO about clarification regarding the question that was asked, what exactly was meant by the increase of gas consumption, as well as where the source of that information was. And the gentleman answered that this was actually from the statistic of the IPP company and not from the KEPCO documentation or figures. So that was the clarification, and now we will go into the answer of that question. [Foreign Language – Korean] [Interpreted] Concerning the information that you mentioned in terms of increase of gas consumption for the IPP, actually there may be other purposes that gas consumption was used for outside of power generation. For example, regional heating related purposes and self generation type of purposes maybe included in there. So there may not be a direct correlation between the increase of power generated by that IPP and its gas consumption. [Foreign Language – Korean] [Interpreted] Did that answer your question?

[Foreign Language – Korean] [Interpreted] The additional question that I had was if in order to maintain a certain level of reserve, the IPPs have to incur additional fuel costs outside of what was actually traded. In that case are they able to claim that fuel cost or not, that was the question?

[Foreign Language – Korean] [Interpreted] Actually not just the IPP LNG power plant, but all power plants in general, in order to respond to any surges in demand, in order to maintain a certain level of credibility in operations, they always maintain a certain level of reserves. [Foreign Language – Korean] [Interpreted] Next question please.

[Foreign Language – Korean] [Interpreted] The following question is by [inaudible]. Please go ahead sir.

[Foreign Language – Korean] [Interpreted] Yes, I have two questions. First of all, do you have any figures for the accounts receivable for the month of April, and if you do have those figures, could you release how much it is. And I understand, you probably have the second quarter forecast in terms of any increase of sales volume, in that case that could be the basis for the forecast for accounts receivable for the second quarter as well. Would you let us know about that question. Second question I have is that yesterday we had some announcements coming out from the Ministry of Knowledge Economy about the energy supply demand related issue for the summer period of this year, as well as energy conservation related policies and policy direction. The main line of the announcement is that the preventive maintenance related shutdowns have been postponed from the spring period to the autumn period to make certain that supply is fully maintained during this period, and there was also mentioning about shifting to high calorific coal usage. Regarding the types of announcements by the Ministry what do you believe will be the increase forecasted for coal unit cost in the second quarter?

[Foreign Language – Korean] [Interpreted] Regarding your first question, sales volume is expected to increase in the second quarter by about 4.4% versus the same period of the previous year. However, we do not have the same kind of forecast given for accounts receivable as of yet. On the overall general trend, we expect that compared to the month of January to March, the second quarter accounts receivable will probably rise slightly, but we do not have the exact figures as of yet. And when we do, we will get back to you with those figures. [Foreign Language – Korean] [Interpreted] Concerning the other question, with the overall utilization rate of nuclear power plants decreasing, as well as the peak for the summer to increase, I think it is the right direction to go in terms of performing the maintenance related shutdowns to the autumn period. However that announcement has not been fully confirmed by us yet. As for your question regarding any increase in coal related fuel costs, of course, with more power generated through the coal power plants the unit cost -- the cost will actually raise in terms of the coal fuel. However, that also increases the overall power generated, and also LNG side related cost will decrease on the other side of the coin. Therefore with that in total, we believe that it will be actually beneficial for our overall income statement related figures. However, we do not have the actual figures on hand yet.

[Foreign Language – Korean] [Interpreted] I think to add on to that answer because I think my question needs to be clarified a little bit further, the figures that I have -- for the figures, few unit costs for coal, oil and LNG are a little bit different from the forecast that you have given. So, I wanted to make certain if our understanding was correct, because based upon the figures that I have I cannot fully understand how you expect the cash receivable to increase. :

[Foreign Language – Korean] [Interpreted] As for your question about the price difference between high calorific and low calorific coal prices, we don’t have those exact figures on hand. I apologize, and we will get back to you later about that difference rate. Concerning your other questions about accounts receivable, the previously figure that we had mentioned in terms of the forecast for fuel cost that was based upon the monthly figures that have been the actuals recorded by the power plants themselves. For the accounts receivable, what usually happens is that we reflect the amount of the previous year. That is to say for the month of April the accounts receivable will reflect the base fuel cost of what we experienced from July to September of last year. So we make a moving average of those three months to be reflected as the base fuel cost, and we also take into consideration the average unit cost difference of the fuel cost in the month of November, December and January. So we take those two into consideration in the accounts receivable. [Foreign Language – Korean] [Interpreted] We will have next question.

[Foreign Language – Korean] [Interpreted] The following question is by [inaudible]. Please go ahead sir.

[Foreign Language – Korean] [Interpreted] Excuse me for that delay. I have three questions. First one is concerning the government’s plan for tariff hike, there has been an announcement about 13.1% of a tariff hike to be planned. How does that reflect in terms of your IRR rate, and fair rate of return, and actual rate of return. So could you give us what that represents in terms of fair rate of return and actual rate of return. And also what will the accounts receivable, what kind of an influence will the accounts receivable have on the actual rate on return side. The second question is I believe that there are proposals to increase the tariff for the industrial usage, could you give us any additional information that you have about how that will differ by season if any, and the third question is I understand that for the reserve electricity level, there are four levels starting from safe rate, all the way up to emergency rate. So there are four levels. Could you tell us what each of those levels represent in terms of figures or percentages or whatever it may be. So, at what point of data do you change from one level and go up to the next level?

[Foreign Language – Korean] [Interpreted] I would like to answer your first question about the tariff hike related issue, for the fair rate of return in 2010, it was at 6.11% level. For the year 2012, we do not have the actual figures as of yet. But probably due to an increase of borrowings, we expect the rate of return to be a little bit lower. Concerning your additional question about any differentiation or different levels being applied by season, or actually the overall policy direction is being considered by the government. But the government is also looking into many possible policy directions. So we don’t have one fixed decided direction as of yet. But it is highly likely that they will take into consideration some different degrees to be applied, especially for the summer and the winter periods. [Foreign Language – Korean] [Interpreted] Now I would like to answer your question about the levels included in the reserve alert system, and its 4 levels. [Foreign Language – Korean] [Interpreted] There are actually three levels here to take into consideration. The level that requires attention is 4 to 3 million kilowatts, attention level is 3 to 2 million kilowatts, and alert level is 2 to 1 kilowatts. [Foreign Language – Korean] [Interpreted] We would like to get back to you with some more detailed information at a later period.

[Foreign Language – Korean] [Interpreted] ?:

[Foreign Language – Korean] [Interpreted] Is your question asking about whether accounts receivable is included in the revenue for the actual rate of return calculation? [Foreign Language – Korean] [Interpreted] Accounts receivable is not reflected in the actual rate of return. [Foreign Language – Korean] [Interpreted] For the September last year blackout, at that moment in time we do not have the actual reserve level figure on hand as of yet. But we believe that it was not the lowest, because at another period in November when the reserve level at that moment fell down to 5.5% or so, that I believe was the lowest. But during the blackout incident, it was not that low. [Foreign Language – Korean] [Interpreted] We would like to get back to you with an answer on that question after fully verifying the details. [Foreign Language – Korean] [Interpreted] Next question please.

[Foreign Language – Korean] [Interpreted] The following question is by [inaudible]. Please go ahead sir.

[Foreign Language – Korean] [Interpreted] Yes, I have two questions. The first one is regarding other sales, I believe that the figure here is 400 billion, and of that I would like to ask how much revenue was generated by the UAE project. The second question, I don’t know if you will be able to give me an answer right now, but if you look at the nuclear power purchase unit cost I think it exceeded 51 from the month of January to March period. So what do you expect it to be, and looking forward will there be any additional increases or are there differences in terms of the purchase, and the unit cost compared to what we saw prior to 2007 that attributed to this?

[Foreign Language – Korean] [Interpreted] Concerning your first question about UAE related revenue generated or profits generated, in the first quarter it was 443 billion from the UAE project. [Foreign Language – Korean] [Interpreted] Please wait while we gather the information for the second question. [Foreign Language – Korean] [Interpreted] Yes, I like to answer your question about the nuclear power cost. In the first quarter of this year it was 50.531, so exceeding 51 as you have mentioned compared to the same period last year, which was 42.681. In terms of calculating the appropriate unit cost of purchase for nuclear power, we actually apply the S&P coefficient, and as you know the S&P increased and due to that the unit price also increase. However, in the second half of this year we expect that to be adjusted and so the price level will also be recovered. [Foreign Language – Korean] [Interpreted] The additional question to that was UAE related revenue and the figures for first quarter of the previous year 2011, and the answer was for Q1 of 2011 it was 126.3 billion. [Foreign Language – Korean] [Interpreted] And a clarification concerning the nuclear power related cost issue, you mentioned that the S&P has increased, but it will be decreased or lowered, and the answer was yes.

[Foreign Language – Korean] [Interpreted] The additional question was do you have information on the operating profit of HNP [ph] for first quarter? [Foreign Language – Korean] [Interpreted] HNP’s operating profit for Q1 of 2012 recorded 512.2 billion, which is a 26.4% increase compared to the previous year.

[Foreign Language – Korean] [Interpreted] The following question is by [inaudible]. Please go ahead ma'am.

[Foreign Language – Korean] [Interpreted] I have three questions. The first one you have already given us information about the UAE project revenue and cost. Do you have any specific figures by quarter, I am sorry, the question was, excuse me, I would like to correct that, is that level of revenue and cost for the UAE project similar quarter-to-quarter, do you have any figures for the overall annual budget, and if so could you give that to us. The second question is what has been budgeted for this year for maintenance and repair related costs. And the third question is in the fuel cost adjusted system the fuel cost adjustments are not directly reflected into the accounts receivable as far as I understand. And I understand that the estimated generation mix is taken into consideration. So the fuel cost is being applied in a per calorie type of analysis, so looking into that situation, could you give us a breakdown of what is expected in terms of the fuel mix, LNG, oil, and coal and others, because I believe that the base load of the nuclear power plant side has become lower. So is that offset also?

[Foreign Language – Korean] [Interpreted] First of all concerning your first question about the UAE project cost and forecast, in Q1, the cost for the UAE project was at around $374 billion, and it is expected to be remaining at similar levels for the second quarter to fourth quarter period. [Foreign Language – Korean] [Interpreted] And for revenue as well, we expect it to be similar for the upcoming quarters. [Foreign Language – Korean] [Interpreted] For the second question concerning repair and maintenance related costs, the total repair and maintenance related cost for KEPCO and the fixed generation companies altogether record about 2.3 trillion. However, one thing to take into consideration is after the consolidated basis, we actually apply some adjustments. I mean 2011 alone, the adjustment was at minus 633 billion. [Foreign Language – Korean] [Interpreted] So based upon the forecast for 2012 being a simple 2.3 trillion, in addition of all of the companies as I mentioned earlier, we do not have that adjustment level as of yet. We do not know what that will be, but if we were to simply impose last year’s figure on that, then it will probably mean it will come to 1.67 trillion loss. [Foreign Language – Korean] [Interpreted] Concerning your question about the fuel mix by generation plant, actually we get that figure from the KPX [ph]. However, we do not have the specific figures as of yet. But we will get back to you once we have them on hand. [Foreign Language – Korean] [Interpreted] One thing that I would like to add concerning the previous question answer related to the UAE project revenue and cost involved, actually the revenue and cost for the UAE project will be different depending on how much progress has been made within the actual project itself. So the actual figures may be quite different if you take that into consideration. [Foreign Language – Korean] [Interpreted] Due to time constraints, we will take maybe one additional question before we conclude.

[Foreign Language – Korean] [Interpreted] Lastly, the question is by [inaudible]. Please go ahead sir.

[Foreign Language – Korean] [Interpreted] If you have no further questions, we will conclude the conference call. Once again thank you for joining us today. Thank you.