As filed with the Securities and Exchange Commission on April 30, 20122014

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 F

 

 

Form 20-F

 

 

(Mark One)

 

¨REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20112013

OR

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

OR

 

¨SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from              to             

Commission File Number: 001-13372

 

 

KOREA ELECTRIC POWER CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

N/A The Republic of Korea
(Translation of registrant’s name into English) (Jurisdiction of incorporation or organization)

 

 

167 SAMSEONG-DONG,512 YEONGDONGDAERO, GANGNAM-GU, SEOUL 135-791, KOREA

(Address of principal executive offices)

 

 

Changyoung Ji,Younseung Lee, +822 3456 4264, cy_ji@kepco.co.kr,4217, winstraight@kepco.co.kr, +822 3456 4299

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

 

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class:

 

Name of each exchange on which registered:

Common stock, par value Won 5,000 per share New York Stock Exchange*
American depositary shares, each representing
one-half of share of common stock
 New York Stock Exchange  

 

*Not for trading, but only in connection with the listing of American depositary shares on the New York Stock Exchange, pursuant to the requirements of the Securities and Exchange Commission.

 

 

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

7 3/4% Debentures due April 1, 2013

Twenty Year 7.40% Amortizing Debentures, due April 1, 2016

One Hundred Year 7.95% Zero-to-Full Debentures, due April 1, 2096

6% Debentures due December 1, 2026

7% Debentures due February 1, 2027

6 3/4% Debentures due August 1, 2027

 

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the last full fiscal year

covered by the annual report:

641,964,077 shares of common stock, par value of Won 5,000 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  þ    No  ¨

If this annual report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  þ

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days:    Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files):    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  þ                    Accelerated filer  ¨                    Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP   ¨                International Financial Reporting Standards as issued by the International Accounting Standards Board  þ            Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  ¨    Item 18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ¨    No  ¨

 

 

 


TABLE OF CONTENTS

 

    Page 

PART I

   2  

        ITEM 1.

 

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

   2  

        ITEM 2.

 

OFFER STATISTICS AND EXPECTED TIMETABLE

   2  

        ITEM 3.

 

KEY INFORMATION

   2  
 

Item 3A.

  

Selected Financial Data

   2  
 

Item 3B.

  

Capitalization and Indebtedness

   4  
 

Item 3C.

  

Reasons for the Offer and Use of Proceeds

   54  
 

Item 3D.

  

Risk Factors

   54  

        ITEM 4.

 

INFORMATION ON THE COMPANY

   1722  
 

Item 4A.

  

History and Development of the Company

   1722  
 

Item 4B.

  

Business Overview

   1823  
 

Item 4C.

  

Organizational Structure

   6874  
 

Item 4D.

  

Property, Plant and Equipment

   7077  

        ITEM 4A.

 

UNRESOLVED STAFF COMMENTS

   7078  

        ITEM 5.

 

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

   7178  
 

Item 5A.

  

Operating Results

   7178  
 

Item 5B.

  

Liquidity and Capital Resources

   9093  
 

Item 5C.

  

Research and Development, Patents and Licenses, etc.

   9497  
 

Item 5D.

  

Trend Information

   9599  
 

Item 5E.

  

Off-Balance Sheet Arrangements

   9599  
 

Item 5F.

  

Tabular Disclosure of Contractual Obligations

   9699  

        ITEM 6.

 

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

   100104  
 

Item 6A.

  

Directors and Senior Management

   100104  
 

Item 6B.

  

Compensation

   103108  
 

Item 6C.

  

Board Practices

   103108  
 

Item 6D.

  

Employees

   104109  
 

Item 6E.

  

Share Ownership

   104109  

        ITEM 7.

 

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

   105110  
 

Item 7A.

  

Major Shareholders

   105110  
 

Item 7B.

  

Related Party Transactions

   105110  
 

Item 7C.

  

Interests of Experts and Counsel

   106111  

        ITEM 8.

 

FINANCIAL INFORMATION

   107111  
 

Item 8A.

  

Consolidated Statements and Other Financial Information

   107111  
 

Item 8B.

  

Significant Changes

   107112  

        ITEM 9.

 

THE OFFER AND LISTING

   108112  
 

Item 9A.

  

Offer and Listing Details

   108112  
 

Item 9B.

  

Plan of Distribution

   110114  
 

Item 9C.

  

Markets

   110114  
 

Item 9D.

  

Selling Shareholders

   113117  
 

Item 9E.

  

Dilution

   113117  
 

Item 9F.

  

Expenses of the Issue

   113117  

        ITEM 10.

 

ADDITIONAL INFORMATION

   114117  
 

Item 10A.

  

Share Capital

   114117  
 

Item 10B.

  

Memorandum and Articles of Incorporation

   114117  
 

Item 10C.

  

Material Contracts

   121124  
 

Item 10D.

  

Exchange Controls

   121124  
 

Item 10E.

  

Taxation

   126130  
 

Item 10F.

  

Dividends and Paying Agents

   136140  
 

Item 10G.

  

Statements by Experts

   136140  
 

Item 10H.

  

Documents on Display

   136140  
 

Item 10I.

  

Subsidiary Information

   136141  

 

i


    Page 

        ITEM 11.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   137141  

        ITEM 12.

 

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

   141147  
 

Item 12A.

  

Debt Securities

   141147  
 

Item 12B.

  

Warrants and Rights

   141147  
 

Item 12C.

  

Other Securities

   141147  
 

Item 12D.

  

American Depositary Shares

   142148  

PART II

   144150  

        ITEM 13.

 

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

   144150  

        ITEM 14.

 

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

   144150  

        ITEM 15.

 

CONTROLS AND PROCEDURES

   144150  

        ITEM 16.

 

[RESERVED]

   145151  

        ITEM 16A.

 

AUDIT COMMITTEE FINANCIAL EXPERT

   145151  

        ITEM 16B.

 

CODE OF ETHICS

   145151  

        ITEM 16C.

 

PRINCIPAL ACCOUNTANTAUDITOR FEES AND SERVICES

   146151  

        ITEM 16D.

 

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE

   146152  

        ITEM 16E.

 

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

   146152  

        ITEM 16F.

 

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTS

   146152  

        ITEM 16G.

 

CORPORATE GOVERNANCE

   147153  

        ITEM 16H.

 

MINE SAFETY DISCLOSURE

   152158  

PART III

   153159  

        ITEM 17.

 

FINANCIAL STATEMENTS

   153159  

        ITEM 18.

 

FINANCIAL STATEMENTS

   153159  

        ITEM 19.

 

EXHIBITS

   153159  

 

ii


CERTAIN DEFINED TERMS AND CONVENTIONS

All references to “Korea” or the “Republic” in this annual report on Form 20-F, or this annual report, are references to Thethe Republic of Korea. All references to the “Government” in this annual report are references to the government of the Republic. All references to “we,” “us,” “our,” “ours,” the “Company” or “KEPCO” in this annual report are references to Korea Electric Power Corporation and, as the context may require, its subsidiaries, and the possessive thereof, as applicable. All references to “the Ministry of Knowledge Economy”Trade, Industry and Energy” and “the Ministry of Strategy and Finance” include the respective predecessors thereof. All references to “tons” are to metric tons, equal to 1,000 kilograms, or 2,204.6 pounds. Any discrepancies in any table between totals and the sums of the amounts listed are due to rounding. All references to “IFRS” in this annual report are references to the International Financial Reporting Standards as issued by the International Accounting Standard Board. Unless otherwise stated, all of our financial information presented in this annual report has been prepared on a consolidated basis and in accordance with IFRS.

In addition, in this annual report, all references to:

 

“KHNP” are to Korea Hydro & Nuclear Power Co., Ltd.,

 

“EWP” are to Korea East-West Power Co., Ltd.,

 

“KOMIPO” are to Korea Midland Power Co., Ltd.,

 

“KOSEP” are to Korea South-East Power Co., Ltd.,

 

“KOSPO” are to Korea Southern Power Co., Ltd., and

 

“KOWEPO” are to Korea Western Power Co., Ltd.,

each of which is our wholly-owned generation subsidiary.

FORWARD-LOOKING STATEMENTS

This annual report includes “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934), including statements regarding our expectations and projections for future operating performance and business prospects. The words “believe,” “expect,” “anticipate,” “estimate,” “project” and similar words used in connection with any discussion of our future operatingoperation or financial performance identify forward-looking statements. In addition, all statements other than statements of historical facts included in this annual report are forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this annual report.

This annual report discloses, under the caption Item 3D. “Risk Factors” and elsewhere, important factors that could cause actual results to differ materially from our expectations (“Cautionary Statements”). All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Cautionary Statements.

PART I

 

ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

 

ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

 

ITEM 3.KEY INFORMATION

Item 3A. Selected Financial Data

The selected consolidated financial data set forth below as of and for the years ended December 31, 2010, 2011, 2012 and 20112013 have been derived from our audited consolidated financial statements which have been prepared in accordance with IFRS.

Prior to December 31, 2010, we prepared our consolidated financial information in accordance with the Korea Electric Power Corporation Act, the Accounting Regulations for Public Enterprise Associate Government Agency and the generally accepted accounting principles in Korea (“Korean GAAP”). A description of the principal differences between our previous accounting standards and IFRS and the impacts of transition to IFRS is provided in Note 4 to the consolidated financial statements included in this report.

Our consolidated financial statements as of and for the years ended December 31, 2010 and 2011 included in this report have been audited by Deloitte Anjin LLC, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee. Deloitte Anjin LLC is a Korean independent registered public accounting firm and is our current independent registered public accounting firm.

You should read the following data with the more detailed information contained in Item 5. “Operating and Financial Review and Prospects” and our consolidated financial statements included in Item 18. “Financial Statements.” Historical results do not necessarily predict future results.

Consolidated Statement of EarningsComprehensive Income (Loss) Data

 

  2010 2011(1)   2010 2011 2012 2013 
  (in billions of Won and millions of US$, except
per share data)
   (in billions of Won and millions of US$, except per share data)(1) 

Sales

  (Won)39,507   (Won)43,532   $37,576    39,507   43,175   49,121   53,713   $50,898  

Cost of sales

   36,188    43,082    37,188  

Gross Profit

   3,319    450    388     3,319    450    661    3,117    2,954  

Other operating income (expense), net

   467    451    389  

Selling and administrative expenses

   1,645    1,752    1,512     1,645    1,752    1,780    1,923    1,822  

Other income (loss)

   119    166    144  

Operating income (loss)

   2,260    (685  (591

Other gains (losses)

   118    166    (1,782  129    122  

Operating profit (loss)

   2,260    (685  (2,300  1,948    1,846  

Finance income (expense), net

   (1,967  (1,911  (1,650   (1,967  (1,911  (1,940  (2,302  (2,181

Profits of affiliates and joint ventures using equity method

   77    123    106  

Income (loss) before income taxes

   370    (2,473  (2,135   370    (2,473  (4,063  (396  (376

Income tax expenses

   439    820    708  

Net loss for the year

   (69  (3,293  (2,843

Other comprehensive loss

   (43  (262  (226

Total comprehensive loss

   (112  (3,555  (3,069

Net income (loss) attributable to:

    

Income tax (expense) benefit

   (439  (820  985    571    541  

Profit (loss) for the period

   (69  (3,293  (3,078  174    165  

Other comprehensive income (loss)

   (43  (262  (322  186    176  

Total comprehensive income (loss)

   (112  (3,555  (3,400  360    341  

Profit (loss) attributable to:

      

Owners of the Company

   (120  (3,370  (2,909   (120  (3,370  (3,167  60    57  

Non-controlling interests

   51    77    66     51    77    89    114    108  

Total comprehensive income (loss) attributable to:

          

Owners of the Company

   (152  (3,628  (3,131   (152  (3,628  (3,448  245    233  

Non-controlling interests

   40    73    62     40    73    48    115    109  

Earnings (loss) per share

          

Basic(2)

   (193  (5,411  (4,671   (193  (5,411  (5,083  96    91  

Diluted(3)

   (193  (5,411  (4,671

Earnings (loss) per ADS

          

Basic(2)

   (97  (2,706  (2,335   (97  (2,706  (2,542  48    46  

Diluted(3)

   (97  (2,706  (2,335

Dividends per share

   —      —      —       —      —      —      90    85  

Other Data:

    

Ratio of earnings to fixed charges(4):

   0.9    (0.2  (0.2

Consolidated Statements of Financial Position Data

 

  As of December 31,  As of December 31, 
  2010 2011(1)  2010 2011 2012 2013 
  (in billions of Won and millions of US$, except
share and per share data)
  (in billions of Won and millions of US$, except share and per share data)(1) 

Net working capital surplus (deficit)(5)

  (Won)(916 (Won)(3,615 $(3,120

Net working capital deficit(3)

 (916 (3,973 (4,884 (4,945 $(4,686

Property, plant and equipment, net

   107,406    112,385    97,009    107,406    112,385    122,376    129,638    122,844  

Construction in progress

   19,253    19,912    17,188  

Total assets

   129,518    136,468    117,797    129,518    136,468    146,153    155,527    147,377  

Total shareholders’ equity

   57,277    53,804    46,443    57,277    53,804    51,064    51,451    48,755  

Controlling interest

   56,818    53,270    45,982  

Non-controlling interest

   459    534    461  

Common stock

   3,208    3,210    2,771  

Equity attributable to owners of the Company

  56,818    53,270    49,889    50,260    47,626  

Non-controlling interests

  459    534    1,175    1,191    1,129  

Share capital

  3,208    3,210    3,210    3,210    3,042  

Number of common shares as adjusted to reflect any changes in capital stock

   641,567,712    641,964,077    641,964,077    641,567,712    641,964,077    641,964,077    641,964,077    641,964,077  

Long-term debt (excluding current portion)

   32,848    39,198    33,835    32,848    39,198    45,525    52,801    50,034  

Other long term liabilities

   25,321    25,725    22,205    25,321    25,725    30,747    31,062    29,434  

 

Notes:

 

(1)

The consolidated financial statements are expressedinformation denominated in Korean Won and, solely for the convenience of the reader, the consolidated financial statements as of and for the year ended December 31, 2011, have2013 has been translated into United States dollars at the rate of (Won)1,158.5 to USD1.00, the noon buying rate in New York

City for cable transfers in Won as certified for customs purposes by the Federal Reserve Bank of New York as of December 30, 2011. The translation should not be construed as a representation that any or all of the amounts shown could be converted into U.S. dollars at this or any other rate.the exchange rate of Won 1,055.3 to US$1.00, which was the Noon Buying Rate as of December 31, 2013.
(2)Basic earnings per share are calculated by dividing net income available to holders of our common shares by the weighted average number of common shares issued and outstanding for the relevant period. Dilutive loss per share is not presented as such amount was anti-dilutive for the periods indicated.
(3)Dilutive earnings per share are calculated in a manner consistent with basic earnings per share, while giving effect to the potential dilution that could occur if convertible securities, options or other contracts to issue common shares were converted into or exercised for common shares.
(4)For purposes of computing ratios of earnings to fixed charges, earnings consist of income before income taxes and fixed charges. Fixed charges consist of interest expense (including capitalized interest), amortization of bond discount and issue expenses and other ancillary expenses. We believe this ratio is helpful to understand our ability to service our debt with our earnings.
(5)Net working capital meansis defined as current assets minus current liabilities. For the periods indicated, current liabilities exceeded current assets, which gave rise to working capital deficit.

Currency Translations and Exchange Rates

In this annual report, unless otherwise indicated, all references to “Won” or “(Won)“₩” are to the currency of Korea, and all references to “U.S. dollars,” “Dollars,” “$” or “US$” are to the currency of the United States of America, all references to “Euro” or “€” are references to the currency of the European Union, and all references to “Yen” or “¥” are references to the currency of Japan. Unless otherwise indicated, all translations from Won to U.S. dollars were made at Won 1,158.51,055.3 to US$1.00, which was the noon buying rate of the Federal Reserve Board (the “Noon Buying Rate”) in effect as of December 30, 2011. The source of these31, 2013, which rates is the Federal Reserve Bank of New York until December 31, 2008. Since January 1, 2009, the Federal Reserve Bank of New York discontinued publication of foreign exchange rates. The source of the rates since January 1, 2009 isare available on the H.10 statistical release of the Federal Reserve Board. On April 13, 2012,11, 2014, the Noon Buying Rate was Won 1,134.21,035.4 to US$1.00. The exchange rate between the U.S. dollar and Korean Won may be highly volatile from time to time and the U.S. dollar amounts referred to in this annual report should not be relied upon as an accurate reflection of our results of operations. No representation is made that the Won or U.S. dollar amounts referred to in this annual report could have been or could be converted into U.S. dollars or Won, as the case may be, at any particular rate or at all.

The following table sets forth, for the periods and dates indicated, certain information concerning the Noon Buying Rate in Won per US$1.00.

 

Year Ended December 31,

  At End of Period   Average(1)   High   Low   At End
of
Period
   Average(1)   High   Low 
  (Won per US$1.00)   (Won per US$1.00) 

2007

   935.8     929.0     950.2     903.2  

2008

   1,262.0     1,098.7     1,507.9     935.2  

2009

   1,163.7     1,274.6     1,570.1     1,149.0     1,163.7     1,274.6     1,570.1     1,149.0  

2010

   1,130.6     1,155.7     1,253.2     1,104.0     1,130.6     1,155.7     1,253.2     1,104.0  

2011

   1,158.5     1,106.9     1,197.5     1,049.2     1,158.5     1,106.9     1,197.5     1,049.2  

2012 (through April 13)

   1,134.2     1,130.1     1,160.0     1,115.7  

2012

   1,063.2     1,126.2     1,185.0     1,063.2  

2013

   1,055.3     1,094.7     1,161.3     1,050.1  

October

   1,060.8     1,065.9     1,075.5     1,057.5  

November

   1,057.8     1,061.6     1,072.7     1,054.8  

December

   1,055.3     1,055.6     1,061.4     1,050.1  

2014 (through April 11)

   1,035.4     1,067.1     1,084.2     1,035.4  

January

   1,125.7     1,140.3     1,160.0     1,120.1     1,080.4     1,067.1     1,083.7     1,050.3  

February

   1,117.1     1,122.7     1,128.9     1,115.7     1,066.0     1,071.3     1,084.2     1,062.1  

March

   1,131.4     1,126.2     1,139.8     1,116.0     1,064.7     1,070.5     1,079.6     1,064.1  

April (through April 13)

   1,134.2     1,133.3     1,143.4     1,122.4  

April (through April 11)

   1,035.4     1,050.1     1,058.3     1,035.4  

 

Source: Federal Reserve Bank of New York (for the periods ended on or prior to December 31, 2008) and Federal Reserve Board (for the period since January 1, 2009).

Note:

 

(1)Represents the daily average of the Noon Buying Rates during the relevant period.

Item 3B. Capitalization and Indebtedness

Not Applicable

Item 3C. Reasons for the Offer and Use of Proceeds

Not Applicable

Item 3D. Risk Factors

Our business and operations are subject to various risks, many of which are beyond our control. If any of the risks described below actually occurs, our business, financial condition or results of operations could be seriously harmed.

Risks Relating to KEPCO

Increases in fuel prices will adversely affect our results of operations and profitability as we may not be able to pass on the increased cost to consumers at a sufficient level or on a timely basis.

Fuel costs constituted 48.2%45.1% and 48.7%47.8% of our sales and cost of sales, respectively, in 2011.2013. Our generation subsidiaries purchase substantially all of the fuel that they use (except for anthracite coal) from a limited number of suppliers outside Korea at prices determined in part by prevailing market prices in currencies other than Won. For example, most of the bituminous coal requirements (which accounted for approximately 43.5%43.0% of our entire fuel requirements in 20112013 in terms of electricity output) are imported from a limited number of countries principally consisting offrom Indonesia and Australia and, to a lesser extent, the United States and Russia, which accounted for approximately 45.9%41.6%, 33.5%38.2%, 7.9%9.5% and 6.8%9.5%, respectively, of the annual bituminous coal requirements of our generation subsidiaries in 2011.2013. Approximately 75.9%89.0% of the bituminous coal requirements of our generation subsidiaries in 20112013 were purchased underlong-term contracts and the remaining 24.1%11.0% from the spot market. Pursuant to the terms of our long-term supply contracts, prices are adjusted annuallyperiodically based on prevailing market conditions. In addition, our generation subsidiaries purchase a significant portion of their fuel requirements under contracts with limited duration. See Item 4B. “Business Overview—Fuel.”

In recent years, the prices of bituminous coal, oil and liquefied natural gas, or LNG, have fluctuated significantly, resulting in a higher fuel cost to us. For example, the average “free on board” Newcastle coal price index ranged from US$72.4 per ton in 2009 to US$98.8 per ton in 2010 and to US$120.5 per ton in 2011, and decreased to US$104.0 per ton as of April 17, 2012. The prices of oil and LNG are substantially dependent on the price of crude oil, and according to Bloomberg (Bloomberg Ticker: PGCRDUBA), the average daily spot price of Dubai crude oil fluctuated from US$61.7 per barrel in 2009 to US$78.1 per barrel in 2010 and US$106.2 per barrel in 2011, and was US$115.4 per barrel as of April 17, 2012.

If fuel prices increase sharply within a short span of time, our generation subsidiaries may be unable to secure requisite fuel supplies at prices commercially acceptable to them. In addition, any significant interruption or delay in the supply of fuel, bituminous coal in particular, from any of their suppliers may cause our generation subsidiaries to purchase fuel on the spot market at prices higher than the prices available under existing supply contracts, resultingwhich would result in an increase in fuel cost. Wecosts. In recent years, however, the prices of our main fuel types, namely, bituminous coal, oil and liquefied natural gas, or LNG have generally declined in tandem with their international market prices. For example, the average “free on board” Newcastle coal 6300 GAR spot price index published by Platts declined from US$96.2 per ton in 2012 to US$85.1 per ton in 2013 and US$73.8 per ton as of April 11, 2014. The prices of oil and LNG are substantially dependent on the price of crude oil, and according to Bloomberg (Bloomberg Ticker: PGCRDUBA), the average daily spot price of Dubai crude oil declined from US$108.9 per barrel in 2012 to US$105.4 per barrel in 2013 and to US$104.1 per barrel as of April 11, 2014. However, we cannot assure you that the fuel prices will remain at similarly low levels or will not significantly increase in the remainder of 20122014 or thereafter.

Because the Government regulates the rates we charge for the electricity we sell to our customers (see Item 4B. “Business Overview—Sales and Customers—Electricity Rates”), our ability to pass on fuel and other cost increases to our customers is limited. The increase in fuel prices led to our recording an operating loss in 2011 and a net loss in 2010 and 2011 under IFRS. We expect that a high level of fuel prices will continue to have a material adverse effect on our results of operation in 2012 and beyond. If fuel prices remain at the current level or continue to increase rapidly and substantially and the Government, out of concern for inflation or for other reasons, maintains the current level of electricity tariff or does not increase it to a level to sufficiently offset the impact of high fuel prices, the fuel price increases will significantly lowernegatively affect our profit margins or even cause us to suffer operating and/or net losses (as was the case from 2008 to 2012 when we suffered consecutive net losses and, from time to time, operating losses) and our business, financial condition, results of operations and cash flows would seriously suffer. In addition, partly because the Government may have to undergo a lengthy deliberative process to approve an increase in electricity tariff, which represents a key component of the consumer price index, the electricity tariff may not be adjusted to a level sufficient to ensure a fair rate of return to us in a timely manner or at all. For

example, in August 2010, August 2011 and December 2011, the Government increased the electricity tariff by an average of 3.5%, 4.9% and 4.5%, respectively. However, such increases were insufficient to fully offset the adverse impact from the rise in fuel costs. Similarly, we cannot assure that any future tariff increase by the Government will be sufficient to fully offset the adverse impact on our results of operations from the current or potential rises in fuel costs.

Further to the announcement by the Ministry of Knowledge EconomyTrade, Industry and Energy in February 2010, a new electricity tariff system went into effect on July 1, 2011. This system is designed to overhaul the prior system for determining electricity tariff chargeable to customers by more closely aligning the tariff levels to the movements in fuel prices, with the aim of providing more timely pricing signals to the market regarding the expected changes in electricity tariff levels and encouraging more efficient use of electricity by customers. Previously, the electricity tariff consisted of two components: (i) base rate and (ii) usage rate based on the cost of electricity and the amount of electricity consumed by the end-users. Under the new tariff system, the electricity tariff will also havehas a third component of fuel cost-adjustedcost pass-through adjustment (“FCPTA”) rate, which willis to be added to or subtracted from the sum of the base rate and the usage rate based on the movements of coal, LNG and oil prices. The fuel cost-related adjustment will be made on a monthly basis based on the three-month average fuel cost which is reflected as fuel-cost adjustment fees two months later.movements of coal, LNG and oil prices. The new tariff system is intended to provide greater financial stability and ensure a minimum return on investment to electricity suppliers, such as us. However, due to inflationary and other policy considerations relating to protecting the consumers from sudden and substantial rises in electricity tariff, the Ministry of Knowledge Economy has forTrade, Industry and Energy issued a hold order on July 29, 2011 suspending our billing and collecting of the time being suspended applyingFCPTA amount. The hold order remains in effect to-date. Furthermore, on January 11, 2013, the fuel cost-based adjustment,Ministry of Trade, Industry and Energy informed us that the FCPTA system needed to be reassessed in light of the other factors such adjustment amount (which has been a positive amountas the prolonged unbilled period since the adoptionannouncement of the new tariff system due to the continued rise in coal, LNG and oil prices) is currently being recorded as accounts receivable pending the commencement of the application of the fuel cost-based adjustment.FCPTA system. There is no assurance as to when the Government will commence applyinglift the fuel cost-based adjustmenthold order and reflectallow us to bill and collect the adjustmentaccumulated FCPTA amount in the electricity tariff payable to us, or whether the new tariff system will undergo furtherother amendments to the effect that it will not fully cover our fuel and other costs on a timely basis or at all, or will not have unintended consequences that we are not presently aware of. Any such development may have a material adverse effect on our business, financial condition, results of operations and cash flows. SeeFor further discussion, including in relation to accounting, see Item 4B. “Business Overview—Recent Developments—Implementation5A. “Operating and Financial Review and Prospects—Critical Accounting Policy—Correction of theAccounting for Fuel Cost-based Tariff System.Cost Pass-through Adjustment.

The Government may adopt policy measures to substantially restructure the Korean electric power industry or our operational structure, which may have a material adverse effect on our business, operations and profitability.

From time to time, the Government considers various policy initiatives to foster efficiency in the Korean electric power industry, and at times have adopted policy measures that have substantially altered our business and operations. For example, in January 1999, with the aim of introducing greater competition in the Korean electric power industry and thereby improving its efficiency, the Government announced a restructuring plan for the Korean electric power industry, or the Restructuring Plan. For a detailed description of the Restructuring Plan, see Item 4B. “Business Overview—Restructuring of the Electric Power Industry in Korea.” As part of this initiative, in April 2001 the Government established the Korea Power Exchange to enable the sale and purchase of electricity through a competitive bidding process, established the Korea Electricity Commission to ensure fair competition in the Korean electric power industry, and, in order to promote competition in electricity generation, split off our electricity generation business to form one nuclear generation company and five non-nuclearthermal generation companies, in each case, to be wholly-ownedwholly owned by us. In 2002, the Government introduced a plan to privatize one of our five non-nuclearthermal generation subsidiaries, but this plan was suspended indefinitely in 2003 due to prevailing market conditions and other policy considerations.

In 2003, the Government established a Tripartite Commission consisting of representatives of the Government, leading businesses and labor unions in Korea to deliberate on ways to introduce competition in electricity distribution, such as by forming and privatizing new distribution subsidiaries. In 2004, the Tripartite Commission recommended not pursuing such privatization initiatives but instead creating independent business

divisions within us to improve operational efficiency through internal competition. Following the adoption of such recommendation by the governmentGovernment in 2004 and further studies by Korea Development Institute, in 2006 we created nine “strategic business units” (which, together with our other business units, were subsequently restructured into 14 such units in February 2012) that camehave a greater degree of autonomy with respect to have separate management, structures (although with limits on its autonomy), financial accounting systems and performance evaluation systems, but withwhile having a common focus on maximizingincreasing profitability.

OnIn August 25, 2010, the Ministry of Knowledge EconomyTrade, Industry and Energy announced the Proposal for the Improvement in the Structure of the Electric Power Industry, whose key initiatives included the following: (i) maintain the current structure of having six generation subsidiaries, (ii) designate the six generation subsidiaries as “market-oriented public enterprises” under the Public Agency Management Act in order to foster competition among them and autonomous and responsible management by them, (iii) create a supervisory unit to act as a “control tower” in reducing inefficiencies created by arbitrary division of labor among the six generation subsidiaries and fostering economies of scale among them and require the presidents of the generation subsidiaries to hold regular meetings, (iv) create a nuclear power export business unit to systematically enhance our capabilities to win projects involving the construction and operation of nuclear power plants overseas, (v) further rationalize the electricity tariff by adopting a fuel-cost based tariff system in 2011 and a voltage-based tariff system in a subsequent year, and (vi) create separate accounting systems for electricity generation, transmission, distribution and sales with the aim of introducing competition in electricity sales in the intermediate future. Pursuant to this Proposal, in December 2010 the Ministry of Knowledge EconomyTrade, Industry and Energy announced guidelines for a cooperative framework between us and our generation subsidiaries, and in January 2011 the five non-nuclearthermal generation subsidiaries formed a “joint cooperation unit” and transferred their pumped-storage hydroelectric business units to KHNP. Furthermore, in January 2011 the six generation subsidiaries were officially designated as “market-oriented public enterprises,” whereupon the President of Korea appoints the president and the statutory auditor of each such subsidiary; the selection of outside directors of each such subsidiary is subject to approval by the minister of the Ministry of Strategy and Finance; the president of each such subsidiary is required to enter into a management contract directly with the minister of the Ministry of Knowledge Economy, performance evaluation of such subsidiaries is conducted byTrade, Industry and Energy; and the Public Enterprise Management Evaluation Commission andconducts performance evaluation of such subsidiaries. Previously, our president appointed the president and the statutory auditor of each such subsidiary are appointed by the President of Korea whilesubsidiary; the selection of outside directors isof each such subsidiary was subject to approval by the minister of the Ministry of Strategy and Finance. Previously,our president; the president of each such subsidiary entered into a management contract with our president,president; and our evaluation committee conducted performance evaluation of such subsidiaries was conducted by our evaluation committee, and the president and the statutory auditor of each such subsidiary were appointed by, and the selection of outside directors was subject to approval by, our president.subsidiaries.

In addition, in order to deal with the shortage of fuel and other resources and also to comply with various environmental standards, the Government has adopted the Renewable Portfolio Standard (“RPS”), under which each generation subsidiary will be required to supply 2.0% and 10.0% of the total energy generated from such subsidiary in the form of renewable energy by 2012 and 2022, respectively, with fines being levied on any unit failing to do so in the prescribed timeline. We currently estimate that, if the RPS is implemented as currently planned, our generation subsidiaries will incur approximately Won 45 trillion in additional capital expenditure over the next 10 years. We expect that such additional capital expenditure will be covered by a corresponding increase in electricity tariff. However, there is no assurance that the Government will in fact raise the electricity tariff to a level sufficient to fully cover such additional capital expenditures or at all. For further details, see Item 4B. “Business Overview—Renewable Energy.”

Other than as set forth above, we are not aware of any specific planplans by the Government to resume the implementation of the Restructuring Plan or otherwise change the current structure of the electric power industry or the operations of us or our generation subsidiaries in the near future. However, for reasons relating to changes in policy considerations, socio-political, economic and market conditions and/or other factors, the Government may resume the implementation of the Restructuring Plan or initiate other steps that may change the structure of the Korean electric power industry or the operations of us or our generation subsidiaries. Any such measures may have a negative effect on our business, results of operation and financial condition.conditions. In addition, the Government, which beneficially owns a majority of our shares and exercises significant control over our business and

operations, may from time to time pursue policy initiatives with respect to our business and operations, whichand such initiatives may vary withfrom the interest and objectives of our other shareholders.

Our capacity expansion plans, which are based on projections on long-term supply and demand of electricity in Korea, may prove to be inadequate.

We and our generation subsidiaries make plans for expanding or upgrading our generation capacity based on the Basic Plan Relating to the Long-Term Supply and Demand of Electricity, or the Basic Plan, which is generally announcedrevised and revisedannounced every two years by the Government. In December 2010,February 2013, the Government announced the fifthSixth Basic Plan relating to the future supply and demand of electricity. The fifthSixth Basic Plan, which is effective for the period from 20102013 to 2024,2027, focuses on, among other things, (i) minimizing the need to construct new generation facilities through active consumer demand management, (ii) ensuring that we maintain adequate electricity generation conformsreserve appropriate to the National Energy Basic Plan relating tosize of the overall energy management policy for Korea, (ii)national economy and (iii) expanding the base-loadour generation capacity to promote economicalefficient supply of electricity (iii) preparing contingency planning to cover for, among others, delayedin consideration of the stability of the national electricity grid network and the specific needs of localities. In addition, while the Sixth Basic Plan did not contemplate the construction of additional nuclear plants in light of the heightened public concern over nuclear safety following the nuclear power plant meltdown in Japan in March 2011, there is no assurance that the Government will not implement a supplemental plan for the construction of additional nuclear plants in the future, which may increase the amount of our required capital expenditure.

In addition, on January 13, 2014, the Ministry of Trade, Industry and Energy adopted the Second Basic National Energy Plan following consultations with representatives from civic groups, the power industry and academia. The Second Basic National Energy Plan, which is a comprehensive plan that covers the entire spectrum of energy industries in Korea, will cover the period from 2013 to 2035 (compared to 2008 to 2030 under the First Basic National Energy Plan) and focuses on the following six key tasks: (i) shifting the focus of energy policy to demand management with a goal of reducing electricity demand by 15% by 2035, (ii) establishing a geographically decentralized electricity generation facilities, and otherwise ensure stable long-term balance betweensystem so as to reduce transmission losses with a goal of supplying at least 15% of total electricity supply and demand, (iv) tightening supply management from 2011 to 2014 in response to the short-term decrease in facility reserve margins, (v) fostering environmentally friendly electricity sources in line with the planned nationwide reduction inthrough such system by 2035, (iii) applying latest greenhouse gas emission reduction technologies to newly constructed generation units in order to further promote safety and environmental friendliness, (iv) strengthening exploration and procurement capabilities to enhance Korea’s energy security and to ensure stable supply of energy and increasing the portion of electricity supplied from renewable sources to 11% by giving priority2035, (v) reinforcing the system for stable supply of conventional energy, such as oil and gas, and (vi) introducing in 2015 an energy voucher system in lieu of a tariff discount system for the benefit of consumers in the constructionlow income group. In addition, the Second Basic National Energy Plan contemplates revising the target level of electricity generated by nuclear generation facilities and taking other green energy initiatives; (vi) appropriately adjustingsources as a percentage of total electricity generated to 29%, compared to 41% under the generation capacity expansion and (vii) improving transparencyFirst Basic National Energy Plan announced in planning and engaging a greater number of experts in the process of planning future basic plans. 2008.

We cannot assure that the fifthSixth Basic Plan, the Second Basic National Energy Plan or the respective plans to be subsequently adopted will successfully achieve their intended goals, the foremost of which is to formulate aensure, through carefully calibrated capacity expansion plan that will result inand other means, balanced overall electricity supply and demand in Korea at an affordable costcosts to the end users.users while promoting efficiency and environmental friendliness in the consumption and production of electricity. If there is a significant variance between the actual capacity expansions by us and our generation subsidiaries based on the projected electricity supply and demand considered in planning our capacity expansions and the actual electricity supply and demand or if these plans otherwise fail to meet their intended goals or have other unintended consequences, this may

result in inefficient use of our capital, mispricing of electricity and undue financing costs on the part of us and our generation subsidiaries, among others, which may have a material adverse effect on our results of operations, financial condition and cash flows.

From time to time, we may experience temporary power shortages or circumstances bordering on power shortages due to factors beyond our control, such as extreme weather conditions. For example, due to extremely cold weather during the winterwinters of 2010-2011recent years, our electricity reserve level fell from time to time to a level lower than the normal level of 5.5% despite emergency measures mandated by the Government, such as reduced daytime railway services and reduced daytime industrial use of electricity during peak hours. In addition, due to the unanticipated late heat wave in mid-September 2011 and the resulting spike in the use of air conditioning, our reserve level fell to a level that resulted in temporary suspensions of electricity supply across several regions of Korea on that day despite emergency measures by the Government, such as direct load control and voluntary conservation, which preventedfor several hours to prevent a full-scale blackout. On February 9, 2012, our nuclear generation unit Kori-1 experienced a station blackout for approximately 12 minutes during a scheduled maintenance overhaul which began on February 4, 2012 and was scheduled to be completed on March 4, 2012. This incident was reported to the Nuclear Safety and Security Commission on March 12, 2012, which ordered a temporary shut-down of the Kori-1 on March 13, 2012, pending further safety evaluation. These circumstancesCircumstances such as these may lead to increasedend-user complaints and greater public scrutiny, over our capacity levels, which may in turn result in our need to modify our capacity expansion plans, and if we were to substantially modify our capacity plans, this may result in additional capital expenditures, which may have a material adverse effect on our results of operations, financial condition and cash flows.

In light of these temporary power shortages, the Government has increasingly expanded its efforts to encourage conservation of electricity, including through a public relations campaign, but there is no assurance such efforts will have the desired effect of substantially reducing the demand for electricity or improving efficient use thereof.

We may require a substantial amount of additional indebtedness to refinance existing debt and for future capital expenditures.

We anticipate that a substantial amount of additional indebtedness will be required in the coming years in order to refinance existing debt, make capital expenditures for construction of generation plants and other facilities and/or make acquisitions and investments related to overseas natural resources. In 2011, 2012 and 2013, our capital expenditures for construction of generation, transmission and distribution facilities amounted to Won 11,984 billion, Won 12,751 billion and Won 15,831 billion, respectively, and our budgeted capital expenditures for 2014, 2015 and 2016 amount to Won 19,898 billion, Won 18,479 billion and Won 16,339 billion, respectively. While we currently do not expect to face any material difficulties in procuring short-term borrowing to meet our liquidity and short-term capital requirements, there is no assurance that we will be able to do so. We expect that a portion of our long-term debt will need to be paid or refinanced through foreign currency-denominated borrowings and capital raising in international capital markets. Such financing may not be available on terms commercially acceptable to us or at all, especially if the global financial markets experience significant turbulence or a substantial reduction in liquidity or due to other factors beyond our control. If we are unable to obtain financing on commercially acceptable terms on a timely basis, or at all, we may be unable to meet our funding requirements or debt repayment obligations, which could have a material adverse impact on our business, results of operations and financial condition.

Recently, in light of the general policy guideline of the Government for public enterprises (including us and our generation subsidiaries) in general to reduce their respective overall debt levels, including by way of disposing of non-core assets, we are currently evaluating ways to reduce our debt levels. We cannot assure whether we or our generation subsidiaries will be able to successfully reduce debt burdens to a level contemplated by the Government or to a level that would be optimal for our capital structure. If we or our generation subsidiaries fail to reduce debt burdens to a level contemplated by the Government or the measures taken by us or our generation subsidiaries to reduce debt levels have unintended adverse consequences, such developments may have an adverse effect on our business, results of operation and financial condition.

The movement of Won against the U.S. dollar and other currencies may have a material adverse effect on us.

The Won has fluctuated significantly against major currencies in recent years, especially as a result of the recentongoing difficulties in the global financial crisis, including the ongoing fiscal and financial instability surrounding several European countries.markets. See Item 3A. “Selected Financial Data—Currency Translations

and Exchange Rates.” Depreciation of Won against U.S. dollar and other foreign currencies typically results in a material increase in the cost of fuel and equipment purchased by us from overseas and the cost of servicing our foreign currency-denominated debt assince the prices for substantially all of the fuel materials and a significant portion of the equipment we purchase are denominated in currencies other than Won, generally in U.S. dollars. Changes in foreign exchange rates may also impact the cost of servicing our foreign currency-denominated debt. As of December 31, 2011,2013, approximately 23.2%20.9% of our long-term debt (including the current portion and discounts on debentures but excluding premium on debentures)issue discounts and premium) before accounting for swap transactions, was denominated in foreign currencies, principally U.S. dollars. In addition, even if we make payments in Won for certain fuel materials and equipment, some of these fuel materials may originate from other countries and their prices may be affected accordingly by the exchange rates between the Won and foreign currencies, especially the U.S. dollars, Yen and Euro.dollar. Since substantially allthe substantial majority of our revenues are denominated in Won, we must generally obtain foreign currencies through foreign-currency denominatedforeign currency-denominated financings or from foreign currency exchange markets to make such purchases or service such debt. As a result, any significant depreciation of Won against the U.S. dollar or other major foreign currencies will have a material adverse effect on our profitability and results of operations.

We may not be successful in implementing new business strategies.

As part of our overall business strategy, we plan to undertake new, or expand existing, projects such as strengthening(i) strengthen reliability of our renewable energy generation capabilities under the Renewable Portfolio Standards initiative, adoption of the “smart grid” projects to improve the operationaldomestic operations by enhancing efficiency of our electricitygeneration, transmission and distribution network,networks, (ii) expand overseas business by selectively exploring renewable energy, smart transmission and expansiondistribution facilities and fuel procurement projects in the overseas markets particularlyalong with our traditional businesses in the constructiongeneration sector, (iii) create a platform for new business growth opportunities by gaining “first mover” advantages in new businesses through technological development, and operation of nuclear generation units(iv) fulfill social responsibilities as an electricity provider by seeking a balance between our public policy mandate and procurement of fuels.profitability.

Due to their inherent uncertainties, such new and expanded strategic initiatives expose us to a number of risks and challenges, including the following:

 

new and expanded business activities may require unanticipated capital expenditures and involve additional compliance requirements;

 

new and expanded business activities may result in less growth or profit than we currently anticipate, and there can be no assurance that such business activities will become profitable at the level we desire or at all;

 

certain of our new and expanded businesses, particularly in the areas of renewable energy, require substantial government subsidies to become profitable, and such subsidies may be substantially reduced or entirely discontinued;

 

we may fail to identify and enter into new business opportunities in a timely fashion, putting us at a disadvantage vis-à-vis competitors, particularly in overseas markets; and

 

we may need to hire or retrain personnel who are able to supervise and conduct the relevant business activities.

As part of our business strategy, we may also seek, evaluate or engage in potential acquisitions, mergers, joint ventures, strategic alliances, restructurings, combinations, rationalizations, divestments or other similar opportunities. The prospects of these initiatives are uncertain, and there can be no assurance that we will be able to successfully implement or grow new ventures, and these ventures may prove more difficult or costly than werewhat we originally anticipated. In addition, we regularly review the profitability and growth potential of our existing and new businesses. As a result of such review, we may decide to exit from or to reduce the resources that we allocate to new or existing ventures in the future. There is a risk that these ventures may not achieve profitability or operational efficiencies to the extent originally anticipated, and we may fail to recover investments or expenditures that we have already made. Any of the foregoing may have a material adverse effect on our reputation, business, results of operation,operations, financial condition and cash flows.

We plan to pursue international expansion opportunities that may subject us to different or greater riskrisks than those associated with our domestic operations.

While our operations have, to date,to-date, been primarily based in Korea, we plan tomay expand, on a selective basis, our overseas operations in the future. In particular, we plan tomay further diversify the geographic focus of our operations from Asia to the rest of the world, including the resource-rich Middle East, Australia and Africa as well as expand our project portfolio which(which has to-date involved primarily the construction and operation of conventional thermal generation units,units) to include the construction and operation of nuclear power plants as well as mining and development of fuel sources in order to increase the level of self-sufficiency in the procurement of fuels.

Overseas operations generally carry risks that are different from those we face in our domestic operations. These risks include:

 

challenges of complying with multiple foreign laws and regulatory requirements, including tax laws and laws regulating our operations and investments;

 

volatility of overseas economic conditions, including fluctuations in foreign currency exchange rates;

 

difficulties in enforcing creditors’ rights in foreign jurisdictions;

 

risk of expropriation and exercise of sovereign immunity where the counterparty is a foreign government;

 

difficulties in establishing, staffing and managing foreign operations;

 

differing labor regulations;

 

political and economic instability, natural calamities, war and terrorism;

 

lack of familiarity with local markets and competitive conditions;

 

changes in applicable laws and regulations in Korea that affect foreign operations; and

 

obstacles to the repatriation of earnings and cash.

Any failure by us to recognize or respond to these differences may adversely affect the success of our operations in those markets, which in turn could materially and adversely affect our business and results of operations.

Furthermore, while we seek to enter into business opportunities in a prudent and selective manner, some of our new international business ventures, such as mining and resource exploration, carry inherent risks inherent to such businesses, whichthat are different from our traditional business of electricity power generation, transmission and distribution. While these new businesses in the aggregate currently do not comprise a material portion of our overall business, as we are relatively inexperienced in these types of businesses, the actual revenues and profitability from, and investments and expenditures into, these business ventures may be substantially different from what we planned or anticipated and have a material adverse impact on our overall business, results of operations, financial condition and cash flows.

The proliferation of a competing system which enables regional districts to independently sourceAn increase in electricity wouldgenerated by and/or sourced from private power producers may erode our market position and hurt our business, growth prospects, revenues and profitability.

As of December 31, 2013, we and our generation subsidiaries owned approximately 81.5% of the total electricity generation capacity in Korea (excluding plants generating electricity for private or emergency use). New entrants to the electricity business will erode our market share and create significant competition, which could have a material adverse impact on our financial conditions and results of operation.

In July 2004,particular, we compete with independent power producers with respect to electricity generation. The independent power generators accounted for 13.2% of total power generation in 2013 and 18.5% of total generation capacity as of December 31, 2013. As of December 31, 2013, there were 10 independent power generators in Korea, excluding renewable energy producers. Prior to December 2010, private enterprises had not been permitted to own and operate coal-fired power plants in Korea. However, the Fifth Basic Plan announced in December 2010 included for the first time a plan for independent power producers to own and operate coal-fired power plants, namely four generation units with aggregate capacity of 2,290 megawatts for completion in 2016. In addition, in connection with the Sixth Basic Plan announced in February 2013, the Ministry of Trade, Industry and Energy accepted additional applications from independent power producers for construction of coal-fired power plants. 15 independent power producers applied for construction of a total of 40 additional coal-fired generation units with aggregate generation capacity of 37,100 megawatts, of which the Government adoptedapproved applications for the construction of six generation units with aggregate generation capacity of 6,000 megawatts. The Government also approved applications from independent power producers for construction of two additional generation units with aggregate generation capacity of 2,000 megawatts to prepare for the contingency of failed or delayed construction of the foregoing generation units. Construction for the six generation units is scheduled to be completed between 2018 and 2021. While it remains to be seen whether construction of these generation units will be completed as scheduled, if it were to be completed as scheduled or independent power producers are permitted to build additional generation capacity (whether coal-fired or not), our market share in Korea may decrease, which may have a material adverse effect on our results of operations and financial condition.

In addition, under the Community Energy System adopted by the Government in 2004, a minimal amount of electricity is supplied directly to enable regional districts to source electricity fromconsumers on a localized basis by independent power producers to supply electricity without having to undergo the cost-based pool system used by our generation subsidiaries and most independent power producers to distribute electricity nationwide. A supplier of electricity under the Community Energy System must be authorized by the Korea Electricity Commission and be approved by the Ministerminister of Knowledge Economythe Ministry of Trade, Industry and Energy in accordance with the Electricity Business Act. The purpose of this system is to geographically decentralize electricity supply and thereby reduce

transmission costslosses and improve the efficiency of energy use. These entities do not supply electricity on a national level but are licensed to supply electricity on ato limited basis to their respective districts under the Community Energy System.geographic areas. As of March 31, 2012, 14 districts were using this system and one district was preparing to launch it. The generation capacity installed or under construction of the electricity suppliers in these 15 districts amounted to approximately 1% of2014, the aggregate generation capacity of our generation subsidiaries as of March 31, 2012. Since the introduction ofsuppliers participating in the Community Energy System represented less than 1% of that of our generation subsidiaries in 2004, a total of 31 districts have obtained the license to supply electricity throughaggregate. Accordingly, we currently do not expect the Community Energy System but 16to be widely adopted, especially in light of such districts have reportedly abandoned plans to adopt the Community Energy System, largely due to the relatively highsignificant level of capital expenditure required the rise in fuel costs and the lower-than-expected electricity output per cost.for such direct supply. However, if the Community Energy System is widely adopted, it willmay erode our currently dominant market position in the generation and distribution of electricity in Korea, which is virtually monopolized by us at present, and may have a material adverse effect on our business, growth, revenuesresults of operations and profitability.financial condition.

Labor unrest may adversely affect our operations.

We and each of our generation subsidiaries have separate labor unions. As of December 31, 2011,2013, approximately 69.8%69.7% of our and our generation subsidiaries’ employees in the aggregate were members of these labor unions. Since thea six-week labor strike in 2002 by the union members of our generation subsidiaries in response to thea proposed privatization of one of our generation subsidiaries, there has been no material subsequent labor dispute. However, we cannot assure you that there will not be a major labor strike or other material disruptions of operations by the labor unions of us and our generation subsidiaries if the Government resumes privatization or other restructuring initiatives or for other reasons, which may adversely affect our business and results of operations.

Planned relocation of the headquarters of us and our generation subsidiaries may reduce our operational efficiency.

In June 2005, as part of an initiative to foster balanced economic growth in the provinces, the Government announced a plan to relocate the headquarters of select government-invested enterprises, including us and our six

generation and certain other subsidiaries, from the Seoul metropolitan area to other provinces in Korea. Currently, our headquarters and those of our generation subsidiaries are within close vicinity of each other in the City of Seoul. Pursuant to the Government’s relocation policy, our headquarters are scheduled to be relocated to Naju in Jeolla Province, which is approximately 300 kilometers south of Seoul. Although the relocation was initially scheduled to occur by the end of 2012, due to construction delays, we currently expect that the relocation will occur by the end of 2014. In addition, the headquarters of certain of our subsidiaries are scheduled to be relocated to various other cities in Korea. See Item 5B. “Liquidity and Capital Resources—Capital Requirements” for further details. While we intend to comply with the relocation plan, there can be no assurance that, following such relocation, we will be able to maintain the current level of operational efficiency due to geographic dispersion of our business units.

Operation of nuclear power generation facilities inherently involves numerous hazards and risks, any of which could result in a material loss of revenues or increased expenses.

Through KHNP, we currently operate 2123 nuclear-fuel generation units. The operationOperation of nuclear power plants is subject to certain hazards, including environmental hazards such as leaks, ruptures and discharge of toxic and radioactive substances and materials. These hazards can cause personal injuries or loss of life, severe damage to or destruction of property and natural resources, pollution or other environmental damage, clean-up responsibilities, regulatory investigation and penalties and suspension of operations. Nuclear power has a stable and relatively inexpensive cost structure (which is least costly among the fuel types used by our generation subsidiaries) and is the second largest source of Korea’s electricity supply, accounting for 31.1%27% of electricity generated in Korea in 2011.2013. Due to significantly lower unit fuel costs compared to those for conventionalthermal power plants, our nuclear power plants are generally operated at full capacity with only routine shutdowns for check-up

fuel replacement and overhauls lasting 20 to 30 days,maintenance, with limited exceptions.

From time to time, our nuclear generation units may experience unexpected shutdowns. For example, on February 9, 2012, Kori-1 experienced a station blackout for approximately 12 minutes during a scheduled maintenance overhaul. This incident was reported to the Nuclear Safety and Security Commission on March 12, 2012, leading to a further safety evaluation, after which Kori-1 resumed operations in August 2012. The breakdown, failure or suspension of operation of a nuclear unit could result in a material loss of revenues, an increase in fuel costs related to the use of alternative power sources, additional repair and maintenance costs, greater risk of litigation and increased social and political hostility to the use of nuclear power, any of which could have a material adverse impact on our financial conditions and results of operation.

Recently, inIn response to the damage to the nuclear facilities (including nuclear meltdowns) in Japan as a result of the tsunami and earthquake in March 2011, the Government announced plans to further enhance the safety and security of nuclear power facilities, including by establishing the Nuclear Safety and Security Commission (“NSSC”) in July 2011 for neutral and independent safety appraisals, subjecting nuclear power plants to additional safety inspections by governmental authorities and civic groups and requiring KHNP to prepare a comprehensive safety improvement plan. As a result of the foregoing, as well as a generally higher level of public and regulatory scrutiny of nuclear power facilities in general following the recent nuclear incident in Japan, KHNP plans to implement a significant number of measures to improve the safety and efficiency of its generation facilities for target completion by 2015. We expect to incur additional compliance costs and capital expenditures in relation to our improvement measures, which could have a material adverse impact on our financial conditions and results of operation.

OppositionRecent findings of falsified testing results and bribery and the subsequent prolonged shutdowns of certain of our nuclear generation units may adversely hurt our reputation, business, results of operations and financial condition.

In May 2013, the Nuclear Safety and Security Commission (“NSSC”) announced that it discovered certain control cables used in three of our then-operating nuclear generation units, Shin-Kori #1 and #2, Shin-Wolsung #1, and three units under construction, Shin-Kori #3 and #4 and Shin-Wolsung #2, had been supplied based on

forged testing results. These parts were custom-made and have critical functions in the case of emergency for activating certain safety signals. The forgery was made by a testing facility in charge of performance evaluation of the parts before delivery.

Upon such discovery, KHNP immediately began internal investigation of related certification documents and reported to the Prosecutor’s Office all testing facilities and suppliers suspected of forgery for further investigation. Currently, the NSSC, with the full cooperation of KHNP, is conducting a full scale investigation into the appropriateness of all testing results at all of our nuclear generation units. In addition, the Prosecutor’s Office has been conducting extensive investigation on all parties suspected of having been involved in the forgery and has brought several criminal and civil charges, including against several of KHNP’s former and current officers and employees. In addition, one of KHNP’s former CEOs and several former and current officers and employees of KHNP were arrested on separate bribery charges brought by the Prosecutor’s Office as part of a wider investigation into the nuclear power industry in general, and in June 2013, KHNP’s then CEO was dismissed by the Government for failure of oversight. KHNP has been fully cooperating with the authorities on these investigations and have promptly taken all appropriate disciplinary actions against KHNP’s employees allegedly involved in such incidents. KHNP has also immediately suspended all existing relationships with all of the entities alleged to have participated in any related illegal or improper activities. KHNP as an entity has not been subject to any criminal charges or sanctions. The investigations by the NSSC and the Prosecutor’s Office are still ongoing.

Immediately following the discovery of the forgery incident, Shin-Kori #1 and #2 and Shin-Wolsung #1 were shut down in May 2013 for further safety inspections. Shin-Kori #3 and #4 and Shin-Wolsung #2, where such parts were also used, currently remain under construction. Shin-Kori #1 and #2 and Shin-Wolsung #1 resumed operations in January 2014 following parts replacement and the NSSC approval. While we expect that the construction of the other units will proceed as originally planned, we cannot assure you that any or all of these units will complete construction as currently scheduled. As a result of the shutdown, we incurred additional operating expenses, including as a result of having had to purchase electricity generated from more expensive fuel sources while the aforementioned nuclear plants were suspended from operation.

The foregoing incidents follow a discovery in November 2012 that certain machinery parts, such as fuses and switches, used in KHNP’s nuclear-fuel generation units Hanbit #5 and Hanbit #6 had been supplied using forged quality certification documents. These parts were generic parts that were not essential to the function or safety of our nuclear generation, and the forgery was made by the suppliers of these parts. Following such discovery, relationships with these suppliers were immediately terminated and these units were shut down in November 2012 pending a Government investigation into the extent of the forgeries and the replacement of the affected parts, and the NSSC performed inspections on all generic supply parts at all of KHNP’s nuclear-fuel generation units. Upon completion of such investigation and inspections, Hanbit #5 and Hanbit #6 resumed operation in December 2012 and January 2013, respectively.

These incidents have had a material adverse effect, and may have a further material adverse effect, on our reputation, business, results of operation, financial condition as well as the general acceptance of nuclear power, especially if, as a result of these incidents or otherwise, there are findings of other criminal or other illegal or improper activities or if there are additional shutdowns that lead to greater social and political concerns over nuclear safety to the effect of impeding with our normal operation of nuclear generation units. See “Item 4B. Business—Recent Developments—Recent incidents involving certain of our nuclear units.”

The construction and operation of nuclear-fuelour generation, unitstransmission and distribution facilities involve difficulties, such as opposition from civic groups, which may have an adverse effect on us.

In recent years,From time to time, we have encountered increasingencounter social and political opposition to theagainst construction and operation of our generation facilities (particularly nuclear generation units.units) and, to a lesser extent, our transmission and distribution facilities.

As a recent example, we are currently facing intense opposition from local residents and civic groups to the construction of transmission lines in the Milyang area despite having offered various compensatory and other support programs. Such opposition has delayed the schedule for completion of this project. Although we and the Government have undertaken various community programs to address concerns of residents in areas near our nuclear units,facilities, civic and community opposition to the construction and operation of nuclear units could result in delayed construction or relocation of our planned nuclear generation units,facilities, which could have a material adverse impact on our business and results of operation. See Item 4B. “Business Overview—Power Generation—Korea Hydro & Nuclear Power Co., Ltd.,” “—Community Programs” and “—Insurance.”

We are subject to environmental regulations, including in relation to climate change, and our operations could expose us to substantial liabilities.

We are subject to national, local and overseas environmental laws and regulations, including increasing pressure to reduce emission of carbon dioxide relating to our electricity generation activities as well as our natural resource development endeavors overseas. Our operations could expose us to the risk of substantial liability relating to environmental or health and safety issues, such as those resulting from discharge of pollutants and carbon dioxide into the environment and the handling, storage and disposal of hazardous materials. We may be responsible for the investigation and remediation of environmental conditions at current or former operational sites. We may also be subject to associatedrelated liabilities including(including liabilities for environmental damage, third party property damage or personal injuryinjury) resulting from lawsuits brought by governments or private litigants. In the course of our operations, hazardous wastes may be generated, at third party-owned or -operated sites, and hazardous wastes may be disposed of or treated at third party-ownedor -operated disposal sites. If those sites become contaminated, we could also be held responsible for the cost of investigation and remediation of such sites for any associate environmental damage,related liabilities, as well as for civil or criminal fines or penalties.

We currently operate extensive programs to comply with various environmental regulations, including the Renewable Portfolio Standard (“RPS”) program, under which each generation subsidiary will beis required to supply 2.0% and 10.0%generate a specified percentage of the total energyelectricity to be generated fromby such generation subsidiary in a given year in the form of renewable energy, with the target percentage being 2.0% in 2012, 2.5% in 2013 and incrementally increasing to 10.0% by 2022. Fines are to be levied on any subsidiary that fails to do so in the prescribed timeline. In 2012, while one of our generation subsidiaries met 100% of its target, five others were unsuccessful to do so. Our six generation subsidiaries met, on average, 90.8% of the target for 2012 and accordingly were fined an aggregate amount of Won 23.7 billion. Compliance by our generation subsidiaries of the 2013 target is currently under evaluation, and if we are found to have failed to meet the target for 2013 or for subsequent years, our generation subsidiaries may become subject to additional fines or other penalties. There is no assurance that such fine or other penalty will not be substantial, and if substantial, such fine or other penalty may have a material adverse effect on our business, results of operations or financial condition. The budgeted amount of capital expenditure for implementation of the RPS as currently planned for the period from 2013 to 2022 respectively. is approximately Won 13.7 trillion. We expect that such additional capital expenditure to be covered by a corresponding increase in electricity tariff. However, there is no assurance that the Government will in fact raise the electricity tariff to a level sufficient to fully cover such additional capital expenditures or at all. See also Item 4B. “Business Overview—Renewable Energy.”

Our environmental measures, including the use of environmentally friendly but more expensive parts and equipment and budgeting capital expenditures for the installation of such facilities, may result in increased operating costs and liquidity requirement. The actual cost of installation and operation of such equipment and related liquidity requirement will depend on a variety of factors which may be beyond our

control. There is no assurance that we will continue to be in material compliance with legal or social standards or requirements in the future in relation to the environment, including in respect of climate change. See Item 4B. “Business Overview—Environmental Programs” and “Business Overview—Renewable Energy.”

Newly adopted coal consumption tax may have a material adverse effect on our business, operations and profitability.

On January 1, 2014, largely based on policy considerations of tax equity among different fuel types as well as environmental concerns, the Ministry of Strategy and Finance announced that, effective July 1, 2014,

consumption tax will apply to bituminous coal, which previously was not subject to consumption tax unlike other fuel types such as LNG or bunker oil. The base tax rate (which is subject to certain adjustments) will be Won 24 per kilogram for bituminous coal; however, due to concerns on the potential adverse effect on industrial activities, the applicable tax rate will be Won 19 per kilogram for bituminous coal with net heat generation of 5,000 kilo calories or more per kilogram, and Won 17 per kilogram for bituminous coal with net heat generation of less than 5,000 kilo calories per kilogram. In contrast, the applicable tax rate for LNG will be reduced from Won 60 per kilogram to Won 42 per kilogram. Since bituminous coal currently represents the largest fuel type for electricity generation, accounting for approximately 43.0% of our entire fuel requirements in 2013 in terms of electricity output, we expect the newly adopted consumption tax thereon will result in an increase of our overall fuel costs, notwithstanding the decrease in the consumption tax rate for LNG, which accounted for approximately 19.7% of our entire fuel requirements in 2013 in terms of electricity output. While we expect that such additional fuel costs will be covered by a corresponding increase in electricity tariff, there is no assurance that the Government will in fact raise electricity tariff to a level sufficient to fully cover such additional costs in a timely manner or at all, and if the Government does not do so, the increase in our overall fuel costs arising from the newly adopted coal consumption tax will adversely affect our results of operation and financial condition.

Our risk management procedures may not prevent losses in debt and foreign currency positions.

We manage interest rate exposure for our debt instruments by limiting our variable rate debt exposure as a percentage of our total debt and closely monitoring the movements in market interest rates. We also actively manage currency exchange rate exposure for our foreign currency-denominated liabilities by measuring the potential loss therefrom using risk analysis software and entering into derivative contracts to hedge such exposure when the possible loss reaches a certain risk limit. To the extent we have unhedged positions or our hedging and other risk management procedures do not work as planned, our results of operations and financial condition may be adversely affected.

The amount and scope of coverage of our insurance are limited.

Substantial liability may result from the operations of our nuclear generation units, the use and handling of nuclear fuel and possible radioactive emissions associated with such nuclear fuel. KHNP carries insurance for its generation units and nuclear fuel transportation, and we believe that the level of insurance is generally adequate and is in compliance with relevant laws and regulations. In addition, KHNP is the beneficiary of Government indemnity which covers a portion of liability in excess of the insurance. However, such insurance is limited in terms of amount and scope of coverage and does not cover all types or amounts of losses which could arise in connection with the ownership and operation of nuclear plants. Accordingly, material adverse financial consequences could result from a serious accident or a natural disaster to the extent it is neither insured nor covered by the government indemnity.

In addition, our non-nuclearthermal generation subsidiaries carry insurance covering certain risks, including fire, in respect of their key assets, including buildings and equipment located at their respective power plants, construction-in-progress and imported fuel and procurement in transit. Such insurance and indemnity, however, cover only a portion of the assets that the non-nuclearthermal generation subsidiaries own and operate and do not cover all types or amounts of loss that could arise in connection with the ownership and operation of these power plants. In addition, unlike us, our generation subsidiaries are not permitted to self-insure, and accordingly have notself-insured, against risks of their uninsured assets or business. Accordingly, material adverse financial consequences could result from a serious accident to the extent it is uninsured.

In addition, because neither we nor our generation subsidiaries, other than KHNP, carry any insurance against terrorist attacks, an act of terrorism would result in significant financial losses. See Item 4B. “Business Overview—Insurance.”

We may require a substantial amount of additional indebtedness to refinance existing debt and for future capital expenditures.

We anticipate that additional indebtedness will be required in the coming years in order to refinance existing debt, make capital expenditures for construction of generation plants and other facilities and make acquisitions and investments related to overseas natural resources. While we currently do not expect to face any material difficulties in procuring short-term borrowing to meet our liquidity and short-term capital requirements, the amount of such additional indebtedness may be substantial. We expect that a portion of our long-term debt will need to be paid or refinanced through foreign currency-denominated borrowings and capital raising in international capital markets. Such financing may not be available on terms commercially acceptable to us or at all, especially if the global financial markets experience significant turbulence or a substantial reduction in liquidity.

We may not be able to raise equity capital in the future without the participation of the Government.

Under applicable laws, the Government is required to directly or indirectly own at least 51.0%51% of our issued capital stock. As of December 31, 2011,February 17, 2014 the last day on which our shareholder registry was closed, the Government, directly and through Korea Finance Corporation (a statutory banking institution wholly-ownedwholly owned by the Government), owned 51.1% of our issued capital stock. Accordingly, without changes in the existing Korean law, it may be difficult or impossible for us to undertake, without the participation of the Government, any equity financing in the future.

Following from the recent decision of the Supreme Court of Korea, we may be exposed to potential claims made by current or previous employees for unpaid wages for the past three years under the expanded scope of ordinary wages and become subject to additional labor costs arising from the broader interpretation of ordinary wages under such decision.

Under the Labor Standards Act, an employee is legally entitled to “ordinary wages.” Under the guidelines previously issued by the Ministry of Labor, ordinary wages include base salary and certain fixed monthly allowances for work performed overtime during night shifts and holidays. Prior to the Supreme Court decision described below, many companies in Korea had typically interpreted these guidelines as excluding from the scope of ordinary wages fixed bonuses that are paid other than on a monthly basis, namely on a bi-monthly, quarterly or biannually basis, although such interpretation had been a subject of controversy and had been overruled in a few court cases.

In December 2013, the Supreme Court of Korea ruled that regular bonuses fall under the category of ordinary wages on the condition that those bonuses are paid regularly and uniformly, and that any agreement which excludes such regular bonuses from ordinary wage is invalid. The Supreme Court further ruled that in spite of invalidity of such agreements, employees shall not retroactively claim additional wages incurred due to such court decision, in case that such claims bring to employees unexpected benefits which substantially exceeds the wage level agreed by employers and employees and cause an unpredicted increase in expenditures for their company, which would lead the company to material managerial difficulty or would threat to the existence of the company. In that case, the claim is not acceptable since it is unjust and is in breach of the principle of good faith. Prior to such Supreme Court ruling, we determined wages in accordance with budget instructions from the Ministry of Strategy and Finance, which excluded bonuses from ordinary wages and which was determined with the consent of the relevant labor unions.

Following the Supreme Court decision, the Korea Power Plant Industry Union and others filed lawsuits in an aggregate amount of Won 44.6 billion against our six generation subsidiaries, based on claims that ordinary wage was paid without including certain items that should have been included as ordinary wage. Our management currently believes that we are not presently obligated to make any payments in relation to this matter and we accordingly had not made any provision in relation thereto as of December 31, 2013 since it is unclear how the Supreme Court ruling should be applied and it is not possible to reasonably estimate the amount of potential loss since such amount will depend on the nature of the future (other than salesagreement between management and relevant labor unions and/or the outcome of treasury stock).the foregoing or related lawsuits. However, should the outcome of these or other lawsuits be finally determined against us, the resulting compensation we will be required to pay and any related increase in labor costs will have an adverse effect on our results of operation and cash flows.

Risks Relating to Korea and the Global Economy

Unfavorable financial and economic conditions in Korea and globally may have a material adverse impact on us.

We are incorporated in Korea, where most of our assets are located and most of our income is generated. As a result, we are subject to political, economic, legal and regulatory risks specific to Korea, and our business, results of operation and financial condition are substantially dependent on the Korean consumers’ demand for

electricity, which are in turn largely dependent on developments relating to the Korean economy. The Korean economy is closely integrated with, and is significantly affected by, developments in the global economy and financial markets. Recent difficulties affecting

While in the aftermath of the global financial crisis that started in the second half of 2008 there have been mixed signs of recovery for the global and Korean economy, substantial uncertainties remain in the form of anticipated tightening of the U.S. monetary policy, continued fiscal and financial challenges for the European, U.S. and global financial sectors, adverse conditions and volatility in the worldwide credit and financial markets,economies, fluctuations in oil and commodity prices, and the general weakness of the European, U.S. and global economy have increased the uncertainty of global economic prospects in general and have adversely affected, and may continue to adversely affect, the Korean economy. Due to recent liquidity and credit concerns and volatility in the global financial markets, the value of the Won relative to the Dollar has also fluctuated significantly in recent years. Furthermore, as a result of adverse global and Korean economic conditions, there has been continuing volatility in the stock prices of Korean companies. While the rate of deterioration of the global economy slowed in the second half of 2009, with some signs of stabilization and improvement in 2010 and 2011, substantial uncertainties have resurfaced in the form of fiscal and financial sector crisis in several European countries (including Italy, Spain, France, Greece and Portugal), a downgrade in the sovereign or other credit ratings of governments and financial institutions in Europe and the United States and signs of cooling of the Chinese economy and a rise of military and political tension in the Crimean peninsula and former members of the Soviet Union. Accordingly, the overall prospects for the Korean and global economy in 20122014 and beyond remain uncertain. While our aggregate financial exposure to the European countries currently beingthat have been significantly affected by the ongoing fiscal and financial crisis remains less than 1% of our consolidated total assets, any future deterioration of the global economy may have an adverse impact on the Korean economy, which in turn could adversely affect our business, financial condition and results of operations. As Korea’sthe Korean economy is highly dependent on the health and direction of the global economy, the prices of our securities may be adversely affected by investors’ reactions to developments in one country can have adverse effects on the securities price of companies in other countries. In addition, due to the ongoing volatility in the global financial markets, the value of the Won relative to the U.S. dollar has also fluctuated significantly in recent years, which in turn also may adversely affect our financial condition and results of operation.

Factors that determine economic and business cycles of the Korean or global economy are for the most part beyond our control and inherently uncertain. In light of the high level of interdependence of the global economy, any of the foregoing developments could have a material adverse effect on the Korean economy and financial markets, and in turn on our business and profitability.

More specifically, factors that could hurt Korea’sthe Korean economy in the future include, among others:

 

monetary tightening by the U.S. government known as “tapering,” further deterioration of the fiscal and financial crisisdifficulties in Europe, downgradesthe slowdowns of the Chinese economy, as well as rising military and political tension in the sovereign or other credit ratingsCrimean peninsula and former members of the governments and financial institutions in Europe and the United States,Soviet Union, which could have adverse effects on the global, and in turn Korean credit and financial markets;markets as well as the exchange rates of Won to other major foreign currencies, particularly U.S. dollar;

 

increases in inflation levels, volatility in foreign currency reserve levels, commodity prices (including coal, oil, LNG prices), exchange rates (particularly against(including fluctuation of U.S. dollar and Japanese Yen exchange rates or revaluation of the U.S. dollar)Renminbi), interest rates, and stock marketsmarket prices and inflows and outflows of foreign capital, either directly, into the stock markets, through derivatives or otherwise;

 

increased reliance on exports to service foreign currency debts, which could causepotential friction with Korea’s trading partners;partners arising, in part, from Korea’s heavy reliance on exports;

 

adverse developments in the economies of countries to which Korea exports goods and services (such as China, the United States and Japan), or in emerging market economies in Asia or elsewhere that could result in a loss of confidence in the Korean economy;

 

the continued emergence of China, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competition in export markets or for foreign investment and relocation of the manufacturing base from Korea to China);

 

social and labor unrest or declining consumer confidence or spending resulting from lay-offs,layoffs, increasing unemployment and lower levels of income;

uncertainty and volatility in real estate prices arising, in part, from the Government’s policy-driven tax and other regulatory measures;

 

rising fiscal deficit as a result of a decrease in tax revenues and a substantial increase in the Government’s expenditures for unemployment compensationwelfare and other social programs that together could lead to an increased Government budget deficit;programs;

political uncertainty or increasing strife among or within political parties in Korea, including as a result of the increasingcontinued polarization of the positions of the ruling conservative party and the progressive opposition, particularly in light of the general election for National Assembly members in April 2012 and the presidential election scheduled for December 2012;opposition;

 

a deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including such deterioration resulting from trade disputes or disagreements in foreign policy;

 

any other development that has a material adverse effect in the global economy, such as an act of war, a terrorist act or a breakout of an epidemic such as SARS, avian flu or swine flu;flu or natural disasters such as earthquakes and tsunamis and the related disruptions in the relevant economies with global repercussions;

 

hostilities involving oil-producing countries in the Middle East and elsewhere and any material disruption in the supply of oil or a material increase in the price of oil resulting from such hostilities; and

 

an increase in the level of tensions or an outbreak of hostilities in the Korean peninsula.

Any future deterioration of the Korean economy could have an adverse effect on our business, financial condition and results of operation.

Tensions with North Korea could have an adverse effect on us and the market value of our shares.

Relations between Korea and North Korea have been tense throughout Korea’s modern history. The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events. In recent years, there have been heightened security concerns stemming from North Korea’s nuclear weapons and long-range missile programs and uncertainty regarding North Korea’s actions and possible responses from the international community. In April 2009, after launching a long-range rocket over the Pacific Ocean which led to protests from the international community, North Korea announced that it would permanently withdraw from the six-party talks that began in 2003 to discuss Pyongyang’s path to denuclearization. On May 25, 2009, North Korea conducted its second nuclear testing by launching several short-range missiles. In response to such actions, the Republic decided to join the Proliferation Security Initiative, an international campaign aimed at stopping the trafficking of weapons of mass destruction, over Pyongyang’s harsh rebuke and threat of war. After the United Nations Security Council passed a resolution on June 12, 2009, to condemn North Korea’s second nuclear test and impose tougher sanctions such as a mandatory ban on arms exports, North Korea announced that it would produce nuclear weapons and take “resolute military actions” against the international community. In November 2010, North Korean forces fired artillery shells at Yeonpyeong Island off the west coast of Korea killing four South Koreans. Efforts at multilateral negotiations with North Korea have been made in response to North Korean provocations, but the prospects of such negotiations remain unclear.

There recently has been increased uncertainty about the future of North Korea’s political leadership and its implications for the economic and political stability of the region. On December 17, 2011, North Korean officials announced thatShortly after the death of Kim Jong-il, the North Koreanalong-standing former ruler died of a heart attack. Shortly after his death, his third son, Kim Jong-eun, who is reported to be in his twenties, was named head of the government and military. Kim Jong-eun’s succession, including its implications for the politics and economy of North Korea, in December 2011 his son Kim Jong-un was named North Korea’s Supreme Commander of the Armed Forces. Whether Kim Jong-un will successfully solidify his political power or whether he will implement policies that will successfully assist North Korea in withstanding the many challenges it faces, however, remains uncertain. In addition,If the consolidation of power by Kim Jong-un is not successful or there exist any material conflicts among different political factions, there may be significant uncertainty regarding the policies, actions and initiatives that North Korea’s economy faces severe challenges.Korea might pursue in the future. For example, in December 2013, Jang Sung-Taek, husband to Kim Jong-un’s aunt, who was widely speculated to be the second in command, was executed on November 30, 2009,charges of sedition, among others. Although the implications of such developments remain uncertain, it may cause further political and social instability in North Korea redenominated its currency at a ratioand/or adoption of 100 to 1 as partmore hostile policies that could enhance friction with Korea and the rest of its first currency reform in 17the world.

In recent years, as a way to control inflation and reduce the income gap among its citizens. In tandem with the currency redenomination, the North Korean government banned the use or possession of foreign currency by its residents

and closed down privately run markets, which led to severe inflation and food shortages. Such developments may further aggravate social and political tensions within North Korea.

Furthermore, there have been recent military conflictsheightened security concerns stemming from North Korea’s nuclear weapons and long-range missile programs and increased uncertainty regarding North Korea’s actions and possible responses from the international community. In January 2003, North Korea renounced its obligations under the Nuclear Non-Proliferation Treaty and conducted multiple rounds of nuclear tests between October 2006 and February 2013, which increased tensions in the region and elicited strong objections worldwide. In response, the United Nations Security Council unanimously passed resolutions that condemned North Korea for the nuclear tests and expanded sanctions against North Korea, most recently in March 2013.

North Korea has recently undertaken other hostile actions. For example, in March 2010, a Korean naval vessel was destroyed by an underwater explosion, killing many of the crewmen on board. The Government formally accused North Korea of causing the sinking, while North Korea denied responsibility. Moreover, in November 2010, North Korea fired more than one hundred artillery shells that hit Korea’s Yeonpyeong Island near the Northern Limit Line, which acts as the de facto maritime boundary between Korea and North Korea on the Korean peninsula. On March 26, 2010, theCheonan, a Korean navy ship, sank off the westernwest coast of the Korean peninsula, causing casualties and significant property damage. The Government

condemned North Korea killing 46 soldiers. An investigation carried outfor the attack and vowed stern retaliation should there be further provocation. In March 2013, North Korea declared the 1953 armistice invalid, stated that it had entered “a state of war” with Korea, and put its artillery at the highest level of combat readiness to protest the Korea-United States allies’ military drills and additional sanctions imposed on North Korea for its missile and nuclear tests.

On April 3, 2013, North Korea blocked South Koreans from entering the Kaesong Industrial Complex, an economic cooperation zone within North Korea and on April 26, 2013 South Korea decided to withdraw its workers from the complex. In September 2013, however, Korea and North Korea reached an agreement and resumed operation of the Kaesong Industrial Complex, and have since made efforts to improve the business environment of the complex, including by building radio frequency identification data transfer systems and launching internet service, among others. In February 2014, the Joint Civilian-Military Investigation Group, consisting of investigators from Korea, the United States, Australia, the United Kingdom and Sweden, concludedU.S. Congressional Research Service reported that theCheonan was sunk by a North Korean torpedo. Also, on November 23, 2010, Government’s approach towards the North Korean military fired artillery shells onto the Korean island of Yeonpyeong, killing two Korean soldiersexpansion and two civilians which set off an exchange of fire between the two sides. Around the end of 2010, the International Criminal Court tentatively concluded that North Korea’s sinking of theCheonan and shellinginternationalization of the island of Yeonpyeong constituted a war crime, and launched a preliminary investigation regarding such incidents. On April 13, 2012,Kaesong Industrial Complex could conflict with U.S. legislative efforts to expand its sanctions on North Korea, conducted a failed rocket launch under the premise of placing a satellite in orbit. This launch has been widely criticized by the international community as a veiled attempt by North Korea to further develop its long-range ballistic missile program.

On August 22, 2011, North Korea unilaterally declared that it will legally dispose of all Korean-owned real estate, equipment and raw materials it seized in April 2010 within the Mt. Geumgang resort area (the “Geumgang area”), concurrent with its seizure and embargo of Korean supplies and assets and its exit order of all employees who were dispatched from Korea (the “2011 Declaration”). Itthere is estimatedno assurance that the value of the assets, including the real estate, owned by the Republic, the Korea Tourism Organization and other private Korean companies in the Geumgang area amount to approximately Won 484.1 billion. Tourism in the Geumgang area has effectively been discontinued since a Korean tourist was shot and killed by a North Korean soldier on July 11, 2008. Currently, the Republic is in the process of considering various options, including legal and diplomatic measures, in response to the 2011 Declaration.Government will not reverse or reduce its such efforts at detente.

There can be no assurance that the level of tension and instability inon the Korean peninsula will not escalate in the future, or that thefuture. Furthermore, North Korea’s economy also faces severe challenges, including severe inflation and food shortages, which may further aggravate social and political regime intensions within North Korea. In addition, reunification of Korea and North Korea may not suddenly collapse.could occur in the future, which would entail significant economic expenditure and commitment by Korea. Any further increase in tensioneconomic or uncertainty relating to the militarypolitical difficulties within North Korea or economic stability in the Korean peninsula, including a breakdown of diplomatic negotiations over the North Korean nuclear program, occurrenceescalation of military hostilities or heightened concerns about the stability oftension between Korea and North Korea’s political leadership,Korea could have a material adverse effect on ourthe Company’s business, financial condition and results of operation and couldoperations as well as lead to a decline in the market value of our common shares and our American depositary shares.

We are generally subject to Korean corporate governance and disclosure standards, which differ in significant respects from those in other countries.

Companies in Korea, including us, are subject to corporate governance standards applicable to Korean public companies which differ in many respects from standards applicable in other countries, including the United States. As a reporting company registered with the Securities and Exchange Commission and listed on the New York Stock Exchange, we are, and will continue to be, subject to certain corporate governance standards as mandated by the Sarbanes-Oxley Act of 2002, as amended. However, foreign private issuers, including us, are exempt from certain corporate governance standards required under the Sarbanes-Oxley Act or the rules of the New York Stock Exchange. For a description of significant differences in corporate governance standards, see Item 16G. “Corporate Governance.” There may also be less publicly available information about Korean companies, such as us, than is regularly made available by public or non-public companies in other countries. Such differences in corporate governance standards and less public information could result in less than satisfactory corporate governance practices or disclosure to investors in certain countries.

You may not be able to enforce a judgment of a foreign court against us.

We are a corporation with limited liability organized under the laws of Korea. Substantially all of our directors and officers and other persons named in this annual report reside in Korea, and all or a significant portion of the assets of our directors and officers and other persons named in this annual report and substantially all of our assets are located in Korea. As a result, it may not be possible for holders of the American depository shares to affect service of process within the United States, or to enforce against them or us in the United States judgments obtained in United States courts based on the civil liability provisions of the federal securities laws of the United States. There is doubt as to the enforceability in Korea, either in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated on the United States federal securities laws.

Risks Relating to Our American Depositary Shares

There are restrictions on withdrawal and deposit of common shares under the depositary facility.

Under the deposit agreement, holders of shares of our common stock may deposit those shares with the depositary bank’s custodian in Korea and obtain American depositary shares, and holders of American depositary shares may surrender American depositary shares to the depositary bank and receive shares of our common stock. However, under current Korean laws and regulations, the depositary bank is required to obtain our prior consent for the number of shares to be deposited in any given proposed deposit which exceeds the difference between (1) the aggregate number of shares deposited by us for the issuance of American depositary shares (including deposits in connection with the initial and all subsequent offerings of American depositary shares and stock dividends or other distributions related to these American depositary shares) and (2) the number of shares on deposit with the depositary bank at the time of such proposed deposit. We have consented to the deposit of outstanding shares of common stock as long as the number of American depositary shares outstanding at any time does not exceed 80,153,810 shares. As a result, if you surrender American depositary shares and withdraw shares of common stock, you may not be able to deposit the shares again to obtain American depositary shares.

Ownership of our shares is restricted under Korean law.

Under the Financial Investment Services and Capital Markets Act, with certain exceptions, a foreign investor may acquire shares of a Korean company without being subject to any single or aggregate foreign investment ceiling. As one such exception, certain designated public corporations, such as us, are subject to a 40% ceiling on acquisitions of shares by foreigners in the aggregate. The Financial Services Commission may impose other restrictions as it deems necessary for the protection of investors and the stabilization of the Korean securities and derivatives market.

In addition to the aggregate foreign investment ceiling, the Financial Investment Services and Capital Markets Act and our Articles of Incorporation set a 3% ceiling on acquisition by a single investor (whether domestic or foreign) of the shares of our common stock. Any person (with certain exceptions) who holds our issued and outstanding shares in excess of such 3% ceiling cannot exercise voting rights with respect to our shares exceeding such limit.

The ceiling on aggregate investment by foreigners applicable to us may be exceeded in certain limited circumstances, including as a result of acquisition of:

shares by a depositary issuing depositary receipts representing such shares (whether newly issued shares or outstanding shares);

shares by exercise of warrant, conversion right under convertible bonds, exchange right under exchangeable bonds or withdrawal right under depositary receipts issued outside of Korea;

shares from the exercise of shareholders’ rights; or

shares by gift, inheritance or bequest.

A foreigner who has acquired our shares in excess of any ceiling described above may not exercise his voting rights with respect to our shares exceeding such limit and the Financial Services Commission may take necessary corrective action against him.

Holders of our ADSs will not have preemptive rights in certain circumstances.

The Korean Commercial Code and our Articles of Incorporation require us, with some exceptions, to offer shareholders the right to subscribe for new shares in proportion to their existing ownership percentage whenever new shares are issued. If we offer any rights to subscribe for additional shares of our common stock or any rights of any other nature, the depositary bank, after consultation with us, may make the rights available to you or use

reasonable efforts to dispose of the rights on your behalf and make the net proceeds available to you. The depositary bank, however, is not required to make available to you any rights to purchase any additional shares unless it deems that doing so is lawful and feasible and:

a registration statement filed by us under the U.S. Securities Act of 1933, as amended, is in effect with respect to those shares; or

the offering and sale of those shares is exempt from or is not subject to the registration requirements of the U.S. Securities Act.

We are under no obligation to file any registration statement with the U.S. Securities and Exchange Commission in relation to the registration rights. If a registration statement is required for you to exercise preemptive rights but is not filed by us, you will not be able to exercise your preemptive rights for additional shares and you will suffer dilution of your equity interest in us.

The market value of your investment in our ADSs may fluctuate due to the volatility of the Korean securities market.

Our common stock is listed on the KRX KOSPI Division of the Korea Exchange, which has a smaller market capitalization and is more volatile than the securities markets in the United States and many European countries. The market value of ADSs may fluctuate in response to the fluctuation of the trading price of shares of our common stock on the Stock Market Division of the Korea Exchange. The Stock Market Division of the Korea Exchange has experienced substantial fluctuations in the prices and volumes of sales of listed securities and the Stock Market Division of the Korea Exchange has prescribed a fixed range in which share prices are permitted to move on a daily basis. Like other securities markets, including those in developed markets, the Korean securities market has experienced problems including market manipulation, insider trading and settlement failures. The recurrence of these or similar problems could have a material adverse effect on the market price and liquidity of the securities of Korean companies, including our common stock and ADSs, in both the domestic and the international markets.

The Korean government has the ability to exert substantial influence over many aspects of the private sector business community, and in the past has exerted that influence from time to time. For example, the Korean government has promoted mergers to reduce what it considers excess capacity in a particular industry and has also encouraged private companies to publicly offer their securities. Similar actions in the future could have the effect of depressing or boosting the Korean securities market, whether or not intended to do so. Accordingly, actual or perceived actions or inactions by the government may cause sudden movements in the market prices of the securities of Korean companies in the future, which may affect the market price and liquidity of our common stock and ADSs.

Your dividend payments and the amount you may realize in connection with a sale of your ADSs will be affected by fluctuations in the exchange rate between the U.S. dollar and the Won.

Investors who purchase the American depositary shares will be required to pay for them in U.S. dollars. Our outstanding shares are listed on the Korea Exchange and are quoted and traded in Won. Cash dividends, if any, in respect of the shares represented by the American depositary shares will be paid to the depositary bank in Won and then converted by the depositary bank into U.S. dollars, subject to certain conditions. Accordingly, fluctuations in the exchange rate between the Won and the U.S. dollar will affect, among other things, the amounts a registered holder or beneficial owner of the American depositary shares will receive from the depositary bank in respect of dividends, the U.S. dollar value of the proceeds which a holder or owner would receive upon sale in Korea of the shares obtained upon surrender of American depositary shares and the secondary market price of the American depositary shares.

ITEM 4. INFORMATION ON THE COMPANYIf the Government deems that certain emergency circumstances are likely to occur, it may restrict the depositary bank from converting and remitting dividends in U.S. dollars.

If the Government deems that certain emergency circumstances are likely to occur, it may impose restrictions such as requiring foreign investors to obtain prior Government approval for the acquisition of Korean securities or for the repatriation of interest or dividends arising from Korean securities or sales proceeds from disposition of such securities. These emergency circumstances include any or all of the following:

sudden fluctuations in interest rates or exchange rates;

extreme difficulty in stabilizing the balance of payments; and

a substantial disturbance in the Korean financial and capital markets.

The depositary bank may not be able to secure such prior approval from the Government for the payment of dividends to foreign investors when the Government deems that there are emergency circumstances in the Korean financial markets.

ITEM 4.INFORMATION ON THE COMPANY

Item 4A. History and Development of the Company

General Information

Our legal and corporate name is Korea Electric Power Corporation. We were established by the Government on December 31, 1981 as a statutory juridical corporation in Korea under the Korea Electric Power Corporation (“KEPCO”) Act as the successor to Korea Electric Company. Our registered office is located at 167 Samseong-dong,512 Yeongdongdaero, Gangnam-gu, Seoul, Korea, and our telephone number is 82-2-3456-4264.82-2-3456-4217. Our website address is www.kepco.co.kr. Our agent in the United States is Korea Electric Power Corporation, New York Office, located at 7th Floor, Parker Plaza, 400 Kelby Street, Fort Lee, NJ 07024.

The Korean electric utility industry traces its origin to the establishment of the first electric utility company in Korea in 1898. On July 1, 1961, the industry was reorganized by the merger of Korea Electric Power Company, Seoul Electric Company and South Korea Electric Company, which resulted in the formation of Korea Electric Company. From 1976 to 1981, the Government acquired the private minority shareholdings in Korea Electric Company. After the Government acquired all the remaining shares of Korea Electric Company, Korea Electric Company was dissolved, and we were incorporated in 1981 and assumed the assets and liabilities of Korea Electric Company. We ceased to be wholly-ownedwholly owned by the Government in 1989 when the Government sold 21.0%21% of our common stock. As of December 31, 2011,February 17, 2014, the last day on which our shareholder registry was closed, the Government maintained 51.1% ownership in aggregate of our common shares by direct holdings by the Government and indirect holdings through Korea Finance Corporation, a statutory banking institution wholly owned by the Government.

Under relevant laws of Korea, the Government is required to own, directly or indirectly, at least 51.0%51% of our capital. Direct or indirect ownership of more than 50% of our outstanding common stock enables the Government to control the approval of certain corporate matters relating to us that require a shareholders’ resolution, including approval of dividends. The rights of the Government and Korea Finance Corporation as holders of our common stock are exercised by the Ministry of Knowledge Economy,Trade, Industry and Energy, based on the Government’s ownership of our common stock and a proxy received from Korea Finance Corporation, in consultation with the Ministry of Strategy and Finance.

We operate under the general supervision of the Ministry of Knowledge Economy.Trade, Industry and Energy. The Ministry of Knowledge Economy,Trade, Industry and Energy, in consultation with the Ministry of Strategy and Finance, is responsible for approving, subject to review by the Korea Electricity Commission, the electricity rates we charge our customers. See Item 4B. “Business Overview—Sales and Customers—Electricity Rates.” We furnish reports to officials of

the Ministry of Knowledge Economy,Trade, Industry and Energy, the Ministry of Strategy and Finance and other Government agencies and regularly consult with such officials on matters relating to our business and affairs. See Item 4B. “Business Overview—Regulation.” Our non-standing directors, who comprise the majority of our board of directors, must be appointed by the Ministry of Strategy and Finance following the review and resolution of the Public Agencies Operating Committee from a pool of candidates recommended by our director nomination committee and must have ample knowledge and experience in business management, and our President must be appointed by the President of the Republic upon the motion of the minister of the Ministry of Knowledge EconomyTrade, Industry and Energy following the nomination by our director nomination committee, the review and resolution of the Public Agencies Operating Committee and an approval at the general meeting of shareholders. See Item 6A. “Directors and Senior Management—Board of Directors.”

Item 4B. Business Overview

Introduction

We are an integrated electric utility company engaged in the transmission and distribution of substantially all of the electricity in Korea. Through our six wholly-owned generation subsidiaries, we also generate substantially allthe substantial majority of the electricity produced in Korea. As of December 31, 2011,2013, we and our generation subsidiaries owned approximately 88.4%81.5% of the total electricity generatinggeneration capacity in Korea (excluding plants generating electricity primarily for private or emergency use). In 2011,2013, we sold to our customers approximately 455 billion kilowatt-hours474,849 gigawatt-hours of electricity. We purchase electricity principally from our generation subsidiaries and to a lesser extent from independent power producers. Of the 477 billion kilowatt-hours479,287 gigawatt-hours of electricity we purchased in 2011, 32.0%2013, 28.8% was generated by KHNP, our wholly-owned nuclear and hydroelectric power generation subsidiary, 56.9%60.6% was generated by our wholly-owned five non-nuclearthermal generation subsidiaries and 11.1%10.6% was generated by independent power producers. Our five non-nuclearthermal generation subsidiaries are KOSEP, KOMIPO, KOWEPO, KOSPO and EWP, each of which is wholly-ownedwholly owned by us and is incorporated in Korea. We derive substantially all of our revenues and profit from Korea, and substantially all of our assets are located in Korea.

In 2011,2013, we had sales of Won 43,53253,713 billion and net profit of Won 174 billion, compared to sales of Won 49,121 billion and net loss of Won 3,3703,078 billion (excluding non-controlling interests) compared to sales of Won 39,507 billion and net loss of Won 120 billion (excluding non-controlling interests) in 2010. Our sales increased primarily as a result of a 4.8% increase in kilowatt hours of electricity sold in 2011, which was attributable primarily to the general increase in demand for electricity among consumers in Korea as a result of the economic recovery in 2011 compared to 2010. The increase in the volume of electricity sold was due to a 8.1% increase of electricity sold to the industrial sector, including light power usage, and a 2.1% increase in kilowatt hours of electricity sold to the commercial sector, which more than offset a 0.9% decrease in kilowatt hours of electricity sold to the residential sector. See Item 5A. “Operating Results.”2012.

Our revenues are closely tied to demand for electricity in Korea. Demand for electricity in Korea increased at a compounded average growth rate (“CAGR”) of 5.5%4.3% per annum from 20072009 to 2011,2013, compared to the real gross domestic product, or GDP, which increased at a CAGRcompounded average growth rate of 3.5%3.2% during the same period, according to Thethe Bank of Korea. The GDP growth rate was 3.6% for 2011 as compared to 6.2% for 2010. Demand3.0% during 2013 while demand for electricity in Korea increased by 4.8% from 2010 to 2011.1.8% during 2013.

Strategy

In June 2009,October 2013, we established a vision for ourselvesannounced our corporate strategy titled “Global Top Green & Smart Energy Pioneer.” Under this strategy, we seek to become a leading global energy enterprise through enhanced global competitiveness and strengthening our contribution to the global environmental campaigns through continued development of “green” and “smart” power-related technologies. We also aim to adapt to the growing uncertainties in global economy by 2020, oneselectively pursuing new business opportunities and through development of the top utility service providersinnovative technologies. In addition, we are in the world in termsprocess of environmentally-friendly clean energy, withintegrating a focus on substantially increasing“creating shared value” platform to our revenue, maintaining a fair level of return on investment, further expandingbusiness model and operating strategy so as to enhance our overseas businesses and upgrading our technologies, includingsocial contributions as well as financial profitability in the areaform of nuclear plant design. In order to achieve this vision, we have formulated the following strategies:creating new business opportunities while promoting energy welfare for our consumers.

 

  

Become a global leaderStrengthen reliability of our domestic operations.Our primary strategies in “green” technology. With the increasing demand for,this connection are to enhance efficiency of our electricity generation, transmission and embrace of, environmentally friendly, or green, energy worldwide in substitutiondistribution networks and acceptability of the conventional thermal energy,construction and operation of our related facilities. Toward this end, we believe that green energy represents an important business potential as well as a worthy corporate purpose befitting our status as a provider of public utility. In particular, our “green growth” initiatives will strategically focus on the following:

(i)Development of capabilities to generate electricity with lower carbon emission—We are currently developing, or seek to develop, a standardized integrated gasification combined cycle generation unit, namely a generation unit that uses high-purity gas produced by pressurizing coal or other solid waste at high temperature for generationensuring stable supply of electricity, with relatively low carbon emission, with an installed capacity of 300 megawatts, a standardized “carbon capture and storage” facility with an installed capacity of 500 megawatts and a standardized nuclear power generation unit for export purposes.making our electricity networks “smarter”

 (ii)Improvement

and more intelligent, creating customer-oriented marketing solutions, hiring outside agencies to assist with site selection for our facilities and improving the compensation system in efficiencyrelation to our facilities. We also aim to strengthen our marketing capabilities in anticipation of increasing competition, as well as bolster programs designed to encourage efficient energy use. We believe these measures will be instrumental to reinforcing our electricity transmission and distribution—We are currently developing, or seek to develop, an intelligent power transmission and distribution network, or “smart grids,” based on advanced information technology, in order to promote a more efficient allocation and use of electricity by consumers, a superconducting technology that will improve efficiencydominance in the transmission ofKorean electricity over such network and localized “high-voltage direct current” technology that will reduce electricity loss over the course of transmission and distribution.

(iii)Participation in the development of green energy infrastructure—We are currently developing, or seek to develop, charging facilities for electric vehicles and standard models for a residential unit that can be powered solely by electricity.

Capture and expand business opportunities. We seek to capture business opportunities presented by our leadership in green technology and transmission and distribution technology by developing commercial applications thereof, including by way of developing related information and communication technologies and diversifying our consulting business.market.

 

  

Expand overseas business. TheOur primary focusstrategies in this connection are to develop tailored expansion plans specific to the target region, increase the level of our overseas business diversification is twofold: (i) leveraging our experiencecontrol over the proposed projects and knowhow gained from our core businessprocure secure supply of electricity generation in Korea, including nuclear power generation, to capture business opportunities overseas so as to expand our growth potential, and (ii) direct participation in mining and other resource development projects overseas, by way of acquisition or equity investment, in order to facilitate and increase self-sufficiency in fuel procurement. We alsofuels. In this connection, we plan to expand our geographic focus from Southeast Asia to various other regionsthermal and nuclear power projects as well as selectively explore renewable energy, smart transmission and distribution facilities and fuel procurement projects in the world, including the resource-rich Middle East, Africa and Australia.overseas markets.

 

  

Advance innovationCreate a platform for new business growth opportunities.Our primary objectives in this connection are to gain “first mover” advantages in new businesses through technological development and operational efficiency. Promoting innovationto create opportunities for synergy through formation of an integrated energy network connecting Northeast Asia. Towards these goals, we plan to focus on development of high value-added electricity-related technology, commercialization of our strategic projects and operational efficiency has been andestablishment of “super grids” in Northeast Asia.

Fulfill social responsibilities as an electricity provider.In this connection, we will continue to be an important partseek a balance between our public policy mandate and profitability and develop sustainable products, including through leadership in low-carbon clean energy business, development of oura sustainable energy business strategy. Specifically, we aim to foster further strategic cooperation among our affiliatesmodel and adopt innovative management systems that will enhance operational efficiency and cost control.actualization of results-oriented social responsibility as a global corporate citizen.

Recent Developments

Increase in Electricity Tariff Rates

Effective as of August 1, 2011,November 21, 2013, the Government increased the electricity rates that we charge to the end-users by an average of 4.9%5.4% as further set forth in the following table:

 

Type of Usage*

 Residential  Commercial  Industrial  Educational  Agricultural  Street
Lighting
 
  Low-
voltage
  High-
voltage
  Average  Low-
voltage
  High-
voltage
  Average    

% increase

  2.0    2.3    6.3    4.4    2.3    6.3    6.1    6.3    No change    6.3  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

*Tariff on overnight power usage was also increased by 8.0% on all types of usage.

Type of
Usage

 Residential  Commercial  Industrial  Educational  Agricultural  Street
Lighting
  Overnight
Usage
 
  Less than
300  kW
  300 kW or
more
  Average  Less than
300  kW
  300 kW or
more
  Average     

% increase

  2.7    5.2    6.4    5.8    6.4    6.4    6.4    —      3.0    5.4    5.4  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Effective as of December 5, 2011,January 14, 2013, the Government further increased the electricity rates that we charge to the end-users by an average of 4.5%4.0% as further set forth in the following table:

 

Type of Usage

 Residential  Commercial Industrial Educational  Agricultural  Street
Lighting
  Residential  Commercial Industrial Educational  Agricultural  Street
Lighting
  Overnight
Usage
 
 Low-
voltage
 High-
voltage
 Average Low-
voltage
 High-
voltage
 Average   Low-voltage High-voltage Average Low-voltage High-voltage Average 

% increase

  No change    3.9    5.0    4.5    3.9    6.6    6.5    4.5    No change    6.5    2.0    2.7    6.3    4.6    3.5    4.4    4.4    3.5    3.0    5.0    5.0  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

We cannot assure you that such tariff increaseincreases will be sufficient to fully offset the adverse impact on our results of operations from the current or future movements in fuel costs.

Implementation of the Fuel Cost-based Tariff SystemProposed Second Basic National Energy Plan

Further to the announcement byOn January 13, 2014, the Ministry of Knowledge EconomyTrade, Industry and Energy adopted the Second Basic National Energy Plan following consultations with representatives from civic groups, the power industry and academia. The Second Basic National Energy Plan, which is a comprehensive plan that covers the entire spectrum of energy industries in Korea, will cover the period from 2013 to 2035 (compared to 2008 to 2030 under the First Basic National Energy Plan) and focuses on the following six key tasks: (i) shifting the focus of energy policy to demand management with a goal of reducing electricity demand by 15% by 2035, (ii) establishing a geographically decentralized electricity generation system so as to reduce transmission losses with a goal of

supplying at least 15% of total electricity through such system by 2035, (iii) applying latest greenhouse gas emission reduction technologies to newly constructed generation units in order to further promote safety and environmental friendliness, (iv) strengthening exploration and procurement capabilities to enhance Korea’s energy security and to ensure stable supply of energy and increasing the portion of electricity supplied from renewable sources to 11% by 2035, (v) reinforcing the system for stable supply of conventional energy, such as oil and gas, and (vi) introducing in 2015 an energy voucher system in lieu of a tariff discount system for the benefit of consumers in the low income group. In addition, the Second Basic National Energy Plan contemplates revising the target level of electricity generated by nuclear sources as a percentage of total electricity generated to 29%, compared to 41% under the First Basic National Energy Plan announced in 2008.

Additional Entry of Private Enterprises in the Coal-Fired Power Generation Business

In connection with the Sixth Basic Plan announced in February 2013, the Ministry of Trade, Industry and Energy accepted additional applications from independent power producers for construction of coal-fired power plants. The Fifth Basic Plan announced in December 2010 included for the first time a new electricity tariff system went intoplan for independent power producers to own and operate coal-fired power plants, namely two such generation units with aggregate capacity of 2,000 megawatts for completion in 2016. Prior to December 2010, private enterprises had not been permitted to own and operate coal-fired power plants in Korea. For the Sixth Basic Plan, 15 independent power producers applied for construction of a total of 40 additional coal-fired generation units with aggregate generation capacity of 37,100 megawatts, of which the Government approved applications for the construction of six generation units with aggregate generation capacity of 6,000 megawatts. The Government also approved applications from independent power producers for construction of two additional generation units with aggregate generation capacity of 2,000 megawatts to prepare for the contingency of failed or delayed construction of the foregoing generation units. Construction for the six generation units is scheduled to be completed between 2018 and 2021.

Coal Consumption Tax

On January 1, 2014, largely based on policy considerations of tax equity among different fuel types as well as environmental concerns, the Ministry of Strategy and Finance announced that, effective July 1, 2014, consumption tax will apply to bituminous coal, which previously was not subject to consumption tax unlike other fuel types such as LNG or bunker oil. The base tax rate (which is subject to certain adjustments) will be Won 24 per kilogram for bituminous coal; however, due to concerns on the potential adverse effect on July 1, 2011. This system is designedindustrial activities, the applicable tax rate will be Won 19 per kilogram for bituminous coal with net heat generation of 5,000 kilo calories or more per kilogram, and Won 17 per kilogram for bituminous coal with net heat generation of less than 5,000 kilo calories per kilogram. In contrast, the applicable tax rate for LNG will be reduced from Won 60 per kilogram to overhaulWon 42 per kilogram. Since bituminous coal currently represents the prior systemlargest fuel type for determining electricity tariff chargeable to customersgeneration, accounting for approximately 43.0% of our entire fuel requirements in 2013 in terms of electricity output, we expect the newly adopted consumption tax thereon will result in an increase of our overall fuel costs, notwithstanding the decrease in the consumption tax rate for LNG, which accounted for approximately 19.7% of our entire fuel requirements in 2013 in terms of electricity output. While we expect that such additional fuel costs will be covered by more closely aligning the tariff levels to the movements in fuel prices, with the aim of providing more timely pricing signals to the market regarding the expected changesa corresponding increase in electricity tariff, levels and encouraging more efficient use of electricity by customers. Previously,there is no assurance that the Government will in fact raise electricity tariff consistedto a level sufficient to fully cover such additional costs in a timely manner or at all, and if the Government does not do so, the increase in our overall fuel costs arising from the newly adopted coal consumption tax will adversely affect our results of two components: (i) base rateoperation and (ii) usage ratefinancial condition.

Recent Incidents Involving Certain of Our Nuclear Generation Units

In May 2013, the NSSC announced that it discovered certain control cables used in three of our then-operating nuclear generation units, Shin-Kori #1 and #2, Shin-Wolsung #1, and three units under construction, Shin-Kori #3 and #4 and Shin-Wolsung #2, had been supplied based on forged testing results. These parts were custom-made and have critical functions in the costcase of electricityemergency for activating certain safety signals. The forgery was made by a testing facility in charge of performance evaluation of the parts before delivery.

Upon such discovery, KHNP immediately began internal investigation of related certification documents and reported to the Prosecutor’s Office all testing facilities and suppliers suspected of forgery for further investigation. Currently, the NSSC, with the full cooperation of KHNP, is conducting a full scale investigation into the appropriateness of all testing results at all of our nuclear generation units. In addition, the Prosecutor’s Office has been conducting extensive investigation on all parties suspected of having been involved in the forgery and has brought several criminal and civil charges, including against several of KHNP’s former and current officers and employees. In addition, one of KHNP’s former CEOs and several former and current officers and employees of KHNP were arrested on separate bribery charges brought by the Prosecutor’s Office as part of a wider investigation into the nuclear power industry in general, and in June 2013, KHNP’s then CEO was dismissed by the Government for failure of oversight. KHNP has been fully cooperating with the authorities on these investigations and have promptly taken all appropriate disciplinary actions against KHNP’s employees allegedly involved in such incidents. KHNP has also immediately suspended all existing relationships with all of the entities alleged to have participated in any related illegal or improper activities. KHNP as an entity has not been subject to any criminal charges or sanctions. The investigations by the NSSC and the amount of electricity consumed byProsecutor’s Office are still ongoing.

Immediately following the end-users. Under the new tariff system, the electricity tariff will also have a third component of fuel cost-adjusted rate, which will be added to or subtracted from the sumdiscovery of the base rateforgery incident, Shin-Kori #1 and #2 and Shin-Wolsung #1 were shut down in May 2013 for further safety inspections. Shin-Kori #3 and #4 and Shin-Wolsung #2, where such parts were also used, currently remain under construction. Shin-Kori #1 and #2 and Shin-Wolsung #1 resumed operations in January 2014 following parts replacement and the usage rate based onNSSC approval. While we expect that the movementsconstruction of coal, LNG and oil prices. Thethe other units will proceed as originally planned, we cannot assure you that any or all of these units will complete construction as currently scheduled. As a result of the shutdown, we incurred additional operating expenses, including as a result of having had to purchase electricity generated from more expensive fuel cost-related adjustment will be made on a monthly basis based onsources while the three-month average fuel cost which is reflected as fuel-cost adjustment fees two months later.aforementioned nuclear plants were suspended from operation.

The new tariff system is intendedIn response to provide greater financial stability and ensure a minimum return on investment to electricity suppliers, such as us. However, due to inflationary and other policy considerations relating to protecting the consumers from sudden and substantial rises in electricity tariff,recent scandals, the Ministry of Knowledge EconomyTrade, Industry and Energy has announced a number of measures to enhance the integrity, transparency and overall quality of the procurement, testing and verification processes with respect to parts used at our nuclear generation units, including: (i) encouraging open hiring (including outside experts) to reduce the chances of collusion, (ii) establishing a Government-supervised independent testing verification agency for nuclear generation parts, (iii) requiring KHNP to obtain testing results directly from testing facilities instead of indirectly from suppliers as has been the existing practice, (iv) increasing criminal and civil penalties for wrongdoings related to quality certifications, and (v) enhancing transparency in KHNP’s procurement process. We are actively and promptly implementing these measures. In addition, KHNP has filed a lawsuit seeking compensation for damages against the supplier and testing facility that were responsible for the time being suspended applying the fuel cost-based adjustment,forgery.

These incidents have had a material adverse effect, and such adjustment amount (which has been a positive amount since the adoption of the new tariff system due to the continued rise in coal, LNG and oil prices) is currently being recorded as accounts receivable pending the commencement of the application of the fuel cost-based adjustment. There is no assurance as to when the Government will commence applying the fuel cost-based adjustment and reflect the adjustment amount in the electricity tariff payable to us, or whether the new tariff system will undergo further amendments to the effect that it will not fully cover our fuel and other costs on a timely basis or at all, or will not have unintended consequences that we are not presently aware of. Any such development may have a further material adverse effect, on our reputation, business, results of operation, financial condition as well as the general acceptance of nuclear power, especially if, as a result of these incidents or otherwise, there are findings of other criminal or other illegal or improper activities or if there are additional shutdowns that lead to greater social and political concerns over nuclear safety to the effect of impeding with our normal operation of nuclear generation units. See Item 3D. “Risk Factors—Recent findings of falsified testing results and bribery and the subsequent prolonged shutdowns of certain of our nuclear generation units may adversely hurt our reputation, business, results of operations and cash flows.financial condition.”

Transfer of Pumped Storage Hydro-electric UnitsCoal-Fired Power Plant Project in Vietnam

Effective January 2011, the pumped-storage hydro-electricity business of each of our five non-nuclear generation subsidiaries, comprising of 16 units with total installed capacity of 4,700 megawatts, were transferred to our nuclear and hydro-electric subsidiary KHNP for greater operational efficiency.

Overseas Activities

Pursuant to our strategy to diversify and facilitate procurement of fuel sources and expand our overseas activities in general, we and our generation subsidiaries have recently been involved in several acquisition, investment and other operating activities overseas. Our recent overseas activities include:

in September 2011, entering into a joint venture with Megha Engineering & Infrastructures Ltd. to improve the overall power distribution network in Madhya Pradesh, India through a feeder separation program, which includes improvements of transmission lines and installation of power meters in rural areas;

in October 2011,On March 19, 2013, a consortium consisting of our wholly-owned generation subsidiary, KOMIPO,us and POSCO Engineering beingMarubeni, a Japanese corporation, was selected by the CityMinistry of Boulder as the winning bidder in an auctionIndustry and Trade of Vietnam for the construction and operation of a solar1,200 megawatt coal-fired power plant in Nevada, United States;

in November 2011, participating in a joint venture with China Datang Group in the construction and operation of two additional wind-powered electricity generation facilities in Neimenggu and Chaoyang City in Liaoning, China with total generation capacity of approximately 93 megawatts;

Thanh Hoa province, Vietnam. Construction will begin in December 2011,2014 with target completion

by December 2018, after which we will operate the plant for 25 years. We have entered into ana power purchase agreement with Electricity of Vietnam (EVN). Total project cost is expected to acquire through our wholly-owned subsidiary, KOMIPO,be US$2.3 billion, of which 25% will be funded by capital contribution and the remaining 75% by debt financing. The share capital of the special purpose entity that will be in charge of this project will be US$ 575 million, and KEPCO and Marubeni will each hold a 29%50% equity interest in Navanakorn Electric Co.,such entity.

Electricity Storage System and Smart Grid Initiatives

We have recently been actively participating in the Government’s initiative for wider distribution and use of electricity storage systems (“ESS”). An ESS is a Thailand power company,facility that stores electricity generated during times of low demand and transmits such electricity during times of high demand. Since our generation units currently set aside part of their capacity for frequency adjustment, replacing such parts with ESSs is expected to jointly develop a combined-cycle power plant projectresult in Thailand;

in January 2012, winning a bidsignificant fuel cost savings and efficiency enhancement for the generation process. We plan to build, ownestablish and operate ESSs with total capacity of 50 megawatts in 2014 and gradually increase the capacity to 500 megawatts by 2017, which we believe will result in fuel cost savings of approximately Won 300 billion per year.

We are also involved in a 600-megawatts diesel engine powernumber of smart-grid related initiatives. For example, we are participating in the Government’s Smart Grid Expansion Business along with 47 other corporations and agencies. This initiative involves setting out a realistic business model for commercialization of smart grid technologies for general use and distribution. The consortium is currently working on the details of such model. In addition, after completing the experimentation stage at one of our office buildings, we plan to roll out “smart grid stations,” which include facilities that integrate renewable energy production, electricity storage, advanced metering and/or building automation, to our office buildings in 210 locations nationwide. We are also in the process of developing micro-grids, for which the experimentation stage was completed, as replacement for long-distance transmission grids. Furthermore, we are also upgrading our current facility in Almanakher, Jordan;

in February 2012, entering into an agreementmanagement programs and office software to acquire a 14% equity interest in Strathmore Minerals Corp. of Canada in relation to a uranium development project in Gas Hills, Wyoming, with an option to acquire up to a maximum of 40% equity interest in Gas Hills;comprehensively integrate smart grid and advanced metering operating systems.

in March 2012, entering into an agreement, through our wholly-owned generation subsidiary, KOWEPO, to acquire a 22.7% equity interest in Pioneer Gas Power of India to construct a 388-megawatt gas-powered power facility in Maharashtra, India.

For further details on these activities, see “—Overseas Activities.”

Government Ownership and Our Interactions with the Government

The KEPCO Act requires that the Government own at least 51.0%51% of our capital stock. Direct or indirect ownership of more than 50.0%50% of our outstanding common stock enables the Government to control the approval of certain corporate matters which require a shareholders’ resolution, including approval of dividends. The rights of the Government and Korea Finance Corporation as holders of our common stock are exercised by the Ministry of Knowledge EconomyTrade, Industry and Energy in consultation with the Ministry of Strategy and Finance. TheWe are currently not aware of any plans of the Government currently has no plan to cease to own, directly or indirectly, at least 51.0%51% of our outstanding common stock.

We play an important role in the implementation of the Government’s national energy policy, which is established in consultation with us, among other parties. As an entity formed to serve public policy goals of the Government, we seek to maintain a fair level of profitability and strengthen our capital base in order to support the growth of our business in the long term.

The Government, through its various policy initiatives for the Korean energy industry as well as direct and indirect supervision of us and our industry, plays an important role in our business and operations. Most importantly, the electricity tariff rates we charge to our customers are establishedregulated by the Government taking into account, among others, our needs to recover the costs of operations, make capital investments and providerecoup a fair return to our security holders,on capital invested by us, as well as the Government’s overall policy considerations, such as inflation. See Item 4B. “Business Overview—Sales and Customers—Electricity Rates.”

In addition, pursuant to the Basic Plan determined by the Government, we and our generation subsidiaries have made, and plan to make, substantial expenditures for the construction of generation plants and other facilities to meet increased demand for electric power. See Item 5B. “Liquidity and Capital Resources—Capital Requirements.”

Restructuring of the Electric Power Industry in Korea

On January 21, 1999, the Ministry of Knowledge EconomyTrade, Industry and Energy published the Restructuring Plan. The overall objectives of the Restructuring Plan consisted of: (i) introducing competition and thereby increasing efficiency in the Korean electric power industry, (ii) ensuring a long-term, inexpensive and stable electricity supply, and (iii) promoting consumer convenience through the expansion of consumer choice.

The following provides further details relating to the Restructuring Plan.

Phase I

During Phase I, which served as a preparatory stage for Phase II and lasted from the announcement of the Restructuring Plan in January 1999 until April 2001, we undertook steps to split our generation business units off into one wholly-owned nuclear generation subsidiary (namely, KHNP) and five non-nuclear wholly-owned

thermal generation subsidiaries (namely, KOSEP, KOMIPO, KOSEP, KOWEPO, KOSPO and EWP), each with its own management structure, assets and liabilities. These steps were completed upon the approval of the split-off at our shareholders’ meeting in April 2001.

The Government’s principal objectives in the split-off of the generation units into separate subsidiaries were to: (i) introduce competition and thereby increase efficiency in the electricity generation industry in Korea, and (ii) ensure a stable supply of electricity in Korea.

Following the implementation of Phase I, we retained, until the adoption of the Community Energy System in July 2004 as further discussed in “—Transmission and Distribution” below, ourhave substantial monopoly position with respect to the transmission and distribution of electricity in Korea.

While our ownership percentage of the non-nuclear and non-hydroelectricthermal generation subsidiaries will depend on the further adjustments to the Restructuring Plan to be adopted by the Government, we plan to retain 100.0%100% ownership of both KHNP and our transmission and distribution business.

Phase II

At the outset of Phase II in April 2001, the Government introduced a cost-based competitive bidding pool system under which we purchase power from our generation subsidiaries and other independent power producers for transmission and distribution to customers. For a further description of this system, see “—Purchase of Electricity—Cost-based Pool System” below.

In order to support the logistics of the cost-based pool system, the Government established the Korea Power Exchange in April 2001 pursuant to the Electricity Business Law. The primary function of the Korea Power Exchange is to deal with the sale of electricity and implement regulations governing the electricity market to allow for electricity distribution through a competitive bidding process. The Government also established the Korea Electricity Commission in April 2001 to regulate the Korean electric power industry and ensure fair competition among industry participants. To facilitate this goal, the Korea Power Exchange established the Electricity Market Rules relating to the operation of the bidding pool system. To amend the Electricity Market Rules, the Korea Power Exchange must have the proposed amendment reviewed by the Korea Electricity Commission and then obtain the approval of the Ministry of Knowledge Economy.Trade, Industry and Energy.

The Korea Electricity Commission’s main functions include implementation of standards and measures necessary for electricity market operation and review of matters relating to licensing participants in the Korean electric power industry. The Korea Electricity Commission also acts as an arbitrator in tariff-related disputes among participants in the Korean electric power industry and investigates illegal or deceptive activities of the industry participants.

Privatization of Non-nuclearThermal Generation Subsidiaries

In April 2002, the Ministry of Knowledge EconomyTrade, Industry and Energy released the basic privatization plan for five of our generation subsidiaries other than KHNP. Pursuant to this plan, we commenced the process of selling our equity interest in KOSEP in 2002. According to the original plan, this process was, in principle, to take the form of a sale of management control, potentially supplemented by an initial public offering as a way of broadening the investor base. In November 2003, KOSEP submitted its application to the Korea Exchange for a preliminary screening review, which was approved in December 2003. However, in June 2004, KOSEP made a request to the Korea Exchange to delay its stock listing due to unfavorable stock market conditions at that time. We may resume the stock listing process for KOSEP in due course, after taking into consideration the overall stock market conditions and other pertinent matters. The aggregate foreign ownership of our generation subsidiaries is limited to 30.0%30% of total power generation capacity in Korea. In consultation with us, the Government will determine the size of the ownership interest to be sold and the timing of such sale, with a view to encouraging competition and assuring adequate electricity supply and debt service capability.

We believe the Government currently has no specific plans to resume the public offering of KOSEP or commence the same for any of our other generation subsidiaries in the near future. However, we cannot assure that our generation subsidiaries will not become part of Government-led privatization initiatives in the future for reasons relating to a change in Government policy, economic and market conditions and/or other factors.

Suspension of the Plan to Form and Privatize Distribution Subsidiaries

In 2003, the Government established a Tripartite Commission consisting of representatives of the Government, leading businesses and labor unions in Korea to deliberate on ways to introduce competition in electricity distribution, such as by forming and privatizing new distribution subsidiaries. In 2004, the Tripartite Commission recommended not pursuing such privatization initiatives but instead creating independent business divisions within us to improve operational efficiency through internal competition. Following the adoption of such recommendation by the Government in 2004 and further studies by Korea Development Institute, in 2006 we created nine “strategic business units” (which, together with our other business units, were subsequently restructured into 14 such units in February 2012) that camehave a greater degree of autonomy with respect to have separate management, structures (although with limits on its autonomy), financial accounting systems and performance evaluation systems, but withwhile having a common focus on maximizingincreasing profitability.

Initiatives to Improve the Structure of Electricity Generation

In 2009, the Government commissioned Korea Development Institute to undertake a study addressing concerns regarding inefficiencies in the cost structure of electricity generation, including by potentially consolidating one or more of our generation subsidiaries or merging them with us. On August 25, 2010, based on this study and deliberations with various interested parties, the Ministry of Knowledge EconomyTrade, Industry and Energy announced the Proposal for the Improvement in the Structure of the Electric Power Industry, whose key initiatives include the following: (i) maintain the current structure of having six generation subsidiaries, (ii) designate the six generation subsidiaries as “market-oriented public enterprises” under the Public Agency Management Act in order to foster competition among them and autonomous and responsible management by them, (iii) create a supervisory unit to act as a “control tower” in reducing inefficiencies created by arbitrary division of labor among the six generation subsidiaries and fostering economies of scale among them and require the presidents of the generation subsidiaries to hold regular meetings, (iv) create a nuclear power export business unit to systematically enhance our capabilities to win projects involving the construction and operation of nuclear power plants overseas, (v) further rationalize the electricity tariff by adopting a fuel-cost based tariff system in 2011 and a voltage-based tariff system in a subsequent year, and (vi) create separate accounting systems for electricity generation, transmission, distribution and sales with the aim of introducing competition in electricity sales in the intermediate future.

Pursuant to this Proposal, in December 2010 the Ministry of Knowledge EconomyTrade, Industry and Energy announced guidelines for a cooperative framework between us and our generation subsidiaries, and in January 2011 the five non-nuclearthermal generation subsidiaries formed a “joint cooperation unit” and transferred their pumped-storage hydroelectric

business units to KHNP. Furthermore, in January 2011 the six generation subsidiaries were officially designated as “market-oriented public enterprises,” whereupon the President of Korea appoints the president and the statutory auditor of each such subsidiary; the selection of outside directors of each such subsidiary is subject to approval by the minister of the Ministry of Strategy and Finance; the president of each such subsidiary is required to enter into a management contract directly with the minister of the Ministry of Knowledge Economy, performance evaluation of such subsidiaries is conducted byTrade, Industry and Energy; and the Public Enterprise Management Evaluation Commission andconducts performance evaluation of such subsidiaries. Previously, our president appointed the president and the statutory auditor of each such subsidiary are appointed by the President of Korea whilesubsidiary; the selection of outside directors isof each such subsidiary was subject to approval by the minister of the Ministry of Strategy and Finance. Previously,our president; the president of each such subsidiary entered into a management contract with our president,president; and our evaluation committee conducted performance evaluation of such subsidiaries was conducted by our evaluation committee, and the president and the statutory auditor of each such subsidiary were appointed by, and the selection of outside directors was subject to approval by, our president.

subsidiaries.

Purchase of Electricity

Cost-based Pool System

Since April 2001, the purchase and sale of electricity in Korea is required to be made through the Korea Power Exchange, which is a statutory not-for-profit organization established under the Electricity Business Act with responsibilities for setting the price of electricity, handling the trading and collecting relevant data for the electricity market in Korea. The suppliers of electricity in Korea consist of our six generation subsidiaries, which were spun off from us in April 2001, and independent power producers, which numbered 411 10 (excluding renewable energy producers)as of December 31, 2011.2013. We distribute electricity purchased through the Korea Power Exchange to the end users.

Our Relationship with the Korea Power Exchange

We have certainThe key features of our relationships with the Korea Power Exchange as follows:include the following: (i) we and our six generation subsidiaries are member corporations of the Korea Power Exchange and collectively own 100.0%100% of its share capital, (ii) three of the 10 members of the board of directors of the Korea Power Exchange are currently our or our subsidiaries’ employees, and (iii) one of our employees is currently a member in three of the key committees of the Korea Power Exchange that are responsible for evaluating the costs of producing electricity, making rules for the Korea Power Exchange and gathering and disclosing information relating to the Korean electricity market.

Notwithstanding the foregoing relationships, however, we do not have control over the Korea Power Exchange or its policies since, among others, (i) the Korea Power Exchange, its personnel, policies, operations and finances are closely supervised and controlled by the Government, namely through the Ministry of Knowledge Economy,Trade, Industry and Energy, and are subject to a host of laws and regulations, including, among others, the Electricity Business Act and the Public Agencies Management Act, as well as the Articles of Incorporation of the Korea Power Exchange, (ii) we are entitled to elect no more than one-third of the Korea Power Exchange directors and our representatives represent only a minority of its board of directors and committees (with the other members being comprised of representatives of the Ministry of Knowledge Economy,Trade, Industry and Energy, employees of the Korea Power Exchange, businesspersons and/or scholars), and (iii) the role of our representatives in the policy making process for the Korea Power Exchange is primarily advisory based on their technical expertise derived from their employment at us or our generation subsidiaries. Consistent with this view, the Finance Supervisory Service issued a ruling on April 12,in 2005 that stated that we are not deemed to have significant influence or control over the decision-making process of the Korea Power Exchange relating to its business or financial affairs.

Pricing Factors

The price of electricity in the Korean electricity market is determined principally based on the cost of generating electricity using a system known as the “cost-based pool” system. Under the cost-based pool system, the price of electricity has two principal components, namely the marginal price (representing in principle the variable cost of generating electricity) and the capacity price (representing in principle the fixed cost of generating electricity).

Under the merit order system, the electricity purchase allocation, the system marginal price (as described below) and the final allocation adjustment are automatically determined based on an objective formula. The variable cost (including the adjusted coefficient as described below) and the capacity price are determined in advance of trading by the Cost Evaluation Committee. Accordingly, a supplier of electricity cannot exercise control over the merit order system or its operations to such supplier’s strategic advantage.

Marginal Price

The primary purpose of the marginal price is to compensate the generation companies for fuel costs, which represents the principal component of the variable costs of generating electricity. The concept ofWe currently refer such marginal price under the cost-based pool system has undergone several changes in recent years in large part due to the sharp fluctuations in fuel prices. For example, prior to December 31, 2006, the marginal price operated on a two-tiered structure, namely, a “base load” marginal price applicable to electricity generated from nuclear fuels and coals, which tend to be less expensive per unit of electricity than electricity generated from liquefied natural gas, oil and hydroelectric power to which a “non-base load” marginal price applied. The base load marginal price and the non-base load marginal price were generally set at levels so that electricity generated from cheaper fuels could be utilized first while ensuring a relatively fair rate of return to all generation units. However, when the price of coal

rose sharply beginning in the second half of 2006, the pre-existing base load marginal price was abolished and a market cap by the name of “regulated market price” was introduced in its stead for electricity generated from base load fuels, with the regulated market price being set at a level higher than the pre-existing base load marginal price in order to compensate the generation subsidiaries for the rapid rise in the price of coal. However, when the price of coal continued to rise sharply above the level originally assumed in setting the regulated market price, this had the effect of undercutting our profit margin as the purchaser of electricity from our generation subsidiaries, although the generation subsidiaries were able to maintain a better margin under the regulated market price regime than under the pre-existing base load marginal price regime. Accordingly, on May 1, 2008, the regulated market price regime was abolished, and the current system of “system marginal price” was introduced in order to set the marginal price in a more flexible way by using the concept of an “adjusted coefficient” tailored to each fuel type.

Under the system marginal price regime currently in effect, the marginal price of electricity at which our generation subsidiaries sell electricity to us is determined using the following formula:

Variable cost + [System marginal price – Variable cost] * Adjusted coefficientprice.”

The system marginal price represents, in effect, the marginal price of electricity at a given hour at which the projected demand for electricity and the projected supply of electricity for such hour intersect, as determined by the merit order system, which is a system used by the Korea Power Exchange to allocate which generation units will supply electricity for which hour and at what price. To elaborate, the projected demand for electricity for a given hour is determined by the Korea Power Exchange based on a forecast made one day prior to trading, and such forecast takes into account, among others, historical statistics relating to demand for electricity nationwide by day and by hour, after taking into account, among others, seasonality and peak-houron-peak-hour versus non-peakoff-peak hour demand analysis. The projected supply of electricity at a given hour is determined as the aggregate of the available capacity of all generation units that have submitted bids to supply electricity for such hour. These bids are submitted to the Korea Power Exchange one day prior to trading.

Under the merit order system, the generation unit with the lowest variable cost of producing electricity among all the generation units that have submitted a bid for a given hour is first awarded a purchase order for electricity up to the available capacity of such unit as indicated in its bid. The generation unit with the next lowest variable cost is then awarded a purchase order up to its available capacity in its bid, and so forth, until the projected demand for electricity for such hour is met. We refer to the variable cost of the generation unit that is the last to receive the purchase order for such hour as the system marginal price, which also represents the most expensivehighest price at which electricity can be supplied at a given hour based on the demand and supply for such hour. Generation units whose variable costs exceed the system marginal price for a given hour do not receive purchase orders to supply electricity for such hour. The variable cost of each generation unit is determined by the Cost Evaluation Committee (comprised of representatives from the Ministry of Trade, Industry and Energy, the Korea Power Exchange, generation companies, scholars and researchers as well as us) on a monthly basis and reflected in the following month based on the fuel costs as of two months prior to such determination. The purpose of the merit order system is to encourage generation units to reduce its electricity generation costs by making its generation process more efficient, sourcing fuels from most cost-effective sources or adopting other cost savings programs.

The final allocation of electricity supply however, is further adjusted on the basis of other factors, including the proximity of a generation unit to the geographical area to which power is being supplied, network and fuel constraints and the amount of power loss.

The purpose of the merit order system is to encourage generating units to reduce its electricity generation costs by making its generation process more efficient, sourcing fuels from most cost-effective sources or adopting other cost savings programs. The additional This adjustment mechanism is designed to adjust for transmission losses in order to improve the overall cost-efficiency in the distribution and transmission of electricity to end-users.

The price of electricity at which our generation subsidiaries sell electricity to us is determined using the end-users by adjusting for losses arising from the distribution and transmission process.following formula:

Under the merit order system, the electricity purchase allocation, the systemVariable cost + [System marginal price and the final allocation adjustment are automatically– Variable cost] * Adjusted coefficient

The adjusted coefficient is determined based on an objective formula.considerations of, among others, electricity tariff rates, the differential generation costs for different fuel types and the relative fair returns on investment in respect of us compared to our generation subsidiaries. The purpose of the adjusted coefficient is to prevent electricity trading from resulting in undue imbalances as to the capacity price and the variable costs are determined in advance of trading by the Cost Evaluation Committee. Accordingly, a supplier of electricity cannot exercise control over the merit order system or its operations to such supplier’s strategic advantage.relative financial results among generation subsidiaries as well as

between us (as the purchaser of electricity) and our generation subsidiaries (as sellers of electricity). Such imbalances may arise from excessive profit taking by base load generators (on account of their inherently cheaper fuel cost structure compared to non-base load generators) as well as from fluctuations in fuel prices (it being the case that during times of rapid and substantial rises in fuel costs which are not offset by corresponding rises in electricity tariff rates charged by us to end-users, on a non-consolidated basis our profitability will decline compared to that our generation subsidiaries since our generation subsidiaries are entitled to sell electricity to us at cost plus a guaranteed margin).

The adjusted coefficient applies uniformlyin principle to all generation units that use the same type of fuel, and is generally higherexcept for generation unitsindependent power producers that use LNG or oil as fuel. Independent power producers that use coal as fuel will be entitled to the adjusted coefficient upon commencement of commercial operation beginning from 2016. The adjusted coefficient is currently set at the highest level for the marginal price of electricity generated using nuclear fuel, followed by coal, oil and LNG. The differentiated adjusted coefficients reflect the Government’s current energy policy objectives and have the effect of setting priorities in the fuel types that inherently entail higher construction and maintenance costs, such as nuclear plants.to be used in electricity generation. The adjusted coefficient is determined by the Cost Evaluation Committee in principle on an annual basis, although in exceptional cases driven by external factors such as material developments in fuel costs and electricity tariff rates, the adjusted coefficient may be adjusted on a quarterly basis.

Capacity Price

In addition to payment in respect of the variable cost of generating electricity, our generation subsidiariesunits receive payment in the form of capacity price, the purpose of which is to compensate them for the costs of constructing generation facilities and to provide incentives for new construction. The capacity price is determined annually by the Cost Evaluation Committee based on the construction costs and maintenance costs of a standard generation unit and is paid to each generation company for the amount of available capacity indicated in the bids submitted the day before trading, subject to such capacity being actually available on the relevant day of trading. From time to time, the capacity price is adjusted in ways to soften the impact of changes in the marginal price over time based on the expected rate of return for our generational subsidiaries. Currently, the capacity price is Won 7.46/kWhkW-h and since January 1, 2012 hasis applied equally to all generation units, regardless of fuel types used.

Effective as of January 1, 2007, a regionally differentiated capacity price system was introduced by setting a standard capacity reserve margin in the range of 12.0% to 20.0% in order to prevent excessive capacity build-up as well as induce optimal capacity investment at the regional level. The capacity reserve margin is the ratio of peak demand to the total available capacity. Under this system, generation units in a region where available capacity is insufficient to meet demand for electricity as evidenced by a failure to meet the standard capacity reserve margin receive increased capacity price. Conversely, generation units in a region where available capacity exceeds demand for electricity as evidenced by satisfaction ofexceeding the standard capacity reserve margin receive reduced capacity price. Other than the foregoing region-based variations,Since 2006, the capacity price generallyreceived by generation units has been subject to hourly and seasonal adjustments in order to incentivize our generation subsidiaries to operate their generation facilities at full capacity during periods of highest demand. For example, the capacity price paid differs depending on whether the relevant hour is a “on-peak” hour, a “mid-peak” hour or an “off-peak” hour (it being highest for the on-peak hours and lowest for the off-peak hours) and the capacity price paid is highest during the months of January, July and August when electricity usage is highest due to weather conditions. Other than subject to the aforementioned variations, the same capacity pricing mechanism applies uniformly to all generation units regardless of fuel types used.

Following the suspension of the plan to form separate distribution subsidiaries through privatization (see “— Restructuring of the Electric Power Industry in Korea—Suspension of the Plan to Form and Privatize Distribution Subsidiaries”), there was a discussion of replacing the current cost-based pool system with a more market-oriented system known as a two-way bidding pool system. Under the two-way bidding pool system, a pool of generating companies on the supply side and a pool of retail distributors on the demand side would each make a bid based on which the electricity price will be determined, which would contrast with the current system where we have a virtual monopoly of the demand side as the purchaser and distributor of substantially all of electricity in Korea. However, we believe that due to the indefinite suspension of the restructuring plan, the two-way bidding pool system is unlikely to be adopted in the near future absent any unexpected change in government policy.

Power Trading Results

The results of power trading, as effected through the Korea Power Exchange, for our generation subsidiaries for the year ended December 31, 20112013 are as follows:

 

  

Items

  Volume
(Gigawatt
hours)
   Percentage
of Total
Volume
(%)
   Sales to
KEPCO
(in billions
of Won)
   Percentage
of

Total Sales
(%)
   Unit Price
(Won/kWh)
   

Items

  Volume
(Gigawatt
hours)
   Percentage
of Total
Volume
(%)
   Sales to
KEPCO
(in billions
of Won)
   Percentage
of
Total Sales
(%)
   Unit Price
(Won/kWh)
 

Generation Companies

  KHNP   152,343     33.0     6,556     17.8     43.0    KHNP   137,948     28.8     6,289     14.9     45.59  
  

KOSEP

   58,002     12.6     4,311     11.7     74.3    

KOSEP

   59,211     12.3     4,040     9.5     68.23  
  

KOMIPO

   51,322     11.1     4,996     13.6     97.4    

KOMIPO

   55,631     11.6     5,659     13.4     101.72  
  

KOWEPO

   52,870     11.4     5,188     14.1     98.1    

KOWEPO

   55,954     11.7     5,755     13.6     102.86  
  

KOSPO

   58,049     12.6     5,899     16.0     101.6    

KOSPO

   65,685     13.7     7,136     16.9     108.64  
  

EWP

   51,088     11.0     4,699     12.8     92.0    

EWP

   54,069     11.3     5,301     12.5     98.04  
  

Others(1)

   38,386     8.3     5,172     14.0     134.8    

Others(1)

   50,788     10.6     8,109     19.2     159.67  
    

 

   

 

   

 

   

 

   

 

     

 

   

 

   

 

   

 

   

 

 
  

Total

   462,060     100.0     36,821     100.0     79.7    

Total

   479,287     100.0     42,288     100.0     88.23  
    

 

   

 

   

 

   

 

   

 

     

 

   

 

   

 

   

 

   

 

 

Energy Sources

  Nuclear   147,667     31.9     5,789     15.7     39.2    Nuclear   132,396     27.6     5,179     12.2     39.12  
  

Bituminous coal

   185,658     40.2     12,480     33.9     67.2    

Bituminous coal

   186,886     39.0     10,972     26.1     58.71  
  

Anthracite coal

   7,772     1.7     767     2.1     98.6    

Anthracite coal

   7,367     1.5     676     1.6     91.73  
  

Oil

   9,563     2.1     2,160     5.9     225.9    

Oil

   14,750     3.1     3,271     7.8     221.78  
  

LNG

   2,477     0.5     463     1.2     187.0    

LNG

   4,462     0.9     1,040     2.5     215.31  
  

Combined-cycle

   93,483     20.2     13,205     35.9     141.3    

Combined-cycle

   115,420     24.1     18,238     43.4     158.52  
  

Hydro

   4,119     0.9     561     1.5     136.2    

Hydro

   3,558     0.7     608     1.4     170.92  
  

Pumped-storage

   3,212     0.7     567     1.5     176.4    

Pumped-storage

   4,086     0.9     835     2.0     204.42  
  

Others

   8,109     1.8     829     2.3     102.2    

Others

   10,361     2.2     1,469     3.0     120.62  
    

 

   

 

   

 

   

 

   

 

     

 

   

 

   

 

   

 

   

 

 
  

Total

   462,060     100.0     36,821     100.0     79.7    

Total

   479,287     100.0     42,288     100.0     88.23  
    

 

   

 

   

 

   

 

   

 

     

 

   

 

   

 

   

 

   

 

 

Load

  Base load   337,768     73.1     18,618     50.6     55.1    Base load   323,099     67.4     16,442     38.9     50.89  
  

Non-base load

   124,292     26.9     18,203     49.4     146.5    

Non-base load

   156,188     32.6     25,846     61.1     165.48  
    

 

   

 

   

 

   

 

   

 

     

 

   

 

   

 

   

 

   

 

 
  

Total

   462,060     100.0     36,821     100.0     79.7    

Total

   479,287     100.0     42,288     100.0     88.23  
    

 

   

 

   

 

   

 

   

 

     

 

   

 

   

 

   

 

   

 

 

 

Note:

 

(1)Others represent independent power producers that trade electricity through the cost-based pool system of power trading.trading (excluding independent power producers that supply electricity under power purchase agreements with us).

Power Purchased from Independent Power Producers Under Power Purchase Agreements

In 2011,2013, we purchased an aggregate of 14,63816,892 gigawatt hours of electricity generated by independent power producers under existing power purchase agreements. These purchases were made outside of the cost-based pool system of power trading. These independent power producers had an aggregate generatinggeneration capacity of 3,9414,268 megawatts as of December 31, 2011.2013.

Power Generation

As of December 31, 2011,2013, we and our generation subsidiaries had a total of 503598 generation units, including nuclear, thermal, hydroelectric and internal combustion units, representing total installed generatinggeneration capacity of 67,00570,845 megawatts. Our thermal units produce electricity using steam turbine generators fired by coal, oil and oil. InternalLNG. Our internal combustion units areuse oil or diesel-fired gas turbineturbines and combined-cycle units. Combined-cycle units consist of either LNG-firedour combined-cycle units or oil-fired combined-cycle units.are primarily LNG-fired. We also purchase power from several generation plants not owned by our generation subsidiaries.

The table below sets forth as of and for the year ended December 31, 20112013 the number of units, installed capacity and the average capacity factor for each type of generating facilities owned by our generation subsidiaries.

 

  Number
of Units
   Installed
Capacity(1)
   Average  Capacity
Factor(2)
   Number
of Units
   Installed
Capacity(1)
   Average  Capacity
Factor(2)
 
      (Megawatts)   (Percent)       (Megawatts)   (Percent) 

Nuclear

   21     18,716     90.7     23     20,716     75.5  

Thermal:

            

Coal

   51     24,205     92.7     51     24,534     93.6  

Oil

   19     4,478     23.7     16     3,950     40.3  

LNG

   4     888     29.6     4     888     45.4  
  

 

   

 

   

 

   

 

   

 

   

 

 

Total thermal

   74     29,571     80.4     71     29,372     85.0  
  

 

   

 

   

 

   

 

   

 

   

 

 

Internal combustion

   172     356     39.9     208     330     23.8  

Combined-cycle

   97     12,936     66.4     107     14,886     63.5  

Hydro

   67     5,329     13.6     71     5,334     12.2  

Wind

   31     67     34.7     40     94     17.1  

Solar

   37     24     15.4     70     70     13.6  

Fuel cell

   4     6     58.6     7     14     66.1  

Biogas

   1     30     45.0  
  

 

   

 

   

 

   

 

   

 

   

 

 

Total

   503     67,005     76.5     598     70,845     71.0  
  

 

   

 

   

 

   

 

   

 

   

 

 

 

Notes:

 

(1)Installed capacity represents the level of output that may be sustained continuously without significant risk of damage to plant and equipment.
(2)Average capacity factor represents the total number of kilowatt hours of electricity generated in the indicated period divided by the total number of kilowatt hours that would have been generated if the generation units were continuously operated at installed capacity, expressed as a percentage.

The expected useful life of a unit, assuming no substantial renovation, is approximately as follows: nuclear, over 40 years; thermal, over 30 years; internal combustion, over 25 years; and hydroelectric, over 55 years. Substantial renovation can extend the useful life of thermal units by up to 20 years.

We seek to achieve efficient use of fuels and diversification of generatinggeneration capacity by fuel type. In the past, we relied principally upon oil-fired thermal generation units for electricity generation. Since the oil shock in 1974, however, Korea’s power development plans have emphasized the construction of nuclear generation units. While nuclear units are more expensive to construct than non-nuclearthermal generation units of comparable capacity, nuclear fuel is less expensive than fossil fuels in terms of electricity output per unit cost. However, efficient operation of nuclear units requires that such plants be run continuously at relatively constant energy output levels. As it is impractical to store large quantities of electrical energy, we seek to maintain nuclear power production capacity at approximately the level at which demand for electricity is continuously stable. During those times when actual demand exceeds the usual level of continuous demand,electricity supply from nuclear power, we rely on units fired by fossil fuels and hydroelectric units, which can be started and shut down more quickly and efficiently than nuclear units, to meet the excess demand. Bituminous coal is currently the least expensive thermal fuel per kilowatt-hour of electricity produced, and therefore we seek to maximize the use of bituminous coal for generation needs in excess of the stable demand level, except for meeting short-term surges in demand which require rapid start-up and shutdown. Thermal units fired by LNG, hydroelectric units and internal combustion units are the most efficient types of units for rapid start-ups and shutdowns, and therefore we use such units principally to meet short-term surges in demand. Anthracite coal is a less efficient fuel source than bituminous coal in terms of electricity output per unit cost.

Our generation subsidiaries have constructed and recommissioned thermal and internal combustion units in order to help meet power demand. Subject to market conditions, our generation subsidiaries plan to continue to add additional thermal and internal combustion units. These units generally take less time to complete construction than nuclear units.

The high average age of our oil-fired thermal units is attributable to our reliance on oil-fired thermal units as the primary means of electricity generation until mid-1970s. Since then, we have diversified our fuel sources and constructed relatively few oil-fired thermal units compared to units of other fuel types.

The table below sets forth, for the periods indicated, the amount of electricity generated by facilities linked to our grid system and the amount of power used or lost in connection with transmission and distribution.

 

  2007   2008   2009   2010   2011   % of 2011
Gross
Generation(1)
   2009   2010   2011   2012   2013   % of 2013
Gross
Generation(1)
 
  (in gigawatt hours, except percentages)   (in gigawatt hours, except percentages) 

Electricity generated by generation subsidiaries:

            

Electricity generated by us and our generation subsidiaries:

            

Nuclear

   142,937     150,958     147,771     148,596     154,723     31.1     147,771     148,596     154,723     150,327     138,784     26.8  

Thermal:

            

Coal

   155,684     174,156     193,803     198,287     199,516     40.2     193,803     198,287     199,516     199,329     201,119     38.8  

Oil

   15,703     7,981     11,970     10,874     9,501     1.9     11,970     10,874     9,456     13,553     13,941     2.7  

LNG

   2,028     1,518     762     2,288     2,233     0.4     762     2,288     2,233     3,453     2,950     0.6  
  

 

   

 

   

 

   

 

   

 

   

 

 

Total thermal

   173,415     183,655     206,535     211,449     211,205     42.5  
  

 

   

 

   

 

   

 

   

 

   

 

 

Internal combustion

   579     503     697     731     821     0.2     697     731     821     752     741     0.1  

Combined-cycle

   60,465     55,909     47,580     70,081     71,624     14.4     47,580     70,081     71,668     75,751     85,703     16.6  

Hydro

   2,779     3,836     4,091     4,393     4,815     1.0     4,091     4,393     4,815     5,140     5,679     1.1  

Wind

   21     53     82     91     117     0.0     82     91     117     127     155     0.03  

Solar and fuel cells

   5     15     24     44     60     0.0     24     44     60     83     251     0.05  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total generation

   380,201     394,929     406,780     435,384     443,409     89.2  

Total generation by us and our generation subsidiaries

   406,780     435,384     443,409     448,516     449,323     86.8  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Electricity purchased from others:

            

Electricity generated by IPPs:

            

Thermal

   20,660     25,699     25,274     37,197     50,468     10.2     25,274     37,197     42,240     48,043     54,242     10.5  

Hydro

   2,263     1,727     1,550     2,079     3,016     0.6  

Hydro and other renewable

   1,550     2,079     11,244     13,015     14,149     2.7  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total purchased

   22,923     27,426     26,824     39,276     53,484     10.8  

Total generation by IPPs

   26,824     39,276     53,484     61,058     68,391     13.2  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Gross generation

   403,124     422,355     433,604     474,660     496,893     100.0     433,604     474,660     496,893     509,574     517,714     100  

Auxiliary use(2)

   16,613     17,374     18,258     19,564     19,986     4.0     18,258     19,372     19,689     20,154     21,303     4.1  

Pumped-storage(3)

   1,817     3,243     3,713     3,663     4,257     0.9     3,713     3,663     4,257     4,789     5,408     1.0  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total net generation(4)

   384,694     401,726     411,631     451,433     472,650     95.1     411,631     451,625     472,947     484,631     491,003     94.8  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Transmission and distribution losses(5)

   15,345     16,106     16,770     18,034     17,430     —       16,770     18,034     17,430     17,292     18,311     3.73  

 

IPPs = Independent power producers

Notes:

 

(1)Unless otherwise indicated, percentages are based on gross generation.
(2)Auxiliary use represents electricity consumed by generation units in the course of generation.
(3)Pumped-storage represents electricity consumed during low demand periods in order to store water which is utilized to generate hydroelectric power during peak demand periods.
(4)Total net generation is gross generation minus auxiliary and pumped-storage use.
(5)Our transmission and distribution loss in 2011, calculated as the ratio of totalTotal transmission and distribution losses todivided by total net generation, was 3.7%.generation.

The table below sets forth our total capacity at the end of, and peak and average loads during, the indicated periods.

 

   2007   2008   2009   2010   2011��
   (Megawatts) 

Total capacity

   68,268     72,491     73,470     76,078     76,649  

Peak load

   62,285     62,794     66,797     71,308     73,137  

Average load

   46,019     48,082     49,498     54,185     56,619  

   2009   2010   2011   2012   2013 
   (Megawatts) 

Total capacity

   73,470     76,078     76,649     81,806     82,296  

Peak load

   66,797     71,308     73,137     75,987     76,522  

Average load

   49,498     54,185     56,723     58,012     58,615  

Korea Hydro & Nuclear Power Co., Ltd.

We commenced nuclear power generation activities in 1978 when our first nuclear generation unit, Kori-1, began commercial operation. On April 2, 2001, we transferred all of our nuclear and hydroelectric power generation assets and liabilities of our thermal generation subsidiaries were transferred to KHNP.

KHNP owns and operates 2123 nuclear generation units at four power plant complexes in Korea, located in Kori, Wolsong, Yonggwang (Hanbit) and Ulchin 51(Hanul), 50 hydroelectric generation units including 16 pumped storage hydro generation units as well as twofive solar generation units and one wind generation unit as of December 31, 2011.2013.

The table below sets forth the number of units and installed capacity as of December 31, 20112013 and the average capacity factor by types of generation units in 2011.2013.

 

  Number of Units   Installed  Capacity(1)   Average  Capacity
Factor(2)
   Number of Units   Installed  Capacity(1)   Average  Capacity
Factor(2)
 
      (Megawatts)   (Percent)       (Megawatts)   (Percent) 

Nuclear

   21     18,716     90.7     23     20,716     75.5  

Hydroelectric

   51     5,303     11.5     50     5,307     12.0  

Solar

   5     16     15.3  

Wind

   1     0.8     7.9     1     0.8     7.1  

Solar

   2     3     13.2  
  

 

   

 

   

 

   

 

   

 

   

Total

   75     24,022     —       79     26,040    
  

 

   

 

   

 

   

 

   

 

   

 

Notes:Notes:

 

(1)Installed capacity represents the level of output that may be sustained continuously without significant risk of damage to plant and equipment.
(2)Average capacity factor represents the total number of kilowatt hours of electricity generated in the indicated period divided by the total number of kilowatt hours that would have been generated if the generation units were continuously operated at installed capacity, expressed as a percentage.

The Shin-Kori-1,Shin-Kori-2 and Shin-Wolsong-1, each with a 1,000 megawatt capacity, commenced commercial operation on February 28, 2011.in July 2012. We are currently building sevenfive additional nuclear generation units, consisting of three units eachone unit with a 1,000 megawatt capacity and four units each with a 1,400 megawatt capacity at the Shin-Kori Shin-Wolsong and Shin-UlchinShin-Hanul sites, respectively. We expect to complete these units between 20122014 and 2018. In addition, we plan to build four additional nuclear units, each with a 1,400 megawatt capacity, and two additional nuclear units, each with a 1,500 megawatt capacity at the Shin-Kori and Shin-UlchinShin-Hanul sites between 20182019 and 2021.2024.

Nuclear

The table below sets forth certain information with respect to the nuclear generation units of KHNP as of December 31, 2011.2013.

 

Unit

  Reactor
Type(1)
  

Reactor Design(2)

  

Turbine and

Generation(3)

  Commencement
of Operations
   Installed
Capacity
 
   (Megawatts)              

Kori-1

  PWR  W  GEC, Hitachi, D   1978     587  

Kori-2

  PWR  W  GEC   1983     650  

Kori-3

  PWR  W  GEC, Hitachi   1985     950  

Kori-4

  PWR  W  GEC, Hitachi   1986     950  

Shin-Kori-1

  PWR  D, KOPEC, W  D, GE   2011     1,000  

Wolsong-1

  PHWR  AECL  P   1983     679  

Wolsong-2

  PHWR  AECL, H, K  H, GE   1997     700  

Wolsong-3

  PHWR  AECL, H  H, GE   1998     700  

Wolsong-4

  PHWR  AECL, H  H, GE   1999     700  

Yonggwang-1

  PWR  W  W, D   1986     950  

Yonggwang-2

  PWR  W  W, D   1987     950  

Yonggwang-3

  PWR  H, CE, K  H, GE   1995     1,000  

Yonggwang-4

  PWR  H, CE, K  H, GE   1996     1,000  

Yonggwang-5

  PWR  D, CE, W, KOPEC  D, GE   2002     1,000  

Yonggwang-6

  PWR  D, CE, W, KOPEC  D, GE   2002     1,000  

Ulchin-1

  PWR  F  A   1988     950  

Ulchin-2

  PWR  F  A   1989     950  

Ulchin-3

  PWR  H, CE, K  H, GE   1998     1,000  

Ulchin-4

  PWR  H, CE, K  H, GE   1999     1,000  

Ulchin-5

  PWR  D, KOPEC, W  D, GE   2004     1,000  

Ulchin-6

  PWR  D, KOPEC, W  D, GE   2005     1,000  
          

 

 

 

Total nuclear

           18,716  
          

 

 

 

Unit

  Reactor
Type(1)
  

Reactor Design(2)

  

Turbine and

Generation(3)

  Commencement
of Operations
   Installed
Capacity
 
   (Megawatts)              

Kori-1

  PWR  W  GEC, Hitachi, D   1978     587  

Kori-2

  PWR  W  GEC   1983     650  

Kori-3

  PWR  W  GEC, Hitachi   1985     950  

Kori-4

  PWR  W  GEC, Hitachi   1986     950  

Shin-Kori-1

  PWR  D, KOPEC, W  D, GE   2011     1,000  

Shin-Kori-2

  PWR  D, KOPEC, W  D, GE   2012     1,000  

Wolsong-1

  PHWR  AECL  P   1983     679  

Wolsong-2

  PHWR  AECL, H, K  H, GE   1997     700  

Wolsong-3

  PHWR  AECL, H  H, GE   1998     700  

Wolsong-4

  PHWR  AECL, H  H, GE   1999     700  

Shin-Wolsong-1

  PWR  D, KOPEC, W  D, GE   2012     1,000  

Hanbit-1

  PWR  W  W, D   1986     950  

Hanbit-2

  PWR  W  W, D   1987     950  

Hanbit-3

  PWR  H, CE, K  H, GE   1995     1,000  

Hanbit-4

  PWR  H, CE, K  H, GE   1996     1,000  

Hanbit-5

  PWR  D, CE, W, KOPEC  D, GE   2002     1,000  

Hanbit-6

  PWR  D, CE, W, KOPEC  D, GE   2002     1,000  

Hanul-1

  PWR  F  A   1988     950  

Hanul-2

  PWR  F  A   1989     950  

Hanul-3

  PWR  H, CE, K  H, GE   1998     1,000  

Hanul-4

  PWR  H, CE, K  H, GE   1999     1,000  

Hanul-5

  PWR  D, KOPEC, W  D, GE   2004     1,000  

Hanul-6

  PWR  D, KOPEC, W  D, GE   2005     1,000  
          

 

 

 

Total nuclear

           20,716  
          

 

 

 

 

Notes:Notes:

 

(1)“PWR” means pressurized light water reactor; “PHWR” means pressurized heavy water reactor.
(2)“W” means Westinghouse Electric Company (U.S.A.); “AECL” means Atomic Energy Canada Limited (Canada); “F” means Framatome (France); “H” means Hanjung; “CE” means Combustion Engineering (U.S.A.); “D” means Doosan Heavy Industries; “K” means Korea Atomic Energy Research Institute.
(3)“GEC” means General Electric Company (UK)(U.K.); “P” means Parsons (Canada and UK)U.K.); “W” means Westinghouse Electric Company (U.S.A.); “A” means Alsthom (France); “H” means Hanjung; “GE” means General Electric (U.S.A.); “D” means Doosan Heavy Industries; “Hitachi” means Hitachi Ltd. (Japan).

The table below sets forth the average capacity factor and average fuel cost per kilowatt for 20112013 with respect to each nuclear generation unit of KHNP.

 

Unit

  Average Capacity
Factor
   Average Fuel Cost
Per kWh
 
   (Percent)   (Won) 

Kori-1

   87.9     4.9  

Kori-2

   98.8     5.0  

Kori-3

   90.7     4.6  

Kori-4

   92.9     4.7  

Shin-Kori-1

   100.0     6.0  

Wolsong-1

   49.3     12.8  

Wolsong-2

   99.6     5.9  

Wolsong-3

   97.5     6.7  

Wolsong-4

   94.3     6.9  

Yonggwang-1

   101.1     4.8  

Yonggwang-2

   92.0     4.3  

Yonggwang-3

   91.6     4.7  

Yonggwang-4

   91.2     4.7  

Yonggwang-5

   94.6     4.3  

Yonggwang-6

   93.2     4.6  

Ulchin-1

   99.7     4.3  

Ulchin-2

   80.0     4.6  

Ulchin-3

   90.4     4.5  

Ulchin-4

   69.4     4.3  

Ulchin-5

   92.4     4.4  

Ulchin-6

   92.9     4.5  
  

 

 

   

 

 

 

Total nuclear

   90.7     5.0  
  

 

 

   

 

 

 

The average capacity factor of all of our nuclear units in aggregate has been maintained at 90.0% or more in each year since 2000.

Unit

  Average Capacity
Factor
   Average Fuel Cost
Per kWh
 
   (Percent)   (Won) 

Kori-1

   49.9     5.9  

Kori-2

   80.9     6.4  

Kori-3

   100.1     5.3  

Kori-4

   75.5     6.7  

Shin-Kori-1

   26.6     12.8  

Shin-Kori-2

   40.8     6.5  

Wolsong-1

   —       —    

Wolsong-2

   83.7     7.5  

Wolsong-3

   92.6     7.4  

Wolsong-4

   90.3     7.6  

Shin-Wolsong-1

   38.1     8.2  

Hanbit-1

   82.4     6.5  

Hanbit -2

   75.2     5.3  

Hanbit -3

   54.1     6.1  

Hanbit -4

   86.6     5.7  

Hanbit -5

   94.1     4.8  

Hanbit -6

   98.1     5.0  

Hanul-1

   85.8     5.7  

Hanul-2

   88.2     5.7  

Hanul-3

   100.0     5.3  

Hanul-4

   37.8     6.1  

Hanul-5

   85.5     5.6  

Hanul-6

   99.8     5.0  
  

 

 

   

 

 

 

Total nuclear

   75.5     6.1  
  

 

 

   

 

 

 

Under extended-cycle operations, nuclear units can be run continuously for periods longer than the conventional 12-month period between scheduled shutdowns for refueling and maintenance. Since 1987, we have adopted the mode of extended-cycle operations for all of our pressurized light water reactor units and plan to use it for our newly constructed units. The average duration of shutdown for routine fuel replacement and maintenance was 37117.5 days excluding Wolsong unit-1, or 51 days including Wolsong unit-1,per unit in 2011.

2013, which was higher than that for previous years due to the quality assurance-related incidents which led to a shutdown of a number of KHNP’s nuclear units from May 2013 until January 2014 (see Item 3D. “Risk Factors—Risks Relating to KEPCO—Recent findings of falsified testing results and bribery and the subsequent prolonged shutdowns of certain of our nuclear generation units may adversely hurt our reputation, business, results of operations and financial condition.”) as well as scheduled long-term overhauls. In addition, KHNP’s nuclear units experienced an average of 0.30.26 unplanned shutdowns per unit in 2011.2013. In the ordinary course of operations, KHNP’s nuclear units routinely experience damage and wear and tear, which are repaired during routine shutdown periods or during unplanned temporary suspensions of operations. No significant damage has occurred in any of KHNP’s nuclear reactors, and no significant nuclear exposure or release incidents have occurred at any of KHNP’s nuclear facilities since the first nuclear plant commenced operation in 1978. See Item 3D. “Risk Factors—Risks Relating to KEPCO—Operation of nuclear power generation facilities inherently involves numerous hazards and risks, any of which could result in a material loss of revenues or increased expenses.”

Hydroelectric

Effective January 1, 2011, pursuant to the Government’s Proposal for Improvements in the Structure of the Electric Power Industry announced onin August 25, 2010, theour five non-nuclearthermal generation companiessubsidiaries transferred all of the assets and liabilities relating to their pumped-storage and five other hydroelectric business units to KHNP. The table below sets forth certain information, including the installed capacity as of December 31, 20112013 and the average capacity factor in 2011.2013.

 

Location of Unit

  Number of Units   

Classification

  Year Built   Installed Capacity   Average Capacity
Factor
   Number of Units   

Classification

  Year Built   Installed Capacity   Average Capacity
Factor
 
             (Megawatts)   (%)              (Megawatts)   (%) 

Hwacheon

   4    Dam waterway   1944     108.0     29.1     4    Dam waterway   1944     108.0     23.4  

Chuncheon

   2    Dam   1965     62.2     28.5     2    Dam   1965     62.3     23.6  

Euiam

   2    Dam   1967     45.0     41.2     2    Dam   1967     48.0     31.8  

Cheongpyung

   4    Dam   1943     139.6     36.5     4    Dam   1943     140.1     43.4  

Paldang

   4    Dam   1973     120.0     42.0     4    Dam   1973     120.0     44.1  

Seomjingang

   3    Basin deviation   1945     34.8     45.8     3    Basin deviation   1945     34.8     51.5  

Boseonggang

   2    Basin deviation   1937     4.5     56.4     2    Basin deviation   1937     4.5     58.3  

Kwoesan

   2    Dam   1957     2.6     46.8     2    Dam   1957     2.6     58.2  

Anheung

   3    Dam waterway   1978     0.5     44.8     3    Dam waterway   1978     0.5     52.0  

Kangreung

   2    Basin deviation   1991     82.0     —       2    Basin deviation   1991     82.0     —    

Topyeong(1)

   1    Dam   2011     0.05     16.3  

Muju(1)

   1    Dam   2003     0.4     15.4  

Topyeong

   1    Dam   2011     0.05     44.1  

Muju(1)

   1    Dam   2003     0.4     17.5  

Sancheong(1)

   2    Dam   2001     1.0     33.5     1    Dam   2001     1.0     42.4  

Yangyang(1)

   2    Dam   2005     1.4     17.8  

Yecheon(1)

   1    Dam   2011     0.9     24.5  

Cheongpeoung(1)

   2    Pumped Storage   1980     400     4.3  

Samrangjin(1)

   2    Pumped Storage   1985     600     7.9  

Muju(1)

   2    Pumped Storage   1995     600     9.8  

Sancheong(1)

   2    Pumped Storage   2001     700     10.2  

Yangyang(1)

   4    Pumped Storage   2006     1,000     8.4  

Cheongsong(1)

   2    Pumped Storage   2006     600     11.0  

Yecheon(1)

   2    Pumped Storage   2011     800     10.8  

Yangyang(1)

   2    Dam   2005     1.4     25.5  

Yecheon(1)

   1    Dam   2011     1.0     19.4  

Cheongpeoung(1)

   2    Pumped Storage   1980     400.0     6.5  

Samrangjin(1)

   2    Pumped Storage   1985     600.0     9.5  

Muju(1)

   2    Pumped Storage   1995     600.0     10.8  

Sancheong(1)

   2    Pumped Storage   2001     700.0     10.1  

Yangyang(1)

   4    Pumped Storage   2006     1,000.0     9.7  

Cheongsong(1)

   2    Pumped Storage   2006     600.0     11.1  

Yecheon(1)

   2    Pumped Storage   2011     800.0     10.7  
  

 

       

 

   

 

   

 

       

 

   

 

 

Total

   51         5,303     11.5     50         5,307     12.0  
  

 

       

 

   

 

   

 

       

 

   

 

 

 

Note:

 

(1)Indicates facilities that have been transferred from our five non-nuclearthermal generation companies to KHNP as of January 1, 2011.

Solar/Wind

The table below sets forth certain information, including the installed capacity as of December 31, 20112013 and the average capacity factor in 2011,2013, regarding each solar and wind power unit of KHNP. Yecheon-units 1 and 2 began commercial operation in July 2012 and December 2012, respectively. KHNP added a 11-megawatt capacity unit to the Younggwang Solar Park, for which commercial operation began in November 2012.

 

Location of Unit

     

Classification

  Year Built   Installed Capacity   Average  Capacity
Factor
    

Classification

  Year Built   Installed Capacity   Average  Capacity
Factor
 
            (Megawatts)   (Percent)           (Megawatts)   (Percent) 

Yonggwang

    Solar   2008             3     13.2     Solar   2008     13.9     15.3  

Yecheon

   Solar   2012     2.0     15.9  

Kori

    Wind   2008     1     7.9     Wind   2008     0.8     7.1  
        

 

   

 

        

 

   

Total

         4     12.1          16.7    
  

 

      

 

   

 

        

 

   

K-Water (formerly Korea Water Resources Corporation), which is a Government-owned entity, assumes full control of multi-purpose dams, while KHNP maintains the dams used for power generation. Existing

hydroelectric power units have exploited most of the water resources in the RepublicKorea available for commercially viable hydroelectric power generation. Consequently, we expect that no new major hydroelectric power plants will be built in the foreseeable future. Due to the ease of its start-up and shut-down mechanism, hydroelectric power generation is reserved for peak demand periods.

Korea South-East Power Co., Ltd.

The table below sets forth, by fuel type, the weighted average age and installed capacity as of December 31, 20112013 and the average capacity factor and average fuel cost per kilowatt in 20112013 based upon the net amount of electricity generated, of KOSEP.

 

  Weighted
Average Age
of Units
   Installed
Capacity
   Average
Capacity
Factor
   Average Fuel
Cost per kWh
   Weighted
Average Age
of Units
   Installed
Capacity
   Average
Capacity
Factor
   Average Fuel
Cost per kWh
 
  (Years)   (Megawatts)   (Percent)   (Won)   (Years)   (Megawatts)   (Percent)   (Won) 

Bituminous:

                

Samchunpo #1, 2, 3, 4, 5, 6

   19.8     3,246     92.5     66.0     22.1     3,240     93.9     57.0  

Yong Hung #1, 2, 3, 4

   4.8     3,372     92.9     64.5     7.3     3,340     91.6     57.5  

Yosu # 2

   36.5     328.6     79.2     95.6  

Anthracite:

                

Yongdong #1, 2

   34.4     325     88.3     104.5     37.3     325     83.3     99.0  

Oil-fired:

        

Yosu #1, 2

   34.6     529     28.1     157.6  
  

 

   

 

   

 

   

 

 

Total thermal

   19.7     7,472     87.9     68.6  
  

 

   

 

   

 

   

 

 

Combined cycle and internal Combustion:

                

Bundang gas turbine #1,2,3,4,5,6,7,8; steam turbine #1, 2

   17.5     924     47.3     173.4     20.0     922     52.1     200.3  

Hydro, Solar and other renewable energy

   —       70.3     —       149.5  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 
Total   18.7     8,396     83.3     75.4     21.3     8,226     86.8     70.4  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Korea Midland Power Co., Ltd.

The table below sets forth, by fuel type, the weighted average age and installed capacity as of December 31, 20112013 and the average capacity factor and average fuel cost per kilowatt in 20112013 based upon the net amount of electricity generated, of KOMIPO.

 

  Weighted
Average Age
of Units
   Installed
Capacity
   Average
Capacity
Factor
   Average Fuel
Cost per  kWh
   Weighted
Average Age
of Units
   Installed
Capacity
   Average
Capacity
Factor
   Average Fuel
Cost per  kWh
 
  (Years)   (Megawatts)   (Percent)   (Won)   (Years)   (Megawatts)   (Percent)   (Won) 

Bituminous:

                

Boryeong #1, 2, 3, 4, 5, 6, 7, 8

   16.9     4,000     95.1     64.9     18.9     4,000     95.0     41.8  

Anthracite:

                

Seocheon #1, 2

   28.4     400     86.2     120.1     30.5     400     83.4     82.1  

Oil-fired:

                

Jeju #2, 3

   11.4     150     55.9     275.3     13.5     150     72.4     208.8  

LNG-fired:

                

Seoul #4, 5

   42.0     388     31.6     226.2     44.1     388     39.5     209.3  

Incheon #1, 2

   39.3     500     26.5     200.7     41.4     500     36.8     195.5  
  

 

   

 

   

 

   

 

 

Total thermal

   21.4     5,438     82.5     83.5  
  

 

   

 

   

 

   

 

 

Combined-cycle and internal combustion:

                

Boryeong gas turbine #1, 2, 3, 4, 5, 6; steam turbine
#1, 2, 3,

   12.8     1,350     45.6     147.8  

Incheon gas turbine #1, 2, 3, 4; steam turbine #1, 2

   4.5     1,012     83.4     133.2  

Boryeong gas turbine #1, 2, 3, 4, 5, 6 ; steam turbine #1, 2, 3

   14.8     1,350     52.4     143.6  

Incheon gas turbine #1, 2, 3, 4, 5, 6 ; steam turbine #1, 2, 3

   8.8     1,462.4     84.1     138.2  

Sejong gas turbine #1, 2 ; steam turbine #1

   0.1     530.4     73.6     78.5  

Jeju Gas Turbine #3

   34.1     55     0.2     9,635.7     36.1     55     0.8     724.3  

Jeju Internal Combustion Engine #1,2

   4.5     80     70.5     238.1  

Jeju Internal Combustion Engine #1, 2

   6.6     80     68.7     181.4  

Wind-powered:

        

Yangyang #1, 2

   7.5     3.0     19.9     10.8  

Hydroelectric:

        

Boryeong

   4.8     7.5     28.7     0.5  

Photovoltaic (“PV”) power and fuel cell generation:

        

Boryeong (PV) site

   5.6     0.6     10.8     14.3  

Seocheon (PV) site

   5.9     1.2     12.6     —    

Jeju (PV) site

   1.8     1.1     13.4     —    

Seoul (PV) site

   2.3     1.3     14.9     2.7  

Yeosu (PV) site

   1.8     2.2     17.1     —    

Incheon (PV) site

   2.0     0.3     13.8     —    

Boryeong (fuel cell) site

   5.3     0.3     90.6     182.4  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

   10.0     2,497     59.1     144.0     18.3     8,933     78.0     85.6  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Wind-powered:

        

Yangyang #1, 2

   5.5     3     18.6     3.9  

Mini-hydro:

        

Boryeong

   2.8     7.5     17.6     59.3  

Photovoltaic power & Fuel Cell generation:

        

Boryeong (Photo) site

   3.7     0.6     13.3     345.3  

Seocheon (Photo) site

   3.9     1.2     14.6     410.2  

Jeju (Photo) site

   3.9     0.1     15.2     —    

Seoul(Photo) site

   0.4     1.3     13.2     4.5  

Boryeong (fuel Cell) site

   3.3     0.3     79.0     272.0  
  

 

   

 

   

 

   

 

 

Total Photovoltaic & Fuel Cell generation

   2.3     3.8     21.2     293.3  
  

 

   

 

   

 

   

 

 
Total   17.7     7,949     74.5     98.6  
  

 

   

 

   

 

   

 

 

Korea Western Power Co., Ltd.

The table below sets forth, by fuel type, the weighted average age and installed capacity as of December 31, 20112013 and the average capacity factor and average fuel cost per kilowatt in 20112013 based upon the net amount of electricity generated, of KOWEPO.

 

  Weighted
Average Age
of Units
   Installed
Capacity
   Average
Capacity
Factor
   Average Fuel
Cost per kWh
   Weighted
Average Age
of Units
   Installed
Capacity
   Average
Capacity
Factor
   Average Fuel
Cost per kWh
 
  (Years)   (Megawatts)   (Percent)   (Won)   (Years)   (Megawatts)   (Percent)   (Won) 

Bituminous:

                

Taean #1, 2, 3, 4, 5, 6, 7, 8

   11.4     4,000     96.2     51.7     13.4     4,000     96.7     41.3  

Oil-fired:

                

Pyeongtaek #1, 2, 3, 4

   30.1     1,400     21.3     179.6     32.1     1,400     30.0     189.1  
  

 

   

 

   

 

   

 

 

Total thermal

   16.2     5,400     76.8     61.0  
  

 

   

 

   

 

   

 

 

Combined cycle:

                

Pyeongtaek

   19.5     480     35.0     152.9  

Pyeongtaek #1, 2

   11.0     964     36.2     175.7  

Gunsan

   3.6     718.4     85.1     133.5  

West Incheon

   19.5     1,800     76.0     124.6     21.5     1,800     80.7     140.9  

Gunsan

   1.6     718.4     79.6     117.3  
  

 

   

 

   

 

   

 

 

Total combined-cycle

   15.1     2,998.4     70.3     124.9  
  

 

   

 

   

 

   

 

 

Mini-hydro:

        

Hydroelectric:

        

Taean

   4.3     2.2     21.5     —       6.3     2.2     21.7     —    
  

 

   

 

   

 

   

 

 

Solar:

                

Taean

   6.4     0.1     12.4     —       8.4     0.1     12.7     —    

Taean 2

   1.9     0.6     14.0     —    

Gunsan

   3.5     0.3     14.8     —    

Samryangjin

   4.3     3.0     14.2     4.9     6.1     3.0     14.7     —    

Gunsan

   1.4     0.3     15.4     —    
  

 

   

 

   

 

   

 

 

Total solar

   4.0     3.4     14.1     —    

Sejong City

   1.5     4.9     14.8     —    

Gyeonggi-do

   0.7     2.5     13.5     —    

Yeongam

   0.8     13.3     16.4     —    
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 
Total   15.8     8,404     74.5     83.0     16.9     8,909     76.2     87.03  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Korea Southern Power Co., Ltd.

The table below sets forth, by fuel type, the weighted average age and installed capacity as of December 31, 20112013 and the average capacity factor and average fuel cost per kilowatt in 20112013 based upon the net amount of electricity generated, of KOSPO.

 

  Weighted
Average Age
of Units
   Installed
Capacity
   Average
Capacity
Factor
   Average Fuel
Cost per  kWh
   Weighted
Average Age
of Units
   Installed
Capacity
   Average
Capacity
Factor
   Average Fuel
Cost per kWh
 
  (Years)   (Megawatts)   (Percent)   (Won)   (Years)   (Megawatts)   (Percent)   (Won) 

Bituminous:

                

Hadong #1, 2, 3, 4, 5, 6, 7, 8

   11     4,000     100.6     50.4     12.3     4,000     95.0     40.0  

Oil-fired:

                

Youngnam #1, 2

   40.5     400     15.8     207.2     41.9     400     33.2     214.7  

Nam Jeju #3, 4

   5.5     200     76.0     226.2     7.0     200     74.9     209.5  
  

 

   

 

   

 

   

 

 

Total thermal

   13.3     4,600     92.3     58.8  
  

 

   

 

   

 

   

 

 

Combined cycle:

                

Shin Incheon #9, 10, 11, 12

   15.7     1,800     59.0     128.7  

Shin Incheon #1, 2, 3, 4

   17.2     1,800     83.4     139.3  

Busan #1, 2, 3, 4

   7.5     1,800     78.6     119.7     10.2     1,800     91.4     133.3  

Yeongwol #1

   0.3     848     60.0     122.4     3.6     848     60.9     139.0  

Hallim

   15.5     105     5.0     281.9     17.5     105     14.9     305.4  
  

 

   

 

   

 

   

 

 

Total combined cycle

   10.1     4,553     65.7     123.6  
  

 

   

 

   

 

   

 

 

Internal combustion:

        

Nam Jeju

   21.3     40     30.9     198.1  

Wind power:

                

Hankyung

   5.9     21     25.5     0.6     7.2     21     28.7     —    

Seongsan

   2.3     20     28.6     0.5     4.2     20     29.9     —    
  

 

   

 

   

 

   

 

 

Total wind power

   4.1     41     27.0     0.5  
  

 

   

 

   

 

   

 

 

Solar

   1.9     4     13.2     0.1     3.2     6     13.7     —    
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

   11.6     9,238     78.6     85.9     13.2     9,200     84.5     92.8  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Korea East-West Power Co., Ltd.

The table below sets forth, by fuel type, the weighted average age and installed capacity as of December 31, 20112013 and the average capacity factor and average fuel cost per kilowatt in 20112013 based upon the net amount of electricity generated, of EWP.

 

  Weighted
Average Age
of Units
   Installed
Capacity
   Average
Capacity
Factor
   Average Fuel
Cost per  kWh
   Weighted
Average Age
of Units
   Installed
Capacity
   Average
Capacity
Factor
   Average Fuel
Cost per  kWh
 
  (Years)   (Megawatts)   (Percent)   (Won)   (Years)   (Megawatts)   (Percent)   (Won) 

Bituminous:

                

Dangjin #1, 2, 3, 4, 5, 6,7,8

   8.0     4,000     94.1     63.5     9.5     4,000     78.3     39.5  

Honam #1, 2

   38.1     500     91.4     80.6     40.8     500     87.9     60.2  

Anthracite:

                

Donghae #1, 2

   12.1     400     84.8     95.0     14.8     400     78.3     61.7  

Oil-fired:

                

Ulsan #1, 2, 3, 4, 5, 6

   33.3     1,800     19.1     220.6     46.7     1,800     43.4     194.4  
  

 

   

 

   

 

   

 

 

Total thermal

   23.1     6,700     72.3     78.0  
  

 

   

 

   

 

   

 

 

Combined cycle:

                

Ulsan gas turbine #1, 2, 3, 4, 5, 6; steam turbine #1, 2, 3

   18.1     1,200     67.7     140.7     16.9     1,686     49.0     153.4  

Ilsan gas turbine #1, 2, 3, 4, 5, 6; steam turbine #1, 2

   16.1     900     44.1     178.9     18.3     900     49.7     175.2  
  

 

   

 

   

 

   

 

 

Total combined-cycle and internal combustion

   17.1     2,100     55.9     153.2  
  

 

   

 

   

 

   

 

 

Mini-hydro:

        

Mini hydro:

        

Dangjin

   2.0     5.0     69.1     83.5     4.0     5.0     62.7     —    

Photovoltaic:

                

Dangjin

   1.0     1.0     14.0     50.3     3.0     1.0     14.6     —    

Ulsan

   0.1     0.5     11.1     50.9     2.0     0.5     13.3     1.8  

Kwangyang

   0.1     2.3     0.4     0     2.1     2.3     12.4     3.1  

Dangjin Storage Facility

   1.0     0.7     14.2     —    

Dangjin Floating System

   0.5     1.0     14.6     —    

Dangjin Waste Treatment Facility

   0.0     1.3     0.2     0     2.0     1.3     11.6     —    

Donghae

   5.0     1.0     10.5     453.5     7.0     1.0     12.6     1.0  
  

 

   

 

   

 

   

 

 

Total Photovoltaic

   1.1     6.1     12.7     183.2  
  

 

   

 

   

 

   

 

 

Fuel cell:

                

Ilsan #1

   2.1     2.4     59.6     200.6  

Ilsan # 1

   4.1     2.4     83.8     171.7  

Ilsan # 2

   0.1     2.8     77.3     180.6     2.1     2.8     73.6     189.7  
  

 

   

 

   

 

   

 

 

Total Fuel Cell

   1.1     5.2     75.7     188.5  

Ilsan # 3

   0.8     2.8     77.1     176.5  

Ulsan

   0.2     2.8     24.9     115.0  

Wind Power:

        

YeongGwang Jisan

   1.2     3.0     11.6     153.4  

Biomass:

        

Donghae

   0.5     30.0     82.4     175.2  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 
Total   9.05     8,816.3     69.5     140.3     8.0     9,342.6     71.4     2.9  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Power Plant Remodeling and Recommissioning

Our generation subsidiaries supplement power generation capacity through remodeling or recommissioning of thermal units. Recommissioning includes installation of anti-pollution devices, modification of control systems and overall rehabilitation of existing equipment. The following table shows recent remodeling and recommissioning initiatives by our generation subsidiaries.

 

Power Plant

  

Capacity

  

Completed (Year)

  

Extension

  Company

Taean #1-8

  

4,000 MW

(500 MW×8)

  

FGDEP(1): 1998 to 2007

SCR(2): 2005 to 2007

EP(3): 1995 to 2007

LNCS(4):1995 to 2007

EP(3) upgrade (#5, 2009)

EP(3) upgrade (#6, 2010)

EP(3) upgrade (#4, 2011)

EP(1) upgrade (#1, 2012)

  Anti-pollution  KOWEPO

Pyeongtaek #1-4

  

1,400 MW

(350 MW×4)MW ×4)

  

FGD(1): 2005

SCR(2): 2006 to 2007

EP(3): 1992

EP(3)Steam turbine upgrade (#1, 2009)

EP(3) upgrade (#2, 2010)

4, 2013)
  Anti-pollutionKOWEPO

Seoincheon CC

1,800 MW

(gas turbines 150 MW ×8)

(steam turbines 75 MW ×8)

LNCS(4): 1992

Gas turbine upgrade

(2003 to 2006)

Anti-pollution

Efficiency

10-year
performance-
improvement

KOWEPO

Honam #1

250 MW201010 yearsEWP

Honam #2

250 MW201010 yearsEWP

Gunsan CC

718.4 MW

(gas turbines 233.3 MW ×2)

(steam turbines 251.8 MW ×1)

LNCS(4): 2010Anti-pollution  KOWEPO

Boryeong #1-8

  

4,000 MW

(500 MW×8)MW ×8)

  

FGD(1): 1996 to 2009Control System upgrade

SCR(2): 2006 to 2009

LNCS(4): 1993 to 2009

EP(3): 1984 to 2009

2009 (#1,2)(#6, 2011, #3,5, 2012)

  

Anti-pollution

10 years

Performance-
improvement
  KOMIPO

Incheon #1,2CC #2

  

500508.9 MW

(250 MW×2)

SCR(2): 2002 to 2005gas turbines 164

LNCS(3): 2002 to 2005

Anti-pollutionKOMIPO

Seoul #4,5

387.5 MW ×2)

(137.5 MW×1)steam turbines 181

(250 MW×1)MW ×1)

  SCR(2) : 2001 to 20022012  Anti-pollution  KOMIPO

Seocheon #1,2Yosu #1

350 MW201630 yearsKOSEP

Yosu #2

328.6 MW201330 yearsKOSEP

Yonghung #5-6

  

400 MW

(200 MW×2)

FGD(1): 1998, SCR : 2006

LNCS(4): 2004 to 2005

EP(3): 1982 to 1983

Anti-pollutionKOMIPO

Incheon #1,2

500 MW

(250 MW×2)

1996(#1)

2002(#2)

10 yearsKOMIPO

Jeju T/P #2,3

150 MW

(75 MW×2)

SCR(2): 2010

EP(3): 2000

Anti-pollutionKOMIPO

Jeju D/P #1,2

80 MW

(40 MW×2)

SCR(2): 2005 to 2009

EP(3): 2005 to 2009

FGD(1): 2005 to 2009

Anti-pollutionKOMIPO

Power Plant

Capacity

Completed (Year)

Extension

Company

Yonghung #5,6

1,7501,740 MW

(870 MW × 2)×2)

  2014  30 years  KOSEP

Hadong #1-8

4,000 MW

(500 MW × 8)

FGD(1) : 1998 to 2009

EP(3) : 1997 to 2009

LNCS(3) :1997 to 2009

SCR(2): 2006 to 2009

Anti-pollutionKOSPO

Shin-Incheon CC

1,800 MW

(gas turbines 150 MW

× 8)

(steam turbines 150 MW × 4)

LNCS(4) : 1996Anti-pollutionKOSPO

Busan CC

1,800 MW

(gas turbines 150 MW

× 8)

(steam turbines 150 MW × 4)

LNCS(4) : 2003 to 2004Anti-pollutionKOSPO

Youngnam #1,2

400 MW

(200 MW × 2)

FGD(1): 1999

SCR(2): 2002

EP(3): 1988 to 1990

LNCS(4): 2002-

Anti-pollutionKOSPO

Namjeju T/P #3,4

200 MW

(100 MW × 2)

FGD(1): 2006 to 2007

SCR(2): 2006 to 2007

EP(3): 2006 to 2007

Anti-pollutionKOSPO

Namjeju D/P #1-4

40 MW

(10 MW × 4)

SCR(2): 1999 to 2000

EP(3): 1990 to 1991

Anti-pollutionKOSPO

Yeongwol CC

848MW

(gas turbines

183 MW × 3)

(steam turbines

299 MW × 1)

LNCS(4): 2010Anti-pollutionKOSPO

 

Notes:

 

(1)FGD”EP” means a flue gas desulphurizationan electrostatic precipitation system.
(2)“SCR” means a selective catalytic reduction system.
(3)“EP” means an electrostatic precipitation system.
(4)

“LNCS” means a low nitrodioxide (NO2 ) combustion system.

Transmission and Distribution

We currently transmit and distribute substantially all of the electricity in Korea.

In addition to us, under the Community Energy System there are also 12 other entities in Korea that are licensed to supply electricity in limited geographical areas, but their aggregate market share has to-date been insignificant. In July 2004, the Government adopted the Community Energy System to enable regional districts to source electricity from independent power producers to supply electricity without having to undergo the cost-based pool system used by our generation subsidiaries and most independent power producers to distribute electricity nationwide. A supplier of electricity under the Community Energy System must be authorized by the Korea Electricity Commission and be approved by the Minister of Knowledge Economy in accordance with the Electricity Business Act. The purpose of this system is to decentralize electricity supply and thereby reduce transmission costs and improve the efficiency of energy use. These entities do not supply electricity on a national level but are licensed to supply electricity on a limited basis to their respective districts under the Community

Energy System. As of March 31, 2012, 14 districts were using this system and one other district was preparing to launch it and there were 12 independent entities that were licensed to distribute electricity in all of such 15 districts, to which we also transmit and distribute electricity. The generation capacity installed or under construction of the electricity suppliers in these 15 districts amounted to approximately 1% of the aggregate generation capacity of our generation subsidiaries as of March 31, 2012. Since the introduction of the Community Energy System in 2004, a total of 31 districts have obtained the license to supply electricity through the Community Energy System, but 16 of such districts have reportedly abandoned plans to adopt the Community Energy System, largely due to the relatively high level of capital expenditure required, the rise in fuel costs and the lower-than-expected electricity output per cost. However, if the Community Energy System is widely adopted, it will erode our market position in the generation and distribution of electricity in Korea, which has been virtually monopolized by us until recently, and may have a material adverse effect on our business, growth, revenues and profitability.

The table below sets forth as of December 31, 2010 and 2011 and March 31, 2012, the number of districts with government permits to participate in the Community Energy Supply, the number of apartments in such districts and generating capacity to be installed.

As of the date specified below

  Number of
Districts with
Permit to
Participate
   Number of
Apartments
   Generating
Capacity
 
       (in thousands)   (Megawatts) 

December 31, 2010

   31     320     1,474  

December 31, 2011

   31     320     1,474  

March 31, 2012(1)

   31     320     1,474  

Note:

(1)Reflects 16 districts with a permit to participate in the Community Energy System, which have subsequently announced that they are abandoning plans to adopt such system. The number of apartments and generating capacity represented by such districts are approximately 190 thousand units and 866 megawatts, respectively.

As of December 31, 2011,2013, our transmission system consisted of 31,24932,249 circuit kilometers of lines of 765 kilovolts and others including high voltagehigh-voltage direct current lines, and we had 749790 substations with an aggregate installed transformer capacity of 264,373279,520 megavolt-amperes.

As of December 31, 2011,2013, our distribution system consisted of 102,582105,740 megavolt-amperes of transformer capacity and 8,463,7568,698,776 units of support with a total line length of 435,549449,683 circuit kilometers.

In recent years, we have made substantial investments in our transmission and distribution systems to increase geographic coverage and improve efficiency. Our current projects principally focus on increasing capabilities of the existing lines and reducing our transmission and distribution loss, which was 3.7%3.73% of our gross generation in 2011.2013. In light of the increased damage to large-scale transmission and distribution facilities, we plan to reinforce stability of our transmission and distribution facilities through stricter design and material specifications. In addition, we also plan to expand underground transmission and distribution facilities to meet customer demand for more environment-friendly facilities. In order to reduce the interruption time in power distribution, which is an indicator of the quality of electricity transmission, we are also continuing to invest in upgrading our evaluation technologies, automation of electricity transmission and development of new transmission technologies. technologies, among others.

In particular, as part of our overall business strategy, we are currently developing, or seek to develop, an intelligent power transmission and distribution network, or “smart grids,” based on advanced information technology, in order to promote a more efficient allocation and use of electricity by consumers, a superconductingconsumers. We expect that

such technology that will improve efficiency in the transmission of electricity over such network and localized “high-voltage direct current” technology that will reduce electricity loss over the course of electricity transmission and distribution. See “—Strategy.”In July 2012, the Government implemented a master plan to build out a smart grid, which includes the Advanced Metering Infrastructure (“AMI”) roadmap. In accordance with such plan, we will install “smart meters” and related communication networks and operating systems for 22 million households as part of the “smart grid” initiative in an effort to enhance efficiency in the power electricity industry and alleviate growing energy shortage concerns. Smart meters refer to digital meters that record, on a real-time basis, electricity consumption within a household and the effective tariff rate at the time of electricity usage so that consumers will have a price-based incentive to enhance efficiency in their electricity usage. On the other hand, the smart grid refers to the next-generation network for electricity distribution that integrates information technology into the existing power grid with the aim of enabling two-way real time exchange of information between electricity suppliers and consumers for optimal efficiency in electricity use. The smart grid project is scheduled to be completed in 2030, and the AMI project is currently scheduled to be completed in 2020. We expect that the smart grid initiative would significantly increase efficient energy consumption by providingreal-time data to customers, which would in turn help to reduce greenhouse gas emission and decrease Korea’s reliance on foreign energy sources. As of December 31, 2013, we have installed 2.5 million smart meter units, and plan to install an additional 2.3 million units in 2014. The AMI project is expected to cost Won 1.7 trillion by 2020.

Some of the facilities we own and use in our distribution system use rights of way and other concessions granted by municipal and local authorities in areas where our facilities are located. These concessions are generally renewed upon expiration.

Fuel

Nuclear

Uranium, the principal fuel source for nuclear power, accounted for 34.1%34.9%, 33.5% and 34.2%30.9% of our fuel requirements for electricity generation in 20102011, 2012 and 2011,2013, respectively.

All uranium ore concentrates are imported from, and conversion and enrichment of such concentrates are provided by, sources outside Korea and are paid for with currencies other than Won, primarily in U.S. dollars.

In order to ensure stable supply, KHNP enters into long-term and medium-term contracts with various suppliers and supplements such supplies with purchases in spot markets. In 2011,2013, KHNP purchased 100%, or approximately 3,3744,238 tons, of its uranium concentrate requirement under both long-term and spot supply contracts with suppliers in Australia, Canada,the United Kingdom, Kazakhstan, France, Germany, Niger, Canada, Japan Kazakhstan and Niger.Australia. Under the long-term supply contracts, the purchase prices of uranium concentrates are adjusted annually based on base prices and spot market prices prevailing at the time of actual delivery. The conversion and enrichment services of uranium concentrateconcentrates are provided by suppliers in Canada, China, France, Germany, Japan, China, Russia, the United Kingdom and the United States. A Korean supplier typically provides fabrication of fuel assemblies. Except for certain fixed contract prices, contract prices for processing of uranium are adjusted annually in accordance with the general rate of inflation. KHNP intends to obtain its uranium requirements in the future, in part, through purchases under medium- to long-term contracts and, in part, through spot market purchases.

Coal

Bituminous coal accounted for 43.6%43.1%, 42.5% and 43.5%43.0% of our fuel requirements for electricity generation in 20102011, 2012 and 2011,2013, respectively, and anthracite coal accounted for 1.9%, 2.0% and 1.9%1.8% of our fuel requirements for electricity generation in 20102011, 2012 and 2011,2013, respectively.

In 2011,2013, our generation subsidiaries purchased approximately 79.879.5 million tons of bituminous coal, of which approximately 45.9%41.6%, 33.5%38.2%, 7.9%9.5%, 6.8%9.5% and 5.9%1.2% were imported from Indonesia, Australia, the United States, Russia, and others, respectively. Approximately 75.9%89.0% of the bituminous coal requirements of our generation

subsidiaries in 20112013 were purchased under long-term contracts with the remaining 24.1%11.0% purchased in the spot market. Some of our long-term contracts relate to specific generating plants and extend through the end of the projected useful lives of such plants, subject in some cases to periodic renewal. Pursuant to the terms of ourlong-term supply contracts, prices are adjusted annuallyperiodically based on market conditions. The average cost of bituminous coal per ton purchased under such contracts amounted to Won 107,413116,073, Won 113,705 and Won 116,07394,217 in 20102011, 2012 and 2011,2013, respectively. Due to such price increases as well as increased shipping cost for bituminous coal, our generation subsidiaries may not be able to secure their respective bituminous coal supply at prices comparable to those of prior periods. See Item 3D. “Risk Factors—Risks Relating to KEPCO—Increases in fuel prices will adversely affect our results of operations and profitability, as we may not be able to pass on the increased cost to consumers at a sufficient level or on a timely basis.”

In 2011,2013, our generation subsidiaries purchased approximately 1.70.8 million tons of anthracite coal. The prices for anthracite coal under such contracts are set by the Government. The average cost of anthracite coal per ton purchased under such contracts was Won 130,836136,471, Won 141,669 and Won 136,471126,425 in 20102011, 2012 and 2011,2013, respectively.

Oil

Oil accounted for 2.5%2.4%, 3.2% and 2.2%3.3% of our fuel requirements for electricity generation in 20102011, 2012 and 2011,2013, respectively.

In 2011,2013, our generation subsidiaries purchased approximately 14.421.7 million barrels of fuel oil, substantially all of which 65.3% was purchased from domestic refiners and the remainder from foreign sources, in each case, through competitive open bidding. Purchase prices are based on the spot market price in Singapore. The average cost per barrel was Won 98,023128,395, Won 139,204 and Won 128,395123,402 in 20102011, 2012 and 2011,2013, respectively.

LNG

LNG accounted for 16.6%16.7%, 17.7% and 16.8%19.7% of our fuel requirements for electricity generation in 20102011, 2012 and 2011,2013, respectively. In 2011,2013, for use in electricity generation we purchased approximately 10.712.3 million tons of LNG from Korea Gas Corporation, a Government-controlled entity in which we currently own a 24.5% equity interest. In 2013, we purchased all of our LNG requirements for use in power generation from Korea Gas Corporation. Under the terms of the LNG contract with Korea Gas Corporation, our annual minimum purchase quantity is determined by our negotiations with Korea Gas Corporation, subject to the Government’s approval, and may be adjusted through negotiations between the parties. Under this contract, all of our five non-nuclearthermal generation subsidiaries are jointly and severally obligatedagreed to purchase a total of 10.511.4 million tons of LNG in 2012,2013, subject to an automatic price adjustment annually based on a pre-determined formula if the actual purchased amount exceeds or falls short of the contracted amount. In addition, the annual purchase quantity of LNG to be purchased from Korea Gas Corporation will exclude any amount of LNG purchased from a source other than Korea Gas Corporation. We believe the quantities of LNG provided under such contract will be adequate to meet the needs of our generation subsidiaries for LNG for the next several years. OurThe LNG supply contract withcontracts between our generation subsidiaries and Korea Gas Corporation hasgenerally have a term of 20 years and expires in December 2026.

The annualprovide for minimum purchase pricerequirements for LNG is determined by our negotiations withgeneration subsidiaries, the specific terms of which are subject to negotiation between Korea Gas Corporation subject toand our generation subsidiaries and approval by the Ministry of Knowledge Economy. Korea Gas Corporation imports LNG primarily from Indonesia, Malaysia, Brunei, Qatar, Oman, Australia, Egypt and Nigeria and supplies LNG to us and other Korean gas companies.Government. The average cost per ton of LNG under our contract with Korea Gas Corporation was Won 778,980888,808, Won 1,020,528 and Won 888,7451,002,323 in 20102011, 2012 and 2011,2013, respectively.

Hydroelectric

As of December 31, 2011, hydroelectric units represented approximately 8.0%Hydroelectric power generation accounted for 1.1%, 1.1% and 1.3% of our total installed generating capacity.

fuel requirements for electricity generation in 2011, 2012 and 2013, respectively. The availability of water for hydroelectric power depends on rainfall and competing uses for available water supplies, including residential, commercial, industrial and agricultural consumption. Pumped storage enables us to increase the available supply of water for use during periods of peak electricity demand.

As of January 1, 2011, assets and liabilities relating to the pumped storage units of the five non-nuclearthermal generation subsidiaries were recognized and transferred to KHNP pursuant to the Government’s Proposal for Improvements in the Korean Electric Power Industry.

Sales and Customers

Our sales depend principally on the level of demand for electricity in Korea and the rates we charge for the electricity we sell to the end-users.

Demand for electricity in Korea grew at a compounded average rate of 5.5%4.3% per annum for the five years ended December 31, 2011.2013. According to Thethe Bank of Korea, the compounded growth rate for real gross domestic product, or GDP, was approximately 3.5%3.2% for the same period. The GDP growth rate was approximately 6.2% in 20103.7%, 2.3% and approximately 3.6% in 2011.3.0% during 2011, 2012 and 2013, respectively.

The table below sets forth, for the periods indicated, the annual rate of growth in Korea’s gross domestic product, or GDP, and the annual rate of growth in electricity demand (measured by total annual electricity consumption) on a year-on-year basis.

 

      2007         2008         2009         2010         2011       2009 2010 2011 2012 2013 

Growth in GDP (at 2006 constant prices)

   5.1  2.3  0.3  6.2  3.6

Growth in GDP

   0.7  6.5  3.7  2.3  3.0

Growth in electricity consumption

   5.7  4.5  2.4  10.1  4.8   2.4  10.1  4.8  2.5  1.8

Electricity demand in Korea varies within each year for a variety of reasons other than the general growth in GDP demand. Electricity demand tends to be higher during daylight hours due to heightened commercial and industrial activities and electricalelectronic appliance use. Due to the use of air conditioning during the summer and heating during the winter, electricity demand is higher during these two seasons than the spring or the fall. Variation in weather conditions may also cause significant variation in electricity demand.

We do not use any marketing channels, including any special sales methods, to sell electricity to our customers, other than to install electricity meters on-site and take monthly readings of such meters, based upon which invoices are sent to our customers.

Demand by the Type of Usage

The table below sets forth the consumption of electric power, and growth of such consumption on a year-on-year basis, by the type of usage (in gigawatt hours) for the periods indicated.

 

 2007
(GWh)
 YoY
growth
(%)
 2008
(GWh)
 YoY
growth
(%)
 2009
(GWh)
 YoY
growth
(%)
 2010
(GWh)
 YoY
growth
(%)
 2011
(GWh)
 YoY
growth
(%)
 % of
Total
2011
  2009
(GWh)
 YoY
growth
(%)
 2010
(GWh)
 YoY
growth
(%)
 2011
(GWh)
 YoY
growth
(%)
 2012
(GWh)
 YoY
growth
(%)
 2013
(GWh)
 YoY
growth
(%)
 % of
Total
2013
 

Residential

  75,148    3.3    77,269    2.8    78,548    1.7    82,890    5.5    82,130    (0.9  18.0    59,426    2.7    63,200    6.3    63,524    0.5    65,484    3.1    65,815    0.5    13.9  

Commercial

  82,208    5.7    86,827    5.6    89,619    3.2    97,410    8.7    99,504    2.1    21.8    89,619    3.2    97,410    8.7    99,504    2.1    101,593    2.1    102,196    0.6    21.5  

Educational

  5,304    10.7    5,783    9.0    6,465    11.8    7,453    15.3    7,568    1.5    1.7    6,465    11.8    7,453    15.3    7,568    1.5    7,860    3.9    7,947    1.1    1.7  

Industrial

  194,936    6.5    203,475    4.4    207,216    1.8    232,672    12.3    251,491  �� 8.1    55.3    207,216    1.8    232,672    12.3    251,491    8.1    258,102    2.6    265,373    2.8    55.9  

Agricultural

  8,215    7.6    8,869    8.0    9,671    9.0    10,654    10.2    11,232    5.4    2.5    9,671    9.0    10,654    10.2    11,232    5.4    12,776    13.8    13,866    8.5    2.9  

Street lighting

  2,794    4.0    2,847    1.9    2,954    3.8    3,081    4.3    3,145    2.1    0.7    2,954    3.8    3,081    4.3    3,145    2.1    3,158    0.4    3,156    (0.1  0.7  

Overnight Power

  19,122    (1.4  19,690    3.0    18,606    (5.5  17,620    (5.3  16,496    (6.4  3.4  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total

  368,605    5.7    385,070    4.5    394,475    2.4    434,160    10.1    455,070    4.8    100.0    394,475    2.4    434,160    10.1    455,070    4.8    466,593    2.5    474,849    1.8    100.0  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

The industrial sector represents the largest segment of electricity consumption in Korea. Demand for electricity from the industrial sector increased by 8.1% to 251,491was 265,373 gigawatt hours in 20112013, representing a 2.8% increase from 2010,2012, largely due to the continued export-led growth of the Korean economy in 2011.

economy. Demand for electricity from the commercial sector has increased in recent years, largely due to increased commercial activities in Korea and the rapid expansion of the service sector of the Korean economy, which has resulted in increased office building construction, office automation and use of air conditioners. Growth in the commercial sector is also attributable to the construction industry and the expansion of the leisure and distribution industries. Demand for electricity from the commercial sector, increased by 2.1% to 99,504however, remained largely stable at 102,196 gigawatt hours in 20112013, representing a 0.6% increase from 2010.2012.

In 2011,2013, we distributed electricity to approximately 2022 million households, which represent substantially all of the households in Korea. Demand for electricity from the residential sector is largely dependent on population growth and increased use of heaters, air conditioners and other electricalelectronic appliances. Demand for electricity from the residential sector decreased by 0.9% to 82,130remained relatively stable at 65,815 gigawatt hours in 2011 from 2010 due to the relatively less warm summer in 20112013, representing a 0.5% increase compared to 2010 resulting in reduced use of air conditioning in 2011, which more than offset increased electricity demand from greater electric heater usage during the winter of 2011 due to the relatively colder winter compared to 2010.2012.

Demand Management

Our ability to provide an adequate supply of electricity is principally measured by the facility capacity reserve margin and the supply capability reserve margin. The facility capacity reserve margin represents the difference between the peak usage during a year and the installed capacity at the time of such peak usage, expressed as a percentage of such installed capacity. The supply capability reserve margin represents the difference between the peak usage in a year and the average available capacity at the time of such peak usage, expressed as a percentage of such peak usage. The following table sets forth our facility reserve margin and supply reserve margin for the periods indicated.

 

       2007          2008          2009          2010          2011     

Facility reserve margin

   7.9  12.0  9.7  6.7  4.1

Supply reserve margin

   7.2  9.1  7.9  6.2  5.1

Both the facility reserve margin and the supply reserve margin decreased from 2010 to 2011, mainly due to economic recovery and unanticipated weather conditions, including relatively colder winter in 2011 compared to 2010 resulting in greater use of heaters in 2011 at peak hours.

   2009  2010  2011  2012  2013 

Facility reserve margin

   10.0  6.7  4.8  7.7  7.5

Supply reserve margin

   7.9  6.2  5.5  5.2  5.5

While we seek to meet the growing demand for electricity in Korea primarily by continuing to expand our generatinggeneration capacity, through the addition of new generating facilities, we also implement several measures to curtail electricity consumption, especially during peak periods. The principal measure we take is toWe apply for large-scale customers, time-of-use rate schedules,and seasonality tariff, which are structured so that higher tariffs are charged at the time and months of peak demand. Our other demand management programs include applyingto select types of customers, and we also apply a progressive rate structure for the residential use of electricity. We seekhave several demand management programs to reduce not only energy consumption but also greenhouse gas emission by deploying various high efficiency devicescontrol demand and induce power conservation during peak hours and peak seasons such as energy efficient lightings. Furthermore, we replace lightingsproviding incentives for low-income households for free as part of government’s energy welfare policy.reducing power consumption during peak hours.

Electricity Rates

The Electricity Business Law and the Price Stabilization Act of 1975, each as amended from time to time, prescribe the procedures for the approval and establishment of rates charged for the electricity we sell. We submit our proposals for revisions of rates or changes in the rate structure to the Ministry of Knowledge Economy.Trade, Industry and Energy. The Ministry of Knowledge EconomyTrade, Industry and Energy then reviews these proposals and, uponfollowing consultation with the Electricity Rates Expert Committee of the Ministry of Knowledge EconomyTrade, Industry and Energy and the Ministry of Strategy and Finance, makes the final decision. Under the Electricity Business Law, the Korea Electricity Commission must review our proposals prior to the Ministry of Knowledge Economy’sTrade, Industry and Energy’s final decision.

Under the Electricity Business Law and the Price Stabilization Act, electricity rates are established at levels that would enable us to recover our operating costs attributable to our basic electricity generation, transmission and distribution operations as well as receive a fair investment return on capital used in those operations. For the purposes of rate approval, operating costs are defined as the sum of our operating expenses (which principally consists of cost of sales and selling and administrative expenses) and our adjusted income taxes.

Fair investment return represents an amount equal to the rate base multiplied by the rate of return. The rate base is equal to the sum of:

 

net utility plant in service (which is equal to utility plant minus accumulated depreciation minus revaluation reserve);

 

working capital for two months (equal to one-sixth of our annual operating expenses other than depreciation expenses and any other non-cash expenses);

 

our equity interests in generation subsidiaries; and

 

the portion of construction-in-progress which is charged from our retained earnings.

The amounts used for the variables in the rates are those projected by us for the periods to be covered by the rate approval. There is no provision for prior period adjustments to compensate us.

For the purpose of determining the fair rate of return, the rate base is divided into two components in proportion to our total shareholders’ equity and our total debt. The rate of return permitted in relation to the debt component of the rate base is set at a level designed to approximate the weighted average interest cost on all types of borrowing for the periods covered by the rate approval. The rate of return permitted in relation to the equity component of the rate base is set by applying the capital asset pricing model which takes account of the risk-free rate, the return on the Korea Stock Price Index, KOSPI, a Korean equity market index, and the correlation of the stock price of our company with KOSPI. In 2011,2012, the approved rate of return on the debt component of the rate base was 3.9%3.2% while the approved rate of return on the equity component of the rate base was 7.3%6.6%. As a result of such approved rates of returns, the fair rate of return in 20112012 was determined to be 5.9%4.8%. The fair rate of return for 2013 has not yet been determined.

The Electricity Business Law and the Price Stabilization Act do not specify a basis for determining the reasonableness of our operating expenses or any other items (other than the level of the fair investment return) for the purposes of the rate calculation. However, the Government exercises substantial control over our budgeting and other financial and operating decisions.

In addition to the calculations described above, a variety of other factors are considered in setting overall tariff levels. These other factors include consumer welfare, our projected capital requirements, the effect of electricity tariff on inflation in Korea and the effect of tariff on demand for electricity.

From time to time, our actual rate of return on invested capital may differ significantly from the fair rate of return on invested capital assumed for the purposes of electricity tariff approvals, for reasons, among others, related to movements in fuel prices, exchange rates and demand for electricity that differ from what is assumed for determining our fair rate of return. For example, between 1987 and 1990, the actual rate of return was above the fair rate of return due to declining fuel costs and rising demand for electricity at a rate not anticipated for purposes of determining our fair rate of return. Similarly, depreciation of the Won against the U.S. dollar accounted for our actual rates of return being lower than the fair rate of return for the period from 1996 to 2000, and for2000. For the period since 2006, our actual rates of return have been lower than the fair ratesrate of return largely due to risinga general increase in fuel costs and higheradditional facility investment costs.costs incurred, the effects of which were not offset by timely increases in our tariff rates. Partly in response to the variance between our actual rates of return and the fair rates of return, the Government from time to time adjustsincreases the electricity tariff rates, but there typically is a significant time lag for the tariff adjustmentincreases as such adjustmentincreases requires a series of deliberative processes and administrative procedures and the Government also has to consider other policy considerations, such as the inflationary effect of overall tariff increases and the efficiency of energy use from sector-specific tariff increases. Furthermore, there is no assurance that the tariff adjustments will have the desired effect at a level anticipated or at all, or that they will not have unintended adverse consequences.

Recent adjustmentsincreases to the electricity tariff rates by the Government involve the following, which were made principally in response to the rising fuel prices which hurt our profitability as well as to encourage a more efficient use of electricity by the different sectors:

 

effective August 1, 2010, a 3.5% overall increase in our average tariff rate, consisting of increases in the residential, educational, industrial, street lighting and night power usage tariff rates by 2.0%, 5.9%, 5.8%, 5.9% and 8.0%, while making no changes to the commercial and agricultural tariff.

effective August 1, 2011, a 4.9% overall increase in our average tariff rate, consisting of increases in the industrial, commercial, residential, educational, street lighting and nightovernight power usage tariff rates by 6.1%, 4.4%, 2.0%, 6.3%, 6.3% and 8.0%, while making no changes to the agricultural tariff.

 

effective December 5, 2011, a 4.5% overall increase in our average tariff rate, consisting of increases in the industrial, commercial, educational and street lighting tariff rates by 6.5%, 4.5%, 4.5% and 6.5%, while making no changes to the residential, agricultural and nightovernight power usage tariff.

effective August 6, 2012, a 4.9% overall increase in our average tariff rate, consisting of increases in the residential, commercial, educational, industrial, street lighting, agricultural and overnight power usage tariff rates by 2.7%, 4.4%, 3.0%, 6.0%, 4.9%, 3.0% and 4.9%, respectively.

effective January 14, 2013, a 4.0% overall increase in our average tariff rate, consisting of increases in the residential, commercial, industrial, educational, agricultural, street lighting and overnight power usage tariff rates by 2.0%, 4.6%, 4.4%, 3.5%, 3.0%, 5.0% and 5.0%, respectively.

effective November 21, 2013, a 5.4% overall increase in our average tariff rate, consisting of increases in the residential, commercial, industrial, agricultural, street lighting and overnight power usage tariff rates by 2.7%, 5.8%, 6.4%, 3.0%, 5.4% and 5.4%, respectively, while making no change to the educational tariff.

The tariff rates we charge for electricity vary among the different classes of consumers, which principally consist of industrial, commercial, residential, educational and agricultural consumers. The tariff also varies depending upon the voltage used, the season, the time of day,usage, the rate option selected by the user and, in the residential sector, the amount of electricity used per household, as well as other factors. For example, we adjust for seasonal tariff variations by excluding June from the summer seasonapplying higher rates when peak rates are in effect and increasing the rates fordemand tends to rise such as during the months of June, July and August (when the demand tends to rise due to increased use of air conditioning) and November, December, January and February (when demand tends to correspondrise due to increased use of heating), which reflects the policy of the Korean government to cope with the rise in electricity demand during peak seasons by encouraging a more closely to peak demand trends.efficient use of electricity by customers.

Our current tariff schedule, which became effective as of December 5, 2011,November 21, 2013, is summarized below by the type of usage:

 

  

Industrial. The basic charge varies from Won 4,9005,550 per kilowatt to Won 7,9309,810 per kilowatt depending on the type of contract, the voltage used and the rate option. The energy usage charge varies from Won 4553.7 per kilowatt hour to Won 167.9196.6 per kilowatt hour depending on the type of contract, the voltage used, the season, the time of day and the rate option.

 

  

Commercial. The basic charge varies from Won 5,6106,160 per kilowatt to Won 7,4309,810 per kilowatt depending on the type of contract, the voltage used and the rate option. The energy usage charge varies from Won 46.253.7 per kilowatt hour to Won 172.9196.6 per kilowatt hour depending on the type of contract, the voltage used, the season, the time of day and the rate option.

 

  

Residential. Residential tariff includes a basic charge ranging from Won 390410 for electricity usage of less than 100 kilowatt hours to Won 12,23012,940 for electricity usage in excess of 500 kilowatt hours. Residential tariff also includes an energy usage charge ranging from Won 57.360.7 to Won 670.6709.5 per kilowatt hour for electricity usage depending on the amount of usage and voltage.

 

  

Educational. The basic charge varies from Won 5,3905,230 per kilowatt to Won 6,5406,980 per kilowatt depending on the voltage used and the rate option. The energy usage charge varies from Won 40.243.8 per kilowatt hour to Won 147160.4 per kilowatt hour depending on the voltage used, the season and the rate option.

 

  

Agricultural. The basic charge varies from Won 340360 per kilowatt to Won 1,0701,210 per kilowatt depending on the type of usage. The energy usage charge varies from Won 20.621.6 per kilowatt-hour to Won 36.441.9 per kilowatt hour depending on the type of usage.contract, the voltage used and the season.

 

  

Street-lighting. The basic charge is Won 5,4206,290 per kilowatt and the energy usage charge is Won 7485.9 per kilowatt hour. For electricity capacity of less than 1 kilowatt or for places where the installation of the electricity meter is difficult, a fixed rate of Won 32.337.5 per watt applies, with the minimum charge per month of Won 1,050.1,220.

In 2001, as part of implementing the Restructuring Plan, the Ministry of Trade, Industry and Energy established the Electric Power Industry Basis Fund to enable the Government to take over certain public services previously performed by us. In 2013, 3.7% of the tariff we collected from our customers was transferred to this fund prior to recognizing our sales revenue.

Fuel Cost Pass-through Adjustment to the Tariff System

Further to the announcement by the Ministry of Knowledge EconomyTrade, Industry and Energy in February 2010, a new electricity tariff system went into effect on July 1, 2011. This system is designed to overhaul the prior system for determining electricity tariff chargeable to customers by more closely aligning the tariff levels to the movements in fuel prices, with the aim of providing more timely pricing signals to the market regarding the expected changes in electricity tariff levels and encouraging more efficient use of electricity by customers. Previously, the electricity tariff consisted of two components: (i) base rate and (ii) usage rate based on the cost of electricity and the amount of electricity consumed by the end-users. Under the new tariff system, the electricity tariff willis also to have a third component of fuel cost-adjustedFCPTA rate, which willis to be added to or subtracted from the sum of the base rate and the usage rate based on the movements of coal, LNG and oil prices. The fuel cost-related adjustment will be made on a monthly basis based on the three-month average fuel cost which is reflected as fuel-cost adjustment fees two months later.movements of coal, LNG and oil prices. The new tariff system is intended to provide greater financial stability and ensure a minimum return on investment to electricity suppliers, such as us. However, due to inflationary and other policy considerations relating to protecting the consumers from sudden and substantial rises in electricity tariff, the Ministry of Knowledge Economy has forTrade, Industry and Energy issued a hold order on July 29, 2011 suspending our billing and collecting of the time being suspended applyingFCPTA amount. The hold order remains in effect to-date. In addition, on January 11, 2013, we were informed by the Ministry of Trade, Industry and Energy that the fuel cost-basedcost pass-through adjustment and such adjustment amount (which has been a positive amount since the adoptionsystem would need to be reassessed in light of the new tariff system due toprolonged unbilled period after the

continued rise in coal, LNG and oil prices) is currently being recorded as accounts receivable pending the commencement announcement of the application of the fuel cost-based adjustment.such system. There is no assurance as to when the Government will commence applyinglift the fuel cost-based adjustmenthold order and reflectallow us to bill and collect the adjustmentaccumulated FCPTA amount in the electricity tariff payable to us, or whether the new tariff system will undergo furtherother amendments to the effect that it will not fully cover our fuel and other costs on a timely basis or at all, or will not have unintended consequences that we are not presently aware of. Any such development may have a material adverse effect on our business, financial condition, results of operations and cash flows. See Item 4B. “Business Overview—Recent Developments—Implementation of the 5B. “Operating and Financial Review and Prospects—Critical Accounting Policy—Fuel Cost-based Tariff System.Cost Pass-through Adjustment.

In 2001, as part of implementing the Restructuring Plan, the Ministry of Knowledge Economy established the Electric Power Industry Basis Fund to enable the Government to take over certain public services previously performed by us. In 2011, 3.7% of the tariff we collected from our customers was transferred to this fund prior to recognizing our sales revenue.

Power Development Strategy

We and our generation subsidiaries make plans for expanding or upgrading our generation capacity based on the Basic Plan Relating to the Long-Term Supply and Demand of Electricity, or the Basic Plan, which is announcedgenerally revised and revised generallyannounced every two years by the Government.

In December 2010,February 2013, the Government announced the fifthSixth Basic Plan relating to the future supply and demand of electricity. The fifthSixth Basic Plan, which is effective for the period from 20102013 to 2024,2027, focuses on, among other things, (i) minimizing the need to construct new generation facilities through active consumer demand management, (ii) ensuring that we maintain adequate electricity generation conformsreserve appropriate to the National Energy Basic Plan relating tosize of the overall energy management policy for Korea, (ii)national economy and (iii) expanding the base-loadour generation capacity to promote economicalefficient supply of electricity (iii) preparing contingency planning to cover for, among others, delayedin consideration of the stability of the national electricity grid network and the specific needs of localities. In addition, while the Sixth Basic Plan did not contemplate the construction of additional nuclear plants in light of the heightened public concern over nuclear safety following the nuclear power plant meltdown in Japan in March 2011, there is no assurance that the Government will not implement a supplemental plan for the construction of additional nuclear plants in the future, which may increase the amount of our required capital expenditure.

In addition, on January 13, 2014, the Ministry of Trade, Industry and Energy adopted the Second Basic National Energy Plan following consultations with representatives from civic groups, the power industry and academia. The Second Basic National Energy Plan, which is a comprehensive plan that covers the entire spectrum of energy industries in Korea, will cover the period from 2013 to 2035 (compared to 2008 to 2030 under the First Basic National Energy Plan) and focuses on the following six key tasks: (i) shifting the focus of energy policy to demand management with a goal of reducing electricity demand by 15% by 2035, (ii) establishing a geographically decentralized electricity generation facilities, and otherwise ensuring stable long-term balance betweensystem so as to reduce transmission losses with a goal of supplying at least 15% of total electricity supply and demand, (iv) tightening supply management from 2012 to 2014 in response to the short-term decrease in facility reserve margins, (v) fostering environmentally friendly electricity sources in line with the planned nationwide reduction inthrough such system by 2035, (iii) applying latest greenhouse gas emission reduction technologies to newly constructed generation units in order to further promote safety and environmental friendliness, (iv) strengthening exploration and procurement capabilities to enhance Korea’s energy security and to ensure stable supply of energy and increasing the portion of electricity supplied

from renewable sources to 11% by giving priority2035, (v) reinforcing the system for stable supply of conventional energy, such as oil and gas, and (vi) introducing in 2015 an energy voucher system in lieu of a tariff discount system for the benefit of consumers in the constructionlow income group. In addition, the Second Basic National Energy Plan contemplates revising the target level of electricity generated by nuclear generation facilities and taking other green energy initiatives, (vi) appropriately adjustingsources as a percentage of total electricity generated to 29%, compared to 41% under the generation capacity expansion and (vii) improving transparency in planning and engaging a greater number of experts in the process of planning future basic plans.First Basic National Energy Plan.

We cannot assure that the fifthSixth Basic Plan, the Second Basic National Energy Plan or the respective plans to be subsequently adopted will successfully achieve their intended goals, the foremost of which is to formulate aensure, through carefully calibrated capacity expansion plan that will result inand other means, balanced overall electricity supply and demand in Korea at an affordable costcosts to the end users.users while promoting efficiency and environmental friendliness in the consumption and production of electricity. If there is a significant variance between the actual capacity expansions by us and our generation subsidiaries based on the projected electricity supply and demand considered in planning our capacity expansions and the actual electricity supply and demand or if these plans otherwise fail to meet their intended goals or have other unintended consequences, this may result in inefficient use of our capital, mispricing of electricity and undue financing costs on the part of us and our generation subsidiaries, among others, which may have a material adverse effect on our results of operations, financial condition and cash flows.

Capital Investment Program

The table below sets forth, for each of the years ended December 31, 20102011, 2012 and 2011,2013, the amounts of capital expenditures (including capitalized interest) for the construction of generation, transmission and distribution facilities. The figures in the table are derived from “Additions to property, plant and equipment” under the item “cash flows from investing activities” in our consolidated statements of cash flows.

 

2010 2011 
(In billions of Won) 
(Won)10,184 (Won)10,610  

In accordance with the fifth Basic Plan, our generation subsidiaries currently intend to add new installed capacity of 39,523 megawatts during the period from 2012 to 2024 by newly constructing 13 nuclear units,

17 coal-fired units, 14 LNG-combined units. According to the fifth Basic Plan, the total capacity of all generating facilities at the end of 2024 is expected to be 112,593 megawatts, with nuclear power plants accounting for 31.9% of the total capacity. Coal-fired plants, LNG combined plants, oil-fired plants and hydroelectric and other plants are expected to account for 27.9%, 20.9%, 3.6% and 15.7%, of the total capacity, respectively.

2011

 2012  2013 
(In billions of Won) 
₩11,984 12,751   15,831  

The table below sets forth the currently estimated installed capacity for new or expanded generation units to be completed by our generation subsidiaries according to the fifth Basic Plan in each year from 20122014 to 2015.2017.

 

Year

  Number of Units   

Type of Units

  Total Installed Capacity   Number of Units   

Type of Units

  Total Installed  Capacity(1) 
         (Megawatts) 

2012

   2    LNG-combined   1,283  
   2    Nuclear power   2,000  

2013

   3    LNG-combined   1,650  
   2    Nuclear power   2,400           (Megawatts) 

2014

   9    LNG-combined   6,100     1    Nuclear power   1,400  
   1    Nuclear   1,400     2    Coal-fired   1,740  
   3    Coal-fired   2,240     3    LNG-combined   1,007  

2015

   9    Coal-fired   6,050     2    Coal-fired   2,020  

2016

   6    Coal-fired   5,470  
   3    LNG-combined   1,200  

2017

   1    Nuclear power   1,400  
   1    Coal-fired   1,000  
   1    LNG-combined   900  

From 2016 and 2024,

Note:

(1)Does not include installed capacity for two nuclear units with an aggregate installed capacity of 2,400 megawatts that were expected to be completed in 2013 but for which construction has been delayed.

For the period from 2018 to 2027, our generation subsidiaries currently plan to complete eightseven additional nuclear units with an aggregate installed capacity of 11,40010,000 megawatts five(subject to any further plan to be announced by the Government in relation to the construction of additional nuclear generation capacity which was not included in the Sixth Basic Plan) and four additional coal-fired units with an aggregate installed capacity of 5,0002,740 megawatts.

As part of our capital investment program, we also intend to add new transmission lines and substations, continue to replace overhead lines with underground cables and improve the existing transmission and distribution systems.

The actual number and capacity of generation units and transmission and distribution facilities we construct and the timing of such construction are subject to change depending upon a variety of factors, including, among others, changes in the Basic Plan, demand growth projections, availability and cost of financing, changes in fuel prices and availability of fuel, ability to acquire necessary plant sites, environmental considerations and community opposition.

The table below sets forth, for the yearsperiod from 20122014 to 2015,2017, the budgeted amounts of capital expenditures (including capitalized interest) for the construction of generation, transmission and distribution facilities pursuant to our capital investment program. The budgeted amounts may vary from the actual amounts of capital expenditures for a variety of reasons, including, among others, the implementation of the fifthSixth Basic Plan, changes in the number of units to be constructed, the actual timing of such construction, changes in rates of exchange between the Won and foreign currencies and changes in interest rates.

 

  2012   2013   2014   2015   Total   2014   2015   2016   2017   Total 
  (in billions of Korean won)   (in billions of Won) 

Generation:

          

Generation(1):

          

Nuclear

   4,892     5,432     5,526     6,272     22,122     4,844     5,231     6,137     6,423     22,634  

Thermal

   3,336     8,531     6,567     3,713     22,147     7,963     5,673     2,895     3,009     19,539  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Sub-total

   8,228     13,963     12,093     9,985     44,269     12,807     10,903     9,032     9,431     42,173  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Transmission and Distribution:

                    

Transmission

   2,627     2,353     2,244     1,965     9,189     2,492     2,441     2,982     2,324     10,240  

Distribution

   2,195     2,182     2,139     2,080     8,596     2,509     2,773     2,553     2,414     10,249  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Sub-total

   4,822     4,535     4,383     4,045     17,785     5,001     5,214     5,535     4,739     20,489  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Others(1)(2)

   1,872     2,328     2,508     2,363     9,071     2,090     2,361     1,772     1,422     7,646  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

   14,922     20,826     18,984     16,393     71,125     19,898     18,479     16,339     15,592     70,307  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

 

Note:Notes:

 

(1)The budgeted amounts for our generation facilities are based on the Sixth Basic Plan.
(2)Principally consists of investments in renewable energy generation, among others.

We have financed, and plan to finance in the future, our capital investment programs primarily through net cash provided by our operating activities and financing in the form of debt securities and loans from domestic financial institutions, and to a lesser extent, borrowings from overseas financial institutions. In addition, in anticipation oforder to prepare for potential liquidity shortage, we and our generation subsidiaries maintain several credit facilities with domestic financial institutions in the aggregate amounts of Won 3,5832,550 billion and US$4,549 million, the full amount of which was available as of December 31, 2011.2013. We, KHNP and KHNPKOWEPO also maintain global medium-term note programs in the aggregate amount of US$810 billion, of which approximately US$4.64 billion remains currently available for future drawdown. See also Item 5B. “Liquidity and Capital Resources—Capital Resources.”

Environmental Programs

The Environmental Policy Basic Act, the Air Quality Preservation Act, the Water Quality Preservation Act, the Marine Pollution Prevention Act and the Waste Management Act, collectively referred in this annual report as the Environmental Acts, are the major laws of Korea that regulate atmospheric emissions, waste water, noise and other emissions from our facilities, including power generators and transmission and distribution units. Our existing facilities are currently in material compliance with the requirements of these environmental laws and international agreements, such as the United Nations Framework Convention on Climate Change, the Montreal Protocol on Substances that Deplete the Ozone Layer, the Stockholm Convention on Persistent Organic Pollutants and the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and

Their Disposal. In order to foster coordination among us and our generation subsidiaries in respect of climate change and development of renewable energy sources, we formed the Committee on Climate Change and the Committee on Renewable Energy in 2005. In 2011 the Ministry of Security and Public Administration and Safety issued guidelines for the reduction inof nationwide greenhouse gas emissions and energy conservation, pursuant to which we are intensifying our efforts to reduce the levels of carbon emission in order to help meet the national target for greenhouse gas emission reduction.

In 2005, we became the first public company in Korea to join the United Nations Global Compact, an international voluntary initiative designed to hold a forum for corporations, United Nations agencies, labor and civic groups to promote reforms in economic, environmental and social policy.policies. As part of our involvement with such initiative, since September 2005, we have issued an annual report named the “Sustainability Report” to disclose our activities from the perspectives of economy, environment and society, in accordance with the reporting guidelines of the Global Reporting Initiative, the official collaborating center of the United Nations Environment Program that works in cooperation with United Nations Secretary General. In November 2010, our report on the Communication on Progress was reviewed favorably by the United Nations Global Compact and was subsequently posted on its website in recognition of our strong commitment to compliance with the principles of United Nations Global Compact. In 2008May 2013, we obtained the Carbon Trust Standard, a certificate issued by Carbon Trust, an agency of the British government for excellence in demonstrated efforts to reduce carbon footprint. We are also a participant of the Carbon Disclosure Project, an international organization that promotes transparency in informational disclosure of carbon management process. We aim to become a global leader in carbon management and 2009, our sustainability report was selected as a notable report on Communication on Progress by the United Nations Global Compact.reduction.

Atmospheric emissions from generating plants burning fossil fuels include, among others, sulfur dioxide, nitrogen oxide and particulates. The Environmental Acts establish emissions standards relating to, among other things, sulfur dioxide, nitrogen oxide and particulates. Such standards have become more stringent from January 1999 to reduce the amount of permitted emissions.

The table below sets forth the number of emission control equipment installed at coal-fired power plants by our generation subsidiaries as of December 31, 2011.2013.

 

     KOSEP       KOMIPO       KOWEPO       KOSPO       EWP   

Flue Gas Desulphurization System

   12     12     12     12     13  

Selective Non-Catalytic Reduction System

   —       —       —       —       3  

Selective Catalytic Reduction System

   9     16     12     15     13  

Electrostatic Precipitation System

   14     14     12     14     18  

Low NO2 Combustion System

   18     16     26     30     30  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   53     58     62     71     77  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

   KOSEP   KOMIPO   KOWEPO   KOSPO   EWP 

Flue Gas Desulphurization System

   11     12     12     12     13  

Selective Non-catalytic Reduction System

   —       2     —       —       3  

Selective Catalytic Reduction System

   9     18     12     12     13  

Electrostatic Precipitation System

   13     20     12     12     18  

Low NO2 Combustion System

   16     28     26     29     30  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   49     80     62     65     77  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The table below sets forth the amount of annual emission from all generating facilities of our generation subsidiaries for the periods indicated. The amount of CO2 emissions is expected tomay increase in 2012the near future due to the construction of additional coal thermal power plants but is expected to decrease thereafter,in the long-term, principally due to an increased use of nuclear power and renewable energy.

 

Year

  Sox
(g/MWh)
   NOx
(g/MWh)
   Dust
(g/MWh)
   CO2
(kg/MWh)
   Sox
(g/MWh)
   NOx
(g/MWh)
   Dust
(g/MWh)
   CO2
(kg/MWh)
 

2009

   169     308     8     489  

2010

   158     283     8     467  

2011

   145     278     8     452     148     284     8     464  

2012

   165     297     8     471  

2013

   155     283     7     487  

In order to comply with the current and expected environmental standards and address related legal and social concerns, we intend to continue to install additional equipment, make related capital expenditures and

undertake several environmentally friendlyenvironment-friendly measures to foster community goodwill. For example, in October 2004, we and our generation subsidiaries reached an agreement with the Ministry of Environment and civic organizations to completely remove polychlorinated biphenyl, or PCB, a toxin, from the insulating oil of our transformers by 2025.2015. In addition, when constructing certain large new transmission and distribution facilities, we assess and disclose their environmental impact at the planning stage of such construction, as well as consult with local residents, environmental groups and technical experts to generate community support for such projects. We exercise additional caution in cases where such facilities are constructed near ecologically sensitive areas such as wetlands or preservation areas. We also make reasonable efforts to minimize any negative environmental impact, for example, by using more environmentally-friendlyenvironment-friendly technology and hardware. In addition, we also undertake measures to minimize losses during the transmission and distribution process by making our power distribution network more energy-efficient in terms of loss of power, as well as to lower consumption of energy, water and other natural resources. In addition, we and our subsidiaries have acquired the ISO 14000 certification which is an environmental management system widely adopted internationally and have made it a high priority to make our electricity generation and distribution more environmentally friendly. In 2013, we further reinforced our environmental management system by acquiring the ISO 14001 certification as well as a domestic certification of the “green management system” that relates to the management of resources, energy, green house effects and social responsibilities.

Our environmental measures, including the use of environmentally friendlyenvironment-friendly but more expensive parts and equipment and budgetingallocation of capital expenditures for the installation of such facilities, may result in increased operating costs and liquidity requirement. The actual cost of installation and operation of such equipment and related liquidity requirement will depend on a variety of factors which may be beyond our control. There is no assurance that we will continue to be in material compliance with legal or social standards or requirements in the future in relation to the environment.

As part of our long-term strategic initiatives, we plan to take other measures designed to promote the generation and use of environmentally friendly, or green, energy. See Item 4B. “Business Overview—Strategy.”

Renewable Energy

Some of our generation facilities are powered by renewable energy sources, such as solar energy, wind power and hydraulic power. While such facilities are currently insignificant as a proportion of our total generatinggeneration capacity or generation volume of our generation subsidiaries, we expect that the portion will increase in the future, especially since we are required to comply with the Renewable Portfolio Standard policy as described below.

The following table sets forth the generatinggeneration capacity and generation volume in 20112013 of our generation facilities that are powered by renewable energy sources.

 

  Generating Capacity
(megawatts)
 Generation Volume
(gigawatt-hours)
   Generation Capacity
(megawatts)
 Generation Volume
(gigawatt-hours)
 

Hydraulic Power

   625.5    1,519.9     5,334    5,679  

Wind Power

   81.5    154.7     94    155  

Solar Energy

   25.0    25.0  

Fuel Cells

   5.8    40.3  

By-product gas

   116.0    85.0  

Solar Energy, Fuel Cells and Biogas

   114    251  
  

 

  

 

   

 

  

 

 

Subtotal

   853.8    1,824.9     5,542    6,086  

As percentage of total(1)

   1  0.41   7.8  1.4

 

Note:

 

(1)As a percentage of the total generatinggeneration capacity or total generation volume, as applicable, of all ofus and our generation subsidiaries.

In order to deal with shortage of fuel and other resources and also to comply with various environmental standards, in 2012 the Government has adopted the Renewable Portfolio Standard (“RPS”) policy, underprogram, which replaced the Renewable Portfolio Agreement which had been in effect from 2006 to 2011. Under the RPS program, each generation subsidiary will beis required to supply 2.0% and 10.0%generate a specified percentage of the total energyelectricity to be generated fromby such

generation subsidiary in a given year in the form of renewable energy, with the target percentage being 2.0% in 2012, 2.5% in 2013 and incrementally increasing to 10.0% by 2012 and 2022, respectively, with fines being2022. Fines are to be levied on any unit failingsubsidiary that fails to do so in the prescribed timeline. We currently estimate that, under the current RPS policy,In 2012, while one of our generation subsidiaries will incurmet 100% of its target, five others were unsuccessful to do so. Our six generation subsidiaries met, on average, 90.8% of the target for 2012 and accordingly were fined an aggregate amount of Won 23.7 billion. Compliance by our generation subsidiaries of the 2013 target is currently under evaluation, and if our generation subsidiaries are found to have failed to meet the target for 2013 or for subsequent years, our generation subsidiaries may become subject to additional fines or other penalties. The budgeted amount of capital expenditure for implementation of the RPS as currently planned for the period from 2013 to 2022 is approximately Won 45 trillion in additional capital expenditure over the next 10 years.13.7 trillion. We expect that such additional capital expenditure willto be covered by a corresponding increase in electricity tariff. However, there is no assurance that the Government will in fact raise the electricity tariff atto a level sufficient to fully cover such additional capital expenditures or at all.

In July 2005, nine government-invested utilities companies, including us, entered into a Renewable Portfolio Agreement (“RPA”) with the Government in orderAs to expand the generation and distribution of renewable energy. This agreement contemplates two phases of capacity build-up for the generation and distribution of renewable energy. During Phase I, which lasted from 2006 to 2008,how we made capital expenditures of Won 520.1 billion to construct renewable energy generation capacity of 184 megawatts, of which 63 megawatts capacity has been completed to-date. During Phase II, lasting from 2009 to 2011, we and our generation subsidiaries made capital expenditures of Won 920.7 billion to construct renewable energy facilities with an aggregate generation capacity of 366 megawatts.

The breakdown of capital expenditures for Phase I and Phase II under the RPA by type of expenditure is as follows:

   Phase I (2006 – 2008)   Phase II (2009 – 2011) 
   (in billions of Won) 

Facilities investment

  (Won)388.2    (Won)830.4  

Research and development

   128.0     86.8  

Promotion and other

   3.9     3.5  
  

 

 

   

 

 

 

Total

  (Won)520.1    (Won)920.7  
  

 

 

   

 

 

 

We have financed, and plan to finance in the future, our capital investmentexpenditures related to our environmental programs, primarily through net cash provided by our operating activities and financing in the form of debt securities and loans from domestic financial institutions, and to a lesser extent, from overseas financial institutions. In addition, in anticipation of potential liquidity shortage, we and KHNP also maintain global medium-term note programs in the aggregate amount of US$8 billion, of which approximately US$4.6 billion remains currently available for future drawdown. See Item 5B. “Liquidity and see “—Capital Resources—Capital Resources.Investment Program.

Community Programs

Building goodwill with local communities is important to us in light of concerns among the local residents and civic groups in Korea regarding construction and operation of generation units, particularly nuclear generation units. The Act for Supporting the Communities Surrounding Power Plants requires that the generatinggeneration companies and the affected local governments carry out various activities up to a certain amount annually to address neighboring community concerns. Pursuant to this Act, we and our generation subsidiaries, in conjunction with the affected local and municipal governments, undertake various programs, including scholarships and financial assistance to low-income residents.

Under the Act for Supporting the Communities Surrounding Power Plants, activities required to be undertaken under the Act are funded partly by the Electric Power Industry Basis Fund (see “—Sales and Customers—Electricity Rates”) and partly by KHNP as part of its budget. KHNP is required to make annual contributions to the affected local communities in an amount equal to Won 0.25 per kilowatt hour of electricity generated by its nuclear generation units during the one-year period before the immediately preceding fiscal year and Won 5 million per thousand kWkilowatts of hydroelectric generation capacity. In addition, under the Korean tax law, KHNP is required to pay local tax levied on its nuclear generation units in an amount equal to Won 0.50 per kilowatt hour of their generation volume in the affected areas and Won 2 per 10 cubecubic meters of water used for hydroelectric generation.

Prior to the construction of a generation unit, our generation subsidiaries perform an environmental impact assessment which is designed to evaluate public hazards, damage to the environment and concerns of local residents. A report reflecting this evaluation and proposing measures to address the problems identified must be submitted to and approved by the Ministry of Trade, Industry and Energy following agreement with related administrative bodies, including the Ministry of Environment prior to the construction of the unit. Our generation subsidiaries are then required to implement the measures reflected in the approved report.

Despite these activities, civic community groups may still oppose the construction and operation of generation units (including nuclear units), and such opposition could adversely impact our construction plans for generation units (including nuclear units) and have a material adverse effect on our business, results of operations and cash flow.

Nuclear Safety

KHNP takes nuclear safety as its top priority and continues to focus on ensuring the safe and reliable operation of nuclear power plants. KHNP also focuses on enhancing corporate ethics and transparency in the operation of its plants.

KHNP has a corporate code of ethics and is firmly committed to enhancing nuclear safety, developing new technologies and improving transparency. KHNP has also established the “Statement of Safety Policy for

Nuclear Power Plants” to ensure the highest level of nuclear safety. Furthermore, KHNP invests approximately 5% of its total annual sales into research and development for the enhancement of nuclear safety and operational performance.

KHNP implements comprehensive programs to monitor, ensure and improve safety of nuclear power plants. In order to enhance nuclear safety through risk-informed assessment, KHNP conducts probabilistic safety assessments, including for low power-shutdown states, for all its nuclear power plants. In order to systematically verify nuclear safety and identify the potential areas for safety improvements, KHNP performs periodic safety reviews on a 10-year frequency basis for all its operating units. These reviews have been completed for Kori units 1, 2, 3 and 4, YonggwangHanbit units 1, 2, 3 and 4, UlchinHanul units 1, 2, 3 and 4 and Wolsong units 1, 2, 3 and 4. Reviews for YounggwangHanbit units 5 and 6 and Hanul units 5 and 6 are in progress. In order to enhance nuclear safety and plant performance, KHNP has established a maintenance effectiveness monitoring program based on the maintenance rules issued by the United States Nuclear Regulatory Commission, which covers all of KHNP’s nuclear power plants other than the Shin-Kori unit 1. KHNP is currently developing advanced maintenance rule implementation programs for Shin-Kori unit 1 and nuclear power plants to be constructed in the future.commercial operation.

KHNP has developed the Risk Monitoring System for operating nuclear power plants, which it implements in all of its nuclear power plants. The Risk Monitoring System is intended to help ensure nuclear plant safety. In addition, KHNP has developed and implemented the Severe Accident Management Guidelines and is developing the Severe Accident Management Guidelines for Low Power-Shutdown States in order to manage severe accidents for all of its nuclear power plants.

KHNP conducts various activities to enhance nuclear safety such as quality assurance audits and reviews by the KHNP Nuclear Review Board and reviews by the KHNP operational safety review team, which consists of former employees of KHNP and experts from academia and internal research institutes.Review. KHNP maintains a close relationship with international nuclear organizations in order to enhance nuclear safety. In particular, KHNP invites international safety review teams such as the World Association of Nuclear Operators (“WANO”) Peer Review Team the International Atomic Energy Agency (“IAEA”) and the Operational Safety ReviewExpert Mission Team to its nuclear plants for purposes of meeting international standards for independent review of its facilities. KHNP actively exchanges relevant operational information and technical expertise with its peers in other countries. For example, in March 2011, Shin-Wolsong 1November 2013, Wolsung 2 hosted the WANO Pre-Startup Peer Review and Ulchin 5 and 6 conducted the WANO Peer Review and Hanul 3 conducted the WANO Follow-up Peer Review in September 2011.February 2014. KHNP also invited the WANO Corporate Peer Review Team for the first time in November 2013. The recommendations and findings from this event were shared with KHNP’s other nuclear plants to implement improvements at such plants.

The average level of radiation dose per unit amounted to a relatively low level of 0.530.46 man-Sv in 2011,2012, which was substantially lower than the global average in 20102012 of 0.790.76 man-Sv/year as reported in the WANO performance indicator report.

Recently, inIn response to the damage to the nuclear facilities (including nuclear meltdowns) in Japan as a result of the tsunami and earthquake in March 2011, the Government established a Nuclear Safety Commission in July 2011 for neutral and independentconducted additional safety appraisals, subjectinginspections on nuclear power plants to additional safety inspections by a group of experts from governmental authorities, and civic groups and requiringacademia. As a result of such inspections, the Government required KHNP to perform 46 comprehensive safety improvement measures. The Government also established the Nuclear Safety & Security Commission in October 2011 for neutral and independent safety appraisals. KHNP developed 10 additional measures through benchmarking overseas cases and the internal analysis of current operations. KHNP plans to implement these measures, which are expected to be completed by 2015, at total expected cost of approximately Won 1.1 trillion. As of December 31, 2013, KHNP had completed 32 of such measures.

Low and intermediate level waste, or LILW, and spent fuels are stored in temporary storage facilities at each nuclear site of KHNP. The temporary LILW storage facilities at the nuclear sites will be sufficient to accommodate all LILWs produced up to 2014. We expect that the Korea Radioactive Waste Management CorporationAgency (“KRMC”KORAD”) will complete the construction of a LILW disposal facility in the city of Gyeongju by June 2014, and starting from December 2010, LILW stored in temporary storage facilities at UlchinHanul and Wolsong was transferred to a disposal facility in the city of Gyeongju.

In order to increase the storage capacity of temporary storage facilities for spent fuels, KHNP has been pursuing various projects, such as installing high-density racks in spent fuel pools and building dry storage facilities and transporting the spent fuels to other nuclear units within a nuclear site.facilities. Through these activities, we expect that the storage capacity for spent fuels in all nuclear sites will be sufficient to accommodate all the spent fuels produced by 2016. The policy for spent fuel management options is currently under development.

TheIn 2009, the Radioactive Waste Management Act (“RWMA”) was enacted in an effort to centralize management of the disposal of spent fuel and low and intermediate level radioactive wasteLILW and enhance the security and efficiency of related management processes. The RWMA became effective on January 1, 2009 and designated KRMCdesignates KORAD to manage the disposal of spent fuels and low and intermediate level radioactive waste.LILW. Pursuant to the RWMA, the Government has established the Radioactive Waste Management Fund. The management expense for LILW is paid when LILW is transferred to KRMC,KORAD, and the charge for spent fuel is paid based on the quantity ofgenerated every quarter. LILW-related management costs and charges for spent fuel generatedare reviewed by the Ministry of Trade, Industry and Energy every quarter.two years. In December 2012, such costs and charges were increased by a committee composed of Government officials, KHNP, Korea Radioactive Waste Management Corporation and experts in finance and accounting. This may result in an increase in future expenses that KHNP may incur in relation to radioactive waste.

All of KHNP’s nuclear plants are currently in compliance with Korean law and regulations and the safety standards of the IAEA in all material respects.

Since For a description of certain past incidents relating to quality assurance in respect of KHNP, see Item 3D. “Risk Factors—Recent findings of falsified testing results and bribery and the submissionsubsequent prolonged shutdowns of certain of our annual report on Form 20-F in June 2011, there have been no significant safety-related events or accidents in KHNP’s nuclear power plants that would have a material adverse effect on us.generation units may adversely hurt our reputation, business, results of operations and financial condition.”

Decommissioning

Decommissioning of a nuclear power unit is the process whereby the unit is shut down at the end of its life, the fuel is removed and the unit is eventually dismantled. KHNP implements a dismantling policy under which dismantling would take place five to ten years after the unit’s permanent shutdown. Kori unit-1,closure. KHNP renewed the operation license of Kori-1, the first nuclear power plant constructed in Korea, which commenced its operation in 1978, and reached the end of its intended lifefor an additional 10 years in June 2007. KHNP obtained an approvalis also in the process of renewing the operation license of Wolsung-1 to extend the Koriits life cycle, whose original operation for another 10 years, and the unit resumed its operations in January 2008. Wolsong unit-1, the second nuclear power plant in Korea, will reach the end of its intended lifetimelicense expired in November 2012. Applications for continued operationIf the Wolsung-1 license is extended, decommissioning of Wolsong unit-1 were submitteda nuclear power generation unit is not expected to the Ministry of Education, Science and Technology in December 2009 and are currently being reviewed by the Nuclear Safety and Security Commission. Wolsong unit-1 underwent facility improvement in July 2011 and has since normally operated at 100% capacity.

commence before 2017. While it does not carry a cash reserve for its decommissioning liability, KHNP retains full financial and operational responsibility for decommissioning its units.

KHNP has accumulated the decommissioning cost as a liability since 1983. The decommissioning costs of nuclear facilities were estimated based on the study by the related committee andare defined by the Radioactive-Waste Management Act, which requires KHNP to credit annual appropriations separately. The decommissioningThese costs are estimated based on studies conducted by the relevant committees, and are reviewed by the Ministry of Knowledge EconomyTrade, Industry and Energy every two years.

In December 2012, estimated decommissioning costs were increased in consideration of overseas cases of decommissioning, inflation rate assumptions, changes in the operating environment and other criteria. As a result, KHNP was required to accrue additional provisions due to increased future decommissioning costs, and as of December 31, 2013, KHNP accrued Won 15,427 billion for the cost of dismantling and decontaminating existing nuclear power plants, which consisted of dismantling costs of nuclear plants of Won 9,888 billion and dismantling costs of spent fuel and radioactive waste of Won 5,539 billion. For the accounting treatment of decommissioning costs, see Item 5A. “Operating Results—and Financial Review and Prospects—Critical Accounting Policies—Decommissioning Costs.”

Overseas Activities

We are actively engaged in a number of overseas activities. We believe that such activities help us to facilitate procurement of requisite fuels and diversify our revenue streams by leveraging the operational experience of us and our subsidiaries gathered from providing a

full range of services, such as power plant construction and specialized engineering and maintenance services in Korea, as well as to establish strategic relationships with a number of countries that are or may become providers of fuels.

The table set below summarizes theour overseas projects that we are currently pursuing based on binding agreements.projects.

 

Country

  

Project Period

  

Project Description

Generation Projects:

Ilijan, PhilippinesUnited Arab Emirates

December 2009 to May 2020Construction, operation and support for four 1,400 megawatt nuclear power generation units

United Arab Emirates

  March 19992011 to June 2022August 2039  1,200-megawatt1,600 megawatt combined-cycle gas power plant project (BOT)(BOO)(1)(4)

Naga, PhilippinesJordan

  Since February 2006October 2009 to December 2035  242.5-megawatt373 megawatt combined-cycle power plant (O&M/M&A)in Al Qatrana (BOO)(2)(4)

Cebu, PhilippinesJordan

  September 2012 to June 2011 to May 20362039  200-megawatt CFBC573 megawatt diesel engine power plant in Almanakher (BOO)((4)

Jordan

January 2013 to January 2035Construction and operation of a wind farm in Fujeij (BOO)3(4)

Rabigh, Saudi Arabia

July 2009 to April 2033) coal-fired1,204 megawatt oil-fired power plant (BOO)(4)(4)

Shanxi, China

  April 2007 to April 2056  5,489-megawatt6,887 megawatt coal-fired power plants (BOO)(4)(4) and coal mine projects

Gansu, China

  September 2005 to April 2029  99-megawatt99 megawatt wind power plants (BOO)(4)(4)

Inner Mongolia, China

  May 2007December 2006 to December 20352032  990-megawatt991 megawatt wind power plants (BOO)((4)

Liaoning, China

July 2012 to July 2032226 megawatt wind power plant (BOO)(4)

Vietnam

December 2014 to December 20431,200 megawatt coal-fired power plants project (BOT)(1)

Thailand

2011 to 2037111 megawatt combined-cycle power plant (BOO)(4)

Thailand

2012 to 20338 megawatt solar power plant (BOO)(4)

Ilijan, Philippines

November 1997 to May 20221,200 megawatt combined-cycle power plant project (BOT)(1)

Naga, Philippines

Since February 2006200.8 megawatt power plant (O&M)(2)

Cebu, Philippines

February 2008 to May 2036200 megawatt CFBC(3)4 coal-fired power plant (BOO))(4)

India

February 2012 to December 2039Construction, O&M of a 388 megawatt combined-cycle power plant

United States

2013 to 2065300 megawatt solar power plant in Nevada (BOO)(4)

United States

Since September 2012Construction and operation of a 80 megawatt Novus 1 wind farm project

Country

  

Project Period

  

Project Description

Liaoning, ChinaUnited States

  AprilSince December 2012Construction and operation of a 40 megawatt Novus 2 wind farm project

Mexico

September 2010 to April 2031May 2038  226-megawatt wind433 megawatt combined-cycle power plant project (BOO)(4)

ThailandChile

  2011June 2014 to 2037October 2031  Purchase of minority equity interest in Navanakorn Electric Co.517 megawatt combined cycle gas turbine power plant (BOO)(4)

IndonesiaNigeria

  Since July 20102007  PurchaseAcquisition of an equity interest in Egbin Power Plc for operation and maintenance of PT Bayan Resources Tbka 1,320 megawatt gas-fired power plant in Nigeria

Exploration and Production Projects:

Indonesia

  Since July 2009  Purchase of equity interest of PT Adaro Energy Tbk

BhutanIndonesia

  AprilSince August 2010Purchase of equity interest of PT Bayan Resources Tbk

Indonesia

Since August 2011 toPurchase of equity interest of LongDaliq mines

Australia

Since January 2008Moolarben thermal coal mine development

Australia

Since November 2007Share subscription of Cockatoo Coal Limited, a coal development company

Australia

Since July 2010Bylong thermal coal mine development

Australia

Since June 2012  Bhutan Semtohka substation upgradation with 220/66kV50/63MVA transformerAcquisition of equity interest of Amber Energy Company, an operator of Decker and Black Cutte mines

IndiaCanada

  September 2011 to 2013Since June 2009  11kV feeder separation program for separationShare subscription of non-agricultural and agricultural consumers, replacement of bare Low Tension line with Aerial Bunched cable and meterization of unmetered consumers in rural areasDenison Mines, a uranium development company

IndiaCanada

From December 2007Uranium exploration project in the Cree East

Canada

  January 20122008 to December 2048May 2013  PurchaseUranium exploration project in the Waterbury Lake

United States

Since July 2012Acquisition of minority interest in Energy Fuel Inc., a minorityDenver-based uranium producer, in exchange for equity interest in Strathmore Minerals Corp.

Niger

Since December 2009Share subscription of Pioneer Gas Power of India for construction, operation and maintenance ofANCE, a combined-cycle power planturanium development company

Nigeria

  Since March 2006  Exploration of oil and gas for two offshore blocks

Nigeria

  Since October 2008  Development of downstream projects in Nigeria

NigeriaFrance

  Since 2007Acquisition of majority interest in Egbin Power Plc, a power plant owner and operator in Nigeria

Jordan

MayJune 2009 to December 2035373-megawatt combined-cycle power plant (BOO)(4)

Jordan

March 2012 to June 20382015  Construction and operation of a diesel engine poweruranium enrichment plant in Almanakher, Jordan

Saudi Arabia

July 2009 to March 20331,204-megawatt oil-fired power plant (BOO)(4)

UAE

March 2011 to March 20391,600-megawatt combined-cycle gas power plant project (BOO)(4)

UAE

December 2009 to May 2020Construction, operation and support for four 1,400-megawatt nuclear power generation units

Niger

Since December 2009Share subscription of ANCE, a uranium development company

Australia

Since January 2008Moolarben thermal coal mine development

Country

  

Project Period

  

Project Description

Transmission and Distribution projects:

AustraliaIndia

  Since November 2007September 2011 to 2014  Share subscription11kV feeder separation program for separation of Cockatoo Coal Limited, a coal development company

Australia

Since July 2010Bylong thermal coal mine development

Canada

December 2007 to August 2012Uranium exploration projectnon-agricultural and agricultural consumers, replacement of bare low tension line with aerial bunched cable and meterization of unmetered consumers in the Cree East

Canada

January 2008 to May 2013Uranium exploration project in the Waterbury Lake

Canada

Since June 2009Share subscription of Denison Mines, a uranium development company

United States

2013 to 2065Construction and operation of a solar power plant in Nevada (BOO)(4)

United States

Since February 2012Acquisition of minority interest in Strathmore Minerals Corp. in relation to a uranium development project in Wyoming

Mexico

January 2011 to May 2038433-megawatt combined-cycle power plant project (BOO)(4)

France

June 2009 to 2015Construction and operation of a uranium enrichment plantrural areas

Kazakhstan

  February 2011 to 2013December 2014  Modernization of 17 substations in Actub, Kazakhstan

KazakhstanDominican Republic

  Since MarchMay 2011 to May 2014  ConstructionRehabilitation of 325 km of 220kV transmission lines in Moniak, Kazakhstanelectricity distribution networks

 

Notes:

 

(1)Represents “build, operate and transfer” projects.
(2)Represents “rehabilitation, operation, maintenance and management” projects
(3)Represents “circulating fluidized bed combustion” projects.
(4)Represents “build, own and operate” projects.

While strategically important, we believe that our overseas activities, as currently being conducted, are not in the aggregate significant in terms of scope or amount compared to our domestic activities. In addition, a number of the overseas contracts currently being pursued are based on non-binding memoranda of understanding and the details of such projects may significantly change during the course of negotiating the definitive agreements.

A further description of the material overseas activities by us and our subsidiaries by key geographic region is provided below.

AsiaGeneration projects

ChinaUnited Arab Emirates

In September 2005 and April 2006,December 2009, following an international open bidding process, we and China Datangentered into a prime contract with the Emirates Nuclear Energy Corporation (the “ENEC”), a state-owned nuclear energy provider of the People’s Republic of China formed joint venturesUnited Arab Emirates (“UAE”), to design, build and help operate four wind-powered generation projects in China, consisting of one unit in Gansu province with total capacity of 49.3 megawatts and three units in Inner Mongolia with total capacity of

139.4 megawatts. Since then, one unit with capacity of 49.5 megawatts has been added in Gansu and thirteen units with total capacity with 851.4 megawatts have been added in Inner Mongolia. In Liaoning province, we have developed five units under an understanding with the government of Chaoyang City. In November 17, 2011, one unit with total capacity of 45 megawatts was added to Inner Mongolia and one unit with total capacity of 48 megawatts was added to Liaoning. The joint ventures were capitalized with RMB 271 million for the Gansu projects, RMB 3,252 million for the Inner Mongolia projects and RMB 678 million for the Liaoning projects. One-third of the investment was funded with equity contribution and the remaining two-thirds with debt. We and China Datang Corporation hold 60:40 equity interests in each of the aforementioned joint ventures and we participate in the projects through our wholly-owned subsidiary, KEPCO Neimnggu International Limited. Of the 25 windcivil nuclear power generation units constructedto be located in Barakah, a region approximately 270 kilometers from Abu Dhabi, for the UAE’s peaceful nuclear energy program. The contract amount for the project is US$18.6 billion, with the term of the contract to last from December 27, 2009 to May 1, 2020. Under the contract, we and the subcontractors, some of which are our subsidiaries, are to perform various duties in connection with the project, including, among others, (i) designing and constructing four nuclear power generation units (each with a capacity of 1,400 megawatts), (ii) supplying nuclear fuel for three fuel cycles including initial loading (with each cycle currently projected to last for approximately 18 months), and (iii) providing technical support, training and education to the plant operation personnel. The target completion dates for the four units are set for May 2017, May 2018, May 2019 and May 2020.

In addition, in order to foster a long-term strategic partnership and stable management of the units post-construction, we currently plan to make an equity investment in a project company established by ENEC. Details of such investment, including its size and structure, remain subject to further negotiation at this time, and we plan to make further disclosures regarding such investment in due course and as appropriate.

In October 2010, a consortium, which included us, was selected by Abu Dhabi Water & Electricity Authority (“ADWEA”), a state-run utilities provider in the aforementioned areasUnited Arab Emirates, as the preferred bidder in China, 18 unitsan

international bidding for the construction and operation of the combined-cycle natural gas-fired electricity generation facilities in Shuweihat, UAE with a totalan expected aggregate generation capacity of 826 megawatts are currently in operation. These projects are currently generating additional revenue from the clean development mechanism (CDM) business.

We formed a limited partnership with Shanxi International Electricity Group and Deutsche Bank in China to develop and operate power projects and coal mines in Shanxi province, China, which was approved by the Chinese government in April 2007. As of December 31,1,600 megawatts. In February 2011, the total installed capacity was 5,489 megawattsconsortium entered into a formal contract with ADWEA for the construction and our equity ownership inoperation of the partnership was 34%, representing 1,867 megawatts in installed capacity.

Philippines

We are currently engaged ingeneration facilities. This project involves three major power projects in the Philippines: (i) a “build, operateyears of construction starting from March 2011, and transfer”25 years of a 1,200-megawatt combined-cycle power plant project in Ilijan, construction of which began in November 1997 and was completed in June 2002, and operation by us until 2022 (the project cost of the Ilijan project was US$710 million, for which project finance on a limited recourse basis was provided), and (ii) acquisition of a 40.0% equity interestfollowing its completion in SPC Power Corporation, an independent power producer operating a 242.5-megawatt Naga power complex in Cebu, the Philippines, in February 2006 for which rehabilitation, operation, maintenance and management was completed in March 25, 2012 followed by six months of operation and maintenance thereafter and (iii) a “build, operate and own” of a 200-megawatt CFBC coal power plant in Cebu for which construction began in February 2008 and was completed in May, 2011, followed by operation thereof until 2036. The project cost of the Cebu project was US$451 million, for which project finance on a limited recourse basis was provided.

On December 24, 2011, our contract to operate and maintain a 650-megawatt oil-fired power plant project in Malaya expired. We are currently in the process of transferring this project to National Power Corporation, a state-owned company in the Philippines. We expect the transfer process to take up to two years.

Indonesia

On July 23, 2009, we, together with KOSEP, purchased a 1.5% equity interest in PT Adaro Energy Tbk (“Adaro”) for an aggregate purchase price of US$46 million. Adaro is the second largest coal producer in Indonesia and the fifth largest coal exporter in the world, and has produced a total of 50 million tons of coal in 2011. As part of this investment, we are entitled to an annual coal procurement of 3 million tons per year.

On August 19, 2010, we purchased a 20% equity interest in PT Bayan Resources Tbk (“Bayan”), an Indonesian mining company, for a purchase price of US$518 million. Bayan is engaged in open cut mining of various coal qualities from mines located primarily in East and South Kalimantan, and has produced 20 million tons of coal in 2011. In addition, because Bayan owns the largest coal terminal and the only floating transfer-station in Indonesia, we believe that the acquisition will improve our access to much-needed transportation infrastructure within Indonesia. As part of this investment, we are entitled to an annual coal procurement of 2 million tons per year between 2012 and 2014 and 7 million tons per year beginning in 2015.

We expect that both of our investments in Indonesia will help us secure a more stable supply of coal for power generation and help us hedge against fluctuations in fuel prices.

Kazakhstan

On February 23, 2011, a consortium led by us, Hyundai Engineering & Construction and Hyundai Corporation won a power transmission and variation project from Kazakhstan Electricity Grid Operating Company (“KEGOC”), a Kazakhstan state-run company. This US$100 million project will be conducted on an engineering, procurement and construction (EPC) basis, in connection with which are modernizing 17 substations in Actub, Kazakhstan. The project is expected to be completed by the end of 2013. The consortium also won an additional US$46 million project from KEGOC in March 1, 2011 to construct power transmission facilities in Moniak, Kazakhstan. The Moniak project involves the construction of 200kV transmission lines with a total length of 325km, and is expected to be completed by the end of 2012.

Bhutan

In April 2011, a consortium led by us entered into an agreement with the Bhutan Electricity Authority for the upgrade of the Semtohka substation and construction of a power transformer for an estimated project cost of US$2.6 million. Due for completion by the end of June 2012, this project is expected to create 63 megavolt-amperes of transformer capacity.

India

In September 2011, a joint venture company established by us and Megha Engineering & Infrastructures Ltd. (“Megha”) entered into an agreement with M.P. Paschim Kshetra Vidyut Vitaran Co. Ltd., Indore (“Paschim”) and M.P. Poorv Kshetra Vidyut Vitaran Co. Ltd., Jabalpur (“Poorv”), each a state-controlled electricity provider in India, to improve the overall power distribution network in Madhya Pradesh, India through a feeder separation program, including improvements of transmission lines and installation of power meters in seven rural areas. The joint venture company will be responsible for five of the projects in conjunction with Megha. In addition, we will be separately responsible for the remaining two projects.2014. The total project cost is estimated to be US$100 million. Construction for1.5 billion, of which approximately 20% will be financed through equity investments by the consortium members and the remaining 80% through project beganfinancing. Equity interests in September 2011the consortium are owned by ADWEA (60.0%), Sumitomo (20.4%) and is expected to be completed in 2013.

In March 2012, our wholly-owned generation subsidiary, KOWEPO, purchased a 22.7 % equity interest in Pioneer Gas Power for a purchase price of approximately US$20 million to construct a 388-megawatt combined-cycle power plant in Maharashtra, India.us (19.6%). The total sizeamount of our equity investment in the project which commenced in January 2012, is expected to be approximately US$25056 million, and we expect the power facility to begin commercial operationare participating in 2014. KOWEPO will be responsible for operation and maintenance of the project.

Thailand

On December 23, 2011, our wholly-owned generation subsidiary, KOMIPO, agreed to purchasethis project through a 29% equity interest in Navanakorn Electric Co., a Thailand power company, to jointly develop a combined-cycle power plant project in Thailand with generation capacity of 111 megawatts. The total project cost is currently estimated to be US$187 million, and KOMIPO expects to invest approximately US$15.6 million into this project. This project is expected to involve two years of construction starting from 2011 and 25 years of operation beginning in 2013.

Middle Eastspecial purpose vehicle.

Jordan

In July 2008, a consortium consisting of us and Xenel was selected as the preferred bidder to “build, own and operate” a gas-fired power plant with installed capacity of 373 megawatts in Al Qatrana, near Amman, Jordan. ConstructionAfter entering into definitive agreements in October 2009, construction of the power plant began in May 2009March 2010 and was completed in December 2011. The total cost of construction was approximately US$460 million. Operation of the power plant will be for a period of 25 years lasting until 2036.2035. We and Xenel established a joint venture to oversee the project, with us and Xenel holding an 80:20 equity interest, respectively. We expect our total investment in the project to be approximately US$11496 million. We believe that this project will help us expand our business in the Middle East and position us as a competitive power producer in the global market.

OnIn January 30, 2012, a consortium consisting of us, Mitsubishi Corporation and Wartsila Development & Financial Services was selected by National Electric Power Corporation, a state-run electricity provider in Jordan, to construct and operate a diesel engine power project in Almanakher with an expected total generation capacity of 600573 megawatts. In August 2012, we established a special-purpose vehicle for the purpose of carrying out the project and on September 24, 2012, the consortium entered into a power purchase agreement with the National Electric Power Company. This project involvesis comprised of three phases and is scheduled for completion by September 2014. The project is expected to require a construction period of two years of construction beginning in April 2012 followed by an operational period of 25 years of operation upon target completion of the power plant in 2014. Phase I of the project consists of partial completion of construction by May 2013, after which we will begin partial operations of the power plant.years. The total project cost is currently estimated towill be US$800 million, of which approximately 25%funded primarily through debt financing and the remaining will be financed through equity investments by the consortium members and the remaining 75% through debt.members. We expect to invest US$120 million and hold a 60% equity interest in the consortium. We plan

In January 2013, we were selected by Ministry of Energy and Mineral Resources of Jordan as an independent power producer to establish“build, own and operate” a subsidiarywind farm with installed capacity of 99 megawatts in Fujeij, which is located on plateau 150 kilometers south of Amman, Jordan. This is the first of a series of projects to take place in Jordan, and we expect to build wind turbines with total capacity amounting up to 1,800 megawatts by 2020. The project involves 20 months of construction and 20 years of operation. Under the contract with Jordan’s Ministry of Energy and Mineral Resources, construction is scheduled to begin in 2014 for completion by the purposeend of participating2016. The total project cost is approximately US$200 million, of which approximately 42% will be financed through equity investments solely from us, and we will be the 100% equity holder of the project and the remaining 58% through debt financing. With this project, we expect to diversify our business portfolio in the consortium.Middle East from the existing nuclear and thermal power plants to renewable energy.

Saudi Arabia

OnIn December 1, 2008, we formed a consortium with ACWA Power International of Saudi Arabia and submitted a bid for the 1,204 megawatt oil-fired power project in Rabigh, Saudi Arabia. In March 2009, we were selected as the preferred bidder, against competitors that included Suez of Belgium, IP of Britain and Oger of Saudi Arabia. The project’s target completion date is 2013 and the project will involve operation of the plant for 20 years with an estimated project cost of US$2.5 billion. We are expected to hold a 40.0% equity interest in the joint venture which will oversee the project. On July 11, 2009, we entered into a power purchase agreement with Saudi Electricity Company. Construction of the project was completed in April 2013, and we will participate in the operation of the plant for 20 years. This project has an estimated project cost of US$2.5 billion. We currently hold a 40.0% equity interest in the joint venture entity, Rabigh Electricity Company, which will oversee the project.

China

In April 2007, we formed a limited partnership with Shanxi International Electricity Group and Deutsche Bank in China to constructdevelop and operate power projects and coal mines in Shanxi province, China, which was approved by the Chinese government. As of December 31, 2013, total capital investment in these projects amounted to US$1.3 billion. We are expected to participate in the operation of the project for a heavy oilperiod of 50 years ending 2056. As of December 31, 2013, the total installed capacity was 6,887 megawatts and our equity interest in the partnership was 34%.

In September 2005 and April 2006, we and China Datang Corporation of the People’s Republic of China formed joint ventures to build four wind-powered generation projects in China, consisting of one project in Gansu province with total capacity of 49.3 megawatts and three projects in Inner Mongolia with total capacity of 139.4 megawatts. Since then, one project with capacity of 49.5 megawatts has been added in Gansu and 15 projects with total capacity with 851.4 megawatts have been added in Inner Mongolia. In Liaoning province, we are developing five projects with total capacity of 226 megawatts under an understanding with the government of Chaoyang City. As of December 2013, 642.5 megawatts and 178.0 megawatts of the aforementioned projects had been developed in Inner Mongolia and Liaoning province, respectively. The joint ventures were capitalized with RMB 271 million for the Gansu projects, RMB 3,297 million for the Inner Mongolia projects and RMB 678 million for the Liaoning projects. One-third of the investment was funded with equity contribution and the remaining two-thirds with debt. We and China Datang Corporation hold 40% and 60% of equity interests, respectively, in each of the aforementioned joint ventures and we are participating in the projects through our wholly-owned subsidiaries. Of the 25 wind power plant at Rabighgeneration projects in Saudi Arabia.the aforementioned areas in China, 20 projects with a total capacity of 919 megawatts are currently in operation. The other five projects are still in the preparation stage.

United Arab EmiratesVietnam

On December 27, 2009, following an international open bidding process, we entered into a prime contract with the Emirates Nuclear Energy Corporation (the “ENEC”), a state-owned nuclear energy provider of the United Arab Emirates (“UAE”), to design, build and help operate four civil nuclear power generation units to be located in Braka, a region approximately 270 kilometers from Abu Dhabi, for the UAE’s peaceful nuclear energy program. The contract amount for the project is US$18.6 billion, with the term of the contract to last from December 27, 2009 to May 1, 2020. Under the contract, we and the subcontractors, some of which are our subsidiaries, are to perform various duties in connection with the project, including, among others, (i) designing and constructing four nuclear power generation units (each with a capacity of 1,400 megawatts), (ii) supplying nuclear fuel for three fuel cycles including initial loading (with each cycle currently projected to last for approximately 18 months), and (iii) providing technical support, training and education to the plant operation personnel. The target completion dates for the four units are set for May 2017, May 2018, May 2019 and May 2020. In addition, in order to foster a long-term strategic partnership and stable management of the units post-construction, we currently plan to make an equity investment in an operation company to be established by ENEC. Details of such investment, including its size and structure, remain subject to further negotiation at this time, and we plan to make further disclosures regarding such investment in due course and as appropriate.

On October 18, 2010,March 2013, a consortium led byconsisting of us and Marubeni, a Japanese corporation, was selected by Abu Dhabi Water & Electricity Authority (“ADWEA”), a state-run utilities provider in the United Arab Emirates, as the preferred bidder in an international biddingMinistry of Industry and Trade of Vietnam for the construction and operation of a 1,200 megawatt coal-fired power plant in Thanh Hoa province, Vietnam. Construction will begin in December 2014 with target completion by December 2018, following which we will handle operation for 25 years. We have entered into a power purchase agreement with Electricity of Vietnam. Total project cost is expected to be US$2.3 billion, of which 25% will be funded by capital contribution and the remaining 75% by debt financing. The share capital of the special purpose entity that will be in charge of this project will be US$ 575 million, and KEPCO and Marubeni will each hold 50% equity interest in such entity.

Thailand

In December 2011, KOMIPO agreed to purchase a 29% equity interest in Navanakorn Electric Co., a Thailand power company, to jointly develop a combined-cycle natural gas-fired electricity generation facilitiespower plant project in Shuweihat, UAEThailand with an expected aggregate generation capacity of 1,600111 megawatts. On February 15, 2011, the consortium entered into a formal contract with ADWEA for the construction and operation of the generation facilities. This project involves three years of construction starting from March 2011, and 25 years of operation following its completion in March 2014 until March 2039. The total project cost is currently estimated to be US$1.5 billion,187 million, and KOMIPO expects to invest approximately US$15.6 million into this project. Following the completion of construction in 2013, this project commenced commercial operation on October 31, 2013 for a period of 25 years.

In September 2012, KOMIPO entered into an agreement with Toyo-Thai Corp. PCL to build and operate a 8 megawatt solar power plant in Ang Thong. The total project cost is currently estimated to be US$26 million, and KOMIPO invested approximately US$0.9 million into this project and acquired a 10% equity interest. Following the completion of construction in 2013, this project commenced commercial operation in March 2013 for a period of 20 years.

Philippines

We are currently engaged in three major power projects in the Philippines: (i) a “build, operate and transfer” of a 1,200-megawatt combined-cycle power plant project in Ilijan, construction of which began in November 1997 and

was completed in June 2002, and operation by us until 2022 (the project cost of the Ilijan project was US$721 million, for which project finance on a limited recourse basis was provided), and (ii) ownership of a 39.6% equity interest in SPC Power Corporation, an independent power producer operating a 200.8-megawatt Naga power complex in Cebu, in which we initially acquired a 40.0% equity interest in February 2006 pursuant to a rehabilitation, operation, maintenance and management (ROMM) agreement, which was completed in March 25, 2012 followed by an approximately 20% will be financed throughtwo-year operation and maintenance period thereafter and (iii) a “build, operate and own” of a 200-megawatt CFBC coal power plant in Cebu for which construction began in February 2008 and was completed in May 2011, followed by operation thereof until 2036. The project cost of the Cebu project was US$451 million, for which project finance on a limited recourse basis was provided.

India

In 2012, KOWEPO purchased a 40% equity investments by the consortium members and the remaining 80% through project financing. Equity interestsinterest in the consortium are owned by ADWEA (60.0%), Sumitomo (20.4%) and us (19.6%), subjectPioneer Gas Power for a purchase price of approximately US$35 million to further change.construct a 388-megawatt combined-cycle power plant in Maharashtra, India. The total amountsize of our equity investmentthe project, which commenced in the projectFebruary 2012, is expected to be approximately Won 60.4 billion,US$274 million and we are participatingexpect the power facility to begin commercial operation in this2014. KOWEPO will be responsible for operation and maintenance of the project through a special purpose vehicle.

North Americauntil December 2039.

United States

OnIn October 31, 2011, a consortium consisting of our wholly-owned generation subsidiary, KOMIPO, and POSCO Engineering Co., was selected by the City of Boulder as the winning bidder in an auction for the construction and operation of a US$1 billion solar power plant project in Nevada, the United States with generation capacity of 300-megawatts. The total size of the project is expected to be approximately US$300 million, and KOMIPO expects to invest approximately US$90 million and hold a 30% equity interest in the project. Construction of the project commenced in September 2013and is expected to commence in September 2013 and be completed by December 2014, to be followed by 50 years of operation from 2015 to 2065.

On FebruaryIn 2012, KOSEP completed construction of wind farm projects in Oklahoma, KODE Novus 1 LLC and KODE Novus 2 LLC. The two wind farm projects have generation capacities of 80 megawatts and 40 megawatts, respectively, and KOSEP commenced operation of these projects in December 2012 we signedfor a term of 20 years. The total project cost is expected to be US$27.8 million, and KOSEP will hold a 50% and 49% equity interest in these wind farm projects, respectively.

Mexico

In August 2010, a consortium led by us was selected as the preferred bidder in an international auction for the construction and operation of the Norte II gas-fueled combined-cycle electricity generation facility in Chihuahua, Mexico, as ordered by the Commission Federal de Electricidad (“CFE”) of Mexico. The consortium established a special purpose vehicle, KST Electric Power Company (“KST”), to act as the operating entity, and in September 2010, KST entered into a power purchase agreement with Strathmore Minerals Corp.CFE in relation to the construction and operation of a 433-megawatt combined-cycle power plant at Chihuahua in Mexico. In October 2010, KST was licensed by the Mexican government as an independent power producer, which allows it to produce and sell electricity to CFE during the specified contract period. The project will be undertaken on a “build, own and operate” basis. The total cost of the project is approximately US$430 million. We hold a 56% equity interest in the consortium, with the remaining equity interests held by Samsung C&T (with a 34% equity interest) and Techint, a Mexico company (with a 10% equity interest). Approximately 22.5% of the total project costs will be financed through equity investments by the consortium and the remaining 77.5% through project financing. Commercial operation commenced in December 2013 following completion of the construction, and the operation period will run for 25 years until 2038. Our wholly-owned subsidiary, KEPCO Energy Service Company, currently manages the operation of the project.

Chile

In November 2013, following an international competitive bidding process, KOSPO and Samsung C&T Corporation were awarded a 517 megawatt combined cycle gas turbine power plant project by BHP Billiton and entered into a long-term contract to build, own, operate and maintain the power plant to supply electric power to a copper mines in Chile. The term of the contract is 15 years from the commercial operation date, with an option to extend the term three times by five years each. In order to facilitate project management, KOSPO established a wholly-owned subsidiary, KOSPO Chile SpA, which made an investment into a special purpose company, Kelar S.A. As of December 31, 2013, KOSPO Chile SpA’s equity interest in the project was 65%. Construction for the project is scheduled to begin in June 2014 with commercial operation expected to begin in October 2016.

Nigeria

In October 2007, we invested US$9.1 million in KEPCO Energy Resource Nigeria Ltd. (“Strathmore”KERNL”), a joint venture with Energy Resource Ltd., a Nigerian company. We currently own 30.0% of KERNL’s equity capital. In May 2007, KERNL entered into a share purchase agreement with the Nigerian government for the purchase of 70% of the equity capital of Egbin Power Plc in Nigeria, which owns and operates the Egbin power plant, a 1,320-megawatt gas-fired power plant in Lagos, Nigeria for a consideration of approximately US$407 million. The acquisition was completed in October 2013, and in June 2013, we entered into a contract with Egbin Power Plc for the operation and maintenance of the Egbin power plant. The contract price was US$315 million. In November 2013, we commenced operation and maintenance services for a term of five years and will expire in October 2018.

Exploration and Production Projects

Indonesia

In July 2009, we, together with KOSEP, purchased a 1.5% equity interest in PT Adaro Energy Tbk (“Adaro”) for an aggregate purchase price of US$47 million. Adaro is the second largest coal producer in Indonesia and the fifth largest coal exporter in the world, and has produced a total of 52 million tons of coal in 2013. As part of this investment, we are entitled to acquire approximately 14an annual coal procurement of 3 million common shares of Strathmoretons per year. In August 2010, we purchased a 20% equity interest in PT Bayan Resources Tbk (“Bayan”), an Indonesian mining company, for a purchase price of U$8US$518 million. Bayan is engaged in open cut mining of various coal qualities from mines located primarily in East and South Kalimantan, and has produced approximately 13 million tons of coal in 2013. In addition, because Bayan owns the largest coal terminal and the only floating transfer-station in Indonesia, we believe that the acquisition will improve our access to much-needed transportation infrastructure within Indonesia. As part of this investment, we are entitled to an annual coal procurement of 2 million tons per year between 2012 and 2014 and 7 million tons per year beginning in 2015. We expect that both of our investments in Indonesia will help us secure more stable supply of coal for power generation and help us hedge against fluctuations in fuel prices.

In August 2011, KOSPO entered into an agreement with PT. Kedap Sayaaq to acquire a result10% equity interest in LongDaliq mines located in western Kalimantan, Indonesia. KOSPO acquired such equity interest in 2013, and will secure up to three million tons of coal per year through a coal off-take agreement.

Australia

In January 2008, a consortium consisting of Korea Resources Corporation, a Government-controlled enterprise, Hanwha Corporation, us and four of our wholly owned generation subsidiaries, namely, KOSEP, KOMIPO, KOWEPO and KOSPO, entered into an agreement with Felix Resources Limited, an Australian coal mining company, to develop the Moolarben coal mine located in Western Coal Fields, New South Wales, Australia. Under the terms of agreement, the consortium purchased a 10% equity interest in the Moolarben

project from Felix, of which we and our four generation subsidiaries own an aggregate of 5% and 80% equity interests, respectively of the project is held by Felix which was acquired by Yancoal Australia in December 2009. In 2013 Moolarben produced 6.4 million tons of coal, of which we and our four generation subsidiaries imported 2.5 million tons in 2013. We and our four generation subsidiaries have a coal off-take agreement for a total of 2.5 million tons of coal per annum.

In November 2007, we and EWP entered into a share subscription agreement with Cockatoo Coal Limited (“Cockatoo”), a coal exploration and mining company located in Australia. We and EWP currently hold a 1.1% equity interest, in aggregate, in Cockatoo after having made a total investment of A$21.8 million. Cockatoo has several coal exploration projects in Queensland and New South Wales and one production project in Bowen Basin, Queensland, Australia.

In July 2010, Kepco Australia Pty Ltd., our wholly-owned subsidiary, entered into an agreement with Anglo American Metallurgical Coal Pty Ltd. to acquire 100% of the equity interest in Anglo Coal (Bylong) Pty Ltd., a wholly-owned subsidiary of Anglo, for a purchase price of A$403 million. Bylong owns a bituminous coal mine in New South Wales, Australia. From this acquisition, we hold approximately 14%expect to secure an average of 5.1 million tons of bituminous coal per year from this mine during the period from 2017 to 2052. We and Cockatoo are currently undergoing a feasibility study for this project to explore and develop coal that is of export quality.

In June 2012, KOSPO entered into an agreement with Amber Energy Company, which is the operator of Decker and Black Cutte mines located in Brisbane, Australia. In the event of the initial public offering, which has not yet taken place, KOSPO is entitled to convert convertible bonds to an equity interests of Strathmore. Under this agreement, we haveinterest within one year period from the rightinitial public offering. KOSPO is also entitled to purchase a portion of any future annual uranium production from Strathmore’s properties in Gas Hills, Wyoming. The proceeds from our investment will be used for a “Phase I” exploration and development program. Upon completion of Phase I, we have the right to participate in the “Phase II” development based on an option to purchasesecure up to a total 40% interest in the Gas Hills Properties for an additional investment of U$32 million. With this investment, we will be able to off-take, for the duration of the project operation, 40% of approximately 400two million tons of uranium that are currently expected to be produced from these properties.coal per year through a coal off-take agreement.

Canada

OnIn June 2009, we, together with KHNP, entered into a definitive agreement with Denison Mines Corporation (“Denison”) under which we currently hold a 9.05% equity interest in Denison Mines. Under the terms of the agreement, we are entitled to procure up to approximately 20.0% of Denison’s current annual uranium production, during the period from 2010 to 2015.

In December 14, 2007, a consortium consisting of four Korean companies, namely us, Korea Resources Corporation, Hanwha Corporation and SK EnergyInnovation Co., Ltd., entered into an agreement with CanAlaska Uranium, Ltd., a uranium exploration company located in Canada (“CanAlaska”), to carry out a joint uranium exploration project to search for uranium deposits across mines in the Cree East area, Saskatchewan, Canada. Under the terms of the agreement, the consortium and CanAlaska each hold a 50.0% equity interest in the four-year project. The estimated capital expenditure for the project is C$19 million, all of which is to be bornepaid by the consortium through cash contributions over the term of the project. We have invested C$4.75 million for which we have received a 12.5% equity interest in the project at the end of 2010. If additional capital expenditure is required, the amount in excess of C$19 million is to be shared equally between CanAlaska and the consortium.

OnIn January 30, 2008, a consortium consisting of us, KHNP, KoreaKEPCO Nuclear Fuel Co., Ltd., Hanwha Corporation and Gravis Capital Corp., a Canadian company, entered into an agreement with Fission Energy Corp., a uranium exploration company located in Canada, to carry out a joint uranium exploration project in Waterbury Lake, Saskatchewan, Canada. Under the terms of the agreement, each of the consortium and Fission Energy Corp. holds a 50% equity interest in the three-year project. The estimated capital expenditure for the project is C$15 million, all of which is to be bornepaid by the consortium through cash contributions over the term of the project. Under the terms of the agreement, the consortium is required to purchase a 50% equity interest in the project held by Fission Energy Corp. upon the final payment of cash contributions by the consortium during the term of the project. We have a 20% equity interest in the project and are expected to make estimated cash contributions of C$6 million. During the three-year exploration period, which ended in April 2010, we

discovered a high grade uranium mineralization after drilling 20 sites out of 97 sites. OnIn August 16, 2010, the consortium entered into an additional agreementagreements consisting of a limited partnership agreement, a shareholders agreement and an operating service agreement with Fission Energy Corp. and extended the exploration period to May 2013 in order to enlarge known mineralization and to produce a resource estimate. OnIn April 12, 2011, Fission Energy Corp. exercised a Back-In Option under the limited partnership agreement dated August 16, 2010, and provided to the consortium consideration of C$6 million. As a result of the exercise of the Back-In Option, the Fission Energy Corp.’s equity interest increased by 10% and the consortium’s equity interest was reduced by 10%. Currently, Fission Energy Corp. and the consortium hold a 60% and 40% equity interest, respectively, in the special purpose entity established to operate this project, of which we hold a 16% equity

interest. Subsequent to the exercise of the Back-In Option, the consortium and Fission Energy Corp. isare required to make estimated cash contributions for the project on the basis of their respective equity interest.

United States

On June 15, 2009,July 2, 2012, we together withand KHNP entered intoacquired a definitive agreement with Denison Mines Corporation (“Denison”) under which we currently hold a 15.1%9.4% equity interest in Energy Fuel Inc. (“EFI”), a Denver-based uranium producer, from Denison Minesin exchange for the equity interest we held in Strathmore Minerals Corp. in connection with Denison’s restructuring of its assets based in the United States, including the sale of Strathmore to EFI. EFI will assume the off-take contract between us and remainDenison. Following the largest shareholder thereof. Under the terms of the agreement,off-take contract, we are entitled to procure up to approximately 20.0% of Denison’s current annual uranium production, during the period from 2010 to 2015. For the period from 2016, weand KHNP will also be entitled to procure up to 20.0% of Denison’s annual uranium production provided that we beneficially own 10.0% or more of Denison’s share capital. We procured 159 metricsecure 160 tons of uranium per year until 2015, and will renegotiate on the procurement amounts in 2011 and expect such amounts to increase in the near future.2016.

MexicoNiger

On August 2, 2010, a consortium led by us was selected as the preferred bidder in an international auction for the construction and operation of the Norte II gas-fueled combined-cycle electricity generation facility in Chihuahua, Mexico, as ordered by the Comision Federal de Electricidad (“CFE”) of Mexico. This facility is expected to have a generation capacity of 433 megawatts, and the project will be undertaken on a “build, own and operate” basis. The total size of the project, which commenced in September 2010 and is expected to end in May 2038, is expected to be approximately US$430 million. We hold a 56% interest in the consortium, whose other members are Samsung C&T (with a 34% interest) and Techint, a Mexico company (with a 10% interest). The consortium established a special purpose vehicle, KST Electric Power Company (“KST”), to act as the operating entity, and on September 7, 2010, KST entered into a power purchase agreement with CFE to construct and operate a combined-cycle power plant at Chihuahua in Mexico. In October 2010 KST was licensed by the Mexican government as an independent power producer, which allows it to produce and sell electricity to CFE during the specified contract period.

Australia

On November 7, 2007, we and EWP entered into a share subscription agreement with Cockatoo Coal Limited (“Cockatoo”), a coal exploration and mining company located in Australia. We and EWP currently hold a 4.7% aggregate equity interest in Cockatoo after having made a total investment of A$21.8 million. Cockatoo has several coal exploration projects in Queensland and New South Wales and one production project in Bowen Basin, Queensland, Australia.

On January 2, 2008, a consortium consisting of Korea Resources Corporation, Hanwha Corporation, us and four of our wholly-owned generation subsidiaries, namely, KOSEP, KOMIPO, KOWEPO and KOSPO, entered into an agreement with Felix Resources Limited, an Australian coal mining company, to develop the Moolarben coal mine located in Western Coal Fields, New South Wales, Australia. Under the terms of agreement, the consortium purchased 10% equity interest in the Moolarben project from Felix, of which we and our four generation subsidiaries own an aggregate of 5%, 80% equity interest of the project is held by Felix which was acquired by Yancoal Australia in December 2009. In 2011 Moolarben produced 5 million tons of coal, of which we imported 2.5 million tons in 2011. Our four generation subsidiaries have a coal off-take agreement for a total of 2.5 million tons of coal per annum.

On July 5, 2010, Kepco Australia Pty Ltd., our wholly-owned subsidiary, entered into an agreement with Anglo American Metallurgical Coal Assets Eastern Australia Ltd. to acquire 100% of the equity interest in Anglo Coal (Bylong) Pty Ltd., a wholly-owned subsidiary of Anglo, for a purchase price of A$402 million. Bylong owns a bituminous coal mine in New South Wales, Australia. From this acquisition, we expect to secure an average of 7.5 million tons of bituminous coal per year from this mine during the period from 2016 to 2045. We and Cockatoo are currently undergoing a feasibility study for this project to explore and develop coal that is of export quality.

Africa

In August 2005, a consortium consisting of us, Korea National Oil Corporation, a Government-controlled enterprise, and Daewoo Shipbuilding & Marine Engineering won a bid from the federal government of Nigeria for exploration and production of oil in two off-shore blocks. This consortium holds 60.0% of the equity interest in the special purpose vehicle established to carry out the project regarding these two blocks and we hold 8.8% of the interest in the consortium. In March 2006, the consortium entered into production sharing contracts with Nigerian National Petroleum Corporation in connection with this project. Under these contracts, if the consortium is successful in finding oil, it will be entitled to operate the related facilities for 20 years. However, in January 2009, the government of Nigeria unilaterally decided to void allocation of the oil blocks granted to the consortium based on a claim that the consortium failed to pay full amount of the consideration. Korea National Oil Corporation has filed a suit in the Nigerian court challenging this assertion. On August 20, 2009, the Federal High Court in Nigeria ruled that the Nigerian government illegally cancelled offshore exploration rights with respect to the deep sea oil exploration projects and banned the Nigerian government from further interfering with the consortium. The Nigerian government subsequently appealed the ruling and the case is currently pending in court.

Another consortium consisting of us, KNOC and POSCO Engineering & Construction commenced the development of the downstream projects in Nigeria in 2006. While an agreement in-principle was entered into with the Nigerian authorities regarding the project development in October 2008, due to the court proceedings discussed above, these projects are currently on hold.

In October 2007, we invested US$9.1 million in KEPCO Energy Resource Nigeria Ltd., or KERNL, a joint venture with Energy Resource Ltd., a Nigerian company. We currently own 30.0% of KERNL’s equity capital. In May 2007, KERNL entered into a share purchase agreement with the Nigerian government for the purchase of 51.0% of the equity capital of Egbin Power Plc in Nigeria, which owns and operates the Egbin power plant, for a consideration of approximately US$280 million. The acquisition remains to be completed.

On December 30, 2009, we and KHNP, our wholly-owned nuclear generation subsidiary, entered into a definitive agreement with Areva NC Expansion (“ANCE”) to purchase 1.0 million shares, or 15.0%, of the share capital of ANCE at an aggregate purchase price of EUR 170 million. We are entitled to procure up to approximately 10.0%9.0% of Imouraren SA’s annual uranium production in Niger, which is estimated to be 770626 metric tons based on ANCE’s annual production plan during the period between 20152017 and 2046.2052. Imouraren SA is an ANCE-invested mine operating company. We and KHNP currently hold a 13.5% equity interest in aggregate in ANCE.

EuropeNigeria

In August 2005, a consortium consisting of us, Korea National Oil Corporation (“KNOC”), a Government-owned entity, and Daewoo Shipbuilding & Marine Engineering won a bid from the federal government of Nigeria for exploration and production of oil in two off-shore blocks. The consortium, of which we hold a 8.8% equity interest, holds 60.0% of the equity interest in the special purpose vehicle established to carry out the project regarding these two blocks. In March 2006, the consortium entered into production sharing contracts with Nigerian National Petroleum Corporation in connection with this project. However, in January 2009, the government of Nigeria unilaterally decided to void allocation of the two blocks granted to the consortium based on a claim that the consortium failed to pay full amount of the consideration. KNOC filed a suit in the Nigerian court challenging this decision in August 2009, the final outcome of which is currently pending. In the meanwhile, our projects in Nigeria remain on hold.

France

OnIn June 30, 2009, KHNP acquired a 2.5% equity interest in Societe D. Enrichissement Du Tricastin (“SET Holding”), which was established by Areva for the purpose of constructing and operating a uranium enrichment plant in Tricastin, France. KHNP has invested approximately 129 million Euros for thea 2.5% equity interest, and COGAC SAS and a group led by Japan France Enrichment Investing and Kansai Electric Power in JapanCo. have

acquired a 5% and Suez Energy International in Belgium have also acquired 2.5% and 5.0%4.5% equity interest, respectively, in SET Holding. The maximum production capability of the uranium enrichment plant is eight million7,500 ton Separative Work Unit or, SWU. We believe that this investment will help us secure a more stable and economical supply of enriched uranium.

Transmission and Distribution Projects

India

In September 2011, a joint venture company established by us and Megha Engineering & Infrastructures Ltd. (“Megha”) entered into an agreement with M.P. Paschim Kshetra Vidyut Vitaran Co. Ltd., Indore (“Paschim”) and M.P. Poorv Kshetra Vidyut Vitaran Co. Ltd., Jabalpur (“Poorv”), each a state-controlled electricity provider in India, to improve the overall power distribution network in Madhya Pradesh, India through a feeder separation program, including improvements of transmission lines and installation of power meters in seven rural areas. The joint venture company will be responsible for five of the projects in conjunction with Megha. In addition, we will be separately responsible for the remaining two projects. The total project cost is estimated to be US$100 million, of which US$32 million will be invested in the projects conducted by us and the remaining US$68 million in the projects conducted in conjunction with Megha. Construction for the project began in September 2011 and is expected to be completed in 2014.

Kazakhstan

On February 23, 2011, a consortium led by us, Hyundai Engineering and Hyundai Corporation won a power transmission project from Kazakhstan Electricity Grid Operating Company (“KEGOC”), a Kazakhstan state-run company. This US$100 million project will be conducted on an engineering, procurement and construction (EPC) basis, in connection with which are modernizing 17 substations in Actub, Kazakhstan. The project is expected to be completed by the end of 2014.

Dominican Republic

In May 2011, we entered into an agreement with Corporación Dominicana de Empresas Eléctricas Estatales (“CDEEE”) to improve power distribution networks in three local districts in Dominican Republic. We will construct 1,294 kilometers of distribution lines and 12,644 electricity poles as part of the rehabilitation project. Total project cost is expected to be US$51 million, and we will be in charge of design, procurement and construction. We expect to complete construction of such lines and poles by May 2014.

North Korea

Kaesong Complex

Since 2005, we have provided electricity to the industrial complex located in Kaesong, North Korea, which was established pursuant to an agreement made during the summit meeting of the two Koreas in June 2000. The Kaesong complex is the largest economic project between the two Koreas and is designed to combine the

Republic’s capital and entrepreneurial expertise with the availability of land and labor of North Korea. In March 2005, we built a 22.9 kilovolt distribution line from Munsan substation in Paju, Gyeonggi Province to the Kaesong complex and became the first to supply electricity to pilot zones such as ShinWon Ebenezer. In April 2006, we started to construct a 154 kilovolt, 16 kilometer transmission line connecting Munsan substation to the Kaesong complex as well as Pyunghwa substation in the complex and began operations in May 2007.

As of December 31, 2011,2013, we supplied electricity to 232245 units, including administrative agencies, support facilities and resident corporations, using a tariff structure identical to that of South Korea. No assurance can be given that we will not experience any material losses from this project as a result of, among other things, a project suspension or failure of the project as a result of a breakdown or escalation of hostilities in the relationship between the Republic and North Korea. See Item 3D. “Risk Factors—Risks Relating to Korea and the Global Economy—Tensions with North Korea could have an adverse effect on us and the market value of our shares.”

The Light Water Reactor Project

The Korean Peninsula Development Organization, or KEDO, was chartered in March 1995 as an international consortium stipulated by the Agreed Framework, which was signed by the United States and North Korea in October 1994. KEDO signed an agreement with North Korea in December 1995 to construct two light water reactors in North Korea in return for certain nuclear nonproliferation steps to be taken by North Korea. KEDO designated us as its prime contractor to build two units of pressurized light water reactors with total capacity of 2,000 megawatts. We entered into a fixed price turnkey contract with KEDO which became effective on February 3,in 2000. However, when North Korea did not meet the conditions required for the continuation of the project, KEDO suspended the project in December 2003. Following the suspension, KEDO notified us of the termination of the project and the related turnkey contract between KEDO and us. On December 12,In 2006, we entered into a transfer agreement with KEDO. According to the transfer agreement, we assumed substantially all of KEDO’s rights and obligations related to the light water reactor outside of North Korea. In exchange, we waived the right to claim any expenses incurred and any potential claims by subcontractors to KEDO. Pursuant to the terms of the transfer agreement, we are required to report to KEDO the disposal or reuse of the transferred equipment. The gains from the transfer agreement will be shared with KEDO through further negotiations between the two parties.

We decided to dispose of transferred equipment in 2010, the majority of which we sold through an international open bidding process and negotiated agreements in 2011. In January 2012, we disposed of the remaining transferred equipment through a sales contract with KHNP for the remaining Nuclear Steam Supply System equipment. In March 2012, we submitted to KEDO the Final Report on Resale for the transferred equipment under the terms of the transfer agreement. In January 2013, KEDO gave us a final notice that all related terms and conditions of the transfer agreement were terminated.

Insurance

We and our generation subsidiaries carry insurance covering against certain risks, including fire, in respect of key assets, including buildings, equipment, machinery, construction-in-progress and procurement in transit, as well as, in the case of KEPCO, directors’ and officers’ liability insurance. We and our generation subsidiaries maintain casualty and liability insurance against risks related to our business to the extent we consider appropriate. Other than KHNP, neither we nor our generation subsidiaries separately insure against terrorist attacks. These insurance and indemnity policies, however, cover only a portion of the assets that we own and operate and do not cover all types or amounts of loss that could arise in connection with the ownership and operation of these assets. Other than KHNP, neither we nor our generation subsidiaries separately insure against terrorist attacks.

Substantial liability may ariseresult from the operationoperations of nuclear-fueledour nuclear generation units, and from the use and handling of nuclear fuel and possible radioactive emissions associated with such nuclear fuel. KHNP maintains property and liability insurance against risks of its business to the extent required by the related law and regulations or considered as appropriate and otherwise self-insures against such risks. KHNP carries insurance

for its generation units against certain risks, including property damage, nuclear fuel transportation and liability insurance for personal injury and property damage. Each of KHNP’s four power plant complexes hasKHNP carries property damage insurance coverage ofcovering up to US$1 billion per accident in respect of suchfor all properties within its plant complex,complexes, which includes property insurance coverage for acts of terrorism up to US$300 million and for breakdown of machinery up to US$300 million. KHNP maintains a nuclear liability insurance for personal injury and third-party property damage for a coverage of up to Won 50 billion per accident per plant complex, for a total coverage of Won 250 billion. Under the terms of an agreement between KHNP and the Korean Atomic Insurance Pool, this coverage can be extended from Won 50 billion to Won 100 to 120 billion (Won 100 billion for a plant complex with under four units, and additional Won 10 billion added per unit for a plant complex with more than four units). KHNP is also the beneficiary of a Government indemnity with respect to such risks for damage claims of up to Won 50 billion per nuclear plant complex, for a total coverage of Won 250 billion. Under the Nuclear Damage Compensation Act of 1969, as amended, KHNP is liable only up to 300 million Special Drawing Rights, or SDRs, which amounts to approximately US$461463 million, at the rate of 1 SDR = US$1.53571.54171 as posted on the Internet homepage of the

International Monetary Fund on March 12, 2012,April 7, 2014, per single accident; provided that such limitation will not apply where KHNP intentionally causes harm or knowingly fails to prevent the harm from occurring. KHNP will receive the Government’s support, subject to the approval of the National Assembly, if (i) the damages exceed the insurance coverage amount of Won 50 billion and (ii) the Government deems such support to be necessary for the purposes of protecting damaged persons and supporting the development of nuclear energy business. The amount of Government’s support to KHNP for such qualifying nuclear incident would be 300 million SDRs, or the limit of KHNP’s liability, minus the coverage amount of up to Won 50 billion as determined by the National Assembly. While KHNP carries insurance for its generation units and nuclear fuel transportation, the level of insurance is generally adequate and is in compliance with relevant laws and regulations, and KHNP is the beneficiary of a certain Government indemnity which covers a portion of liability in excess of the insurance, suchinsurance. Such insurance is limited in terms of amount and scope of coverage and does not cover all types or amounts of losses which could arise in connection with the ownership and operation of nuclear plants. Accordingly, material adverse financial consequences could result from a serious accident to the extent it is neither insured nor covered by the government indemnity.

See Item 3D. “Risk Factors—Risks Relating to KEPCO—The amount and scope of coverage of our insurance are limited.”

Competition

We currently transmitAs of December 31, 2013, we and distribute substantially allour generation subsidiaries owned approximately 81.5% of the total electricity generation capacity in Korea (excluding plants generating electricity for private or emergency use). New entrants to the electricity business will erode our market share and create significant competition, which could have a material adverse impact on our financial conditions and results of operation.

In particular, we compete with independent power producers with respect to electricity generation. The independent power generators accounted for 13.2% of total power generation in 2013 and 18.5% of total generation capacity as of December 31, 2013. As of December 31, 2013, there were 10 independent power generators in Korea, excluding renewable energy producers. Prior to December 2010, private enterprises had not been permitted to own and operate coal-fired power plants in Korea. However, the Fifth Basic Plan announced in December 2010 included for the first time a plan for independent power producers to own and operate coal-fired power plants, namely four generation units with aggregate capacity of 2,290 megawatts for completion in 2016. In addition, in connection with the Sixth Basic Plan announced in February 2013, the Ministry of Trade, Industry and Energy accepted additional applications from independent power producers for construction of coal-fired power plants. 15 independent power producers applied for construction of a total of 40 additional coal-fired generation units with aggregate generation capacity of 37,100 megawatts, of which the Government approved applications for the construction of six generation units with aggregate generation capacity of 6,000 megawatts. The Government also approved applications for construction of two additional generation units with aggregate generation capacity of 2,000 megawatts to us,prepare for the contingency of failed or delayed construction of the foregoing generation units. Construction for the six generation units is scheduled to be completed between 2018 and 2021. While it remains to be seen whether construction of these generation units will be completed as scheduled, if it were to be completed as scheduled or independent power producers are permitted to build additional generation capacity (whether coal-fired or not), our market share in Korea may decrease, which may have a material adverse effect on our results of operations and financial condition.

In addition, under the Community Energy System there are also 12 other entities in Korea that are licensed to supply electricity in limited geographical areas, but their aggregate market share has to-date been insignificant. In July 2004,adopted by the Government adopted the Community Energy Systemin 2004, a minimal amount of electricity is supplied directly to enable regional districts to source electricity fromconsumers on a localized basis by independent power producers to supply electricity without having to undergo the cost-based pool system used by our generation subsidiaries and most independent power producers to distribute electricity nationwide. A supplier of electricity under the Community Energy System must be authorized by the Korea Electricity Commission and be approved by the Ministerminister of Knowledge Economythe Ministry of Trade, Industry and Energy in accordance with the Electricity Business Act. The purpose of this system is to geographically decentralize electricity supply and thereby reduce transmission costslosses and improve the efficiency

of energy use. These entities do not supply electricity on a national level but are licensed to supply electricity on ato limited basis to their respective districts under the Community Energy System.geographic areas. As of March 31, 2012, 14 districts were using this system and one other district was preparing to launch it and there were 12 independent entities that are licensed to distribute electricity in all of such 15 districts, to which we also transmit and distribute electricity. The generation capacity installed or under construction of the electricity suppliers in these 15 districts amounted to approximately 1% of2014, the aggregate generation capacity of our generation subsidiaries as of March 31, 2012. Since the introduction ofsuppliers participating in the Community Energy System represented less than 1% of that of our generation subsidiaries in 2004, a total of 31 districts have obtained the license to supply electricity throughaggregate. Accordingly, we currently do not expect the Community Energy System but 16to be widely adopted, especially in light of such districts have reportedly abandoned plans to adopt the Community Energy System, largely due to the relatively highsignificant level of capital expenditure required the rise in fuel costs and the lower-than-expected electricity output per cost.for such direct supply. However, if the Community Energy System is widely adopted, it willmay erode our currently dominant market position in the generation and distribution of electricity in Korea, which has been virtually monopolized by us until recently, and may have a material adverse effect on our business, growth, revenuesresults of operations and profitability.financial condition.

The electric power industry, which began its liberalization process with the establishment of our power generation subsidiaries in April 2001, may become further liberalized in accordance with the Restructuring Plan. See Item 4B. “Business Overview—Restructuring of the Electric Power Industry in Korea.”

In the residential sector, consumers may use natural gas, oil and coal for space and water heating and cooking. However, currently there is no practical substitute for electricity for lighting and other household appliances, which is available on commercially affordable terms.

In the commercial sector, electricity is the dominant energy source for lighting, office equipment and air conditioning. For its other uses, such as space and water heating, natural gas and, to a lesser extent, oil, provide competitive alternatives to electricity.

In the industrial sector, currently thereelectricity is no practical substitutethe dominant energy source for electricity in a number of industrial applications, including lighting and power for many types of industrial machinery and processes that are available on commercially affordable terms. For other uses, such as space and water heating, electricity competes with oil and natural gas and potentially with gas-fired combined heating and power plants.

Regulation

We are a statutory juridical corporation established under the KEPCO Act for the purpose of ensuring a stable supply of electric power and further contributing toward the sound development of the national economy through facilitating development of electric power resources and carrying out proper and effective operation of the electricity business. The KEPCO Act (including the amendment thereto) prescribes that we engage in the following activities:

 

 1.development of electric power resources;

 

 2.generation, transmission, transformation and distribution of electricity and other related business;business activities;

 

 3.research and development of technology development related to the businesses mentioned in items 1 and 2;

 

 4.overseas businessbusinesses related to the businesses mentioned in items 1 through 3;

 

 5.investments or contributions related to the businesses mentioned in items 1 through 4;

 

 6.businesses incidental to items 1 through 5;

 

 7.developmentDevelopment and operation of certain real estate holdings, subject to certain restrictions pursuantheld by us to the Presidential Decreeextent that:

a.it is necessary to develop certain real estate held by us due to external factors, such as relocation, consolidation, conversion to indoor or underground facilities or deterioration of the KEPCO Act;our substation or office; or

b.it is necessary to develop certain real estate held by us to accommodate development of relevant real estate due to such real estate being incorporated into or being adjacent to an area under planned urban development; and

 

 8.other businessesactivities entrusted by the Government.

The KEPCO Act currently requires that our profits be applied in the following order of priority:

 

first, to make up any accumulated deficit;

 

second, to set aside 20.0% or more of profits as a legal reserve until the accumulated reserve reaches one-half of our capital;

 

third, to pay dividends to shareholders;

fourth, to set aside a reserve for expansion of our business;

 

fifth, to set aside a voluntary reserve for the equalization of dividends; and

 

sixth, to carry forward surplus profit.

Based on our consolidated financial results asAs of December 31, 2011,2013, the legal reserve was Won 1,604 billion and the voluntary reserve was Won 22,753 billion, which consisted of reserve for business expansion wasof Won 15,94916,936 billion, and the reserve for investment ofin social overhead capital wasof Won 5,277 billion, research for research and human development of Won 330 billion and reserve for equalizing dividends of Won 210 billion.

We are under the supervision of the Ministry of Knowledge Economy,Trade, Industry and Energy, which has principal responsibility with respect to director and management appointments and rate approval.

Because the Government owns part of our capital stock, the Government’s Board of Audit and Inspection may audit our books.

The Electricity Business Act requires that licenses be obtained in relation to the generation, transmission, and distribution and salesales of electricity, with limited exceptions. We hold the license to generate, transmit, distribute and sell electricity. Several other companies have received a license solely for power generation. See Item 4B. “Business Overview—Purchase of Electricity—Cost-based Pool System.” Each of our six generation subsidiaries holds an electricity generation license. As of March 31, 2012, we and 12 other electricity suppliers (we nationally and the 12 other suppliers for a total of 15 districts) have obtained a license for the distribution of electricity under the Community Energy System as authorized by the Korea Electricity Commission and approved by the Minister of Knowledge Economy in accordance with the Electricity Business Act. The Electricity Business Act also governs the formulation and approval of electricity rates in Korea. See “—Sales and Customers—Electricity Rates” above.

Our operations are subject to various laws and regulations relating to environmental protection and safety. See “—Community Programs” above.

Proposed Sale by Us of Certain Power Plants and Equity Interests

The following table summarizes our current plans for sale of certain of our assets. The consummation of these plans, however, is subject to, among others, related Government policies and market conditions.

 

Equity holdings

 

Primary business

 Net asset value /
book value as
of December 31,
2011
  Ownership
percentage as
of December 31,
2011
  Ownership
percentage
to be sold
 
     (in billions of Won) 

KEPCO Plant Service & Engineering Co., Ltd.

 Overhauling and repairing power plants  494(1)   75.0  15.0

KEPCO Engineering & Construction Co., Inc

 

Designing and

engineering power plants

  380(1)   74.9  16.9

LG Uplus Corp.

 Electronics, telecommunications and Internet access services  284(2)   7.5  7.5

Korea Electric Power Industrial Development Co., Ltd.

 Electricity metering  21(3)   29.0  29.0

Notes:

(1)Represents net asset value of a consolidated subsidiary.
(2)Represents book value recorded by us as an available-for-sale financial asset as of December 31, 2011.
(3)Represents book value recorded by us as an investment in associate as of December 31, 2011.

Equity Holdings

 

Primary Business

 Fair Value as of
December 31, 2013
  Ownership
Percentage as
of December 31,
2013
  Ownership
Percentage
to be Sold
 
    (in billions of Won)       

KEPCO Plant Service & Engineering Co., Ltd.

 Utility plant maintenance  1,554    63.0  12.0

KEPCO Engineering & Construction Co., Inc.

 Architectural engineering for utility plants  1,639    70.9  19.9

LG Uplus Corp.

 Telecommunications and Internet access services  413    8.8  8.8

Korea Electric Power Industrial Development Co., Ltd.

 Electricity metering  39    29.0  29.0

KEPCO Plant Service & Engineering Co., Ltd.

In December 2007, we completed the initial public offering of KEPCO Plant Service & Engineering Co., Ltd., or KPS, formerly our wholly-owned subsidiary, by listing approximately 20.0% of its equity interest on the Korea stock exchangeStock Exchange for an aggregate considerationgross proceeds of Won 120 billion. Pursuant to the Third Phase of the Public Institution Reform Plan, we sold an additionalthrough block sales to third party investors 5.0% of KPS shares throughin December 2012, 5.0% in September 2012 and another 7.0% of KPS shares in December 2013. We currently hold a block sale and plan to sell an additional 15.0% of KPS’s63.0% equity interest by the end of 2012 subject to prevailing market conditions. We expect to maintain control of KPS subsequent to the planned sale. As such, KPS is expected to remain as our consolidated subsidiary.in KPS.

KEPCO Engineering & Construction Co., Inc.

Pursuant to the Third Phase of the Public Institution Reform Plan announced by the Government in August 2008, we conducted the initial public offering of Korea Engineering and Construction Co., Ltd., or KEPCO E&C formerly known as Korea Power Engineering Co., Ltd., in December 2009. We2009 for gross proceeds to us of Won 165 billion, following which we owned 97.9%77.9% of KEPCO E&C’s shares prior to the initial public offering and currently own 77.9% following the initial public offering. Gross proceeds from the initial public offering were Won 165 billion.shares. In furtherance of the Third Phase of the Public Institution Reform Plan, we plan to sell an additional 20.0% equity interestsold 3.08% of our shares in KEPCO E&C by the endin November 2011 to third party investors for gross proceeds of 2012, subject to prevailing market conditions, and in furtherance of such plan, on November 29, 2011,approximately Won 101 billion. In December 2013, we further sold an additional 3.08% of our sharesa 4.0% equity interest in KEPCO E&C to third party investors for gross proceeds of approximately Won 10185 billion. Following such sale, weWe currently hold 74.9%a 70.9% equity interest in KEPCO E&C. We expect to maintain control of KEPCO E&C subsequent to the planned sale. As such, KEPCO E&C is expected to remain as our consolidated company.

LG Uplus Corp.

We currently own a 7.46%8.8% equity interest in LG Uplus Corp., a telecommunications and Internet access service provider in Korea which is the surviving entity after the consolidation of LG Dacom, LG Telecom and LG Powercom in January 2010. Pursuant to the Fifth Phase of the Public Institution Reform Plan, we currently plan to sell our remaining equity interest in LG Uplus Corp. subject to prevailing economic and market conditions.

Korea Electric Power Industrial Development Co., Ltd.

In February 2003, we privatized Korea Electric Power Industrial Development, or KEPID, formerly our wholly-owned subsidiary, by selling 51.0% of its equity interest to Korea Freedom Federation. Pursuant to the Fifth Phase of the Public Institution Reform Plan announced by the Government in January 2009, we sold 20% of the KEPID shares through additional listing andlisting. We currently plan to sell the remaining 29.0% of KEPID’s equity interest based on, among others, considerations of economic and market conditions.

Item 4C. Organizational Structure

As of December 31, 2011,2013, we had 6680 subsidiaries, 3058 associates and 2236 joint ventures (not including any special purpose entities).

Subsidiaries

Our wholly-owned six generation subsidiaries are KHNP, KOSEP, KOMIPO, KOWEPO, KOSPO and EWP. Our non-generation subsidiaries include KEPCO E&C, KEPCO KPS, KEPCO NF, and KEPCO KDN. For a full list of our subsidiaries, including foreign subsidiaries, and their respective jurisdiction of incorporation, please see Exhibit 8.1 attached to this annual report.

Associates and Joint Ventures

An associate is an entity over which we have significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but isdoes not have control or joint control over those policies. AAccording to IFRS 11, joint venture is a contractual arrangement whereby wearrangements are classified as joint operations or joint ventures, depending on the rights and other parties undertake an economic activity that is subject to joint control (namely when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consentobligations of the parties sharing control)to the arrangements. As a result of IFRS 11, we have changed our accounting policy for our interests in joint arrangements. Under IFRS 11, we have classified our interests in joint arrangements as either joint operations (if we have rights to the assets, and obligations for the liabilities, relating to an arrangement) or joint ventures (if we have rights only to the net assets of an arrangement). Joint ventureWhen making this assessment, we considered the structure of the arrangements, that involve the establishmentlegal form of aany separate entityvehicles, the contractual terms of the arrangements and other facts and circumstances. Previously, the structure of the arrangement was the sole focus of classification. We have re-evaluated our involvement in which each party has an interest are referred to asour only joint arrangement and have reclassified the investment from a jointly controlled entities. The accounts of the associates andentity to a joint ventures are not required to be consolidated in our financial statements. We record our equity interests in these associates and joint ventures as investments under the equity method of accounting.venture. See

Note 1817 of the notes to our consolidated financial statements.

The table below sets forth for each of our principal associates and joint ventures the name and our percentage shareholdingshareholdings and their principal activities as of December 31, 2011.2013.

 

  Ownership
(Percent)
   

Principal Activities

Associates:

   

Daegu Green Power Co., Ltd.

  41.048    Power generation

Korea Gas Corporation

  24.520    Importing and wholesaling LNG

Korea Electric Power Industrial Development
Co., Ltd.

  29.029    Electricity metering

YTN Co., Ltd.

  21.421    Broadcasting

Cheongna Energy Co., Ltd.

  30.044    

Generating and distributing

vapor and hot/cold water

Gangwon Wind Power Co., Ltd.(1).(1)

  15.015    Wind power generatinggeneration

Hyundai Green Power Co., Ltd.

  29.029    Generating electricityPower generation

AMEC Partners Korea Power Exchange(2)

  19.0100Management of power market

AMEC Partners Korea(3)

19    Resources development

Hyundai Energy Co., Ltd.(4)

  29.029    Power generation

Ecollite Co., Ltd.

  33.536    Artificial light-weight aggregate

Taebaek Wind Power Co., Ltd.

  25.025    Construction and servicePower generation

Alternergy Philippine Investments Corporation

  50.050    Power generation

Muju Wind Power Co., Ltd.

  25.025    Power generation

Pyeongchang Wind Power Co., Ltd.

  25.025    Power generation

Daeryun Power co.Co., Ltd.

  19.820    Power generation

JinanJangsu Wind Power Co., LtdLtd.

  25.025    Power generation

Changjuk Wind Power Co., Ltd.

  30.0Power generation

Commerce and Industry Energy Co., Ltd.

29.5Power generation

Gyeongju Wind Power Co., Ltd.

30.030    Power generation

KNH Solar Co., Ltd.

  27.027    Power generation

SPC Power Corporation

  40.038    Power generation

Gemeng International Energy Group Co., Ltd.

  34.034    Construction and operation of utility plantPower generation

PT.CirebonPT. Cirebon Electric Power

  27.528    Construction and operation of utility plantPower generation

KNOC Nigerian East Oil Co., Ltd.((5)3).

  14.615    Oil and gas exploration in NigeriaResources development

KNOC Nigerian West Oil Co., Ltd.(3)(5)

  14.615    Oil and gas exploration in NigeriaResources development

Dolphin Property Limited(3)(5)

  15.015    Rental company

E-Power S.AS.A.

  30.030    

Operation of utility plant

and sales of electricity

PT Wampu Electric Power

  46.046    Power generation

PT. Bayan Resources TBK

  20.020    Resources development

Korea S-Power Co., Ltd.

40Power Exchangegeneration

Pioneer Gas Power Limited(4)(6)

  100.040    Management ofPower generation

Eurasia Energy Holdings

40

Power generation and

resources development

Xe-Pian Xe-Namnoy Power Co., Ltd.

25Power generation

Busan Solar Co., Ltd.(3)

20Power generation

Hadong Mineral Fiber Co., Ltd.

25Recycling fly ashes

Green Biomass Co., Ltd.

34Power generation

Gumi-Ochang Photovoltaic Power Co., Ltd.(1)

10Power generation

Chungbuk Photovoltaic Power Co., Ltd.(1)

10Power generation

Cheonan Photovoltaic Power Co., Ltd.(1)

10Power generation

PT. Mutiara Jawa

29

Manufacturing and operating

floating coal terminal

Hyundai Asan Solar Power Co., Ltd.

10Power generation

Ownership
(Percent)

Principal Activities

Heang Bok Do Si Photovoltaic Power Co., Ltd.

28Power generation

Jeonnam Solar Co., Ltd.

10Power generation

DS POWER Co., Ltd.

11Power generation

D Solarenergy Co., Ltd.(1)

10Power generation

Dongducheon Dream Power Co., Ltd.

44Power generation

KS Solar Corp. Ltd.(3)

19Power generation

KOSCON Photovoltaic Co., Ltd.(1)

19Power generation

Yeongwol Energy Station Co., Ltd.(1)

13Power generation

Yeonan Photovoltaic Co., Ltd. (1)

19Power generation

Q1 Solar Co., Ltd.

28Power generation

Jinbhuvish Power Generation(1)

5Power generation

Best Solar Energy Co., Ltd.

23Power generation

Seokcheon Solar Power Co., Ltd.(1)

10Power generation

SE Green Energy Co., Ltd.

48Power generation support

Daegu Photovoltaic Co., Ltd.

29Power generation

Jeongam Wind Power Co., Ltd.

40Power generation

Korea Power Engineering Service Co., Ltd.

29Construction and service

Golden Route J Solar Power Co., Ltd.(1)

10Photovoltaic power marketgeneration

Joint ventures:Ventures:

   

Canada Korea Uranium Limited Partnership(5).

12.5Resources development

KEPCO-Uhde Inc.(6)(7)

  66.066    Power generation

Eco Biomass Energy Sdn. Bhd.(7)

  40.062    Power generation

Datang Chaoyang Renewable Power Co., Ltd.

  40.040    Power generation

Shuweihat Asia Power Investment B.V.

  49.049    Holding company

Shuweihat Asia Operation & Maintenance Company(6)(7)

  55.055    Maintenance of utility plant

Waterbury Lake Uranium LPL.P.

  40.040    Resources developmentPower generation

ASM-BG Investicii AD

  50.050    Power generation

RES Technology AD

  50.050    Power generation

KV Holdings, Inc.

  40.0Power generation

Kings Plaza JV, LLC(6)

75.040    Power generation

KEPCO SPC Power Corporation(6)(7)

  76.075    Construction and operation of utility plant

Canada Korea Uranium Limited Partnership(8)

13Resources development

KEPCO Energy Resource Nigeria Limited

  30.030    Holding company

Gansu Datang Yumen Wind Power CompanyCo., Ltd.

  40.040    Power generation

Datang Chifeng Renewable Power Co., Ltd.

  40.040    Power generation

Datang KEPCO Chaoyang Renewable Power
Co., Ltd.

  40.040    Power generation

Rabigh Electricity Company

  40.040    Construction of utility plant and salesSales of electricity

Rabigh Operation & Maintenance Company

  40.040    Maintenance of utility plant

Jamaica Public Service Company Limited

  40.040    Power generation

KW Nuclear Components Co., Ltd.

  43.445    R&DResearch and development

Busan Shinho Solar power Co., Ltd.

  20.025    Power generation

STX Electric Power Co., Ltd.

  49.049Power generation

YEONGAM Wind Power Co., Ltd.

49Power generation

Global Trade of Power System Co., Ltd.

29Exporting products and technology of small or medium business by proxy

Expressway Solar-light Power Generation
Co., Ltd

29Power generation

KODE NOVUS 1 LLC.

50Power generation

KODE NOVUS 2 LLC.

49    Power generation

Ownership
(Percent)

Principal Activities

Daejung Offshore Wind Power Co., Ltd.

50Power generation

Arman Asia Electric Power Company(7)

60Power generation

KEPCO-ALSTOM Power Electronics Systems, Inc.(7)

51Research and development

Dongbu Power Dangjin Corporation

40Power generation

Honam Wind Power Co., Ltd.

46Power generation

Nepal Water & Energy Development Company
Pty Ltd.

44Power generation

Kelar S.A.(7)

65Power generation

PT. Tanjung Power Indonesia

35Power generation

Incheon New Power Co., Ltd.

29Power generation

Seokmun Energy Co., Ltd.

34Integrated energy business

 

Notes:

 

(1)Although we hold less than 20% of the equity shares of Gangwon Wind Power Co., Ltd., we mayWe can exercise significant influence over the company due toby virtue of our abilitycontractual right to appoint directors to the board of directors of the entity, and our indirect control over the managementby special decision criteria of itsour financial and operating policies.policy of the board of directors.
(2)Although we hold less than 20% ofThe Government regulates our ability to make operating and financial decisions over the equity shares of AMEC Partners Korea, we mayentity, as the Government requires maintaining arms-length transactions between KPX and our other subsidiaries. We can exercise significant influence overby its right to nominate directors to the company due toboard of directors of the entity.
(3)We can exercise significant influence by virtue of our abilitycontractual right to appoint a director to the board of directors.directors of the entity.
(3)(4)AlthoughAs of December 31, 2013, NH Power II Co., Ltd. and NH Bank collectively held a 16% equity interest in Hyundai Energy Co., Ltd. According to the shareholders’ agreement in March 2011, we hold less than 20% ofhave a call option to acquire the equity sharesinterest in Hyundai Energy Co., Ltd. held by NH Power II Co., Ltd. and NH Bank provided that we pay them a certain rate of return thereon, and NH Power II Co., Ltd. and NH Bank have put options to dispose of their equity interests to us. In connection with this company,agreement, we mayapplied the equity method of investment in Hyundai Energy Co., Ltd. based on a deemed ownership of an 45% equity interest therein.
(5)We can exercise significant influence over the company due toby virtue of our abilitycontractual right to appoint one out of four members of the steering committee. In addition,committee of the entity. Moreover, we engage inhave significant financial transactions with the companyassociate, through which further results in our indirectwe can exercise significant influence on the company.entity.
(4)(6)We hold 100%As of the equity sharesreporting date, the reporting periods of Koreaall associates and joint ventures end on December 31, except for Pioneer Gas Power Exchange and we exercise some control over the company due to our ability to nominate directors to the board of directors. However, Korea Power Exchange is not classified as our subsidiary because the Korean Government has the ability to appoint directors to the board of directors.Limited whose reporting period ends on March 31.
(5)(7)Although we hold less than 20% ofAccording to the equity shares of Canada Korea Uranium Limited Partnership, we possesshareholder agreement, all critical financial and operating decisions must be agreed by all parties with ownership interests. For these reasons, the entities are classified as joint ventures.
(8)We have joint control on the associates by virtue of the company due to our abilitycontractual right to appoint directors to the board of directors of the entity, and our indirect control over the managementby special decision criteria of itsour financial and operating policies.
(6)We hold over 50%policy of the equity shares of the company. However, pursuant to the terms of the joint venture agreement, all material decisions require the consent of each of the parties to the joint venture agreement, each of whom has equal voting rights in the board of directors. For these reasons, the company is classified as a joint venture.

Item 4D. Property, Plant and Equipment

Our property consists mainly of power generation, transmission and distribution equipment and facilities in Korea. See Item 4B. “Business Overview—Power Generation,” “—Transmission and Distribution” and “—Capital Investment Program.” In addition, we own our corporate headquarters building complex at 167 Samseong-dong,512 Yeongdongdaero, Gangnam-gu, Seoul 135-791, Korea. OnIn June 24, 2005, the Government announced its policy to relocate the headquarters of government-invested enterprises, including us and certain of our subsidiaries, out of the Seoul metropolitan area to other provinces in Korea. As of December 31, 2011,2013, the net book value of our property, plant and equipment was Won 112,385129,638 billion. As of December 31, 2013, investment property, which

is accounted for separately from our property, plant and equipment, amounted to Won 538 billion. No significant amount of our properties is leased. There are no material encumbrances on our properties, including power generation, transmission and distribution equipment and facilities.

 

ITEM 4A.UNRESOLVED STAFF COMMENTS

We do not have any unresolved comments from the SEC staff regarding our periodic reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion on our operating and financial review and prospects together with our consolidated financial statements and the related notes which appear elsewhere in this annual report. Our results of operations, financial condition and cash flows may materially change from time to time, for reasons including various policy initiatives (including changes to the Restructuring Plan) by the Government in relation to the Korean electric power industry, and accordingly our historical performance may not be indicative of our future performance. See Item 4B. “Business Overview—Restructuring of the Electric Power Industry in Korea” and Item 3D. “Risk Factors—The Government may adopt policy measures to substantially restructure the Korean electric power industry or our operational structure, which may have a material adverse effect on our business, operations and profitability.”

Item 5A. Operating Results

Overview

As weWe are a predominant market participant in the Korean electric power industry, and our business is heavily regulated by the Government, including with respect to the rates we charge to customers for the electricity we sell. In addition, our business requires a high level of capital expenditures for the construction of electricity generation, transmission and distribution facilities and is subject to a number of variable factors, including demand for electricity in Korea and fluctuations in fuel costs, which are in turn impacted by the movements in the exchange rates between the Won and other currencies.

Under the Electricity Business Law and the Price Stabilization Act, the Government generally establishes electricity rates at levels that are expected to permit us to recover our operating costs attributable to our basic electricity generation, transmission and distribution operations in addition to receiving a fair investment return on capital used in those operations. For a detailed description of the fair investment return, see Item 4B. “Business Overview—Sales and Customers—Electricity Rates.” We have recordedFrom 2008 to 2012, we had consecutive net losses and, from time to time, operating income for every fiscal year since our inception in 1981; however, since 2008, we have recorded operating losses and/or net losses, due to substantial increases in fuel prices which have more than offset the effect from the increases in the electricity tariff rates we charge to our customers.

We estimate that In 2013, largely due to increases in electricity tariff rates and the general decline of fuel prices, will continuewe had an operating profit and a net profit.

If fuel prices were to be volatilerise substantially and accordinglyrapidly in the future, such rise may have a material adverse effect on our results of operations and profitability in 2012 and beyond.profitability. In part to address these concerns, the Government from time to time increases the electricity tariff rates (most recently in August 2010January and August and December 2011)November 2013). However, such increases may be insufficient to fully offset the adverse impact from the rise in the fuel costs, and since such increases typically require lengthy public deliberations in order to be implemented, the tariff increases often occur with a significant time lag and as a result our results of operations and cash flows may suffer.

Further to the announcement by the Ministry of Knowledge EconomyTrade, Industry and Energy in February 2010, a new electricity tariff system went into effect on July 1, 2011. This system is designed to overhaul the prior system for determining electricity tariff chargeable to customers by more closely aligning the tariff levels to the movements in

fuel prices, with the aim of providing more timely pricing signals to the market regarding the expected changes in electricity tariff levels and encouraging more efficient use of electricity by customers. Previously, the electricity tariff consisted of two components: (i) base rate and (ii) usage rate based on the cost of electricity and the amount of electricity consumed by the end-users. Under the new tariff system, the electricity tariff also has a third component of fuel cost pass-through adjustment (“FCPTA”) rate, which is to be added to or subtracted from the sum of the base rate and the usage rate on a monthly basis based on the three-month average movements of coal, LNG and oil prices. The new tariff system is intended to provide greater financial stability and ensure a minimum return on investment to electricity suppliers, such as us. However, due to inflationary and other policy considerations relating to protecting the consumers from sudden and substantial rises in electricity tariff, the Ministry of Knowledge Economy has forTrade, Industry and Energy issued a hold order on July 29, 2011 suspending our billing and collecting of the time being suspended applyingFCPTA amount. The hold order remains in effect to-date. Furthermore, on January 11, 2013, the fuel cost-based adjustment,Ministry of Trade, Industry and Energy informed us that the FCPTA system needed to be reassessed in light of the other factors such adjustment amount (which has been a positive amountas the prolonged unbilled period since the adoptionannouncement of the FCPTA system. There is no assurance as to when the Government will lift the hold order and allow us to bill and collect the accumulated FCPTA amount or whether the new tariff system duewill undergo other amendments to the continued riseeffect that it will not fully cover our fuel and other costs on a timely basis or at all, or will not have unintended consequences that we are not presently aware of. Any such development may have a material adverse effect on our business, financial condition, results of operations and cash flows. For further discussion, including in coal, LNGrelation to accounting, see Item 5A. “Operating and oil prices) is currently being recorded as accounts receivable pending the commencementFinancial Review and Prospects—Critical Accounting Policy—Correction of the application of the fuel cost-based adjustment. See “—Electricity Rates.Accounting for Fuel Cost Pass-through Adjustment.

The results of our operations are largely affected by the following factors:

 

demand and supply offor electricity;

 

electricity rates we charge to our customers;

 

fuel costs; and

 

the exchange rates of Won against other foreign currencies, in particular the U.S. dollar.

Demand and Supply offor Electricity

Our sales are largely dependent on the level of demand for electricity in Korea and the rates we charge for the electricity we sell.

Demand for electricity in Korea grew at a compounded average rate of 5.5%4.3% per annum for the five years ended December 31, 2011.2013. According to Thethe Bank of Korea, the compounded growth rate for real gross domestic product, or GDP, was approximately 3.5%3.2% during the same period. The GDP increased, on a year-on-year basis, by 6.2%3.7% in 20102011, by 2.3% in 2012 and by 3.6%3.0% in 2011.2013.

The table below sets forth, for the periods indicated, the annual rate of growth in Korea’s gross domestic product, or GDP, and the annual rate of growth in electricity demand (measured by total annual electricity consumption).

 

      2007         2008         2009         2010         2011           2009         2010         2011         2012         2013     

Growth in GDP (at 2006 constant prices)

   5.1  2.3  0.3  6.2  3.6

Growth in GDP

   0.7  6.5  3.7  2.3  3.0

Growth in electricity consumption

   5.7  4.5  2.4  10.1  4.8   2.4  10.1  4.8  2.5  1.8

Demand for electricity may be categorized either by the type of its usage or by the type of customers. The following describes the demand for electricity by the type of its usage, namely, industrial, commercial and residential:

 

The industrial sector currently represents the largest segment of electricity consumption in Korea. While demandDemand for electricity from the industrial sector (including the agricultural sector) has increased steadily as a result of the economic expansion in Korea, it has gradually declined as a percentage of total demand from 57.3% in 2000 to 55.3% in 2011. Demand from the industrial sector increased by 8.1% to 251,491was 265,373 gigawatt hours in 20112013, representing a 2.8% increase from 2010,2012, largely due to the continued export-led growth of the Korean economy backed by greater utilization of industrial plants.economy.

Demand for electricity from the commercial sector has increased in recent years, bothlargely due to increased commercial activities in absolute termsKorea and as a percentage of total demand, as a result of the continuing growthrapid expansion of the service sector inof the Korean economy, which has led to anresulted in increased number of office buildings,building construction, office automation and use of air conditioners. Growth in the commercial sector is also attributable to the construction industry and the expansion of the leisure and distribution industries. Demand from the commercial sector increased by 2.1% to 99,504 gigawatt hours in 2011 from 2010, largely as a result of the increased commercial activities in Korea, which was partially offset by weakened consumer sentiment in light of the enhanced uncertainties in the global economy.

Demand for electricity from the residentialcommercial sector decreased by 0.9% to 82,130remained largely stable at 102,196 gigawatt hours in 20112013, representing a 0.6% increase from 2010. 2012.

In 2011,2013, we provideddistributed electricity to approximately 2022 million households, which represent substantially all of the households in Korea. Demand for electricity from the residential sector is largely dependent on population growth and the increased use of heaters, air conditioners and other electricalelectronic appliances. Residential demandDemand for electricity decreasedfrom the residential sector remained relatively stable at 65,815 gigawatt hours in 2011, largely due to the relatively less warm summer in 20112013, representing a 0.5% increase compared to 2010 resulting in reduced use of air conditioning in 2011, which more than offset increased electricity demand from greater electric heater usage during the winter of 2011 due to the relatively colder winter compared to 2010.2012.

For a discussion on demand by the type of customers, see Item 4B. “Business Overview—Sales and Customers—Demand by the Type of Usage.”

As for the supply of electricity in Korea,Since our inception, we have since our inception had and, subject to any substantial future developments in respect of the Restructuring Plan, expect to have, the predominant market share in terms of generation of electricity as well as transmission and distribution thereof to the end-users.generated in Korea. As for transmission and distribution of electricity we accounted for approximately 99% ofpurchase from the market share, in terms of transmission and distribution capacity, in 2010 and 2011. While as of March 31, 2012, there were 12 other entities in Korea that are also licensed to supply electricity under the Community Energy System, these suppliers are, by the terms of their licenses, permitted to supply electricity to limited geographical areas, and their aggregate transmission and distribution capacity accounted for approximately 1% of our capacity. Furthermore, since the introduction of the Community Energy System in 2004, a total of 31 districts have obtained the license to supply electricity through the Community Energy System, but 16 of such districts have reportedly abandoned plans to adopt the Community Energy System, largely due to the relatively high level of capital expenditure required, the rise in fuel costs and the lower-than-expected electricity output per cost. See Item 4B. “Business Overview—Transmission and Distribution.” As for the generation of electricity that we purchase for transmission and distribution to our end-users, our generation subsidiaries accounted for 91.5%88.9%, 90.9% and 88.9%89.4% in 20102011, 2012 and 2011,2013, respectively, withwhile the remainder was accounted for by independent power producers. As for transmission and distribution of electricity, we have historically handled, expect to continue to handle, substantially all of such activities in Korea.

We currently expect that ourwe will continue to have a dominant market dominanceshare in the supplygeneration, transmission and distribution of electricity in Korea will continue for the foreseeable future, absent any substantial changes to the Restructuring Plan or other policy initiatives by the Government in relation to the Korean electric power industry, or an unexpected proliferationlevel of districts opting for supply ofmarket penetration by independent power producers or localized electricity throughsuppliers under the Community Energy System. See Item 4B. “Business Overview—Competition.”

Electricity Rates

Under the Electricity Business Law and the Price Stabilization Act, electricity rates are established at levels that will permit us to recover our operating costs attributable to our basic electricity generation, transmission and distribution operations in addition to receiving a fair investment return on capital used in those operations. For further discussion of fair investment return, see Item 4B. “Business Overview—Sales and Customers—Electricity Rates.”

From time to time, our actual rate of return on invested capital may differ significantly from the fair rate of return on invested capital assumed for the purposes of electricity tariff approvals, for reasons, among others, related to movements in fuel prices, exchange rates and demand for electricity that differdiffers from what is assumed for determining our fair rate of return. For example, between 1987 and 1990, the actual rate of return was above the fair rate of return due to declining fuel costs and rising demand for electricity at a rate not anticipated for purposes of determining our fair rate of return. Similarly,electricity. In contrast, depreciation of the Won against the U.S. dollar accounted for our actual rates of return being lower than the fair rate of return for the period from 1996 to 2000, and for the period since 2006, our actual rates of return have been lower than the fair rate of return largely to a general increase in fuel costs and higher facility investment costs.2000. Partly in response to the variance between our actual rates of return and the fair rate of return, the Government from time to time adjustsincreases the electricity tariff rates, but there typically is a significant time lag for the tariff adjustmentincrease as such adjustmentincrease requires a series of deliberative processes and administrative procedures and the Government also has to consider other policy considerations, such as the inflationary effect of overall tariff increases and the efficiency of energy use fromthrough sector-specific tariff increases. Furthermore, there is no assurance thatFor the period since 2006, our actual rate of return has been lower than the fair rate of return largely due to increases in fuel costs and additional facility investment costs, the effects of which were not offset by timely increases in the electricity tariff adjustments will have the desired effect at a level anticipated or at all, or that they will not have unintended adverse consequences.rates.

Recent adjustmentsincreases to the electricity tariff rates by the Government involve the following, which were made principally in response to the rising fuel prices which hurt our profitability as well as to encourage a more efficient use of electricity by the different sectors:

 

effective August 1, 2010, a 3.5% overall increase in our average tariff rate, consisting of increases in the residential, educational, industrial, street lighting and night power usage tariff rates by 2.0%, 5.9%, 5.8%, 5.9% and 8.0%, while making no changes to the commercial and agricultural tariff.

effective August 1, 2011, a 4.9% overall increase in our average tariff rate, consisting of increases in the industrial, commercial, residential, educational, street lighting and nightovernight power usage tariff rates by 6.1%, 4.4%, 2.0%, 6.3%, 6.3% and 8.0%, while making no changes to the agricultural tariff.

 

effective December 5, 2011, a 4.5% overall increase in our average tariff rate, consisting of increases in the industrial, commercial, educational and street lighting tariff rates by 6.5%, 4.5%, 4.5% and 6.5%, while making no changes to the residential, agricultural and nightovernight power usage tariff.

Further

effective August 6, 2012, a 4.9% overall increase in our average tariff rate, consisting of increases in the residential, commercial, educational, industrial, street lighting, agricultural and overnight power usage tariff rates by 2.7%, 4.4%, 3.0%, 6.0%, 4.9%, 3.0% and 4.9%, respectively.

effective January 14, 2013, a 4.0% overall increase in our average tariff rate, consisting of increases in the residential, commercial, industrial, educational, agricultural, street lighting and overnight power usage tariff rates by 2.0%, 4.6%, 4.4%, 3.5%, 3.0%, 5.0% and 5.0%, respectively.

effective November 21, 2013, a 5.4% overall increase in our average tariff rate, consisting of increases in the residential, commercial, industrial, agricultural, street lighting and overnight power usage tariff rates by 2.7%, 5.8%, 6.4%, 3.0%, 5.4% and 5.4%, respectively, while making no change to the announcement by the Ministry of Knowledge Economy in February 2010, a new electricity tariff system went into effect on July 1, 2011. This system is designed to overhaul the prior system for determining electricity tariff chargeable to customers by more closely aligning the tariff levels to the movements in fuel prices, with the aim of providing more timely pricing signals to the market regarding the expected changes in electricity tariff levels and encouraging more efficient use of electricity by customers. Previously, the electricity tariff consisted of two components: (i) base rate and (ii) usage rate based on the cost of electricity and the amount of electricity consumed by the end-users. Under the new tariff system, the electricity tariff will also have a third component of fuel cost-adjusted rate, which will be added to or subtracted from the sum of the base rate and the usage rate based on the movements of coal, LNG and oil prices. The fuel cost-related adjustment will be made on a monthly basis based on the three-month average fuel cost which is reflected as fuel-cost adjustment fees two months later. The new tariff system is intended to provide greater financial stability and ensure a minimum return on investment to electricity suppliers, such as us. However, due to inflationary and other policy considerations relating to protecting the consumers from sudden and substantial rises in electricity tariff, the Ministry of Knowledge Economy has for the time being suspended applying the fuel cost-based adjustment, and such adjustment amount (which has been a positive amount since the adoption of the new tariff system due to the continued rise in coal, LNG and oil prices) is currently being recorded as accounts receivable pending the commencement of the application of the fuel cost-based adjustment. There is no assurance as to when the Government will commence applying the fuel cost-based adjustment and reflect the adjustment amount in the electricity tariff payable to us, or whether the new tariff system will undergo further amendments to the effect that it will not fully cover our fuel and other costs on a timely basis or at all, or will not have unintended consequences that we are not presently aware of. Any such development may have a material adverse effect on our business, financial condition, results of operations and cash flows.educational tariff.

See Item 4B. “Business Overview—Sales and Customers—Electricity Rates” and Item 4B. “—Recent Developments— Implementation of the Fuel Cost-based Tariff System.”

Fuel Costs

Our results of operations are also significantly affected by the cost of producing electricity, which is subject to a variety of factors, including, in particular, the cost of fuel.

Cost of fuel in any given year is a function of the volume of fuels consumed and the unit fuel cost for the various types of fuel used for generation of electricity (i) bywhich affects the cost structure for both our generation subsidiaries or (ii) byand independent power producers from whom we purchase electric power. A significant change in the unit fuel costs materially impacts the costs of electricity generated by our generation subsidiaries, (whichwhich mainly comprise our fuel costs form partunder the cost of our power generation, transmission and distribution expenses)sales, as well as, to our knowledge, the costs of electricity generated by the independent power producers that sell their electricity to us (which costs form part(see Item 4A. “Purchase of Electricity—Cost-based Pool System”), which mainly comprise our purchased power expenses).costs under the cost of sales. We believe that unit fuel costs materially impact the total fuel costs for both generated power and purchased power, but we are however unable to provide a comparative analysis since the unit fuel cost information for purchased power is proprietary information of the independent power producers who use a significantly different composition of the types of fuels for power generation.and their cost structures are proprietary information.

Fuel costs accounted for 45.1%49.7%, 48.5% and 48.2%45.1% of our sales and 49.3%50.2%, 49.2% and 48.7%47.8% of our cost of sales in 20102011, 2012 and 2011,2013, respectively. Substantially all of the fuel (except for anthracite coal) used by our generation subsidiaries is imported from outside of Korea at prices determined in part by prevailing market prices in

currencies other than Won. In addition, our generation subsidiaries purchase a significant portion of their fuel requirements under contracts with limited quantity and duration. Pursuant to the terms of our long-term supply contracts, prices are adjusted from time to time subject to prevailing market conditions. See Item 4B. “Business Overview—Fuel.”

Uranium accounted for 34.1%34.9%, 33.5% and 34.2%30.9% of our fuel requirements in 20102011, 2012 and 2011,2013, respectively. Coal accounted for 45.5%43.1%, 42.5% and 45.4%43.0% of our fuel requirements in 20102011, 2012 and 2011,2013, respectively. LNG accounted for 16.6%16.7%, 17.7% and 16.8%19.7% of our fuel requirements in 20102011, 2012 and 2011,2013, respectively. Oil accounted for 2.5%2.4%, 3.2% and 2.2%3.3% of our fuel requirements in 20102011, 2012 and 2011,2013, respectively. In each case, the fuel requirements are measured by the amount of electricity generated by us and our generation subsidiaries and do not include electricity purchased from third parties.independent power producers. In order to ensure stable supplies of fuel materials, our generation subsidiaries enter into long-term and medium-term contracts with various suppliers and supplement such supplies with fuel materials purchased on spot markets.

In the past few years, the

The price of bituminous coal fluctuated significantly. For example, the price of bituminous coal increased substantially in the first half of 2008, after which it gradually decreased. However, it has increased againfluctuates significantly from the second half of 2009.time to time. See Item 4B. “Business Overview—Fuel.” In 2011,2013, approximately 75.9%89.0% of the bituminous coal requirements of our generation subsidiaries were purchased under long-term contracts and 24.1%11.0% purchased on the spot market. The average “free on board” Newcastle coal 6300 GAR spot price index waspublished by Platts declined from US$120.596.2 per ton in 20112012 to US$85.1 per ton in 2013 and decreased to US$104.073.8 per ton as of April 17, 2012.11, 2014. If the price of bituminous coal price rises againwere to sharply rise, our generation subsidiaries may not be able to secure their respective bituminous coal supplies at prices commercially acceptable to them. In addition, any significant interruption or delay in the supply of fuel, bituminous coal in particular, from any of their suppliers could cause our generation subsidiaries to purchase fuel on the spot market at prices higher than contracted, resulting in an increase in fuel cost. Furthermore, there have been recent increases in crude oil prices that may lead to an increase in the price of commodity oil that we use, thereby resulting in higher fuel cost.

Nuclear power has a stable and relatively low-cost structure and forms a significant portion of electricity supplied in Korea. Due to significantly lower unit fuel costs as compared withto those of conventionalfor thermal power plants, our nuclear power plants are generally operateoperated at full capacity with only routine shutdowns for check-upfuel replacement and overhauls lasting 20 to 30 days.maintenance, with limited exceptions. In case of shortage in electricity generation resulting from stoppages of the nuclear power plants, we seek to make up for such shortage with power generated by our coal-firedthermal power plants.

Because the Government heavily regulates the rates we charge for the electricity we sell (see Item 4B. “Business Overview—Sales and Customers—Electricity Rates”), our ability to pass on such cost increases to our customers is limited. For example, sincefrom 2008 to 2012 we recordedhad consecutive net losses and, from time to time, operating loss and/or net losslosses, largely due to sustained rises in fuel costs that were neither timely nor sufficiently offset by a corresponding rise in electricity tariff rates. If the fuel prices remain at the current level or continue tosubstantially increase and the Government, out of concern for inflation or for other reasons, maintains the current level of electricity tariff orand does not increase it to a level to sufficiently offset the impact of rising fuel prices or prolongs the hold-order on the fuel cost pass-through adjustment system or amend or modify it to the effect that we are prevented from billing and collection of the fuel cost pass-through adjustment amount on a timely basis or at all, the price increases will significantly narrownegatively affect our profit margins or even cause us to suffer net losses and our business, financial condition, results of operations and cash flows would seriously suffer.

Movements of the Won against the U.S. Dollar and Other Foreign Currencies

Korean Won has fluctuatedfluctuates significantly against major currencies in recent years.from time to time. For fluctuations in exchange rates, see Item 3A. “Selected Financial Data—Currency Translations and Exchange Rates.” In particular, Korean Won underwent substantial fluctuations during the recent global financial crisis, and has remainedremains subject to significant volatility even in its aftermath.volatility. The Noon Buying Rate per one U.S. dollar increaseddecreased from Won 1,130.6 on December 31, 2010 to Won 1,158.5 on December 31, 2011 to Won 1,063.2 on December 31, 2012 and to Won 1,055.3 on December 31, 2013 and was Won 1,134.21,035.4 on April 13, 2012.11, 2014. While the Won has recently been appreciatinggenerally appreciated against U.S. dollar and other foreign currencies there were times in the past when it underwent steady2013, Won also depreciates from time to time, and such depreciation which resultedmay result in a significant increase in the cost of fuel materials and equipment purchased from overseas as well as the cost of servicing our

foreign currency debt. As of December 31, 2011,2013, approximately 23.2%20.9% of our long-term debt (including the current portion and discounts on debentures but excluding premium on debentures)issue discounts and premium) before accounting for swap transactions was denominated in foreign currencies, principally in U.S. dollar, Yen and Euro.dollars. The prices for substantially all of the fuel materials and a significant portion of the equipment we purchase are stated in currencies other than Won, generally in U.S. dollars. Since substantially alla substantial portion of our revenues areis denominated in Won, we must generally obtain foreign currencies through foreign-currency denominatedforeign currency-denominated financings or from foreign currency exchange markets to make such purchases or service such debt, fulfill our obligations under existing overseas investments and make new overseas investments. As a result, any significant depreciation of Won against U.S. dollar or other foreign currencies will have a material adverse effect on our profitability and results of operations. See Item 3D. “Risk Factors—Risks Relating to KEPCO—The movement of Won against the U.S. dollar and other currencies may have a material adverse effect on us.”

Recent Accounting Changes

The selected consolidated financial dataNew Amendments Adopted

New amendments to IFRS and other accounting standards are set forth below as of and for the years ended December 31, 2010 and 2011 have been derived frombelow. These amendments had no impact on our audited consolidated financial statements asincluded in this annual report.

Amendments to IFRS 10—Consolidated Financial Statements

Amendments to IFRS 11—Joint Arrangement

Amendments to IFRS 12—Disclosure of and forInterests in Other Entities

Amendments to IFRS 13—Fair Value Measurement

Amendments to IAS 19—Employee Benefits

Amendments to IFRIC 20—Stripping Costs in the years ended December 31, 2010 and 2011, which have been prepared in accordance with IFRS.

Historically, we prepared our financial statements in accordance with Korean GAAP. AsProduction Phase of January 1, 2011 (the “datea Surface Mine

See Note 2 of transition”), we have adopted IFRS as issued by IASB, and preparedthe notes to our first consolidated financial statements included in accordance withthis annual report for further related information.

New Amendments Not Yet Adopted

The following new amendments to existing IFRS 1 First-time of adoption of IFRS.

Starting onand other standards have been published for mandatory application for annual periods beginning after January 1, 2011, we2014.We have preparednot early adopted them. We are in the process of evaluating the impact on our consolidated financial information in accordance with IFRS. A descriptionstatements upon the adoption of these amendments.

Amendments to IFRS 7—Financial Instruments: Disclosures

Amendments to IFRIC 21—Levies

See Note 2 of the principal differences between our previous accounting standards and IFRS and the impacts of transitionnotes to IFRS is as follows (also see paragraph 4 below):

(1)IFRS 1First-time of adoption of IFRS–Optional exemptions

IFRS 1 provides for a number of optional exemptions from the general principle of full retrospective applications. Our optional exemptions for first-time adoption of IFRS are as follows:

(a)Business combination

We have elected not to apply IFRS 3,Business Combinations retrospectively to past business combinations that occurred before January 1 2010, the date of transition to IFRS.

(b)Fair value or revaluation as deemed cost

Land, property, plant and equipment have been revalued at the date of transition to IFRS and that revaluation is used as the asset’s deemed cost.

Effect of revaluation in certain land, property, plant and equipment as of January 1, 2010 are as follows

(KRW in millions):

Korean GAAP

  Revaluation
increase
   IFRS 

(Won) 74,033,431

  (Won)21,839,510    (Won)95,872,941  

(c)Cumulative translation differences

Cumulative translation differences for all foreign operations were deemed to be zero at the date of transition to IFRS.

(d)Leases

We have elected to apply the transitional provisions in International Financial Reporting Interpretations Committee (“IFRIC”) 4,Determining Whether an Arrangement Contains a Lease (“IFRIC 4”), thereby determining whether we have any arrangements that exist at the date of transition to IFRS that contain a lease on the basis of facts and circumstances existing at January 1, 2010. No such arrangements were identified.

(e)Investments in subsidiaries, associates, and joint ventures

For certain investments in foreign subsidiaries, associates, or joint ventures, who have previously adopted IFRS, we recognized the carrying values on the respective entity’s books, as of date of transition, as deemed cost.

(f)Decommissioning liabilities included in the cost of property, plant and equipment

In accordance with IFRIC 1Changes in Existing Decommissioning, Restoration and Similar Liabilities, specified changes in a decommissioning, restoration or similar liability are added to or deducted from the cost of the asset to which it relates, and the adjusted depreciable amount of the asset is then depreciated prospectively over its useful life.

(2)Exceptions to retrospective application of other accounting standards.

(a)Derecognition of financial assets

We applied derecognition criteria listed in IAS 39Financial Instruments: Recognition and derecognition for transfer of financial assets for transfers after the transition date. For any derecognized financial assets in accordance with past accounting standards before the date of transition, we did not retrospectively recognize such assets in accordance with IFRS, even if it does not satisfy the derecognition criteria under IFRS.

(b)Exception for estimates

Unless there is objective evidence that estimates were in error, we applied estimates which are estimated before the date of transition to be consistent with estimates made for the same date under Korean GAAP, after adjustments to reflect any difference in accounting policies.

(3)Explanation of transition to IFRS

Korean GAAP

IFRS

Scope of consolidation (*1)

The definition of control is similar to those in IFRS. However, some of the scope of consolidation is restricted by the Act on External Audit of Stock Companies as below.

•    An entity that another entity owns more than 30% of shares as the largest shareholder is included in consolidation.

•    A subsidiary with less than 10 billion Won in its total assets as of the previous fiscal year end is excluded from consolidation.

•    An unincorporated entity such as a partnership is excluded from consolidation

Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. All entities controlled by us are consolidated regardless of quantitative significance. As a result, at transition date to IFRS, our change in scope of consolidation as compared with those of Korean GAAP.

Korean GAAP

IFRS

Property, plant and equipment

Under Korean GAAP, we use the cost model in the measurement after initial recognition.

The depreciation method is required to be applied consistently at each period and cannot be changed unless there are justified reasons. For a newly acquired asset, the same depreciation methods applied to the existing, similar assets are applied consistently.

We revalued our property and equipment as at January 1, 2010 and used their fair values as deemed cost in the opening IFRS statement of financial position.

For the measurement after initial recognition, IAS 16, Property, Plant and Equipment allows for an entity to choose either the cost model or the revaluation model by the class of property and equipment and we have chosen the cost model.

The residual value, the useful life and the depreciation method of property and equipment are required to be reviewed at least at each financial year-end and, if expectations differ from previous estimates, the changes should be accounted for as a change in an accounting estimate in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

We changed our depreciation method of equipment from a declining balance method to a straight-line method in connection with the adoption of IFRS.

Revenue recognition

Under Korean GAAP, we read meters and bill customers on a cycle basis. We did not accrue revenue for power sold to customers between the meter-reading date and end of the reporting period but recorded the revenue in the subsequent period. Such practice was consistent with the Accounting Regulations for Public Enterprise Associated Government Agency, which has been approved by the Korean Ministry of Strategy and Finance (formerly the Korean Ministry of Finance and Economy) and considered by the utility industry in Korea as Korean GAAP.Under IFRS, we estimate and recognize unbilled revenue related to the sale of power between the meter-reading dates and the end of the reporting period.

Retirement benefit obligation & long-term employee benefits obligation

Allowances for retirement benefits accrued equal to the amounts to be paid at the end of reporting period, assuming that the all entitled employees with a service year more than a year would retire at once. Retirement benefit expenses incur at the point when the payment obligation is fixed. We recognized allowances for long-term employee benefit at the point when the payment obligation is fixed.The retirement benefit amount is appropriated as a defined benefit obligation by actuarial assessment using the projected unit credit method. Also, we recognize our long-term employee benefits obligation by actuarial assessment using the projected unit credit method.

Korean GAAP

IFRS

Income tax

Under Korean GAAP, deferred tax assets and liabilities were classified as either current or non-current based on the classification of their underlying assets and liabilities assuming that all differences from one entity are recovered or settled together. If there are no corresponding assets or liabilities, deferred tax assets and liabilities were classified based on the periods the temporary differences were expected to reverse.

Under Korean GAAP the temporary differences associated with investments in subsidiaries, branches and associates and interest in joint ventures were recognized as deferred tax assets and liabilities.

Under IFRS, deferred tax assets and liabilities are all classified as non-current on the statement of financial position.

Under IFRS, the temporary differences associated with investments in subsidiaries, branches and associates and interest in joint ventures is recognized as deferred assets and liabilities reflecting the manner in which Company expects to recover or settle the carrying amount of its assets and liabilities.

Financial assets—measurement and impairment

Our available-for-sale securities, loans & receivables and other financial assets are measured at fair value. Under Korean GAAP, expected loss was estimated and set as allowance for doubtful accounts based on our evaluation of loans’ and receivables’ collectability.Under IFRS, we review whether or not impairment exists for individually significant loans and receivables. For other loans and receivables, we group loans and receivables which have similar credit risks, performs collective impairment test, and estimates the incurred loss as allowance for doubtful loans and receivables.

Construction contracts

Under Korean GAAP, there was no concept of recognizing the gross amount due from or due to customers as an asset or liability.Under IFRS, the due from or due to customers amount which is the net amount of cost incurred plus recognized profits, less the sum of the recognized losses and progress billing. If the costs incurred plus recognized profit (or losses) exceeds progress billings a due from customer amount is recognized as an asset, and if the progress billing exceeds the cost incurred plus recognized profit (or losses) a due to customer amount is recognized as a liability.

Other reclassifications

i.       Memberships and guarantee deposits Under Korean GAAP memberships and guarantee deposits were classified as other non-current assets.

ii.      Investment property and intangible assets Under Korean GAAP, properties acquired for earn rental income and/or for capital appreciation (including property under construction for such purposes) were classified as property, plant and equipment.

Under IFRS facility-use memberships are recognized as intangible assets with an indefinite useful life and guarantee deposits that satisfy the definition of financial assets are classified as loans and receivables at amortized costs.

Under IFRS, such properties are reclassified separately as investment properties and for property under construction with intangible asset type items are classified separately within intangible assets.

(*1)As of January 1, 2010, the date of transition to IFRS, our change in scope of consolidation is as follows:

Type

Description

Company

Newly Added

Under the former ‘Act on External Audit of Stock companies’ Article 1.3 Section 2.1 in the Republic of Korea, companies those whose total assets are less than 10 billion Korean won were not subject to consideration, However, under IFRS all entities are subject to consolidation.

KEPCO Canada Uranium Investment Limited Partnership

KEPCO Middle East Holding Company

Qatrana Electric Power Company

Sylardus Holdings B.V.

Akkuyu Finance B.V.

Akkuyu Fuel B.V.

Akkuyu Operation B.V.

Korea Electric Power Nigeria Ltd.

KOWEPO International Corporation

KOSPO Jordan LLC

EWP Cebu Corporation

KOREA Waterbury Uranium Limited Partnership

Akkuyu Electricity Production Company

Excluded

Under the former ‘Act on External Audit of Stock companies’ Article 1.3 Section 2.1 in the Republic of Korea, entities where we own more than 30% of shares and is the largest shareholder with the largest voting rights were included in the scope. Under IFRS no such exceptions exist.

KEPCO SPC Power Corporation.

(formerly KEPCO Salcon Power Corporation)

(4)Explanation of effects of transition to IFRS

(a)Effects in equity at January 1, 2010, date of transition, are as follows (KRW in millions):

Item

  Note  Asset  Liability  Equity 

Korean GAAP

     93,208,031    51,804,224    41,403,807  

Reconciliation of transition effects

      

Consolidation

  (*1)   656,730    102,943    553,787  

Property, plant and equipment

  (*2)   26,567,833    9,382,612    17,185,221  

Leases

  (*3)   1,248,604    1,564,536    (315,932

Revenue recognition

  (*4)   1,285,709    326,598    959,111  

Employee benefits

  (*5)   80,676    683,829    (603,153

Income taxes

  (*6)   (500,193  1,685,847    (2,186,040

Other

  (*7)   70,643    (219,894  290,537  
    

 

 

  

 

 

  

 

 

 

IFRS

     122,618,033    65,330,695    57,287,338  
    

 

 

  

 

 

  

 

 

 

(b)Effects in equity at December 31, 2010, the end date of the last fiscal period the last financial statements were prepared under Korean GAAP, are as follows (KRW in millions):

Item

  Note   Asset  Liability  Equity 

Korean GAAP

     99,610,398    58,121,798    41,488,600  

Reconciliation of transition effects

      

Consolidation

   (*1)     501,166    (301,393  802,559  

Property, plant and equipment

   (*2)     28,672,884    11,771,386    16,901,498  

Leases

   (*3)     1,120,143    1,420,717    (300,574

Revenue recognition

   (*4)     1,350,042    344,135    1,005,907  

Employee benefits

   (*5)     78,867    876,723    (797,856

Income taxes

   (*6)     (1,771,638  294,934    (2,066,572

Other

   (*7)     (44,068  (287,043  242,975  
    

 

 

  

 

 

  

 

 

 

IFRS

     129,517,794    72,241,257    57,276,537  
    

 

 

  

 

 

  

 

 

 

(c)Effects in net income and comprehensive income for the year ended December 31, 2010, the end date of the last fiscal period the last financial statements were prepared under Korean GAAP, are as follows (KRW in millions):

Item

  Note   Net income (Loss)  Comprehensive income (Loss) 

Korean GAAP

     (19,855  (56,124

Reconciliation of transition effects

     

Consolidation

   (*1)     107,454    184,513  

Property, plant and equipment

   (*2)     (68,265  (99,293

Leases

   (*3)     15,359    15,359  

Revenue recognition

   (*4)     41,835    41,835  

Employee benefits

   (*5)     (79,237  (165,186

Income taxes

   (*6)     (20,551  19,152  

Other

   (*7)     (45,907  (51,990
    

 

 

  

 

 

 

IFRS

     (69,167  (111,734
    

 

 

  

 

 

 

Notes:

(*1)Effects of change in scope of consolidation and the effects of the adoption of IFRS by our associates.
(*2)Effects of revaluation of land, property, plant and equipment, net, and investment property, which was used as deemed cost.
(*3)Application of lease accounting of arrangement, power purchase agreement (“PPA”) which contains a lease portion under IFRIC 4Determining whether an arrangement contains a lease.
(*4)Under Korean GAAP, we read meters and billed customers on a cycle basis. We did not accrue revenue for power sold to customers between the meter-reading date and end of the reporting period but recorded the revenue in the subsequent period. Such practice was consistent with the Accounting Regulations for Public Enterprise Associated Government Agency, which has been approved by the Korean Ministry of Strategy and Finance (formerly the Korean Ministry of Finance and Economy) and considered by the utility industry in Korea as Korean GAAP. However, under IFRS, we estimate and recognize unbilled revenue related to the sale of power between the meter-reading dates and the end of the reporting period.
(*5)Effects of retirement benefit obligation & long-term employee benefits obligation.
(*6)Effects of adjustments which are made for additional deferred income tax incurred from temporary differences of income tax of the subsidiaries in accordance with the IFRS, and reclassification of current deferred income tax to non-current, offsetting of deferred income tax asset and liability.

(*7)Other effects mainly consist of reclassification of membership which has unlimited period of validity to intangible assets with indefinite useful lives, and derecognition of certain provisions which do not match the recognition criteria of IFRS.

(d)Effects of IFRS transition adjustments in the consolidated statement of cash flows for the year ended December 31, 2010.

Under IFRS, dividends received, interest received, interest paid and income taxes paid which were presented in aggregate under Korean GAAP, are now presented separately in the statement of cash flows. Except for the aforementioned items, there are no significant differences between the consolidated statement of cash flow prepared in accordance with Korean GAAP and IFRS.

(e)Components classified as operating income (loss) under IFRS but classified as non-operating income (loss) under Korean GAAP in the past for period for the years ended December 31, 2011 and 2010 are as follows (KRW in millions):

   2011  2010 

Reversal of other provisions

  (Won)110   (Won)14,754  

Reversal of allowance for doubtful accounts

   460    6,951  

Gains on assets contributed

   4,392    1,390  

Gains from liabilities exempted

   4,578    5,679  

Compensation and reparations revenue

   30,350    12,501  

Electricity infrastructure development fund

   48,154    41,189  

Revenue from research contracts

   6,124    542  

Rental income

   180,563    168,386  

Others (other income)

   43,114    28,018  

Compensation and reparations expense

   (2,000  —    

Transfer to other provisions

   (238  (22,004

Depreciation expenses on investment properties

   (927  (1,129

Depreciation expenses on assets not in use

   (6,619  (6,723

Other bad debt expense

   (867  (471

Donations

   (100,352  (30,874

Others (other expenses)

   (36,592  (8,586

Gains on disposition of property, plant, and equipment

   38,776    42,037  

Gains on disposition of intangible assets

   —      —    

Reversal of intangible assets loss on impairment

   —      16  

Gains on foreign currency translation (related to operating activities)

   1,659    4,634  

Gains on foreign currency transaction (Related to operating activities)

   100,811    90,452  

Insurance proceeds

   —      34  

Others (Other income)

   213,624    219,110  

Loss on disposition of property, plant, and equipment

   (31,228  (46,882

Loss on disposition of intangible assets

   (5  (12

Property, Plant, and Equipment loss on impairment

   —      (26,648

Intangible assets loss on impairment

   (221  (450

Loss on foreign currency translation (Related to operating activities)

   (5,402  (3,603

Loss on foreign currency transaction (Related to operating activities)

   (98,806  (97,210
  

 

 

  

 

 

 

Others (Other loss)

  (Won)(53,505)   (Won)(63,271)  
  

 

 

  

 

 

 

Fuel costs increased to Won 20,971 billion in 2011 from Won 17,823 billion in 2010 and accounted for 48.7% and 49.3% of our consolidated cost of salesfinancial statements included in 2011 and 2010, respectively.this annual report for further related information.

Critical Accounting Policies

The following discussion and analysis isare based on our consolidated financial statements.statements included in this annual report. The fundamental objective of financial reporting is to provide useful information that allows a reader to comprehend our business activities. To aid in that understanding, our management has identified “critical accounting policies.”

We make a number of estimates and judgments in preparing our consolidated financial statements. These estimates may differ from actual results and have a significant impact on our recorded assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We consider an estimate to be a critical accounting estimate if it requires a high level of subjectivity or judgment, and a significant change in the estimate would have a material impact on our financial condition or results of operations. Further discussion of these critical accounting estimates and policies is included in the notes to our consolidated financial statements.statements included in this annual report.

The accounting policies set out below have been applied consistently by us and our subsidiaries to all periods presented in thesethe consolidated annual financial statements, and in preparing the opening IFRS statement of financial position as of January 1, 2010 for the purposes of the transition from previous GAAP (Korean GAAP) to IFRS, unless otherwise indicated.

Sale and Purchase of Electricity Sales

The Government approves the rates we charge to customers for our power transmission and distribution divisions.customers. Our utility rates are designed to recover our reasonable costs plus a fair investment return. Our powerWe purchase electricity principally from our generation subsidiaries’ rates are determined insubsidiaries based on a competitive bidding process though the market.Korea Power Exchange.

Under IFRS, we

We recognize electricity sales revenue based on power sold (transferred to the customer) up to the reporting date. As no specific regulatory accounting guidance exists under IFRS, we do not apply any regulatory accounting related to our regulated divisions. To determine the amount of power sold, we estimatemake reasonable estimates on daily power volumes for residential, commercial, industrial and other uses. The differences between the current month’s estimated amountamounts and actual (meter-read) amount, isamounts are adjusted for (trued-up) during the next month period.

Correction of Accounting for Fuel Cost-based Tariff SystemCost Pass-through Adjustment

As of July 1, 2011, a new electricity tariff system approved by the Government approvedtook effect featuring a fuel cost-based tariffcost pass-through adjustment (“FCPTA”). This system allowingis intended to allow us to adjustpass through fluctuations in fuel costs ultimately to customers. The FCPTA amount is determined based on a prior three-month period moving average of international fuel prices and other factors, and such amount is reflected two months later. On July 29, 2011, out of inflationary and other policy considerations, the Government issued a hold-order suspending us from billing or collecting the FCPTA amount from customers.

Our accounting policy was to recognize unbilled fuel cost adjustments as assets under the IFRS Conceptual Framework when we concluded that it is probable that future economic benefits would flow to us. We had concluded that we controlled a resource as a result of past events from which future economic benefits were expected to flow to us. The Regulation for Electricity Service, which regulates the FCPTA system, provides a legal “resource” or right to bill where the costs we incur will result in future cash flows. The operation of the FCPTA system creates a right to charge rates in amounts that would permit us to recover the related costs, such amounts being subject to government approval. In addition, we relied on the authority of the Ministry of Trade, Industry and Energy, which regulates and approves the electricity tariff we charge to our customers, including the FCPTA system. As of December 31, 2011, we determined that it was probable that economic benefits associated with the unbilled fuel cost adjustments would be realizable based on the changes in fuel costs with a view to ultimately passing through increases in fuel costs to our customers. The adjustment amount is determined by a formula based on the prior three months moving average of global fuel cost changes and other factors.

Currently, the Government has issued a temporary suspension on our collectionauthority of the fuel cost adjustment amounts from the customers as a means to control inflationMinistry of Trade, Industry and Energy in Koreasetting and enforcing electricity rates for other policy considerations. As a result,customers. Therefore, we concluded that as of December 31, 2011 weit was probable that our unbilled FCPTA amount would be collected.

We previously recognized receivablesrevenue and a receivable for the FCPTA amounts subject to the hold order in the amount of Won 357 billion357,085 million at December 31, 2011. However, we came to realize that our FCPTA rate regulatory scheme closely resembles a cost-of service scheme, and have therefore determined that the appropriate accounting for the unbilled FCPTA amounts is to reduce cost of sales by the unbilled FCPTA amounts and recognize a related fuel cost adjustment amounts.non-financial asset by the same amount, which is more consistent with accounting policies for rate regulated assets of other standard-setting bodies. In accordance with IAS 8—Accounting Policies, Changes in Accounting Estimates and Errors, we used judgment in developing and applying an accounting policy that results in information that is relevant and reliable. In making that judgment, management considered pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards, other accounting literature and accepted industry practices. We have concluded that the aforementioned error is immaterial, and corrected the accounting for our unbilled FCPTA amounts in our consolidated financial statements as of and for the year ended December 31, 2011 included in Item 18. “Financial Statements.”

During the fourth quarter of 2012, we had further consultations with the Ministry of Trade, Industry and Energy as to the outlook for the lifting the hold-order. Furthermore, on January 11, 2013, the Ministry of Trade, Industry and Energy informed us that the FCPTA system needed to be reassessed in light of other factors such as the prolonged unbilled period since the announcement of the FCPTA system. We have therefore concluded that, in consideration of the prolonged unbilled period and recent consultations with, and information from, the Ministry, we would not be able to bill and collect the unbilled FCPTA amounts for the foreseeable future. As a result, we wrote off the entire unbilled FCPTA amounts of Won 1,877 billion recognized through December 31, 2012, including the unbilled FCPTA amounts as of December 31, 2011. As a result, there were no FCPTA amounts remaining in the consolidated statement of financial position as of December 31, 2012 and 2013.

Furthermore, we will cease recording a regulatory asset prospectively related to the FCPTA amounts unless and until the likelihood of recovery once again satisfies the probable threshold contained in the IFRS Conceptual Framework or enacted IFRS at such time.

Derivative Instruments

We recordrecognize rights and obligations arising from derivative instruments as assets and liabilities, which are stated at fair value. The gains and losses that result from the change in the fair value of derivative instruments are reported in current earnings. However, for derivative instruments designated as hedging the exposure of variable cash flows, the effective portions of the gains or losses on the hedging instruments are recorded as accumulated other comprehensive income (loss) and credited or charged to operations at the time the hedged transactions affect earnings, and the ineffective portions of the gains or losses are credited or charged immediately to operations.

Significant management judgment is involved in determining the fair value of estimated derivative instruments. The estimates and assumptions used by our management to determine fair value can be impacted by many factors, such as the estimated discount factor derived from observable market data, credit risk of the counterparty and the estimated cash flow based on settlement period, interest convention, and other contract information of the derivative instruments.

As of December 31, 2010 and 2011, we recorded net derivative assets (liabilities), in the amounts of Won 248 billion andhad Won 244 billion respectively, under IFRS.of net amounts as assets, and as of December 31, 2012, we had Won 376 billion of net amounts as liabilities. As of December 31, 2013, we had Won 614 billion of net amounts as liabilities. Changes in the estimated discount factor or cash flow, or changes in the assumptions and judgments by management underlying these estimates, may cause material revisions to the estimated total gain or loss effect of derivative instruments, which could have a material effect on the recorded asset or liability.

Decommissioning Costs

We recordrecognize the fair value of estimated decommissioning costs as a liability in the period in which we incur a legal obligation associated with retirement of long-lived assets that result from acquisition, construction, development and/or normal use of the assets. We also recordrecognize a corresponding asset that is depreciated over the life of the asset. Accretion expense consists of period-to-period changes in the liability for decommissioning costs resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows. Depreciation and accretion expenses are included in the cost of electric power in the accompanying consolidated statements of comprehensive income.

Significant management judgment is involved in determining the fair value of estimated decommissioning costs. The estimates and assumptions used by our management to determine fair value can be impacted by many factors, such as the estimated decommissioning costs based on engineering studies commissioned and approved by the Korean government, and changes in assumed dates of decommissioning, inflation rate, discount rate, decommissioning technology, regulation and the general economy.

As of December 31, 20102011, 2012 and 2011,2013, we recordedhad a liability for decommissioning costs in the amounts of Won 5,9766,727 billion, Won 11,913 billion and Won 6,72712,348 billion, respectively. Changes in the estimated costs or timing of decommissioning, or changes in the assumptions and judgments by management underlying these estimates, may cause material revisions to the estimated total cost to decommission these facilities, which could have a material effect on the recorded liability. We used a discount raterates of 4.36%, 4.49% and an4.49% and inflation raterates of 2.30%, 2.93% and 2.93% when calculating the decommissioning cost liability recorded as of December 31, 20102011, 2012 and 2011.2013, respectively. In addition, the following is a sensitivity analysis of the potential impact on decommissioning costs from a 0.10%0.1% increase or decrease in each of the inflation rate and the discount rate, assuming that all other aforementioned assumptions remain constant:

 

   Sensitivity to inflation rate  Sensitivity to discount rate 
  +0.10%   -0.10%  +0.10%  -0.10% 
   (in billions of Won) 

Increase (decrease) of provision for decommissioning costs

  (Won)180.3    (Won)(174.5 (Won)(132.5 (Won)136.1  
   Sensitivity to inflation rate  Sensitivity to discount rate 
  +0.10%   -0.10%  +0.10%  -0.10% 
   (in billions of Won) 

Increase (decrease) of liability for decommissioning costs

  289    (281 (268 276  

See Notes 2726 and 4443 of the notes to our consolidated financial statements included in this annual report for further related information.

Provision for Decontamination of Transformer

Under the Persistent Organic Pollutants Management Act which was enacted in 2007, we are required to remove the toxin polychlorinated biphenyls (PCBs) from our transformers’ insulating oil by 2015. We are also required to inspect the PCB levels in our transformers and dispose of any PCBs in excess of established safety standards.

As of December 31, 20102011, 2012 and 2011,2013, we recorded a liabilityhad liabilities of Won 278215 billion, Won 220 billion and Won 215220 billion, respectively, for inspection and disposal costs related to the decontamination of existing transformers.

The estimates and assumptions used by our management to determine fair value can be affected by many factors, such as the estimated costs of inspection and disposal, inflation rate, discount rate, regulations and the general economy.

Changes in the estimated costs or changes in the assumptions and judgments underlying these estimates may cause material revisions to the estimated total costs, which could have a material effect on our recorded liability. When calculating the provision for the decontamination of our transformers, we used a discount rate of 6.49% and an inflation rate of 2.81% as of December 31, 2010, and a discount rate of 5.84% and an inflation rate of 3.34% as of December 31, 2011. In addition, the following is2011, a sensitivity analysisdiscount rate of the potential impact on decontamination costs based on a 0.10% increase or decrease in each of the4.92% and an inflation rate of 3.10% as of December 31, 2012 and thea discount rate assuming that all other aforementioned assumptions remain constant:of 4.92% and an inflation rate of 3.10% as of December 31, 2013.

  Sensitivity to inflation rate  Sensitivity to discount rate 
 +0.10%  -0.10%  +0.10%  -0.10% 
  (in billions of Won) 

Increase (decrease) of provision for decontamination of transformer

 (Won)1.3   (Won)(1.3 (Won)(1.3 (Won)1.3  

Deferred Tax Assets

In assessing the realizability of the deferred tax assets, our management considers whether it is probable that a portion or all of the deferred tax assets will not be realized. The ultimate realization of our deferred tax assets is dependent on whether we are able to generate future taxable income in specific tax jurisdictions during the periods in which temporary differences become deductible. Our management has scheduled the expected future reversals of the temporary differences and projected future taxable income in making this assessment. Based on these factors, our management believes that it is probable that we will realize the benefits of these temporary differences as of December 31, 2011.2013. However, the amount of deferred tax assets that is realized may be different if we do not realize estimated future taxable income during the carry forward periods as originally expected.

In relation to the deferred tax assets recognized for tax loss, future taxable income is estimated considering the followings: (i) five-year mid- to long-term financial forecasts of earnings before tax approved by management and submitted to the Ministry of Strategy and Finance, and (ii) average amount of tax adjustments for the recent three years. Based on the estimated amount and timing of future taxable profit, our management determined that all tax losses for the year ended December 31, 2013 could be recognized as an asset.

For tax credits carried forward, similar to deferred tax assets recognized for tax loss, our management estimates the probability timing of future taxable profits in determining the probability of utilization of tax credits carried forward. In addition, our management considers the possible carry forward period and available tax credit or deductible temporary differences within the tax laws of each country in which the tax credits originated.

Similarly, our management also estimates the probability of utilization of temporary differences considering the probability of generating future taxable profits in the periods that the deductible temporary differences reverse. We do not recognize deferred tax assets for certain temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures considering future dividends or disposals.

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities at each separate taxpaying entity. Under IFRS, a deferred tax asset is recognized for temporary difference that will result in deductible amounts in future years and for carry forwards. If, based on the weight of available evidence, it is more likely than not that some or all of the entire portion of the deferred tax asset will not be realized, that portion is deducted directly from the deferred tax asset.

We believe that the accounting estimate related to the realizability of deferred tax asset is a “critical accounting estimate” because: (i) it requires management to make assessments about the timing of future events, including the probability of expected future taxable income and available tax planning opportunities, and (ii) the difference between these assessments and the actual performance could have a material impact on the realization of tax benefits as reported in our results of operations. Management’s assumptions require significant judgment because actual performance has fluctuated in the past and may continue to do so.

Useful Lives of Property, Plant and Equipment

In accordance with IFRS, property,Property, plant and equipment are statedinitially measured at cost. We do not depreciate land. Depreciation is computed by the straight-line method (and unit-of-production method for loaded nuclear fuel (PWR)cost, and capitalized asset retirementafter initial recognition, are carried at cost of loaded nuclear fuel), using rates based on the estimated useful lives. Net property, plantless accumulated depreciation and equipment as of December 31, 2011 totaled Won 112,385 billion representing more than 82% of total assets. Given the significanceaccumulated impairment losses. The cost of property, plant and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the associated depreciation expense to our financial statements,initial estimate of the determinationcosts of an asset’s economic useful lifedismantling and removing the item and restoring the site on which it is considered to be a critical accounting estimate.located.

Economic useful life is the duration of time the asset is expected to be productively employed by us, which may be less than its physical life. Management’s assumptions on the following factors, among others, affect the determination of estimated economic useful life: wear and tear, obsolescence, technical standards, changes in market demand and technological changes. We apply the following

The estimated useful lives forof our property, plant and equipment:equipment are as follows:

 

   Estimated useful lifeUseful lives (years)

Buildings

  8 ~ 40

Structures

  8 ~ 50

Machinery

  6 ~ 32

Vehicles

  4

Loaded heavy water

  30

Asset retirement costs

  18, 30, 40

Finance lease assets

  20

Ships

  9

Others

  4 ~ 9

Generally,A component that is significant compared to the total cost of property, plant and equipment is depreciated over its separate useful life is estimatedlife. Depreciation methods, useful lives and residual values are reviewed at the timeend of each reporting date and adjusted, if appropriate. In 2012, we changed the asset is acquired and is based on historical experience with similar assets and takes into account anticipated technological or other changes. If technological changes were to occur more rapidly than anticipated or in a different form than anticipated or the assets experienced unexpected levels of wear and tear, theestimated useful lives assigned to these assets may need to be shortened, resultingof certain buildings. As a result of the change in the recognition of increasedaccounting estimate, depreciation expenses decreased by Won 85,388 million and Won 57,378 million in future periods.2012 and 2013, respectively. In addition, we estimate that depreciation expense will decrease by Won 31,979 million and Won 22,158 million in 2014 and 2015, respectively.

Impairment of Long-lived Assets

Under IFRS, atAt the end of each reporting period, we review the carrying amounts of tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, we estimate the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and

consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell andor value in use. In assessing value in use, the estimated future cash flows are discounted to their present valuevalues using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in income or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decreasedecrease.

WhereIn the event that an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but soensuring that the increasedsuch carrying amount increase does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or the cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in income or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

The assessment of impairment is a critical accounting estimate, because significant management judgment is required to determine: (i) ifwhether an indicator of impairment has occurred, (ii) how assets should be grouped, and (iii) if an impairment exists, the recoverable amount of the asset or asset group.group in the case of an impairment. If management’s assumptions about these assets change as a result of events or circumstances, and management believes the assets may have declined in value, we may record impairment charges, resulting in lower profits. Our management uses its best estimate in making these evaluations and considers various factors, including the future prices of energy, fuel costs and other operating costs. However, actual market prices and operating costs could vary from those used in the impairment evaluations, and the impact of such variations could be material. There was no impairment for the past three years and no cash-generating units were at risk of impairment as of December 31, 2013.

Accrual for Loss Contingencies for Legal Claims

We are involved in legal proceedings regarding matters arising in the ordinary course of business. RelatedIn relation to these matters, as of December 31, 2011,2013, we were engaged in 429597 lawsuits as a defendant and 103119 lawsuits as a plaintiff. The total amount claimed against us was Won 138.5402 billion and the total amount claimed by us was Won 21.4109 billion as of December 31, 2011.2013. As of December 31, 2011, we had an accrual2013, our provisions for loss contingencies ofthese legal claims amounted to Won 44.424 billion. We record liabilities for estimated loss contingencies when we assess that a loss is probable and the amount of the loss can be reasonably estimated. The determination for a loss contingency is based on management judgment and estimates with respect to the likely outcome of the matter, including the analysis of different scenarios. LiabilitiesThese provisions are recorded or adjusted when events or circumstances cause these judgments or estimates to change. In assessing whether a loss is a reasonable possibility, we may consider the following factors: the nature

Actual amounts of our liabilities as determined upon settlement of legal claims or by final decisions of the litigation, claim or assessment, available information, opinions or views of legal counsel and other advisors, and the experience gained from similar cases. We provide disclosures for material contingencies when there is a reasonable possibility that a loss or an additional losscourts in relation thereto may be incurred.

As new developments occursubstantially different from the amounts of provisions recognized or more information becomes available, our assumptions and estimates of these liabilities may change. Revisions to contingent liabilities disclosed. If the actual amounts are generally reflected in income when new or different facts or information become known or circumstances change that affect previous assumptions with respect tohigher than the likelihood or amountamounts of loss. If changes in these or other assumptions orrelated provisions, the anticipated outcomes we use to estimate contingencies cause a loss to become more likely, it could materially affect futureresulting additional liabilities would adversely impact our results of operations, for any particular quarterly or annual period.

Actual amounts realized upon settlement of contingencies may be different than amounts recordedfinancial condition and disclosed and could have a significant impact on the liabilities and expenses recorded on the consolidated financial statements.cash flows.

Consolidated Results of Operations

20112013 Compared to 20102012

In 2011,2013, our consolidated sales, which is principally derived from the sale of electric power, increased by 10.2%9.3% to Won 43,53253,713 billion from Won 39,50749,121 billion in 2010,2012, reflecting primarily a 4.8%7.3% overall increase in our

average electricity tariff rates in 2013 (as a result of a 4.0% increase effective January 14, 2013 and a 5.4% increase effective November 21, 2013) and a 1.8% increase in the volume of electricity sold from 434,160466,593 gigawatt hours in 20102012 to 455,070474,849 gigawatt hours in 2011 and a 4.9% increase in our overall average electricity tariff rates effective August 1, 2011 and a 4.5% increase in our overall average electricity tariff rates effective December 5, 2011.2013. The overall increase in the volume of electricity sold was primarily attributable to a 8.1%2.8% increase in the volume of electricity sold to the industrial sector, which represents the largest segment of electricity consumption in Korea, from 232,672258,102 gigawatt hours in 20102012 to 251,491265,373 gigawatt hours in 2011,2013, and, to a lesser extent, a 2.1%0.6% increase in the volume of electricity sold to the commercial sector from 97,410101,593 gigawatt hours in 20102012 to 99,504102,196 gigawatt hours in 2011, which more than offset2013 and a 0.9% decrease0.5% increase in the volume of electricity sold to the residential sector, including overnight power usage, from 82,89065,484 gigawatt hours in 20102012 to 82,13065,815 gigawatt hours in 2011.2013. The increase in the volume of electricity sold to the industrial sector was primarily due to the general increase in demand for electricity in these sectorsthis sector in Korea largely as a result of the continued export-led growth of the Korean economy, which involved an increased

industrial output and greater capacity utilization in industrial plants. The increase in the volume of electricity sold to the commercial sector was primarily due to increased commercial activities in Korea, which was partially offset by weakened consumer sentiment in light of the enhanced uncertainties in the global economy. The decrease in the volume of electricity sold to the residential sector was primarily due to the unanticipated low temperatures during the summer of 2011. For a discussion of the increase in our electricity tariff rates, see Item 4B. “Business Overview—Sales and Customers—Electricity Rates.”

Our consolidated cost of sales, which is principally derived from the costs related to the purchase of fuels for generation of electricity and to a lesser extent, from the purchase of power from independent power producers, depreciation and depreciation,salaries, increased by 19.1%4.4% to Won 43,08250,596 billion in 20112013 from Won 36,18748,459 billion in 2010,2012, primarily due to a 17.7%1.6% increase in fuel costs, a 46.1%15.6% increase in purchased power and a 145.7%5.6% increase in depreciation, which were partially offset by a 3.0% decrease in salaries and a 1.4% decrease in other cost of sales (excluding purchased power). sales.

Fuel costs, increased to Won 20,971 billion in 2011 from Won 17,823 billion in 2010. The fuel costswhich accounted for 48.7%47.8% and 49.3%49.2% of our consolidated cost of sales in 20112013 and 2010, respectively. Such increase2012, respectively, increased to Won 24,200 billion in fuel costs was primarily2013 from Won 23,823 billion in 2012 largely due to a 17.8% increase inan increased use of more expensive fuel cost forsources such as LNG due to the extended suspension of three of our nuclear units related to quality assurance issues, which was partially offset by a 1.4%2.6% decrease in unit fuel cost mainly resulting from the general decline in international market prices for oil. Fuel cost for LNG, which accounted for 43.3% of the totalour main fuel cost in 2011, increased mainly due to a 14.1% increase in unit cost of LNG and a 3.2% increase in LNG consumption mainly due to increased demand for electricity as a result of economic recovery and unanticipated weather conditions, including relatively colder winter in 2011 compared to 2010 resulting in greater use of heaters in 2011 at peak hours. Fuel cost for coal, which accounted for 45.4% of the total fuel cost in 2011, increased by 21.1%, mainly due to a 17.1% increase in unit cost for bituminous coal. For further information on the increase in fuel costs, see Item 4B. “Business Overview—Fuel.”types. Purchased power, which accounted for 17.4%22.4% and 14.2%20.2% of our cost of sales in 20112013 and 2010,2012, respectively, increased by 46.1%15.6% to Won 7,50011,329 billion in 20112013 from Won 5,1339,801 billion in 2010,2012, primarily due to a 37.1%12.1% increase in the volume of power purchased from independent power producers (who generate electricity primarily through LNG-fired power plants), from 38,68260,392 gigawatt hours in 20102012 to 53,02467,676 gigawatt hours in 2011,2013, primarily to compensate for the shortfall in the supply of electricity due to the higher than anticipated rise in demand for electricity in 2011.2013 as well as extended suspension of three of our nuclear units related to quality assurance issues. Depreciation expense increased by 3.0%5.6% to Won 6,7337,228 billion in 20112013 from Won 6,5406,846 billion in 20102012 primarily due to thean increase of additional property, plant and equipment related to the construction of new generation facilities pursuant to our capital investment program. Maintenance costs increased

Salaries decreased by 6.0%3.0% to Won 1,4162,583 billion in 20112013 from Won 1,3352,662 billion in 20102012 primarily due to an increasea decrease in new construction projects and maintenance on KHNP’s Wolsong-1 unit.performance pay. Other remaining items of our cost of sales (excluding purchased power) increased significantlydecreased to Won 1,7845,255 billion in 20112013 from Won 7265,327 billion in 20102012 primarily due to an increasea decrease in provision for decommissioning costs related to the disposal of our nuclear waste.facilities.

As a cumulative result of the foregoing factors, our consolidated gross profit decreased by 86.4%increased significantly to Won 4503,117 billion in 20112013 from Won 3,319661 billion in 2010,2012, and our consolidated gross profit margin decreasedincreased significantly to 1.0%5.8% in 20112013 from 8.4%1.3% in 2010.2012. The increases in our consolidated gross profit and consolidated gross profit margin were largely attributable to the 9.3% increase in our consolidated sales (which were due to the 7.3% overall increase in the average electricity tariff rates and, to a lesser extent, the 1.8% increase in the volume of electricity sold), which was partially offset by the 4.4% increase in our consolidated cost of sales (which was mainly due to the 15.6% increase in purchased power and, to a lesser extent, the 1.6% increase in fuel costs and the 5.6% increase in depreciation expense).

Our consolidated selling and administrative expenses increased by 6.5%8.0% to Won 1,7521,923 billion in 20112013 from Won 1,6451,780 billion in 2010,2012, primarily as a result of increases in amortization of intangibles related to the increase in purchase of software, research and development expenses related to electronic data processing, maintenance costs, employee benefits, feesdepreciation and commissions, related to electricity meter outsourcing costswhich increased by Won 22 billion and other expenses related to marketing and promotion.Won 67 billion, respectively.

Our consolidated other operating income, net decreasedof expenses, increased by 3.4%4.2% to Won 451626 billion in 20112013 from Won 467600 billion in 2010,2012, mainly as a result of thean increase in insurance compensations and an increase in contributions related to renewable energy initiatives.from the Electric Power Industry Basis Fund, which was partially offset by an increase in donations for educational and other purposes.

OurWe had consolidated other gains, net, other income increased by 39.5% toof Won 166 billion from Won 119129 billion in 2010,2013 compared to consolidated other losses, net, of Won 1,782 billion in 2012, primarily as a result of the increasea write-off in gains on foreign currency transactions due to increased volatility in foreign exchange rates in 2011.2012 of our accumulated but unbilled fuel cost-based adjustment amounts. (See Item 5B. “Operating and Financial Review and Prospects—Critical Accounting Policy—Correction of Accounting for Fuel Cost Pass-through Adjustment”). Other profit is mainly composed of gain or loss from disposal of assets and inventories, among others.

As a cumulative result of the foregoing factors, we recordedhad consolidated operating income of Won 1,948 billion in 2013 compared to consolidated operating loss of Won 6852,300 billion in 2011 compared to2012, and our consolidated operating income of Won 2,260 billionmargin was 3.6% in 2010. We recorded2013 compared to an operating loss margin of 4.7% in 2012. These turnarounds were mainly due to the 9.3% increase in our consolidated sales, which was partially offset by the 4.4% increase in our consolidated cost of sales.

Our consolidated finance expenses, net of income, increased by 18.7% to Won 2,302 billion in 2013 from Won 1,940 billion in 2012, primarily as a result of a decrease in net gains on foreign currency translation, and an increase in net interest expense, which was partially offset by a decrease in net losses on valuation of derivatives.

We had consolidated loss of affiliates or joint ventures using equity method of Won 42 billion in 2013, compared to consolidated profit of affiliates or joint ventures using equity method of Won 177 billion in 2012, primarily as a result of decreased profits from Korea Gas Corporation mainly due to an impairment loss on intangible assets.

As a cumulative result of the foregoing factors, our consolidated loss before income taxes significantly decreased to Won 396 billion in 2013 from Won 4,063 billion in 2012.

Our income tax benefit decreased by 42.1% to Won 571 billion in 2013 from Won 985 billion in 2012, largely as a result of a decrease in our loss before income taxes, which was partially offset by an increase in adjustments related to unrealized deferred tax assets. See Note 41 to our financial statements included in this annual report. Our effective tax benefit rate, which represents tax benefit as a percentage of loss before income taxes, increased from 24.3% in 2012 to 144.0% in 2013 primarily due to the effect of recognition of deferred tax assets in relation to amounts received from customers regarding installation and use of facilities required for electricity supply.

As a cumulative result of the above factors, we had consolidated profit of Won 174 billion in 2013, compared to consolidated loss of Won 3,078 billion in 2012. Our consolidated net profit margin was 0.3% in 2013 compared to consolidated net loss margin of 6.3% in 2012. Our profit attributable to the owners of the company was Won 60 billion in 2013, compared to loss of Won 3,167 billion attributable to the owners of the company in 2012.

We had consolidated other comprehensive income of Won 186 billion in 2013 compared to consolidated other comprehensive loss of Won 322 billion in 2012, largely as a result of positive changes in actuarial gains or losses on retirement benefit obligations, net of tax (related to changes in future salary increases), gains on valuation of derivatives using cash flow hedge accounting, share in other comprehensive income of associates and joint ventures, net of tax. Furthermore, there were valuation gains on available-for-sale securities of LG Uplus Corp. and Korea District Heating Corp. in 2013.

As a cumulative result of the above factors, we had consolidated total comprehensive income of Won 360 billion in 2013, compared to consolidated total comprehensive loss of Won 3,400 billion in 2012.

2012 Compared to 2011

In 2012, our consolidated sales, which is principally derived from the sale of electric power, increased by 13.8% to Won 49,121 billion from Won 43,175 billion in 2011, reflecting primarily a 2.5% increase in the volume of electricity sold from 455,070 gigawatt hours in 2011 to 466,593 gigawatt hours in 2012 and a 4.9% increase in our overall average electricity tariff rates effective August 6, 2012. The overall increase in the volume of electricity sold was primarily attributable to a 2.6% increase in the volume of electricity sold to the industrial sector, which represents the largest segment of electricity consumption in Korea, from 251,491 gigawatt hours in 2011 to 258,102 gigawatt hours in 2012, and, to a lesser extent, a 2.1% increase in the volume of electricity sold to the commercial sector from 99,504 gigawatt hours in 2011 to 101,593 gigawatt hours in 2012 and a 1.2% increase in the volume of electricity sold to the residential sector, including overnight power usage, from 82,130 gigawatt hours in 2011 to 83,104 gigawatt hours in 2012. The increase in the volume of electricity sold to the industrial sector was primarily due to the general increase in demand for electricity in this sector in Korea largely as a result of continued export-led growth of the Korean economy, which involved an increased industrial output and greater capacity utilization in industrial plants. The increase in the volume of electricity sold to the commercial sector was primarily due to increased commercial activities in Korea, which was partially offset by weakened consumer sentiment in light of the ongoing uncertainties in the global economy. The increase in the volume of electricity sold to the residential sector was primarily due to increased usage of heating and air conditioning in 2012. For a discussion of the increase in our electricity tariff rates, see Item 4B. “Business Overview—Sales and Customers—Electricity Rates.”

Our consolidated cost of sales, which is principally derived from the costs related to the purchase of fuels for generation of electricity and to a lesser extent, from the purchase of power from independent power producers, depreciation and salaries, increased by 13.4% to Won 48,459 billion in 2012 from Won 42,725 billion in 2011, primarily due to a 11.0% increase in fuel costs, a 32.4% increase in purchased power, a 6.0% increase in salaries, a 1.7% increase in depreciation and a 7.0% increase in other cost of sales. Fuel costs, which accounted for 49.2% and 50.2% of our consolidated cost of sales in 2012 and 2011, respectively, increased by 11.0% to Won 23,823 billion in 2012 from Won 21,456 billion in 2011. Such increase in fuel costs was primarily due to an increase in energy consumption as a result of the general economic recovery and extreme weather conditions in 2012 and a 9.8% increase in unit cost of fuel mainly due to a 14.8% increase in unit cost of LNG. Purchased power, which accounted for 20.2% and 17.3% of our cost of sales in 2012 and 2011, respectively, increased by 32.4% to Won 9,801 billion in 2012 from Won 7,404 billion in 2011, primarily due to a 13.9% increase in the volume of power purchased from independent power producers (who generate electricity primarily through LNG-fired power plants), from 53,024 gigawatt hours in 2011 to 60,392 gigawatt hours in 2012, primarily to compensate for the shortfall in the supply of electricity due to the higher than anticipated rise in demand for electricity in 2012. Salaries increased by 6.0% to Won 2,662 billion in 2012 from Won 2,510 billion in 2011 primarily due to an increase in the number of our and our generation subsidiaries’ employees. Depreciation expense increased by 1.7% to Won 6,846 billion in 2012 from Won 6,733 billion in 2011 primarily due to an increase of additional property, plant and equipment related to the construction of new generation facilities pursuant to our capital investment program. Other remaining items of our cost of sales increased to Won 5,327 billion in 2012 from Won 4,622 in 2011 primarily due to an increase in costs related to our nuclear complex construction projects in the United Arab Emirates, an increase in provision for decommissioning costs of our nuclear facilities and provision for potential fines and penalties under the Renewable Portfolio Standard.

As a cumulative result of the foregoing factors, our consolidated gross profit increased by 46.8% to Won 661 billion in 2012 from Won 450 billion in 2011, while our consolidated gross profit margin increased to 1.3% in 2012 from 1.0% in 2011. The increases in our consolidated gross profit and consolidated gross profit margin were largely attributable to the 13.8% increase in our consolidated sales (which were due to the 4.9% increase in the overall average electricity tariff rates and the 2.5% increase in the volume of electricity sold), which was partially offset by the 13.4% increase in our consolidated cost of sales (which was mainly due to the 11.0% increase in fuel costs and the 32.4% increase in purchased power).

Our consolidated selling and administrative expenses increased by 1.6% to Won 1,780 billion in 2012 from Won 1,752 billion in 2011, primarily as a result of increases in salaries, research and development expenses and rent expenses.

Our consolidated net other operating income increased by 33.2% to Won 600 billion in 2012 from Won 451 billion in 2011, mainly as a result of an increase in compensation for damages received from a lawsuit in which we were the plaintiff, which more than offset the return to normal levels of donations related to renewable energy initiatives.

We had consolidated other losses, net, of Won 1,782 billion in 2012 compared to consolidated other gains, net, of Won 166 billion in 2011, primarily as a result of a write-off of our accumulated but unbilled fuel cost-based adjustment amounts as further described in Item 5A. “Operating and Financial Review and Prospects—Critical Accounting Policy—Correction of Accounting for Fuel Cost Pass-through Adjustment.”

As a cumulative result of the foregoing factors, our consolidated operating loss increased significantly to Won 2,300 billion in 2012 from Won 685 billion in 2011. Our operating loss margin increased to 4.7% in 2012 from 1.6% in 2011, compared to operating profit margin of 5.7% in 2010, largely due to a 17.7%11.0% increase in fuel costs and a 46.1%32.4% increase in purchased power which more than offset the 10.0%13.8% increase in our revenue from the sale of electricity.

Our consolidated net financial expense decreasedincreased by 2.8%1.5% to Won 1,940 billion in 2012 from Won 1,911 billion in 2011, from Won 1,967 billion in 2010, primarily as a result of the increaseincreases in gainsnet interest expense and net losses on valuation of derivatives, related to the overall appreciation of Won against the U.S. dollar.which were substantially offset by an increase in net gains on foreign currency translation.

Our consolidated profits of affiliates or joint ventures using equity method increased by 60.6%43.7% to Won 177 billion in 2012 from Won 123 billion in 2011, from Won 77 billion in 2010, primarily as a result of an increase in profits from Korea Gas Corporation and our overseas subsidiaries and affiliates due toprimarily as a result of the expansion of our overseas business.

As a cumulative result of the foregoing factors, we recordedhad consolidated loss before income taxes of Won 2,4734,063 billion in 20112012 compared to consolidated income before income taxes of Won 3702,473 billion in 2010. Our2011. We had consolidated income tax expenses increased by 86.8%income of Won 985 billion in 2012 compared to consolidated income tax expense of Won 820 billion in 2011, from Won 439 billion in 2010, primarily due to tax loss carry forward assessment which resultedthe absence of a one-time write-off in a decrease in2011 of deferred tax asset and an increaseassets in consolidated income tax expense.relation to net loss from the previous year due to the low probability of recovery.

As a cumulative result of the above factors, our consolidated loss for the year increased substantiallydecreased to Won 3,078 billion in 2012 from Won 3,293 billion in 2011, from Won 69 billion in 2010, and our consolidated net loss margin substantially increaseddecreased to 6.3% in 2012 from 7.6% in 2011 from 0.2% in 2010.2011. We also recordedhad net loss attributable to ownersour shareholders of the CompanyWon 3,167 billion in 2012, compared to net loss of Won 3,370 billion in 2011, compared to net loss attributable to owners of the Company of Won 120 billionour shareholders in 2010.2011.

Our consolidated other comprehensive loss substantially increased by 22.9% to Won 322 billion in 2012 from Won 262 billion in 2011 from Won 43 billion in 2010, primarilylargely as a result of the effectnegative changes in foreign currency translation of recording a negative net change in fair value of available-for-sale financial assets,foreign operations, net of tax, in 2011, which was largely due to unfavorable market conditions of the Korean stock market. Such change more than offset a positive change inand share in other comprehensive income (loss) of associates and joint ventures, net of tax, which were partially offset by a positive net change in 2011, which was largely due to exchange rate fluctuations that impacted the translationsfair value of other comprehensive income (loss)available-for-sale financial assets, net of our overseas associatestax, and joint ventures.a decrease in defined benefit actuarial losses, net of tax.

As a cumulative result of the above factors, our consolidated total comprehensive loss for the period increased substantiallydecreased by 4.4% to Won 3,400 billion in 2012 from Won 3,555 billion in 2011 from Won 112 billion in 2010.2011.

Inflation

The effects of inflation in Korea on our financial condition and results of operations are reflected primarily in construction costs as well as in labor expenses. Inflation in Korea has not had a significant impact on our results of operations in recent years. It is possible that inflation in the future may have an adverse effect on our financial condition or results of operations.

Segment Results

We operate the following business segments: transmission and distribution, nuclear power generation and non-nuclearthermal power generation and all other.others. The transmission and distribution segment, which is operated by KEPCO, the parent company, consists of operations related to the transmission, distribution and sale to end-users of electricity purchased from our generation subsidiaries as well as from independent power producers. The power generation segment, which is operated by KEPCO’s one nuclear generation subsidiary and five non-nuclearthermal generation subsidiaries, consists of operations related to the generation of electricity sold to KEPCO through the Korea Power Exchange. The transmission and distribution segment and the power generation

segment together represent our electricity business. The remainder of our operation is categorized as “all other.others.” The all other segment consists primarily of operations related to the plant maintenance and engineering and maintenance of generation plants,service, information services, and sales of nuclear fuel, communication line leasing, overseas businesses and others. In 20102011, 2012 and 2011,2013, the revenue from external customersunaffiliated revenues of the power generation segment (representing the six generation subsidiaries) and all our other revenues in the aggregate amounted to only 2.2%2.4%, 2.5% and 2.4%2.6% of our consolidated revenues, respectively, and the results of operations for our business segments substantially mirror our consolidated results of operations. For further information, see Note 4 of the notes to our consolidated financial statements included in this annual report.

Item 5B. Liquidity and Capital Resources

We expect that our capital requirements, capital resources and liquidity position may change in the course of implementing the Restructuring Plan. See Item 4B. “—Business Overview—Restructuring of the Electric Power Industry in Korea” and Item 3D. “Risk Factors—Risks Relating to KEPCO— The Government may adopt policy measures to substantially restructure the Korean electric power industry or our operational structure, which may have a material adverse effect on our business, operations and profitability.”

Capital Requirements

We anticipate that the following represent the major sources of our capital requirements in the short-term to intermediate future:

 

capital expenditures pursuant to our capital investment program;

 

working capital requirements, the largest component of which is fuel purchases;

 

payment of principal and interest on our existing debt;

 

headquarters relocation expenses pursuant to Government policy; and

 

overseas investments.

In addition, if there were to occur unanticipated material changes to the Restructuring Plan, the Basic Plan or other major policy initiatives of the Government relating to the electric power industry, or natural disasters, such developments may require a significant amount of additional capital requirements.

Capital Expenditures

We anticipate that capital expenditures will be the most significant use of our funds for the next several years. Our capital expenditures relate primarily to the construction of new generation units, maintenance of existing generation units and a significant expansion of our transmission and distribution systems. Our capital expenditures generally follow budgets established under the fifth Basic Plan Relating to the Long-Term Supply and Demand of Electricity, which contains projections relating to the supply and demand of electricity of Korea based on which we plan the construction of additional generation units and transmission systems. See Item 4B. “Business Overview—Capital Investment Program” for a further description of our capital investment program.

Our total capital expenditures for the construction of generation, transmission and distribution facilities were Won 10.2 trillion11,984 billion, Won 12,751 billion and Won 10.6 trillion15,831 billion in 20102011, 2012 and 2011,2013, respectively, and under our current budgets, are estimated to be approximately Won 14.9 trillion,19,898 billion, Won 20.8 trillion18,479 and Won 19.0 trillion16,339 billion in 2012, 20132014, 2015 and 2014,2016, respectively. We plan to finance our capital expenditures primarily through borrowings from financial institutions, issuance of securities in the capital markets, borrowings from financial institutions and construction grants.

In addition, in order to deal with the long-term shortage of fuel and other resources and also to comply with various environmental standards, in April 20102012 the Government announced a plan to adopthas adopted the Renewable Portfolio Standard (“RPS”) policy, underprogram, which replaces the Renewable Portfolio Agreement which was in effect from 2006 to 2011. Under the RPS program, each of our generation subsidiaries will besubsidiary is required to supply 2.0% and 10.0%generate a specified percentage of the total electricity to be generated from itby such generation subsidiary in a given year in the form of renewable energy, with the target percentage being 2.0% in 2012, 2.5% in 2013 and incrementally increasing to 10.0% by 2012 and 2022, respectively, with fines being levied on any unit failing to do so in2022. The current budgeted amount of capital expenditure for implementation of the prescribed timeline. We currently estimate that, if the Renewable Portfolio Standard is implementedRPS as currently planned our generation subsidiaries will incurfor the period from 2013 to 2022 is approximately Won 45 trillion in additional capital expenditure over the next 10 years.13.7 trillion. We expect that such additional capital expenditure will be covered by a corresponding increase in electricity tariff. However, there is no assurance that the Government will in fact raise the electricity tariff atto a level sufficient to fully cover such additional capital expenditures or at all. See Item 4B. “Business Overview—Renewable Energy” for a further description of the Renewable Portfolio Standard and our related past capital expenditures.

Fuel Purchases

We require significant funds to finance our operations, principally in relation to the purchase of fuels by our generation subsidiaries for generation of electricity. In 20102011, 2012 and 2011,2013, fuel costs accounted for 45.1%49.7%, 48.5% and 48.2%45.1% of our sales and 49.3%50.2%, 49.2% and 48.7%47.8% of our cost of sales, respectively. We plan to fund our fuel purchases primarily with net operating cash, although in cases of rapid increases in fuel prices as wasis the case in recent years,from time to time, we may also rely on borrowings from financial institutions and issuance of debt securities in the capital markets.

Repayment of Existing Debt

Payments of principal and interest on indebtedness will require considerable resources. The table below sets forth the scheduled maturities of the outstanding interest-paying debt (excluding issue discounts and premium) before accounting for swap transactions of us and our outstanding debtsix wholly-owned generation subsidiaries as of December 31, 20112013 for each year from 20122014 to 20162018 and thereafter. As of December 31, 2013, such debt represented 97.7% of our outstanding debt on a consolidated basis.

 

Year ended

December 31(1)

  Local currency
borrowings
   Foreign currency
borrowings
   Domestic
Debentures
   Foreign
debentures
   Exchangeable
bonds
   Total 
   (in millions of Won) 

2012

   1,425,989     677,087     4,180,010     726,193     —       7,009,279  

2013

   1,230,129     1,128,331     3,980,000     1,613,593     —       7,952,053  

2014

   544,088     —       4,250,000     2,248,935     —       7,043,023  

2015

   25,159     —       4,270,000     1,672,285     —       5,967,444  

2016

   40,172     —       4,080,000     749,645     —       4,869,817  

Thereafter

   1,633,550     49,557     9,560,000     2,218,854     —       13,461,961  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   4,899,087     1,854,975     30,320,010     9,229,505     —       46,303,577  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Note:

(1)As of December 31, 2011, we had borrowings under conditional agreements of Won 21.4 billion, of which Won 11.3 billion was denominated in Won and Won 10.1 billion in foreign currencies, with maturity dates between 2021 and 2026. Such loans are not included in the above table. Under the terms of the conditional loans, we are not obligated to repay the principal and interest on such loans if the underlying projects fail.

Year ended
December 31

  Local Currency
Borrowings
   Foreign Currency
Borrowings
   Domestic
Debentures
   Foreign
Debentures
   Total 
   (in millions of Won) 

2014

   910,408     477,154     4,250,000     2,375,008     8,012,570  

2015

   424,425     —       4,400,000     1,213,946     6,038,371  

2016

   757,133     —       5,920,000     686,020     7,363,153  

2017

   836,232     —       4,630,000     1,371,890     6,838,122  

2018

   849,201     —       5,051,060     2,522,592     8,422,853  

Thereafter

   391,284     9,270     19,560,000     3,011,631     22,972,185  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   4,168,683     486,424     43,811,060     11,181,087     59,647,254  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

We and our six wholly-owned generation subsidiaries have incurred interest charges (including capitalized interest) in relation to our interest-paying debt of Won 2,4822,721 billion, Won 2,927 billion and Won 2,6973,084 billion in 20102011, 2012 and 2011,2013, respectively. We anticipate that interest charges will increase in future years because of, among other factors, anticipated increases in our long-term debt. See “—Capital Resources” below. The weighted average raterates of interest on our and our six wholly-owned generation subsidiaries’ debt was 5.16%were 4.91%, 4.65% and 4.91%4.11% in 20102011, 2012 and 2011,2013, respectively.

We plan to repay the principal and interest on our existing debt primarily through borrowings from financial institutions, issuance of securities in the capital markets and net operating cash.

Relocation Expenses

In June 2005, the Government announced its policy to relocate the headquarters of government-invested enterprises, including us and certain of our subsidiaries, including six generation subsidiaries, out offrom the Seoul metropolitan area to other provinces in Korea. Pursuant to this policy, our headquarters are scheduled to be relocated to Naju in Jeolla Province, which is approximately 300 kilometers south of Seoul. Although the relocation was initially scheduled to occur by the end of 2012, due to construction delays, we currently expect that the relocation will occur by the end of 2014. In addition, the headquarters of certain of our subsidiaries are scheduled to be relocated to various other cities in Korea. Under the current relocation plan as approved by the Government in 2007 and in accordance with the relevant statute and related guidelines, the total relocation cost for us and our generation subsidiaries is estimated to be Won 1,0791,522 billion, which will be paid out over the construction period. Under a special act enacted for this purpose, we are required to sell the property in our current headquarters within one year after the relocation.

We plan to finance our relocation costs primarily through net cash flows from our operation, proceeds from the sale of the existing headquarters and investing activities, as well as borrowings from financial institutions and issuance of securities in the capital markets, as well as net operating cash.among others.

Overseas Investments

As part of our revenue diversification and fuel procurement strategy, we plan to continue to make overseas investments on a selective basis, which will be funded primarily through foreign currency-denominated borrowings and debt securities issuances as well as net operating cash from such projects.

Capital Resources

We have traditionally met our working capital and other capital requirements primarily from net cash provided by operating activities, issuance of debt securities and borrowings from financial institutionsinstitutions. Net cash provided by operating activities is primarily a function of electricity sales and construction grants.fuel purchases and is also affected by increases and decreases in trade receivables, trade payables and inventory related to electricity sales and fuel purchases. Net cash provided by operating activities was Won 6,7404,145 billion, Won 3,917 billion and Won 4,1456,884 billion in 20102011, 2012 and 2013, respectively.

As of December 31, 2011, 2012 and 2013, our long-term debt (excluding the current portion but including issue discounts and premium), before accounting for swap transactions, amounted to Won 39,198 billion, Won 45,525 billion and Won 52,801 billion, respectively, representing 72.9%, 89.1% and 102.6% of shareholders’ equity, respectively, as of such dates. As of December 31, 2011, 2012 and 2013, the current portions of our long-term debt were Won 5,832 billion, Won 7,005 billion and Won 7,508 billion, respectively. As of December 31, 2011, 2012 and 2013, our short-term borrowings amounted to Won 1,174 billion, Won 689 billion and Won 579 billion, respectively. See Note 23 of the notes to our consolidated financial statements included in this annual report. Total long-term debt (including the current portion but excluding issue discounts and premium), before accounting for swap transactions, as of December 31, 2011 (including the current portion and discounts on debentures and excluding premium on debentures)2013 was Won 45,03160,441 billion, of which Won 34,64447,793 billion was denominated in Won and an equivalent of Won 10,38712,648 billion was denominated in foreign currencies, primarily U.S. dollars. Construction grants received were Won 1,595 billion and Won 1,374 billion in 2010 and 2011, respectively. In addition, in anticipation of potential liquidity shortage, we maintain several credit facilities with domestic financial institutions amounting to Won 3,583 billion and US$1.1 billion, the full amount of which was available as of December 31, 2011. In addition, we, KHNP and KHNPKOWEPO also maintain Won-denominated and U.S. dollar-denominated global medium-term note programs in the aggregate amount of US$810 billion, of which approximately US$4.64 billion remains currently available for future drawdown.

As of December 31, 2010 and 2011, our long-term debt, excluding the current portion thereof, as a percentage of shareholders’ equity was 57.3% and 72.9%, respectively. As of December 31, 2010 and 2011, the current portion of our long-term debt was Won 6,311 billion and Won 5,832 billion, respectively. As of December 31, 2010 and 2011, our short-term borrowings amounted to Won 458 billion and Won 1,174 billion, respectively. See Note 24 of the notes to our consolidated financial statements.

Subject to the implementation of our capital expenditure plan and the sale of our interests in our generation subsidiaries and other subsidiaries, our long-term debt may increase or decrease in future years. Until recently, a substantial portion of our long-term debt was raised through foreign currencycurrency-denominated borrowings. However, we have been adjusting the proportion of foreign currency-denominated debt in order to reduce the

impact of foreign exchange rate fluctuations on our results of operations, we have reduced the proportion of our debt which is denominated in foreign currencies and plan to adjust the proportion of foreign currency debt in order to optimize our foreign currency exposure in light of, among others, the fluctuations in the value of Won, the cost of funding by each currency and the maturity of fund available in each market.operations. Our foreign currency-denominated long-term debt (including the current portion but excluding issue discounts and premium), before accounting for swap transactions, increased from Won 9,99211,291 billion as of December 31, 20102012 to Won 10,38712,648 billion as of December 31, 2011 before accounting for swap transactions.2013.

Our ability to incur long-term debt in the future is subject to a variety of factors, many of which are beyond our control, including, the implementation of the Restructuring Plan and the amount of capital that other Korean entities may seek to raise in capital markets. Economic, political and other conditions in Korea may also affect investor demand for our securities and those of other Korean entities. In addition, our ability to incur debt will also be affected by the Government’s policies relating to foreign currency borrowings, the liquidity of the Korean capital markets and our operating results and financial condition. In case of adverse developments in Korea, however, the price at which such financing may be available may not be acceptable to us.

We incur our short-term borrowings primarily through commercial papers sold to domestic financial institutions. The proceeds from our short-term borrowings are used primarily for fuel purchase and other working capital purposes. Our short-term borrowings increased significantly from (Won)458 billion as of December 31, 2010 to Won 1,174 billion as of December 31, 2011, primarily as a result of the issuance of commercial papers to domestic financial institutions and domestic bank borrowings, in part, for the purpose of funding the purchase of fuels, the cost of which continued to significantly increase in 2011. In large part due to the ample liquidity in the domestic financial markets and the strong credit ratings of us and our generation subsidiaries, weWe have not had, and we currently do not expect to have, any material difficulties in obtaining short-term borrowingsborrowings. In addition, in order to prepare for potential liquidity shortage, we maintain several credit facilities with domestic financial institutions amounting to Won 2,550 billion and US$4,549 million, the foreseeable future. However, there is no assurance that we will not face any such difficulties due to unforeseen circumstances.full amount of which was available as of December 31, 2013.

We may raise capital from time to time through the issuance of equity securities. However, there are certain restrictions on our ability to issue equity, including limitations on shareholdings by foreigners. In addition, without changes in the existing KEPCO Act which requires that the Government, directly or pursuant to the Korea Finance Corporation Act, through Korea Finance Corporation, own at least 51% of our capital stock, it may be difficult or impossible for us to undertake any equity financing other than sales of treasury stock without the participation of the Government. In caseEven if we are able to conduct equity financing with the participation of adverse economic developments in Korea, however, the share price at which such financingGovernment, prevailing market conditions may be availablesuch that we may not be able conduct equity financing on terms that are commercially acceptable to us. See Item 3D. “Risk Factors—Risks Relating to Korea and the Global Economy.”

Our total shareholders’ equity decreasedslightly increased from Won 57,27751,064 billion as of December 31, 20102012 to Won 53,80451,451 billion as of December 31, 2011.2013.

Liquidity

Our liquidity is substantially affected by our construction expenditures and fuel purchases. Construction in progress increased slightlyby 29.0% from Won 19,25321,184 billion as of December 31, 20102012 to Won 19,91227,334 billion as of December 31, 2011.2013. Fuel costs increased by 1.6% to Won 20,97124,200 billion in 20112013 from Won 17,82323,823 billion in 2010.2012.

Our cash flows are also impacted by several other factors. Our net cash provided by operating activities amounted to Won 3,917 billion in 2012 and Won 6,884 billion in 2013. The fuel costs accounted for 48.7%increase in net cash provided by operating activities in 2013 compared to 2012 was mainly due to an increase in cash collected from our customers in tandem with increases in the sales volume and 49.3% of our consolidatedelectricity tariff rates in 2013 compared to 2012 and the decrease in the unit cost of salescoal, LNG and oil in 20112013 compared to 2012, which in turn led to a decrease in cash paid for fuel cost. Our cash flows from investing activities are affected by acquisitions of property, plant and 2010, respectively.equipment. Our cash flows from financing activities are mainly affected by borrowings and issuance of debt securities and repayment thereof, as well as dividends paid.

Due to the capital-intensive nature of our business as well as significant volatility in fuel prices, from time to time we operate with a working capital deficit,deficits, and we may have substantial working capital deficitdeficits in the

future. In order to meet capital requirements related to working capital deficit, we intend to continue to rely primarily upon net cash provided by operating activities, sales of debt securities, borrowings from financial institutions and construction grants. See “—Capital Resources.” As of December 31, 20102011, 2012 and 2011,2013, we had a working capital deficit of Won 9163,974 billion, Won 4,884 billion and Won 3,6154,945 billion, respectively. We have traditionally met our working capital and other capital requirements primarily fromwith net cash provided by operating activities, issuance of debt securities, borrowings from financial institutions and construction grants. We also incur our short-term borrowings primarily through commercial papers sold to domestic financial institutions. We have not had, and we do not expect to have, any material difficulties in obtaining short-term borrowings. See “—Capital Resources.”

We may face liquidity concerns in the case of significant depreciation of Koreanthe Won against major foreign currencies over a short period of time. While substantially all of our revenues are denominated in Won, we pay for substantially all of our fuel purchases in foreign currencies and a substantial portion of our long-term debt is denominated in foreign currencies, and payment of principal and interest thereon is made in foreign currencies. In the past, we have incurred foreign currency debt principally due to the limited availability and the high cost of Won-denominated financing in Korea. However, in light of the increasing sophistication of the Korean capital markets and the recent increase in liquidity in the Korean financial markets, we plan to reduce the portion of our debt which is denominated in foreign currencies although we intend to continue to raise certain amounts of capital through long-term foreign currency debt for purposes of maintaining diversity in our funding sources as well as paying for overseas investments in foreign currencies. As of December 31, 2011,2013, approximately 23.2%20.9% of our long-term debt (including the current portion and discounts on debentures but excluding premium on debentures)issue discounts and premium) before accounting for swap transactions was denominated in currencies other than Won.

We enter into currency swaps and other hedging arrangements with respect to our debt denominated in foreign currencies only to a limited extent due primarily to the limited size of the Korean market for such derivative arrangements. Such instruments include combined currency and interest rate swap agreements, interest rate swaps and foreign exchange agreements. We do not enter into derivative financial instruments in order to hedge market risk resulting from fluctuations in fuel costs. Our policy is to hold or issue derivative financial instruments for hedging purposes only. Our derivative financial instruments are entered into with major financial institutions, thereby minimizing the risk of credit loss. See Note 1211 of the notes to our consolidated financial statements.

We did not pay any dividends in 20102012 and 2013 in respect of fiscal years 2011 and 2012, due to our incurring net losses for such fiscal years; however, we currently have no plans to paypaid dividends in 2012of Won 90 per share on April 25, 2014 as we recordedhad net lossesincome in 2011.fiscal year 2013.

Other

Our operations are materially affected by the policies and actions of the Government. See Item 4B. “Business Overview—Regulation.”

Item 5C. Research and Development, Patents and Licenses, etc.

Research and Development

We maintain aOur research and development program is focused on developing highly advanced electric power, technology necessaryrenewable energy, smart grid and customer-friendly electricity service technologies that will enable us to become a global leader in the electric powerenergy industry. In order to achieve this goal,our corporate vision of becoming a “Global Top Green & Smart Energy Pioneer,” in 2013 we have adopted the “GreenKEPCO Technology Development Strategy which emphasizes enhanced technological convergence and Roadmap” ascustomer service. As part of the “2020 Mid-such strategy, we seek to develop (i) clean and Long-Term Strategic Management Plan” which we announcedsmart energy technology, including in 2009. This strategic roadmap consists ofrelation to low carbon emission in power generating technology, high efficiencygeneration, (ii) an efficient and intelligent power transmission and distribution grid system, (iii) technology that will enhance efficiency and responsiveness to consumer’s electricity consumption patterns, and (iv) improvements in information, communication and technology (“ICT”) for enhanced customer service.

In 2014, consistent with the demand-creating green technology. We are planningGovernment guidelines, we plan to invest Won 3,572 billion to developapproximately 0.5% of our annual revenue in the research and development of green and smart technologies, such asparticularly with a focus on the following 12 areas: integrated gasification combined cycle for synthetic natural gas production, carbon capture and storage, offshore wind power, offshore energy development, high voltage direct currents, super conductor, smart grid, super conductor, electricity-powered vehiclesmicro grid, demand responsive and all-electric powered houses.energy efficiency applications, power ICT solutions, intelligent plant management system and energy storage systems.

As part of our strategy for future growth, we have placed a high priority onOur high-priority “green and smart energy” projects currently include the development of the following “green energy” projects:following:

 

a high-efficiency absorbentacquiring integrated gasified process technology;

establishing high-tech smart grid and micro grid test beds in Jeju Island;

developing highly efficient absorbents for carbon capture;

 

the establishment of a joint venture company to adopt a technology of integrated gasified process;commercializing offshore wind power plants;

 

an infrastructureobtaining high-voltage direct currents technology suitable for electricity-powered vehicles;

a high-tech smart grid test bed in Jeju Island;

a conversion system for a 80kV high voltage direct current;domestic operation; and

 

all-electric powered houses.experimental testing of large-scale electricity storage systems with capacities ranging from four to eight megawatts.

In the field of hydroelectric and thermal power, our research and development efforts are primarily focused on developing technologies required for the efficient operation of thermal power plants, such as the “Development of Advanced Thermal Power Plant” project using the “Ultra-Super Critical Technology.” We also emphasize enhancing plant maintenance, which has proven to be of great importance in maintaining a competitive edge in this field, through accurate damage analysis, environmentally-friendly inspections and various other protective and optimization measures.

In the field of nuclear power, our research and development efforts are primarily focused on developing technology for enhancing the safety and economy of nuclear plants, such as our “Basic Design for Advanced Power Reactor” project. Our research and development objective for this field is to obtain technologies necessary to perform reactor/activities also focus on the following:

in the thermal power generation sector, enhancing efficiency and reducing cost in power plant safetyconstruction and operation as well as in our plant maintenance, including through improvements in damage analysis radiation control and radioactive waste reduction,environment-friendly inspections;

in the renewable energy sector, enhancing efficiency, lowering costs of power generation, identifying new energy sources and seismic monitoring and analysis.exploring new business opportunities;

In

in the field of electric power systems, we have focused our researchsystem sector, enhancing the stability and development efforts on developing required technology and providing technical support forreliability in the stable and reliable operation of our electric power systems, suchgrid as the Static Synchronous Compensator (STATCOM). We have also developed the technology for an efficientwell as enhancing efficiency in electricity distribution, system, andincluding through introducing preventive maintenance measures for substations and developing technologies related to system automation, power utilization and power line communication.communication;

in the customer service sector, developing technologies enabling a greater range of business opportunities and heightened customer service in anticipation of the upcoming rollout of the smart grid system; and

in the technological convergence sector, identifying new business opportunities through convergence among technologies and businesses and maximizing synergy from such convergence in tandem with the promotion of creative economy in Korea as well as globally.

In addition, we have been cooperatingcooperate closely with many foreignseveral other electric utilitiesutility companies and research institutes, both foreign and domestic, on a diverse rangevarious projects to diversify the scope and scale of projects.our research and development activities.

We invested approximately Won 766640 billion in 20112013, and currently plan to invest Won 948924 billion in 20122014, on research and development. We had approximately 895888 employees engaged in research and development activities as of December 31, 2011.2013. As a result of our research, approximately 2,382 intellectual property6,222 patent applications were submitted in Korea and abroad, out of which 1,313 intellectual propertyand 2,794 applications have been registered to date. Inwere approved, in each case, in 2013.In addition, we are currently constructingplan to establish a management infrastructure tothat will facilitate the development of high value-added intellectual properties. We also seek opportunities to market theour technologies we have developed by identifying key items that have market potential in light of intellectual property, overseas market conditions and cost-efficiency issues. We are continuously upgrading our research and development programs, restructuring our research and development organization and reallocating and reassigning research personnel.overseas.

Item 5D. Trend Information

Trends, uncertainties and events which could have a material impact on our sales, liquidity and capital resources are discussed above in Item 5A. “Operating Results” and Item 5B. “Liquidity and Capital Resources.”

Item 5E. Off-Balance Sheet Arrangements

We havehad no significant off-balance sheet arrangements as of December  31, 2011 except for purchase obligations, payment guarantees and overdraft as described in Item 5F.2013.

Item 5F. Tabular Disclosure of Contractual Obligations

The following summarizes certain of ourthe contractual obligations of us and our six wholly-owned generation subsidiaries as of December 31, 20112013 and the effect such obligations are expected to have on liquidity and cash flow in future periods.

 

  Payments Due by Period   Payments Due by Period 

Contractual Obligations(1)

  Total   Less than 1
year
   1–3 years   4–5 years   After 5
years
   Total   Less than
1 year
   1–3 years   3–5 years   After 5 years 
  (in billions of Won)   (in billions of Won) 

Long-term debt(2)

  (Won)45,130    (Won)5,836    (Won)14,995    (Won)10,837    (Won)13,462    54,366    2,731    13,402    15,261    22,972  

Interest payments on long-term debt(3)(4)

   10,839     2,132     3,249     1,862     3,596  

Short-term borrowings

   1,174     1,174     —       —       —       5,281     5,281     —       —       —    

Plant construction(4)(5)

   45,790     7,611     23,390     14,789     —    

Interest payments (3)

   12,774     1,801     3,605     2,264     5,104  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

  (Won)102,933    (Won)16,753    (Won)41,634    (Won)27,488    (Won)17,058    72,421    9,813    17,007    17,525    28,076  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

 

Notes:

 

(1)We entered intohave several other contractual obligations, including finance lease agreements with Korea Development Leasing Corporation and others for certain computer systems.agreements. We believe the remaining annual payments under capital and operating lease agreements as of December 31, 20112013 were immaterial. Contractual obligations related to payment of debt of us and our six wholly-owned generation subsidiaries represented 97.7% of our outstanding debt as of December 31, 2013 on a consolidated basis.
(2)Includes the current portion and excludes amortization of note discount and issue costs.portion.
(3)A portion of our long-term debt carried a variable rate of interest. We used the interest rate in effect as of December 31, 20112013 for the variable rate of interest in calculating the interest payments on long-term debt for the periods indicated.
(4)These figures represent those of us and our six wholly-owned generation subsidiaries, which represent more than 90% of the corresponding amounts on a consolidated basis.
(5)Based on budgeted amounts, as of December 31, 2011, of capital expenditure for the construction of generation facilities of our generation subsidiaries through 2015. The budgeted amounts may differ from the actual amounts of expenditure.

For a description of our commercial commitments and contingent liabilities, see Note 49 of the notes to our consolidated financial statements.statements included in this annual report.

We entered into a power purchasingpurchase agreement with GS EPS Co., Ltd. and three other independent power producers, under which we are required to annually purchase a minimum amount ofall electricity generated by these companies to the extent such electricity is traded through the KPX. The purchase prices for such electricity are predetermined under the power purchase agreements, subject to annual adjustments. We purchased power from these companies. Power we purchased from these companies amounted toin the amounts of Won 2,1952,529 billion, Won 3,249 billion and Won 2,5293,161 billion for the years ended December 31, 2010in 2011, 2012 and 2011,2013, respectively.

We have entered into contracts with domestic and foreign suppliers (includingto purchase bituminous coal and anthracite coal. Although we meet our coal requirements primarily through purchases in spot markets, substantial amounts of such requirements are also met through purchases under long-term supply contracts. Under our long-term supply contracts, purchase prices are adjusted periodically based on prevailing market conditions. We currently purchase all our LNG requirements from Korea Gas Corporation, a related party) to purchase bituminous coal, anthracite coal and LNG. These contracts generally have terms of three months to one year and provide for periodic price adjustments to then-market prices. Under most of the coal purchase contracts, we are required to purchase an annual quantity of coal.party. We have also entered into long-term transportation contracts with Hanjin Shipping Co., Ltd. and others.

We import all uranium ore concentrates from sources outside Korea (including the United States, United Kingdom, Kazakhstan, France, Russia, South Africa,Germany, Niger, Canada, Japan and Australia) through medium- to long-term contracts and pay for such concentrates with currencies other than Won, primarily U.S. dollars. Contract prices for processing of uranium are generally based on market prices. See Note 48 of the notes to our consolidated financial statements for further details of these contracts.

Under the Long-term Transmission and Substation Plan approved by the Ministry of Knowledge Economy, which took effect on March 13, 2009,Trade, Industry and Energy, we are liable for the construction of all of our power transmission facilities and the maintenance and repair expenses for such facilities.

In July 2005, nine government-invested utilities companies, including us, entered into a Renewable Portfolio Agreement with the Government in order to expand the generation and distribution of renewable energy. This agreement contemplates two phases of capacity build-up for the generation and distribution of renewable energy.

Under Phase II, which lasted from 2009 to 2011, we and our generation subsidiaries made capital expenditures of Won 1,227 billion in the aggregate to construct renewable energy generation capacity of 534 megawatts.

Payment guarantee and short-term credit facilities from financial institutions as of December 31, 20112013 were as follows:

Payment guarantee

 

Description

  

Financial Institutions

  Credit Lines 
      (In millions of Won or
thousands of USD,
GBP, EUR, AED,
JPY, NPR SAR, AED,
BTN, INR, THB,
BDT, and EUR)INR)
 

Payment of import letter of credits

Suhyup Bank and othersKRW99,213
  Korea Exchange Bank and others   USD     1,616,0632,053,328  
  Korea Exchange Bank   GBP     61,169  
Korea Exchange BankEUR3,100
Nonghyup Bank and othersJPY18,914,670

Inclusive credits

  Korea Exchange Bank and others   KRW     387,5001,176,600  
  HSBC and others   USD     547,012545,512  

Performance guarantees of business on overseas oilfield or Electricityguarantees

  Bank of KathmanduNPR155,448
SABBSAR100,000
Export-import Bank of KoreaSeoul Guarantee Insurance and othersUSD223,708
Hana Bank   KRW     65,000159,426  

Performance guarantees on guarantees

  Korea Exchange Bank   AED     54,880  
  Bhutan NationalStandard Chartered Bank and others   BTNUSD     11,857843,811
Kookmin BankEUR37,082  
  HSBC and others   INR     244,333236,443  

Guarantees for bid

  Seoul Guarantee Insurance and othersKRW16,592
Standard Chartered BankSMBC and others   USD     653,230

Guarantees for bid

HSBC and othersINR82,700
Standard Chartered BankTHB72,000
Shinhan Bank and othersUSD81,01611,470  

Warranty bond and others

Korea Exchange BankBDT10,206
Bhutan National BankBTN11,857
  Shinhan Bank   EUR     5,43854,880
HSBCUSD252,140
Katumandu Bank and othersNPR85,289

Other guarantees

Korea Exchange Bank and othersKRW9,503
BNP Paribas and othersUSD1,409,500  
  HSBC   INR     139,690
Nonghyup BankUSD20,212

Other guarantees

Shinhan BankUSD750157,830  

Overdraft and Others

 

Description

  

Financial Institutions

  Credit Lines 
      (In millions of Won
or
thousands of USD)US$)
 

Overdraft

  KookminNonghyup Bank and others   WonKRW     1,534,0002,125,000  

Commercial paper

  ShinhanKorea Exchange Bank and others   WonKRW     2,049,0001,129,000  

Limit amount available for card

  IndustrialHana Bank of Korea and others   WonKRW     71,57071,500  

Loan limit

  Korea ExchangeHana Bank and others   WonKRW     506,830195,996  
  HSBCBNP Paribas and others   USD     1,233,0002,646,059  

Repayment guarantees for foreign currency debentures

  Korea Development Bank   USD     583,993420,009  

We have entered into contracts with several companies in the aggregate amount of Won 28,224 billion as of December 31, 2011 for construction of power plant facilities and facility maintenance.

We have provided a debtrepayment guarantee of US$58 million to Sumitomo Mitsui Banking Corporation and other financial institutions and a guarantee on interest swap agreement of US$1.5 million to Sumitomo Mitsui Banking Corporation in relation to the UAE Shuweihat S3 project.

We provide Won 5.2 billionprovided a performance guarantee to Kookmin Bank related to a construction completion to Kookmin Bank. Ascontract. Such guarantee is not recognized as a provision for financial guarantee because such performance guarantee does not meet the definition of a financial guarantee contract in IAS 39, no related liability is recognized.under IFRS.

We haveExisting guarantees provided by us to our associates and joint and several obligations for liabilities in our pumped storage power business with five of our power generation subsidiaries and KHNP, which occurred prior to January 1, 2011 when our pumped storage power business segment was reorganized from five of our power generation subsidiaries (KOSEP, KOMIPO, KOWEPO, KOSPO, and EWP) and merged into KHNP.

As of December 31, 2011, our affiliate, Hyundai Energy Co., Ltd., which is engaged in the integrated energy business, carried long-term borrowings for project financing amounting to Won 450 billion from Korea Development Bank (“KDB”) and others. In connection with such borrowings, we pledged our investment securities in Hyundai Energy Co., Ltd., amounting to Won 30,878 million, to secure long-term borrowings amounting to Won 390 billion on behalf of our investee. In addition, we placed guarantees for the business performance of Hyundai Energy Co., Ltd., and had a payment guarantee in relation to the repayment of the principal and interest in arrears of unsubordinated borrowings amounting to Won 60 billion. In relation to the above project financing, NH Power II Co., Ltd. and Daewoo Securities Co., Ltd. entered into an agreement with Yeocheon TPL Co., Ltd. to acquire shares in Hyundai Energy Co., Ltd. held by Yeocheon TPL Co., Ltd. We placed guarantees for a fixed return on investment to the financial institutions and obtained the rights to acquire preferential investment securities in return.

As of December 31, 2011, our related parties, RES Technology AD (“RES”) and ASM-BG Investicii AD, (“ASM”), which are engaged in the photovoltaic power generation business in Bulgaria, had long-term borrowings for project financing amounting to EUR 59,243 thousand and EUR 59,469 thousand from KDB and others, respectively. In connection with these borrowings, we pledged our investment securities in RES and ASM to secure the long-term borrowings.

We have provided the following guarantees for our subsidiaries and affiliatesventures as of December 31, 2011:2013 are as follows:

 

TypePrimary Guarantor
(Providing Company)

  

Guaranteed companySecondary Guarantor
(Provided Company)

Type of
Guarantees

  Amounts (thousands)Foreign
Currency
 Credit Limit

Guarantee (Final
Provided Company)

SubsidiaryKEPCO

  KEPCO IlijanSPC Power CorporationDebt guaranteesUSD189,565SMBC and others

KEPCO

Shuweihat Asia Power Investment B.V.Performance guaranteesUSD17,900ADWEA

KEPCO

Shuweihat Asia O&M Co, Ltd.Performance guaranteesUSD11,000ADWEA

KEPCO

KNOC Nigerian East Oil Co., Ltd. and KNOC Nigerian West Oil Co., Ltd.Performance guaranteesUSD34,650Korea National Oil Corporation (Nigerian government)

KEPCO

Amman Asia Electric Power CompanyPerformance guaranteesUSD19,800Standard Chartered Bank

KOWEPO

Cheongna Energy Co., Ltd.Collateralized money investedKRW42,646Hana Bank, Korea Exchange Bank
Guarantees for supplemental funding—  

KOWEPO

Xe-Pian Xe-Namnoy Power Co., Ltd.Performance guaranteesUSD2,310Krung Thai Bank
Collateralized money investedUSD16,934

KOWEPO

Rabigh O&M Co., Ltd.Performance guaranteesSAR4,800Saudi Arabia British Bank

KOWEPO

Deagu Photovoltaic Co., Ltd.Collateralized money investedKRW1,229Shinhan Capital Co., Ltd.

KOWEPO

Dongducheon Dream Power Co., Ltd.Collateralized money investedKRW144,200Kookmin Bank and others

KOWEPO

PT Mutiara JawaCollateralized money investedUSD2,610Shinhan Bank Singapore

EWP

Busan shinho Solar power Co., Ltd.Collateralized money investedKRW2,100KT Capital Co., Ltd.

EWP

STX Electric Power Co., Ltd.Collateralized money investedKRW176,400Korea Development Bank

EWP

Honam Wind Power Co., Ltd.Collateralized money investedKRW3,600Shinhan Bank and others

KOSPO

KNH Solar Co., Ltd.Collateralized money investedKRW1,296Shinhan Bank, Kyobo Life Insurance Co., Ltd.
Performance guarantees and guarantees for supplemental funding(1)   USD 72,000—    —  

SubsidiaryPrimary Guarantor
(Providing Company)

Secondary Guarantor
(Provided Company)

Type of
Guarantees

  KEPCO Shanxi InternationalForeign
Currency
Credit Limit

Guarantee (Final
Provided Company)

KOSPO

Daeryun Power Co., Ltd.Collateralized money investedKRW25,477Korea Development Bank, Dongbu Insurance Co., Ltd. and others
Guarantees for supplemental funding(2)(1)  
USD 116,474
RMB800,000
  
—  

SubsidiaryKOSPO

Changjuk Wind Power Co., Ltd.Collateralized money investedKRW3,801Shinhan Bank, Woori Bank
Guarantees for supplemental funding(1)—  

KOSPO

Busan Solar Co., Ltd.Collateralized money investedKRW793NH Bank

KOSPO

Taebaek Wind Power Co., Ltd.Guarantees for supplemental funding(1)—  Shinhan Bank, Bank of Cheju

KOSPO

Daegu Green Power Co., Ltd.Collateralized money investedKRW76,193Korea Exchange Bank and others
Performance guarantees and guarantees for supplemental funding(1)—  

KOSPO

KS Solar Corp. Ltd.Collateralized money investedKRW637Shinhan Capital Co., Ltd.

KOSPO

Jeonnam Solar
Co., Ltd.
Collateralized money investedKRW700Shinhan Capital Co., Ltd.

KOSPO

Kelar S.A.Performance guaranteesUSD13,000Korea Exchange Bank

KEPCO E&C

DS Power Co., Ltd.Collateralized money investedKRW2,900Korea Exchange Bank

KOSPO

KRW15,000and Daewoo Securities Co., Ltd.

KEPCO E&C

Performance guarantees and guarantees for supplemental funding(1)—  

KOSPO

—  

KOMIPO

Hyundai Green Power Co., Ltd.Collateralized money investedKRW87,003Korea Development Bank and others
Guarantees for supplemental funding(1)—  

KOMIPO

Gangwon Wind Power Co., Ltd.Collateralized money investedKRW7,410Industrial Bank of Korea

Primary Guarantor
(Providing Company)

Secondary Guarantor
(Provided Company)

Type of
Guarantees

  KEPCO Lebanon SARL.Foreign
Currency
Credit Limit

Guarantee (Final
Provided Company)

KOMIPO

Cheonan Photovoltaic Power Co., Ltd.Collateralized money investedKRW122KT Capital Corporation

KOMIPO

Gumi-ochang Photovoltaic Power Co., Ltd.Collateralized money investedKRW288Shinhan Capital Co., Ltd.

KOMIPO

Chungbuk Photovoltaic Power Co., Ltd.Collateralized money investedKRW166KT Capital Corporation

KOMIPO

Golden Route J Solar Power Co., Ltd.Collateralized money investedKRW82Shinhan Capital Co., Ltd.

KOMIPO

PT. Cirebon Electric PowerDebt guaranteesUSD8,091Hana Bank

KOMIPO

D Solarenergy Co., Ltd.Collateralized money investedKRW400Shinhan Capital Co., Ltd.

KOMIPO

Hyundai Asan Solar Power Co., Ltd.Collateralized money investedKRW471Shinhan Capital Co., Ltd.

KOSEP

Hyundai Energy Co., Ltd.Collateralized money investedKRW71,070Korea Development Bank and others
Performance guarantees and guarantees for supplemental funding(3)(1)   USD 17,113—    —  

SubsidiaryKOSEP

  Qatrana ElectricRES Technology ADCollateralized money investedKRW15,595Korea Development Bank and others
Debt guaranteesEUR4,271

KOSEP

ASM-BG investicii ADCollateralized money investedKRW16,101Korea Development Bank and others
Debt guaranteesEUR4,175

KOSEP

Express solar-light Power CompanyGeneration Co., Ltd.Collateralized money investedKRW3,132Woori Bank and others
Guarantees for supplemental funding(4)(1)   USD 17,600—    —  

SubsidiaryKOSEP

  S-Power Co., Ltd.Collateralized money investedKRW108,000Korea Development Bank and others
KST Electric Power CompanyPerformance guarantees and guarantees for supplemental funding(5)(1)   USD 83,587—    —  

SubsidiaryPrimary Guarantor
(Providing Company)

  

KEPCO Middle East Holding CompanySecondary Guarantor
(4
)Provided Company)

Type of
Guarantees

Foreign
Currency
   USD 67,000

Affiliate

KNOC Nigerian East Oil Co., Ltd.Credit Limit(6)

KNOC Nigerian West Oil Co., Ltd.(6)

   USD 34,650

Guarantee (Final
Provided Company)

AffiliateKOSEP

  Shuweihat AsiaYEONGAM Wind Power Investment B.V.Co., Ltd.Collateralized money investedKRW11,584Kookmin Bank and others
Guarantees for supplemental funding(7)(1)   USD 17,944—    —  

AffiliateKOSEP

  Coscon Photovoltaic Co., Ltd.Collateralized money investedKRW245Shinhan Capital Co., Ltd.

KOSEP

Yeonan Solar Co., Ltd.Collateralized money investedKRW157Shinhan Capital Co., Ltd.

KOSEP

Q1 Solar Energy Co., Ltd.Collateralized money investedKRW1,005Shinhan Bank and others

KOSEP

Best Solar Energy Co., Ltd.Collateralized money investedKRW1,242Shinhan Bank and others

KOSEP USA, INC.

KODE NOVUS II LLCShuweihat Asia O&M Co.Guarantees for supplemental funding(7)(1)—  Korea Development Bank and others

KOSEP USA, INC.

KODE NOVUS I LLCGuarantees for supplemental funding(1)—  Daewoo Shipbuilding & Marine Engineering Co., Ltd.

KOSEP

Yeong Wol Energy Station Co., Ltd.Collateralized money investedKRW462Daewoo Securities Co., Ltd. and others

KHNP

KRW1,400

KEPCO KPS

Incheon New Power Co., Ltd.Collateralized money investedKRW461Shinhan Bank
Guarantees for supplemental funding(1)   USD 11,000

Affiliate

KEPCO SPC Power Co.(8)—      USD 220,590

Affiliate

Rabigh Electricity Company(9)—      SAR100,000

 

Notes:Note:

 

(1)KEPCO Ilijan Corporation, which is a subsidiary of KEPCO International Philippines Inc., is engaged in the power generation business in the Philippines and borrowed US$242 million in 2000 as project financing from Japan Bank of International Cooperation and others. In connection with the borrowing, KEPCO Ilijan Corporation’s investment securities held by KEPCO International Philippines Inc. were pledged as collateral. We have provided the National Power Corporation and others with the guarantee not to exceed US$72 million on performance of the power generation business of KEPCO Ilijan Corporation.
(2)KEPCO Shanxi International Ltd. (the wholly-owned subsidiary) formed the consortium with Deutsche Bank and Shanxi International Electric Power Ltd. to invest in the Chinese electric power generation business. The consortium established Gemeng International Energy Group Co., Ltd. (34.0% of ownership) to support this business. We have provided HSBC and Export-Import Bank of Korea (the “EXIM Bank”) with the payment guarantee for KEPCO Shanxi International Ltd.’s loan of US$116.5 million. We agreed with Deutsche Bank to refund the investment of RMB800 million and pay the additional interest of Libor + 2% for the period from initial investment date to the unqualified date in accordance with terms of the agreement, if Gemeng International Energy Group Co., Ltd. fails to be listed on the Hong Kong stock exchange within six years from the establishment date.

(3)We have provided performance guarantees related to the operation of the Lebanon power generation plant amounting to US$17.1 million to the Lebanon Electricity Agency.
(4)We invested in a power plant construction project in Al Qatrana, Jordan through KEPCO Middle East Holding Company SPC (our wholly-owned subsidiary), and established the Qatrana Electric Power Company (80% of ownership) to operate this project. Qatrana Electric Power Company provided the Jordanian Electric Power Company with a performance guarantee for this project. We provided a payment guarantee of US$17.6 million to Qatrana Electric Power Company and US$67 million to KEPCO Middle East Holding Company SPC in favor of XENEL, a power company located in Saudi Arabia and a partner in the business.
(5)On August 2, 2010, a consortium led by us was selected as the preferred bidder in an international auction for the construction and operation of the Norte II gas-fueled combined-cycle electricity generation facility in Chihuahua, Mexico, as ordered by the Comision Federal de Electricidad (“CFE”) of Mexico. The consortium established a special purpose vehicle, KST Electric Power Company, to act as the operating entity, and we have provided Comision Federal de Electricidad with a performance guarantee amounting to US$23 million for KST Electric Power Company’s obligations under the project. In addition, we have provided SMBC and other financial institutions with a payment guarantee amounting to US$61 million in the aggregate related to equity bridge loan of KST Electric Power Company.
(6)In August 2005, a consortium consisting of us, Korea National Oil Corporation, a state-controlled enterprise, and Daewoo Shipbuilding & Marine Engineering won a bid from the federal government of Nigeria for the exploration and production of oil in two off-shore blocks. This consortium holds a 60% equity interest in the special purpose vehicle established to carry out the project regarding these two blocks. We hold a 15% equity interest in the consortium. In March 2006, the consortium entered into production sharing contracts with the Nigerian National Petroleum Corporation in connection with this project. Under these contracts, if the consortium is successful in finding oil, it will be entitled to operate the related facilities for 20 years. Regarding the exploration and development project, we provided the Nigeria government with a performance guarantee of US$34.7 million. However, on January 9, 2009, the consortium was informed of a unilateral decision by the government of Nigeria to void allocation of the oil blocks granted to the consortium and refund the prepaid signature bonus. The leader of the consortium, Korea National Oil Corporation has filed a suit in the Nigerian court and won the case on August 21, 2009. As of December 31, 2010, Nigeria’s government has appealed a federal court’s decision and the case is currently pending.
(7)On October 18, 2010, a consortium including us was selected by Abu Dhabi Water & Electricity Authority (“ADWEA”), a state-run utilities provider in the United Arab Emirates, as the preferred bidder in an international bidding for the construction and operation of the combined-cycle natural gas-fired electricity generation facilities in Shuweihat, UAE with an expected aggregate generation capacity of 1,600 megawatts. In connection with this project, we have provided a performance guarantee to ADWEAprovide supplemental funding for Shuweihat Asia Power Investment B.V. and Shuweihat Asia O&M Co.’s obligations under the project.
(8)In 2011, we engagedbusinesses in a 200 megawatt oil-fired power plant project in Cebu through our affiliate, KEPCO SPC Power Co. We have provided a payment guarantee amounting to US$221 million for KEPCO SPC Power Co.’s obligations under the project.
(9)We invested in power plant constructioncases of excessive business in Rabigh, Saudi Arabia through KEPCO Netherlands B.V. (the wholly-owned subsidiary), and established Rabigh Electricity Company (having a 40% ownership) to operate this business. Rabigh Electricity Company has provided the Saudi Electricity Company with the performance guarantee for PPA contract through Saudi British Bank and counter guarantees through EXIM Bank. In relation to the guarantee, we have provided a payment guarantee amounting SAR 100 million to EXIM Bank for the above counter guarantees.expenses or insufficient repayment of borrowings.

Other than as described in this annual report and also in Notes 46 and 4849 of the notes to our consolidated financial statements included in this annual report, we did not have any other material purchase obligations, credit lines and guarantee commitments provided to any third parties as of December 31, 2011.2013.

We are subject to a number of legal proceedings. For a description of our legal proceedings, see Item 8A. “Consolidated Statements and Other Financial Information—Legal Proceedings.”

ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Item 6A. Directors and Senior Management

Board of Directors

Under the KEPCO Act, the Public Agencies Management Act and our Articles of Incorporation, our board of directors, which is required to consist of not more than 15 directors, including the president, is vested with the authority over our management.

Pursuant to our Articles of Incorporation and the Public Agencies Management Act, we have two types of directors: standing directors (sangim-isa in Korean) and non-standing directors (bisangim-isa in Korean). The standing directors refer to our directors who serve their positions in full-time capacity. Many of our standing directors concurrently hold executive positions with us or our subsidiaries. The non-standing directors refer to our directors who do not serve their positions in full-time capacity. The non-standing directors currently do not hold any executive positions with us or our subsidiaries.

Under our Articles of Incorporation, there may not be more than seven standing directors, including our president, and more than eight non-standing directors. The number of standing directors, including our president, may not exceed the number of non-standing directors. A senior non-standing director appointed by the Ministry of Strategy and Finance becomes our chairman of the board following the review and resolution of the Public Agencies Operating Committee.

Our president is appointed by the President of the Republic upon the motion of the Ministry of Knowledge EconomyTrade, Industry and Energy following the nomination by our director nomination committee, the review and resolution of the Public Agencies Operating Committee pursuant to the Public Agencies Management Act and an approval at the general meeting of our shareholders. Our controller & auditor general is appointed by the President of the Republic upon the motion of the Ministry of Strategy and Finance following the nomination by our director nomination committee, the review and resolution of the Public Agencies Operating Committee pursuant to the Public Agencies Management Act and an approval at the general meeting of our shareholders. Standing directors (other than our president and controller & auditor general) are appointed by our president with the approval at the general meeting of our shareholders.

On January 24, 2011, the Ministry of Knowledge EconomyTrade, Industry and Energy changed the designation of our generation subsidiaries from “other public institutions” to “market-oriented public enterprise”.enterprises.” As “other public institutions” under the provisions of the Public Agencies Management Act, our generation subsidiaries were not subject to the same regulations applicable to us with regards to corporate governance matters such as the appointment and dismissal of directors and the composition of the boards of directors. However, as market-oriented public enterprises, our generation subsidiaries are currently subject to the same corporate governance rules applicable to us. All of our generation subsidiaries accordingly amended their respective articles of incorporation in 2011 and are currently generally subject to the same system of regulations applicable to us.

The non-standing directors must be appointed by the Ministry of Strategy and Finance following the review and resolution of the Public Agencies Operating Committee from a pool of candidates recommended by the director nomination committee and must have ample knowledge and experience in business management. Government officials that are not part of the teaching staff in national and public schools are ineligible to become our non-standing directors. Our president serves as our chief executive officer and represents us and administers our day-to-day business in all matters and bears the responsibility for the management’s performance. The term of our president is three years, while that of our directors is two years. According to the Public Agencies Management Act, our president’s term cannot be terminated unless done so by the President of the Republic pursuant to the Public Agencies Management Act or upon an event as specified in our Articles of Incorporation.

Attendance by a majority of the board members constitutes a voting quorum for our board meetings, and resolutions can be passed by a majority of the board members. In the event the president acts in violation of law

or the Articles of Incorporation, is negligent in his duties, or otherwise is deemed to be significantly impeded in performing his official duties as chief executive officer, the board of directors may by resolution request the Ministerminister of the Ministry of Knowledge EconomyTrade, Industry and Energy to dismiss or recommend the dismissal of the president.

Non-standing directors may request any information necessary to fulfill their duties from the chief executive officer, and except in special circumstances, the chief executive officer must comply with such request.

The names, titles and outside occupations, if any, of the directors as of April 6, 201217, 2014 and the respective years in which they took office are set forth below.

 

Name

 

Age

 

Title

 

Outside Occupation

 

Position Held Since

Kim, Joong-KyumCho, Hwan-Eik

 (62)(64) President, and Chief Executive Officer and Standing Director None September 16, 2011
December 17, 2012

Han, Dae-SooAhn, Hong-Ryoul

 (67)(55) Standing Director and Controller & Auditor GeneralMember of the Audit Committee NoneAuditor at Korea Hemophilia Foundation January 24, 2011
December 27, 2013

Cho, In-KookPark, Kyu-Ho

 (57)(56) Standing Director and Executive Vice President of Domestic Operations None March 11, 2011
June 18, 2013

Byun, Jun-YeonPark, Jung-Keun

 (57) Standing Director and Executive Vice President of Overseas Operations & Chief Nuclear Officer None April 22, 2011
October 29, 2013

Kim, Jong-HoBaek, Seung-Jung

 (57)(58) Standing Director and Executive Vice President & Chief Human ResourcesFinancial Officer None March 11, 2011
June 18, 2013

Kim, Chong-YoungByung-Sook

 (57)(56) Standing Director and Executive Vice President & Chief Technology Officer None March 11, 2011
June 18, 2013

Koo, Bon-Woo

 (56)(58) Standing Director and Executive Vice President & Chief OperatingPower Grid Officer None February 20, 2012

Lee, Tae-Sik

(65)Non-Standing DirectorAdvisor, SK Energy Co., Ltd.June 8, 2011

Lee, Gi-Pyo

(53)Non-Standing DirectorChief, Boyun Social Welfare Center of BusanOctober 19, 2009

Shin, Il-Soon

(63)Non-Standing DirectorPolicy advisor of Grand National PartyApril 11, 2011

Kim, Kyung-Min

(63)Non-Standing Director and member of the Audit CommitteeProfessor, Department of Political Science and Diplomacy, Hanyang UniversityJune 8, 2011

Chung, Hae-Joo

 (68)(71) Non-Standing Director Chairman of the Board, Korea Testing & Research Institute June 30, 2011

Kim, Jung-Hyun

(58)Non-Standing DirectorProfessor, Yonsei UniversityJune 13, 2012

Yim, Chu-Hwan

(65)Non-Standing DirectorVisiting Professor, Korea UniversityOctober 19, 2012

Shin, Il-Soon

(66)Non-Standing DirectorPolicy advisor of New Frontier PartyApril 11, 2011

Nam, Dong-Kyoon

 (59)(61) Non-Standing DirectorStanding Auditor, BC CardOctober 24, 2011

Lee, Kang-Hee

(72)Non-Standing DirectorMember of the Incheon City Advisory CommitteeMarch 14, 2014

Cho, Jeon-Hyeok

(54) Non-Standing Director and member of the Audit Committee Professor of economics, Myungji University October 24, 2011
March 14, 2014

Ryu, Chang-MooChoi, Gyo-Il

 (61)(52) Non-Standing Director and member of the Audit Committee NoneAttorney, Choi, Gyo-Il Law Firm February 6, 2012March 14, 2014

Kim, Joong-KyumCho, Hwan-Eik has been our President, Chief Executive Officer and Standing Director since September 16, 2011.December 17, 2012. Prior to his current position, he served as Chair-professor at Hanyang University, President andof the Korea Trade-Investment Promotion Agency, CEO of Hyundai Engineering & Construction Co., Ltd., a leading construction company based in Korea.Korea Export Insurance Corporation and Vice Minister of the Ministry of Commerce. Mr. KimCho received a B.S.Ph.D. in architectural engineeringbusiness administration from KoreaHanyang University.

Han, Dae-SooAhn, Hong-Ryoul has been our Standing Director and Controller & Auditor Generalmember of the Audit Committee since January 24, 2011.December 27, 2013. Mr. Ahn currently serves as auditor of Korea Hemophilia Foundation. Prior to his current position, he served as Second Deputy Secretary-General of the Grandattorney at Ahn, Hong-Ryoul Law Firm and public prosecutor at Busan District Public Prosecutor’s Office. Mr. Ahn received a B.A. in law from Seoul National Party, the current ruling political party in Korea. Mr. Han received an M.A. in public administration from Yonsei University.

Cho, In-KookPark, Kyu-Ho has been our Standing Director since March 11, 2011.June 18, 2013. Mr. ChoPark also currently serves as our Executive Vice President of Domestic Operations and previously served as our ExecutiveChief Financial Officer, Vice President of Busan District Division and Chief Operating Officer.Head of our Beijing office. Mr. ChoPark received a B.A. in economicsan M.B.A. from HanyangKorea University.

Byun, Jun-YeonPark, Jung-Keunhas been our Standing Director since April 22, 2011.October 29, 2013. Mr. ByunPark also currently serves as our Executive Vice President of Overseas Operations and Chief Nuclear Project Officer and previously served as our Executive Vice President of Personnel & General Affairs Department, Vice President of International Strategy Office and Chief Global Business Officer.Vice President of Procurement & Contract Department. Mr. ByunPark received a B.S.B.A. in electrical engineeringeconomics from KoreaChung-Ang University.

Kim, Jong-HoBaek, Seung-Jung has been our Standing Director since March 11, 2011.June 18, 2013. Mr. KimBaek also currently serves as our Executive Vice President and Chief Human ResourcesFinancial Officer and previously served as ourChief Human Resources Officer, Vice President of the Labor Management Department.Audit & Inspection Office and Vice President of Daegu-Gyeongbuk District Division. Mr. KimBaek received a B.A.an M.A. in economics from Chung-AngKyungpook National University.

Kim, Chong-YoungByung-Sook has been our Standing Director since March 11, 2011.June 18, 2013. Mr. Kim also currently serves as our Executive Vice President and Chief Technology Officer and previously served as ourthe Vice President of the KEPCO Research Institute.Institute, Vice President of Technology Policy & Planning Department and Vice President of Distribution Construction Department. Mr. Kim received a D.S.Ph.D in metallurgicalelectrical engineering from SeoulChonbuk National University.

Koo, Bon-Woo has been our Standing Director since February 20, 2012. Mr. Koo also currently serves as our Executive Vice President and Chief OperatingPower Grid Officer and previously served as our Executive Vice President and Chief Operating Officer and Vice President of Transmission Operation Department. Mr. Koo received a B.S. in electrical engineering from Chung-Ang University.

Lee, Tae-SikChung, Hae-Joohas been our Non-Standing Director since June 30, 2011. Mr. Chung is currently the chairman of the board of Korea Testing & Research Institute. Mr. Chung received a B.A. in law from Seoul National University and completed a public policy course at Seoul National University Graduate School of Public Administration.

Kim, Jung-Hyun has been our Non-Standing Director since June 8, 2011.13, 2012. Mr. Lee is currently an advisorKim previously served as a professor of SK Energy Co., Ltd.chemical and biomolecular engineering at Yonsei University. Mr. LeeKim received a B.A. in political science from Seoul National University and an M.A. in international public policychemical and biomolecular engineering from Johns HopkinsYonsei University and a Ph.D in polymer engineering from Lehigh University.

Lee, Gi-PyoYim, Chu-Hwanhas been our Non-Standing Director since October 19, 2009.2012. Mr. Lee is currentlyYim previously served as a chiefvisiting professor of Bohyun Social Welfare Center of Busan.electronics and information engineering at Korea University. Mr. Yim received an M.A. in industrial education from Seoul National University and a Ph.D in telecommunication system from Braunschweig University.

Shin, Il-Soon has been our Non-Standing Director since April 11, 2011. Mr. Shin is currently a policy advisor to the Grand NationalNew Frontier Party. Mr. Shin received a B.S. in electrical engineering from U.S. Military Academy (West Point), an M.A. in military art and science from the United States Army Command and General Staff College and aan M.A. in business administration from Kyungnam University.

Kim, Kyung-Minhas been our Non-Standing Director since June 8, 2011. Mr. Kim is currently a professor of political science and diplomacy in Hanyang University. Mr. Kim received a B.A. in politics from Hanyang University and a Ph.D in political science from the University of Missouri.

Chung, Hae-Joohas been our Non-Standing Director since June 30, 2011. Mr. Chung is currently the chairman of the board of the Korea Testing & Research Institute. Mr. Jung received a B.A. in law from Seoul National University and completed a public policy course at Seoul National University Graduate School of Public Administration.

Nam, Dong-Kyoonhas been our Non-Standing Director since October 24, 2011. Mr. Nam is currently a standing auditor of BC Card. Mr. Nam previously served as the Vice Mayor for Political Affairs, Daegu Metropolitan City. Mr. Nam received an M.A. in economics from Vanderbilt University.

Ryu, Chang-MooLee, Kang-Heehas been our Non-Standing Director since February 6, 2012.14, 2014. Mr. RyuLee is currently a member of the Incheon City Advisory Committee. Mr. Lee previously served as a member of the presidentNational Assembly for two terms and a member of Korea Trade Insurance Corporation.the Advisory Board on Democratic Peaceful Unification.

Cho, Jeon-Hyeok has been our Non-Standing Director since February 14, 2014. Mr. RyuChoi is currently Professor of economics at College of Liberal Arts, Myungji University. Mr. Choi previously served as a Professor of the Department of Economics at National University of Incheon and Chief Executive Officer of Naeil Venture Capital. Mr. Cho received a B.A.Ph.D in Business Administrationeconomic theory and financial economics from Sungkyunkwan University of Wisconsin at Madison.

Choi, Gyo-Il has been our Non-Standing Director since February 14, 2014. Mr. Choi is currently an attorney-at-law at Choi, Gyo-Il law Firm. Mr. Choi previously served as Chief Public Prosecutor at the Seoul Prosecutor’s Office and a M.A.Deputy Minister at the Ministry of Justice. Mr. Lee received an LL.B in Businesslaw from BrunelKorea University.

The business address of our directors is 167 Samseong-Dong,512 Yeongdongdaero, Gangnam-Gu, Seoul, Korea.

Audit Committee

Under the Public Agencies Management Act, which took effect as of April 1, 2007, we are designated as a “market-oriented public enterprise”enterprises” and, as such, are required to establish an audit committee in lieu of the preexistingpre-existing board of auditors upon expiration of the term of the last remaining member of the board of auditors. In September 2007, we amended our Articles of Incorporation to establish, in lieu of the pre-existing board of auditors, an audit committee meeting the requirements under the Sarbanes-Oxley Act. Under the Public Agencies Management Act, the Korean Commercial Code and the amended Articles of Incorporation, we are required to maintain an audit committee consisting of three members, of which not less than two members are required to be the non-standing directors. The roles and responsibilities of our audit committee members are to perform the functions of an audit committee meeting the requirements under the Sarbanes-Oxley Act. Our audit committee was established on December 8, 2008.

Our audit committee currently consists of Han, Dae Soo,Ahn, Hong-Ryoul, a standing director, and Kim, Kyung-MinCho, Jeon-Hyeok and Nam, Dong-Kyoon,Choi, Gyo-Il, both non-standing directors. All such members of the audit committee are independent within the meaning of the Korea Stock Exchange listing standards, the regulations promulgated under the Korean Commercial Code and the New York Stock Exchange listing standards.

Item 6B. Compensation

In 2011,2013, the aggregate amount of remuneration paid and accrued to our directors and executive officers in the aggregate was Won 1,3015,951 million. The aggregate amount accrued in 20112013 to provide retirement and severance benefits for our directors and executive officers was Won 56396 million.

Item 6C. Board Practices

Under the Public Agencies Management Act and our Articles of Incorporation, the term of office for our directors and executive officers that are appointed after April 1, 2007 is three years for the president and two years for other executive officers. The officers and the directors may be reappointed for an additional term of one year. In order to be reappointed, the president must be evaluated on the basis of his management performance; a standing director, on the basis of the performance of the duties for which he was elected to perform, or if the standing director has executed an incentive bonus contract, on the basis of his performance under the contract; and a non-standing director, on the basis of his performance of the duties for which he was elected to perform.

Our board currently does not maintain a compensation committee. See Item 16G. “Corporate Governance.” However, we currently maintain an audit committee meeting the requirements of the Sarbanes-Oxley Act to perform the roles and responsibilities of the compensation committee. Prior to the establishment of the audit committee on December 8, 2008 pursuant to the Public Agencies Management Act, we maintained a board of auditors, which performed the roles and responsibilities required of an audit committee under the Sarbanes-Oxley Act, including the supervision of the financial and accounting audit by the independent registered public accountants.

The president’s management contract provides forincludes benefits upon termination of his employment. The amount for termination benefits payable equals the average value of compensation for one month times the number of years the president is employed by us, provided that the president is only eligible for termination benefits after more than one year of continuous service.

The termination benefits for standing directors are determined in accordance with our internal regulations for executive compensation. Standing directors are only eligible for benefits upon termination of employment or death following one year of continuous service.

See also Item 16G. “Corporate Governance” for a further description of our board practices.

Item 6D. Employees

As of December 31, 2011,2013, we and our generation subsidiaries had a total of 37,82839,566 regular employees and 1,997 non-regular employees, almost all of whom are employed within Korea. Approximately 10.4% of our regular employees (including employees of our generation subsidiaries) are located at theour head offices of us and our generation subsidiaries.office in Seoul.

The following table sets forth the number of and other information relating to our regular employees, not including directors or senior management, as of December 31, 2011.2013.

 

  KEPCO   KHNP   KOSEP   KOMIPO   KOWEPO   KOSPO   EWP   Total   KEPCO KHNP KOSEP KOMIPO KOWEPO KOSPO EWP Total 

Regular Employees

                         

Administrative

   4,400     792     223     253     208     248     213     6,337     4,577    862    270    254    267    252    254    6,736  

Engineers

   9,056     7,078     1,453     1,629     1,367     1,459     1,646     23,688     9,435    7,727    1,582    1,772    1,611    1,573    1,856    25,556  

Others

   5,847     1,112     195     253     146     152     98     7,803     5,632    960    166    174    126    126    90    7,274  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

   19,303     8,982     1,871     2,135     1,721     1,859     1,957     37,828     19,644    9,549    2,018    2,200    2,004    1,951    2,200    39,566  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Head Office Employees

   1,355     1,032     369     266     259     289     346     3,916     1,567    1,109    351    234    293    272    293    4,119  

% of total

   7.0     11.5     19.7     12.5     15     15.5     17.7     10.4     8  11.6  17.4  10.6  14.6  13.9  13.3  10.4

Members of Labor Union

   14,608     5,558     1,235     1,416     1,111     1,190     1,281     26,399     14,672    6,013    1,395    1,433    1,305    1,277    1,501    27,596  

% of total

   75.7     61.9     66.0     66.3     64.6     64.0     65.5     69.8     75  63.0  69.1  65.1  65.1  65.5  68.2  69.7

We and each of our generation subsidiaries have separate labor unions. Approximately 69.8%69.7% of our and our generation subsidiaries’ employees in the aggregate are members of these labor unions, each of which negotiates a collective bargaining agreement for its members each year. Under applicable Korean law, an employee-employer cooperation committee, which is composed of eight representatives of management and eight representatives of labor, is required to be, and has been, established at the holding company and at each of our generation subsidiaries. The committee meets periodically to discuss various labor issues.

Since our formation in 1981, our businesses had not been interrupted by any work stoppages or strikes except in early 2002, when employees belonging to our five non-nuclearthermal generation subsidiaries went on strike for six weeks to protest the Government’s decision to privatize such non-nuclearthermal generation subsidiaries according to the Restructuring Plan, which privatization plan has since been suspended indefinitely. See Item 3D. “Risk Factors—Risks Relating to KEPCO—The Government may adopt policy measures to substantially restructure the Korean electric power industry or our operational structure, which may have a material adverse effect on our business, operations and profitability.”

We believe our relations with our employees are generally good.

Item 6E. Share Ownership

None of our directors and members of our administrative, supervisory or management bodies own more than 0.1% of our common stock.

ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Item 7A. Major Shareholders

The following table sets forth certain information relating to certain owners of our capital stock as of December 31, 2011,February 17, 2014, the date we last closed our shareholders’ registry:

 

Title of Class

  

Identity of Person or Group

  

Shares Owned

   

Percentage of Class(1)(%)

   

Identity of Person or Group

  Shares Owned   Percentage of  Class(1) (%) 

Common stock

  Government   135,917,118     21.17    Government   135,917,118     21.2  
  Korea Finance Corporation(2)   192,159,940     29.94    Korea Finance Corporation(2)   192,159,940     29.9  
  Subtotal   328,077,058     51.11    Subtotal   328,077,058     51.1  
  Korea Resolution & Collection Corporation(3)   32,210,933     5.02    National Pension Corporation   41,775,649     6.5  
  National Pension Corporation   24,087,867     3.75    KEPCO (held in the form of treasury stock)   18,929,995     2.9  
  KEPCO (held in the form of treasury stock)   18,929,995     2.95    Employee Stock Ownership Association   —       —    
  Employee Stock Ownership Association   —       —      Directors and executive officers as a group   —       —    
  Directors and executive officers as a group   —       —      Public (non-Koreans)   150,612,232     23.5  
  Public (non-Koreans)   150,112,797     23.38    

Common shares

   118,634,815     18.5  
  

Common shares

   92,680,326     14.43    

American depositary shares

   31,977,417     5.0  
  

American depositary shares

   57,432,471     8.95    Public (Koreans)   102,569,143     16.0  
    

 

   

 

     

 

   

 

 
  Sub Total   553,418,650     86.21    Total   641,964,077     100.00  
    

 

   

 

     

 

   

 

 
  Public (Koreans)   88,545,427     13.79  
    

 

   

 

 
  Total   641,964,077     100.00  
    

 

   

 

 

 

Notes:

 

(1)Percentages are based on issued shares of common stock (including treasury stock).
(2)Korea Finance Corporation is a Government-controlled entity.
(3)Korea Resolution & Collection Corporation is a wholly-owned subsidiary of the Korea Deposit Insurance Corporation that specializes in the resolution, management and collection of debts and assets originated from troubled financial institutions.

All of our shareholders have equal voting rights. See Item 10B. “Memorandum and Articles of Incorporation—Description of Capital Stock—Voting Rights.”

Item 7B. Related Party Transactions

We are engaged in a variety of transactions with our affiliates. We have related party transactions with Government-controlled entities such as Korea Gas Corporation, our consolidated subsidiaries and our equity investees. In addition, we engage in related party transactions with Korea Finance Corporation, one of our major shareholders. See Note 46 of the Notes to our consolidated financial statements included in this annual report for a description of transaction and balances with our related parties.

In the past three years, our related party transactions principally consisted of purchases of LNG from Korea Gas Corporation, sales of electricity to Korea District Heating Co., Ltd., and long-term borrowings from Korea Finance Corporation. In 20102011, 2012 and 2011,2013, we and our generation subsidiaries purchased LNG from Korea Gas Corporation in the aggregate amount of Won 6,9309,377 billion, Won 11,645 billion and Won 9,37712,937 billion, respectively. As of December 31, 2011,2013, we had long-term borrowings from Korea Finance Corporation in the aggregate amount of Won 1,8722,300 billion.

We also engage in extensive transactions with our consolidated generation subsidiaries, including the purchase of electricity from them through Korea Power Exchange, sales of electricity to them, payment and

receipt of commissions for services and receivables and payables transactions. These are eliminated in the consolidation process. We also provide guarantees for certain of our affiliates. See Item 5F. “Tabular Disclosure of Contractual Obligations—Overdraft and Others.” We also have certain relationships with the Korea Power Exchange. See Item 4B. “Business Overview—Purchase of Electricity—Cost-based Pool System.”

For a further description of our transactions with our affiliates, see Notes 18 and 46 of the Notes to our consolidated financial statements included in this report. For a further description of our transactions with our consolidated subsidiaries, see Note 46 of the Notes to our consolidated financial statements included in this annual report.

Item 7C. Interests of Experts and Counsel

Not Applicable

ITEM 8.FINANCIAL INFORMATION

Item 8A. Consolidated Statements and Other Financial Information

We prepare our consolidated financial statements in compliance with requirements under Item 18. “Financial Statements.”

Legal Proceedings

As of December 31, 2011,2013, we, including our generation subsidiaries, were engaged in 429597 lawsuits as the defendant and 103119 lawsuits as the plaintiff. As of the same date, the total amount of damages claimed against us was Won 138402 billion, for which we have made a reserveprovision of Won 4424 billion as of December 31, 2011,2013, and the total amount claimed by us was Won 21109 billion as of December 31, 2011.2013. While the outcome of any of these lawsuits cannot presently be determined with certainty, our management currently believes that the final results from these lawsuits will not have a material adverse effect on our liquidity, financial position or results of operation.

The following are potentially significant claims pertaining to us and our subsidiaries.

In 2009, we entered into a contract with LS Cable & System Ltd. (“LS Cable”) under which LS Cable agreed to install submarine cables in an area between Jindo and Jeju Island. LS Cable & System Ltd. notified us of the completion of construction and requested the issuance of a certificate of completion. We however disagreed that LS Cable had completed construction in accordance with the conditions of the contract, rejected the goods delivered and refused to pay LS Cable the contracted amount. In April 2013, LS Cable filed for arbitration with the Korean Commercial Arbitration Board seeking Won 194 billion in total from us in relation to unpaid invoices under the contract and extra payments relating to claims of rejecting the test on completion and the goods delivered. Our management currently believes that we are not presently obligated to make any payments in relation to this matter and we accordingly had not made any provision in relation thereto as of December 31, 2013 based on the view that LS Cable did not fully perform its obligations according to the contract terms and further that it is not possible to reasonably estimate the amount of potential loss since the Korean Commercial Arbitration Board is in the early stages of examining the facts of the case, including by hiring third-party experts.

In January 2013, Korea Nuclear Technology Co., Ltd. (“KNT”) initiated litigation against KHNP based on the claim that KNT had a right to supply KHNP with passive autocatalytic recombiners (“PARs”), which had been developed under a cooperative research and development agreement between KNT and KHNP through a contract to be negotiated between the two parties without being required to undergo an open bidding process for a period of three years, but that KHNP selected a third party to supply the PARs following an open bidding process. The claimed amount of damages and compensation was Won 6.9 billion. In October 2013, the lower court ruled against KNT based on the principles of freedom of contract and the preference for competitive bidding. In December 2013, KNT filed for an appeal. Our management currently believes that we are not presently obligated to make any payments in relation to this matter and we accordingly had not made any provision in relation thereto as of December 31, 2013, based on the view that KHNP was not legally obligated to enter into a contract with KNT for the supply of PARs, which view has been supported by the lower court ruling.

In December 2013, the Supreme Court of Korea ruled that regular bonuses fall under the category of ordinary wages on the condition that those bonuses are paid regularly and uniformly, and that any agreement which excludes such regular bonuses from ordinary wage is invalid. The Supreme Court further ruled that in

spite of invalidity of such agreements, employees shall not retroactively claim additional wages incurred due to such court decision, in case that such claims bring to employees unexpected benefits which substantially exceeds the wage level agreed by employers and employees and cause an unpredicted increase in expenditures for their company, which would lead the company to material managerial difficulty or would threat to the existence of the company. In that case, the claim is not acceptable since it is unjust and is in breach of the principle of good faith. Prior to such Supreme Court ruling, we determined wages in accordance with budget instructions from the Ministry of Strategy and Finance, which excluded bonuses from ordinary wages and which was determined with the consent of the relevant labor unions. Following the Supreme Court decision, the Korea Power Plant Industry Union and others filed lawsuits in an aggregate amount of Won 44.6 billion against our six generation subsidiaries, based on claims that ordinary wage was paid without including certain items that should have been included as ordinary wage. Our management currently believes that we are not presently obligated to make any payments in relation to this matter and we accordingly had not made any provision in relation thereto as of December 31, 2013 since it is unclear how the Supreme Court ruling should be applied and it is not possible to reasonably estimate the amount of potential loss since such amount will depend on the nature of the future agreement between management and relevant labor unions and/or the outcome of the foregoing or related lawsuits.

In addition, our generation subsidiaries, currently and from time to time, are involved in lawsuits incidental to the conduct of their business. A significant number of such lawsuits are based on the claim that the construction and operation of the electricity generation units owned by our generation subsidiaries have impaired neighboring fish farms. Our generation subsidiaries normally pay compensation to the members of fishery associations near our power plant complex for expected losses and damages arising from the construction and operation of their power plants in advance. Despite such compensation paid by us, a claim may still be filed against our generation subsidiaries challenging the compensation paid by us. We do not believe such claims or proceedings, individually or in the aggregate, have had or will have a material adverse effect on us and our generation subsidiaries. However, we cannot assure you that this will be the case in the future, given the possibility that we may become subject to more litigation and lawsuits arising from changes in the environmental laws and regulations applicable to us and our generation subsidiaries and people’s growing demand for more compensation.

Dividend Policy

For our dividend policy, see Item 10B. “Memorandum and Articles of Incorporation—Description of Capital Stock—Dividend Rights.” For a description of the tax consequences of dividends paid to our shareholders, see Item 10E. “Taxation—Korean Taxes—Shares or ADSs—Dividends on the Shares of Common Stock or ADSs” and Item 10E. “Taxation—U.S. Federal Income and Estate Tax Consideration for U.S. Persons—Tax Consequences with Respect to Common Stock and ADSs—Distributions on Common Stock or ADSs.”

Item 8B. Significant Changes

Not Applicable

ITEM 9. THE OFFER AND LISTING

ITEM 9.THE OFFER AND LISTING

Item 9A. Offer and Listing Details

Notes

We have issued the following registered notes and debentures, which are traded principally in the over-the counterover-the-counter market:

7-3/4% Debentures due April 1, 2013 (the “7-3/4% Debentures”);

 

7.40% Amortizing Debentures, due April 1, 2016 (the “7.40% Debentures”);

 

7.95% Zero-To-Full Debentures, due April 1, 2096 (the “7.95% Debentures”);

 

6% Debentures due December 1, 2026, (the “6% Debentures”);

 

7% Debentures due February 1, 2027 (the “7% Debentures”); and

6-3/4% Debentures due August 1, 2027 (the “6-3/4% Debentures,” and together with the 7-3/4% Debentures, the 7.40% Debentures, the 7.95% Debentures, the 6% Debentures and the 7% Debentures, the “Registered Debt Securities”).

Sales prices for the Registered Debt Securities are not regularly reported on any United States securities exchange or other United States securities quotation service.

Share Capital

The principal trading market for our common stock is the Korea Exchange. Our common stock is also listed on the New York Stock Exchange in the form of ADSs. The ADSs have been issued by JPMorgan Chase Bank as depositary and are listed on the New York Stock Exchange under the symbol “KEP.” One ADS represents one-half of one share of our common stock. As of December 31, 2011,February 17, 2014, the date we last closed our shareholders’ registry, 114,864,94263,954,834 ADSs representing 9.0%5.0% shares of our common stock were outstanding.

Common Stock

Shares of our common stock are listed on the KRX KOSPI Market of the Korea Exchange. The table below shows the high and low closing prices on the KRX KOSPI Market of the Korea Exchange for our common stock since 2007.2009.

 

  Price   Price 

Period

      High           Low           High           Low     
  (In Won)   (In Won) 

2007

    

First Quarter

   44,800     37,500  

Second Quarter

   42,300     37,500  

Third Quarter

   47,700     40,150  

Fourth Quarter

   43,300     37,250  

2008

    

First Quarter

   39,500     28,200  

Second Quarter

   34,150     30,200  

Third Quarter

   42,300     37,500  

Fourth Quarter

   32,950     21,000  

2009

        

First Quarter

   32,500     23,000     32,500     23,000  

Second Quarter

   30,600     25,700     30,600     25,700  

Third Quarter

   35,800     28,000     35,800     28,000  

Fourth Quarter

   35,700     31,550     35,700     31,550  

2010

    

First Quarter

   41,600     33,800  

Second Quarter

   36,600     30,700  

Third Quarter

   33,600     28,800  

Fourth Quarter

   32,700     27,700  

2011

    

First Quarter

   30,050     25,800  

Second Quarter

   30,000     25,600  

Third Quarter

   28,400     20,450  

Fourth Quarter

   27,150     20,650  

2012

    

First Quarter

   27,900     22,250  

Second Quarter

   25,850     21,450  

Third Quarter

   27,900     23,750  

Fourth Quarter

   30,450     26,200  

2013

    

First Quarter

   34,850     29,000  

Second Quarter

   32,600     24,850  

Third Quarter

   30,700     26,350  

Fourth Quarter

   34,750     27,250  

2014

    

First Quarter (through April 11)

    

January

   36,400     33,400  

February

   37,600     34,900  

March

   37,800     36,250  

April (through April 11)

   39,700     37,100  

   Price 

Period

      High           Low     
   (In Won) 

2010

    

First Quarter

   41,600     33,800  

Second Quarter

   36,600     30,700  

Third Quarter

   33,600     28,800  

Fourth Quarter

   32,700     27,700  

2011

    

First Quarter

   30,050     25,800  

Second Quarter

   30,000     25,600  

Third Quarter

   28,400     20,450  

Fourth Quarter

   27,150     20,650  

2012 (through April 17)

    

January

   27,900     25,100  

February

   27,900     24,900  

March

   25,050     22,250  

April (through April 17)

   22,650     22,150  

ADSs

The table below shows the high and low closingtrading prices on the New York Stock Exchange for the outstanding ADSs since 2007.2009. Each ADS represents one-half of one share of our common stock.

 

   Price 

Period

      High           Low     
   (In US$) 

2007

    

First Quarter

   23.64     19.82  

Second Quarter

   22.77     20.38  

Third Quarter

   25.71     20.75  

Fourth Quarter

   23.87     19.75  

2008

    

First Quarter

   20.66     13.99  

Second Quarter

   16.83     14.40  

Third Quarter

   16.32     12.08  

Fourth Quarter

   12.50     7.23  

2009

    

First Quarter

   12.38     6.90  

Second Quarter

   12.37     9.34  

Third Quarter

   15.24     10.99  

Fourth Quarter

   15.25     13.52  

2010

    

First Quarter

   17.89     14.86  

Second Quarter

   16.55     12.70  

Third Quarter

   14.19     12.28  

Fourth Quarter

   14.54     11.91  

2011

    

First Quarter

   13.48     11.39  

Second Quarter

   13.74     11.86  

Third Quarter

   13.35     8.50  

Fourth Quarter

   11.55     8.25  

  Price   Price 

Period

      High           Low           High           Low     
  (In US$)   (In US$) 

2012 (through April 17)

    

2009

    

First Quarter

   12.38     6.90  

Second Quarter

   12.37     9.34  

Third Quarter

   15.24     10.99  

Fourth Quarter

   15.25     13.52  

2010

    

First Quarter

   17.89     14.86  

Second Quarter

   16.55     12.70  

Third Quarter

   14.19     12.28  

Fourth Quarter

   14.54     11.91  

2011

    

First Quarter

   13.48     11.39  

Second Quarter

   13.74     11.86  

Third Quarter

   13.35     8.50  

Fourth Quarter

   11.55     8.25  

2012

    

First Quarter

   12.45     9.73  

Second Quarter

   11.18     9.36  

Third Quarter

   12.42     10.37  

Fourth Quarter

   13.97     11.65  

2013

    

First Quarter

   16.35     13.04  

Second Quarter

   14.70     10.70  

Third Quarter

   14.59     11.45  

Fourth Quarter

   16.61     12.77  

2014

    

First Quarter (through April 11)

    

January

   12.33     11.15     17.30     15.51  

February

   12.45     11.05     17.63     16.08  

March

   11.21     9.73     17.75     16.81  

April (through April 17)

   9.92     9.53  

April (through April 11)

   19.07     17.66  

Item 9B. Plan of Distribution

Not Applicable

Item 9C. Markets

The Korea Exchange

The Korea Exchange began its operations in 1956, originally under the name of the Korea Stock Exchange. On January 27, 2005, pursuant to the Korea Securities and Futures Exchange Act, the Korea Exchange was officially created through the consolidation of the Korea Stock Exchange, the Korea Futures Exchange, the KOSDAQ Stock Market, Inc., or KOSDAQ, and the KOSDAQ Committee within the Korea Securities Dealers Association, which was in charge of the management of the KOSDAQ. The KRX KOSPI Market of the Korea Exchange, formerly the Korea Stock Exchange, has a single trading floor located in Seoul. The Korea Exchange

is a limited liability company, the shares of which are held by (i) securities companies and futures companies that were the members of the Korea Stock Exchange or the Korea Futures Exchange and (ii) the shareholders of the KOSDAQ.

As of April 17, 2012March 31, 2014 the aggregate market value of equity securities listed on the KOSPI of the Korea Exchange was approximately Won 1,141,8841,182,488 billion. The average daily trading volume of equity securities for 2011the first quarter of 2014 was approximately 354238 million shares with an average transaction value of Won 6,8833,752 billion.

The Korea Exchange has the power in some circumstances to suspend trading of shares of a given company or to de-list a security. The Korea Exchange also restricts share price movements. All listed companies are required to file accounting reports annually, semi-annually and quarterly and to release immediately all information that may affect trading in a security.

The Government has in the past exerted, and continues to exert, substantial influence over many aspects of the private sector business community which can have the intention or effect of depressing or boosting the market. In the past, the Government has informally both encouraged and restricted the declaration and payment of dividends, induced mergers to reduce what it considers excess capacity in a particular industry and induced private companies to publicly offer their securities.

The Korea Exchange publishes the Korea Composite Stock Price Index, or KOSPI, every thirty seconds, which is an index of all equity securities listed on the KRX KOSPI Market of the Korea Exchange. On January 1, 1983, the method of computing KOSPI was changed from the Dow Jones method to the aggregate value method. In the new method, the market capitalizations of all listed companies are aggregated, subject to certain adjustments, and this aggregate is expressed as a percentage of the aggregate market capitalization of all listed companies as of the base date, January 4, 1980.

Movements in KOSPI in the past five years are set out in the following table:

 

  Opening   High   Low   Closing   Opening   High   Low   Closing 

2007

   1,435.3     2,064.4     1,192.8     1,897.1  

2008

   1,853.5     1,888.9     938.8     1,124.5  

2009

   1,157.4     1,718.9     1,018.8     1,682.8     1,157.4     1,718.9     1,018.8     1,682.8  

2010

   1,696.1     2,043.5     1,552.8     2,043.5     1,696.1     2,043.5     1,552.8     2,043.5  

2011

   2,070.1     2,228.9     1,706.2     1,825.7     2,070.1     2,228.9     1,706.2     1,825.7  

2012 (through April 17)

   1,826.5     2,049.3     1,826.4     1,985.3  

2012

   1,826.4     2,049.3     1,769.3     1,982.3  

2013

   2,031.1     2,059.6     1,780.6     2,011.3  

2014 (through April 11)

   1,967.2     2,008.6     1,886.9     1,997.4  

 

Source:The Korea Exchange

Shares are quoted “ex-dividend” on the first trading day of the relevant company’s accounting period; since the calendar year is the accounting period for the majority of listed companies, this may account for the drop in KOSPI between its closing level at the end of one calendar year and its opening level at the beginning of the following calendar year.

With certain exceptions, principally to take account of a share being quoted “ex-dividend” and “ex-rights,” upward and downward movements in share prices of any category of shares on any day are limited under the rules of the Korea Exchange to 15% of the previous day’s closing price of the shares, rounded down as set out below:

 

Previous Day’s Closing Price (Won)

  Rounded Down to (Won) 

less than 5,000

  (Won)5  

5,000 to less than 10,000

   10  

10,000 to less than 50,000

   50  

50,000 to less than 100,000

   100  

100,000 to less than 500,000

   500  

500,000 or more

   1,000  

As a consequence, if a particular closing price is the same as the price set by the fluctuation limit, the closing price may not reflect the price at which persons would have been prepared, or would be prepared to continue, if so permitted, to buy and sell shares. Orders are executed on an auction system with priority rules to deal with competing bids and offers.

Due to deregulation of restrictions on brokerage commission rates, the brokerage commission rate on equity securities transactions may be determined by the parties, subject to commission schedules being filed with the Korea Exchange by the securities companies. In addition, a securities transaction tax will generally be imposed on the transfer of shares or certain securities representing rights to subscribe for shares. A special agricultural and fishery tax of 0.15% of the sales prices will also be imposed on transfer of these shares and securities on the Korea Exchange. See Item 10E. “Taxation—Korean Taxes.”

The number of companies listed on the KRX KOSPI Market of the Korea Exchange since 2007,2009, the corresponding total market capitalization at the end of the periods indicated and the average daily trading volume for those periods are set forth in the following table:

 

Year

 Number of
Listed
Companies
  Total Market Capitalization on
the last day for each period
 Average Daily Trading
Volume, Value
  Number
of Listed
Companies
  Total Market Capitalization on the
Last Day for Each Period
 Average Daily Trading
Volume, Value
 
 (Millions of
Won)
 (Thousands of
U.S. dollars)(1)
 (Thousands of
Shares)
 (Millions of
Won)
 Thousands of
U.S. dollars)(1)
   (Millions of
Won)
 (Thousands of
U.S. dollars)(1)
 (Thousands of
Shares)
 (Millions of
Won)
 Thousands of
U.S. dollars)(1)
 

2007

  746    951,900,447    1,014,612,517    363,732    5,539,588    5,919,628  

2008

  765    576,927,703    458,789,426    355,205    5,189,644    4,126,953  

2009

  770    887,935,183    760,478,917    485,657    5,795,552    4,963,645    770    887,935,183    760,478,917    485,657    5,795,552    4,963,645  

2010

  777    1,141,885,458    1,002,621,352    380,859    5,619,768    4,934,382    777    1,141,885,458    1,002,621,352    380,859    5,619,768    4,934,382  

2011

  791    1,041,999,162    903,493,594    353,759    6,883,146    5,950,877    791    1,041,999,162    903,493,594    353,759    6,883,146    5,968,218  

2012 (as of April 17)

  789    1,141,883,974    1,003,677,572    500,531    4,991,720    4,387,554  

2012

  784    1,154,294,166    1,077,671,708    486,480    4,823,643    4,503,448  

2013

  777    1,185,973,724    1,123,826,138    328,325    3,993,422    3,784,158  

2014 (through March 31)

  775    1,182,487,723    1,106,369,501    238,476    3,752,227    3,510,691  

 

Source: The Korea Exchange

Note:

 

(1)Converted at the Concentration Base Rate of Thethe Bank of Korea or the market average exchange rate as announced by Seoul Money Brokerage Services, Ltd. in Seoul, as the case may be, at the end of the periods indicated.

The Korean securities markets are principally regulated by the Financial Services Commission and the Financial Investment Services and Capital Markets Act. The law imposes restrictions on insider trading and price manipulation, requires specified information to be made available by listed companies to investors and establishes rules regarding margin trading, proxy solicitation, takeover bids, acquisition of treasury shares and reporting requirements for shareholders holding substantial interests. Beginning on February 4, 2009, the Korean securities markets became subject to the Financial Investment Services and Capital Markets Act.

Protection of Customer’s Interest in Case of Insolvency of Financial Investment Companies with a Brokerage License

Under Korean law, the relationship between a customer and a financial investment company with a brokerage license in connection with a securities sell or buy order is deemed to be consignment, and the securities acquired by a consignment agent (i.e., the financial investment company with a brokerage license) through such sell or buy order are regarded as belonging to the customer insofar as the customer and the consignment agent’s creditors are concerned. Therefore, in the event of bankruptcy or reorganization procedures involving a financial investment company with a brokerage license, the customer of such financial investment company is entitled to the proceeds of the securities sold by such financial investment company.

When a customer places a sell order with a financial investment company with a brokerage license which is not a member of the Korea Exchange and this financial investment company places a sell order with another

financial investment company with a brokerage license which is a member of the Korea Exchange, the customer is still entitled to the proceeds of the securities sold received by the non-member company from the member company regardless of the bankruptcy or reorganization of the non-member company.

Likewise, when a customer places a buy order with a non-member company and the non-member company places a buy order with a member company, the customer has the legal right to the securities received by thenon-member company from the member company, because the purchased securities are regarded as belonging to the customer insofar as the customer and the non-member company’s creditors are concerned.

Under the Financial Investment Services and Capital Markets Act, the Korea Exchange is obliged to indemnify any loss or damage incurred by a counterparty as a result of a breach by its members. If a financial

investment company with a brokerage license which is a member of the Korea Exchange breaches its obligation in connection with a buy order, the Korea Exchange is obliged to pay the purchase price on behalf of the breaching member.

As the cash deposited with a financial investment company with a brokerage license is regarded as belonging to such financial investment company, which is liable to return the same at the request of its customer, the customer cannot take back deposited cash from the financial investment company with a brokerage license if a bankruptcy or reorganization procedure is instituted against such financial investment company and, therefore, can suffer from loss or damage as a result. However, the Depositor Protection Act provides that Korean Deposit Insurance Corporation will, upon the request of the investors, pay investors up to Won 50 million per depositor per financial institution in case of the such financial investment company’s bankruptcy, liquidation, cancellation of securities business license or other insolvency events (collectively, the “Insolvency Events”). Pursuant to the Financial Investment Services and Capital Markets Act, subject to certain exceptions, financial investment companies with a brokerage license are required to deposit the cash received from their customers with the Korea Securities Finance Corporation, a special entity established pursuant to the Financial Investment Services and Capital Markets Act. Set-off or attachment of cash deposits by financial investment companies with a brokerage license is prohibited. The premiums related to this insurance under the Depositor Protection Act are paid by financial investment companies with a brokerage license.

Item 9D. Selling Shareholders

Not Applicable

Item 9E. Dilution

Not Applicable

Item 9F. Expenses of the Issue

Not Applicable

ITEM 10. ADDITIONAL INFORMATION

Item 10A. Share Capital

Not Applicable

Item 10B. Memorandum and Articles of Incorporation

Set forth below is information relating to our capital stock, including brief summaries of material provisions of our Articles of Incorporation, the KEPCO Act, the Financial Investment Services and Capital Markets Act, the

Korean Commercial Code and certain related laws of Korea, all currently in effect. The following summaries are qualified in their entirety by reference to our Articles of Incorporation and the applicable provisions of the KEPCO Act, Financial Investment Services and Capital Markets Act, the Korean Commercial Code, the Public Agencies Management Act and certain related laws of Korea. In order to comply with the Public Agencies Management Act,November 2013 we amended our Articles of Incorporation and our internal regulations in March 2009, and in March 2010, March 2011 and April 2012, we againmost recently amended our Articles of Incorporation to reflect the amendments to the KEPCO Act, the Korean Commercial Code anda regulation promulgated under the Public Agencies Management Act, as well as other relevant laws and regulations of Korea.Act.

Objects and Purposes

We are a statutory juridical corporation established under the KEPCO Act for the purpose of ensuring “stabilization of the supply and demand of electric power, and further contributing toward the sound development of the national economy through expediting development of electric power resources and carrying out proper and effective operation of the electricity business.” The KEPCO Act and our Articles of Incorporation contemplate that we engage in the following activities:

 

 1.development of electric power resources;

 

 2.generation, transmission, transformation and distribution of electricity and other related business;business activities;

 

 3.research and development of technology development related to the businesses mentioned in items 1 and 2;

 

 4.overseas businessbusinesses related to the businesses mentioned in items 1 through 3;

 

 5.investments or contributions related to the businesses mentioned in items 1 through 4;

 

 6.businesses incidental to items 1 through 5;

 

 7.developmentDevelopment and operation of certain real estate holdings, subjectheld by us to the extent that:

a.it is necessary to develop certain restrictions pursuantreal estate held by us due to Presidential Decreeexternal factors, such as relocation, consolidation, conversion to indoor or underground facilities or deterioration of the KEPCO Act;our substation or office; or

b.it is necessary to develop certain real estate held by us to accommodate development of relevant real estate due to such real estate being incorporated into or being adjacent to an area under planned urban development; and

 

 8.other businessesactivities entrusted by the Government.

Our registered name is “Hankook Chollryuk Kongsa” in Korean and “Korea Electric Power Corporation” in English. Our registration number in the commercial registry office is 114671-0001456.

Directors

Under the KEPCO Act and our Articles of Incorporation, our board of directors consists of our president, standing directors and non-standing directors. A majority of the board members constitutes a voting quorum, and resolutions will be passed by a majority of the board members. Directors who have an interest in certain agenda proposed to the board may not vote on such issues.

The standards of remuneration for our officers, including directors, shall be determined by a resolution of the board of directors, provided that the maximum amount of remuneration to be paid to our officers shall be determined by shareholder resolution and provided that the remuneration standards for the president and standing directors shall be determined by board resolution in accordance with the guideline thereon established by the

Minister minister of the Ministry of Strategy and Finance through review and resolution of our management committee. Directors who have an interest may not participate in the meeting of the board of directors for determining the remuneration for officers.

Neither the KEPCO Act nor our Articles of Incorporation have provisions relating to (i) borrowing powers exercisable by the directors and how such borrowing powers can be varied, (ii) retirement or non-retirement of directors under an age limit requirement, or (iii) the number of shares required for a director’s qualification.

Share Capital

Currently, our authorized share capital is 1,200,000,000 shares, which consists of shares of common stock and shares of non-voting preferred stock, par value Won 5,000 per share. Under our Articles of Incorporation, we are authorized to issue up to 150,000,000 non-voting preferred shares. As of December 31, 2011,February 17, 2014, the last day on

which the shareholder registry was closed for purposes of identifying shareholders of record, 641,964,077 common shares were issued and no non-voting preferred shares have been issued. As of December 31, 2011,2013, we held 18,929,995 shares of our common stock as treasury stock. All of the issued and outstanding common shares are fully-paid and non-assessable and are in registered form. Share certificates are issued in denominations of 1, 5, 10, 50, 100, 500, 1,000 and 10,000 shares.

Description of Capital Stock

Dividend Rights

Under the KEPCO Act, we are authorized to pay preferential dividends on our shares held by public shareholders as opposed to those held by the Government. Dividends to public shareholders are distributed in proportion to the number of shares of the relevant class of capital stock owned by each public shareholder following approval by the shareholders at a general meeting of shareholders. Korea Finance Corporation may receive dividends in proportion to the numbers of our shares held by them. Under the Korean Commercial Code and our Articles of Incorporation, we will pay full annual dividends on newly issued shares.

Under our Articles of Incorporation, holders of non-voting preferred shares (of which there are currently none) are entitled to receive an amount not less than 8% of their par value as determined by a resolution of the board of directors at the time of their issuance. However, if the dividends on our common shares exceed the dividends on our non-voting preferred shares, the holders of non-voting preferred shares will be entitled to participate in the distribution of such excess amount with the holders of the common shares at an equal rate.

We declare our dividend annually at the annual general meeting of shareholders which is held within three months after the end of the fiscal year. The annual dividend is paid to the shareholders on record as of the end of the fiscal year preceding the annual shareholders’ meeting. Annual dividends may be distributed either in cash or in our shares. However, a dividend of shares must be distributed at par value, and dividends in shares may not exceed one-half of the annual dividend.

Under the Korean Commercial Code and our Articles of Incorporation, we do not have an obligation to pay any annual dividend unclaimed for five years from the payment date.

The KEPCO Act provides that we shall not pay an annual dividend unless we have made up any accumulated deficit and set aside as a legal reserve an amount equal to 20.0% or more of our net profit until our accumulated reserve reaches one-half of our stated capital.

Distribution of Free Shares

In addition to dividends in the form of shares to be paid out of retained or current earnings, the Korean Commercial Code permits us to distribute to our shareholders an amount transferred from our capital surplus or legal reserve to stated capital in the form of free shares.

Voting Rights

Holders of our common shares are entitled to one vote for each common share, except that voting rights with respect to any common shares held by us or by a corporate shareholder, more than one-tenth of whose outstanding capital stock is directly or indirectly owned by us, may not be exercised. Any person (with certain exceptions) who holds more than 3% of our issued and outstanding shares cannot exercise voting rights with respect to the shares in excess of this 3% limit. See “—Limitation on Shareholdings.” Pursuant to the Korean Commercial Code, cumulative voting is permissible in relation to the appointment of directors. Under the Korean Commercial Code, a cumulative vote can be requested by the shareholders of a corporation representing more thanat least 1% of the total voting shares of such corporation if the relevant shareholders’ meeting is intended to elect more than two seats of the board of directors and the request for cumulative voting is made to the management of the

corporation in writing at least six weeks in advance of the shareholders’ meeting. Under this new voting method, each shareholder will have multiple voting rights corresponding to the number of directors to be appointed in such voting and may exercise all such voting rights to elect one director. Shareholders are entitled to vote cumulatively unless the Articles of Incorporation expressly prohibit cumulative voting. Our current Articles of Incorporation do not prohibit cumulative voting. Except as otherwise provided by law or our Articles of Incorporation, a resolution can be adopted at a general meeting of shareholders by affirmative majority vote of the voting shares of the shareholders present or represented at a meeting, which must also represent at least one-fourth of the voting shares then issued and outstanding. The holders of our non-voting preferred shares (other than enfranchised preferred shares (as described below)) are not entitled to vote on any resolution or to receive notice of any general meeting of shareholders unless the agenda of the meeting includes consideration of a resolution on which such holders are entitled to vote. If we are unable to pay any dividend to holders of non-voting preferred shares as provided in our Articles of Incorporation, the holders of non-voting preferred shares will become enfranchised and will be entitled to exercise voting rights until such dividends are paid. The holders of these “enfranchised preferred shares” have the same rights as holders of our common shares to request, receive notice of, attend and vote at a general meeting of shareholders. Pursuant to the KEPCO Act and our Articles of Incorporation, the appointment of standing directors, the president and standing statutory auditor are subject to shareholder approval.

Under the Korean Commercial Code, for the purpose of electing our statutory auditor, a shareholder (together with certain related persons) holding more than 3% of the total shares having voting rights may not exercise voting rights with respect to shares in excess of such 3% limit.

The Korean Commercial Code provides that the approval by holders of at least two-thirds of those shares having voting rights present or represented at a meeting, where such shares also represent at least one-third of the total issued and outstanding shares having voting rights, is required in order to, among other things:

 

amend our Articles of Incorporation;

 

remove a director or statutory auditor;

 

effect any dissolution, merger, consolidation or spin-off of us;

 

transfer the whole or any significant part of our business;

 

effect the acquisition by us of all of the business of any other company;

 

effect the acquisition by us of the business of another company that may have a material effect on our business;

 

reduce capital; or

 

issue any new shares at a price lower than their par value.

Under our Articles of Incorporation, an approval by the Ministry of Knowledge EconomyTrade, Industry and Energy is required in order to amend the Articles of Incorporation. Any change to our authorized share capital requires an amendment to our Articles of Incorporation.

In addition, in the case of amendments to our Articles of Incorporation or any merger or consolidation of us or in certain other cases which affect the rights or interests of the non-voting preferred shares a resolution must be adopted by a meeting of the holders of non-voting preferred shares approving such event. This resolution may be adopted if approval is obtained from holders of at least two-thirds of those non-voting preferred shares present or represented at such meeting and such non-voting preferred shares also represent at least one-third of our total issued and outstanding non-voting preferred shares.

A shareholder may exercise his voting rights by proxy. The proxy shall present the power of attorney prior to the start of the general meeting of shareholders. Under the Financial Investment Services and Capital Markets Act and our Articles of Incorporation, no one other than us may solicit a proxy from shareholders.

Subject to the provisions of the Deposit Agreement,deposit agreement, holders of our American Depositary Shares (“ADSs”) are entitled to instruct the Depositary,depositary, whose agent is the record holder of the underlying common shares, how to exercise voting rights relating to those underlying common shares.

Preemptive Rights and Issuance of Additional Shares

Authorized but unissued shares may be issued at such times and, unless otherwise provided in the Korean Commercial Code, upon such terms as our board of directors may determine. The new shares must be offered on uniform terms to all our shareholders who have preemptive rights and who are listed on the shareholders’ register as of the record date. Subject to the limitations described under “—Limitation on Shareholdings” below and with certain other exceptions, all our shareholders are entitled to subscribe for any newly issued shares in proportion to their existing shareholdings. Under the Korean Commercial Code, we may vary, without shareholder approval, the terms of such preemptive rights for different classes of shares. Public notice of the preemptive rights to new shares and their transferability must be given not less than two weeks (excluding the period during which the shareholders’ register is closed) prior to the record date. Our board of directors may determine how to distribute shares for which preemptive rights have not been exercised or where fractions of shares occur.

Our Articles of Incorporation provide that new shares that are (1) publicly offered pursuant to the Financial Investment Services and Capital Markets Act, (2) issued to members of our employee stock ownership association, (3) represented by depositary receipts, (4) issued through offering to public investors, or (5) issued to investors in kind under the State Property Act may be issued pursuant to a resolution of the board of directors to persons other than existing shareholders, who in such circumstances will not have preemptive rights.

WeUnder our Articles of Incorporation, we may issue convertible bonds or bonds with warrants each up to an aggregate principal amount of Won 2,000 billion and Won 1,000 billion, respectively, to persons other than existing shareholders. However, the aggregate principal amount of convertible bonds and bonds with warrants so issued to persons other than existing shareholders may not exceed Won 2,000 billion.

Under the Financial Investment Services and Capital Markets Act and our Articles of Incorporation, members of our employee stock ownership association, whether or not they are our shareholders, have a preemptive right, subject to certain exceptions, to subscribe for up to 20.0% of any shares publicly offered pursuant to the Financial Investment Services and Capital Markets Act. This right is exercisable only to the extent that the total number of shares so acquired and held by members of our employee stock ownership association does not exceed 20.0% of the total number of shares then outstanding.

Liquidation Rights

In the event of our liquidation, the assets remaining after payment of all debts, liquidation expenses and taxes will be distributed among shareholders in proportion to the number of shares held. Holders of our non-voting preferred shares have no preference in liquidation.

Rights of Dissenting Shareholders

In certain limited circumstances (including, without limitation, the transfer of the whole or any significant part of our business or the merger, or consolidation upon a split-off of us with another company), dissenting holders of shares have the right to require us to purchase their shares. To exercise such right, shareholders must submit a written notice of their intention to dissent to us prior to the general meeting of shareholders or the class meeting of holders of non-voting preferred shares, as the case may be. Within 20 days after the date on which the relevant resolution is passed at such meeting, such dissenting shareholders must request us in writing to purchase their shares. We are obligated to purchase the shares of dissenting shareholders within one month after the expiration of such 20-day period. The purchase price for such shares must be determined through negotiation

between the dissenting shareholders and us. Under the Financial Investment Services and Capital Markets Act, if we cannot agree on a price through negotiation, the purchase price will be the average of (1) the weighted average of the daily share price on the Korea Exchange for a two-month period before the date of adoption of the relevant board resolution, (2) the weighted average of the daily share price on the Korea Exchange for the one month period before such date and (3) the weighted average of the daily share price on the Korea Exchange for the one week period before such date. However, if we or dissenting shareholders who requested us to purchase their shares oppose such purchase price, the determination of a purchase price may be filed with a court. Holders of ADSs will not be able to exercise dissenter’s rights unless they have withdrawn the underlying Common Stock and become our direct shareholders.

Transfer of Shares

Under the Korean Commercial Code, the transfer of shares is effected by delivery of share certificates, but in order to assert shareholders’ rights against us, the transferee must have his name and address registered on our register of shareholders. For this purpose, shareholders are required to file one’s name, address and seal with our transfer agent. Under our Articles of Incorporation, non-resident shareholders must appoint an agent authorized to receive notices on their behalf in Korea and file a mailing address in Korea. These requirements do not apply to the holders of ADSs. Under current Korean regulations, the Korea Securities Depository, foreign exchange banks (including domestic branches of foreign banks), financial investment companies with a dealing, brokerage or collective investment license and internationally recognized foreign custodians are authorized to act as agents and provide related services for foreign shareholders. Our transfer agent is the Kookmin Bank, located at 9-1, Namdaemun-ro, 2-ga, Chung-ku, Seoul, Korea. Certain foreign exchange controls and securities regulations apply to the transfer of our shares by non-residents of Korea or non-Koreans. See Item 9. “The Offer and Listing.”

Acquisition of Our Own Shares

We generally may not acquire our own shares except in certain limited circumstances, including, without limitation, a reduction in capital. Under the Korean Commercial Code, except in case of a reduction in capital, any of our shares acquired by us must be sold or otherwise transferred to a third party within a reasonable time. In general, our 50.0% or more owned-subsidiaries are not permitted to acquire our shares.

In addition, we may acquire our shares through purchase on the Korea Exchange or through a tender-offer. We may also acquire interests in our own shares through trust agreements with financial investment companies with a trust license. The aggregate purchase price for our shares may not exceed the total amount available offor dividends at the end of the preceding fiscal year, less the amount of dividends and mandatory reserves required to be set aside for that fiscal year, subject to certain procedural requirements.

General Meeting of Shareholders

The ordinary general meeting of our shareholders is held within three months after the end of each fiscal year, and subject to board resolution or court approval, an extraordinary general meeting of our shareholders may be held as necessary or at the request of shareholders holding an aggregate of 1.5% or more of our outstanding

common shares for at least six consecutive months. Under the Korean Commercial Code, an extraordinary general meeting of shareholders may be convened at the request of our audit committee, subject to a board resolution or court approval. Holders of non-voting preferred shares may only request a general meeting of shareholders once the non-voting preferred shares have become enfranchised as described under “—Description of Capital Stock—Voting Rights” above. Written notices setting forth the date, place and agenda of the meeting must be given to shareholders at least two weeks prior to the date of the general meeting of shareholders. However, pursuant to the Korean Commercial Code and our Articles of Incorporation, with respect to holders of less than 1% of the total number of our issued and outstanding shares which are entitled to vote, notice may be given by placing at least two public notices at least two weeks in advance of the meeting in at least two daily

newspapers published in Seoul or by placing a public notice in the electrical disclosure system of the Financial Supervisory Service or the Korea Exchange, at least two weeks in advance of the meeting. Currently, for giving such notice, we use two daily newspapers published in Seoul as well as an electronic disclosure system available for access at a website maintained by the FSS (known as the Data Analysis, Retrieval and Transfer System, or DART). Shareholders not on the shareholders’ register as of the record date are not entitled to receive notice of the general meeting of shareholders or attend or vote at such meeting. Holders of the enfranchised preferred shares on the shareholders’ register as of the record date are entitled to receive notice of, and to attend and vote at, the general meetings. Otherwise, holders of non-voting preferred shares are not entitled to receive notice of general meetings of shareholders or vote at such meetings but may attend such meetings.

The general meeting of shareholders is held in Seoul.

Register of Shareholders and Record Dates

Our transfer agent, Kookmin Bank, maintains the register of our shareholders at its office in Seoul, Korea. It registers transfers of our shares on the register of shareholders upon presentation of the share certificates.

The record date for annual dividends is December 31. For the purpose of determining the holders of shares entitled to annual dividends, the register of shareholders may be closed from January 1 to January 31 of each year. Further, the Korean Commercial Code and our Articles of Incorporation permit us at least two weeks’ public notice to set a record date and/or close the register of shareholders for not more than three months for the purpose of determining the shareholders entitled to certain rights pertaining to our shares. The trading of our shares and the delivery of certificates in respect of them may continue while the register of shareholders is closed.

Annual Report

At least one week prior to the annual general meeting of shareholders, our annual report and audited consolidated financial statements must be made available for inspection at our principal office and at all branch offices. Copies of annual reports, the audited non-consolidated financial statements and any resolutions adopted at the general meeting of shareholders will be available to our shareholders.

Under the Financial Investment Services and Capital Markets Act, we must file with the Financial Services Commission and the Korea Exchange an annual report within 90 days after the end of our fiscal year, a half-year report within 45 days after the end of the first six months of our fiscal year and quarterly reports within 45 days after the end of the first three months and nine months of our fiscal year. However, due toFollowing our adoption of IFRS starting in January 1, 2011 pursuant to regulatory requirements for listed companies in Korea, we are required to file half-year and quarterly reports containing interim financial statements and notes thereto on a consolidated basis in addition to non-consolidatedas well as on a separate basis. The filing deadline for such reports will be temporarily extended to 60 days for fiscal years 2011 and 2012. Therefore, we are required to file our half-year report within 60 days after the end of the first six months of 2011 and 2012 and our quarterly reports within 60 days after the end of the first three months and nine months of 2011 and 2012.

Limitation on Shareholdings

No person other than the Government, our employee stock ownership association and persons who obtain an approval from the Financial Services Commission may hold for its account more than 3% of our total issued and outstanding shares. In calculating shareholdings for this purpose, shares held by your spouse and your certain relatives or by your certain affiliates (such spouses, relatives and affiliates are together referred to as “Affiliated Holders”) are deemed to be held by you. If you hold our shares in violation of this 3% limit, you are not entitled to exercise the voting rights or preemptive rights of our shares in excess of such 3% limit and the Financial Services Commission may order you to take necessary corrective action. In addition, the KEPCO Act currently requires that the Government, directly or through Korea Finance Corporation, own not less than 51% of our capital. For other restrictions on shareholdings, see Item 9. “The Offer and Listing.”

Change of Control

The KEPCO Act requires that the Government, directly or pursuant to the Korea Finance Corporation Act, through Korea Finance Corporation, own not less than 51.0%51% of our capital.

Disclosure of Share Ownership

Under the Financial Investment Services and Capital Markets Act, any person whose direct or beneficial ownership of a listed company’s shares with voting rights, equity-related debt securities including convertible bonds, bonds with warrants, exchangeable bonds, certificates representing the rights to subscribe for common shares, derivatives-linked securities and depository receipts of the aforementioned securities (collectively referred to as “Equity Securities”), together with the Equity Securities directly or beneficially owned by certain related persons or by any person acting in concert with the person, accounts for 5% or more of our total outstanding Equity Securities is required to report the status and purpose (in terms of whether the purpose of shareholding is to participate in the management of the issuer) of the holdings and the material contents of the agreements relating to the Equity Securities and other matters prescribed by the Presidential Decree under the Financial Investment Services and Capital Markets Act to the Financial Services Commission of Korea and the Korea Exchange within five business days after reaching the 5% ownership interest threshold.

In addition, any change (i) in the purpose of the shareholding or in the ownership, (ii) the major terms and conditions of agreements relating to Equity Securities owned (such as trust agreements and collateral agreements) to the extent the number of relevant Equity Securities is 1% or more of the total outstanding Equity Securities, or (iii) the type of ownership (direct ownership or holding) to the extent the number of relevant Equity Securities is 1% or more of the total outstanding Equity Securities, must be reported to the Financial Services Commission of Korea and the Korea Exchange within five business days from the date of such change (or by the 10thtenth day of the month following the month in which the change occurs, in the case of a person with no intent to seek management control). Notwithstanding the foregoing, certain professional investors designated by the Financial Services Commission may report such matters to the Financial Services Commission and the Korea Exchange by the tenth day of the month immediately following the end of the quarter in which such 5.0% ownership interest is reached or the change occurs.

When filing a report to the Financial Services Commission and the Korea Exchange in accordance with the reporting requirements described above, a copy of such report must be sent to the relevant listed company. Violation of these reporting requirements may subject a person to sanctions such as prohibition on the exercise of voting rights with respect to the Equity Securities for which the reporting requirement was violated or fines or imprisonment. Furthermore, the Financial Services Commission may order the disposal of the Equity Securities for which the reporting requirement was violated.violated or may impose administrative fine.

A person reporting to the Financial Services Commission and the Korea Exchange that his purpose of holding the Equity Securities is to participate in the management of the listed company is prohibited from

acquiring additional Equity Securities of the listed company and exercising voting rights during the period commencing from the date on which the event triggering the reporting requirements occurs to the fifth day from the date on which the report is made.

Item 10C. Material Contracts

Not applicable.

Item 10D. Exchange Controls

General

The Foreign Exchange Transaction Act and the Presidential Decree and regulations under that Act and Decree, or collectively the Foreign Exchange Transaction Laws, regulate investment in Korean securities by non-residents and issuance of securities outside Korea by Korean companies. Non-residents may invest in Korean

securities pursuant to the Foreign Exchange Transaction Laws. The Financial Services Commission has also adopted, pursuant to its authority under the Financial Investment Services and Capital Markets Act, regulations that regulate investment by foreigners in Korean securities and issuance of securities outside Korea by Korean companies.

Subject to certain limitations, the Ministry of Strategy and Finance has the authority to take the following actions under the Foreign Exchange Transaction Laws: (i) if the Government deems it necessary on account of war, armed conflict, natural disaster or grave, sudden and significant changes in domestic or foreign economic circumstances or similar events or circumstances, the Ministry of Strategy and Finance may temporarily suspend performance under any or all foreign exchange transactions, in whole or in part, to which the Foreign Exchange Transaction Laws apply (including suspension of payment and receipt of foreign exchange) or impose an obligation to deposit, safe-keep or sell any instruments of payment to the Bank of Korea or certain other governmental agencies or financial institutions, and (ii) if the Government concludes that the international balance of payments and international financial markets are experiencing or are likely to experience significant disruption or that the movement of capital between Korea and other countries are likely to adversely affect the Korean Won, exchange rates or other macroeconomic policies, the Ministry of Strategy and Finance may take action to require any person who intends to effect or effects a capital transaction to deposit all or a portion of the instruments of payment acquired in such transactions with the Bank of Korea or certain other governmental agencies or financial institutions.

Government Review of Issuances of Debt Securities and ADSs and Report for Payments

In order for us to issue debt securities of any series outside of the Republic, we are required to file a report with our designated foreign exchange bank or the Ministry of Strategy and Finance on the issuance of such debt securities, depending on the issuance amount. The Ministry of Strategy and Finance may at its discretion direct us to take measures as necessary to avoid undue exchange rate fluctuations before it accepts such report. Furthermore, in order for us to make payments of principal of or interest on the debt securities of any series and other amounts as provided in an indenture and such debt securities, we are required to present relevant documents to the designated foreign exchange bank at the time of each actual payment. The purpose of such presentation is to ensure that the actual remittance is consistent with the terms of the transaction reported to our designated foreign exchange bank or the Ministry of Strategy and Finance.

In order for us to offer for purchase shares of our common stock held in treasury in the form of ADSs or issue shares of our common stock represented by the ADSs, we are required to file a prior report of such offer or issuance with our designated foreign exchange bank or the Ministry of Strategy and Finance, depending on the offering amount. The Ministry of Strategy and Finance may at its discretion direct us to take measures as necessary to avoid undue exchange rate fluctuations before it accepts such report. No further Governmental approval is necessary for the initial offering and issuance of the ADSs.

In order for a depositary to acquire any existing shares of our common stock from holders of these shares of common stock (other than from us) for the purpose of issuance of depositary receipts representing these shares of common stock, the depositary would be required to obtain our consent for the number of shares to be deposited in any given proposed deposit which exceeds the difference between (1) the aggregate number of shares deposited by us or with our consent for the issuance of ADSs (including deposits in connection with the initial and all subsequent offerings of ADSs and stock dividends or other distributions related to these ADSs) and (2) the number of shares on deposit with the depositary at the time of such proposed deposit. We may not grant this consent for the deposit of shares of our common stock in the future, if our consent is required. Therefore, a holder of ADSs who surrenders ADSs and withdraws shares of our common stock may not be permitted subsequently to deposit such shares and obtain ADSs.

In addition, we are also required to notify the Ministry of Strategy and Finance upon receipt of the full proceeds from the offering of ADSs. No additional Governmental approval is necessary for the offering and issuance of ADSs.

Reporting Requirements for Holders of Substantial Interests

Under the Financial Investment Services and Capital Markets Act, any person whose direct beneficial ownership of a listed company’s Equity Securities, together with the Equity Securities beneficially owned by certain related persons or by any person acting in concert with such person, accounts for 5% or more of our total outstanding Equity Securities is required to report the status and purpose (namely, whether the purposes of the share ownership is to participate in the management of the issuer) of the holdings and the material contents of the agreements relating to the Equity Securities and other matters prescribed by the Presidential Decree under the Financial Investment Services and Capital Markets Act to the Financial Services Commission and the Korea Exchange within five business days after reaching the 5% ownership interest and any change in ownership interest subsequent to the report which equals or exceeds 1.0% of the total outstanding Equity Securities is required to be reported to the Financial Services Commission and the Korea Exchange within five business days from the date of the change.

In addition, any change (i) in the purpose of the shareholding or in the ownership, (ii) the major terms and conditions of agreements relating to Equity Securities owned (such as trust agreements and collateral agreements) to the extent the number of relevant Equity Securities is 1% or more of the total outstanding Equity Securities, or (iii) the type of ownership (direct ownership or holding) to the extent the number of relevant Equity Securities is 1% or more of the total outstanding Equity Securities, must be reported to the Financial Services Commission of Korea and the Korea Exchange within five business days from the date of such change (or by the 10thtenth day of the month following the month in which the change occurs, in the case of a person with no intent to seek management control). Notwithstanding the foregoing, certain professional investors designated by the Financial Services Commission may report such matters to the Financial Services Commission and the Korea Exchange by the tenth day of the month immediately following the end of the quarter in which such 5.0% ownership interest is reached or the change occurs.

When filing a report to the Financial Services Commission and the Korea Exchange in accordance with the reporting requirements described above, a copy of such report must be sent to the relevant listed company. Violation of these reporting requirements may subject a person to sanctions such as prohibition on the exercise of voting rights with respect to the Equity Securities for which the reporting requirement was violated or fines or imprisonment. Furthermore, the Financial Services Commission may order the disposal of the Equity Securities for which the reporting requirement was violated.violated or may impose administrative fine.

A person reporting to the Financial Services Commission and the Korea Exchange that his purpose of holding the Equity Securities is to participate in the management of the listed company is prohibited from acquiring additional Equity Securities of the listed company and exercising voting rights during the period commencing from the date on which the event triggering the reporting requirements occurs to the fifth day from the date on which the report is made.

In addition to the reporting requirements described above, any person whose direct or beneficial ownership of our voting stock and/or depository receipts for our voting stock accounts for 10.0% or more of the total issued and outstanding voting stock, whom we refer to as a major shareholder, must file a report to the Securities and Futures Commission and to the Korea Exchange within five business days after the date on which the person reached such shareholding limit. In addition, such person must file a report to the Securities and Futures Commission and to the Korea Exchange regarding any subsequent change in his/her shareholding. Such report on subsequent change in shareholding must be filed within five business days of the occurrence of any such change. Violation of these reporting requirements may subject a person to criminal sanctions such as fines and imprisonment.

Restrictions Applicable to ADSs

No Governmental approval is necessary for the sale and purchase of ADSs in the secondary market outside Korea or for the withdrawal of shares of our common stock underlying ADSs and the delivery inside Korea of

the withdrawn shares. However, a foreigner who intends to acquire shares must obtain an Investment Registration Card from the Financial Supervisory Service as described below. The acquisition of shares by a foreigner must be reported by the foreigner or his standing proxy in Korea immediately to the Governor of the Financial Supervisory Service.

Special Reporting Requirement for Companies Whose Securities Are Listed on Foreign Exchanges

Under the regulations of the Financial Services Commission amended on December 24, 2009, (i) if a company listed on the Korea Exchange has submitted a public disclosure of material matters to a foreign financial investment supervisory authority pursuant to the laws of the foreign jurisdiction, then it must submit a copy of the public disclosure and a Korean translation thereof to the Financial Services Commission of Korea and the Korea Exchange, and (ii) if a company listed on the Korea Exchange is approved for listing on a foreign stock market or determined to be de-listed from the foreign stock market or actually listed on, or de-listed from, a foreign stock market, then it must submit a copy of any document, which it submitted to or received from the relevant foreign government, foreign financial investment supervisory authority or the foreign stock market, and a Korean translation thereof to the Financial Services Commission of Korea and the Korea Exchange.

Persons who have acquired shares of our common stock as a result of the withdrawal of shares of common stock underlying ADSs may exercise their preemptive rights for new shares, participate in free distributions and receive dividends on shares of our common stock without any further governmental approval.

Restrictions Applicable to Common Stock

Under the Foreign Exchange Transaction Laws and the Regulations on Financial Services Commission regulations promulgated thereunderInvestment Business (together, the “Investment Rules”), foreigners are permitted to invest, subject to certain exceptions and procedural requirements, in all shares of Korean companies unless prohibited by specific laws. Foreign investors may trade shares listed on the Korea Exchange only through the Korea Exchange except for certain limited circumstances. These circumstances include, among others, (1) odd-lot trading of shares, (2) acquisition of shares by a foreign company as a result of a merger, (3) acquisition or disposal of shares in connection with a tender offer, (4) acquisition of shares by exercise of warrant, conversion right under convertible bonds, exchange right under exchangeable bonds or withdrawal right under depositary receipts issued outside of Korea by a Korean company, such shares being “Converted Shares,” (5) acquisition of shares through exercise of rights under securities issued outside of Korea, (6) acquisition of shares as a result of inheritance, donation, bequest or exercise of shareholders’ rights (including preemptive rights or rights to participate in free distributions and receive dividends), (7) over-the-counter transactions between foreigners of a class of shares for which a ceiling on aggregate acquisition by foreigners (as explained below) exists and has been reached or exceeded, (8) acquisition of shares by direct investment under the Foreign Investment Promotion Law, (9) acquisition and disposal of shares on an overseas stock exchange market, if such shares are simultaneously listed on the KRX KOSPI Market or the KRX KOSDAQ Market of the Korea Exchange and such overseas stock exchange, and

(10) arm’s length transactions between foreigners in the event all such foreigners belong to an investment group managed by the same person. For over-the-counter transactions of shares listed on the Korea Exchange outside the Korea Exchange between foreigners of a class of shares for which a ceiling on aggregate acquisition by foreigners exists and has been reached or exceeded, a financial investment company with a brokerage license in Korea must act as an intermediary. Odd-lot trading of shares listed on the Korea Exchange outside the Korea Exchange must involve a financial investment company with a dealing license in Korea as the other party. Foreign investors are prohibited from engaging in margin transactions with respect to shares subject to a ceiling on acquisition by foreigners.

The Investment Rules require a foreign investor who wishes to invest in or dispose of shares on the Korea Exchange (including Converted Shares) to register his/her identity with the Financial Supervisory Service prior to making any such investment or disposal unless he/she had previously registered. However, such registration requirement does not apply to foreign investors who acquire Converted Shares with the intention of selling them

within three months from the date they were acquired. Upon registration, the Financial Supervisory Service will issue to the foreign investor an Investment Registration Card which must be presented each time the foreign investor opens a brokerage account with a financial investment company or financial institution in Korea. Foreigners eligible to obtain an Investment Registration Card include any foreign nationals who are individuals (with residence abroad for six months or more), foreign governments, foreign municipal authorities, foreign public institutions, international financial institutions or similar international organizations, corporations incorporated under foreign laws and any person in any additional category designated by the Decree of the Minister of StrategyFinancial Services and Finance.Capital Markets Act. All Korean branches of a foreign corporation as a group are treated as a separate foreigner from the head office of the foreign corporation. However, a foreign branch of a Korean securities company, a foreign corporation or a depositary issuing depositary receipts may obtain one or more Investment Registration Cards in its name in certain circumstances as described in the relevant regulations.

Upon a foreign investor’s purchase of shares through the Korea Exchange, no separate report by the investor is required because the Investment Registration Card system is designed to control and oversee foreign investment through a computer system. However, a foreign investor’s acquisition or sale of shares outside the Korea Exchange (as discussed above) must be reported by the foreign investor or his standing proxy to the Governor of the Financial Supervisory Service at the time of each acquisition or sale. However, a foreign investor must ensure that any acquisition or sale by it of shares outside the Korea Exchange in the case of trades in connection with a tender offer, odd-lot trading of shares or trades of a class of shares for which the aggregate foreign ownership limit has been reached or exceeded, is reported to the Governor of the Financial Supervisory Service by the Korea Securities Depository, financial investment companies with a dealing or brokerage license or securities finance companies engaged to facilitate such transactions. In the event a foreign investor desires to acquire or sell shares outside the Korea Exchange and the circumstances in connection with such sale or acquisition do not fall within the exceptions made for certain limited circumstances described above, then the foreign investor must obtain the prior approval of the Governor. In addition, in the event a foreign investor acquires or sells shares outside the Korea Exchange, a prior report to the Bank of Korea may also be required in certain circumstances. A foreign investor may appoint one or more standing proxies from among the Korea Securities Depository, foreign exchange banks (including domestic branches of foreign banks), financial investment companies with a dealing, brokerage or collective investment license and certain eligible foreign custodians which will exercise shareholders’ rights or perform any matters related to the foregoing activities if the foreign investor does not perform these activities himself. However, a foreign investor may be exempted from complying with these standing proxy rules with the approval of the Governor of the Financial Supervisory Service in cases deemed inevitable by reason of conflict between the laws of Korea and those of the home country of the foreign investor.

Certificates evidencing shares of Korean companies must be kept in custody with an eligible custodian in Korea, the Korea Securities Depository, foreign exchange banks (including domestic branches of foreign banks), financial investment companies with a dealing, brokerage or collective investment license and certain eligible foreign custodians are eligible to be a custodian of shares for a non-resident or foreign investor. A foreign

investor must ensure that his custodian deposits his shares with the Korea Securities Depository. Generally, a foreign investor may not permit any person, other than his/her standing proxy, to exercise rights relating to his shares or perform any tasks related thereto on his behalf. However, a foreign investor may be exempted from complying with this deposit requirement with the approval of the Governor of the Financial Supervisory Service in circumstances where compliance is made impracticable, including cases where such compliance would contravene the laws of the home country of the foreign investor.

Under the Investment Rules, with certain exceptions, a foreign investor may acquire shares of a Korean company without being subject to any single or aggregate foreign investment ceiling. However, certain designated public corporations are subject to a 40.0% ceiling on acquisitions of shares by foreigners in the aggregate and a ceiling on acquisitions of shares by a single foreign investor provided in the Articles of Incorporation of such corporations. Of the Korean companies listed on the Korea Exchange, we are so designated. The Financial Services Commission may increase or decrease these percentages ifimpose other restrictions as it deems it necessary for the public interest,

protection of investors or industrial policy.and the stabilization of the Korean securities and derivatives market. Generally, the ownership of Converted Shares constitutes foreign ownership for purposes of such aggregate foreign ownership limit. However, the acquisition of Converted Shares is one of the exceptions under which foreign investors may acquire shares of designated corporations in excess of the 40.0% ceiling.

In addition to the aggregate foreign investment ceiling set by the Financial Services Commission under authority of the Financial Investment Services and Capital Markets Act, our Articles of Incorporation set a 3% ceiling on acquisition by a single investor (whether domestic or foreign) of the shares of our common stock. Any person (with certain exceptions) who holds more than 3% of our issued and outstanding shares cannot exercise voting rights with respect to our shares in excess of this 3% limit.

The ceiling on aggregate investment by foreigners applicable to us may be exceeded in certain limited circumstances, including as a result of acquisition of:

 

shares by a depositary issuing depositary receipts representing such shares (whether newly issued shares or outstanding shares);

 

Converted Shares;

 

shares from the exercise of shareholders’ rights; or

 

shares by gift, inheritance or bequest.

A foreigner who has acquired shares in excess of any ceiling described above may not exercise his voting rights with respect to the shares exceeding such limit and the Financial Services Commission may take necessary corrective action against him.

Under the Foreign Exchange Transaction Laws, a foreign investor who intends to acquire shares must designate a foreign exchange bank at which he must open a foreign currency account and a Won account exclusively for stock investments. No approval is required for remittance into Korea and deposit of foreign currency funds in the foreign currency account. Foreign currency funds may be transferred from the foreign currency account at the time required to place a deposit for, or settle the purchase price of, a stock purchase transaction to a Won account opened at a securities company. Funds in the foreign currency account may be remitted abroad without any governmental approval.

Dividends on shares of our common stock are paid in Won. No governmental approval is required for foreign investors to receive dividends on, or the Won proceeds of the sale of, any shares to be paid, received and retained in Korea. Dividends paid on, and the Won proceeds of the sale of, any shares held by a non-resident of Korea must be deposited either in a Won account with the investor’s securities company or the investor’s Won account. Funds in the investor’s Won account may be transferred to his foreign currency account or withdrawn for local living expenses, provided that any withdrawal of local living expenses in excess of a certain amount is

reported to the tax authorities by the foreign exchange bank at which Won account is maintained. Funds in the investor’s Won account may also be used for future investment in shares or for payment of the subscription price of new shares obtained through the exercise of preemptive rights.

Financial investment companies with a securities dealing, brokerage or collective investment license are allowed to open foreign currency accounts with foreign exchange banks exclusively for accommodating foreign investors’ stock investments in Korea. Through these accounts, these securities companies and asset management companies may enter into foreign exchange transactions on a limited basis, such as conversion of foreign currency funds and Won funds, either as a counterparty to or on behalf of foreign investors without the foreign investors having to open their own accounts with foreign exchange banks.

Item 10E. Taxation

Korean Taxes

The following summary describes the material Korean tax consequences of ownership of the Registered Debt Securities and ADSs. Persons considering the purchase of the Registered Debt Securities or ADSs should consult their own tax advisors with regard to the application of the Korean income tax laws to their particular situations as well as any tax consequences arising under the laws of any other taxing jurisdiction. Reference is also made to a tax treaty between the Republic and the United States entitled “Convention Between the Government of Thethe Republic of Korea and the Government of the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respectRespect to Taxes on Income and the Encouragement of International Trade and Investment,” signed on June 4, 1976 and entered into force on October 20, 1979.

The following summary of Korean tax considerations applies to you so long as you are not:

 

a resident of Korea;

 

a corporation organized under Korean law or having its head office, principal place of business or place of effective management in Korea; or

 

engaged in a trade or business in Korea through a permanent establishment or a fixed base to which the relevant income is attributable or with which the relevant income is effectively connected.

Registered Debt Securities

Taxation of Interest

Pursuant to the Special Tax Treatment Control Law (“STTCL”), when we make payments of interest to you on the Registered Debt Securities, no amount will be withheld from such payments for, or on account of, any income taxes of any kind imposed, levied, withheld or assessed by Korea or any political subdivision or taxing authority thereof or therein.therein, provided that Registered Debt Securities are deemed to be foreign currency-denominated bonds issued outside of Korea for the purpose of the STTCL.

If the tax exemption under the STTCL referred to above were to cease to be in effect, the rate of income tax or corporation tax applicable to the interest on the Registered Debt Securities would be 14% of income for a non-resident without a permanent establishment in Korea. In addition, a tax surcharge called a local income surtax would be imposed at the rate of 10.0% of the income tax or corporation tax (which would increase the total tax rate to 15.4%), unless reduction is available under an applicable income tax treaty. If you are a qualified resident in a country that has entered into a tax treaty with Korea, you may qualify for an exemption or a reduced rate of Korean withholding tax. See the discussion under “—Shares or ADSs—Tax Treaties” below for an additional explanation on treaty benefits.

In order to obtain the benefits of an exemption or a reduced withholding tax rate under a tax treaty, you must submit to us, prior to the interest payment date, such evidence of tax residence as may be required by the Korean tax authorities in order to establish your entitlement to the benefits of the applicable tax treaty.

Furthermore, Korean tax laws require the beneficial owner to submit an application for entitlement to a preferential tax rate together with evidence of tax residence (including a certificate of tax residence of the beneficial owner issued by a competent authority of the country of tax residence of the beneficial owner) to a withholding obligor paying Korean source income in order to benefit from the available reduced tax rate pursuant to the relevant tax treaty. Under Korean tax laws and subject to certain exceptions, an overseas investment vehicle (which is defined as an organization established in a foreign jurisdiction that manages funds collected through investment solicitation by acquiring, disposing or otherwise investing in proprietary targets and then distributes the proceeds thereof to investors) (the “Overseas Investment Vehicle”) must obtain an application for a preferential tax rate from the beneficial owner and forward it to the withholding obligor along with an overseas investment vehicle report (prepared by the Overseas Investment Vehicle) which includes a detailed statement on the beneficial owner‘s income.

Taxation of Capital Gains

Korean tax laws currently exclude from Korean taxation gains made by a non-resident without permanent establishment in Korea from the sale of a Registered Debt Security to another non-resident (except where a non-resident sells Registered Debt Securities to another non-resident who has permanent establishments in Korea, if any). In addition, capital gains realized from the transfer of Registered Debt Securities outside Korea by non-residents with or without permanent establishments in Korea are currently exempt from taxation by virtue of the STTCL, provided that the issuance of such Registered Debt Securities is deemed to be an overseas issuance of foreign currency-denominated bonds under the STTCL. If you sell or otherwise dispose of a Registered Debt Security through other ways than those mentioned above, any gain realized on the transaction will be taxable at ordinary Korean withholding tax rates (which is the lesser of 22.0% (including local income surtax) of the net gain or 11.0% (including local income surtax) of the gross sale proceeds, subject to the production of satisfactory evidence of the acquisition cost of such Registered Debt Securities and net of certain direct transaction costs attributable to the disposal of such Registered Debt Securities), unless an exemption is available under an applicable income tax treaty. See the discussion under “—Shares or ADSs—Tax Treaties” below for an additional explanation on treaty benefits.

Inheritance Tax and Gift Tax

If you die while you are the holder of Registered Debt Securities, the subsequent transfer of the Registered Debt Securities by way of succession will be subject to Korean inheritance tax. Similarly, if you transfer Registered Debt Securities as a gift, the donee will be subject to Korean gift tax and you may be required to pay the gift tax if the donee fails to do so.

At present, Korea has not entered into any tax treaty relating to inheritance or gift taxes.

Shares or ADSs

Dividends on the Shares of Common Stock or ADSs

We will deduct Korean withholding tax from dividends (whether in cash or in shares) paid to you at a rate of 22% (inclusive of local income surtax). If you are a qualified resident in a country that has entered into a tax treaty with Korea, you may qualify for a reduced rate of Korean withholding tax. See the discussion under “—Tax Treaties” below for an additional explanation on treaty benefits.

In order to obtain the benefits of a reduced withholding tax rate under a tax treaty, you must submit to us, prior to the dividend payment date, such evidence of tax residence as may be required by the Korean tax authorities in order to establish your entitlement to the benefits of the applicable tax treaty. Evidence of tax residence may be submitted to us through the ADS depositary. If we distribute to you free shares representing a transfer of certain capital reserves or asset revaluation reserves into paid-in capital, such distribution may be subject to Korean withholding tax.

Furthermore, Korean tax laws require the beneficial owner to submit an application for entitlement to a preferential tax rate together with evidence of tax residence (including a certificate of tax residence of the beneficial owner issued by a competent authority of the country of tax residence of the beneficial owner) to a withholding obligor paying Korean source income in order to benefit from the available reduced tax rate pursuant to the relevant tax treaty. Under Korean tax laws and subject to certain exceptions, the Overseas Investment Vehicle must obtain an application for entitlement to a preferential tax rate from the beneficial owner and forward it to the withholding obligor along with an overseas investment vehicle report (prepared by the Overseas Investment Vehicle) which includes a detailed statement on the beneficial owner’s income.

Taxation of Capital Gains

As a general rule, capital gains earned by non-residents upon the transfer of the common shares or ADSs would be subject to Korean withholdingincome tax at a rate equal to the lesser of (i) 11.0% (including local income surtax) of the gross proceeds realized or (ii) 22.0% (including local income surtax) of the net realized gain (subject to the

production of satisfactory evidence of the acquisition costs and certain direct transaction costs arising out of the transfer of such common shares or ADSs), unless such non-resident is exempt from Korean income taxation under an applicable Korean tax treaty into which Korea has entered with the non-resident’s country of tax residence. Please see the discussion under “—Tax Treaties” below for an additional explanation on treaty benefits. Even if you do not qualify for any exemption under a tax treaty, you will not be subject to the foregoing withholdingincome tax on capital gains if you qualify for the relevant Korean domestic tax law exemptions discussed in the following paragraphs.

You will not be subject to Korean income taxation on capital gains realized upon the transfer of our common stocks or ADSs through the Korea Exchange if you (i) have no permanent establishment in Korea and (ii) did not own or have not owned (together with any shares owned by any entity which you have a certain special relationship with and possibly including the shares represented by the ADSs) 25.0% or more of our total issued and outstanding shares at any time during the calendar year in which the sale occurs and during the five calendar years prior to the calendar year in which the sale occurs.

It should be noted that (i) capital gains earned by you (regardless of whether you have a permanent establishment in Korea) from the transfer of ADSs outside Korea will be exempted from Korean income taxation provided that ADSs are deemed to have been issued overseas under the STTCL, but (ii) if and when an owner of the underlying shares of stock transfers ADSs after conversion of the underlying shares into ADSs, the exemption described in (i) is not applicable.

If you are subject to tax on capital gains with respect to the sale of ADSs, or of shares of common stock which you acquired as a result of a withdrawal, the purchaser or, in the case of the sale of shares of common stock on the Korea Exchange or through an investment dealer or investment broker under the Financial Investment Services and Capital Markets Act, an investment dealer or investment broker is required to withhold Korean tax from the sales price in an amount equal to 11.0% (including residentlocal income surtax) of the gross realization proceeds and to make payment of these amounts to the Korean tax authority, unless you establish your entitlement to an exemption under an applicable tax treaty or domestic tax law or produce satisfactory evidence of your acquisition cost and transaction costs for the shares of common stock or the ADSs.

However, if you transfer the ADSs following an exchange of the underlying shares of stock owned by you for ADSs to a purchaser who is a non-residents or a foreign company without permanent establishment in Korea, you are obligated to file a corporatean income tax return and pay tax on gain realized from such transfer unless a purchaserexempt under an applicable tax treaty or an investment dealer or investment broker, as the case may be, withholds and remits the tax on capital gains derived from transfer of ADSs,domestic law, as discussed above. Further, if you transfer the shares of common stock outside of Korea (excluding a transfer on a foreign exchange) to non-residents or foreign companies without having permanent establishments in Korea, you are obligated to file an income tax return and pay income tax on capital gain realized from such transfer unless exempt under an applicable tax treaty or domestic law. If a purchaser or an investment dealer or investment broker, as the case may be, withholdwithholds and remits the tax on capital gains derived from transfer of shares of common stock or ADSs, your obligation to file an income tax return and pay income tax will be exempt.

ToIn order to obtain the benefit of an exemption from tax pursuant to a tax treaty, you muchmust submit to the purchaser or the investment dealer or the investment broker, or through the ADS depositary, as the case may be, prior to or at the time of payment, such evidence of your tax residence as the Korean tax authorities may require in support of your claim for treaty benefits. Please see the discussion under “—Tax Treaties” below for an additional explanation on claiming treaty benefits. Furthermore, Korean tax laws require the beneficial owner to submit an application for tax exemption together with evidence of tax residence (including a certificate of tax residence of the beneficial owner issued by a competent authority of the country of tax residence of the beneficial owner) to a withholding obligor paying Korean source income in order to benefit from the available exemption pursuant to the relevant tax treaty. Under Korean tax laws and subject to certain exceptions, the Overseas Investment Vehicle must obtain an application for tax exemption from the beneficial owner and forward it to the withholding obligor along with an overseas investment vehicle report (prepared by the Overseas Investment Vehicle) which includes a detailed statement on the beneficial owner’s income.

Tax Treaties

Korea has entered into a number of income tax treaties with other countries (including the United States), which would reduce or exempt Korean withholding tax on dividends on, and capital gains on transfer of, shares of our common stock or ADSs. For example, under the Korea-United States income tax treaty, reduced rates of Korean withholding tax of 16.5% or 11.0% (respectively, including local income surtax, depending on your shareholding ratio) on dividends and an exemption from Korean withholding tax on capital gains are available to residents of the United States that are beneficial owners of the relevant dividend income or capital gains. However, under Article 17 (Investment of Holding Companies) of the Korea-United States income tax treaty, such reduced rates and exemption do not apply if (i) you are a United States corporation, (ii) by reason of any special measures, the tax imposed on you by the United States with respect to such dividends or capital gains is substantially less than the tax generally imposed by the United States on corporate profits, and (iii) 25.0% or more of your capital is held of record or is otherwise determined, after consultation between competent

authorities of the United States and Korea, to be owned directly or indirectly by one or more persons who are not individual residents of the United States. Also, under Article 16 (Capital Gains) of the Korea-United States income tax treaty, the exemption on capital gains does not apply if you are an individual, and (a) you maintain a fixed base in Korea for a period or periods aggregating 183 days or more during the taxable year and your ADSs or shares of common stock giving rise to capital gains are effectively connected with such fixed base or (b) you are present in Korea for a period or periods of 183 days or more during the taxable year.

You should inquire for yourself whether you are entitled to the benefit of an income tax treaty with Korea. It is the responsibility of the party claiming the benefits of an income tax treaty in respect of dividend payments or capital gains to submit to us, the purchaser or the investment dealer or the investment broker, as applicable, a certificate as to his tax residence. In the absence of sufficient proof, we, the purchaser or the investment dealer or the investment broker, as applicable, must withhold tax at the normal rates. Further, in order for you to obtain the benefit of a tax exemption on certain Korean source income (e.g., interest, dividends and capital gains) under an applicable tax treaty, Korean tax law requireslaws require you (or your agent) to submit thean application for tax exemption along with a certificate of your tax residencyresidence issued by a competent authority of your country of tax residence, subject to certain exceptions. SuchUnder Korean tax laws and subject to certain exceptions, the Overseas Investment Vehicle must obtain an application should be submittedfor tax exemption from the beneficial owner and forward it to the withholding obligor along with an overseas investment vehicle report (prepared by the Overseas Investment Vehicle) which includes a detailed statement on the beneficial owner’s income. The withholding obligor must submit the application and the report to the relevant district tax office by the ninth day of the month following the date of the first payment of such income.

Furthermore, the Korean tax laws require the beneficial owner to submit an application for entitlement to a preferential tax rate together with evidence of tax residence (including a certificate of tax residence of the beneficial owner issued by a competent authority of the country of tax residence of the beneficial owner) to a withholding obligor paying Korean source income in order to benefit from the available reduced tax rate pursuant to the relevant tax treaty. Under Korean tax laws and subject to certain exceptions, the Overseas Investment Vehicle must obtain an application for a preferential tax rate from the beneficial owner and forward it to the withholding obligor along with an overseas investment vehicle report (prepared by the Overseas Investment Vehicle) which includes a detailed statement on the beneficial owner’s income.

Inheritance Tax and Gift Tax

If you die while holding an ADS or donate an ADS, it is unclear whether, for Korean inheritance and gift tax purposes, you will be treated as the owner of the shares of common stock underlying the ADSs. If the tax authority interprets depositary receipts as the underlying share certificates, you may be treated as the owner of the shares of common stock and your heir or the donee (or in certain circumstances, you as the donor) will be subject to Korean inheritance or gift tax presently at the rate of 10.0% to 50.0%, depending on the value of the ADSs or shares of common stock.

If you die while holding a share of common stock or donate a share of common stock, your heir or donee (or in certain circumstances, you as the donor) will be subject to Korean inheritance or gift tax at the same rate as indicated above.

At present, Korea has not entered into any tax treaty relating to inheritance or gift taxes.

Securities Transaction Tax

If you transfer shares of common stock on the Stock Market of the Korea Exchange, you will be subject to securities transaction tax at the rate of 0.15% and an agriculture and fishery special surtax at the rate of 0.15% of the sale price of the shares of common stock. If your transfer of the shares of common stock is not made on the Stock Market of the Korea Exchange, subject to certain exceptions you will be subject to securities transaction tax at the rate of 0.5% and will not be subject to an agriculture and fishery special surtax.

Under the Securities Transaction Tax Law, capital gains fromdepositary receipts (such as ADSs) constitute share certificates subject to the securities transaction tax. However, a transfer of depositary receipts listed on the New York Stock Exchange, NASDAQ National Market or other qualified foreign exchanges will be exempt from the securities transaction tax although depositary receipts, including ADSs, constitute share certificates subject to the securities transaction tax.

In principle, the securities transaction tax, if applicable, must be paid by the transferor of the shares or rights. When the transfer is effected through the Korea Securities Depository, the Korea Securities Depository is generally required to withhold and pay the tax to the tax authorities. When such transfer is made through an investment dealer or investment broker under the Financial Investment Services and Capital Markets Act only, such investment dealer or investment broker is required to withhold and pay the tax. Where the transfer is effected by a non-resident without a permanent establishment in Korea, other than through the Korea Securities Depository or an investment dealer or investment broker, the transferee is required to withhold the securities transaction tax for payment to the Korean tax authority.

U.S. Federal Income and Estate Tax Considerations for U.S. Persons

The following is a summary of certain U.S. Federal income and estate tax consequences for beneficial owners of the Registered Debt Securities, common stock and ADSs that are “U.S. Persons.” For purposes of this summary, you are a “U.S. Person” if you are any of the following for U.S. Federal income tax purposes:

 

an individual citizen or resident of the United States;

 

a corporation, or other entity treated as a corporation for U.S. Federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

an estate the income of which is subject to U.S. Federal income taxation regardless of its source; or

 

a trust if (1) it is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.

This summary is based on current law, which is subject to change (perhaps retroactively), is for general purposes only and should not be considered tax advice. This summary does not represent a detailed description of the federalU.S. Federal income and estate tax consequences to you in light of your particular circumstances. The discussion set forth below is applicable to you if (i) you are a resident of the United States for purposes of the current income tax treaty between the United States and Korea (the “Treaty”), (ii) your Registered Debt Securities, common stock or ADSs are not, for purposes of the Treaty, effectively connected with a permanent establishment in Korea and (iii) you otherwise qualify for the full benefits of the Treaty. Except where noted, it deals only with Registered Debt Securities, common stock or ADSs held as capital assets, and it does not represent a detailed description of the U.S. Federal income and estate tax consequences applicable to you if you

are subject to special treatment under the U.S. Federal income tax laws (including if you are a dealer in securities or currencies, a financial institution, a regulated investment company, a real estate investment trust, an insurance company, a tax exempt organization, a person holding the Registered Debt Securities, common stock or ADSs as part of a hedging, integrated or conversion transaction, constructive sale or straddle, a person owning 10.0% or more of our voting stock, a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings, a person liable for the alternative minimum tax, an investor in a pass-through entity, or a U.S. Person whose “functional currency” is not the U.S. dollar). We cannot assure you that a change in law will not alter significantly the tax considerations that we describe in this summary.

If a partnership holds the Registered Debt Securities, common stock or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our Registered Debt Securities, common stock, or ADSs, you should consult your tax advisor.

Because of the 100 year100-year maturity of the One Hundred Year 7.95% Zero-to-Full Debentures, due April 1, 2096 (the “ZTF Debentures”), it is not certain whether the ZTF Debentures will be treated as debt for U.S. Federal income tax purposes. The discussion below assumes that the ZTF Debentures (as well as the other Registered Debt Securities) will be treated as debt, except that a summary of the consequences to you if the ZTF Debentures were not treated as debt is provided under “Tax Consequences with Respect to Registered Debt Securities Generally—ZTF Debentures Treated as Equity” below.

The discussion of the tax consequences of ownership of common stock and ADSs below, is based, in part, upon representations made by the Depositary to us and assumes that the Deposit Agreement,deposit agreement, and all other related agreements, will be performed in accordance with their terms.

You should consult your own tax advisor concerning the particular U.S. Federal income and estate tax consequences to you of the ownership of the Registered Debt Securities, common stock and ADSs, as well as the consequences to you arising under the laws of any other taxing jurisdiction.

Tax Consequences with Respect to Registered Debt Securities Generally

Payments

Except as provided below with regard to original issue discount (as defined below) on the ZTF Debentures, interest payments on a Registered Debt Security will generally be taxable to you as ordinary income at the time it is paid or accrued in accordance with your method of accounting for tax purposes. Principal payments on an amortizing Registered Debt Security generally will constitute a tax-free return of capital to you.

Although interest payments to you are currently exempt from Korean taxation, if the Korean law providing for the exemption is repealed, then, in addition to interest payments on the Registered Debt Securities and original issue discount (as defined below) on the ZTF Debentures, you will be required to include in income any additional amounts and any Korean tax withheld from interest payments notwithstanding that you in fact did not receive such withheld tax. You may be entitled to deduct or credit such Korean tax (up to the Treaty rate), subject to applicable limitations in the Internal Revenue Code of 1986, as amended (the “Code”). Your election to deduct or credit foreign taxes will apply to all of your foreign taxes for a particular taxable year. Interest income on a Registered Debt Security (including additional amounts and any Korean taxes withheld in respect thereof) and original issue discount on a ZTF Debenture generally will constitute foreign source income and generally will be considered passive category income for purposes of computing the foreign tax credit. You maywill generally be denied a foreign tax credit for Korean taxes imposed with respect to the Registered Debt Securities where you do not meet a minimum holding period requirement during which you are not protected from risk of loss. The rules governing the foreign tax credit are complex. Investors are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

Original Issue Discount

The ZTF Debentures were issued with original issue discount, or OID, for U.S. Federal income tax purposes equal to the difference between (i) the sum of all scheduled amounts payable on the ZTF Debentures (including the interest payable on such ZTF Debentures) and (ii) the “issue price” of the ZTF Debentures. The “issue price” of each ZTF Debenture is the first price at which a substantial amount of the ZTF Debentures was sold to the public (other than to an underwriter, broker, placement agent or wholesaler). If you hold ZTF Debentures, then you generally must include OID in gross income in advance of the receipt of cash attributable to that income, regardless of your method of accounting. However, you generally will not be required to include separately in income cash payments received on the ZTF Debentures, even if denominated as interest.

The amount of OID includible in income by the initial holder of a ZTF Debenture is the sum of the “daily portions” of OID with respect to the ZTF Debenture for each day during the taxable year or portion of the taxable year in which such holder held such ZTF Debenture, or accrued OID (for a discussion relevant to subsequent purchasers, see “—Market Discount” and “—Bond Premium,” below). The daily portion is determined by allocating to each day in any “accrual period” a pro rata portion of the OID allocable to that accrual period. The “accrual period” for a ZTF Debenture may be of any length and may vary in length over the term of the ZTF Debenture, provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs on the first day or the final day of an accrual period. The amount of OID allocable to any accrual period other than the final accrual period is an amount equal to the product of the ZTF Debenture’s adjusted issue price at the beginning of such accrual period and its yield to maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period). OID allocable to a final accrual period is the difference between the amount payable at maturity and the adjusted issue price at the beginning of the final accrual period. The “adjusted issue price” of a ZTF Debenture at the beginning of any accrual period is equal to its issue price increased by the accrued OID for each prior accrual period (for subsequent purchasers, determined without regard to the amortization of any acquisition or bond premium, as described below) and reduced by any payments previously made on such ZTF Debenture. Under these rules, you will have to include in income increasingly greater amounts of OID in successive accrual periods. We are required to provide information returns stating the amount of OID accrued on ZTF Debentures held of record by persons other than corporations and other exempt holders.

As discussed above, although interest payments to you are currently exempt from Korean taxation, if the Korean law providing for the exemption is repealed, then Korean withholding tax may be imposed at times that differ from the times at which you are required to include interest or OID in income for U.S. Federal income tax purposes and this disparity may limit the amount of foreign tax credit available.

Market Discount

If you purchase a Registered Debt Security other than a ZTF Debenture for an amount that is less than its stated redemption price at maturity, or, in the case of a ZTF Debenture, its adjusted issue price, the amount of the difference will be treated as “market discount” for U.S. Federal income tax purposes, unless that difference is less than a specified de minimis amount. Under the market discount rules, you will be required to treat any payment, other than qualified stated interest (as defined in the Code), on, or any gain on the sale, exchange, retirement or other disposition of, a Registered Debt Security as ordinary income to the extent of the market discount that you have not previously included in income and are treated as having accrued on the Registered Debt Security at the time of its payment or disposition. In addition, you may be required to defer, until the maturity of the Registered Debt Security or its earlier disposition in a taxable transaction, the deduction of all or a portion of the interest expense on any indebtedness attributable to the Registered Debt Security.

Any market discount will be considered to accrue ratably during the period from the date of acquisition to the maturity date of the Registered Debt Security, unless you elect to accrue on a constant interest method. Your election to accrue market discount on a constant interest method is to be made for the taxable year in which you acquired the Registered Debt Security, applies only to that Registered Debt Security and cannot be revoked. You

may elect to include market discount in income currently as it accrues, on either a ratable or constant interest method, in which case the rule described above regarding deferral of interest deductions will not apply. Your election to include market discount in income currently, once made, applies to all market discount obligations acquired by you on or after the first taxable year to which your election applies and may not be revoked without the consent of the Internal Revenue Service (“IRS”). You should consult your own tax advisor before making this election.

Bond Premium

If you purchase a ZTF Debenture for an amount that is greater than its adjusted issue price but equal to or less than the sum of all amounts payable on the ZTF Debenture after the purchase date, you will be considered to have purchased that ZTF Debenture at an “acquisition premium.” Under the acquisition premium rules, the amount of OID that you must include in gross income with respect to a ZTF Debenture for any taxable year will be reduced by the portion of the acquisition premium properly allocable to that year.

If you purchase a Registered Debt Security for an amount in excess of the sum of all amounts payable on the Registered Debt Security after the purchase date other than qualified stated interest, you will be considered to have purchased the Registered Debt Security at a “premium” and, if such Registered Debt Security is a ZTF Debenture, you will not be required to include any OID in income. You generally may elect to amortize the premium over the remaining term of the Registered Debt Security on a constant yield method as an offset to interest when includible in income under your regular accounting method. In the case of instruments that provide for alternative payment schedules, bond premium is calculated by assuming that (a) you will exercise or not exercise options in a manner that maximizes your yield, and (b) we will exercise or not exercise options in a manner that minimizes your yield (except that we will be assumed to exercise call options in a manner that maximizes your yield). If you do not elect to amortize bond premium, that premium will decrease the gain or increase the loss you would otherwise recognize on disposition of a Registered Debt Security. Your election to amortize premium on a constant yield method will also apply to all debt obligations held or subsequently acquired by you on or after the first day of the first taxable year to which the election applies. You may not revoke the election without the consent of the IRS. You should consult your own tax advisor before making this election.

Sale, Exchange and Retirement of Registered Debt Securities

When you sell, exchange or retire a Registered Debt Security, you will recognize gain or loss equal to the difference between the amount you receive (not including an amount equal to any accrued qualified stated interest, which will be taxable as ordinary income to the extent not previously included in income) and your adjusted tax basis in the Registered Debt Security. Your tax basis in a Registered Debt Security other than a ZTF Debenture will generally be your cost of obtaining the Registered Debt Security increased by any market discount included in income and reduced by payments of principal you receive and any bond premium that you elect to amortize. Your adjusted tax basis in a ZTF Debenture will, in general, be your cost therefor, increased by any market discount and OID previously included in income and reduced by any cash payments on the ZTF Debentures and any bond premium that you elect to amortize. Your gain or loss realized on selling, exchanging or retiring a Registered Debt Security will generally be treated as United States source income. Consequently, you may not be able to use the foreign tax credit arising from any Korean tax imposed on the disposition of Registered Debt Securities unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources. Except as described above with respect to market discount, your gain or loss will be capital gain or loss and will be long-term capital gain or loss if, at the time of the sale, exchange or retirement of a Registered Debt Security, you have held the Registered Debt Security for more than one year. If you are an individual and the Registered Debt Security being sold, exchanged or retired is a capital asset that you held for more than one year, you may be eligible for reduced rates of taxation on any capital gain recognized. Your ability to deduct capital losses is subject to limitations.

ZTF Debentures Treated as Equity

If the ZTF Debentures were treated as equity for U.S. Federal income tax purposes, amounts deemed paid with respect to the ZTF Debentures would be deemed dividends for U.S. Federal income tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined for U.S. Federal income tax purposes).

You would include the amounts deemed paid by us on the ZTF Debentures (before reduction for Korean withholding tax, if any) as dividend income when actually or constructively paid by KEPCO. Section 305 of the Code, which would apply to the ZTF Debentures if they were treated as equity for U.S. Federal income tax purposes, requires current accrual of dividends under principles similar to the accrual of OID. Amounts treated as dividends will not be eligible for the dividends received deduction generally allowed to U.S. corporations.

Tax Consequences with Respect to Common Stock and ADSs

In general, for U.S. Federal income tax purposes, holders of ADSs will be treated as the owners of the underlying common stock that is represented by such ADSs. Accordingly, deposits or withdrawals of common stock by holders of ADSs will not be subject to U.S. Federal income tax. However, the U.S. Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS and the issuer of the security underlying the ADS may be taking actions that are inconsistent with the claiming of foreign tax credits by the holders of ADSs. Such actions would also be inconsistent with the claiming of the reduced rate of tax applicable to dividends received by certain non-corporate holders. Accordingly, the analysis of creditability of Korean taxes and the availability of the reduced tax rate for dividends received by certain non-corporate holders, each described below, could be affected by future actions that may be taken by such intermediaries.

Distributions on Common Stock or ADSs

The gross amount of distributions (other than certain distributions of common stock or rights to subscribe for common stock) to holders of common stock or ADSs (including amounts withheld in respect of Korean withholding taxes) will be treated as dividend income to such holders, to the extent paid out of our current or accumulated earnings and profits, as determined under U.S. Federal income tax principles. Such income (including withheld taxes) will be includable in the gross income of a holder as ordinary income on the day actually or constructively received by the holder, in the case of common stock, or by the Depositary, in the case of ADSs. Such dividends will not be eligible for the dividends received deduction allowed to corporations under the Code.

With respect to non-corporate U.S. Persons, certain dividends paid by a qualified foreign corporation and received by such holders in taxable years beginning before January 1, 2013 may be subject to reduced rates of taxation. A qualified foreign corporation includes a foreign corporation that is eligible for the benefits of an income tax treaty with the United States, if such treaty contains an exchange of information provision and the United States Treasury Department had determined that the treaty is satisfactory for purposes of the legislation. The United States Treasury Department has determined that the Treaty, which contains an exchange of information provision, is (in the absence of additional guidance) satisfactory for these purposes. In addition, we believe we are eligible for the benefits of the United States-Korean income tax treaty. However, a foreign corporation is also treated as a qualified foreign corporation with respect to dividends paid by that corporation on shares (or ADSs backed by such shares) that are readily tradable on an established securities market in the United States. Shares of our common stock will generally not be considered readily tradable for these purposes. However, United States Treasury Department guidance indicates that our ADSs, which are listed on the New York Stock Exchange, are readily tradable on an established securities market in the United States. There can be no assurance that our ADSs will be considered readily tradable on an established securities market in later years. Non-corporate U.S. Persons that do not meet a minimum holding period requirement during which they are not protected from a risk of loss or that elect to treat the dividend income as “investment income” pursuant to Section 163(d)(4) of the Code will not be eligible for

the reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. Holders should consult their own tax advisors regarding the application of the foregoing rules to their particular circumstances.

The amount of any dividend paid in Won will equal the United States dollar value of the Won received calculated by reference to the exchange rate in effect on the date the dividend is received by the holder, in the case of common stock, or by the Depositary, in the case of ADSs, regardless of whether the Won are converted into U.S. dollars. If the Won received as a dividend are not converted into U.S. dollars on the date of receipt, a holder will have a basis in the Won equal to their U.S. dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other disposition of the Won will be treated as United States source ordinary income or loss. The amount of any distribution of property other than cash will be the fair market value of such property on the date of distribution.

The maximum rate of withholding tax on dividends paid to you pursuant to the Treaty is 16.5%. You will be required to properly demonstrate to us and the Korean tax authorities your entitlement to the reduced rate of withholding under the Treaty. Subject to certain conditions and limitations, Korean withholding taxes (up to the Treaty rate) will be treated as foreign taxes eligible for credit against your U.S. Federal income tax liability. For purposes of calculating the foreign tax credit, dividends paid on the common stock or ADSs will be treated as foreign source income and will generally constitute passive category income. Further, in certain circumstances, if you have held common stock or ADSs for less than a specified minimum period during which you are not protected from risk of loss, or are obligated to make payments related to the dividends, you will not be allowed a foreign tax credit for foreign taxes imposed on dividends paid on common stock or ADSs. The rules governing the foreign tax credit are complex. Investors are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances including the possible adverse impact on creditability to the extent you are entitled to a refund of any Korean tax withheld or a reduced rate of withholding.

To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits for a taxable year, as determined under U.S. Federal income tax principles, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of the common stock or ADSs (thereby increasing the amount of gain, or decreasing the amount of loss, to be recognized by the investor on a subsequent disposition of the common stock or ADSs), and the balance in excess of adjusted basis will be taxed as capital gain recognized on a sale or exchange of property. Consequently, such distributions in excess of our current and accumulated earnings and profits would not give rise to foreign source income and you generally would not be able to use the foreign tax credit arising from any Korean withholding tax imposed on such distributions unless

such credit can be applied (subject to applicable limitations) against U.S. tax due on other foreign source income in the appropriate category for foreign tax credit purposes. However, we do not expect to keep earnings and profits in accordance with U.S. Federal income tax principles. Therefore, you should expect that a distribution will generally be treated as a dividend (as discussed above).

Distributions of common stock or rights to subscribe for common stock that are received as part of a pro rata distribution to all of our shareholders generally will not be subject to U.S. Federal income tax. Consequently such distributions will not give rise to foreign source income and you generally will not be able to use the foreign tax credit arising from any Korean withholding tax unless such credit can be applied (subject to applicable limitations) against U.S. tax due on other income derived from foreign sources. The basis of the new common stock or rights so received will be determined by allocating your basis in the old common stock between the old common stock and the new common stock or rights received, based on their relative fair market value on the date of distribution. However, the basis of the rights will be zero if (i) the fair market value of the rights is less than 15% of the fair market value of the old common stock at the time of distribution, unless the taxpayer elects to determine the basis of the old common stock and of the rights by allocating between the old common stock and the rights the adjusted basis of the old common stock or (ii) the rights are not exercised and thus expire.

Sale, Exchange or Other Disposition of ADSs or Common Stock

Upon the sale, exchange or other disposition of ADSs or common stock, you generally will recognize capital gain or loss equal to the difference between the amount realized upon the sale, exchange or other disposition and your adjusted tax basis in the ADSs or common stock. The capital gain or loss will be long-term capital gain or loss if at the time of sale, exchange or other disposition, the ADSs or common stock have been held by you for more than one year. Under current law, long-term capital gains of individuals are, under certain circumstances, taxed at lower rates than items of ordinary income. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by you will generally be treated as U.S. source gain or loss. Consequently, you may not be able to use the foreign tax credit arising from any Korean tax imposed on the disposition of ADSs or common stock unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources.

You should note that any Korean securities transaction tax will not be treated as a creditable foreign tax for U.S. Federal income tax purposes, although you may be entitled to deduct such taxes, subject to applicable limitations under the Code.

Estate and Gift Taxation

As discussed above in “—Korean Taxes—Registered Debt Securities—Inheritance Tax and Gift Tax” and “—Korean Taxes—Shares or ADSs—Inheritance Tax and Gift Tax,” Korea may impose an inheritance tax on your heir who receives ADSs and will impose an inheritance tax on an heir who receives common stock or Registered Debt Securities. The amount of any inheritance tax paid to Korea may be eligible for credit against the amount of U.S. Federal estate tax imposed on your estate. Prospective purchasers should consult their personal tax advisors to determine whether and to what extent they may be entitled to such credit. Korea also imposes a gift tax on the donation of any property located within Korea. The Korean gift tax generally will not be treated as a creditable foreign tax for United States tax purposes.

Information Reporting and Backup Withholding

In general, information reporting requirements will apply to principal, interest, OID and premium payments on Registered Debt Securities and dividend payments in respect of the common stock or ADSs or the proceeds received on the sale, exchange or redemption of the Registered Debt Securities, common stock or ADSs paid within the United States (and in certain cases, outside of the United States) to holders other than certain exempt recipients, and a backup withholding may apply to such amounts if you fail to provide an accurate taxpayer identification number or to report interest and dividends required to be shown on your U.S. Federal income tax returns. The amount of any backup withholding from a payment to you will be allowed as a refund or a credit against your U.S. Federal income tax liability, provided the required information is furnished to the IRS.

Item 10F. Dividends and Paying Agents

Not Applicable

Item 10G. Statements by Experts

Not Applicable

Item 10H. Documents on Display

We are subject to the information requirements of the Exchange Act, and, in accordance therewith, are required to file reports, including annual reports on Form 20-F, and other information with the U.S. Securities and Exchange Commission. You may inspect and copy these materials, including this annual report and the

exhibits thereto, at SEC’s Public Reference Room 100 Fifth Street, N.E., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the public reference rooms. As a foreign private issuer, we are also required to make filings with the Commission by electronic means. Any filings we make electronically will be available to the public over the Internet at the Commission’s web site at http://www.sec.gov.

Item 10I. Subsidiary Information

Not Applicable

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk exposures are to fluctuations in exchange rates, interest rates and fuel prices. We are exposed to foreign exchange risk related to foreign-currency denominatedforeign currency-denominated liabilities. As of December 31, 2011,2013, approximately 23.2%20.9% of our long-term debt (including the current portion and discounts on debentures but excluding premium on debentures)issue discounts and premium), before accounting for swap transactions, was denominated in foreign currencies, principally in the U.S. dollar, Yen and Euro.dollars. However, substantially alla substantial portion of our revenues areis denominated in Won. As a result, changes in exchange rates, particularly between the Won and the U.S. dollar, significantly affect us due to our significant amounts of foreign-currency denominatedforeign currency-denominated debt and the effect of such changes on the amount of funds required by us to make interest and principal payments on such debt. In order to reduce the impact of foreign exchange rate fluctuations on our results of operations, we have recently been reducing and plan to continue to reduce the proportion of our debt which is denominated in foreign currencies and the proportion of its foreign currency debt which is denominated in U.S. dollars.currencies.

We are also exposed to foreign exchange risk related to our purchases of fuels since we obtain substantially all of our fuel materials (other than anthracite coal) directly or indirectly from sources outside Korea. Prices for such fuel materials are quoted based on prices stated in, and in many cases are paid for in, currencies other than Won. In 2011,2013, fuel costs represented 48.2%45.1% of our sales.

We are exposed to interest rate risk due to significant amounts of debt. Upward fluctuations in interest rates increase the cost of additional debt and the interest cost of outstanding floating rate borrowings. We are also exposed to fluctuations in prices of fuel materials. In 2011,2013, for electricity generation, uranium accounted for 34.2%30.9% of our fuel requirements, coal accounted for 45.4%44.8%, LNG accounted for 16.8%19.7% and oil accounted for 2.2%3.3%. In 2010,2012, measured on the same basis, uranium accounted for 34.1%33.5% of our fuel requirements, coal accounted for 45.5%44.5%, LNG accounted for 16.6%17.7% and oil accounted for 2.5%3.2%, measured in each case by the amount of electricity we generated.

For additional discussions of our market risks, see Item 3D. “Risk Factors” and Item 5B. “Liquidity and Capital Resources—Liquidity.”

We have entered into various swap contracts to hedge exchange rate risks arising from foreign currency-denominated debts. Details of currency swap contracts outstanding as of December 31, 20112013 are as follows:

 

 

Counterparty

 Contract
year
  Settlement
year
  Contract amounts Contract
interest rate
 Contract
exchange
rate
  Counterparty Contract
Year
  Settlement
Year
  Contract amounts Contract
interest rate
 Contract
Exchange
Rate
 

Type

 Pay Receive Pay Receive  Pay Receive Pay Receive 
     (KRW in millions, USD,
JPY in thousands)
          (KRW in millions, USD in
thousands)
     

Trading

 Morgan Stanley  2010    2012   KRW120,000   USD100,000    3.75 3M USD
Libor +
1.90%
  1,200.00   Shinhan Bank  2010    2014    KRW 84,615    USD 75,000    6.83 5.50%  1,128.20  
 

Morgan Stanley

  2010    2015   KRW118,800   USD100,000    4.61 3M USD
Libor +
1.64%
  1,188.00   RBS  2010    2014    KRW 141,125    USD 125,000    6.78 5.50%  1,129.00  
 

ING

  2010    2012   KRW117,900   USD100,000    3.64 6M USD
Libor +
1.37%
  1,179.00   Morgan Stanley  2010    2014    KRW 112,320    USD 100,000    6.71 5.50%  1,123.20  
 

M-UFJ

  2010    2015   KRW116,100   USD100,000    4.00 3M USD
Libor +
1.00%
  1,161.00   HSBC  2011    2014    KRW 112,320    USD 100,000    6.71 5.50%  1,123.20  
 

DBS

  2011    2014   KRW56,150   USD50,000    4.21 3M USD
Libor +
1.00%
  1,123.00   Bank of America  2011    2014    KRW 110,310    USD 100,000    6.93 5.50%  1,103.10  
 

SMBC

  2011    2014   KRW56,150   USD50,000    4.21 3M USD
Libor +
1.00%
  1,123.00   UBS  2011    2015    KRW 220,356    USD 200,000    3.90 3.00%  1,101.78  
 RBS  2011    2015    KRW 110,110    USD 100,000    3.90 3.00%  1,101.10  

  

Counterparty

 Contract
year
  Settlement
year
  Contract amounts  Contract
interest rate
 Contract
exchange
rate
 

Type

    Pay  Receive  Pay  Receive 
          (KRW in millions, USD,
JPY in thousands)
         
 

Mizuho

  2011    2014   KRW 112,800   USD 100,000    3.86 3M
USD
Libor +
0.80%
  1,128.00  
 

DBS

  2011    2014   KRW109,500   USD100,000    3.80 3M
USD
Libor +
0.85%
  1,095.00  
 

Barclays

  2008    2013   KRW187,020   USD200,000    7.50 7.75%  935.10  
 

Credit Suisse

  2008    2013   KRW140,265   USD150,000    6.94 7.75%  935.10  
 

Shinhan Bank

  2010    2014   KRW84,615   USD75,000    6.83 5.50%  1,128.20  
 

RBS

  2010    2014   KRW141,125   USD125,000    6.78 5.50%  1,129.00  
 

Morgan Stanley

  2010    2014   KRW112,320   USD100,000    6.71 5.50%  1,123.20  
 

HSBC

  2010    2014   KRW112,320   USD100,000    6.71 5.50%  1,123.20  
 

BOA

  2010    2014   KRW110,310   USD100,000    6.93 5.50%  1,103.10  
 

UBS

  2011    2015   KRW220,356   USD200,000    3.90 3.00%  1,101.78  
 

RBS

  2011    2015   KRW110,110   USD100,000    3.90 3.00%  1,101.10  
 

Barclays

  2011    2015   KRW108,390   USD100,000    3.78 3.00%  1,083.90  
 

Credit Suisse

  2011    2015   KRW108,390   USD100,000    3.78 3.00%  1,083.90  
 

Morgan Stanley

  2011    2015   KRW63,006   USD60,000    4.06 3.00%  1,050.10  
 

BTMU

  2009    2012   KRW138,018   JPY10,000,000    4.10 3M
EuroYen
Tibor +
2.50%
  13.80  
 

Deutsche Bank

  2009    2014   KRW126,610   USD100,000    5.39 6.25%  1,266.10  
 

Nomura Securities

  2009    2014   KRW126,610   USD100,000    5.35 6.25%  1,266.10  
 

Nomura Securities

  2009    2014   KRW126,610   USD100,000    5.33 6.25%  1,266.10  
 

Morgan Stanley

  2009    2014   KRW126,610   USD100,000    5.32 6.25%  1,266.10  
 

Morgan Stanley

  2010    2014   KRW126,610   USD100,000    5.30 6.25%  1,266.10  
 

Barclays

  2010    2014   KRW126,610   USD100,000    5.29 6.25%  1,266.10  
 

CITI

  2010    2014   KRW126,610   USD100,000    5.27 6.25%  1,266.10  
 

JP Morgan

  2010    2014   KRW126,610   USD100,000    4.93 6.25%  1,266.10  
 

Deutsche Bank

  2010    2014   KRW126,610   USD100,000    4.93 6.25%  1,266.10  
 

RBS

  2010    2014   KRW126,610   USD100,000    4.93 6.25%  1,266.10  
 

DBS

  2010    2013   KRW 226,900   USD 200,000    3.70 3M USD
Libor +
0.25%
  1,134.50  
 

SMBC

  2010    2013   KRW113,400   USD100,000    3.92 3M
USD
Libor +
0.90%
  1,134.00  
 

BTMU

  2010    2013   KRW56,525   USD50,000    3.92 3M
USD
Libor +
0.90%
  1,130.50  
 

Mizuho

  2010    2013   KRW56,750   USD50,000    3.92 3M
USD
Libor +
0.90%
  1,135.00  
 

CITI

  2010    2015   KRW116,080   USD100,000    3.97 3.13%  1,160.80  
 

Deutsche Bank

  2010    2015   KRW116,080   USD100,000    3.98 3.13%  1,160.80  
 

RBS

  2010    2015   KRW116,080   USD100,000    3.97 3.13%  1,160.80  
 

HSBC

  2010    2015   KRW116,080   USD100,000    3.23 3.13%  1,160.80  
 

UBS

  2010    2015   KRW116,080   USD100,000    3.23 3.13%  1,160.80  
  Counterparty Contract
Year
  Settlement
Year
  Contract amounts  Contract
interest rate
 Contract
Exchange
Rate
 

Type

    Pay  Receive  Pay  Receive 
          (KRW in millions, USD in
thousands)
         
 Barclays Bank PLC  2011    2015    KRW 108,390    USD 100,000    3.78 3.00%  1,083.90  
 Credit Suisse  2011    2015    KRW 108,390    USD 100,000    3.22 3.00%  1,083.90  
 Morgan Stanley  2011    2015    KRW 63,006    USD 60,000    4.06 3.00%  1,050.10  
 Goldman Sachs  2010    2015    KRW 156,643    USD 140,000    3.92 3.00%  1,118.88  
 Deutsche Bank  2012    2018    KRW 110,412    JPY 10,000,000    6.21 4.19%  11.04  
 IBK  2013    2018    KRW 111,800    USD 100,000    3.16 2.79%  1,118.00  
 Bank of America  2012    2018    KRW 103,580    JPY 10,000,000    7.05 4.19%  10.36  
 Morgan Stanley  2010    2015    KRW 118,800    USD 100,000    4.61 3M Libor +
1.64%
  1,188.00  
 M-UFJ  2010    2015    KRW 116,100    USD 100,000    4.00 3M Libor +
1.00%
  1,161.00  
 DBS  2011    2014    KRW 56,150    USD 50,000    4.21 3M Libor +
1.00%
  1,123.00  
 SMBC  2011    2014    KRW 56,150    USD 50,000    4.21 3M Libor +
1.00%
  1,123.00  
 Mizuho Corporate
Bank
  2011    2014    KRW 112,800    USD 100,000    3.86 3M Libor +
0.80%
  1,128.00  
 DBS  2011    2014    KRW 109,500    USD 100,000    3.80 3M Libor +
0.85%
  1,095.00  
 Deutsche Bank  2009    2014    KRW 126,610    USD 100,000    5.39 6.25%  1,266.10  
 Nomura  2009    2014    KRW 126,610    USD 100,000    5.35 6.25%  1,266.10  
 Nomura  2009    2014    KRW 126,610    USD 100,000    5.33 6.25%  1,266.10  
 Morgan Stanley  2009    2014    KRW 126,610    USD 100,000    5.32 6.25%  1,266.10  
 Morgan Stanley  2010    2014    KRW 126,610    USD 100,000    5.30 6.25%  1,266.10  
 Barclays Bank PLC  2010    2014    KRW 126,610    USD 100,000    5.29 6.25%  1,266.10  
 Citibank  2010    2014    KRW 126,610    USD 100,000    5.27 6.25%  1,266.10  
 JP Morgan  2010    2014    KRW 126,610    USD 100,000    4.93 6.25%  1,266.10  
 Deutsche Bank  2010    2014    KRW 126,610    USD 100,000    4.93 6.25%  1,266.10  
 RBS  2010    2014    KRW 126,610    USD 100,000    4.93 6.25%  1,266.10  
 Citibank  2010    2015    KRW 116,080    USD 100,000    3.97 3.13%  1,160.80  
 Deutsche Bank  2010    2015    KRW 116,080    USD 100,000    3.98 3.13%  1,160.80  
 RBS  2010    2015    KRW 116,080    USD 100,000    3.97 3.13%  1,160.80  
 HSBC  2010    2015    KRW 116,080    USD 100,000    3.23 3.13%  1,160.80  
 UBS  2010    2015    KRW 116,080    USD 100,000    3.23 3.13%  1,160.80  
 Citibank  2012    2022    KRW 112,930    USD 100,000    2.79 3.00%  1,129.30  
 JP Morgan  2012    2022    KRW 112,930    USD 100,000    2.79 3.00%  1,129.30  
 Bank of America  2012    2022    KRW 112,930    USD 100,000    2.79 3.00%  1,129.30  
 Goldman Sachs  2012    2022    KRW 112,930    USD 100,000    2.79 3.00%  1,129.30  
 HSBC  2012    2022    KRW 111,770    USD 100,000    2.89 3.00%  1,117.70  
 Hana Bank  2012    2022    KRW 111,770    USD 100,000    2.87 3.00%  1,117.70  
 Standard Chartered  2012    2022    KRW 111,770    USD 100,000    2.89 3.00%  1,117.70  
 Deutsche Bank  2012    2022    KRW 55,885    USD 50,000    2.79 3.00%  1,117.70  
 DBS  2013    2018    KRW 108,140    USD 100,000    2.63 3M Libor

+0.84%

  1,081.40  
 DBS  2013    2018    KRW 108,140    USD 100,000    2.57 3M Libor

+0.84%

  1,081.40  
 DBS  2013    2018    KRW 108,140    USD 100,000    2.57 3M Libor

+0.84%

  1,081.40  
 HSBC  2013    2018    KRW 107,450    USD 100,000    3.41 2.88%  1,074.50  
 Standard Chartered  2013    2018    KRW 107,450    USD 100,000    3.44 2.88%  1,074.50  
 JP Morgan  2013    2018    KRW 107,450    USD 100,000    3.48 2.88%  1,074.50  

 

Counterparty

 Contract
year
  Settlement
year
  Contract amounts Contract
interest rate
 Contract
exchange
rate
  Counterparty Contract
Year
  Settlement
Year
  Contract amounts Contract
interest rate
 Contract
Exchange
Rate
 

Type

 Pay Receive Pay Receive  Pay Receive Pay Receive 
     (KRW in millions, USD in
thousands)
       
 HSBC  2013    2020    USD 92,940    AUD 100,000    

 

3M Libor

+1.22

 

  5.75  0.93  
 HSBC  2013    2020    USD 93,480    AUD 100,000    

 

3M Libor

+1.18

  

  5.75  0.93  
     (KRW in millions, USD,
JPY in thousands)
      Standard Chartered  2013    2020    USD 117,250    AUD 125,000    

 

3M Libor

+1.25

 

  5.75  0.94  

Cash flow hedge

 Credit Suisse  2009    2013   KRW 197,475   USD 150,000    5.12 4.75%  1,316.50   Citibank  2006    2016    KRW 113,200    USD 100,000    1.05  6.00  1,132.00  
 

Credit Suisse

  2006    2016   KRW94,735   USD100,000    5.26 6.00%  947.35   Barclays Bank
PLC
  2006    2016    KRW 113,200    USD 100,000    1.05  6.00  1,132.00  
 

Barclays

  2006    2016   KRW94,735   USD100,000    5.26 6.00%  947.35   Credit Suisse  2006    2016    KRW 113,200    USD 100,000    1.05  6.00  1,132.00  
 

Citibank

  2006    2016   KRW94,735   USD100,000    5.24 6.00%  947.35   Goldman Sachs  2011    2017    KRW 105,260    USD 100,000    3.99  3.63  1,052.60  
 

Goldman Sachs

  2011    2017   KRW105,260   USD100,000    3.99 3.63%  1,052.60   Barclays Bank
PLC
  2011    2017    KRW 105,260    USD 100,000    3.99  3.63  1,052.60  
 

Citibank

  2011    2017   KRW105,260   USD100,000    3.99 3.63%  1,052.60   Citibank  2011    2017    KRW 105,260    USD 100,000    3.99  3.63  1,052.60  
 

Barclays

  2011    2017   KRW105,260   USD100,000    3.99 3.63%  1,052.60   HSBC  2012    2014    KRW 45,264    USD 40,000    3.25  
 
3M Libor
+1.50
  
  1,131.60  
 

UBS

  2006    2016   KRW98,100   USD100,000    5.48 5.50%  981.00   Citibank  2012    2014    KRW 33,948    USD 30,000    3.25  
 
3M Libor
+1.50
  
  1,131.60  
 

Credit Suisse

  2006    2016   KRW98,100   USD100,000    5.48 5.50%  981.00   RBS  2012    2014    KRW 22,632    USD 20,000    3.25  
 
3M Libor
+1.50
  
  1,131.60  
 

Citi Group

  2008    2013   KRW113,304   USD120,000    4.96 5.38%  944.20   UOB  2012    2014    KRW 33,948    USD 30,000    3.25  

 

3M Libor

+1.50

 

  1,131.60  
 

Goldman Sachs

  2008    2013   KRW113,304   USD120,000    4.96 5.38%  944.20   DBS  2012    2014    KRW 56,580    USD 50,000    3.20  

 

3M Libor

+1.50

  

  1,131.60  
 

Barclays

  2008    2013   KRW56,652   USD60,000    4.96 5.38%  944.20   ANZ  2012    2014    KRW 22,632    USD 20,000    3.20  

 

3M Libor

+1.50

  

  1,131.60  
 

Barclays

  2006    2016   KRW71,888   USD75,000    4.81 5.50%  958.51   Citibank  2012    2014    KRW 20,369    USD 18,000    3.20  

 

3M Libor

+1.50

  

  1,131.60  
 

Deutsche Bank

  2006    2016   KRW71,888   USD75,000    4.81 5.50%  958.51   Credit Suisse  2012    2014    KRW 45,264    USD 40,000    2.77  

 

3M Libor

+1.50

  

  1,131.60  
 

Barclays

  2004    2014   KRW172,875   USD150,000    5.10 5.75%  1,152.50   RBS  2012    2014    KRW 58,843    USD 52,000    2.77  

 

3M Libor

+1.50

  

  1,131.60  
 

RBS

  2008    2013   KRW149,040   USD150,000    5.03 5.38%  993.60   Citibank  2013    2018    KRW 54,570    USD 50,000    2.90  

 

3M Libor

+1.01

  

  1,091.40  
 

Deutsche Bank

  2008    2013   KRW149,040   USD150,000    5.03 5.38%  993.60   Standard Chartered  2013    2018    KRW 54,570    USD 50,000    2.90  

 

3M Libor

+1.01

  

  1,091.40  
 

BTMU

  2010    2013   KRW113,200   USD100,000    4.11 3M USD
Libor +
0.80%
  1,132.00   Credit Suisse  2013    2018    KRW 111,410    USD 100,000    3.22  

 

3M Libor

+1.50

  

  1,114.10  
 

BTMU

  2010    2015   KRW55,900   USD50,000    4.03 3M USD
Libor +
1.20%
  1,118.00   UBS AG  2006    2016    KRW 98,100    USD 100,000    5.48  5.50  981  
 Credit Suisse  2006    2016    KRW 98,100    USD 100,000    5.48  5.50  981  
 Barclays Bank
PLC
  2006    2016    KRW 71,888    USD 75,000    4.81  5.50  958.51  
 Deutsche Bank
AG
  2006    2016    KRW 71,888    USD 75,000    4.81  5.50  958.51  
 Barclays Bank
PLC
  2012    2017    KRW 142,500    USD 125,000    3.83  3.13  1,140.00  
 Morgan Stanley  2012    2017    KRW 142,500    USD 125,000    3.83  3.13  1,140.00  
 RBS  2012    2017    KRW 142,500    USD 125,000    3.83  3.13  1,140.00  
 JP Morgan  2012    2017    KRW 142,500    USD 125,000    3.83  3.13  1,140.00  
 RBS  2013    2019    KRW 118,343    CHF 100,000    3.47  1.63  1,183.43  

  Counterparty Contract
Year
  Settlement
Year
  Contract amounts  Contract
interest rate
  Contract
Exchange
Rate
 

Type

    Pay  Receive  Pay  Receive  
          (KRW in millions, USD in
thousands)
          
 Barclays Bank
PLC
  2013    2019    KRW 59,172    CHF 50,000    3.47%    1.63  1,183.43  
 Nomura  2013    2019    KRW 59,172    CHF 50,000    3.47%    1.63  1,183.43  
 Barclays Bank
PLC
  2013    2018    KRW 107,360    USD 100,000    3.34%    2.88  1,073.60  
 RBS  2013    2018    KRW 107,360    USD 100,000    3.34%    2.88  1,073.60  
 JP Morgan  2013    2018    KRW 161,040    USD 150,000    3.34%    2.88  1,073.60  
 Standard Chartered  2013    2018    KRW 161,040    USD 150,000    3.34%    2.88  1,073.60  
 Barclays Bank
PLC
  2004    2014    KRW 172,875    USD 150,000    5.10%    5.75  1,152.50  
 Barclays Bank
PLC
  2013    2018    KRW 81,188    USD 75,000    2.65%    1.88  1,082.50  
 RBS  2013    2018    KRW 81,188    USD 75,000    2.65%    1.88  1,082.50  
 Deutsche Bank  2013    2018    KRW 81,188    USD 75,000    2.65%    1.88  1,082.50  
 Citibank  2013    2018    KRW 81,188    USD 75,000    2.65%    1.88  1,082.50  
 BTMU  2010    2015    KRW 55,900    USD 50,000    4.03%    

 

3M Libor

+1.20

  

  1,118.00  
 RBS  2012    2017    KRW 115,140    USD 100,000    3.38%    2.50  1,151.40  
 BNP Paribas  2012    2017    KRW 115,140    USD 100,000    3.38  2.50  1,151.40  
 Hana Bank  2012    2017    KRW 115,140    USD 100,000    3.38%    2.50  1,151.40  
 Barclays Bank
PLC
  2012    2017    KRW 57,570    USD 50,000    3.38%    2.50  1,151.40  
 Standard Chartered  2012    2017    KRW 57,570    USD 50,000    3.38%    2.50  1,151.40  
 Nomura  2012    2017    KRW 57,570    USD 50,000    3.38%    2.50  1,151.40  
 Credit Agricole  2012    2017    KRW 57,570    USD 50,000    3.38%    2.50  1,151.40  
 Societe Generale  2013    2018    KRW 106,190    USD 100,000    3.48%    2.63  1,061.90  
 BNP Paribas  2013    2018    KRW 53,095    USD 50,000    3.48%    2.63  1,061.90  
 Hana Bank  2013    2018    KRW 53,095    USD 50,000    3.48%    2.63  1,061.90  
 Standard Chartered  2013    2018    KRW 106,030    USD 100,000    3.48%    2.63  1,060.30  
 Barclays Bank
PLC
  2013    2018    KRW 53,015    USD 50,000    3.48%    2.63  1,060.30  
 Hana Bank  2013    2018    KRW 31,809    USD 30,000    3.48%    2.63  1,060.30  
 Societe Generale  2013    2018    KRW 21,206    USD 20,000    3.48%    2.63  1,060.30  
 HSBC  2013    2018    KRW 53,015    USD 50,000    3.47%    2.63  1,060.30  
 Nomura  2013    2018    KRW 53,015    USD 50,000    3.47%    2.63  1,060.30  

Under these currency swap contracts, we recognized a valuation gainloss of Won 148,299217,361 million in 2011,2013, net.

Details of interest rate contracts outstanding as of December 31, 20112013 are as follows:

 

  

Counterparty

 Contract
year
  Settlement
year
  Notional amount   Contract interest rate
per annum
  

Counterparty

 Contract
Year
  Settlement
Year
  Notional Amount  Contract Interest Rate Per
Annum
 

Type

     Pay Receive  Pay Receive 
       

(KRW in millions,

JOD, MXN in thousands)

            

(KRW in millions,

USD in thousands)

     

Trading

  Korea Exchange Bank  2010    2013   KRW100,000     4.18 3M CD + 0.58 Nonghyup Bank  2010    2015    KRW 100,000    4.90  3M CD + 1.05
  

Nonghyup Bank

  2010    2015   KRW 100,000     4.90 3M CD + 1.05 

Nonghyup Bank

  2010    2015    KRW 100,000    4.83  3M CD + 0.90
  

Nonghyup Bank

  2010    2015   KRW100,000     4.83 3M CD + 0.90 

Nonghyup Bank

  2010    2015    KRW 50,000    4.77  3M CD + 0.90
  

Nonghyup Bank

  2010    2015   KRW50,000     4.77 3M CD + 0.90 

Korea Development Bank

  2012    2016    KRW 200,000    3.57  3M CD + 0.26
  

Korea Exchange Bank

  2011    2014   KRW100,000     4.08 3M CD + 0.03 

Nonghyup Bank

  2012    2016    KRW 100,000    3.49  3M CD + 0.25
  

Korea Exchange Bank

  2011    2012   KRW100,000     3.93 3M CD + 0.04 

Korea Development Bank

  2012    2016    KRW 50,000    3.49  3M CD + 0.25
  

Korea Exchange Bank

  2011    2014   KRW100,000     3.89 3M CD + 0.05 

HSBC

  2012    2016    KRW 50,000    3.49  3M CD + 0.25
  

Korea Exchange Bank

  2011    2013   KRW100,000     3.89 3M CD + 0.07 

Standard Chartered

  2012    2016    KRW 200,000    3.55  3M CD + 0.26
  

Shinhan Bank

  2011    2014   KRW100,000     3.63 3M CD + 0.18 

Standard Chartered

  2012    2017    KRW 160,000    3.57  3M CD + 0.32
  

Korea Exchange Bank

  2011    2013   KRW100,000     3.85 3M CD + 0.43 

JP Morgan

  2013    2018    KRW 150,000    3.58  3M CD + 0.31
  

Woori Bank

  2011    2013   KRW150,000     3.92 3M CD + 0.43 

Korea Exchange Bank

  2011    2014    KRW 100,000    4.08  3M CD + 0.03
  

Kookmin Bank

  2011    2013   KRW100,000     3.84 3M CD + 0.44 

Korea Exchange Bank

  2011    2014    KRW 100,000    3.89  3M CD + 0.05
  

Hana Bank

  2011    2013   KRW50,000     3.67 3M CD + 0.25 

Shinhan Bank

  2011    2014    KRW 100,000    3.63  3M CD + 0.18
  

Korea Exchange Bank

  2011    2014   KRW200,000     3.66 3M CD + 0.24 

Korea Exchange Bank

  2011    2014    KRW 200,000    3.66  3M CD + 0.24
  

Korea Exchange Bank

  2011    2013   KRW100,000     3.53 3M CD + 0.14 

Korea Exchange Bank

  2012    2015    KRW 100,000    3.58  3M CD + 0.15
  

Korea Exchange Bank

  2011    2013   KRW100,000     3.56 3M CD + 0.19 

Korea Exchange Bank

  2012    2015    KRW 200,000    3.65  3M CD + 0.10
  

Shinhan Bank

  2011    2012   KRW100,000     3.60 3M CD + 0.08 

Korea Exchange Bank

  2012    2015    KRW 100,000    2.86  3M CD + 0.05
  

Korea Exchange Bank

  2009    2012   KRW100,000     4.88 3M CD + 0.54 

Korea Exchange Bank

  2013    2016    KRW 100,000    2.82  3M CD + 0.04
  

RBS

  2009    2012   KRW100,000     4.79 3M CD + 0.55 

Korea Exchange Bank

  2013    2016    KRW 200,000    2.57  3M CD + 0.04
  

Korea Exchange Bank

  2010    2013   KRW100,000     4.11 3M CD + 0.25 

Korea Exchange Bank

  2013    2016    KRW 100,000    2.75  3M CD + 0.03

Cash flow hedge

  BNP Paribas  2009    2027   JOD119,335     4.16 6M USD Libor   

BNP Paribas

  2009    2027    USD 108,633    4.16  6M USD Libor  
  

KFW

  2009    2027   JOD119,335     4.16 6M USDLibor   

KFW

  2009    2027    USD 108,633    4.16  6M USD Libor  
  

Credit Agricole

  2011    2012   MXN33,750     1.33 6M USDLibor   

Credit Agricole

  2012    2033    USD 106,684    

 

3.98

4.10

% ~

  6M USD Libor  
  

SMBC

  2011    2012   MXN41,250     1.33 6M USDLibor   

SMBC

  2012    2033    USD 139,510    

 

4.05

4.18

% ~ 

  6M USD Libor  
  

Credit Agricole

  2011    2012   MXN4,990     3.98 6M USDLibor  
  

SMBC

  2011    2012   MXN4,990     4.06 6M USDLibor  
  

Credit Agricole

  2011    2012   MXN6,604     4.10 6M USDLibor  
  

SMBC

  2011    2012   MXN6,604     4.18 6M USDLibor  
  

Credit Agricole

  2011    2012   MXN13,355     4.10 6M USDLibor  
  

SMBC

  2011    2012   MXN13,355     4.05 6M USDLibor  

Under these interest rate swap contracts, we recognized a valuation gain of Won 23,42613,112 million in 2011,2013, net.

We engage in transactions denominated in foreign currencies and consequently, we become exposed to fluctuations in exchange rates. The carrying amounts of our foreign currency-denominated monetary assets and monetary liabilities as of December 31, 2012 and 2013 were as follows:

   Assets   Liabilities 

Type

  2012   2013   2012   2013 
   (In thousands of USD, EUR, GBP and other
foreign currencies)
 

AUD

   1,188     1,460    152,692    321,444 

CAD

   2,314     4    4    611 

CNY

   1     1    —      —   

EUR

   9,091     27,946    18,792    33,398 

IDR

   711,304     546,902    1,726    2,973 

MXN

   703     5,064    —      426 

PHP

   1,043,932     248,623    31,675    22,954 

SAR

   1,309     1,565    —      —   

USD

   292,256     627,504    9,866,661    11,207,483 

INR

   417,544     362,996    52,755    500,933 

PKR

   63,445     116,847    277    650 

MGA

   240,233     2,124,218    92,979    101,503 

JPY

   520     176,921    20,006,730    22,521,580 

KZT

   720,121     164,790    —      16,517 

GBP

   6     —      253    4 

CHF

   —       143,120    223    400,012 

AED

   220     288    1,829    809 

SEK

   —       —      1,105    —   

JOD

   —       132     —       1  

BDT

   —       34,753     —       2,977  

CLP

   —       93     —       —    

The following analysis sets forth the sensitivity of our consolidated net income before income taxes (our “pre-tax income”) to changes in exchange rates, interest rates, electricity rates and fuel costs. For purposes of this section, we and the generation subsidiariesour related parties will be deemed one entity. The range of changes in such risk categories represents our view of the changes that are reasonably possible over a one-year period, although it is difficult to predict such changes as a result of adverse economic developments in Korea. See Item 3D. “Risk Factors—Risks Relating to Korea and the Global Economy—Unfavorable financial and economic conditions in Korea and globally may have a material adverse impact on us.” The following discussion only addresses material market risks faced by us and does not discuss other risks which we face in the normal course of business, including country risk, credit risk and legal risk. Unless otherwise specified, all calculations are made under IFRS.

The following modeling assumptions were made in the following sensitivity analysis for 2012:

(1)For any one year period, the Won/U.S. dollar exchange rate at the beginning of such period was assumed to be Won 1,153.3 to US$1.00, which was the Seoul Money Brokerage Service rate as of December 31, 2011;

(2)The amount of foreign currency debt to be incurred by us in 2012 was assumed to be US$3,652 million (or the equivalent amount thereof in other foreign currency) for each year; and

(3)For any one-year period, we used prices of fuel materials in our budget for 2012 as the beginning fuel prices.

If Won depreciates against U.S. dollar and all other foreign currencies held by us by 10% and all other variables are held constant from their levels as of December 31, 2011,2013, we estimate that our unrealized foreign exchange translation losses will increase by Won 1,1081,200 billion in 2012. Under IFRS, such translation losses2014. Such sensitivity analysis is conducted for monetary assets and liabilities denominated in foreign currencies other than functional currency as of December 31, 2013 and 2012, before accounting for swap transactions. To manage our foreign currency risk related to foreign currency-denominated receivables and payables, we have a policy of entering into currency forward agreements. In addition, to manage our foreign currency risk related to foreign currency-denominated expected sales transactions and purchase transactions, we enter into cross-currency swap agreements.

We are exposed to be credited or chargedinterest rate risk due to current operations. However, foreign exchange translation losses during the construction period on debt incurred for the construction of utility plants are permitted to be capitalized under IFRS. See Note 44 of the notes to our consolidated financial statements.

its borrowing with floating interest rates. If the interest rates increase by 1% on all of our borrowings and debentures bearing variable interest and all other variables are held constant from their levels

as of December 31, 2011,2013, we estimate that our income before income taxes will decrease by Won 7173.5 billion in 2012 (not reflecting the fact that a portion of such interest may be capitalized under IFRS). in 2014. Such sensitivity analysis does not take into consideration interest rate swap transactions. To manage our interest rate risks, we, in addition to maintaining an appropriate mix of fixed and floating rate loans, have entered into certain interest rate swap agreements.

IfWe are exposed to electricity rates risk due to the fuel pricesrate regulation by the Government, which considers the effect of anthracite and bituminous coal, oil, LNG and others rise by 1% and all other variables are held constant at their levels as of December 31, 2011, we estimate that our income before income taxes will decrease by Won 212 billion in 2012.

electricity rate changes on the national economy. If the electricity rate rises by 1% and all other variables are held constant at their levels as of December 31, 2011,2013, we estimate that our net income before income taxes will increase by 310Won 511.1 billion in 2012.2014.

We are exposed to fuel price risks due to the heavy influence of fuel costs on our sales and cost of sales. If the fuel prices of anthracite and bituminous coal, oil, LNG and others used for generation by us and our generation subsidiaries rise by 1% and all other variables are held constant as of December 31, 2013, we estimate that our income before income taxes will decrease by Won 242 billion in 2014.

The above discussion and the estimated amounts generated from the sensitivity analysesanalyzes referred to above include “forward-looking statements,” which assume for analytical purposes that certain market conditions may occur. Accordingly, such forward-looking statements should not be considered projections by us of future events or losses.

See Note 44 of the notes to our consolidated financial statements included in this annual report for further related information.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Item 12A. Debt Securities

Not applicable.

Item 12B. Warrants and Rights

Not applicable.

Item 12C. Other Securities

Not applicable.

Item 12D. American Depositary Shares

Under the terms of the Deposit Agreement in respect of our ADSs, the holder and beneficiary owners of ADSs, any party depositing or withdrawing or surrendering ADSs or ADRs, whichever applicable, may be required to pay the following fees and charges to JPMorgan Chase Bank acting as depositary for our ADSs:

 

Item

  

Services

  

Fees

1

  Taxes and other governmental charges  As applicable

2

  Registration of transfer of common shares generally on our shareholders’ register, any institution authorized under the applicable law to effect book-entry transfers of securities (including Korea Securities Depositary), or any entity that presently carries out the duties of registrar for the common shares, and applicable to transfers of common shares to the name of the Depositary or its nominee on the making of deposits or withdrawals  A fee of $1.50 or less per ADS

3

  Cable, telex and facsimile transmission expenses  As applicable

4

  Expenses incurred by the Depositary in the conversion of foreign currency  As applicable

5

  Execution and delivery of ADRs and the surrender of ADRs  Fee of $0.05 or less per ADS

6

  Cash distribution made by the Depositary or its agent  Fee of $0.02 or less per ADS

7

  Fee for the distribution of proceeds of sales of securities or rights for distribution other than cash, common shares or rights to subscribe for shares, distribution in shares or distribution in rights to subscribe for shares  Lesser of (i) the fee for the execution and delivery of ADRs referred to above which would have been charged as a result of the deposit by the holders of securities or common shares received in exercise of rights distributed to them, but which securities or rights are instead sold by the Depositary and the net proceeds distributed and (ii) the amount of such proceeds

8

  Depositary services performed in administering the ADRs (which fee shall be assessed against holders of ADSs as of the record date or dates and shall be payable at the sole discretion of the Depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions)  Fee of US$0.02 or less per ADS per calendar year

Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary by the brokers (on behalf of their clients) receiving the newly-issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs to the depositary for cancellation. The brokers in turn charge these transaction fees to their clients.

Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary to the holders of record of ADSs as of the applicable ADS record date. The depositary fees payable for cash distributions are generally deducted from the cash being

distributed. In the case of distributions other than cash (i.e., stock dividends, rights offerings), the depositary charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or un-certificated in direct registration), the depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts via the central clearing and settlement system, Thethe Depository Trust Company (“DTC”), the depositary generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the depositary.

In the event of refusal to pay the depositary fees, the depositary may, under the terms of the Deposit Agreement, refuse the requested service until payment is received or may set-off the amount of the depositary fees from any distribution to be made to the ADS holder.

The fees and charges the ADS holders may be required to pay may vary over time and may be changed by us and by the depositary. The ADS holders will receive prior notice of such changes.

Depositary Payments for the Fiscal Year 20112013

The following table sets forth our expenses incurred in 2011,2013, which were reimbursed by JPMorgan Chase Bank, N.A., acting as depositary for our ADSs:

 

   (In thousands of
U.S. dollars)
 

Reimbursement of listing fees on the New York Stock Exchange

  US$11891  

Reimbursement of legal fees

   239491  

Reimbursement of accounting fees

   205178  

Contributions towards our investor relations and other financing efforts (including investor conferences, non-deal roadshows and market information services)

   9421,548  

Other

   22123  
  

 

 

 

Total

  US$1,526 2,431  
  

 

 

 

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Control

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2011.2013. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives. Based upon our evaluation, our chief executive officer and chief financial officer concluded that the design and operation of our disclosure controls and procedures as of December 31, 20112013 were effective to provide reasonable assurance that information required to be disclosed by us in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decision regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for our company. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we have evaluated the effectiveness of our internal control over financial reporting as of December 31, 20112013 based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.Commission (1992). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with generally accepted accounting principles and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a company’s assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of a company’s management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to consolidated financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules as promulgated by the Securities and Exchange Commission, management assessed the effectiveness of our internal control over financial reporting as of December 31, 20112013 using criteria established in Internal Control-Integrated Framework

issued by the Committee of Sponsoring Organizations of the Treadway Commission.Commission (1992). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 20112013 based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The effectiveness of internal control over financial reporting has been audited by Deloitte Anjin LLC, an independent registered public accounting firm, who has also audited our consolidated financial statements for the year ended December 31, 2011.Commission (1992).

AttestationAudit Report of the Independent Registered Public Accounting Firm

Deloitte Anjin LLCKPMG Samjong Accounting Corp. has issued an attestationaudit report on the effectiveness of our internal control over financial reporting, under Auditing Standard No. 5 of the Public Company Accounting Oversight Board, which is included elsewhere in this annual report.

Changes in Internal Controls

There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 20112013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We operate an integrated ERP system for a transparent and efficient management of the core ERP components, including personnel, accounting, procurement, construction and facilities maintenance. In addition, we also operate a strategic enterprise management system that includes business warehouse, management information and business planning and simulation systems. We continue to upgrade and improve the ERP system, which is being used as our core information infrastructure.

ITEM  16.[RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that we have at least one “audit committee financial expert” as such term is defined by the regulations of the Securities and Exchange Commission issued pursuant to Section 407 of the Sarbanes-Oxley Act of 2002. Our audit committee financial expert is Nam, Dong-Kyoon.Cho, Jeon-Hyeok. Such member currently remains a member of the audit committee and is independent within the meaning of the Korea Stock Exchange listing standards, the regulations promulgated under the Enforcement Decree of the Korean Commercial Code and the New York Stock Exchange listing standards. For biographic information of our audit committee financial expert, Nam, Dong-Kyoon,Cho, Jeon-Hyeok, see Item  6A. “Directors and Senior Management.”

ITEM 16B. CODE OF ETHICS

ITEM 16B.CODE OF ETHICS

We have adopted a code of ethics for our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions as required under Section 406 of the Sarbanes-Oxley Act of 2002, together with an insider reporting system in compliance with Section 301 of the Sarbanes-Oxley Act. The code of ethics is available on our website www.kepco.co.kr. We have not granted any waiver, including an implicit waiver, from a provision of the code of ethics to any of the above-mentioned officers during our most recently completed fiscal year.

ITEM 16C. PRINCIPAL AUDITOR FEES AND SERVICES

ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the aggregate fees billed for each of the years ended December 31, 20102012 and 20112013 for professional services rendered by our principal accountantsauditors for such year, for various types of services and a brief description of the nature of such services. Deloitte Anjin LLC, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, was our principal accountant for the years ended December 31, 2010 and 2011, and we currently expect them to serve as our principal accountantauditor for the year ended December 31, 2012. KPMG Samjong

Accounting Corp., a Korean independent registered public accounting firm, was our principal auditor for the year ended December 31, 2013 and we currently expect KPMG Samjong Accounting Corp. to serve as our principal auditor for the year ended December 31, 2014.

 

 Aggregate fees billed during the
Year Ended December 31,
     Aggregate Fees Billed During    

Type of services

 2010
(Deloitte Anjin)
   2011
(Deloitte Anjin)
   

Nature of services

Type of Services

 2012   2013   

Nature of Services

 (In millions of Won)     (In millions of Won)    

Audit Fees

 (Won)3,439    (Won)3,100    Audit service for KEPCO and its subsidiaries. 3,109    2,979    Audit service for KEPCO and its subsidiaries.

Audit-Related Fees

  100     87    Accounting advisory service.  355     94    Accounting advisory service.

Tax Fees

  4     5    Tax return and consulting advisory service.  —       35    Tax return and consulting advisory service.

All Other Fees

  —       —      All other services which do not meet the three categories above.  —       496    All other services which do not meet the three categories above.
 

 

   

 

    

 

   

 

   

Total

 (Won)3,543    (Won)3,192     3,464    3,604    
 

 

   

 

    

 

   

 

   

United States law and regulations in effect since May 6, 2003 generally require all engagementsservice of the principal accountantsauditors be pre-approved by an independent audit committee or, if no such committee exists with respect to an issuer, by the entire board of directors. We have adopted the following policies and procedures for consideration and approval of requests to engage our principal accountantsauditors to perform audit and non-audit services. Engagement requests of audit and non-audit services for us and our subsidiaries must in the first instance be submitted to our Treasury Department subject to reporting to our Chief Financial Officer. If the request relates to services that would impair the independence of our principal accountants,auditors, the request must be rejected. If the engagementservice request relates to audit and permitted non-audit services for us and our subsidiaries, it must be forwarded to our audit committee.committee and receive pre-approval.

In addition, United States law and regulations permit the pre-approval requirement to be waived with respect to engagements for non-audit services aggregating no more than five percent of the total amount of revenues we paid to our principal accountants,auditors, if such engagements were not recognized by us at the time of engagement and were promptly brought to the attention of our audit committee or a designated member thereof and approved prior to the completion of the audit.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Neither we nor any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Exchange Act, purchased any of our equity securities during the period covered by this annual report.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTS

Not applicable.Due to the expiration of the term of the appointment of Deloitte Anjin LLC as the independent registered public accounting firm for us and our certain other subsidiaries, including KHNP, as of the fiscal year ended December 31, 2012, we appointed KPMG Samjong Accounting Corp. as the independent registered public accounting firm for us and KHNP for the years ended December 31, 2013, 2014 and 2015, effective from January 1, 2013. The decision to make such appointment was approved at our audit committee meeting on March 27, 2013.

The foregoing decision to change the independent registered public accounting firm was made pursuant to the rules of the Board of Audit and Inspection, a Government agency, relating to audits of public enterprises, under which a public accounting firm may not audit a public enterprise (including us and KHNP) for a term exceeding six consecutive years. The fiscal year 2012 marked the sixth year of audit by Deloitte Anjin LLC of us and KHNP.

The consolidated financial statements as of and for the years ended December 31, 2011 and 2012, before the effects of the retrospective adjustments to apply the changes in accounting described in Note 2 thereto and the retrospective adjustments to the disclosures for a change in the composition of segments discussed in Note 4 thereto, were audited by Deloitte Anjin LLC. Deloitte Anjin LLC’s engagement as our independent registered public accounting firm was terminated after the completion of the audit of our consolidated financial statements as of and for the year ended December 31, 2012. The audit report of Deloitte Anjin LLC on our consolidated financial statements as of and for the years ended December 31, 2011 and 2012, before the effects of the adjustments discussed in Note 2 and Note 4 thereto, prepared in accordance with IFRS did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. Furthermore, in connection with the audit of our consolidated financial statements as of and for the years ended December 31, 2011 and 2012, before the effects of the adjustments discussed in Note 2 and Note 4 thereto, there were no disagreements (as described in Item 16F(a)(1)(iv) of Form 20-F) with Deloitte Anjin LLC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Deloitte Anjin LLC, would have caused Deloitte Anjin LLC to make reference to the subject matter of the disagreement in connection with their reports. In addition, we confirm that between January 1, 2011 and the date of the termination of Deloitte Anjin’s engagement as our independent registered public accounting firm, there were no “reportable events” requiring disclosure pursuant to Item 16F(a)(1)(v) of Form 20-F. The foregoing also applies in the same way to KHNP’s consolidated financial statements as of and for the years ended December 31, 2011 and 2012, before the effects of the adjustments discussed in Note 2 thereto, and the audit report of Deloitte Anjin LLC thereon; and KHNP also did not have any disagreements with Deloitte Anjin LLC as to the matters mentioned above and there were similarly no reportable events as applies to KHNP.

Between January 1, 2011 and the date of appointment of KPMG Samjong Accounting Corp. as our independent registered public accounting firm, neither we nor anyone on our behalf consulted with KPMG Samjong Accounting Corp. with respect to either (1) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements, and neither a written report nor oral advice was provided to us that KPMG Samjong Accounting Corp. concluded was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue or (2) any matter that was either the subject of a disagreement, as defined in Item 16F(a)(1)(iv) of Form 20-F and the related instructions to Item 16F, or a reportable event, as described in Item 16F(a)(1)(v) of Form 20-F. Similarly, neither KHNP nor anyone on its behalf consulted with KPMG Samjong Accounting Corp. with respect to the matters mentioned above.

We provided a copy of this disclosure to Deloitte Anjin LLC and requested that Deloitte Anjin LLC furnish us with a letter addressed to the SEC stating whether or not it agrees with the statements made above. A copy of Deloitte Anjin LLC’s letter addressed to the SEC dated April 30, 2013 is attached to this annual report as Exhibit 15.5.

ITEM 16G. CORPORATE GOVERNANCE

We are committed to high standards of corporate governance. We are in compliance with the corporate governance provisions of the KEPCO Act, the Public Agencies Management Act, the Korean Commercial Code, the Financial Investment Services and Capital Markets Act of Korea and the Listing Rules of the Korea Exchange. We, like all other companies in Korea, must comply with the corporate governance provisions under the Korean Commercial Code, except to the extent the KEPCO Act and the Public Agencies Management Act otherwise require. In addition, as a listed company, we are subject to the Financial Investment Services and Capital Markets Act of Korea, unless the Financial Investment Services and Capital Markets Act of Korea otherwise provides.

The Public Agencies Management Act

On April 1, 2007, the Government-InvestedGovernment-invested Enterprise Management Basic Act, which was enacted in 1984, was abolished and the Public Agencies Management Act took effect. Unless stated otherwise, the Public Agencies

Management Act takes precedence over any other laws and regulations in the event of inconsistency. Under this Act, the Ministerminister of the Ministry of Strategy and Finance designated us as a “market-oriented public enterprise,” as defined under this Act, on April 2, 2007, and we became subject to this Act accordingly.

The Public Agencies Management Act requires a number of changes in the appointment process for our executive officers, which we have incorporated in our amendment to our Articles of Incorporation in September 2007. A senior non-standing director appointed by the Ministerminister of the Ministry of Strategy and Finance becomes our chairman of the board following the review and resolution of the Public Agencies Operating Committee. Our president is appointed by the President of the Republic upon the motion of the Ministry of Knowledge EconomyTrade, Industry and Energy following the nomination by our director nomination committee, the review and resolution of the Public Agencies Operating Committee pursuant to the Public Agencies Management Act and an approval at the general meeting of our shareholders. Standing directors other than our president must be appointed by our president with the approval at the general meeting of our shareholders from a pool of candidates recommended by our director nomination committee. Prior to the enactment of the Act, standing directors were appointed directly by the Ministerminister of the Ministry of Knowledge Economy.Trade, Industry and Energy. The non-standing directors must be appointed by the Ministerminister of the Ministry of Strategy and Finance following the review and resolution of the Public Agencies Operating Committee from a pool of candidates recommended by the director nomination committee and must have ample knowledge and experience in business management. Government officials that are not part of the teaching staff in national and public schools are ineligible to become our non-standing directors.

Under the Public Agencies Management Act and our Articles of Incorporation, the term of office for directors that are appointed after the effective date of such act, or April 1, 2007, is three years for the president and two years for other directors. The directors may be reappointed for an additional term of one year. In order to be reappointed, the president must be evaluated on the basis of his management performance; a standing director, on the basis of the performance of the duties for which he was elected to perform, or if the standing director has executed an incentive bonus contract, on the basis of his performance under the contract; and a non-standing director, on the basis of his performance of the duties for which he was elected to perform.

Under the Public Agencies Management Act and our Articles of Incorporation, a recommendation from the director nomination committee is required for the appointment of our executive officers, except in the case of reappointments. The director nomination committee consists of five to fifteen members, including private-sector members appointed by the board of directors. Non-standing directors must comprise at least the majority of the director nomination committee. One of the private-sector members must be able to represent our opinion and must not be currently employed by us. As required under the Public Agencies Management Act, we established an audit committee. At least two-thirds of the audit committee members must be non-standing directors, and at least one committee member must be an expert in finance or accounting. According to the Public Agencies Management Act, our president’s term cannot be terminated unless done so by the President of the Republic pursuant to the Public Agencies Management Act or upon an event as specified in our Articles of Incorporation.

As required under Public Agencies Management Act, we submit to the Government by October 31 every year a report on our medium- to long-term management goals. Under the Public Agencies Management Act, we are also required to give separate public notice of important management matters, such as our budget and financial statements, status of directors and annual reports. In addition, for purposes of providing a comparison of the management performances of government agencies, we are required to post on a designated website a notice on a standard form detailing our management performance. Following consultation with the Ministerminister of the Ministry of Knowledge EconomyTrade, Industry and Energy and the review and resolution of the operating committee, the MinisterMinistry of Strategy and Finance must examine the adequacy and competency of government agencies and establish plans on merger, abolishment, restructuring and privatization of public agencies. In such case, the Ministerminister of the Ministry of Knowledge EconomyTrade, Industry and Energy must execute these plans and submit a performance report to the MinisterMinistry of Strategy and Finance.

The Korea Electric Power Corporation Act and other laws that had conflicted with the Public Agencies Management Act were amended on May 17, 2010. We amended our Articles of Incorporation to reflect the relevant provisions of the Public Agencies Management Act at a general meeting of our shareholders resolution on September 7, 2007. We also revised our internal regulations as necessary to comply with the Public Agencies Management Act.

On January 24, 2011, the Ministry of Knowledge EconomyTrade, Industry and Energy changed the designation of our generation subsidiaries from “other public institutions” to “market-oriented public enterprise”.enterprises.” As “other public institutions” under the provisions of the Public Agencies Management Act, our generation subsidiaries were not

subject to the same regulations applicable to us with regards to corporate governance matters such as the appointment and dismissal of directors and the composition of the boards of directors. However, as market-oriented public enterprises, our generation subsidiaries are currently subject to the same corporate governance rules applicable to us. All of our generation subsidiaries accordingly amended their respective articles of incorporation in 2011 and are currently generally subject to the same system of regulations applicable to us.

Differences in Korean/New York Stock Exchange Corporate Governance Practices

We are a “foreign private issuer” (as such term is defined in Rule 3b-4 under the Exchange Act), and our ADSs are listed on the New York Stock Exchange, or NYSE. Under Section 303A of the NYSE Listed Company Manual, NYSE-listed companies that are foreign private issuers are permitted to follow home country practice in lieu of the corporate governance provisions specified by the NYSE with limited exceptions. Under the NYSE Listed Company Manual, we as a foreign private issuersissuer are required to disclose significant differences between NYSE”sNYSE’s corporate governance standards and those we follow under Korean law. The following summarizes some significant ways in which our corporate governance practices differ from those followed by U.S. companies listed on the NYSE under the listing rules of the NYSE:

Majority of Independent Directors on the Board

Under the NYSE listing rules, U.S. companies listed on the NYSE must have a board the majority of which is comprised of independent directors satisfying the requirements of “independence” as set forth in Rule 10A-3 under the Exchange Act. No director qualifies as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with us). The NYSE rules include detailed tests for determining director independence. While as a foreign private issuer, we are exempt from this requirement, our board of directors is in compliance with this requirement as it currently consists of 15 directors, of which eight directors satisfy the requirements of “independence” as set forth in Rule 10A-3 under the Exchange Act. U.S. companies listed on the NYSE are required to adopt and disclose corporate governance guidelines. Under the Public Agencies Management Act, more than one-half of our directors must be non-standing directors. The Financial Investment Services and Capital Markets Act of Korea deems a non-standing director nominated pursuant to other applicable laws (such as the Public Agencies Management Act) as an “outside” or “non-executive” director. Under the Public Agencies Management Act, a non-standing director is appointed by the

Ministry of Strategy and Finance following the review and resolution of the Public Agencies Operating Committee from a pool of candidates recommended by the director nomination committee and must have ample knowledge and experience in business management. Government officials that are not part of the teaching staff in national and public schools are ineligible to become our non-standing directors.

Executive Session

Under the NYSE listing rules, non-management directors of U.S. companies listed on the NYSE are required to meet on a regular basis without management present and independent directors must meet separately at least once per year. While no such requirement currently exists under applicable Korean law, listing standards or our Articles of Incorporation, exclusive sessions were held quarterly in 20112013 in order to promote the exchange of diverse opinions by non-standing directors.

Audit Committee

Under the NYSE listing rules, listed companies must have an audit committee that has a minimum of three members, and all audit committee members must satisfy the requirements of independence set forth in Section 303A.02 of the NYSE Listed Company Manual and Rule 10A-3 under the Exchange Act. We are in compliance with this requirement as our audit committee is comprised of three outside directors meeting the requirements of independence set forth in Section 303A.02 of the NYSE Listed Company Manual and

Rule 10A-3 under the Exchange Act. The audit committee must be directly responsible for the appointment, compensation, retention and oversight of the work of the independent registered public accountants. Consistent with the application of the legal requirements then in effect, in June 2005, we amended our Articles of Incorporation, among others, to comply with the general exemptions provided under the audit committee requirements of the Sarbanes-Oxley Act, embodied in Rule 10A-3 of the Exchange Act and established aOur board of auditors consisting of one standing auditor and two non-standing auditors. Beginning in the second half of 2005, our board of auditors performedperforms the roles and responsibilities required of an audit committee under the Sarbanes-Oxley Act, including the supervision of the audit by the independent registered public accountants. Under the Korea Exchange listing rules and the Korean Commercial Code, a large listed company must also establish an audit committee of which at least two-thirds of its members must be outside directors and whose chairman must be an outside director. In addition, at least one member of the audit committee who is an outside director must also be an accounting or financial expert. Currently, our audit committee consists of three independent directors, and our audit committee is in compliance with the foregoing requirements under the NYSE listing rules, the Sarbanes-Oxley Act, the Korea Exchange listing rules and the Korean Commercial Code.

Nomination/Corporate Governance Committee

Under the NYSE listing rules, U.S. companies listed on the NYSE must have a nomination/corporate governance committee composed entirely of independent directors. In addition to identifying individuals qualified to become board members, this committee must develop and recommend to the board a set of corporate governance principles. Under the Public Agencies Management Act, we are required to have a director nomination committee which consists of non-standing directors and ad hoc members appointed by our Board of Directors. Our standing directors and executives as well as governmental officials that are not part of the teaching staff in national and public schools are ineligible to become a member of our director nomination committee. There is no requirement to establish a corporate governance committee under applicable Korean law.

Pursuant to the NYSE listing standards, non-management directors must meet on a regular basis without management present and independent directors must meet separately at least once per year. No such requirement currently exists under applicable Korean law.

Compensation Committee

Under the NYSE listing rules, U.S. companies listed on the NYSE are required to have a compensation committee which is composed entirely of independent directors.

On March 30, 2011, In January 2013, the SEC proposedapproved amendments to the listing rules to implement Section 952 of the Dodd-Frank ActNYSE and NASDAQ regarding the independence of compensation committeescommittee members and the appointment, payment and oversight of compensation consultants. UnderThe listing rules were adopted as required by Section 952 of the proposed rules,Dodd-Frank Act and rule 10C-1 of the SEC provides baseline expectationsSecurities Exchange Act of listing standards for1934, as amended, which direct the national securities exchanges to prohibit the listing of any equity security of a company that is not in compliance with the rule’s compensation committee director and advisor independence requirements. Certain elements of the listing rules became effective on July 1, 2013 and companies listed on the NYSE must comply with such as NYSE and NASDAQ, to implement, and continues to leave tolisting rules by the earlier of the company’s board of directors the ultimate determination as to the independence of compensation committee members. The proposed rules require the exchanges to propose listing standards to determine how the following factors, which are essential factors originally cited by the Dodd-Frank Act, along with other factors that the exchanges add, should be considered in evaluation the independence of compensation committee members:

the source of compensation of a member of the board of directors, including any consulting, advisoryfirst annual meeting after January 15 or other compensatory fees paid by the listed company; and

whether a member of the board of directors has an affiliate relationship with the listed company, a subsidiary of the listed company or an affiliate of a subsidiary of the listed company.

Under the proposed rules, the SEC emphasizes that the foregoing factors are not bright-line prohibitions, and that the exchanges have discretion in establishing their own independence criteria and determining how such factors should be considered.

The SEC’s proposed rules also provide that compensation committees may retain compensation consultants and other advisers after taking into account the independence of the advisers. Compensation committees are not precluded from retaining the company’s advisers. Compensation committees will, however, be directly responsible for the selection, compensation and oversight of the advisers they choose to engage. Listed companies must provide funding for the retention of these advisers. The proposed rules provide five factors that compensation committees must use in evaluating independence, along with any additional factors that the exchanges may require:

the provision of other services to the listed company by the entity that employs the compensation committee adviser;

the amount of fees received from the listed company by the entity that employs the compensation committee adviser, as a percentage of the total revenue of the entity that employs the compensation committee adviser;

the policies and procedures of the entity that employs the compensation committee adviser that are designed to prevent conflicts of interest;

any business or personal relationship of the compensation committee adviser with a member of the compensation committee; and

any stock of the listed company owned by the compensation committee adviser.

The SEC’s proposed rules also include disclosure requirements relating to the use of compensation consultants, which are not subject to the exchange rulemaking process discussed above. The proposed rules require disclosure of:

whether the compensation committee has obtained or retained the advice of a compensation consultant;

whether the use of a compensation consultant raised any conflict of interest; and

if there is a conflict of interest, the nature of the conflict and how the registrant is addressing the conflict.

The SEC proposes to modify the existing disclosure requirement under Item 407(e) of SEC Regulation S-K so that disclosure in the company’s annual proxy statement would be required whenever an issuer’s compensation committee “retained or obtained” the advice of a compensation consultant, regardless of whether a formal engagement or client relationship exists between the consultant and the committee or management, and

irrespective of any fees being paid. The types of “conflicts of interest” that would trigger disclosure are not defined under the SEC’s proposed rules. Instead, companies must look to the facts and circumstances of the engagement to determine whether a conflict exists, including considering the five independence factors discussed above plus any other factors mandated by the exchanges.

Foreign private issuers that disclose in their annual reports the reasons why they do not have an independent compensation committee are exempt from the compensation committee independence requirements. Although foreign private issuers are not specifically exempted from the application of the proposed compensation consultant rules, the proposed rule provides for U.S. national securities exchanges to have authority to exempt any category of issuers consistent with the compensation committee independence rules. The disclosure requirements under the proposed rules relating to compensation consultants are not expected to be applicable to foreign private issuers that are exempt from preparing and filing proxy statements, which is where the new disclosure is expected to be included.

The U.S. national securities exchanges must issue final listing standards implementing the foregoing within one year after the SEC’s proposed rules are finalized and published in the Federal Register. The SEC’s proposed rules are not yet final.October 31, 2014.

No such requirement currently exists under applicable Korean law or listing standards, and we currently do not have a compensation committee.

Corporate Governance Guidelines and Code of Business Conduct and Ethics

Under the NYSE listing rules, U.S. companies listed on the NYSE are required to establish corporate governance guidelines and to adopt a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. As a foreign private issuer, we are exempt from this requirement. Pursuant to the requirements of the Sarbanes-Oxley Act, we have adopted a code of ethics applicable to our President & Chief Executive Officer and all other directors and executive officers including the Chief Financial Officer and the Chief Accounting Officer, as well as all financial, accounting and other officers that are involved in the preparation and disclosure of our consolidated financial statements and internal control of financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We have also adopted

an insider reporting system in compliance with Section 301 of the Sarbanes-Oxley Act. The code of ethics applicable to our executive officers as well as the financial officers of the holding company and its subsidiaries are available on www.kepco.co.kr.

Shareholder Approval of Equity Compensation Plans

Under the NYSE listing rules, shareholders of U.S. companies listed on the NYSE are required to approve all equity compensation plans. Under Korean law and regulations, stock options can be granted to employees to the extent expressly permitted by the articles of incorporation. We currently don’t have any equity compensation plans.

Annual Certification of Compliance

Under the NYSE listing rules, a chief executive officer of a U.S. company listed on the NYSE must annually certify that he or she is not aware of any violation by the company of NYSE corporate governance standards. As a foreign private issuer, we are not subject to this requirement. However, in accordance with rules applicable to both U.S. companies and foreign private issuers, we are required to promptly notify the NYSE in writing if any executive officer becomes aware of any material noncompliance with the NYSE corporate governance standards applicable to us. In addition, foreign private issuers, including us, are required to submit to the NYSE an annual written affirmation relating to compliance with Sections 303A.06 and 303A.11 of the NYSE listed company manual, which are the NYSE corporate governance standards applicable to foreign private

issuers. All written affirmations must be executed in the form provided by the NYSE, without modification. An annual written affirmation is required to be submitted to the NYSE within 30 days of filing with the SEC our annual report on Form 20-F. We have been in compliance with this requirement in all material respects and plan to submit such affirmation within the prescribed time line.

Whistle Blower Protection

On May 25, 2011, the SEC adopted final rules to implement whistleblower provisions of the Dodd-Frank Act, which are applicable to foreign private issuers with securities registered under the U.S. securities laws. The final rules provide that any eligible whistleblower who voluntarily provides the SEC with original information that leads to the successful enforcement of an action brought by the SEC under U.S. securities laws must receive an award of between 10 and 30 percent of the total monetary sanctions collected if the sanctions exceed $1,000,000. An eligible whistleblower is defined as someone who provides information about a possible violation of the securities laws that he or she reasonably believes has occurred, is ongoing, or is about to occur. The possible violation does not need to be material, probably or even likely, but the information must have a “facially plausible relationship to some securities law violation”; frivolous submissions would not qualify. The final rules also prohibit retaliation against the whistleblower. While the final rules do not require employees to first report allegations of wrongdoing through a company’s corporate compliance system, they do seek to incentivize whistleblowers to utilize internal corporate compliance first by, among other things, (i) giving employees who first report information internally the benefit of the internal reporting date for purposes of the SEC program so long as the whistleblower submits the same information to the SEC within 120 days of the initial disclosure; (ii) clarifying that the SEC will consider, as part of the criteria for determining the amount of a whistleblower’s award, whether the whistleblower effectively utilized the company’s corporate compliance program or hindered the function of the program; and (iii) crediting a whistleblower who reports internally first and whose company passes the information along to the SEC, which would mean the whistleblower could receive a potentially higher award for information gathered in an internal investigation initiated as a result of the whistleblower’s internal report.

In addition, the final rules address concerns that the whistleblower rules incentivize officers, directors and those with legal, audit, compliance or similar responsibilities to abuse these positions by making whistleblower

complaints to the SEC with respect to information they obtained in these roles by generally providing that information obtained through a communication subject to attorney-client privilege or as a result of legal representation would not be eligible for a whistleblower award unless disclosure would be permitted by attorney conduct rules. Accordingly, officers and directors, auditors and compliance personnel and other persons in similar roles would not be eligible to receive awards for information received in these positions unless (x) they have a reasonable basis to believe that (1) disclosure of the information is necessary to prevent the entity from engaging in conduct that is likely to cause substantial injury to the financial interests of the entity or investors; or (2) the entity is engaging in conduct that will impede an investigation of the misconduct, for example, destroying documents or improperly influencing witnesses; or (y) 120 days hashave passed since the whistleblower provided the information to senior responsible persons at the entity or 120 days hashave passed since the whistleblower received the information at a time when these people were already aware of the information.

In Korea, there is no corresponding law or regulation.

ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

Not applicable.

ITEM 18. FINANCIAL STATEMENTS

Reference is made to Item 19 “Exhibits” for a list of all financial statements and schedules filed as part of this annual report.

ITEM 19. EXHIBITS

(a) Financial Statements filed as part of this Annual Report

See Index to Financial Statements on page F-1 of this annual report.

(b) Exhibits filed as part of this Annual Report

See Index of Exhibits beginning on page E-1 of this annual report.

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

 

KOREA ELECTRIC POWER CORPORATION

By: 

/s/    Kim, Joong-KyumCho, Hwan-Eik        

Name: Kim, Joong-KyumCho, Hwan-Eik
Title: President and Chief Executive Officer
Date: April 30, 20122014

INDEX TO FINANCIAL STATEMENTS

 

    

Page

Index to Financial Statements

F-1 

Report of Independent Registered Public Accounting Firm Deloitte Anjin LLCKPMG Samjong Accounting Corp., on Consolidated Financial Statements (Korea Electric Power Corporation)

   F-2  

Report of Independent Registered Public Accounting Firm Deloitte Anjin LLCKPMG Samjong Accounting Corp., on Internal Control Over Financial Reporting (Korea Electric Power Corporation)

   F-3

Report of Independent Registered Public Accounting Firm Deloitte Anjin LLC (Korea Electric Power Corporation)

F-5

Report of Independent Registered Public Accounting Firm Ernst & Young Han Young (Korea East-West Power Co., Ltd.)

F-6

Report of Independent Registered Public Accounting Firm Ernst & Young Han Young on Internal Control Over Financial Reporting (Korea East-West Power Co., Ltd.)

F-7  

Report of Independent Registered Public Accounting Firm Ernst & Young Han Young (Korea South-East Power Co., Ltd.)

   F-5

Report of Independent Registered Public Accounting Firm Ernst  & Young Han Young on Internal Control Over Financial Reporting (Korea South-East Power Co., Ltd.)

F-6F-8  

Consolidated Statements of Financial Position as of December 31, 2011, December 31, 20102012 and January 1, 20102013

   F-7F-9  

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December  31, 2011, 2012 and 20102013

   F-9F-11  

Consolidated Statements of Changes in Equity for the Years Ended December 31, 2011, 2012 and 20102013

   F-11F-13  

Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2012 and 20102013

   F-12F-16  

Notes to the Consolidated Financial Statements

   F-14F-18  

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM ON CONSOLIDATED FINANCIAL STATEMENTS

To the Shareholdersshareholders and Board of Directors of

Korea Electric Power Corporation:

We have audited the accompanying consolidated statementsstatement of financial position of Korea Electric Power Corporation (the “Company”) and subsidiaries (collectively referred to as the “Company”) as of December 31, 2011, December 31, 2010 and January 1, 2010,2013, and the related consolidated statements of comprehensive income (loss), changes in equity and cash flows, all expressed in Korean Won, for each of the two years in the periodyear ended December 31, 2011.2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.audit. We did not audit the financial statements of certainKorea East-West Power Co., Ltd., a consolidated subsidiariessubsidiary, whose financial statements reflect 4.4, 5.0 and 5.1comprise 3.93 percent of consolidated total assets (prior to inter-company eliminations) as of December 31, 2011, December 31, 20102013 and January 1, 2010, respectively, and 10.1 and 10.55.90 percent of consolidated total revenue (prior to inter-company eliminations) for each of the two years in the periodyear ended December 31, 2011.2013. Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Korea South-East Power Co., Ltd., isare based solely on the report of the other auditors. The accompanying consolidated financial statements of Korea Electric Power Corporation and subsidiaries as of December 31, 2012, and for the years ended December 31, 2011 and 2012, were audited by other auditors whose report thereon dated April 30, 2013, expressed an unqualified opinion on those financial statements, before the retrospective presentation of the power generation maintenance operating segment as a reportable segment as described in note 4 to the consolidated financial statements and the reclassification adjustments to present accrued incentive compensation as provisions instead of trade accounts payable and other as described in note 2.

We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsaudit and the report of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our auditsaudit and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Korea Electric Power Corporation and subsidiaries as of December 31, 2011, December 31, 2010 and January 1, 2010,2013 and the results of their operations and their cash flows for each of the two years in the periodyear then ended, December 31, 2011 in conformity with the International Financial Reporting Standards as issued by the International Accounting StandardStandards Board.

We have audited the retrospective presentation in 2011 and 2012 of the plant maintenance & engineering service operating segment as a reportable segment as described in note 4 and the reclassification adjustments to present accrued incentive compensation as provisions instead of trade accounts payable and other as described in note 2. In our opinion, such retrospective reportable segment presentation and reclassification adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2011 and 2012 consolidated financial statements of the Company other than with respect to the retrospective reportable segment presentation and reclassification adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2011 and 2012 consolidated financial statements of the Company taken as a whole.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2011,2013, based on the criteria established inInternal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 30, 20122014 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting, based on our audit and the report of the other auditors.

/s/ Deloitte Anjin LLCKPMG Samjong Accounting Corp.

Seoul, Korea

April 30, 20122014

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON

INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Shareholders and Board of Directors of

Korea Electric Power Corporation:

We have audited Korea Electric Power Corporation and subsidiaries’ (collectively referred to as theCorporation’s (the “Company”) internal control over financial reporting as of December 31, 2011,2013, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We did not examineaudit the effectiveness of internal control over financial reporting of certain subsidiariesKorea East-West Power Co., Ltd., a consolidated subsidiary, whose financial statements reflect total assets and revenues constituting 4.43.93 percent and 10.15.90 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2011. The effectiveness of certain consolidated subsidiaries’2013. Korea East-West Power Co., Ltd.’s internal control over financial reporting was audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the effectiveness of certain consolidated subsidiaries’Korea East-West Power Co., Ltd’s internal control over financial reporting, is based solely on the report of the other auditors.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit providesand the report of other auditors provide a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’sgroup’s assets that could have a material effect on the financial statements.

Because of the inherent limitations, of internal control over financial reporting including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be preventedprevent or detected on a timely basis.detect misstatements. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, based on our audit and the report of the other auditors, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011,2013, based on the criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of the Company as of and for the year ended December 31, 2011,2013, all expressed in Korean Won, of the Companywon, and our report dated April 30, 20122014 expressed an unqualified opinion on those consolidated financial statements, based on our audit and the report of the other auditors.

/s/ Deloitte Anjin LLCKPMG Samjong Accounting Corp.

Seoul, Korea

April 30, 20122014

Report of Independent Registered Public Accounting FirmREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TheTo the Board of Directors and StockholderStockholders of

Korea South-EastElectric Power Co., Ltd.Corporation:

We have audited, before the accompanyingeffects of the retrospective adjustments to apply the changes in accounting described in Note 2 to the consolidated financial statements and the retrospective adjustments to the disclosures for a change in the composition of segments discussed in Note 4 to the consolidated financial statements, the consolidated statements of financial position of Korea South-EastElectric Power Co., Ltd. (the “Company”)Corporation and its subsidiaries (the “Group”“Company”) as of December 31, 2011 and 2010, and January 1, 2010,2012, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the two years ended in the period ended December 31, 2011.2011 and 2012 (the 2011 and 2012 consolidated financial statements before the effects of the adjustments discussed in Note 2 and Note 4 to the consolidated financial statements are not presented herein). These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain consolidated subsidiaries whose financial statements reflect 4.7 percent of consolidated total assets as of December 31, 2012 and 9.5 and 10.1 percent of consolidated total revenue for each of the two years in the period ended December 31, 2011 and 2012. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Korea South-East Power Co., Ltd., is based solely on the report of the other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of the other auditors, such consolidated financial statements, before the effects of retrospective adjustment for the change in accounting described in Note 2 and retrospective adjustment for a change in segments discussed in Note 4, present fairly, in all material respects, the financial position of Korea Electric Power Corporation and subsidiaries as of December 31, 2012 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2011 and 2012, in conformity with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

We were not engaged to audit, review, or apply any procedures to the retrospective adjustments for the changes in accounting described in Note 2 to the consolidated financial statements, and the retrospective adjustments to the disclosures for a change in the composition of segments discussed in Note 4 to the consolidated financial statements and, accordingly, we do not express on opinion or any other form of assurance about whether such retrospective adjustments are appropriate and have been properly applied. Those retrospective adjustments were audited by other auditor.

/s/ Deloitte Anjin LLC

Seoul, Korea

April 30, 2013

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholder

Korea East-West Power Co., Ltd.

We have audited the consolidated statement of financial position of Korea East-West Power Co., Ltd. and subsidiaries (the “Company”), a wholly owned subsidiary of Korea Electric Power Corporation as of December 31, 2013 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year ended December 31, 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provideprovides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the CompanyKorea East-West Power Co., Ltd. and subsidiaries as of December 31, 20112013 and 2010, and January 1, 2010 and thetheir consolidated results of their operations, and their cash flows for the yearsyear ended December 31, 2011 and 2010,2013, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardStandards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Korea South-EastEast-West Power Co., Ltd.’s internal control over financial reporting as of December 31, 2011,2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated April 27, 201230, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young Han Young

April 27, 201230, 2014

Seoul, Republic of Korea

Report of Independent Registered Public Accounting FirmREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To theThe Board of Directors and Stockholder of

Korea South-EastEast-West Power Co., Ltd.

We have audited Korea South-EastEast-West Power Co., Ltd.’s (the “Company”) and its subsidiaries (the “Group”)’ internal control over financial reporting as of December 31, 2011,2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the “COSO criteria”). Korea South-EastEast-West Power Co., Ltd.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Korea South-EastEast-West Power Co., Ltd. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011,2013, based on the COSO criteria.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanyingconsolidated statement of financial position of Korea East-West Power Co., Ltd. as of December 31, 2013 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year ended December 31, 2013 and our report dated April 30, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young Han Young

April 30, 2014

Seoul, Republic of Korea

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholder

Korea South-East Power Co., Ltd.

We have audited the consolidated statements of financial position of Korea South-East Power Co., Ltd. (the “Company”) and its subsidiaries (the “Group”) as of December 31, 20112012 and 2010, and January 1, 2010,2011, and the related consolidated statements of comprehensive income, changes in equity and cash flows for each of the two years ended in the period ended December 31, 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Korea South-East Power Co., Ltd. as at December 31, 2012 and 2011 and our report dated April 27,the consolidated results of its financial performance, and its cash flows for each of the two years in the period ended December 31, 2012, expressed an unqualified opinion thereon.in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

/s/ Ernst & Young Han Young

April 27, 201229, 2013

Seoul, Republic of Korea

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONConsolidated Statements of Financial Position

AS OF DECEMBERAs of December 31, 2011, DECEMBER 31, 2010 AND JANUARY 1, 20102012 and 2013

 

 Notes Dec. 31, 2011 Dec. 31, 2010 Jan. 1, 2010   Note     2012   2013 
   (KRW in millions)         In millions of won 

ASSETS

   

CURRENT ASSETS:

    

Assets

       

Current assets

       

Cash and cash equivalents

  6,7,8,38,44   (Won)1,387,921   (Won)2,090,051   (Won)1,475,684     5,6,7,44         1,954,949     2,232,313  

Current financial assets, net

  6,11,12,13,38,44    770,539    723,422    763,751     5,10,11,12,44      656,217     436,213  

Accounts and other receivables, net

  6,9,15,38,44,46    7,632,497    6,612,377    5,982,542  

Trade and other receivables, net

   5,8,14,20,44,45,46      7,184,625     7,526,311  

Inventories, net

  14    3,851,751    3,483,415    3,461,429     13      3,440,341     4,279,593  

Income tax receivables

  40    35,801    3,007    6,841        30,476     223,803  

Current non-financial assets

  16    447,393    244,130    159,448     15      664,047     570,845  

Non-current assets held for sale

      2,828     —    
  

 

  

 

  

 

      

 

   

 

 

Total current assets

      13,933,483     15,269,078  
   14,125,902    13,156,402    11,849,695       

 

   

 

 
  

 

  

 

  

 

 

NON-CURRENT ASSETS:

    

Non-current assets

       

Non-current financial assets, net

  6,7,10,11,12,13,38,44    2,199,032    2,457,432    1,806,109     5,6,9,10,11,12,44      1,873,676     1,902,953  

Non-current accounts and other receivables, net

  6,9,15,38,44,46    1,284,532    846,318    1,026,130  

Non-current trade and other receivables, net

   5,8,14,44,45,46      1,254,330     1,644,333  

Property, plant and equipment, net

  19,48    112,384,881    107,406,466    102,751,572     18,27,48      122,376,140     129,637,596  

Investment properties, net

  20    517,149    533,166    507,959     19,27      590,223     538,327  

Intangible assets, net

  22    848,709    923,136    501,136  

Goodwill

   16      —       2,582  

Intangible assets other than goodwill, net

   21,27      883,814     810,664  

Investments in joint ventures

  5,18    767,202    275,321    195,595     4,17      908,593     1,106,181  

Investments in associates

  5,18    3,718,154    3,490,510    3,284,215     4,17      3,982,340     4,124,574  

Deferred tax assets

  40    372,478    151,870    399,822     41      209,783     359,535  

Non-current non-financial assets

  16    249,811    277,173    295,800     15      140,438     131,511  
  

 

  

 

  

 

      

 

   

 

 
   122,341,948    116,361,392    110,768,338  

Total non-current assets

      132,219,337     140,258,256  
  

 

  

 

  

 

      

 

   

 

 

Total Assets

  5   (Won)136,467,850   (Won)129,517,794   (Won)122,618,033     4         146,152,820     155,527,334  
  

 

  

 

  

 

      

 

   

 

 

LIABILITIES

    

CURRENT LIABILITIES:

    

Accounts and other payables, net

  6,23,25,39,44,46    6,576,158    4,571,145    4,166,228  

Short-term borrowings

  6,24,39,44    1,173,568    457,931    592,875  

Liabilities

       

Current liabilities

       

Trade and other payables, net

   5,22,24,44,46         5,601,852     5,892,763  

Current financial liabilities, net

  6,12,24,39,44,46    5,852,342    6,324,952    5,631,972     5,11,23,44,46      7,788,819     8,425,231  

Income tax payables

  40    505,154    257,563    83,487        334,053     51,407  

Current non-financial liabilities

  28,29    3,541,562    2,383,303    1,828,701     20,28,29      4,117,440     4,730,631  

Current provisions

  27,44    92,383    77,279    65,758     26,44      974,915     1,113,817  
  

 

  

 

  

 

      

 

   

 

 

Total current liabilities

      18,817,079     20,213,849  
   17,741,167    14,072,173    12,369,021       

 

   

 

 
  

 

  

 

  

 

 

NON-CURRENT LIABILITIES:

    

Non-current accounts and other payables, net

  6,23,25,39,44,46    4,178,137    5,280,924    5,245,490  

Non-current liabilities

       

Non-current trade and other payables, net

   5,22,24,44,46      4,173,691     3,971,519  

Non-current financial liabilities, net

  6,12,24,39,44,46    39,403,578    33,052,466    28,034,241     5,11,23,44,46      46,050,766     53,163,394  

Non-current non-financial liabilities

  28,29    5,611,010    5,221,856    5,251,182     28,29      6,298,650     6,985,641  

Employee benefits obligations, net

  26,44    1,942,994    1,964,155    1,985,131     25,44      2,144,334     2,137,296  

Deferred tax liabilities, net

  40    6,786,779    6,307,322    6,463,994  

Deferred tax liabilities

   41      5,433,292     5,002,585  

Non-current provisions

  27,44    7,000,235    6,342,361    5,981,636     26,44      12,170,806     12,602,314  
  

 

  

 

  

 

      

 

   

 

 
   64,922,733    58,169,084    52,961,674  

Total non-current liabilities

      76,271,539     83,862,749  
  

 

  

 

  

 

      

 

   

 

 

Total Liabilities

  5    82,663,900    72,241,257    65,330,695     4         95,088,618     104,076,598  
  

 

  

 

  

 

      

 

   

 

 

(Continued)

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION—(CONTINUED)Consolidated Statements of Financial Position—(Continued)

AS OF DECEMBERAs of December 31, 2011, DECEMBER 31, 2010 AND JANUARY 1, 20102012 and 2013

 

   Notes   Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 
       (KRW in millions) 

EQUITY

     

CONTRIBUTED CAPITAL:

      

Shares issued

   1,30    (Won)3,209,820   (Won)3,207,839   (Won)3,207,839  

Share premium

   30     843,758    835,140    835,140  
    

 

 

  

 

 

  

 

 

 
     4,053,578    4,042,979    4,042,979  
    

 

 

  

 

 

  

 

 

 

RETAINED EARNINGS:

      

Legal reserves

   32     1,603,919    1,603,919    1,603,919  

Voluntary reserves

   31     21,766,678    21,828,100    21,905,812  

Retained earnings before appropriations

   31,32     12,398,497    15,864,213    15,987,364  
    

 

 

  

 

 

  

 

 

 
     35,769,094    39,296,232    39,497,095  
    

 

 

  

 

 

  

 

 

 

OTHER COMPONENTS OF EQUITY:

      

Other capital surpluses

   33     639,028.    569,630    471,708  

Cumulative other comprehensive income

   6     255,095    355,626    306,235  

Treasury stocks

   33     (741,489  (741,489  (741,489

Other equity

   33     13,294,990    13,295,000    13,295,000  
    

 

 

  

 

 

  

 

 

 
     13,447,624    13,478,767    13,331,454  
    

 

 

  

 

 

  

 

 

 

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY

     53,270,296    56,817,978    56,871,528  
    

 

 

  

 

 

  

 

 

 

NON-CONTROLLING INTERESTS

     533,654    458,559    415,810  
    

 

 

  

 

 

  

 

 

 

Total Equity

   44     53,803,950    57,276,537    57,287,338  
    

 

 

  

 

 

  

 

 

 

Total Liabilities and Equity

    (Won)136,467,850   (Won)129,517,794   (Won)122,618,033  
    

 

 

  

 

 

  

 

 

 
   Note      2012  2013 
          In millions of won 

Equity

      

Contributed capital

   30,44      

Share capital

         3,209,820    3,209,820  

Share premium

      843,758    843,758  
     

 

 

  

 

 

 
      4,053,578    4,053,578  

Retained earnings

   31      

Legal reserves

      1,603,919    1,603,919  

Voluntary reserves

      25,961,315    22,753,160  

Retained earnings before appropriations

   32      4,999,049    8,409,007  
     

 

 

  

 

 

 
      32,564,283    32,766,086  
     

 

 

  

 

 

 

Other components of equity

   34      

Other capital surpluses

      705,448    830,982  

Accumulated other comprehensive income

      11,957    55,538  

Treasury stock

      (741,489  (741,489

Other equity

      13,294,990    13,294,973  
     

 

 

  

 

 

 
      13,270,906    13,440,004  
     

 

 

  

 

 

 

Equity attributable to owners of the Company

      49,888,767    50,259,668  
     

 

 

  

 

 

 

Non-controlling interests

   16, 33      1,175,435    1,191,068  
     

 

 

  

 

 

 

Total Equity

         51,064,202    51,450,736  
     

 

 

  

 

 

 

Total Liabilities and Equity

         146,152,820    155,527,334  
     

 

 

  

 

 

 

See accompanying notes to the consolidated financial statements.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

For the years ended December 31, 2011, 2012 and 2013

   Note      2011  2012  2013 
          In millions of won, except per share
information
 

Sales

   4,35,44,46       

Sales of goods

         41,397,469    46,906,587    51,132,803  

Sales of construction services

   20      1,455,132    1,856,045    2,253,083  

Sales of other services

      322,616    357,877    326,619  
     

 

 

  

 

 

  

 

 

 
      43,175,217    49,120,509    53,712,505  
     

 

 

  

 

 

  

 

 

 

Cost of sales

   13,25,42,46       

Cost of sales of goods

      (40,926,543  (46,293,591  (47,983,987

Cost of sales of construction services

      (1,405,302  (1,695,218  (2,159,023

Cost of sales of other services

      (393,049  (470,453  (452,628
     

 

 

  

 

 

  

 

 

 
      (42,724,894  (48,459,262  (50,595,638
     

 

 

  

 

 

  

 

 

 

Gross profit

      450,323    661,247    3,116,867  
     

 

 

  

 

 

  

 

 

 

Selling and administrative expenses

   25,36,42,46      (1,751,696  (1,780,168  (1,923,192

Other income

   37      598,302    675,000    725,457  

Other expenses

   37      (147,595  (74,567  (99,811

Other gains (losses), net

   38      165,703    (1,781,835  128,514  
     

 

 

  

 

 

  

 

 

 

Operating profit (loss)

   4      (684,963  (2,300,323  1,947,835  

Finance income

   5,11,39      607,592    1,128,357    629,542  

Finance expenses

   5,11,40      (2,518,850  (3,068,321  (2,931,622

Equity method income (loss) of associates and joint ventures

   17       

Share in income of associates and joint ventures

      162,513    205,987    170,399  

Gains on disposal of investments in associates and joint ventures

      3,147    —      1,725  

Share in loss of associates and joint ventures

      (42,115  (20,127  (140,984

Losses on disposal of investments in associates and joint ventures

      (450  (162  (45,291

Impairment losses on investments in associates and joint ventures

      —      (8,757  (28,092
     

 

 

  

 

 

  

 

 

 
      123,095    176,941    (42,243
     

 

 

  

 

 

  

 

 

 

Loss before income taxes

      (2,473,126  (4,063,346  (396,488
     

 

 

  

 

 

  

 

 

 

Income tax (expense) benefit

   41      (819,871  985,377    570,794  
     

 

 

  

 

 

  

 

 

 

Profit (loss) for the period

         (3,292,997  (3,077,969  174,306  
     

 

 

  

 

 

  

 

 

 

(Continued)

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)—(Continued)

For the years ended December 31, 2011, 2012 and 2013

   Note      2011  2012  2013 
          In millions of won, except per share
information
 

Other comprehensive income (loss)

   5,11,25,34       

Items that will not be reclassified subsequently to profit or loss:

       

Defined benefit plan actuarial gains (losses), net of tax

   25,31         (152,196  (41,310  132,457  

Share in other comprehensive income (loss) of associates and joint ventures, net of tax

   31      (5,002  (846  7,671  

Items that may be reclassified subsequently to profit or loss:

       

Net change in the unrealized fair value of available-for-sale financial assets, net of tax

   34      (174,958  2,245    86,570  

Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax

   5,11,34      (27,999  (63,850  29,332  

Foreign currency translation of foreign operations, net of tax

   34      47,135    (121,892  (108,625

Share in other comprehensive income (loss) of associates and joint ventures, net of tax

   34      50,862    (96,060  38,366  
     

 

 

  

 

 

  

 

 

 

Other comprehensive income (loss), net of tax

      (262,158  (321,713  185,771  
     

 

 

  

 

 

  

 

 

 

Total comprehensive income (loss) for the period

         (3,555,155  (3,399,682  360,077  
     

 

 

  

 

 

  

 

 

 

Profit (loss) attributable to:

       

Owners of the Company

   43         (3,370,464  (3,166,616  60,011  

Non-controlling interests

      77,467    88,647    114,295  
     

 

 

  

 

 

  

 

 

 
         (3,292,997  (3,077,969  174,306  
     

 

 

  

 

 

  

 

 

 

Total comprehensive income (loss) attributable to:

       

Owners of the Company

         (3,627,669  (3,447,949  245,384  

Non-controlling interests

      72,514    48,267    114,693  
     

 

 

  

 

 

  

 

 

 
         (3,555,155  (3,399,682  360,077  
     

 

 

  

 

 

  

 

 

 

Earnings (loss) per share

   43       

Basic and diluted earnings (loss) per share

         (5,411  (5,083  96  
     

 

 

  

 

 

  

 

 

 

See accompanying notes to the consolidated financial statements.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2011, 2012 and 2013

   

  

  Equity attributable to owners of the Company  Non-
controlling
interests
  Total
equity
 
     Contributed
capital
  Retained
earnings
  Other
components

of equity
  Subtotal   
     In millions of won 

Balance at January 1, 2011

      4,042,979    39,296,232    13,478,767    56,817,978    458,559    57,276,537  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive income for the period

       

Profit (loss) for the period

   —      (3,370,464  —      (3,370,464  77,467    (3,292,997

Items that will not be reclassified subsequently to profit or loss:

       

Defined benefit plan actuarial losses, net of tax

   —      (151,672  —      (151,672  (524  (152,196

Share in other comprehensive loss of associates and joint ventures, net of tax

   —      (5,002  —      (5,002  —      (5,002

Items that may be reclassified subsequently to profit or loss:

       

Net changes in the unrealized fair value of available-for-sale financial assets, net of tax

   —      —      (174,937  (174,937  (21  (174,958

Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax

   —      —      (18,648  (18,648  (9,351  (27,999

Foreign currency translation of foreign operations, net of tax

   —      —      42,173    42,173    4,962    47,135  

Share in other comprehensive income (loss) of associates and joint ventures, net of tax

   —      —      50,881    50,881    (19  50,862  

Transactions with owners of the Company,recognized directly in equity

       

Dividends paid

   —      —      —      —      (44,663  (44,663

Issuance of share capital

   10,599    —      —      10,599    3,187    13,786  

Changes in consolidation scope

   —      —      69,388    69,388    42,991    112,379  

Others

   —      —      —      —      1,066    1,066  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2011

      4,053,578    35,769,094    13,447,624    53,270,296    533,654    53,803,950  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(Continued)

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Equity—(Continued)

For the years ended December 31, 2011, 2012 and 2013

     Equity attributable to owners of the Company  Non-
controlling
Interests
  Total
equity
 
     Contributed
capital
  Retained
earnings
  Other
components of
equity
  Subtotal   
     In millions of won 

Balance at January 1, 2012

      4,053,578    35,769,094    13,447,624    53,270,296    533,654    53,803,950  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive income (loss) for the period

       

Profit (loss) for the period

   —      (3,166,616  —      (3,166,616  88,647    (3,077,969

Items that will not be reclassified subsequently to profit or loss:

       

Defined benefit plan actuarial losses, net of tax

   —      (37,349  —      (37,349  (3,961  (41,310

Share in other comprehensive loss of associates and joint ventures, net of tax

   —      (846  —      (846  —      (846

Items that may be reclassified subsequently to profit or loss:

       

Net changes in the unrealized fair value of available-for-sale financial assets, net of tax

   —      —      2,255    2,255    (10  2,245  

Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax

   —      —      (44,909  (44,909  (18,941  (63,850

Foreign currency translation of foreign operations, net of tax

   —      —      (104,595  (104,595  (17,297  (121,892

Share in other comprehensive loss of associates and joint ventures, net of tax

   —      —      (95,889  (95,889  (171  (96,060

Transactions with owners of the Company, recognized directly in equity

       

Dividends paid

   —      —      —      —      (55,254  (55,254

Issuance of share capital

   —      —      —      —      115,346    115,346  

Changes in consolidation scope

   —      —      66,420    66,420    31,003    97,423  

Issuance of hybrid securities

   —      —      —      —      498,660    498,660  

Others

   —      —      —      —      3,759    3,759  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2012

      4,053,578    32,564,283    13,270,906    49,888,767    1,175,435    51,064,202  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(Continued)

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Equity—(Continued)

For the years ended December 31, 2011, 2012 and 2013

    Equity attributable to owners of the Company  Non-
controlling
Interests
  Total
equity
 
    Contributed
capital
  Retained
earnings
  Other
components of
equity
  Subtotal   
    In millions of won 

Balance at January 1, 2013

   4,053,578    32,564,283    13,270,906    49,888,767    1,175,435    51,064,202  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive income (loss) for the period

       

Profit for the period

   —      60,011    —      60,011    114,295    174,306  

Items that will not be reclassified subsequently to profit or loss:

       

Defined benefit plan actuarial income (loss), net of tax

   —      134,121    —      134,121    (1,664  132,457  

Share in other comprehensive income of associates and joint ventures, net of tax

   —      7,671    —      7,671    —      7,671  

Items that may be reclassified subsequently to profit or loss:

       

Net changes in the unrealized fair value of available-for-sale financial assets, net of tax

   —      —      86,543    86,543    27    86,570  

Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax

   —      —      18,907    18,907    10,425    29,332  

Foreign currency translation of foreign operations, net of tax

   —      —      (100,572  (100,572  (8,053  (108,625

Share in other comprehensive income (loss) of associates and joint ventures, net of tax

   —      —      38,703    38,703    (337  38,366  

Transactions with owners of the Company, recognized directly in equity

       

Dividends paid

   —      —      —      —      (41,812  (41,812

Issuance of share capital

   —      —      (173  (173  31,229    31,056  

Equity transaction in consolidated scope—other than issuance of share capital

   —      —      135,914    135,914    43,128    179,042  

Changes in consolidation scope

   —      —      (10,224  (10,224  (115,991  (126,215

Dividends paid (hybrid securities)

   —      —      —      —      (16,455  (16,455

Others

   —      —      —      —      841    841  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2013

   4,053,578    32,766,086    13,440,004    50,259,668    1,191,068    51,450,736  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

See accompanying notes to the consolidated financial statements.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEConsolidated Statements of Cash Flows

FOR THE YEARS ENDED DECEMBERFor the years ended December 31, 2011, AND 20102012 and 2013

 

   Notes   2011  2010 
   

(KRW in millions except per share amounts)

 

SALES

     

Sales of goods

   5,34,44,46    (Won)41,754,554   (Won)38,004,325  

Sales of service

   5,34,44,46     322,616    747,044  

Sales of construction contracts

   5,21,34,44,46     1,455,132    755,213  
    

 

 

  

 

 

 
     43,532,302    39,506,582  
    

 

 

  

 

 

 

COST OF SALES

     

Cost of sales of goods

   5,14,42,26     41,283,628    35,021,668  

Cost of sales of service

   5,14,42,26     393,049    414,672  

Cost of sales of construction contracts

   5,14,42,26     1,405,302    750,897  
    

 

 

  

 

 

 
     43,081,979    36,187,237  
    

 

 

  

 

 

 

GROSS PROFIT

     450,323    3,319,345  

OTHER OPERATING INCOME

   36     598,303    536,915  

SELLING AND ADMINISTRATIVE EXPENSES

   5,35,42,46     1,751,697    1,644,760  

OTHER OPERATING EXPENSES

   5,36     147,595    69,787  

OTHER INCOME(LOSS)

   37     165,703    118,207  
    

 

 

  

 

 

 

OPERATING INCOME(LOSS)

   5,41     (684,963  2,259,920  
    

 

 

  

 

 

 

FINANCE INCOME

   6,12,38     607,592    591,491  

FINANCE EXPENSES

   6,12,39     2,518,850    2,558,425  

PROFITS OF ASSOCIATES AND JOINT VENTURES USING EQUITY METHOD

     123,095    76,626  

Share in income of associates and joint ventures

     162,513    160,314  

Gain on disposal of associates and joint ventures

     3,147    25,975  

Share in loss of associates and joint ventures

     42,115    56,246  

Loss on disposal of associates and joint ventures

     450    53,417  
    

 

 

  

 

 

 

INCOME (LOSS) BEFORE INCOME TAX

     (2,473,126  369,612  

INCOME TAX EXPENSE

   40     819,871    438,779  
    

 

 

  

 

 

 

NET LOSS FOR THE YEAR

    (Won)(3,292,997 (Won)(69,167
    

 

 

  

 

 

 
     2011  2012  2013 
     In millions of won 

Cash flows from operating activities

    

Profit (loss) for the period

      (3,292,997  (3,077,969  174,306  
  

 

 

  

 

 

  

 

 

 

Adjustments for:

    

Income tax expense (benefit)

   819,871    (985,377  (570,794

Depreciation

   6,782,661    6,903,350    7,303,996  

Amortization

   94,729    93,360    88,379  

Employee benefit expense

   341,902    364,913    384,323  

Bad debt expense

   15,136    41,440    49,110  

Interest expense

   2,123,579    2,344,328    2,381,900  

Loss on sale of financial assets

   —      —      4,202  

Loss on disposal of property, plant and equipment

   31,228    39,942    58,852  

Loss on abandonment of property, plant, and equipment

   296,557    253,985    295,627  

Impairment loss on property, plant and equipment

   —      27,968    24,612  

Impairment loss on intangible assets

   221    459    267  

Loss on disposal of intangible assets

   —      44    1  

Accretion expense to provisions, net

   421,364    843,047    663,621  

Gain (loss) on foreign currency translation, net

   226,012    (766,863  (195,571

Valuation and transaction loss (gain) on derivative instruments, net

   (75,307  597,628    233,484  

Share in income of associates and joint ventures, net

   (120,398  (185,860  (29,414

Gain on sale of financial assets

   —      (189  (107

Gain on sale of property, plant and equipment

   (38,776  (32,797  (59,345

Gain on disposal of intangible assets

   —      (15  (4

Loss on disposal of other non-current assets

   —      584    —    

Gain (loss) on disposal of investments in associates and joint ventures

   (2,699  162    43,566  

Impairment loss on investments in associates and joint ventures

   —      8,757    28,091  

Interest income

   (291,625  (204,123  (182,161

Dividends income

   (18,894  (10,452  (9,870

Impairment loss on available-for-sale financial assets

   —      40,156    12,592  

Impairment loss on other non-current non-financial assets

   —      1,877,371    —    

Others, net

   47,998    (21,434  (64,089
  

 

 

  

 

 

  

 

 

 
   10,653,559    11,230,384    10,461,268  
  

 

 

  

 

 

  

 

 

 

Changes in:

    

Increase in trade receivables

   (664,696  (781,099  (330,494

Decrease (increase) in non-trade receivables

   (45,009  (103,028  20,853  

Decrease (increase) in accrued income

   26,205    (66,504  563  

Decrease (increase) in other receivables

   —      377    (123

Decrease (increase) in other current assets

   (154,062  (384,765  98,724  

Increase in inventories

   (1,411,785  (672,979  (1,206,676

Decrease (increase) in other non-current assets

   (335,262  (1,521,249  65,087  

Increase (decrease) in trade payables

   710,831    154,341    (40,416

Increase (decrease) in non-trade payables

   (298,356  224,567    (195,191

Increase (decrease) in accrued expenses

   308,531    14,197    (240,901

Increase in other payables

   —      —      (1

Increase in other current liabilities

   1,204,974    1,865,302    1,500,717  

Increase (decrease) in other non-current liabilities

   525,996    (262,590  48,719  

Decrease in investments in associates and joint ventures

   62,169    48,429    65,888  

Increase (decrease) in provisions

   (264,898  78,581    (386,377

Payments of employee benefit obligations

   (345,774  (186,274  (132,179

Increase in plan assets

   (291,339  (94,763  (101,720
  

 

 

  

 

 

  

 

 

 
   (972,475  (1,687,457  (833,527
  

 

 

  

 

 

  

 

 

 

(Continued)

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME—(CONTINUED)Consolidated Statements of Cash Flows—(Continued)

FOR THE YEARS ENDED DECEMBERFor the years ended December 31, 2011, AND 20102012 and 2013

 

       2011  2010 
       (KRW in millions except per
share amounts)
 

OTHER COMPREHENSIVE INCOME (LOSS)

     

Net change in fair value of available-for-sale financial assets, net of tax

     (174,958  124,464  

Loss on valuation of derivatives using of cash flow hedge accounting, net of tax

   6,12     (27,999  (35,005

Actuarial losses on retirement benefit obligations

   26     (152,196  (85,605

Share in other comprehensive income(loss) of associates and joint ventures, net of tax

     45,860    (34,297

Foreign currency translation of foreign operations, net of tax

     47,135    (12,124
    

 

 

  

 

 

 
     (262,158  (42,567
    

 

 

  

 

 

 

TOTAL COMPREHENSIVE LOSS FOR THE YEAR

    (Won)(3,555,155 (Won)(111,734
    

 

 

  

 

 

 

NET INCOME(LOSS) ATTRIBUTABLE TO;

     

Owners of the Company

     (3,370,464  (119,931

Non-controlling interests

     77,467    50,764  
    

 

 

  

 

 

 
    (Won)(3,292,997 (Won)(69,167
    

 

 

  

 

 

 

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO;

     

Owners of the Company

     (3,627,669  (151,472

Non-controlling interests

     72,514    39,738  
    

 

 

  

 

 

 
    (Won)(3,555,155 (Won)(111,734
    

 

 

  

 

 

 

EARNINGS PER SHARE;

     

Basic earnings per share

   43    (Won)(5,411 (Won)(193

Diluted earnings per share

   43    (Won)(5,411 (Won)(193
     2011  2012  2013 
     In millions of won 

Cash generated from operating activities

    

Dividends received

      18,894    10,452    14,114  

Interest paid

   (2,196,429  (2,386,125  (2,460,247

Interest received

   247,711    153,414    160,830  

Income taxes paid

   (313,534  (325,866  (632,837
  

 

 

  

 

 

  

 

 

 

Net cash from operating activities

   4,144,729    3,916,833    6,883,907  
  

 

 

  

 

 

  

 

 

 

Cash flows investing activities

    

Proceeds from disposals of subsidiaries, associates and joint ventures

   10,136    8,988    44  

Acquisition of subsidiaries, associates and joint ventures

   (491,293  (404,761  (321,476

Proceeds from disposals of property, plant and equipment

   50,578    100,573    119,464  

Acquisition of property, plant and equipment

   (10,610,402  (11,446,834  (14,259,050

Proceeds from disposals of intangible assets

   467    1,448    39  

Acquisition of intangible assets

   (42,599  (67,715  (69,007

Disposal of investment properties

   523    —      —    

Proceeds from disposals of financial assets

   856,021    650,757    610,847  

Acquisition of financial assets

   (840,852  (637,620  (545,992

Increase in loans

   (146,227  (94,133  (196,607

Decrease in loans

   116,653    141,117    143,935  

Increase in deposits

   (136,376  (120,425  (55,594

Decrease in deposits

   83,334    66,670    51,882  

Receipt of government grants

   48,807    49,618    92,000  

Usage of government grants

   (904  (3,686  (31,027

Net cash inflow (outflow) from business acquisitions

   (65,147  10,022    (41,809

Other cash inflow (outflow) from investing activities, net

   (28,412  26,785    (921
  

 

 

  

 

 

  

 

 

 

Net cash used in investing activities

   (11,195,693  (11,719,196  (14,503,272
  

 

 

  

 

 

  

 

 

 

Cash flows from financing activities

    

Increase (decrease) in short-term borrowings, net

   114,015    (476,192  (107,748

Proceeds from long-term borrowings and debt securities

   12,100,107    14,202,095    15,233,428  

Repayment of long-term borrowings and debt securities

   (5,880,330  (5,895,384  (7,315,752

Payment of finance lease liabilities

   (136,760  (122,320  (125,921

Settlement of derivative instruments, net

   51,916    (247  38,844  

Proceeds on disposal of partial interest in a subsidiary that does not involve loss of control

   100,691    109,589    236,244  

Change in non-controlling interest

   36,142    116,020    47,019  

Cash inflow from hybrid bond

   —      498,660    —    

Dividends paid (hybrid bond)

   —      —      (16,455

Dividends paid

   (44,663  (55,254  (41,812

Other cash inflow (outflow) from financing activities, net

   297    (1,480  (14,715
  

 

 

  

 

 

  

 

 

 

Net cash from financing activities

   6,341,415    8,375,487    7,933,132  
  

 

 

  

 

 

  

 

 

 

Net increase (decrease) in cash and cash equivalents before effect of exchange rate fluctuations

   (709,549  573,124    313,767  

Effect of exchange rate fluctuations on cash held

   7,419    (6,096  (36,403
  

 

 

  

 

 

  

 

 

 

Net increase (decrease) in cash and cash equivalents

   (702,130  567,028    277,364  

Cash and cash equivalents at January 1

   2,090,051    1,387,921    1,954,949  
  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents at December 31, 2013

      1,387,921    1,954,949    2,232,313  
  

 

 

  

 

 

  

 

 

 

See accompanying notes to the consolidated financial statements.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYNotes to the Consolidated Financial Statements

FOR THE YEARS ENDED DECEMBERDecember 31, 2011 AND 2010

  Contributed
capital
  Retained
earnings
  Other
components of
equity
  Equity
attributable to
owners of the
Company
  Non-
controlling

interest
  Total
Equity
 
  (KRW in millions) 

Balance at January 1, 2010

 (Won)4,042,979   (Won)39,497,095   (Won)13,331,454   (Won)56,871,528   (Won)415,810   (Won)57,287,338  

Total comprehensive income:

      

Net (income) loss for the period

  —      (119,931  —      (119,931  50,764    (69,167

Net change in fair value of available-for-sale financial assets, net of tax

  —      —      124,322    124,322    142    124,464  

Loss on valuation of derivatives using cash flow hedge accounting, net of tax

  —      —      (35,005  (35,005  —      (35,005

Actuarial losses on retirement benefit obligations, net of tax

  —      (78,876  —      (78,876  (6,729  (85,605

Share in other comprehensive income (loss) of a associates and joint ventures, net of tax

  —      (2,056  (32,241  (34,297  —      (34,297

Foreign currency translation of foreign operations, net of tax

  —      —      (7,685  (7,685  (4,439  (12,124

Dividends paid

  —      —      —      —      (35,740  (35,740

Capital increase in subsidiaries

  —      —      —      —      16,476    16,476  

Change due to acquisition and disposal of subsidiaries

  —      —      97,922    97,922    22,299    120,221  

Others

  —      —      —      —      (24  (24
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2010

 (Won)4,042,979   (Won)39,296,232   (Won)13,478,767   (Won)56,817,978   (Won)458,559   (Won)57,276,537  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at January 1, 2011

 (Won)4,042,979   (Won)39,296,232   (Won)13,478,767   (Won)56,817,978   (Won)458,559   (Won)57,276,537  

Total comprehensive income:

      

Net (income) loss for the period

  —      (3,370,464  —      (3,370,464  77,467    (3,292,997

Net change in fair value of available-for-sale financial assets, net of tax

  —      —      (174,937  (174,937  (21  (174,958

Loss on valuation of derivatives using cash flow hedge accounting, net of tax

  —      —      (18,648  (18,648  (9,351  (27,999

Actuarial losses on retirement benefit obligations, net of tax

  —      (151,672  —      (151,672  (524  (152,196

Share in other comprehensive income (loss) of associates and joint ventures, net of tax

  —      (5,002  50,881    45,879    (19  45,860  

Foreign currency translation of foreign operations, net of tax

  —      —      42,173    42,173    4,962    47,135  

Dividends paid

  —      —      —      —      (44,663  (44,663

Capital increase

  10,599    —      —      10,599    3,187    13,786  

Change due to acquisition and disposal of subsidiaries

  —      —      69,388    69,388    42,991    112,379  

Others

  —      —      —      —      1,066    1,066  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2011

 (Won)4,053,578   (Won)35,769,094   (Won)13,447,624   (Won)53,270,296   (Won)533,654   (Won)53,803,950  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

See accompanying notes to consolidated financial statements.

KOREA ELECTRIC POWER CORPORATION SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

   2011  2010 
   (KRW in millions) 

CASH FLOWS FROM OPERATING ACTIVITIES:

   

Net loss for the period

  (Won)(3,292,997 (Won)(69,167

Adjustments for:

   

Income tax expense

   819,871    438,779  

Depreciation

   6,782,661    6,579,220  

Amortization of intangible assets

   94,729    117,444  

Retirement benefit expense, net

   341,902    341,210  

Bad debt expense

   15,136    13,569  

Interest expense

   2,123,579    2,045,684  

Loss on disposal of property, plant, and equipment

   31,228    46,882  

Loss on abandonment of property , plant, and equipment

   296,557    219,911  

Impairment loss on intangible assets

   221    451  

Accretion expense to provisions, net

   433,374    139,969  

Loss (gain) on foreign currency translation, net

   226,012    (110,158

Valuation and transaction loss (gain) on derivative instrument, net

   (75,307  196,334  

Share in income of associates and joint ventures, net

   (120,398  (104,068

Gain on disposal of property, plant and equipment

   (38,776  (42,037

Loss (gain) on disposal of associates and joint ventures, net

   (2,699  27,443  

Interest income

   (291,625  (120,422

Dividends income

   (18,894  (3,341

Other losses (gains), net

   47,998    55,308  
  

 

 

  

 

 

 
   10,665,569    9,842,178  
  

 

 

  

 

 

 

Changes in operating assets and liabilities:

   

Increase in accounts receivables

   (1,021,781  (539,781

Increase in non-trade receivables

   (45,009  (24,369

Decrease (increase) in accrued income

   26,205    (6,038

Increase in other receivables

   —      (2,936

Increase in other current assets

   (154,062  (111,388

Increase in inventories

   (1,411,785  (875,476

Decrease in other non-current assets

   21,823    431,576  

Increase in account payables

   710,831    511,311  

Increase (decrease) in non-trade payables

   (7,882  113,467  

Increase in accrued expenses

   30,386    154,231  

Increase in other current liabilities

   1,204,974    262,503  

Increase in other non-current liabilities

   525,996    97,803  

Decrease in associates and joint ventures

   62,169    35,488  

Decrease in provisions

   (289,237  (330,195

Payments of retirement benefit obligations

   (345,774  (401,143

Increase in plan assets

   (291,339  (96,751
  

 

 

  

 

 

 
   (984,485  (781,698
  

 

 

  

 

 

 
   6,388,087    8,991,313  
  

 

 

  

 

 

 

(Continued)

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS—(CONTINUED)

FOR THE YEARS ENDED DECEMBER 30, 2011 AND 2010

   2011  2010 
   (KRW in millions) 

Interest received

  (Won)247,711   (Won)168,014  

Interest paid

   (2,196,429  (2,272,028

Dividends received

   18,894    3,427  

Income tax paid

   (313,534  (150,636
  

 

 

  

 

 

 

Net cash provided by operating activities

   4,144,729    6,740,090  
  

 

 

  

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

   

Disposal of associates and joint ventures

   10,136    35,412  

Acquisition of associates and joint ventures

   (491,293  (756,443

Disposal of property, plant and equipment

   50,578    100,325  

Acquisition of property, plant and equipment

   (10,610,402  (10,184,037

Disposal of intangible assets

   467    198  

Acquisition of intangible assets

   (42,599  (470,413

Disposal of investment properties

   523    —    

Disposal of financial assets

   856,021    295,844  

Acquisition of financial assets

   (840,852  (564,832

Decrease (increase) in loans, net

   (29,574  (203,545

Increase (decrease) in deposits received, net

   (53,042  91  

Receipt of government grants, net

   47,903    27,589  

Net cash outflow from acquisition of subsidiaries

   (65,147  (40,862

Other cash outflow from investing activities, net

   (28,412  (233,476
  

 

 

  

 

 

 

Net cash provided by investing activities

   (11,195,693  (11,994,149
  

 

 

  

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

   

Proceeds from short- term borrowings, net

   114,015    (348,216

Proceeds from long-term borrowings and debentures

   12,100,107    11,654,394  

Repayment of long-term borrowings and debentures

   (5,880,330  (5,786,761

Payment of financial lease

   (136,760  (123,773

Settlement of derivative instruments, net

   51,916    350,404  

Proceeds on disposal of partial interest in a subsidiary that does not involve loss of control

   100,691    149,579  

Change in non-controlling interest

   36,142    16,071  

Dividends paid

   (44,663  (35,740

Other cash inflow (outflow) from financing activities, net

   297    (6,290
  

 

 

  

 

 

 

Net cash provided by financing activities

   6,341,415    5,869,668  
  

 

 

  

 

 

 

EFFECTS OF EXCHANGE RATE CHANGES

   7,419    (1,242

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

   (702,130  614,367  

CASH AND CASH EQUIVALENTS, BEGINING OF THE PERIOD

   2,090,051    1,475,684  
  

 

 

  

 

 

 

CASH AND CASH EQUIVALENTS, END OF THE PERIOD

  (Won)1,387,921   (Won)2,090,051  
  

 

 

  

 

 

 

See accompanying notes to consolidated financial statements

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS2013

 

1.GENERALS:Reporting Entity (Description of the controlling company)

Korea Electric Power Corporation (“KEPCO”(the “Company”) was incorporated on January 1, 1982 in accordance with the Korea Electric Power Corporation Act (the “KEPCO Act”) to engage in the generation, transmission and distribution of electricity and development of electric power resources in the Republic of Korea. The Company also provides power plant construction services. The Company’s stock was listed on the Korea Stock Exchange on August 10, 1989 and the Company listed its Depository Receipts (DR) on the New York Stock Exchange on October 27, 1994.

As of December 31, 2011, the Government of the Republic of Korea (Government), Korea Finance Corporation (“KoFC”) which is wholly owned by the Government, and foreign investors held 21.17%, 29.94%, and 23.38%, respectively, of2013, the Company’s shares.share capital amounts to ₩3,209,820 million and the Company’s shareholders are as follows:

On January 21, 1999, in

   Number of shares   Percentage of
ownership
 

Government of the Republic of Korea

   135,917,118     21.17

Korea Finance Corporation

   192,159,940     29.93

Foreign investors

   147,623,014     23.00

Other

   166,264,005     25.90
  

 

 

   

 

 

 
   641,964,077     100.00
  

 

 

   

 

 

 

In accordance with the restructuring planRestructuring Plan enacted on January 21, 1999 by the Ministry of Trade, Industry and Energy (the “MTIE”, formerly the Ministry of Knowledge Economy (the “MKE”) (the “Restructuring Plan”)Economy), on April 2, 2001 KEPCOthe Company spun off its power generation divisions on April 2, 2001, resulting in the establishment of six power generation subsidiaries.

In addition,

2.Basis of Preparation

The consolidated financial statements were authorized for issuance by the Government established a Tripartite Commission consistingBoard of representatives ofDirectors on February 20, 2014, which were submitted for approval at the Government, leading businesses and labor unions in Korea to deliberateshareholders’ meeting held on ways to introduce competition in electricity distribution, such as by forming and privatizing new distribution subsidiaries. Meanwhile, on June 30, 2004, the privatization initiatives were discontinued, instead independent business divisions for distribution within the Company were created to improve operational efficiency through internal competition. These business divisions have separate management structures, financial accounting systems and performance evaluation systems, but with a common focus on maximizing profitability.March 28, 2014.

 

2.(1)SIGNIFICANT ACCOUNTING POLICIES:

(1)BasisStatement of Preparationcompliance

The Company maintains its official accounting records in Republic of Korean won (“Won”) and prepares consolidated financial statements have been prepared in conformityaccordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (“IASB”). The Company has adopted IFRS as issued by IASB for the annual period beginning on January 1, 2011. In accordance with IFRS 1 First-time adoption of IFRS, the Company’s transition date to IFRS is January 1, 2010. Refer to Note 4, for transition adjustments to IFRS.

The significant accounting policies under IFRS followed by the Company in the preparation of its consolidated financial statements are summarized below. Unless stated otherwise, these accounting policies have been applied consistently to the financial statements for the current period and accompanying comparative period.

(2)Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis, except for certain non-current assets andthe following material items in the consolidated statements of financial position:

derivative financial instruments that are measured at revalued amounts or fair values, as explained invalue

available-for-sale financial assets are measured at fair value

liabilities for defined benefit plans are recognized at the accounting policies below. Historical cost is based onnet of the total present value of defined benefit obligations less the fair value of the consideration given in exchange for assets.plan assets

The Company has not adopted following amendments which are not yet effective as of December 31, 2011.

 

(3)

IFRS 7Financial Instruments: Disclosures (amended)‘Disclosures About Transfers Of Financial Instrument’Functional and presentation currency

Above amendment requires additional disclosures for financial instruments that are transferred but not derecognized in their entirely, and additional disclosures about continuing involvement in the derecognized financial instruments. Above amendments will be applied from the financial year beginning after July 1, 2011.

IAS 12Income taxes (amended)‘Deferred tax: Collection Of Underlying Asset

Above amendment provides a practical solution about assessing whether recovery of the carrying amount of underlying assets would be through sale or use. The amendment requires that if the underlying assets are investment properties carried at fair value method, or properties measured at revaluation model, which is in IAS 16, the entity can presume that recovery of the carrying amount will be through sale.

Above amendments will be applied from the financial year beginning after January 1, 2012.

IAS 19Employee benefits(amended)

Above amendment requires immediate recognition of all estimated changes in the cost of providing defined benefits and all changes in the value of plan assets. This would eliminate the various methods currently in IAS 19, including the ‘corridor’ method, that allowed deferral of some of those gains or losses.

Above amendments will be applied from the financial year beginning after January 1, 2013.

IFRS 13Fair value measurement

IFRS 13 provide a single standard about fair value measurement. Above statement will be applied from the financial year beginning after January 1, 2013.

As of December 31, 2011, the Company does not expect the above amendments will have significant impact on its consolidated financial statements.

On February 22, 2011, the board of directors approved the Company’s current yearThese consolidated financial statements for its annual shareholder’s meeting.are presented in Korean won (“Won”), which are the Company’s functional currency and the currency of the primary economic environment in which the Company operates.

Major accounting policies used for the
(4)Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are stated below.reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

 

(2)(i)Continued operation of Wolseong #1 nuclear power plant

The Company owns Wolseong #1 nuclear power plant, which started its operation on November 21, 1982, and completed its operation on November 20, 2012, completing the permitted operation period of 30 years. As of December 31, 2013, the Company is in the process of obtaining safety assessments to obtain an approval from the Nuclear Safety and Security Commission to resume the plant’s operation for another term. The Company has prepared the consolidated financial statements assuming that the plant will operate for the next 10 years.

(ii)Unbilled revenue

Energy delivered but not yet metered, and the quantities of energy delivered but not yet measured and not billed are calculated at the reporting date based on consumption statistics and selling price estimates. Determination of the unbilled revenues at the end of the reporting period is sensitive to the estimated assumptions and prices based on statistics. Unbilled revenue recognized as of December 31, 2012 and 2013 is ₩1,628,732 million and ₩1,678,327 million, respectively, and is included in sales of goods in the accompanying consolidated statements of financial position.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in the following notes:

Note 18—Property, plant and equipment

Note 44—Risk Management

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is included in the following notes:

Note 41—Income tax

Note 25—Defined employee liabilities

(5)Changes in accounting policies

(i)IFRS 10, ‘Consolidated Financial Statements’

The Company adopted IFRS 10, ‘Consolidated Financial Statements’ since January 1, 2013. As a result, the Company changed its accounting policy with respect to determining whether it has control over and consequently whether it consolidates its investees. IFRS 10 introduces a new control model that is applicable to all investees; among other things, it requires the consolidation of an investee if the Company controls the investee on the basis of de facto circumstances.

The standard includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s return. The adoption of IFRS 10 had no impact on the Company’s consolidated financial statements.

The following amendments to IFRSs have been applied in the current year and do not have any impact on the amounts reported in these consolidated financial statements.

(ii)IFRS 11, ‘Joint Arrangements’

Under IFRS 11, joint arrangements are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the arrangements. As a result of IFRS 11, the Company has changed its accounting policy for its interests in joint arrangements. Under IFRS 11, the Company has classified its interests in joint arrangements as either joint operations (if the Company has rights to the assets, and obligations for the liabilities, relating to an arrangement) or joint ventures (if the Company has rights only to the net assets of an arrangement). When making this assessment, the Company considered the structure of the arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and circumstances. Previously, the structure of the arrangement was the sole focus of classification. The Company has re-evaluated its involvement in its joint arrangements and has reclassified the investment from a jointly controlled entity to a joint venture. Notwithstanding the reclassification, the investment continues to be recognized by applying the equity method and there has been no impact on the recognized assets, liabilities and comprehensive income of the Company.

(iii)IFRS 12, ‘Disclosure of Interests in Other Entities’

The standard brings together into a single standard all the disclosure requirements about an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The standard requires the disclosure of information about the nature, risks and financial effects of these interests.

(iv)IFRS 13, ‘Fair Value Measurement’

IFRS 13, establishes a single framework for measuring fair value and making disclosures about fair value measurements when such measurements are required or permitted by other IFRSs. It unifies the definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It replaces and expands the disclosure requirements about fair value measurements in other IFRSs.

(v)IAS 19, ‘Employee Benefits’

The Company has applied the amendments to IAS 19 in the current year which requires the Company to recognize gains and losses on the settlement of a defined benefit plan when the settlement occurs.

The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest on the net defined benefit liability (asset) can be viewed as comprising interest income on plan assets, interest cost on the defined benefit obligation and interest on the effect of the asset ceiling. Prior to adopting this amendment, the Company measured the interest on plan assets based on the long-term expected rate of return.

The Company has not applied the amendment retrospectively since management believes the impact of the amendments on the Company’s consolidated financial statements is clearly immaterial.

(vi)IFRIC 20, ‘Stripping Costs in the Production Phase of a Surface Mine’

The interpretation provides accounting for the costs from waste removal activity (stripping). To the extent that the benefit from the stripping activity is realized in the form of inventory produced, the

entity shall account for the costs of that stripping activity in accordance with the principles of IAS 2 Inventories. To the extent the benefit is improved access to ore, the entity shall recognize these costs as a non-current asset, if the criteria in paragraph 9 below are met. This Interpretation refers to the non-current asset as the ‘stripping activity asset’.

The Company shall recognize a stripping activity asset if, and only if, all of the following are met:

It is probable that the future economic benefit (improved access to the ore body) associated with the stripping activity will flow to the entity;

the entity can identify the component of the ore body for which access has been improved; and

the costs relating to the stripping activity associated with that component can be measured reliably.

In accordance with the interpretation, the Company has applied it prospectively beginning January 1, 2013. However PT Bayan Resources TBK (PT Bayan), one of the equity method investments of the Company, has retrospectively applied the interpretation and has restated its comparative financial statements to adjust the stripping activity costs that do not meet the criteria for asset recognition in the interpretation. The Company reflected this adjustment of ₩31,529 million due to the change in accounting policy as a loss on its equity method investment during the year ended December 31, 2013.

(6)New standards and interpretations not yet adopted

The following new standards, interpretations and amendments to existing standards have been published for mandatory application for annual periods beginning after January 1, 2014, and the Company has not early adopted them.

(i)IFRS 7, ‘Financial Instruments: Disclosures’

The amendments to IFRS 7 will require changes to the presentation of offsetting financial assets and financial liabilities. The amendments to IFRS 7 are effective for annual periods beginning on or after January 1, 2014.

(ii)IFRIC 21, ‘Levies’

The interpretation covers the accounting for outflows imposed on entities by governments (including government agencies and similar bodies) in accordance with laws and/or regulations. The amendments to IFRS 7 are effective for annual periods beginning on or after January 1, 2014. The Company is in the process of evaluating the impact on the consolidated financial statements upon the adoption of the amendments.

(7)Reclassification of items

The Company has reclassified certain current trade and other payables to current provisions in the accompanying consolidated financial statements. The provisions represent management’s estimated incentive compensation to be paid based on individual performance evaluations or management assessments. The impacts of reclassification of accounts are as below:

  2011  2012 
  Before  After  Difference  Before  After  Difference 
  In millions of won 

Consolidated statement of financial position

      

Trade and other payables

  6,576,158    5,967,442    (608,716  6,418,464    5,601,852    (816,612

Current provisions

  92,383    701,099    608,716    158,303    974,915    816,612  

Consolidated statement of cash flow

      

Accretion expense in provisions, net

  433,374    421,364    (12,010  788,371    843,047    54,676  

Change in provisions

  (289,237  (264,898  24,339    (74,638  78,581    153,219  

Increase (decrease) in non-trade payables

  (7,882  (298,356  (290,474  573,517    224,567    (348,949

Decrease in accrued expenses

  30,386    308,531    278,145    (126,857  14,197    141,054  

The above reclassification does not have an impact on the net assets, net profits and losses or loss per share of the prior periods.

3.Significant Accounting Policies

(1)Basis of Consolidationconsolidation

The consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (or one of its subsidiary)subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Income and expensesexpense of a subsidiary acquired or disposed of during the year are included in the consolidated statement of comprehensive income (loss) from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those usedof the Company.

All intra-group transactions, balances, incomeTransactions between the Company and expensesits subsidiaries are eliminated in full upon consolidation forduring the years ended December 31, 2011 and 2010consolidation.

Changes in the Company’s ownership interests in a subsidiary that do not result in the Company losing control over the subsidiary are accounted for as equity transactions. The carrying amounts of the Company’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.

When the Company loses control of a subsidiary, the income or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognized in other comprehensive income and accumulated in equity, the amounts previously recognized in other comprehensive income and

accumulated in equity are accounted for as if the Company had directly disposed of the relevant assets (i.e. reclassified to income or loss or transferred directly to retained earnings). The fair value of any investment retained in the former subsidiary at the date when control is lost is recognized as the fair value on initial recognition for subsequent accounting under IAS 39,Financial Instruments: ‘Financial Instruments’: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

 

(3)(2)Business Combinationcombinations

Acquisitions of businesses areA business combination is accounted for usingby applying the acquisition method. method, unless it is a combination involving entities or businesses under common control.

The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Company, liabilities incurred by the Company to the former owners of the acquiree and the equity interests issued by the Company in exchange for control of the acquiree. Acquisition-related costs are generally recognized in income or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value at the acquisition date, except that:

 

deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognized and measured in accordance with IAS 12Income Taxes and IAS 19Employee Benefits respectively;

deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognized and measured in accordance with IAS 12, ‘Income Taxes’ and IAS 19, ‘Employee Benefits’ respectively;

 

Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard.

Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5, ‘Non-current Assets Held for Sale’ are measured in accordance with that standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognized immediately in income or loss as a bargain purchase gain.

Non-controlling interest that is present on acquisition day and if it entitles the holder to a proportionate share of the entity’s net assets in an event of a liquidation, the non-controlling interest may be initially measured either at fair value or at the non-controlling interest’s proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The choice of measurement can be elected on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in other IFRS.IFRSs.

When the consideration transferred by the Company in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasuredre-measured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasuredre-measured at subsequent reporting dates in accordance with IAS 39,Financial ‘Financial Instruments: Recognition and MeasurementMeasurement’, or with IAS 37,Provisions, ‘Provisions’, Contingent Liabilities and Contingent Assets,, as appropriate, with the corresponding gain or loss being recognized in income or loss.

When a business combination is achieved in stages, the Company’s previously held equity interest in the acquiree is remeasuredre-measured to fair value at the acquisition date (i.e. the date when the Company obtains control) and the resulting gain or loss, if any, is recognized in income or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to income or loss where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.

 

(4)(3)Investments in associates (Equity-accounted investees)

An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but isdoes not have control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting, except whenaccounting. If the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5Non-current ‘Non-current Assets Held for SaleSale’, any retained portion of an investment in associates that has not been classified as held for sale shall be accounted for using the equity method until disposal of the portion that is classified as held for sale takes place. If the Company holds 20% ~ 50% of the voting power of the investee, it is presumed that the Company has significant influence.

After the disposal takes place, the Company shall account for any retained interest in associates in accordance with IAS 39 ‘Financial Instruments: Recognition and Discontinued Operations. Measurement’ unless the retained interest continues to be an associates, in which case the entity uses the equity method.

Under the equity method, an investment in an associate is initially recognized in the consolidated statement of financial position at cost and adjusted thereafter to recognize the Company’s share of the income or loss and other comprehensive income of the associate. When the Company’s share of losses of an associate exceeds the Company’s interest in that associate (which includes any long-term interests that, in substance, form part of the Company’s net investment in the associate), the Company discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment. Any excess of the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in income or loss.

The requirements of IAS 39,Financial ‘Financial Instruments: Recognition and MeasurementMeasurement’, are applied to determine whether it is necessary to recognize any impairment loss with respect to the Company’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36Impairment ‘Impairment of AssetsAssets’ as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

Upon disposal of an associate that results in the Company losing significant influence over that associate, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value

on initial recognition as a financial asset in accordance with IAS 39.36. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. In addition, the Company accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by that associate would be reclassified to income or loss on the disposal of the related assets or liabilities, the Company reclassifies the gain or loss from equity to income or loss (as a reclassification adjustment) when it loses significant influence over that associate.

When a groupCompany entity transacts with its associate, incomes and losses resulting from the transactions with the associate are recognized in the Company’s consolidated financial statements only to the extent of interests in the associate that are not related to the Company.

 

(5)(4)Investments in joint venturesJoint arrangements

A joint venturearrangement is a contractualan arrangement wherebyof which two or more parties have joint control. Joint control is the Company and other parties undertakecontractually agreed sharing of control of an economic activity that is subject to joint control (i.e.arrangement, which exists only when decisions about the strategic financial and operating policy decisions relating to therelevant activities of the joint venture require the unanimous consent of the parties sharing control).control. Joint arrangements are classified into two types—joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture arrangementsis a joint arrangement whereby the parties that involvehave joint control of the establishmentarrangement (i.e. joint venturers) have rights to the net assets of the arrangement.

If the Company is a separate entityjoint operator, the Company is to recognize and measure the assets and liabilities (and recognize the related revenues and expenses) in which each venturer has anrelation to its interest are referredin the arrangement in accordance with relevant IFRSs applicable to as jointly controlled entities.

Thethe particular assets, liabilities, revenues and expenses. If the joint arrangement is a joint venture, the Company reports its interests in jointly controlled entitiesis to account for that investment using the equity method accounting in accordance with IAS 28, ‘Investment in Associates and Joint Ventures’ (see note 3 (3)), except when the investmentCompany is applicable to the IFRS 5, ‘Non-current Assets Held for Sale’.

(5)Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which case itshould be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the Company is accounted for in accordance with IFRS 5Non-current Assets Held for Sale and Discontinued Operations. Any goodwill arising on the acquisitioncommitted to a sale plan involving loss of control of a subsidiary, all of the Company’sassets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Company will retain a non-controlling interest in a jointly controlled entity is accountedits former subsidiary after the sale.

Non-current assets (and disposal groups) classified as held for in accordance withsale are measured at the Company’s accounting policy forlower of their previous carrying amount and fair value less costs to sell.

(6)Goodwill

The Company measures goodwill arisingwhich acquired in a business combination. Whencombination at the amount recognized at the date on which it obtains control of the acquiree (acquisition date) less any accumulated impairment losses. Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergies arising from the goodwill acquired.

The Company transacts withassesses at the end of each reporting period whether there is any indication that an asset may be impaired. An impairment loss is recognized if the carrying amount of an asset or a CGU exceeds its jointly controlled entity, income and loss resulting from jointly controlled entitiesrecoverable amount. Impairment losses are recognized in profit or loss.

Any impairment identified at the Company’s consolidated financial statementsCGU level will first reduce the carrying value of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Except for impairment losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of interests in the jointly controlled entity that are not related to the Company.depreciation or amortization, if no impairment loss had been recognized.

 

(6)(7)Revenue recognition

Revenue from the sale of goods, rendering of services or use of the Company assets is measured at the fair value of the consideration received or receivable.receivable, net of returns, trade discounts and volume rebates, and are recognized as a reduction of revenue. Revenue is reduced for estimated customer returns, rebatesrecognized when the amount of revenue can be measured reliably and other similar allowances.it is probable that the economic benefits associated with the transaction will flow to the Company.

 

 (a)(i)SaleSales of goods—Electricity salesgoods

The Korean government approves the rates the Company chargescharged to the customers forby the Company’s power transmission and distribution division. The Company’s utility rates are designed to recover the Company’s reasonable costs plus a fair investment return. The Company’s power generation subsidiaries’ rates are determined in the market.

The Company recognizes electricity sales revenue based on power sold (transferred to the customer) up to the reporting date. To determine the amount of power sold, the Company estimates daily power volumes of electricity for residential, commercial, general etc electricity.and etc. The differences between the current month’s estimated amount and actual (meter-read) amount, is adjusted for (trued-up) during the next month period.

Fuel cost pass-through adjustment

As of July 1, 2011, the Korean government approved a fuel cost pass-through adjustment, allowing the Company to ultimately pass-through increase in fuel costs to the customer. The pass-through amount is determined based on prior three months moving average of global fuel changes and other factors.

Currently, the Korean government has issued a temporary hold-order on the Company, in collecting on the pass-through of fuel cost from the customers, as means to stabilize increasing inflation in Korea. As a result, as of December 31, 2011, the Company recognized a receivable in the amount of KRW 357,085 million for pass-through fuel costs.

 

 (b)(ii)RenderingSales of other services

Revenue from a contract to provide services rendered is recognized by referencein profit or loss in proportion to the stage of completion of the contract. Refertransaction at the reporting date. The stage of completion is assessed by reference to Note 2 (7) below for Construction contract related revenue recognition.surveys of work performed or services performed to date as a percentage of total services to be performed or the proportion that costs incurred to date bear to the estimated total costs of the transaction or other methods that reliably measures the services performed.

 

 (c)(iii)Dividend income and interest income

Dividend income from investments is recognized whenin profit or loss on the shareholder’sdate that the Company’s right to receive payment has beenis established, (provided that itwhich in the case of quoted securities is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).ex-dividend date.

Interest income from a financial asset is recognized whenas it is probable thataccrues in profit or loss, using the economic benefits will flow to the Company and the amount of income can be measured reliably.effective interest method. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

 

 (d)(iv)Rental income

The Company’s policy for recognition of revenue from operating leases is described in Note 2 (8)note 3 (9) below.

 (e)(v)Deferral of revenue—Transfer of assetsAssets from customersCustomers

The Company recovers a substantial amount of the cost related to its electric power distribution facilities from customers through the transfer of assets, while the remaining portion is recovered through electricity sales from such customers in the future. As such, the Company believes there exists a continued service obligation to the customers in accordance with IFRIC 18,Transfer ‘Transfer of Assets from Customers,Customers’ when the Company receives an item of property, equipment, or cash for constructing or acquiring an item of a property or equipment, in exchange for supplying electricity to customers. The Company defers the amounts received, which are then recognized as revenue over the estimated service period which does not exceed the transferred asset’s useful life.

 

(7)(8)Construction contractsservices revenue

The Company provides services related to the construction of power plantplants related to facilities toof its customers, mostly in foreign countries.

When the outcome of a construction contract can be estimated reliably, revenue and costs are recognized based on the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized to the extent of contract costs incurred thatwhen it is probable the revenue will be recoverable.realized. Contract costs are recognized as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately.

When contract costs incurred to date plus recognized income less recognized losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognized income less recognized losses, the surplus is shown as the amounts due to customers for contract work. Amounts received before the related work is performed are included in the consolidated statementstatements of financial position, as a liability, as advances received. Amounts billed for work performed but not yet paid by the customer are included in the consolidated statementstatements of financial position under accountas accounts and other receivables.

 

(8)(9)LeaseLeases

The Company classifies and accounts for leases as either a finance or operating lease, depending on the terms. Leases are classified as finance leases wheneverwhere the terms of the lease transferCompany assumes substantially all of the risks and rewards of ownership to the lessee.are classified as finance leases. All other leases are classified as operating leases.

 

 (a)(i)The Company as lessor

Amounts due from lessees under finance leases are recognized as receivables at the amount of the Company’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Company’s net investment outstanding in respect of the leases.

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term.

 

 (b)(ii)The Company as lessee

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are initially recognized as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in income or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Company’s general policy on borrowing costs. Contingent rentals are recognized as expenses in the periods in which they are incurred.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

 

(9)(10)Foreign currencies

The individual financial statements of each subsidiaryTransactions in foreign currencies are presented intranslated to the currency of the primary economic environment in which the entity operates (itsrespective functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Company entity are expressed in KRW which is the functional currencycurrencies of the Company and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual entities transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at theexchange rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary itemsMonetary assets and liabilities denominated in foreign currencies are retranslated atto the rates prevailing at that date.functional currency using the reporting date’s exchange rate. Non-monetary items carried at fair value that areassets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the rates prevailingexchange rate at the date whenthat the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognized in incomeprofit or loss in the period in which they arise except for:

 

(a)exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;

Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;

 

(b)exchange differences on transactions entered into in order to hedge certain foreign currency risks (see Note 2 (22) below for hedging accounting policies); and

Exchange differences on transactions entered into in order to hedge certain foreign currency risks; and

 

(c)exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to income or loss on disposal or partial disposal of the net investment.

Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to income or loss on disposal or partial disposal of the net investment.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Company’s foreign operations are expressed in KRWKorean won using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate).equity.

On the disposal ofWhen a foreign operation (i.e. a disposalis disposed of, the Company’s entire interestrelevant amount in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation,the translation is transferred to profit or loss of significant influence over an associate that includes a foreign operation), allas part of the accumulated exchange differences in respect of that operation attributable to the Company are reclassified to incomeprofit or loss. Any exchange differences that have previously been attributed to non-controlling interests are derecognized, but they are not reclassified to income or loss.

In addition, in relation to a partial disposal of a subsidiary that does not result in the Company losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognized in income or loss. For all other partial disposals (i.e. partial disposals of associates or jointly controlled entities that do not result in the Company losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to income or loss.

Goodwill and fair value adjustmentsloss on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognized in equity.disposal.

 

(10)(11)Borrowing costs

BorrowingThe Company capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying assets, whichasset as part of the cost of that asset. Other borrowing costs are assetsrecognized in expense as incurred. A qualifying asset is an asset that necessarily takerequires a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for theirits intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

All other borrowing costs are recognized in income or loss in the period in which they are incurred.

 

(11)(12)Government grants

Government grants are not recognized untilunless there is reasonable assurance that the Company will comply with the grant’s conditions attached to the grants and that the receipt of the grants are probable.grant will be received.

Government grants are recognized in the consolidated statement of comprehensive income over the periods in which the Company recognizes the related costs, for which the grants are intended to compensate as expense. Specifically, government grants, which are conditional to the Company purchasing, constructing or otherwise acquiring non-current assets, are recognized as deductions for related assets in the consolidated statement of financial position and transferred to income or loss over the estimated useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognized in income or loss in the period in which they become receivable.

In addition, a benefitBenefit from a government loan at a below-market interest rate is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

 

(12)(i)If the Company received grants related to assets

Government grants whose primary condition is that the Company purchase, construct or otherwise acquire long-term assets are deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduced depreciation expense.

(ii)If the Company received grants related to income

Government grants which are intended to compensate the Company for expenses incurred are recognized as other income (government grants) in profit or loss over the periods in which the Company recognizes the related costs as expenses.

(13)Employee benefits

(i)Retirement benefit obligationbenefits: defined contribution plans

PaymentsWhen an employee has rendered service to the Company during a period, the Company recognizes the contribution payable to a defined contribution plans are expensedplan in exchange for that service as incurred, which is as the related employee service is rendered.a liability (accrued expense), after deducting any contribution already paid.

(ii)Retirement benefits: defined benefit plans

For defined benefit pension plans and other post-employment benefits, the net periodic pension expense is actuarially determined on an annual basisby “Pension Actuarial System” developed by independent actuaries using the projected unit credit method.

The asset or liability recognized in the statement of financial position is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognized past service costs. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability.

All actuarial gains and losses that arise in calculating the present value of the defined benefit obligation and the fair value of plan assets are recognized immediately in retained earnings and included in the statement of comprehensive income.

For the purpose of calculating the expected return on plan assets, the assets are valued at fair value. Actual results will differ from results which are estimated based on assumptions. The vested portion of pastPast service cost arising from plan amendments is recognized immediately inas an expense at the income statement. The unvested portion is amortized on a straight-line basis overearlier of the average remaining period untilfollowing dates: (a) when the benefits become vested.plan amendment or curtailment occurs; (b) when the company recognizes related restructuring costs or termination benefits.

The retirement benefit obligation recognized in the consolidated statement of financial position represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial

gains and losses and unrecognized past service cost, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to unrecognized actuarial losses and past service cost, plus the present value of available refunds and reductions in future contributions to the plan.

 

(13)(14)Income taxtaxes

Income tax consists ofexpense comprises current and deferred tax. Current tax and deferred tax.tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

 

 (a)(i)Current tax

TheCurrent tax currentlyis the expected tax payable is basedor receivable on the taxable incomeprofit or loss for the year. Taxable income differs from income as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company’s liability for current tax is calculatedyear, using tax rates that have been enacted or substantively enacted byat the end of the reporting period.period and any adjustment to tax payable in respect of previous years. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.

 

 (b)(ii)Deferred tax

Deferred tax is recognized, onusing the asset-liability method, in respect of temporary differences between the carrying amounts of assets and liabilities in the consolidatedfor financial statementsreporting purposes and the correspondingamounts used for taxation purposes. A deferred tax bases used in the computation of taxable income. Deferred tax liabilities are generallyliability is recognized for all taxable temporary differences. DeferredA deferred tax assets are generallyasset is recognized for all deductible temporary differences to the extent that it is probable that taxable incomeprofit will be available against which those deductible temporary differencesthey can be utilized. SuchHowever, deferred tax assets and liabilities areis not recognized iffor the following temporary difference arises from goodwill or fromdifferences: taxable temporary differences arising on the initial recognition (other than in a business combination) of othergoodwill, or the initial recognition of assets andor liabilities in a transaction that is not a business combination and that affects neither theaccounting profit or loss nor taxable income nor the accounting income.

The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets or deferred tax liabilities on investment properties measured at fair value, unless any contrary evidence exists, are recognizedmeasured using the assumption that the carrying amount of the property will be recovered entirely through sale.

The Company recognizes a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, and associates, and interests in joint ventures, except whereto the extent that the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. DeferredThe Company recognizes a deferred tax assets arising fromasset for all deductible temporary differences associated with sucharising from investments in subsidiaries and interests are only recognizedassociates, to the extent that it is probable that there will be sufficient taxable income against which to utilize the benefits of the temporary differences and they are expected todifference will reverse in the foreseeable future.future and taxable profit will be available against which the temporary difference can be utilized.

The carrying amount of a deferred tax assetsasset is reviewed at the end of each reporting period and reducedreduces the carrying amount to the extent that it is no longer probable that sufficient taxable incomeprofit will be available to allow the benefit of part or all or part of thethat deferred tax asset to be recovered. utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply into the period in whichwhen the asset is realized or the liability is settled, or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset only if there is a legally enforceable right to offset the related current tax liabilities and assets, and they relate to income taxes levied by the same tax authority and they intend to settle current tax liabilities and assets on a net basis.

 (c)(iii)Current and deferred tax for the year

Current and deferred tax are recognized in income or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

 

(14)(15)Property, plant and equipment

Property, plant and equipment are statedinitially measured at cost and after initial recognition, are carried at cost less subsequent accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment isincludes expenditures arising directly attributable to their purchasefrom the construction or construction, which includesacquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. It also includesmanagement and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Subsequent costs are recognized in the carrying amount of an assetproperty, plant and equipment at cost or, if appropriate, as an assetseparate items if it is probable that future economic benefits associated with the assetsitem will flow intoto the Company and the cost of an assetthe item can be measured reliably. Routine maintenance and repairsThe carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are expensedrecognized in profit or loss as incurred.

The Company does not depreciate land. Depreciation expense is computed using theProperty, plant and equipment, except for land, are depreciated on a straight-line method based on thebasis over estimated useful yearslives that appropriately reflect the pattern in which the asset’s future economic benefits are expected to be consumed. For loaded nuclear fuel related to long-term raw materials and spent nuclear fuels related to asset retirement costs, the Company uses the production method to measure and recognizes as expense the economic benefits of the assetsassets.

The estimated useful lives of the Company’s property, plant and equipment are as follows:

 

   Estimated Useful Yearslives (years)

Buildings

  8 ~ 40

Structures

  8 ~ 50

Machinery

  6 ~ 32

Vehicles

  4

Loaded heavy water

  30

Asset retirement costs

  18, 30, 40

Finance lease assets

  20

Ships

  9

Others

  4 ~ 9

For loaded nuclear fuel (PWR) and asset retirement costs relatedA component that is significant compared to long-term raw materials, the Company uses the production method to measure and recognize as expense the economic benefits of the assets.

If thetotal cost of a part of property, plant and equipment is significant compared to the overall total cost of the property, plant and equipment, the cost of the part is separately depreciated from the related property, plant and equipment.

The Company reviews the depreciation method, the estimatedover its separate useful life. Depreciation methods, useful lives and residual values of property, plant and equipmentare reviewed at the end of each annual reporting period. If expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate.date and adjusted, if appropriate.

Property, plant and equipment isare derecognized on disposal, or when no future economic benefits are expected from its use or disposal. Gains or losses arising from derecognition of a property, plant and equipment, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in income or loss when the asset is derecognized.

(15)(16)Investment property

Investment properties are propertiesProperty held to earnfor the purpose of earning rentals and/or forbenefiting from capital appreciation (includingis classified as investment property. Investment property under construction for such purposes). Investment properties are measuredis initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at its cost. Transaction costs are included in the initial acquisitionmeasurement. Subsequently, investment property is carried at depreciated cost less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

While land is not depreciated, all otherSubsequent costs are recognized in the carrying amount of investment property at cost or, if appropriate, as separate items if it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.

Investment property except for land, are depreciated based on the respective assets estimated useful lives ranging froma straight-line basis over 8 ~ 40 years using the straight-line method.as estimated useful lives.

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in income or loss in the period in which the property is derecognized.

 

(16)(17)Intangible assets

 

 (a)(i)Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.

 

 (b)(ii)Internally-generated intangible assets—researchResearch and development expenditure

Expenditure on research activities is recognized as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, all of the following have been demonstrated:

 

theThe technical feasibility of completing the intangible asset so that it will be available for use or sale;

 

theThe intention to complete the intangible asset and use or sell it;

 

theThe ability to use or sell the intangible asset;

 

howHow the intangible asset will generate probable future economic benefits;

 

theThe availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

 

theThe ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. When the development expenditure does not meet the criteria listed above, an internally-generated intangible asset cannot be recognized and the expenditure is recognized in income or loss in the period in which it is incurred.

Internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses.

The estimated useful lives and amortization methods of the Company’s intangible assets with finite useful lives are as follows:

Useful lives (years)

Amortization methods

Usage rights for donated assets

4 ~ 30Straight

Software

4, 5Straight

Industrial rights

5, 10Straight

Development expenses

5Straight

Dam usage right

50Straight

Mining right

—  Unit of production

Others

4 ~ 20, 50Straight

 

 (c)(iii)Intangible assets acquired in a business combination

Intangible assets that are acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

 (d)(iv)Derecognition of intangible assets

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from its use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognized in income or loss when the asset is derecognized.

 

(e)Intangible assets useful lives

As of December 31, 2011, the estimated useful years and amortization method of intangible assets with finite useful lives are as follows (KRW in millions):

(18)Estimated Useful Years

Usage rights for donated assets

4 ~ 30

Software

4, 5

Industrial rights

5, 10

Development expenses

5

Dam usage right

50

Others

4~20

(17)Impairment of property, plant, equipment and intangiblenon-financial assets other than goodwill

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets with definite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in income or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does

not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in income or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

 

(18)(19)Inventories

Inventories are statedmeasured at the lower of cost and net realizable value. Cost of inventories, except for those in in-transit,transit, are measured under the weighted average method and consists of the purchase price, cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realizable value representsis the estimated selling price for inventoriesin the ordinary course of business, less allthe estimated costs of completion and costs necessary to make the sale.

selling expenses. The carrying amount of inventories sold in the period and the amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period; lessperiod the write-down or loss occurs. The amount of any reversal in the period of any write-down of the inventories, arising from an increase in net realizable value, isare recognized as a reduction in the amount of inventories recognized as an expense duringin the period.period in which the reversal occurs.

 

(19)(20)Provisions

Provisions are recognized when the Company has a present obligation (legallegal or constructive)constructive obligation as a result of a past event, it is probable that the Companyan outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision isrisks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (whereprovision. Where the effect of the time value of money is material).material, provisions are determined at the present value of the expected future cash flows.

WhenWhere some or all of the economic benefitsexpenditures required to settle a provision are expected to be recovered from a thirdreimbursed by another party, a receivable isthe reimbursement shall be recognized as an asset ifwhen, and only when, it is virtually certain that reimbursement will be received andif the amount ofentity settles the receivable canobligation. The reimbursement shall be measured reliably.treated as a separate asset.

Increase in provisions due to passage of time is recognized as finance expense during the period. AtProvisions are reviewed at the end of each reporting period the remaining provision balance is reviewed and assessedadjusted to determine ifreflect the current best estimate is being recognized.estimates. If the existence of an obligation to transfer economic benefitit is no longer probable that an outflow of resources embodying economic benefits will be required to settle the relatedobligation, the provision is reversed during the period.

Provisions for estimated future costs are discounted to present value, based on a discount rate which reflects the current market assessment of the time value of money, risks specific to the liability and pre-tax.reversed.

 

 (a)Provision for decommissioning costs

The Company records the fair value of estimated decommissioning costs as a liability in the period in which we incur a legal obligation associated with retirement of long-lived assets that result from acquisition, construction, development and/or normal use of the assets. The Company also recognizes a corresponding asset that is depreciated over the life of the asset. Accretion expense consists of period-to-period changes in the liability for decommissioning costs resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows. Depreciation and accretion expenses are included in cost of sales of goods in the accompanying consolidated statements of comprehensive income.

Under the Korean Electricity Business Act (EBA) Article 94, the Company is required to record a liability for the dismantling (demolition) of nuclear power plants and disposal of spent fuel and low & intermediate radioactive wastes.

(b)(i)Provision for Polychlorinated Biphenyls (“PCB”)

Under the regulation of Persistent Organic Pollutants Management Act, enacted in 2007, the Company is required to remove polychlorinated biphenyls (PCBs), a toxin, from the insulating oil of its transformers by 2025. As a result of the enactments, the Company is required to inspect the PCBs contents of transformers and dispose of PCBs in excess of safety standards under the legally settled procedures. The Company’s estimates and assumptions used to determine fair value can be affected by many factors, such as the estimated costs of inspection and disposal, inflation rate, discount rate, regulations and the general economy.

(ii)Provision for decommissioning costs of nuclear power plants

The Company records the fair value of estimated decommissioning costs as a liability in the period in which the Company incurs a legal obligation associated with retirement of long-lived assets that result from acquisition, construction, development and/or normal use of the assets. Accretion expense consists of period-to-period changes in the liability for decommissioning costs resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows.

 (c)(iii)Provision for disposal of spent nuclear fuel

Under the Radioactive Waste Management Act, the Company is levied to pay the spent nuclear fuel fund for the management of spent nuclear fuel. The Company recognizes the provision of present value of the payments.

(iv)Provision for low and intermediate radioactive wastes

Under the Radioactive Waste Management Act, the Company recognizes the provision for the disposal of low and intermediate radioactive wastes in best estimate of the expenditure required to settle the present obligation.

(v)Provisions for power plant regional support program

In accordance with regulations on nuclear and hydro-electric power plants’ social responsibility to support the surrounding communities of the power plants sites; KHNP, the Company’s nuclear generation subsidiary, accrues 0.25won per KWH of KHNP’s generation volume from two periods prior, as a provision for power plant regional support program during the year. Power plant regional support programs consist of scholarship programs to local students, local economy support programs, local culture support programs, environment development programs, and local welfare programs. The Company recognizes the provision in relation to power plant regional support program.

 

(20)Financial assets(vi)Provision for employment benefits

AllThe Company determines the provision for employment benefits as the incentive payments based on the results of the individual performance evaluation or management assessment.

(21)Non-derivative financial assets

The Company recognizes and measures non-derivative financial assets by the following four categories: financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. The Company recognizes financial assets in the statement of financial position when the Company becomes a party to the contractual provisions of the instrument. Upon initial recognition, non-derivative financial assets are measured at their fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the asset’s acquisition or issuance.

A regular way purchase or sale of financial assets shall be recognized and derecognized, onas applicable, using trade date where theaccounting or settlement date accounting. A regular way purchase or sale is a purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframetime frame established generally by regulation or convention in the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified at fair value through profit or loss, which are initially measured at fair value.

Financial assets are classified into the following specified categories; ‘financial assets at fair value through profit or loss’, (FVTPL), ‘held-to-maturity investments’, ‘available-for-sale financial assets’, and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.marketplace concerned.

 

 (a)(i)Effective interest method

The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as FVTPL.financial assets at fair value through profit or loss.

 

 (b)(ii)Financial assets at fair value through profit or loss (FVTPL)

FinancialA financial asset is classified as financial assets are classified as FVTPL when the financial assetat fair value through profit or loss if it is either held for trading or it is designated as FVTPL.such upon initial recognition. Upon initial recognition, transaction costs are recognized in profit or loss when incurred. A financial assets its acquired principally for the purpose of selling it in the near term are classified as a short-term financial assets held for trading and

also all the derivatives including an embedded derivate that is not designated and effective as a hedging instrument are classified at the short-term trading financial asset as well. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.

A financial asset is classified as held for trading if:

 

itIt has been acquired principally for the purpose of selling it in the near term; or

 

onOn initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking;short term profit taking; or

 

itIt is a derivative, including an embedded derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at FVTPLfinancial assets at fair value through profit or loss upon initial recognition if:

 

suchSuch designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

 

theThe financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its’ performance is evaluated on a fair value basis in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

it forms part of a contract containing one or more embedded derivatives, and IAS 39Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.

It forms a part of a contract containing one or more embedded derivatives, and with K-IFRS No. 1039, Financial Instruments; Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at financial assets at fair value through profit or loss.

Financial assets at FVTPLfair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurementre-measurement recognized in income or loss. The net gain or loss recognized in income or loss incorporates any dividend or interest earned on the financial asset and is included in the ‘finance income and finance expenses’ line item in the consolidated statement of comprehensive income.

 

 (c)(iii)Held-to-maturity investments

Financial assetsA non-derivative financial asset with a fixed or determinable paymentspayment and fixed maturity, dates thatfor which the Company has the positive intentintention and ability to hold to maturity, are classified as held-to-maturity investments. Held-to-maturitySubsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment, with revenue recognized on an effective yield basis.method.

 

 (d)(iv)Available-for-sale financial assets (“AFS”)

FinancialAvailable-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as financial assets at held-to-maturity; held-for-trading; designated as FVTPL;fair value through profit or loss,held-to-maturity investments or loans and receivables are classified as financial assets AFS.receivables.

Gains and losses arising from changes in fair value are recognized in other comprehensive income and accumulated in the valuation reserve. However, impairment losses, interest calculated using the effective interest method, and foreign exchange gains and losses on monetary assets are recognized in income or loss. Unquoted equity investments which are not traded in an active market, whose fair value cannot be measured reliably are carried at cost. Where the investment

When a financial asset is disposed ofderecognized or is determined to be impaired,impairment losses are recognized, the cumulative gain or loss previously accumulatedrecognized in the valuation reserveother comprehensive income is reclassified from equity to incomeprofit or loss.

Dividends on AFSan available-for-sale equity instrumentsinstrument are recognized in incomeprofit or loss when the Company’s right to receive the dividendspayment is established.

The fair value of AFSavailable-for-sale monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. The foreign exchange gains and losses that are recognized in income or loss are determined based on the amortized cost of the monetary asset. Other foreign exchange gains and losses are recognized in other comprehensive income.

 

 (e)(v)Loans and receivables

TradeLoans and receivables loans, and other receivables that haveare financial assets with fixed or determinable payments that are not tradedquoted in an active market are classified as ‘loans and receivables’. Loansmarket. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method less any impairment. Interest income is recognized by applying the effective interest rate, except for short-termloans and receivables whose period interest incomeof which the effect of discounting is immaterial.

 

 (f)(vi)Impairment of financial assets

Financial assets, other than those at FVTPL,financial assets at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For listed and unlisted equity investments classified as AFS,available-for-sale financial asset, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.impairment in addition to the criteria mentioned below .

For all other financial assets, objective evidence of impairment could include:

 

significant financial difficulty of the issuer or counterparty; or

Significant financial difficulty of the issuer or counterparty; or

 

breach of contract, such as a default or delinquency in interest or principal payments; or

Breach of contract, such as a default or delinquency in interest or principal payments, or

 

it becoming probable that the borrower will enter bankruptcy or financial re-organization; or

It becoming probable that the borrower will enter bankruptcy or financial re-organization; or

 

the disappearance of an active market for that financial asset because of financial difficulties.

The disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of,and, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets recorded at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in income or loss.

When an AFSavailable-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to income or loss in the period.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through income or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

In respect of AFSavailable-for-sale equity securities, impairment losses previously recognized in income or loss are not reversed through income or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. In respect of AFSavailable-for-sale debt securities, impairment losses are subsequently reversed through income or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

 

 (g)(vii)DerecognitionDe-recognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the rights to receive the contractual cash flows on the financial asset andin a transaction in which substantially all the risks and rewards of ownership of the financial asset to another entity. Ifare transferred. Any interest in transferred financial assets that is created or retained by the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferredis recognized as a separate asset the Company recognizes its retained interest in the asset and an associated liability for amounts it may have to pay.or liability. If the Company retains substantially all the risks and rewards of ownership of athe transferred financial asset,assets, the Company continues to recognize the transferred financial assetassets and also recognizes a collateralized borrowingfinancial liabilities for the proceedsconsideration received.

On derecognitionde-recognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in income or loss.

On derecognitionde-recognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in income or loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.

 

(21)(22)FinancialNon-derivative financial liabilities and equity instruments issued by the Company

 

 (a)(i)Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

 

 (b)(ii)Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in income or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

 (c)(iii)Financial liabilities at FVTPL

Financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments. Financial liabilities are initially measured at fair value. Transaction cost that are directly attributable to the issue of financial liabilities are added to or deducted from the fair value of the financial liabilities, as appropriate, on initial recognition. Transaction cost directly attributable to acquisition of financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Financial liabilities are classified as either financial liabilities ‘at FVTPL’at fair value through profit or ‘otherloss or other financial liabilities’. liabilities.

(iv)Financial liabilities at fair value through profit or loss (FVTPL)

Financial liabilities are classified as at FVTPLfinancial liabilities at fair value through profit or loss when the financial liability is either held for trading or it is designated as FVTPL.financial liabilities at fair value through profit or loss.

A financial liability is classified as held for trading if:

 

1)it has been acquired principally for the purpose of repurchasing it in the near term; or

It has been acquired principally for the purpose of repurchasing it in the near term; or

 

2)on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or

On initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or

 

3)it is a derivative that is not designated and effective as a hedging instrument.

It is a derivative that is not designated and effective as a hedging instrument.

A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:

 

1)such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

 

2)the financial liability forms part of a group

The financial liability forms part of a Company of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

3)it forms part of a contract containing one or more embedded derivatives, and IAS 39Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.

It forms part of a contract containing one or more embedded derivatives, and IAS 39, ‘Financial Instruments: Recognition and Measurement’, permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial liabilities at FVTPLfair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurementre-measurement recognized in income or loss. The net gain or loss recognized in income or loss incorporates any interest paid on the financial liability and is included in ‘finance income and finance expenses’.

 

 (d)(v)Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

 (e)(vi)Financial guarantee contract liabilities

Financial guarantee contract liabilities are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of: (a) the amount of the obligation under the contract, as determined in accordance with IAS 37,Provisions, ‘ Provisions’, Contingent Liabilities and Contingent Assets;Assets; or (b) the amount initially recognized less, cumulative amortization recognized in accordance with the IAS 18,Revenue ‘ Revenue’.

 

 (f)(vii)DerecognitionDe-recognition of financial liabilities

The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in income or loss.

 

(22)(23)Derivative financial instruments, including hedge accounting

The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including foreign exchange forward contracts, interest rate swaps and cross currency swaps and others.

Derivatives are initially recognized at fair valuevalue. Subsequent to initial recognition, derivatives are measured at the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period.value. The resulting gain or loss is recognized in income or loss immediately unless the derivative is designated and effective as a hedging instrument, in such case the timing of the recognition in income or loss depends on the nature of the hedge relationship.

A derivative with a positive fair value is recognized as a financial asset; a derivative with a negative fair value is recognized as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realized or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

 (a)(i)EmbeddedSeparable embedded derivatives

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and when the host contracts are not measured at FVTPL.

An embedded derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the hybrid instrument to which the embedded derivative is part of, is more than 12 months and it is not expected to be realized or settled within 12 months. All other embedded derivatives are presented as current assets or current liabilities.

 

 (b)(ii)Hedge accounting

The Company designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, as either fair value hedges andor cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item.

 

 (c)(iii)Fair value hedges

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in income or loss immediately, together with any changes in the fair value of the hedged

asset or liability that are attributable to the hedged risk. The changes in the fair value of the hedging instrument and the change in the hedged item attributable to the hedged risk relating to the hedged items are recognized in the consolidated statements of comprehensive income.

Hedge accounting is discontinued when the Company revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. The fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortized as income or loss as of that date.

 

 (d)(iv)Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the heading of reverse for gains(loss)gains (loss) on valuation of derivatives. The gain or loss relating to the ineffective portion is recognized immediately in income or loss, and is included in the ‘finance income and expense’.

Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to income or loss in the periods when the hedged item is recognized in income or loss, in the same line of the consolidated statement of comprehensive income as the recognized hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability.

Hedge accounting is discontinued when the Company revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or it no longer qualifies for hedge accounting. Any gain or loss accumulated in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in income or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in income or loss.

3.Critical accounting judgments and key sources of estimation uncertainty

In the application of the Company accounting policies, which are described in Note 2, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

 

(1)Useful lives of property, plant and equipment

In accordance with IFRS, property, plant and equipment are stated at cost. The Company does not depreciate land. Depreciation is computed by the straight-line method (unit-of-production method for loaded nuclear fuel (PWR) and capitalized asset retirement cost of loaded nuclear fuel) using rates based on the estimated useful lives. Net property, plant and equipment as of December 31, 2011 totaled KRW 112,384,881 million representing more than 82% of total assets. Given the significance of property, plant and equipment and the associated depreciation expense to our financial statements, the determination of an asset’s economic useful life is considered to be a critical accounting estimate.

Economic useful life is the duration of time the asset is expected to be productively employed by us, which may be less than its physical life. Management’s assumptions on the following factors, among others, affect the determination of estimated economic useful life: wear and tear, obsolescence, technical standards, changes in market demand and technological changes. The Company reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period.

(2)Estimations on provision for decommissioning costs

The Company records the fair value of estimated decommissioning costs as a liability in the period in which we incur a legal obligation associated with retirement of long-lived assets that result from acquisition, construction, development and/or normal use of the assets. Under the Korean Electricity Business Act (EBA) Article 94, the Company is required to record a liability for the dismantling (demolition) of nuclear power plants and disposal of spent fuel and low & intermediate radioactive wastes.

Significant management judgment is involved in determining the fair value of estimated decommissioning costs. The estimates and assumptions used by our management to determine fair value can be impacted by many factors, such as the estimated decommissioning costs based on engineering studies commissioned and approved by the Korean government, and changes in assumed dates of decommissioning, inflation rate, discount rate, decommissioning technology, regulation and the general economy.

As of December 31, 2011 and 2010, we recorded liability for decommissioning costs in the amounts of KRW 6,727 billion and KRW 5,976 billion, respectively. Changes in the estimated costs or timing of decommissioning, or changes in the assumptions and judgments by management underlying these estimates, may cause material revisions to the estimated total cost to decommission these facilities, which could have a material effect on the recorded liability. The Company used a discount rate of 4.36% and an inflation rate of 2.30% when calculating the decommissioning cost liability recorded as of December 31, 2011 and 2010. In addition, the following is a sensitivity analysis of the potential

impact on decommissioning costs from a 0.10% increase or decrease in each of the inflation rate and the discount rate, assuming that all other aforementioned assumptions remain constant (KRW in millions):

     Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 
     0.1% 

TYPE

 Accounts Increase  Decrease  Increase  Decrease  Increase  Decrease 

Discount rate

 Nuclear plants  (111,132  114,140    (104,473  107,275    (104,320  107,208  

 Spent fuel  (21,386  21,946    (21,297  21,876    (19,663  20,217  

Inflation rate

 Nuclear plants  150,939    (146,083  136,532    (132,273  130,828    (126,747

 Spent fuel  29,371    (28,439  28,179    (27,284  25,100    (24,303

(3)Provision for Polychlorinated Biphenyls (“PCBs”)

The Company is required to inspect the PCBs contents of transformers and dispose of PCBs in excess of safety standards under the legally settled procedures. The Company’s estimates and assumptions used to determine fair value can be affected by many factors, such as the estimated costs of inspection and disposal, inflation rate, discount rate, regulations and the general economy.

Changes in the estimated costs or changes in the assumptions and judgments underlying these estimates may cause material revisions to the estimated total costs, which could have a material effect on our recorded liability. The Company used a discount rate of 5.84%, 6.49% and 6.49% and an inflation rate of 3.34%, 2.81% and 3.08% when calculating the provision for the decontamination of transformers recorded as of December 31, 2011, December 31, 2010 and January 1, 2010.

In addition, the following is a sensitivity analysis of the potential impact on decontamination costs based on a 0.10% increase or decrease in each of the inflation rate and the discount rate, assuming that all other aforementioned assumptions remain constant (KRW in millions):

        Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 
        0.1% 

TYPE

  Accounts   Increase  Decrease  Increase  Decrease  Increase  Decrease 

Discount rate

   PCBs    (Won)(1,291 (Won)1,302   (Won)(760 (Won)764   (Won)(733 (Won)737  

Inflation rate

   PCBs     1,332    (1,323  790    (788  761    (758

(4)Deferred tax asset

In assessing the realizability of the deferred tax assets, the Company considers whether it is probable that a portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on whether the Company is able to generate future taxable income in specific tax jurisdictions during the periods in which temporary differences become deductible. The Company has scheduled the expected future reversals of the temporary differences and projected future taxable income in making this assessment. Based on these factors, the Company believes that it is probable that the Company will realize the benefits of these temporary differences as of December 31, 2011. However, the amount of deferred tax assets may be different if we do not realize estimated future taxable income during the carry forward periods as originally expected.

The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities at each separate taxpaying entity. Under IFRS, a deferred tax asset is recognized for temporary difference that will result in deductible amounts in future years and for carry forwards. If, based on the weight of available evidence, it is probable that some or the entire portion of the deferred tax asset will not be realized, that portion is deducted directly from the deferred tax asset.

The Company believes that the accounting estimate related to realizability of deferred tax asset is a “critical accounting estimate” because: (i) it requires the Company to make assessments about the timing of future events, including the probability of expected future taxable income and available tax planning opportunities, and (ii) the difference between these assessments and the actual performance could have a material impact on the realization of tax benefits as reported in our results of operations. The Company’s assumptions require significant judgment because actual performance has fluctuated in the past and may continue to do so.

(5)Valuations of financial instruments at fair values

As stated in note 43, the Company uses inputs that are not based on observable market data to estimate the fair value of certain types of financial instruments. Note 43 explains the details of assumptions used for valuations of financial instruments and sensitivity analysis of these assumptions. Management believes valuation techniques and assumptions are reliable and appropriate.

(6)Retirement benefit costs

The Company offers defined benefit retirement plans. The cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting period. For actuarial valuations, discount rate, future salary increase and expected return on plan assets are estimated and these estimations are uncertain.

4.TRANSITION TO IFRSs

(1)Application of IFRS

Historically, the Company prepared it financial statements in accordance with generally accepted accounting principles in the Republic of Korea (“Korean GAAP” or “previous GAAP”). As of January 1, 2011 (the “date of transition”), the Company has adopted IFRS as issued by IASB, and prepared its first consolidated financial statements in accordance with IFRS 1First-time of adoption of IFRS.

(2)IFRS 1First-time of adoption of IFRS—Optional exemptions

IFRS 1 provides for a number of optional exemptions from the general principle of full retrospective applications. The optional exemptions for first-time adoption of IFRS of the Company are as follows.

(a)Business combination

The Company has elected not to apply IFRS 3,Business Combinations retrospectively to past business combinations that occurred before January 1 2010, the date of transition to IFRS.

(b)Fair value or revaluation as deemed cost

Land, property, plant and equipment have been revalued at the date of transition to IFRS and that revaluation is used as the asset’s deemed cost.

Effect of revaluation in land, property, plant and equipment as of January 1, 2010 are as follows

(KRW in millions):

Korean GAAP

  Revaluation increase   IFRS 

(Won) 74,033,431

  (Won)21,839,510    (Won)95,872,941  

(c)Cumulative translation differences

Cumulative translation differences for all foreign operations were deemed to be zero at the date of transition to IFRS.

(d)Leases

The Company has elected to apply the transitional provisions in International Financial Reporting Interpretations Committee (“IFRIC”) 4,Determining Whether an Arrangement Contains a Lease (“IFRIC 4”), thereby determining whether the Company has any arrangements that exist at the date of transition to IFRS that contain a lease on the basis of facts and circumstances existing at January 1, 2010. No such arrangements were identified.

(e)Investments in subsidiaries, associates,Segment, Geographic and joint ventures

For certain investments in foreign subsidiaries, associates, or joint ventures, who have previously adopted IFRS, the Company recognized the carrying values on the respective entity’s books, as of date of transition, as deemed cost.

(f)Decommissioning liabilities included in the cost of property, plant and equipment

In accordance with IFRIC 1Changes in Existing Decommissioning, Restoration and Similar Liabilities, specified changes in a decommissioning, restoration or similar liability are added to or deducted from the cost of the asset to which it relates, and the adjusted depreciable amount of the asset is then depreciated prospectively over its useful life.

(3)Exceptions to retrospective application of other accounting standards.

(a)Derecognition of financial assets

The Company applied derecognition criteria listed in IAS 39Financial Instruments: Recognition and derecognition for transfer of financial assets for transfers after the transition date. For any derecognized financial assets in accordance with past accounting standards before the date of transition, the Company did not retrospectively recognize such assets in accordance with IFRS, even if it does not satisfy the derecognition criteria under IFRS.

(b)Exception for estimates

The company applied estimates which are estimated before the date of transition to be consistent with estimates made for the same date under previous Korean GAAP, after adjustments to reflect any difference in accounting policies.

(4)Explanation of transition to IFRSs

Korean GAAP

IFRS

Scope of consolidation (*1)

The definition of control is similar to those in IFRS. However, some of the scope of consolidation is restricted by the Act on External Audit of Stock Companies as below.

•   An entity that another entity owns more than 30% of shares as the largest shareholder is included in consolidation.

•   A subsidiary with less than 10 billion Won in its total assets as of the previous fiscal year end is excluded from consolidation.

•   An unincorporated entity such as a partnership is excluded from consolidation

Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. All entities controlled by the Company are consolidated regardless of quantitative significance. As a result, at transition date to IFRS, the Company’s change in scope of consolidation as compared with those of Korean GAAP.

Korean GAAP

IFRS

Property, plant and equipment

Under Korean GAAP, the Company uses the cost model in the measurement after initial recognition.

The depreciation method is required to be applied consistently at each period and cannot be changed unless there are justified reasons. For a newly acquired asset, the same depreciation methods applied to the existing, similar assets are applied consistently.

The Company revalued its property and equipment as at January 1, 2010 and used their fair values as deemed cost in the opening IFRS statement of financial position.

For the measurement after initial recognition, IAS 16, Property, Plant and Equipment allows for an entity to choose either the cost model or the revaluation model by the class of property and equipment and the Company has chosen the cost model.

The residual value, the useful life and the depreciation method of property and equipment are required to be reviewed at least at each financial year-end and, if expectations differ from previous estimates, the changes should be accounted for as a change in an accounting estimate in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

The Company changed its depreciation method of equipment from a declining balance method to a straight-line method in connection with the adoption of IFRS.

Revenue recognition

Under Korean GAAP, the Company read meters and bills customers on a cycle basis. The Company did not accrue revenue for power sold to customers between the meter-reading date and end of the reporting period but recorded the revenue in the subsequent period. Such practice was consistent with the Accounting Regulations for Public Enterprise Associated Government Agency, which has been approved by the Korean Ministry of Strategy and Finance (formerly the Korean Ministry of Finance and Economy) and considered by the utility industry in Korea as Korean GAAP.Under IFRS, the Company estimates and recognizes unbilled revenue related to the sale of power between the meter-reading dates and the end of the reporting period.

Retirement benefit obligation & long-term employee benefits obligation

Allowances for retirement benefits accrued equal to the amounts to be paid at the end of reporting period, assuming that the all entitled employees with a service year more than a year would retire at once. Retirement benefit expenses incur at the point when the payment obligation is fixed. The Company recognized allowances for long-term employee benefit at the point when the payment obligation is fixed.The retirement benefit amount is appropriated as a defined benefit obligation by actuarial assessment using the projected unit credit method. Also, the Company recognizes its long-term employee benefits obligation by actuarial assessment using the projected unit credit method.

Korean GAAP

IFRS

Income tax

Under Korean GAAP, deferred tax assets and liabilities were classified as either current or non-current based on the classification of their underlying assets and liabilities assuming that all differences from one entity are recovered or settled together. If there are no corresponding assets or liabilities, deferred tax assets and liabilities were classified based on the periods the temporary differences were expected to reverse.Under IFRS, deferred tax assets and liabilities are all classified as non-current on the statement of financial position.
Under Korean GAAP the temporary differences associated with investments in subsidiaries, branches and associates and interest in joint ventures were recognized as deferred tax assets and liabilities.Under IFRS, the temporary differences associated with investments in subsidiaries, branches and associates and interest in joint ventures is recognized as deferred assets and liabilities reflecting the manner in which Company expects to recover or settle the carrying amount of its assets and liabilities.

Financial assets—measurement and impairment

The Company’s available-for-sale securities, loans & receivables and other financial assets are measured at fair value. Under Korean GAAP, expected loss was estimated and set as allowance for doubtful accounts based on the Company’s evaluation of loans’ and receivables’ collectability.Under IFRS, the Company reviews whether or not impairment exists for individually significant loans and receivables. For other loans and receivables, the Company groups loans and receivables which have similar credit risks, performs collective impairment test, and estimates the incurred loss as allowance for doubtful loans and receivables.

Construction contracts

Under Korean GAAP, there was no concept of recognizing the gross amount due from or due to customers as an asset or liability.Under IFRS, the due from or due to customers amount which is the net amount of cost incurred plus recognized profits, less the sum of the recognized losses and progress billing. If the costs incurred plus recognized profit (or losses) exceeds progress billings a due from customer amount is recognized as an asset, and if the progress billing exceeds the cost incurred plus recognized profit (or losses) a due to customer amount is recognized as a liability.

Other reclassifications

i.  Memberships and guarantee deposits Under Korean GAAP memberships and guarantee deposits were classified as other non-current assets.

Under IFRS facility-use memberships are recognized as intangible assets with an indefinite useful life and guarantee deposits that satisfy the definition of financial assets are classified as loans and receivables at amortized costs.

ii. Investment property and intangible assets
Under Korean GAAP, properties acquired for earn rental income and/or for capital appreciation (including property under construction for such purposes) were classified as property, plant and equipment.

Under IFRS, such properties are reclassified separately as investment properties and for property under construction with intangible asset type items are classified separately within intangible assets.

(*1)As at January 1, 2010, the date of transition to IFRS, the Company’s change in scope of consolidation is as follows:

Type

Description

Company

Newly Added

Under the former ‘Act on External Audit of Stock companies’ Article 1.3 Section 2.1 in the Republic of Korea, companies those whose total assets are less than 10 billion Korean won were not subject to consideration, However, under IFRS all entities are subject to consolidation.

KEPCO Canada Uranium Investment Limited Partnership

KEPCO Middle East Holding Company

Qatrana Electric Power Company

Sylardus Holdings B.V.,

Akkuyu Finance B.V.

Akkuyu Fuel B.V.

Akkuyu Operation B.V.

Korea Electric Power Nigeria Ltd.

KOWEPO International Corporation

KOSPO Jordan LLC

EWP Cebu Corporation

KOREA Waterbury Uranium Limited Partnership

Akkuyu Electricity Production Company

Excluded

Under the former ‘Act on External Audit of Stock companies’ Article 1.3 Section 2.1 in the Republic of Korea, entities where the Company owns more than 30% of shares and is the largest shareholder with the largest voting rights were included in the scope. Under IFRS no such exceptions exist.

KEPCO SPC Power Corporation.

(formerly KEPCO Salcon Power Corporation)

(5)Explanation of effects of transition to IFRS

(a)Effects of transition of IFRS at January 1, 2010, date of transition, are as follows (KRW in millions):

Item

  Note   Asset  Liability  Equity 

Korean GAAP (Previous GAAP)

    (Won)93,208,031   (Won)51,804,224   (Won)41,403,807  

Reconciliation of transition effects

      

Consolidation

   (*1)     656,730    102,943    553,787  

Property, plant and equipment

   (*2)     26,567,833    9,382,612    17,185,221  

Leases

   (*3)     1,248,604    1,564,536    (315,932

Revenue recognition

   (*4)     1,285,709    326,598    959,111  

Employee benefits

   (*5)     80,676    683,829    (603,153

Income taxes

   (*6)     (500,193  1,685,847    (2,186,040

Other

   (*7)     70,643    (219,894  290,537  
    

 

 

  

 

 

  

 

 

 

IFRS

    (Won)122,618,033   (Won)65,330,695   (Won)57,287,338  
    

 

 

  

 

 

  

 

 

 

(b)Effects of transition to IFRS at December 31, 2010, the end date of the last fiscal period the last financial statements were prepared under Korean GAAP, are as follows (KRW in millions):

Item

  Note   Asset  Liability  Equity 

Korean GAAP (Previous GAAP)

    (Won)99,610,398   (Won)58,121,798   (Won)41,488,600  

Reconciliation of transition effects

      

Consolidation

   (*1)     501,166    (301,393  802,559  

Property, plant and equipment

   (*2)     28,672,884    11,771,386    16,901,498  

Leases

   (*3)     1,120,143    1,420,717    (300,574

Revenue recognition

   (*4)     1,350,042    344,135    1,005,907  

Employee benefits

   (*5)     78,867    876,723    (797,856

Income taxes

   (*6)     (1,771,638  294,934    (2,066,572

Other

   (*7)     (44,068  (287,043  242,975  
    

 

 

  

 

 

  

 

 

 

IFRS

    (Won)129,517,794   (Won)72,241,257   (Won)57,276,537  
    

 

 

  

 

 

  

 

 

 

(c)Effects in net income and comprehensive income for the year ended December 31, 2010, the end date of the last fiscal period the last financial statements were prepared under Korean GAAP, are as follows (KRW in millions):

Item

  Note   Net income (Loss)  Comprehensive income (Loss) 

Korean GAAP (Previous GAAP)

    (Won)(19,855 (Won)(56,124

Reconciliation of transition effects

     

Consolidation

   (*1)     107,454    184,513  

Property, plant and equipment

   (*2)     (68,265  (99,293

Leases

   (*3)     15,359    15,359  

Revenue recognition

   (*4)     41,835    41,835  

Employee benefits

   (*5)     (79,237  (165,186

Income taxes

   (*6)     (20,551  19,152  

Other

   (*7)     (45,907  (51,990
    

 

 

  

 

 

 

IFRS

    (Won)(69,167 (Won)(111,734
    

 

 

  

 

 

 

Notes to the Explanation of effects of transition to IFRS

(*1)Effects of change in scope of consolidation and the effects of the adoption of IFRS by the Company’s associates

(*2)Effects of revaluation of land, property, plant and equipment and investment property, which was used as deemed cost.

(*3)Application of lease accounting of arrangement, power purchase agreement (“PPA”) which contains a lease portion under IFRIC 4Determining whether an arrangement contains a leaseInformation

 

 (*4)(1)Under Korean GAAP, the Company read metersSegment determination and billed customers on a cycle basis. The Company did not accrue revenue for power sold to customers between the meter-reading date and endexplanation of the reporting period but recorded the revenue in the subsequent period. Such practice was consistent with the Accounting Regulations for Public Enterprise Associated Government Agency, which has been approved by the Korean Ministry of Strategy and Finance (formerly the Korean Ministry of Finance and Economy) and considered by the utility industry in Korea as Korean GAAP. However, under IFRS, the Company estimates and recognizes unbilled revenue related to the sale of power between the meter-reading dates and the end of the reporting period.

(*5)Effects of retirement benefit obligation & long-term employee benefits obligation

(*6)Effects of adjustments which are made for additional deferred income tax incurred from temporary differences of income tax of the subsidiaries in accordance with the IFRS, and reclassification of current deferred income tax to non-current, offsetting of deferred income tax asset and liability.

(*7)Other effects mainly consist of;

reclassification of membership which has unlimited period of validity to intangible assets with indefinite useful lives, and

derecognition of certain provisions which do not match the recognition criteria of IFRS, etc.

(d)Effects of IFRS transition adjustments in the consolidated statement of cash flows for the year ended December 31, 2010.

Under IFRS, dividends received, interest received, interest paid and income taxes paid which were presented in aggregate under Korean GAAP, are now presented separately in the statement of cash flows. Except for the aforementioned items, there are no significant differences between the consolidated statement of cash flow prepared in accordance with Korean GAAP and IFRS.

(e)For reclassification between operating and non-operating income in the statements of comprehensive income due to the adoption of IFRS, refer to Note 41 (2).

5.SEGMENT INFORMATIONmeasurements

The Company’s operating segments are classified at theits business unit level, at which the Companycomponents that generates separately identifiable revenue and costs, and the relateddiscrete financial information that is reported to and regularly revised by the Company’s the chief operating decision maker, the Chief Executive Officer, for the purpose of resource allocation and assessment of segment performance. The Company’s reportingreportable segments in accordance with IFRS 8, are ‘Transmission and distribution’, ‘Electric power generation (nuclear)(Nuclear)’, ‘Electric power generation (non-nuclear)(Non-nuclear)’, ‘Transmission and distribution’,‘Plant maintenance & engineering service’ and ‘Others’; others mainly representsrepresent the business unit that manages the Company’s foreign operations.

TransactionsThe Power generation maintenance is an operating segment that occur betweenmet the quantitative thresholds to be a reportable segment as of December 31, 2013. Accordingly, the prior period’s reportable segment information has been revised to show the Power generation maintenance information.

Segment operating income (loss) is determined the same way that consolidated operating income (loss) is determined under IFRS without any adjustment for corporate allocations. The accounting policies used by each segment are consistent with the accounting policies used in the preparation of the consolidated financial statements. Segment assets and liabilities are determined based on separate financial statements of the entities instead of on a consolidated basis. There are various transactions between the reportable segments, including sales of property, plant and equipment and so on, that are conducted on an arms-length transactions pricedbasis at market priceprices that would be applicable to an independent third-party. The accounting policiesFor subsidiaries which are in a different segment from that of its immediate parent company, their carrying amount in separate financial statements is eliminated in the consolidating adjustments in the tables below. In addition, consolidation adjustments in the table below include adjustments of the reportable segments areamount of investment in associates and joint ventures from the same ascost basis amount reflected in segment assets to that determined using an equity method basis in the Company’s accounting policies described in Note 2.consolidated financial statements.

(2)(1)The Company’s revenue and income (loss) for each operating segmentFinancial information of the segments for the years ended December 31, 2011, 2012 and 2010,2013, respectively are as follows (KRW in millions):follows:

 

   2011 

Segment

 

  

 Total
segment
revenue
 Intersegment
revenue
 Revenue
from
external
customers
 Depreciation
and
amortization
 Interest
income
 Interest
expense
 Income(loss)
of associates
and joint
ventures
 Employee
benefit
expense
 Loss on
abandonment
of property,
plant, and
equipment
 Accretion
expense to
provisions,
net
 Operating
income
(loss)
 
   In millions of won 

Transmission and distribution

      42,857,773    709,413    42,148,360    2,542,587    73,393    1,409,216    98,558    185,851    299,118    16,903    (2,993,785

Electric power generation (Nuclear)

   6,611,936    6,597,515    14,421    2,422,121    150,165    428,821    —      24,543    —      387,209    1,144,714  

Electric power generation (Non-
nuclear)

   25,349,726    25,078,788    270,938    1,858,736    34,641    321,961    22,698    78,327    19,688    (620  908,773  

Plant maintenance & engineering service

   2,193,511    1,747,014    446,497    65,385    30,500    50    1,838    60,118    —      18,392    295,110  

Others

   297,198    2,197    295,001    4,039    60,459    22,480    —      417    —      —      114,202  

Consolidation adjustments

   (34,134,927  (34,134,927  —      (15,479  (57,533  (58,949  —      (7,354  (22,249  (520  (153,977
  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 
 2011       43,175,217    —      43,175,217    6,877,389    291,625    2,123,579    123,095    341,902    296,557    421,364    (684,963
 Total segment
revenue
 Intersegment
revenue
 Revenue from
external customer
 Operating
income (loss)
 Depreciation  and
amortization
   

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Electric power generation (Nuclear)

 (Won)6,611,937   (Won)6,597,515   (Won)14,421   (Won)1,144,714   (Won)2,422,121  

Electric power generation (Non-nuclear)

  25,349,726    25,078,788    270,938    908,773    1,858,736  

Transmission and distribution

  43,214,857    709,413    42,505,444    (2,993,785  2,542,587  

Others

  2,490,709    1,749,210    741,499    409,312    69,424  

Adjustment

  (34,134,927  (34,134,926  —      (153,977  (15,478

Finance income

             607,592  
 

 

  

 

  

 

  

 

  

 

             

 

 

Finance costs

             (2,518,850
 (Won)43,532,302   (Won)—     (Won)43,532,302   (Won)(684,963 (Won)6,877,390              

 

 

Equity method Income of associates joint ventures

             123,095  
 

 

  

 

  

 

  

 

  

 

             

 

 

Loss before income tax

            (2,473,126
            

 

 

   2012 

Segment

   Total
segment
revenue
 Intersegment
revenue
 Revenue
from
external
customers
 Depreciation
and
amortization
 Interest
income
 Interest
expense
 Income(loss)
of associates
and joint
ventures
 Employee
benefit
expense
 Loss on
abandonment
of property,
plant, and
equipment
 Accretion
expense to
provisions,
net
 Operating
income
(loss)
 
   In millions of won 

Transmission and distribution

      49,033,869    1,121,920    47,911,949    2,562,128    58,509    1,603,628    169,755    207,332    253,985    50,656    (5,309,607

Electric power generation (Nuclear)

   6,717,341    6,698,326    19,015    2,488,367    20,712    394,288    —      41,823    —      733,533    464,506  

Electric power generation (Non-nuclear)

   28,973,768    28,649,846    323,922    1,887,419    57,209    339,057    4,510    63,334    —      19,270    2,210,669  

Plant maintenance & engineering service

   2,369,591    1,798,698    570,893    71,695    30,331    143    2,676    61,583    —      33,492    342,848  

Others

   304,971    10,241    294,730    6,589    83,208    51,460    —      1,950    —      —      117,629  

Consolidation adjustments

   (38,279,031  (38,279,031  —      (19,488  (45,846  (44,248  —      (11,109  —      6,096    (126,368
  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 
 2010       49,120,509    —      49,120,509    6,996,710    204,123    2,344,328    176,941    364,913    253,985    843,047    (2,300,323
 Total segment
revenue
 Intersegment
revenue
 Revenue from
external customer
 Operating
income (loss)
 Depreciation  and
amortization
   

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Electric power generation (Nuclear)

 (Won)5,829,582   (Won)5,814,493   (Won)15,089   (Won)1,760,199   (Won)1,935,972  

Electric power generation (Non-nuclear)

  23,561,102    23,302,116    258,986    1,599,596    2,253,030  

Transmission and distribution

  39,291,282    655,972    38,635,310    (1,312,517  2,459,644  

Others

  2,283,943    1,686,745    597,197    367,710    59,292  

Adjustment

  (31,459,327  (31,459,326  —      (155,068  (11,274

Finance income

             1,128,357  
 

 

  

 

  

 

  

 

  

 

             

 

 

Finance costs

             (3,068,321
 (Won)39,506,582   (Won)—     (Won)39,506,582   (Won)2,259,920   (Won)6,696,664              

 

 

Equity method Income of associates joint ventures

             176,941  
 

 

  

 

  

 

  

 

  

 

             

 

 

Loss before income tax

            (4,063,346
            

 

 

 

     2013 

Segment

 

  

  Total
segment
revenue
  Intersegment
revenue
  Revenue
from
external
customers
  Depreciation
and
amortization
  Interest
income
  Interest
expense
  Income(loss)
of associates
and joint
ventures
  Employee
benefit
expense
  Loss on
abandonment
of property,
plant, and
equipment
  Accretion
expense to
provisions,
net
  Operating
income
(loss)
 
     In millions of won 

Transmission and distribution

      53,367,116    1,069,699    52,297,417    2,660,444    27,187    1,525,166    (2,521  206,279    273,785    253,153    549,929  

Electric power generation (Nuclear)

   6,378,280    6,369,715    8,565    2,724,629    20,994    557,621    (926  51,394    —      250,814    325,274  

Electric power generation (Non-nuclear)

   28,067,093    27,687,112    379,981    1,952,680    50,193    262,076    (40,976  73,710    21,842    154,285    735,546  

Plant maintenance & engineering service

   2,483,670    1,774,577    709,093    72,489    23,473    183    2,180    76,395    —      5,016    248,661  

Others

   365,968    48,519    317,449    14,086    75,653    50,266    —      1,498    —      32    110,841  

Consolidation adjustments

   (36,949,622  (36,949,622  —      (31,953  (15,339  (13,412  —      (24,953  —      321    (22,416
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
      53,712,505    —      53,712,505    7,392,375    182,161    2,381,900    (42,243  384,323    295,627    663,621    1,947,835  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Finance income

             629,542  
            

 

 

 

Finance costs

             (2,931,622
            

 

 

 

Equity method Income of associates joint ventures

             (42,243
            

 

 

 

Loss before income tax

            (396,488
            

 

 

 

(3)(2)The Company’sTotal assets and liabilities for each operating segmentof the segments as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

  Dec. 31, 2011 
  Segment assets  Investments in
associates and
joint venture
  Acquisition of
non-current assets
  Segment liabilities 

Electric power generation (Nuclear)

 (Won)40,041,048   (Won)—     (Won)3,336,956   (Won)19,203,001  

Electric power generation
(Non-nuclear)

  28,760,308    643,469    2,274,255    13,056,245  

Transmission and distribution

  94,769,898    3,804,910    4,704,812    50,330,593  

Others

  6,980,653    36,977    471,782    2,434,805  

Adjustment

  (34,084,057  —      (134,803  (2,360,744
 

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)136,467,850   (Won)4,485,356   (Won)10,653,002   (Won)82,663,900  
 

 

 

  

 

 

  

 

 

  

 

 

 

  Dec. 31, 2010 
  Segment assets  Investments in
associates and
joint venture
  Acquisition of
non-current assets
  Segment liabilities 

Electric power generation (Nuclear)

 (Won)34,704,111   (Won)—     (Won)3,243,595   (Won)15,609,917  

Electric power generation
(Non-nuclear)

  29,909,788    189,558    2,073,914    12,914,055  

Transmission and distribution

  92,299,168    3,540,360    4,532,693    41,887,825  

Others

  6,161,138    35,913    809,069    1,992,377  

Adjustment

  (33,556,411  —      (4,820  (162,917
 

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)129,517,794   (Won)3,765,831   (Won)10,654,451   (Won)72,241,257  
 

 

 

  

 

 

  

 

 

  

 

 

 

    2012 

Segment

    Segment assets Investments in
associates and
joint ventures
   Acquisition of
non-current
assets
 Segment
liabilities
 
    In millions of won 

Transmission and distribution

       96,234,698    3,865,492     4,368,190    54,963,618  

Electric power generation (Nuclear)

    45,061,851    —       2,928,345    24,638,944  

Electric power generation (Non-nuclear)

    31,214,058    986,343     3,735,111    14,640,938  

Plant maintenance & engineering service

    2,439,700    39,098     175,386    978,695  

Others

    5,216,110    —       543,580    1,658,674  
   

 

  

 

   

 

  

 

 

Segment totals

    180,166,417    4,890,933     11,750,612    96,880,869  
   

 

  

 

   

 

  

 

 

Consolidation adjustments:

       

Elimination of inter-segment amounts

    (34,684,916  —       (236,063  (4,219,896

Equity method adjustment

    671,319    —       —      —    

Deferred taxes

    —      —       —      2,427,645  
   

 

  

 

   

 

  

 

 
 Jan. 1, 2010     (34,013,597  —       (236,063  (1,792,251
 Segment assets Investments in
associates and
joint venture
 Acquisition  of
non-current assets
 Segment liabilities    

 

  

 

   

 

  

 

 

Electric power generation (Nuclear)

 (Won)31,781,436   (Won)—     (Won)—     (Won)13,726,615  

Electric power generation (Non-nuclear)

  29,598,311    114,562    —      13,332,164  

Transmission and distribution

  88,970,786    3,329,450    —      39,302,350  

Others

  4,970,728    35,798    —      1,385,274  

Adjustment

  (32,703,228  —      —      (2,415,708

Consolidated totals

       146,152,820    4,890,933     11,514,549    95,088,618  
 

 

  

 

  

 

  

 

    

 

  

 

   

 

  

 

 
 (Won)122,618,033   (Won)3,479,810   (Won)—     (Won)65,330,695  
 

 

  

 

  

 

  

 

     2013 

Segment

    Segment assets Investments in
associates and
joint ventures
   Acquisition of
non-current
assets
 Segment
liabilities
 
    In millions of won 

Transmission and distribution

       98,249,927    3,895,266     4,458,291    56,590,381  

Electric power generation (Nuclear)

    46,717,706    908     2,412,782    26,482,646  

Electric power generation (Non-nuclear)

    36,455,090    1,275,330     6,882,630    19,832,122  

Plant maintenance & engineering service

    2,463,204    59,251     222,547    932,485  

Others

    5,617,304    —       429,626    2,008,541  
   

 

  

 

   

 

  

 

 

Segment totals

    189,503,231    5,230,755     14,405,876    105,846,175  
   

 

  

 

   

 

  

 

 

Consolidation adjustments:

       

Elimination of inter-segment amounts

    (34,834,362  —       (75,237  (4,199,216

Equity method adjustment

    858,465    —       —      —    

Deferred taxes

    —      —       —      2,429,639  
   

 

  

 

   

 

  

 

 
    (33,975,897  —       (75,237  (1,769,577
   

 

  

 

   

 

  

 

 

Consolidated totals

       155,527,334    5,230,755     14,330,639    104,076,598  
   

 

  

 

   

 

  

 

 

(4)(3)GeographicalGeographic information

The Company is engaged in the generation, transmission and distribution of electricity and development of electric power resources in the Republic of Korea. Geographicalfollowing information on revenue from external customers and non-current assets is as follows:determined by the location of the customers and of the assets:

 

   Revenue from external customers Non-current assets(*2) 
  Revenue from external customer   Non-current assets(*2)    2011 2012 2013 2011 2012 2013 
  2011   2010   2011   2010    In millions of won 

Domestic

  (Won)41,928,872    (Won)38,133,778    (Won)114,123,351    (Won)109,163,273        41,493,983    46,981,903    51,314,639    114,481,700    124,433,063    131,876,535  

Overseas(*1)

   1,603,430     1,372,804     4,362,555     3,742,499     1,681,234    2,138,606    2,397,866    4,362,555    4,448,485    4,474,900  
  

 

   

 

   

 

   

 

   

 

  

 

  

 

  

 

  

 

  

 

 
  (Won)43,532,302    (Won)39,506,582    (Won)118,485,906    (Won)112,905,772��       43,175,217    49,120,509    53,712,505    118,844,255    128,881,548    136,351,435  
  

 

   

 

   

 

   

 

   

 

  

 

  

 

  

 

  

 

  

 

 

 

 (*1)Middle East and Asia make up the majority of overseas incomerevenue and non-current assets.

 

 (*2)Amount excludes financial assets and deferred tax assets.assets

 

(5)(4)Information on key clientssignificant customers

There is no individual client who makes upcustomer comprising more than 10% of the Company’s revenue for the years ended December 31, 2011, 2012 and 2010.2013.

6.5.CLASSIFICATION OF FINANCIAL INSTRUMENTS:Classification of Financial Instruments

 

(1)(1)Classification of financial Assetsassets as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follow (KRW in millions):follows:

 

 Dec. 31, 2011    2012 
 FVTPL Loans and
receivables
 Available-for-sale
financial assets
 Held-to-maturity
Investments
 Derivative assets
(using hedge
accounting)
 Total    Financial
assets at fair
value through
profit or loss
 Loans and
receivables
 Available-for-sale
financial assets
 Held-to-maturity
investments
 Derivative assets
(using hedge
accounting)
 Total 

Current Assets

      
   In millions of won 

Current assets

       

Cash and cash equivalents

 (Won)—     (Won)1,387,921   (Won)—     (Won)—     (Won)—     (Won)1,387,921        —      1,954,949    —      —      —      1,954,949  

Current financial assets

             

Held-to-maturity investments

  —      —      —      334    —      334     —      —      —      196    —      196  

Derivative assets

  23,177    —      —      —      —      23,177     52,061    —      —      —      63,945    116,006  

Other financial assets, net

  10,121    736,907    —      —      —      747,028  

Accounts and other Receivables, net

  —      7,632,497    —      —      —      7,632,497  

Other financial assets

   —      540,015    —      —      —      540,015  

Trade and other receivables

   —      7,184,625    —      —      —      7,184,625  
 

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

 
  33,298    9,757,325    —      334    —      9,790,957     52,061    9,679,589    —      196    63,945    9,795,791  
 

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

 

Non-current Assets

      

Non-current financial assets

      

Non-current assets

       

Non- current financial assets

       

Available-for-sale financial assets

  —      —      1,173,085    —      —      1,173,085     —      —      1,141,194    —      —      1,141,194  

Held-to-maturity investments

  —      —      —      1,986    —      1,986     —      —      —      2,020    —      2,020  

Derivative assets

  124,571    —      —      —      321,671    446,242     3,830    —      —      —      123,866    127,696  

Other financial assets, net

  —      577,719    —      —      —      577,719  

Accounts and other Receivables, net

  —      1,284,532    —      —      —      1,284,532  

Other financial assets

   —      602,766    —      —      —      602,766  

Trade and other receivables

   —      1,254,330    —      —      —      1,254,330  
 

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

 
  124,571    1,862,251    1,173,085    1,986    321,671    3,483,564     3,830    1,857,096    1,141,194    2,020    123,866    3,128,006  
 

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

 
 (Won)157,869   (Won)11,619,576   (Won)1,173,085   (Won)2,320   (Won)321,671   (Won)13,274,521        55,891    11,536,685    1,141,194    2,216    187,811    12,923,797  
 

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

 

  Dec. 31, 2010 
  FVTPL  Loans and
receivables
  Available-for-sale
financial assets
  Held-to-maturity
Investments
  Derivative assets
(using hedge
accounting)
  Total 

Current Assets

      

Cash and cash equivalents

 (Won)—     (Won)2,090,051   (Won)—     (Won)—     (Won)—     (Won)2,090,051  

Current financial assets

      

Held-to-maturity investments

  —      —      —      509    —      509  

Derivative assets

  42,737    —      —      —      62,157    104,894  

Other financial assets, net

  —      618,019    —      —      —      618,019  

Accounts and other Receivables, net

  —      6,612,377    —      —      —      6,612,377  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  42,737    9,320,447    —      509    62,157    9,425,850  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Non-current Assets

      

Non-current financial assets

      

Available-for-sale financial assets

  —      —      1,343,204    —      —      1,343,204  

Held-to-maturity investments

  —      —      —      2,142    —      2,142  

Derivative assets

  86,110    —      —      —      275,262    361,372  

Other financial assets, net

  —      750,714    —      —      —      750,714  

Accounts and other Receivables, net

  —      846,318    —      —      —      846,318  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  86,110    1,597,032    1,343,204    2,142    275,262    3,303,750  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)128,847   (Won)10,917,479   (Won)1,343,204   (Won)2,651   (Won)337,419   (Won)12,729,600  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 Jan. 1, 2010    2013 
 FVTPL Loans and
receivables
 Available-for-sale
financial assets
 Held-to-maturity
Investments
 Derivative assets
(using hedge
accounting)
 Total    Financial
assets at fair
value through
profit or loss
 Loans and
receivables
 Available-for-sale
financial assets
 Held-to-maturity
investments
 Derivative assets
(using hedge
accounting)
 Total 

Current Assets

      
   In millions of won 

Current assets

       

Cash and cash equivalents

 (Won)—     (Won)1,475,684   (Won)—     (Won)—     (Won)—     (Won)1,475,684        —      2,232,313    —      —      —      2,232,313  

Current financial assets

             

Held-to-maturity investments

  —      —      —      441    —      441     —      —      —      168    —      168  

Derivative assets

  79,022    —      —      —      248,296    327,318     1,437    —      —      —      —      1,437  

Other financial assets, net

  5,042    430,950    —      —      —      435,992  

Accounts and other Receivables, net

  —      5,982,542    —      —      —      5,982,542  

Other financial assets

   —      434,608    —      —      —      434,608  

Trade and other receivables

   —      7,526,311    —      —      —      7,526,311  
 

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

 
  84,064    7,889,176    —      441    248,296    8,221,977     1,437    10,193,232    —      168    —      10,194,837  
 

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

 

Non-current Assets

      

Non-current assets

       

Non-current financial assets

             

Available-for-sale financial assets

  —      —      735,195    —      —      735,195     —      —      1,256,765    —      —      1,256,765  

Held-to-maturity investments

  —      —      —      2,330    —      2,330     —      —      —      2,117    —      2,117  

Derivative assets

  135,360    —      —      —      417,419    552,779     2,681    —      —      —      82,376    85,057  

Other financial assets, net

  —      515,805    —      —      —      515,805  

Accounts and other Receivables, net

  —      1,026,130    —      —      —      1,026,130  

Other financial assets

   —      559,013    —      —      —      559,013  

Trade and other receivables

   —      1,644,333    —      —      —      1,644,333  
 

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

 
  135,360    1,541,935    735,195    2,330    417,419    2,832,239     2,681    2,203,346    1,256,765    2,117    82,376    3,547,285  
 

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

 
 (Won)219,424   (Won)9,431,111   (Won)735,195   (Won)2,771   (Won)665,715   (Won)11,054,216        4,118    12,396,578    1,256,765    2,285    82,376    13,742,122  
 

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

 

(2)(2)Classification of financial liabilities as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follow (KRW in millions):follows:

 

   Dec. 31, 2011 
   FVTPL   Financial liabilities
recorded at

amortized cost
   Derivative liabilities
(using hedge
accounting)
   Others   Total 

Current Liabilities

          

Borrowings, net

  (Won)—      (Won)2,101,590    (Won)—      (Won)—      (Won)2,101,590  

Debentures, net

   —       4,904,455     —       —       4,904,455  

Exchangeable bonds, net

   —       —       —       —       —    

Derivative liabilities

   19,697     —       168     —       19,865  

Accounts and other

Payables, net

   —       6,576,158     —       —       6,576,158  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   19,697     13,582,203     168     —       13,602,068  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-current Liabilities

          

Borrowings, net

   —       4,641,319     —       —       4,641,319  

Debentures, net

   —       34,557,180     —       —       34,557,180  

Exchangeable bonds, net

   —       —       —       —       —    

Derivative liabilities

   110,272     —       94,807     —       205,079  

Accounts and other

Payables, net

   —       4,178,137     —       —       4,178,137  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   110,272     43,376,636     94,807     —       43,581,715  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (Won)129,969    (Won)56,958,839    (Won)94,975    (Won)—      (Won)57,183,783  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      2012 
      Financial liabilities
at fair value through
profit or  loss
   Financial liabilities
recognized at
amortized cost
   Derivative liabilities
(using hedge
accounting)
   Total 
      In millions of won 

Current liabilities

         

Borrowings

       —       2,215,961     —       2,215,961  

Debt securities

    —       5,478,720     —       5,478,720  

Derivative liabilities

    46,939     —       47,199     94,138  

Trade and other payables

    —       5,601,852     —       5,601,852  
   

 

 

   

 

 

   

 

 

   

 

 

 
    46,939     13,296,533     47,199     13,390,671  
   

 

 

   

 

 

   

 

 

   

 

 

 

Non-current liabilities

         

Borrowings

    —       4,674,935     —       4,674,935  

Debt securities

    —       40,849,793     —       40,849,793  

Derivative liabilities

    322,199     —       203,839     526,038  

Trade and other payables

    —       4,173,691     —       4,173,691  
   

 

 

   

 

 

   

 

 

   

 

 

 
    322,199     49,698,419     203,839     50,224,457  
   

 

 

   

 

 

   

 

 

   

 

 

 
       369,138     62,994,952     251,038     63,615,128  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

   Dec. 31, 2010 
   FVTPL   Financial liabilities
recorded at

Amortized cost
   Derivative liabilities
(using hedge
accounting)
   Others   Total 

Current Liabilities

          

Borrowings, net

  (Won)—      (Won)1,811,783    (Won)—      (Won)—      (Won)1,811,783  

Debentures, net

   —       4,883,370     —       —       4,883,370  

Exchangeable bonds, net

   —       73,957     —       —       73,957  

Derivative liabilities

   9,886     —       3,887     —       13,773  

Accounts and other

Payables, net

   —       4,571,145     —       —       4,571,145  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   9,886     11,340,255     3,887     —       11,354,028  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-current Liabilities

          

Borrowings, net

   —       2,822,902     —       —       2,822,902  

Debentures, net

   —       30,025,022     —       —       30,025,022  

Exchangeable bonds, net

   —       —       —       —       —    

Derivative liabilities

   162,847     —       41,695     —       204,542  

Accounts and other

Payables, net

   —       5,280,924     —       —       5,280,924  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   162,847     38,128,848     41,695     —       38,333,390  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (Won)172,733    (Won)49,469,103    (Won)45,582    (Won)—      (Won)49,687,418  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      2013 
      Financial liabilities
at fair value through
profit or  loss
   Financial liabilities
recognized at
amortized cost
   Derivative liabilities
(using hedge
accounting)
   Total 
      In millions of won 

Current liabilities

         

Borrowings

       —       1,470,862     —       1,470,862  

Debt securities

    —       6,616,636     —       6,616,636  

Derivative liabilities

    304,699     —       33,034     337,733  

Trade and other payables

    —       5,892,763     —       5,892,763  
   

 

 

   

 

 

   

 

 

   

 

 

 
    304,699     13,980,261     33,034     14,317,994  
   

 

 

   

 

 

   

 

 

   

 

 

 

Non-current liabilities

         

Borrowings

    —       4,538,390     —       4,538,390  

Debt securities

    —       48,262,262     —       48,262,262  

Derivative liabilities

    186,336     —       176,406     362,742  

Trade and other payables

    —       3,971,519     —       3,971,519  
   

 

 

   

 

 

   

 

 

   

 

 

 
    186,336     56,772,171     176,406     57,134,913  
   

 

 

   

 

 

   

 

 

   

 

 

 
       491,035     70,752,432     209,440     71,452,907  
   

 

 

   

 

 

   

 

 

   

 

 

 

   Jan. 1, 2010 
   FVTPL   Financial liabilities
recorded at

Amortized cost
   Derivative liabilities
(using hedge
accounting)
   Others   Total 

Current Liabilities

          

Borrowings, net

  (Won)—      (Won)2,446,177    (Won)—      (Won)—      (Won)2,446,177  

Debentures, net

   —       3,775,653     —       —       3,775,653  

Exchangeable bonds, net

   —       —       —       —       —    

Derivative liabilities

   3,017     —       —       —       3,017  

Accounts and other Payables, net

   —       4,166,228     —       —       4,166,228  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   3,017     10,388,058     —       —       10,391,075  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-current Liabilities

          

Borrowings, net

   —       2,491,492     —       —       2,491,492  

Debentures, net

   —       25,436,692     —       —       25,436,692  

Exchangeable bonds, net

   —       69,103     —       —       69,103  

Derivative liabilities

   18,091     —       18,863     —       36,954  

Accounts and other Payables, net

   —       5,245,490     —       —       5,245,490  
   18,091     33,242,777     18,863     —       33,279,731  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (Won)21,108    (Won)43,630,835    (Won)18,863    (Won)—      (Won)43,670,806  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(3)(3)Classification of comprehensive income (loss) from financial instruments for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

      2011  2010 

Cash and cash equivalents

  Interest income  (Won)72,534   (Won)63,518  

Available-for-sale financial assets

  Dividends income   18,894    3,341  

Held-to-maturity investments

  Interest income   85    90  

Loans and receivables

  Interest income   202,104    35,291  

Accounts and other receivables

  Interest income   16,902    21,523  

Derivatives assets (trading)

  Gain (loss) on valuation of derivatives   98,006    (5,458
  Gain (loss) on transaction of derivatives   (5,257  (31,818

Derivative assets (using hedge accounting)

  Gain (loss) on valuation of derivatives   52,491    (30,381
  Gain (loss) on valuation of derivatives—Other comprehensive income (loss)   8,791    (63,447
  Gain (loss) on transaction of derivatives   7,378    52,721  

Financial liabilities recorded at amortized cost

  

Interest expense of borrowings and debentures

   (2,241,771  (1,939,804
  Interest expense of accounts and other payables   (147,882  (268,120

Derivative liabilities (trading)

  Gain (loss) on valuation of derivatives   (27,639  (154,857
  Gain (loss) on transaction of derivatives   (37,498  (24,713

Derivative liabilities (using hedge accounting)

  Gain (loss) on valuation of derivatives   2,158    (17,111
  Gain (loss) on valuation of derivatives—Other comprehensive income (loss)   (36,927  5,164  
  Gain (loss) on transaction of derivatives   (14,332  15,283  
        2011  2012  2013 
        In millions of won 

Cash and cash equivalents

  Interest income      43,822    63,456    60,301  

Available-for-sale financial assets

  Dividends income   18,894    10,452    9,870  
  Interest income   —      —      1,150  
  Impairment loss on available-for-sale financial assets   —      (40,156  (12,592
  Loss on disposal of financial assets   —      —      (4,202

Held-to-maturity investments

  Interest income   85    69    64  

Loans and receivables

  Interest income   188,457    47,028    42,418  

Trade and other receivables

  Interest income   16,902    70,304    60,237  

Other financial assets

  Interest income   —      —      1,082  

Short-term financial instruments

  Interest income   42,359    23,250    16,896  

Long-term financial instruments

  Interest income   —      16    13  

Financial assets at fair value through profit or loss

  

Gain (loss) on valuation of derivatives

   98,006    (42,364  335  
  Gain (loss) on transaction of derivatives   (5,257  7,500    26,889  
  Gain on disposal of financial assets   —      189    196  

Derivative assets
(using hedge accounting)

  

Gain (loss) on valuation of derivatives

   52,491    (127,277  (13,945
  Gain (loss) on valuation of derivatives (equity, before tax)*   (3,295  (85  (27,281
  Gain on transaction of derivatives   7,378    3,064    29,662  

Financial liabilities carried at amortized cost

  

Interest expense of borrowings and debt securities

   (1,668,425  (1,827,239  (1,715,373
  Interest expense of trade and other payables   (147,882  (118,372  (102,388
  Interest expense of others   (307,272  (398,717  (564,139
  Gain (loss) on foreign currency transactions and translations   (175,364  832,360    133,638  

Financial liabilities at fair value through profit or loss

  Loss on valuation of derivatives   (27,639  (275,490  (167,485
  Loss on transaction of derivatives   (37,498  (23,031  (46,639

Derivative liabilities
(using hedge accounting)

  

Gain (loss) on valuation of derivatives

   2,158    (129,417  (65,755
  Gain (loss) on valuation of derivatives (equity, before tax)*   (34,094  (61,920  50,197  
  Gain (loss) on transaction of derivatives   (14,332  (10,613  3,454  

Items are included in other comprehensive income. All other income and gain amounts listed above are included in finance income, and all expense and loss amounts listed above are included in finance expenses in the accompanying consolidated statements of comprehensive income (loss).

7.6.RESTRICTED DEPOSITSRestricted Deposits

Restricted deposits as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows

(KRW in millions):follows:

 

     Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 

Cash and cash equivalents

  Escrow accounts (Won)79,370   (Won)74,220   (Won)65,858  

Cash and cash equivalents

  Others  328    445    115  

Long-term financial instruments

  

Payment guarantees for

borrowings and others

  —      —      125,449  

Long-term financial instruments

  

Guarantee deposit for

checking account

  331    5    5  
   

 

 

  

 

 

  

 

 

 
   (Won)80,029   (Won)74,670   (Won)191,427  
   

 

 

  

 

 

  

 

 

 

8.CASH AND CASH EQUIVALENTS:

Cash and cash equivalents include cash on hand and in banks, net of outstanding bank overdrafts. The Company considers short-term financial instruments with maturities of three months or less at the acquisition date to be cash equivalents.

Cash and cash equivalents as of December 31, 2011, December 31, 2010 and January 1, 2010 are as follows (KRW in millions):

   Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010 

Demand deposit

  (Won)671,038    (Won)488,683    (Won)689,817  

Cash equivalents

   716,883     1,601,368     785,867  
  

 

 

   

 

 

   

 

 

 
  (Won)1,387,921    (Won)2,090,051    (Won)1,475,684  
  

 

 

   

 

 

   

 

 

 

(*)Demand deposits includes government grants for specified purpose in the amount of KRW 17,653 million, KRW 13,297 million and KRW 10,431 million, as of December 31, 2011, December 31, 2010 and January 1, 2010, respectively.
         2012   2013 
         In millions of won 

Cash and cash equivalents

  Escrow accounts       72,979     61,873  
  Deposits for government project    —       17,807  
  Collateral provided for lawsuit    329     —    

Long-term financial instruments

  Guarantee deposits for checking account ��  5     5  
  Guarantee deposits for banking accounts at oversea branches    303     300  
  Collateral provided for lawsuit    —       330  
     

 

 

   

 

 

 
         73,616     80,315  
     

 

 

   

 

 

 

 

9.7.ACCOUNTS AND OTHER RECEIVABLES:Cash and Cash Equivalents

 

 (1)CashAccountsand cash equivalents as of December 31, 2012 and 2013 are as follows:

      2012  2013 
      In millions of won 

Cash

       264    56  

Cash equivalents

    734,722    1,141,202  

Short-term deposits classified as cash equivalents

    1,197,606    1,073,789  

Short-term investments classified as cash equivalents

    52,098    17,266  

Government grants

    (29,741  —    
   

 

 

  

 

 

 
       1,954,949    2,232,313  
   

 

 

  

 

 

 

8.Trade and Other Receivables

(1)Trade and other receivables as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

   Dec. 31, 2011 
   Gross receivables   Allowance for
doubtful accounts
  Present  value
discount
  Book value 

Current Asset:

      

Accounts receivables

  (Won)6,292,468    (Won)(24,586 (Won)(832 (Won)6,267,050  

Other receivables

   1,413,653     (46,373  (1,833  1,365,447  
  

 

 

   

 

 

  

 

 

  

 

 

 
   7,706,121     (70,959  (2,665  7,632,497  

Non-current Asset:

      

Accounts receivables

   505,636     —      (560  505,076  

Other receivables

   943,376     (156,824  (7,096  779,456  
  

 

 

   

 

 

  

 

 

  

 

 

 
   1,449,012     (156,824  (7,656  1,284,532  
  

 

 

   

 

 

  

 

 

  

 

 

 
  (Won)9,155,133    (Won)(227,783 (Won)(10,321 (Won)8,917,029  
  

 

 

   

 

 

  

 

 

  

 

 

 
      2012 
      Gross
amount
   Allowance for
doubtful accounts
  Present value
discount
  Book value 
      In millions of won 

Current assets

       

Trade receivables

       6,776,526     (47,312  (416  6,728,798  

Other receivables

    504,067     (45,791  (2,449  455,827  
   

 

 

   

 

 

  

 

 

  

 

 

 
    7,280,593     (93,103  (2,865  7,184,625  
   

 

 

   

 

 

  

 

 

  

 

 

 

Non-current assets

       

Trade receivables

    451,179     —      (144  451,035  

Other receivables

    989,445     (179,287  (6,863  803,295  
   

 

 

   

 

 

  

 

 

  

 

 

 
    1,440,624     (179,287  (7,007  1,254,330  
   

 

 

   

 

 

  

 

 

  

 

 

 
       8,721,217     (272,390  (9,872  8,438,955  
   

 

 

   

 

 

  

 

 

  

 

 

 

   Dec. 31, 2010 
   Gross receivables   Allowance for
doubtful accounts
  Present  value
discount
  Book value 

Current Asset:

      

Accounts receivables

  (Won)5,262,876    (Won)(29,298 (Won)(572 (Won)5,233,006  

Other receivables

   1,397,179     (17,507  (301  1,379,371  
  

 

 

   

 

 

  

 

 

  

 

 

 
   6,660,055     (46,805  (873  6,612,377  

Non-current Asset:

      

Accounts receivables

   516,941     —      (452  516,489  

Other receivables

   442,233     (107,115  (5,289  329,829  
  

 

 

   

 

 

  

 

 

  

 

 

 
   959,174     (107,115  (5,741  846,318  
  

 

 

   

 

 

  

 

 

  

 

 

 
  (Won)7,619,229    (Won)(153,920 (Won)(6,614 (Won)7,458,695  
  

 

 

   

 

 

  

 

 

  

 

 

 

   Jan. 1, 2010 
   Gross receivables   Allowance for
doubtful accounts
  Present  value
discount
  Book value 

Current Asset:

      

Accounts receivables

  (Won)4,708,799    (Won)(31,658 (Won)(652 (Won)4,676,489  

Other receivables

   1,330,297     (24,080  (164  1,306,053  
  

 

 

   

 

 

  

 

 

  

 

 

 
   6,039,096     (55,738  (816  5,982,542  

Non-current Asset:

      

Accounts receivables

   544,379     —      (712  543,667  

Other receivables

   536,599     (53,603  (533  482,463  
  

 

 

   

 

 

  

 

 

  

 

 

 
   1,080,978     (53,603  (1,245  1,026,130  
  

 

 

   

 

 

  

 

 

  

 

 

 
  (Won)7,120,074    (Won)(109,341 (Won)(2,061 (Won)7,008,672  
  

 

 

   

 

 

  

 

 

  

 

 

 
      2013 
      Gross amount   Allowance for
doubtful accounts
  Present value
discount
  Book value 
      In millions of won 

Current assets

       

Trade receivables

       7,076,303     (65,024  (136  7,011,143  

Other receivables

    559,958     (42,729  (2,061  515,168  
   

 

 

   

 

 

  

 

 

  

 

 

 
    7,636,261     (107,753  (2,197  7,526,311  
   

 

 

   

 

 

  

 

 

  

 

 

 

Non-current assets

       

Trade receivables

    421,949     —      (8  421,941  

Other receivables

    1,255,724     (27,158  (6,174  1,222,392  
   

 

 

   

 

 

  

 

 

  

 

 

 
    1,677,673     (27,158  (6,182  1,644,333  
   

 

 

   

 

 

  

 

 

  

 

 

 
       9,313,934     (134,911  (8,379  9,170,644  
   

 

 

   

 

 

  

 

 

  

 

 

 

 

(2)(2)Other receivables as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

  Dec. 31, 2011     2012 
  Gross receivables   Allowance for
doubtful accounts
 Present  value
discount
 Book value     Gross
amount
   Allowance for
doubtful accounts
 Present value
discount
 Book value 

Current Asset:

      
    In millions of won 

Current assets

       

Non-trade receivables

  (Won)1,230,829    (Won)(46,373 (Won)—     (Won)1,184,456         294,989     (45,791  —      249,198  

Accrued income

   39,358     —      —      39,358      42,067     —      —      42,067  

Deposits

   130,473     —      (1,833  128,640      160,801     —      (2,449  158,352  

Finance leases receivables

   9,279     —      —      9,279  

Finance lease receivables

    4,134     —      —      4,134  

Others

   3,714     —      —      3,714      2,076     —      —      2,076  
  

 

   

 

  

 

  

 

    

 

   

 

  

 

  

 

 
   1,413,653     (46,373  (1,833  1,365,447      504,067     (45,791  (2,449  455,827  

Non-current Asset:

      
   

 

   

 

  

 

  

 

 

Non-current assets

       

Non-trade receivables

   11,937     (591  —      11,346      57,386     (1,684  —      55,702  

Accrued income

   —       —      —      —    

Deposits

   206,470     —      (7,096  199,374      224,112     —      (6,863  217,249  

Finance leases receivables

   366,262     —      —      366,262  

Loans for oversea business

   305,980     (156,233  —      149,747  

Finance lease receivables

    389,326     —      —      389,326  

Others

   52,727     —      —      52,727      318,621     (177,603  —      141,018  
  

 

   

 

  

 

  

 

    

 

   

 

  

 

  

 

 
   943,376     (156,824  (7,096  779,456      989,445     (179,287  (6,863  803,295  
  

 

   

 

  

 

  

 

    

 

   

 

  

 

  

 

 
  (Won)2,357,029    (Won)(203,197 (Won)(8,929 (Won)2,144,903         1,493,512     (225,078  (9,312  1,259,122  
  

 

   

 

  

 

  

 

    

 

   

 

  

 

  

 

 

  Dec. 31, 2010     2013 
  Gross receivables   Allowance for
doubtful accounts
 Present  value
discount
 Book value     Gross
amount
   Allowance for
doubtful accounts
 Present value
discount
 Book value 

Current Asset:

      
    In millions of won 

Current assets

       

Non-trade receivables

  (Won)1,157,335    (Won)(15,303 (Won)—     (Won)1,142,032         233,714     (42,729  —      190,985  

Accrued income

   56,503     (2,204  —      54,299      47,310     —      —      47,310  

Deposits

   180,887     —      (301  180,586      162,730     —      (2,061  160,669  

Finance leases receivables

   —       —      —      —    

Finance lease receivables

    4,569     —      —      4,569  

Others

   2,454     —      —      2,454      111,635     —      —      111,635  
  

 

   

 

  

 

  

 

    

 

   

 

  

 

  

 

 
   1,397,179     (17,507  (301  1,379,371      559,958     (42,729  (2,061  515,168  

Non-current Asset:

      
   

 

   

 

  

 

  

 

 

Non-current assets

       

Non-trade receivables

   1,858     —      —      1,858      102,254     (8,608  —      93,646  

Deposits

    230,083     —      (6,174  223,909  

Finance lease receivables

    845,712     —      —      845,712  

Accrued income

   —       —      —      —        7,052     —      —      7,052  

Deposits

   98,736     —      (5,289  93,447  

Finance leases receivables

   —       —      —      —    

Loans for oversea business

   286,233     (107,115  —      179,118  

Others

   55,406     —      —      55,406      70,623     (18,550  —      52,073  
  

 

   

 

  

 

  

 

    

 

   

 

  

 

  

 

 
   442,233     (107,115  (5,289  329,829      1,255,724     (27,158  (6,174  1,222,392  
  

 

   

 

  

 

  

 

    

 

   

 

  

 

  

 

 
  (Won)1,839,412    (Won)(124,622 (Won)(5,590 (Won)1,709,200         1,815,682     (69,887  (8,235  1,737,560  
  

 

   

 

  

 

  

 

    

 

   

 

  

 

  

 

 

   Jan. 1, 2010 
   Gross receivables   Allowance for
doubtful accounts
  Present  value
discount
  Book value 

Current Asset:

      

Non-trade receivables

  (Won)1,155,593    (Won)(23,452 (Won)—     (Won)1,132,141  

Accrued income

   48,734     (628  —      48,106  

Deposits

   123,935     —      (164  123,771  

Finance leases receivables

   —       —      —      —    

Others

   2,035     —      —      2,035  
  

 

 

   

 

 

  

 

 

  

 

 

 
   1,330,297     (24,080  (164  1,306,053  

Non-current Asset:

      

Non-trade receivables

   3,690     —      —      3,690  

Accrued income

   —       —      —      —    

Deposits

   151,881     —      (533  151,348  

Finance leases receivables

   —       —      —      —    

Loans for oversea business

   307,468     (53,603  —      253,865  

Others

   73,560     —      —      73,560  
  

 

 

   

 

 

  

 

 

  

 

 

 
   536,599     (53,603  (533  482,463  
  

 

 

   

 

 

  

 

 

  

 

 

 
  (Won)1,866,896    (Won)(77,683 (Won)(697 (Won)1,788,516  
  

 

 

   

 

 

  

 

 

  

 

 

 

AccountsTrade and other receivables are classified as loans and other accounts receivables, and are measured atusing the effective interest method. No interest is accrued for trade receivables for the duration between the billing date and the payment due dates. But onceOnce trade receivables are overdue, the Company imposes a 1.5%2.0% interest rate on the first month and 1.0% interest per month from the second month onwards.

Receivables stated above include overdue receivables as of the reporting period end. However, certain overdue receivables are still considered to be reasonably collectable. As such, the Company does not record any allowances related to such overdue receivables considered to be reasonably collectable. Furthermore, the Company does not have any collateral, or received any other credit enhancement or hold any rights to

offset with the counterparty. However, thetrade receivables. The Company holds deposits of three months’three-months’ expected electricity rateusage for customers requesting temporary usage and customers with past defaulted payment.payments.

 

(3)(3)Aging analysis of accountstrade receivables as of December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

  2011 2010     2012 2013 

Account receivables: (not overdue, not impaired)

  (Won)6,748,327   (Won)5,721,049  

Account receivables : (overdue, not impaired)

   

60 ~ 90 days

   17,631    18,702  

90 ~ 120 days

   5,216    6,501  

120 days ~ 1 year

   15,851    15,938  

Over 1 year

   8,641    14,803  

Account receivables : (impaired)

   
    In millions of won 

Trade receivables: (not overdue, not impaired)

       7,125,836    7,350,705  
   

 

  

 

 

Less than 60 days

   156    17      4    292  
   

 

  

 

 

Trade receivables: (overdue, impaired)

    4    292  

60 ~ 90 days

   2    9      33,124    36,707  

90 ~ 120 days

   3    16      9,853    18,214  

120 days ~ 1 year

   246    1,633      25,621    38,066  

Over 1 year

   2,031    1,149      33,267    54,268  
  

 

  

 

    

 

  

 

 
   6,798,104    5,779,817  
  

 

  

 

 

Less: Allowance for doubtful accounts

   (24,586  (29,298

Less: Present value discount

   (1,392  (1,024

Trade receivables: (impairment reviewed)

    101,865    147,255  
  

 

  

 

    

 

  

 

 
  (Won)6,772,126   (Won)5,749,495      7,227,705    7,498,252  
  

 

  

 

    

 

  

 

 

Less allowance for doubtful accounts

    (47,312  (65,024

Less present value discount

    (560  (144
   

 

  

 

 
       7,179,833    7,433,084  
   

 

  

 

 

The Company assesses at the end of each reporting period whether there is any objective evidence that trade receivables are impaired, and provides allowances for doubtful accounts which includes impairment for trade receivables that are individually significant.

The Company considers receivables as overdue if the receivables are outstanding 60 days after the maturity. The Companymaturity and sets allowance based on historical collection rate.past experience of collection.

(4)(4)Aging analysis of other receivables as of December 31, 20112012 and 20102013 are as follows:

 

    2012 2013 
  2011 2010     In millions of won 

Other receivables: (not overdue, not impaired)

  (Won)2,136,076   (Won)1,690,622         1,252,525    1,667,837  
   

 

  

 

 

Less than 60 days

    —      24,878  
   

 

  

 

 

Other receivables: (overdue, not impaired)

       —      24,878  

60 ~ 90 days

   2,134    1,606      7,430    17,507  

90 ~ 120 days

   1,721    1,127      1,870    1,880  

120 days ~ 1year

   7,486    494  

Over 1 year

   13,220    29,425  

Other receivables: (impaired)

   

Less than 60 days

   15    2  

60 ~ 90 days

   —      1  

90 ~ 120 days

   —      1  

120 days ~ 1year

   24    157  

120 days ~ 1 year

    5,520    23,996  

Over 1 year

   196,353    115,977      226,167    79,584  
  

 

  

 

    

 

  

 

 
   2,357,029    1,839,412  

Less: Allowance for doubtful accounts

   (203,197  (124,622

Less: Present value discount

   (8,929  (5,590

Other receivables: (impairment reviewed)

    240,987    122,967  
  

 

  

 

    

 

  

 

 
  (Won)2,144,903   (Won)1,709,200      1,493,512    1,815,682  
  

 

  

 

    

 

  

 

 

Less allowance for doubtful accounts

    (225,078  (69,887

Less present value discount

    (9,312  (8,235
   

 

  

 

 
       1,259,122    1,737,560  
   

 

  

 

 

(5)(5)Changes in the allowance for doubtful accounts for the years ended December 31, 201131,2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

    2011 2012 2013 
  2011 2010     Trade
receivables
 Other
receivables
 Trade
receivables
 Other
receivables
 Trade
receivables
 Other
receivables
 
  Accounts
Receivables
 Other
Receivables
 Accounts
Receivables
 Other
Receivables
     In millions of won 

Beginning balance

  (Won)29,298   (Won)124,622   (Won)31,658   (Won)77,683         29,298    124,622    24,586    203,198    47,312    225,078  

Bad debt expense

   8,022    7,114    12,754    815      14,270    867    37,447    3,994    40,446    8,665  

Write off

   (12,274  (1,780  (14,740  (1,289

Reversal

   (460  —      (374  (6,578

Others

   —      73,242    —      53,991  

Write-offs

    (18,522  (1,780  (14,721  (3,331  (22,734  (4,227

Reversals

    (460  —      —      (152  —      —    

Others(*)

    —      79,489    —      21,369    —      (159,629
  

 

  

 

  

 

  

 

    

 

  

 

  

 

  

 

  

 

  

 

 

Ending balance

  (Won)24,586   (Won)203,198   (Won)29,298   (Won)124,622         24,586    203,198    47,312    225,078    65,024    69,887  
  

 

  

 

  

 

  

 

    

 

  

 

  

 

  

 

  

 

  

 

 

 

10.(*)The amounts in 2011 and 2012 represented allowance against loans to equity method investments which were reversed when the loans were converted to investment in associates during 2013.

9.AVAILABLE-FOR-SALE FINANCIAL ASSETSAvailable-for-sale Financial Assets

 

 (1)Available-for-saleAvailable-for-sale financial assets as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

     Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 
  Ownership
(%)
  Current  Non-Current  Current  Non-Current  Current  Non-Current 

Equity Securities

       

Listed:

       

Kwanglim Co., Ltd.

  0.60 (Won)—     (Won)176   (Won)—     (Won)169   (Won)—     (Won)118  

Sungjee Construction. Co., Ltd.

  0.003  —      15    —      —      —      —    

Korea District Heating Corp.

  19.55  —      141,504    —      179,541    —      —    

Ssangyong Motor Co., Ltd.

  0.00  —      196    —      325    —      —    

LG Uplus Corporation (formerly LG Telecom)

  7.46  —      284,229    —      275,395    —      —    

FISSION Energy Corporation

  0.79  —      802    —      911    —      212  

Denison Mines Corporation

  15.08  —      83,217    —      225,206    —      84,750  

PT Adaro Energy Tbk

  1.50  —      108,460    —      152,804    —      102,804  

Cockatoo Coal Ltd.

  2.94  —      21,994    —      30,612    —      18,296  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   —      640,593    —      864,963    —      206,180  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Unlisted:

       

Construction Guarantee

  0.02  —      601    —      601    —      601  

Global Dynasty overseas resource development private equity firm

  7.14  —      357    —      85    —      —    

Plant & Mechanical Contractors Financial Cooperative of Korea

  0.01  —      36    —      36    —      36  

Fire Guarantee

  0.02  —      20    —      20    —      —    

Korea Software Financial Cooperative

  0.23  —      301    —      301    —      301  

C&Woobang ENC Co., Ltd.

  0.0004  —      22    —      —      —      —    

Women’s venture fund

  10.00  —      1,000    —      1,000    —      1,000  

Engineering Financial Cooperative

  0.07  —      44    —      44    —      44  

Intellectual Discovery, Ltd

  14.30  —      5,000    —      —      —      —    

Electric Contractors’ Financial Cooperative

  0.03  —      151    —      151    —      151  
   Ownership     2012   2013 
   In millions of won 

Equity securities

      

Listed

      

Kwanglim Co., Ltd.(*1)

   0.44      168     150  

Sungjee Construction Co., Ltd.(*1)

   0.01   5     7  

Korea District Heating Corp.(*2)

   19.55   167,541     194,710  

Ssangyong Motor Co., Ltd.(*1)

   0.03   205     291  

LG Uplus Corporation(*2)

   8.80   299,593     412,901  

Fission Uranium Corp.(formerly named Fission)

   0.52   533     848  

Denison Mines Corp.

   12.62   76,765     74,498  

Energy Fuels INC(*4)

   9.06   12,425     10,307  

PT Adaro Energy Tbk

   1.50   84,288     45,204  

Cockatoo Coal Limited(*3)

   1.20   6,487     1,875  

Namkwang Engineering & Construction Co., Ltd

   0.01   —       5  

Byucksan Engineering & Construction Co., Ltd

   0.00   —       1  

Dongyang Engineering & Construction Corp.

   0.01   —       5  

Pumyang Construction Co., Ltd.

   0.00   —       3  

Strathmore Minerals Corp.(*4)

   0.00   4,132     —    
    

 

 

   

 

 

 
     652,142     740,805  
    

 

 

   

 

 

 

Unlisted

      

Construction Guarantee

   0.02   784     790  

Global Dynasty overseas resource development private equity firm

   7.46   881     1,517  

Plant & Mechanical Contractors Financial Cooperative of Korea

   0.01   36     36  

Dongnam Co., Ltd.

   0.46   72     72  

Mobo Co., Ltd.

   0.00   14     14  

Fire Guarantee

   0.02   20     20  

Korea Software Financial Cooperative

   0.18   301     301  

Woobang ENC Co., Ltd.

   0.00   22     22  

Women’s venture fund

   10.00   780     780  

Engineering Financial Cooperative

   0.11   60     60  

Intellectual Discovery, Ltd.

   9.13   5,000     5,000  

Electric Contractors Financial Cooperative

   0.03   152     152  

Korea Specialty Contractor Financial Cooperative

   0.01   417     417  

Information & Communication Financial Cooperative

   0.03   10     10  

Troika overseas resource development private equity firm

   3.66   8,573     10,664  

POSTECH Venture Capital Corporation

   0.00   240     —    

POSTECH electric power fund

   5.61   2,800     —    

Poonglim Industrial Co., Ltd.

   0.01   —       78  

Woori Ascon Co., Ltd.

   0.34   —       10  

HANKOOK Silicon Co., Ltd.

   11.82   —       7,513  

LIG E&C Co., Ltd.

   0.00   —       5  

Miju Steel Mfg Co., Ltd.

   0.23   —       51  

Ginseng K Co., Ltd.

   0.08   —       8  

Dae Kwang Semiconductor Co., Ltd.

   0.07   —       6  

Sanbon Department Store

   0.01   —       124  

SAMBO AUTO. Co., Ltd.

   0.02   38     38  

     Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 
  Ownership
(%)
  Current  Non-Current  Current  Non-Current  Current  Non-Current 

Korea Specialty Contractor Financial Cooperative

  0.01  —      177    —      177    —      177  

Information & Communication Financial Cooperative

  0.01  —      10    —      10    —      10  

Troika overseas resource development private equity firm

  3.66  —      8,372    —      194    —      —    

POSTECH Venture Capital Corporation

  1.05  —      240    —      300    —      300  

POSTECH electric power fund

  12.28  —      2,800    —      3,500    —      3,500  

Korea Electric Engineers Association

  0.28  —      40    —      40    —      40  

Korea electrical manufacturers Association

  1.05  —      240    —      300    —      300  

Korea Engineering & Consulting Association

  0.02  —      16    —      16    —      16  

Korea investment—Korea EXIM Bank CERs private special asset Investment Trust I.

  19.30  —      6,803    —      6,803    —      40  

Hanwha Venture Capital Corporation

  1.20  —      180    —      300    —      300  

Hanwha electric power venture Fund

  15.20  —      2,280    —      3,800    —      3,800  

Hwan Young Steel Co., Ltd.

  0.10  —      97    —      97    —      97  

IBK-AUCTUS green growth Private equity firm

  6.30  —      7,060    —      3,500    —      —    

K&C- Gyeongnam youth job Creation investment fund

  10.00  —      1,660    —      2,000    —      2,000  

Areva NC Expansion

  15.00  —      254,744    —      258,069    —      285,465  

Green & Sustainable Energy InvestmentCorp.,(*1)

  20.00  —      14    —      4    —      —    

Kanan Hydroelectric Power Corp.,(*1)

  20.00  —      19    —      5    —      —    

SET Holdings

  2.50  —      238,561    —      195,262    —      229,255  

3i Powergen Inc.,

  15.00  —      1,647    —      1,626    —      1,582  
   —      532,492    —      478,241    —      529,015  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  (Won)—     (Won)1,173,085   (Won)—     (Won)1,343,204   (Won)—     (Won)735,195  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   Ownership     2012   2013 
   In millions of won 

Korea Bio Fuel Co., Ltd.

   15.00      1,500     1,500  

Korea Electric Engineers Association

   0.26   40     61  

Korea Electrical Manufacturers Association

   0.00   240     —    

Korea investment—Korea EXIM Bank CERs private special asset Investment Trust

   14.18   6,803     6,803  

Hanwha Venture Capital Corporation

   0.00   180     —    

Hanwha Electric Power Venture fund

   16.40   2,280     1,804  

Hwan Young Steel Co., Ltd.

   0.14   97     97  

IBK-AUCTUS green growth private equity firm(*2)

   6.30   6,054     6,054  

K&C- Gyeongnam youth job Creation investment fund

   10.00   1,420     1,340  

Areva Nc Expansion

   13.49   241,472     248,292  

Green & Sustainable Energy Investment Corp.

   19.58   14     13  

Kanan Hydroelectric Power Corp.

   19.58   19     17  

Set Holding

   2.50   169,637     170,514  

Siam Solar Power

   10.00   —       933  

3i Powergen Inc.

   15.00   1,630     1,486  

PT. Kedap Saayq

   10.00   —       18,540  

Navanakorn Electric Co., Ltd.(*5)

   29.00   14,948     16,163  
    

 

 

   

 

 

 
     466,534     501,305  
    

 

 

   

 

 

 

Debt securities

      

Ambre Energy Limited

     22,518     14,655  
    

 

 

   

 

 

 
        1,141,194     1,256,765  
    

 

 

   

 

 

 

 

(*1)It has been determined that available-for-sale financial assets were impaired because the fair values of the securities of Kwanglim Co., Ltd., Ssangyong Motor Co., Ltd. and Sungjee Construction Co., Ltd. declined below their respective acquisition costs during the current year. As such, cumulative losses of ₩415 million previously recognized in other comprehensive loss were reclassified to impairment losses on available-for-sale financial assets for the year ended December 31, 2013.

(*1)2)The fair values of the securities of Korea District Heating Corp. and LG Uplus Corporation have declined below their respective acquisition costs for more than a year. As such, cumulative losses of ₩35,619 million previously recognized in other comprehensive loss were reclassified to impairment losses on available-for-sale financial assets for the year ended December 31, 2012. Also, as the estimated fair value of IBK-AUCTUS green growth private equity firm declined below book value, cumulative losses of ₩1,106 million previously recognized in other comprehensive loss were reclassified to impairment losses on available-for-sale financial assets during the year ended December 31, 2012.

(*3)The fair value of Cockatoo Coal Limited securities declined significantly below the acquisition cost and the cumulative losses of ₩12,177 million previously recognized in other comprehensive loss were reclassified to impairment loss on available-for-sale financial assets during the year ended December 31, 2013.

(*4)Shares of Energy Fuels Inc. were acquired when Strathmore Minerals Corp. was merged into Energy Fuels Inc. during 2013. As a result of the exchange of the shares, a gain on disposal of available-for-sale financial assets amounting to ₩4,202 million was recognized for the year ended December 31, 2013.

(*5)Although the Company holds more than 20% of the equity shares of these investments, the Company cannot exercise significant influence by virtue of its contractual right to appoint directors to the board of directors of the entity.influence.

Book values of unlisted equity securities held by the Company that were measured at cost as of December 31, 2012 and 2013 are ₩296,897 million and ₩330,001 million, respectively, as a quoted market price does not exist in an active market and its fair value cannot be measured reliably.

(2)The fair value and acquisition cost of available-for-sale financial assets as of December 31, 2011 and December 31, 2010 are as follows (KRW in millions):

   Dec 31. 2011   Dec 31. 2010 

Type

  Acquisition cost   Fair value   Acquisition cost   Fair value 

Equity securities

  (Won)1,229,203    (Won)1,173,085    (Won)1,222,586    (Won)1,343,204  

11.10.HELD-TO-MATURITY INVESTMENTS:Held-to-maturity Investments

Held-to-maturity investments as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

   Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010 
   Current   Non-Current   Current   Non-Current   Current   Non-Current 

Government and municipal bonds

  (Won)334    (Won)1,986    (Won)509    (Won)2,142    (Won)441    (Won)2,330  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (Won)334    (Won)1,986    (Won)509    (Won)2,142    (Won)441    (Won)2,330  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      2012   2013 
      Current   Non-current   Current   Non-current 
      In millions of won 

Government and municipal bonds and others

       196     2,020     168     2,117  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

12.11.DERIVATIVES:Derivatives

(1)Derivatives as of December 31, 2012 and 2013 are as follows:

      2012   2013 
      Current   Non-current   Current   Non-current 
      In millions of won 

Derivative assets

         

Currency option

       —       —       963     —    

Currency forward

    245     40     474     206  

Currency swap

    115,761     127,652     —       83,003  

Interest rate swap

    —       4     —       1,848  
   

 

 

   

 

 

   

 

 

   

 

 

 
       116,006     127,696     1,437     85,057  
   

 

 

   

 

 

   

 

 

   

 

 

 

Derivative liabilities

         

Currency option

       9,491     —       42,144     —    

Currency forward

    10,323     105     2,166     —    

Currency swap

    70,011     389,948     291,476     289,819  

Interest rate swap

    4,313     135,985     1,947     72,923  
   

 

 

   

 

 

   

 

 

   

 

 

 
       94,138     526,038     337,733     362,742  
   

 

 

   

 

 

   

 

 

   

 

 

 

(2)Currency option contracts which are not designated as hedge instruments as of December 31, 2013 are as follows:

 

 (1)(i)DerivativesTarget Redemption Forward

Financial institution

  

Contract year

  Position  Contract amount   Contract
exchange rate
   Target
profit
 
   In thousands of U.S. dollars 

Standard Chartered

  2013.11.22 ~ 2014.11.20  SELL  USD6,000     1,101.50     250  

Standard Chartered

  2013.12.09 ~ 2014.12.15  SELL  USD5,000     1,093.50     250  

Standard Chartered

  2013.12.11 ~ 2014.12.15  SELL  USD5,000     1,092.00     250  

Standard Chartered

  2013.12.18 ~ 2014.12.16  SELL  USD5,000     1,090.50     250  

Standard Chartered

  2013.12.19 ~ 2014.12.17  SELL  USD8,000     1,097.50     250  

Barclays Bank PLC

  2013.06.21 ~ 2014.06.24  BUY  USD2,000     1,113.50     200  

Barclays Bank PLC

  2013.07.09 ~ 2014.07.16  BUY  USD3,000     1,109.40     200  

Nomura

  2013.06.27 ~ 2014.06.30  BUY  USD3,000     1,102.40     200  

Credit Suisse

  2013.07.03 ~ 2014.07.02  BUY  USD5,000     1,105.50     200  

Credit Suisse

  2013.11.20 ~ 2014.11.26  SELL  USD5,000     1,099.10     250  

Credit Suisse

  2013.12.17 ~ 2014.12.15  SELL  USD3,000     1,092.00     250  

Morgan Stanley

  2013.07.01 ~ 2014.07.01  BUY  USD5,000     1,098.20     200  

Morgan Stanley

  2013.07.19 ~ 2014.07.15  BUY  USD3,000     1,095.00     200  

Morgan Stanley

  2013.08.19 ~ 2014.08.18  BUY  USD3,000     1,089.40     200  

Morgan Stanley

  2013.09.11 ~ 2014.05.07  BUY  USD 10,000     1,072.90     50  

Morgan Stanley

  2013.10.21 ~ 2014.12.29  BUY  USD3,000     1,047.00     50  

RBS

  2013.06.26 ~ 2014.06.18  BUY  USD3,000     1,112.00     250  

HSBC

  2013.07.04 ~ 2014.07.07  BUY  USD3,000     1,099.80     200  

The Company enters into currency option contracts to buy or sell currency at a specified exchange rate during a specified period of time to hedge currency exchange risk from flaming coal purchase payments. Every week, the Company compares the target profit to the accumulated total profit or loss from the difference between the contract exchange rate and average exchange rate. When the target profits are achieved, the contracts will be automatically terminated.

(ii)European Knock-Out

      Contract amount   Contract
exchange rate
   Barrier(*1) 

Financial institution

  

Contract year

  Pay   Receive     
   In millions of won and thousands of U.S. dollars 

Standard Chartered

  2013.10.31 ~ 2014.04.30   162,368    USD153,670     1,056.60     1,120.00  

Barclays Bank PLC

  2013.09.16 ~ 2014.01.13   5,747    USD5,328     1,078.50     1,150.00  

Barclays Bank PLC

  2013.09.16 ~ 2014.02.12   7,404    USD6,882     1,075.90     1,150.00  

Barclays Bank PLC

  2013.09.16 ~ 2014.03.13   13,826    USD12,879     1,073.50     1,150.00  

Barclays Bank PLC

  2013.10.11 ~ 2014.04.07   9,884    USD9,317     1,060.90     1,130.00  

Barclays Bank PLC

  2013.10.29 ~ 2014.03.26   4,763    USD4,516     1,054.60     1,100.00  

Barclays Bank PLC

  2013.10.29 ~ 2014.04.24   11,250    USD10,689     1,052.50     1,100.00  

Barclays Bank PLC

  2013.12.13 ~ 2014.05.08   8,472    USD8,121     1,043.20     1,100.00  

Korea Exchange Bank

  2013.09.09 ~ 2014.03.05   5,611    USD5,244     1,070.00     1,150.00  

Korea Exchange Bank

  2013.09.09 ~ 2014.02.26   9,831    USD9,217     1,066.70     1,130.00  

Korea Exchange Bank

  2013.10.22 ~ 2014.04.17   5,816    USD5,516     1,054.40     1,110.00  

Korea Exchange Bank

  2013.12.16 ~ 2014.06.11   18,335    USD 17,664     1,038.00     1,100.00  

Credit Suisse

  2013.10.01 ~ 2014.02.26   9,120    USD8,558     1,065.70     1,130.00  

Credit Suisse

  2013.10.01 ~ 2014.03.27   9,531    USD8,964     1,063.20     1,130.00  

Credit Suisse

  2013.10.28 ~ 2014.04.24   10,142    USD9,619     1,054.40     1,110.00  

Morgan Stanley

  2013.10.31 ~ 2014.04.30   158,610    USD 150,000     1,057.40     1,120.00  

RBS

  2013.11.23 ~ 2014.01.28   4,261    USD3,942     1,080.80     1,150.00  

RBS

  2013.11.23 ~ 2014.04.21   5,853    USD5,546     1,055.20     1,110.00  

(*1)Contracts are entered to hedge the currency risk arising from foreign short-term borrowings. The contracts will be automatically cancelled if the market average exchange rate at maturity date is above the barrier.

(3)Currency forward contracts which are not designated as hedge instruments, as of December 31, 2011, December 31, 2010 and January 1, 20102013 are as follows (KRW in millions):follows:

 

  Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 
  Current  Non-Current  Current  Non-Current  Current  Non-Current 

DERIVATIVE ASSETS:

      

Currency forward

 (Won)8,410   (Won)—     (Won)2,108   (Won)—     (Won)23   (Won)—    

Currency swap

  10,756    438,900    99,970    354,923    327,295    549,271  

Interest rate swap

  —      —      2,816    6,449    —      3,508  

Other derivatives

  4,011    7,342    —      —      —      —    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)23,177   (Won)446,242   (Won)104,894   (Won)361,372   (Won)327,318   (Won)552,779  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

DERIVATIVE LIABILITIES:

      

Currency forward

  1,864    2,350    775    —      226    —    

Currency swap

  8,288    124,202    7,507    191,821    —      29,108  

Interest rate swap

  1,934    78,527    5,281    12,721    2,791    6,427  

Other derivatives

  7,779    —      210    —      —      1,419  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)19,865   (Won)205,079   (Won)13,773   (Won)204,542   (Won)3,017   (Won)36,954  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Counterparty

 Contract
Date
  Maturity
Date
 Contract amounts  Contract exchange rate 
   Pay  Receive  
  In millions of won and thousands of foreign currencies 

Korea Exchange Bank

  2013-12-18   2014-01-13  10,715    USD 10,168    1,053.81  

Korea Exchange Bank

  2013-12-18   2014-01-02  2,906    USD 2,760    1,053.21  

RBS

  2013-12-18   2014-01-03  38,396    USD 36,457    1,053.18  

DBS

  2013-12-30   2014-01-13  61,974    USD 58,671    1,056.29  

RBS

  2013-11-19   2014-05-21  7,049    USD 6,603    1,067.50  

BNP Paribas

  2013-11-19   2014-05-21  21,352    USD 20,000    1,067.60  

BNP Paribas

  2013-11-28   2014-05-21  USD 4,000    4,270    1,067.60  

BNP Paribas

  2013-12-20   2014-05-21  USD 7,695    8,215    1,067.60  

Korea Exchange Bank

  2013-12-26  2014-01-02  3,176    USD 3,000    1,058.67  

Korea Exchange Bank

  2013-12-27   2014-01-02  3,168    USD 3,000    1,056.08  

Korea Exchange Bank

  2013-12-27   2014-01-02  8,437    USD 8,000    1,054.68  

The Bank of Nova Scotia

  2013-09-06   2014-01-10  7,666    USD 7,000    1,095.20  

The Bank of Nova Scotia

  2013-11-12   2014-02-14  5,380    USD 5,000    1,075.90  

Standard Chartered

  2013-10-01   2014-01-06  5,398    USD 5,000    1,079.60  

Standard Chartered

  2013-10-01   2014-01-06  10,801    USD 10,000    1,080.10  

Standard Chartered

  2013-10-11   2014-01-15  5,379    USD 5,000    1,075.70  

RBS

  2013-09-09   2014-01-10  4,369    USD 3,979    1,098.00  

RBS

  2013-09-09   2014-01-10  5,485    USD 5,000    1,097.00  

RBS

  2013-09-09   2014-01-10  5,480    USD 5,000    1,096.00  

RBS

  2013-10-11   2014-01-15  2,804    USD 2,607    1,075.70  

RBS

  2013-11-12   2014-02-14  5,380    USD 5,000    1,075.95  

RBS

  2013-09-09   2014-01-10  5,475    USD 5,000    1,095.00  

BNP Paribas

  2013-10-07   2014-01-10  5,377    USD 5,000    1,075.40  

BNP Paribas

  2013-11-12   2014-02-12  5,379    USD 5,000    1,075.80  

Barclays Bank PLC

  2013-10-07   2014-01-10  5,376    USD 5,000    1,075.10  

The Bank of Nova Scotia

  2013-12-10   2014-03-12  1,147    USD 1,085    1,057.05  

Standard Chartered

  2011-08-08   2014.01.27 ~ 2015.12.28  USD 19,623    21,579    1,093.10 ~ 1,103.20  

(4)(2)Currency swap contracts which are not designated as hedge instruments as of December 31, 20112013 are as follows (KRW in millions, USD in thousands, JPY in thousands):follows:

 

Counterparty

 Contract year  Contract amounts  Contract interest rate Contract
exchange  rate
 
  Pay  Receive  Pay  Receive 

Morgan Stanley

  2010    2012   KRW 120,000   USD100,000    3.75 3M USD Libor
+ 1.90%
  1,200.00  

Morgan Stanley

  2010    2015   KRW118,800   USD100,000    4.61 3M USD Libor
+ 1.64%
  1,188.00  

ING

  2010    2012   KRW117,900   USD100,000    3.64 6M USD Libor
+ 1.37%
  1,179.00  

M-UFJ

  2010    2015   KRW116,100   USD100,000    4.00 3M USD Libor
+ 1.00%
  1,161.00  

DBS

  2011    2014   KRW56,150   USD50,000    4.21 3M USD Libor
+ 1.00%
  1,123.00  

SMBC

  2011    2014   KRW56,150   USD50,000    4.21 3M USD Libor
+ 1.00%
  1,123.00  

Mizuho

  2011    2014   KRW112,800   USD100,000    3.86 3M USD Libor
+ 0.80%
  1,128.00  

Counterparty

 Contract year  Contract amounts Contract interest rate Contract
exchange  rate
   Contract year   Contract amount   

Contract interest rate

  Contract
exchange rate
 
 Pay Receive Pay Receive    Pay   Receive   

Pay (%)

  

Receive (%)

  

DBS

  2011    2014   KRW109,500   USD100,000    3.80 3M USD Libor
+ 0.85%
  1,095.00  

Barclays

  2008    2013   KRW187,020   USD200,000    7.50 7.75%  935.10  

Credit Suisse

  2008    2013   KRW140,265   USD150,000    6.94 7.75%  935.10  
  In millions of won and thousands of foreign currencies 

Shinhan Bank

  2010    2014   KRW84,615   USD75,000    6.83 5.50%  1,128.20     2010~2014     84,615     USD 75,000    6.83%  5.50%   1,128.20  

RBS

  2010    2014   KRW141,125   USD125,000    6.78 5.50%  1,129.00     2010~2014     141,125     USD 125,000    6.78%  5.50%   1,129.00  

Morgan Stanley

  2010    2014   KRW112,320   USD100,000    6.71 5.50%  1,123.20     2010~2014     112,320     USD 100,000    6.71%  5.50%   1,123.20  

HSBC

  2010    2014   KRW112,320   USD100,000    6.71 5.50%  1,123.20     2010~2014     112,320     USD 100,000    6.71%  5.50%   1,123.20  

BOA

  2010    2014   KRW110,310   USD100,000    6.93 5.50%  1,103.10  

Bank of America

   2011~2014     110,310     USD 100,000    6.93%  5.50%   1,103.10  

UBS

  2011    2015   KRW220,356   USD200,000    3.90 3.00%  1,101.78     2011~2015     220,356     USD 200,000    3.90%  3.00%   1,101.78  

RBS

  2011    2015   KRW110,110   USD100,000    3.90 3.00%  1,101.10     2011~2015     110,110     USD 100,000    3.90%  3.00%   1,101.10  

Barclays

  2011    2015   KRW108,390   USD100,000    3.78 3.00%  1,083.90  

Barclays Bank PLC

   2011~2015     108,390     USD 100,000    3.78%  3.00%   1,083.90  

Credit Suisse

  2011    2015   KRW108,390   USD100,000    3.78 3.00%  1,083.90     2011~2015     108,390     USD 100,000    3.22%  3.00%   1,083.90  

Morgan Stanley

  2011    2015   KRW63,006   USD60,000    4.06 3.00%  1,050.10     2011~2015     63,006     USD 60,000    4.06%  3.00%   1,050.10  

BTMU

  2009    2012   KRW138,018   JPY10,000,000    4.10 3M EuroYen
Tibor + 2.50%
  13.80  

Goldman Sachs

   2010~2015     156,643     USD 140,000    3.92%  3.00%   1,118.88  

Deutsche Bank

  2009    2014   KRW126,610   USD100,000    5.39 6.25%  1,266.10     2012~2018     110,412     JPY 10,000,000    6.21%  4.19%   11.04  

Nomura Securities

  2009    2014   KRW126,610   USD100,000    5.35 6.25%  1,266.10  

Nomura Securities

  2009    2014   KRW126,610   USD100,000    5.33 6.25%  1,266.10  

IBK

   2013~2018     111,800     USD 100,000    3.16%  2.79%   1,118.00  

Bank of America

   2012~2018     103,580     JPY 10,000,000    7.05%  4.19%   10.36  

Morgan Stanley

   2010~2015     118,800     USD 100,000    4.61%  3M Libor + 1.64%   1,188.00  

M-UFJ

   2010~2015     116,100     USD 100,000    4.00%  3M Libor + 1.00%   1,161.00  

DBS

   2011~2014     56,150     USD 50,000    4.21%  3M Libor + 1.00%   1,123.00  

SMBC

   2011~2014     56,150     USD 50,000    4.21%  3M Libor + 1.00%   1,123.00  

Mizuho Corporate Bank

   2011~2014     112,800     USD 100,000    3.86%  3M Libor + 0.80%   1,128.00  

DBS

   2011~2014     109,500     USD 100,000    3.80%  3M Libor + 0.85%   1,095.00  

Deutsche Bank

   2009~2014     126,610     USD 100,000    5.39%  6.25%   1,266.10  

Nomura

   2009~2014     126,610     USD 100,000    5.35%  6.25%   1,266.10  

Nomura

   2009~2014     126,610     USD 100,000    5.33%  6.25%   1,266.10  

Morgan Stanley

  2009    2014   KRW126,610   USD100,000    5.32 6.25%  1,266.10     2009~2014     126,610     USD 100,000    5.32%  6.25%   1,266.10  

Morgan Stanley

  2010    2014   KRW126,610   USD100,000    5.30 6.25%  1,266.10     2010~2014     126,610     USD 100,000    5.30%  6.25%   1,266.10  

Barclays

  2010    2014   KRW126,610   USD100,000    5.29 6.25%  1,266.10  

CITI

  2010    2014   KRW126,610   USD100,000    5.27 6.25%  1,266.10  

Barclays Bank PLC

   2010~2014     126,610     USD 100,000    5.29%  6.25%   1,266.10  

Citibank

   2010~2014     126,610     USD 100,000    5.27%  6.25%   1,266.10  

JP Morgan

  2010    2014   KRW126,610   USD100,000    4.93 6.25%  1,266.10     2010~2014     126,610     USD 100,000    4.93%  6.25%   1,266.10  

Deutsche Bank

  2010    2014   KRW126,610   USD100,000    4.93 6.25%  1,266.10     2010~2014     126,610     USD 100,000    4.93%  6.25%   1,266.10  

RBS

  2010    2014   KRW126,610   USD100,000    4.93 6.25%  1,266.10     2010~2014     126,610     USD 100,000    4.93%  6.25%   1,266.10  

DBS

  2010    2013   KRW226,900   USD200,000    3.70 3M USD Libor
+ 0.25%
  1,134.50  

SMBC

  2010    2013   KRW113,400   USD100,000    3.92 3M USD Libor
+ 0.90%
  1,134.00  

BTMU

  2010    2013   KRW56,525   USD50,000    3.92 3M USD Libor
+ 0.90%
  1,130.50  

Mizuho

  2010    2013   KRW56,750   USD50,000    3.92 3M USD Libor
+ 0.90%
  1,135.00  

CITI

  2010    2015   KRW116,080   USD100,000    3.97 3.13%  1,160.80  

Citibank

   2010~2015     116,080     USD 100,000    3.97%  3.13%   1,160.80  

Deutsche Bank

  2010    2015   KRW116,080   USD100,000    3.98 3.13%  1,160.80     2010~2015     116,080     USD 100,000    3.98%  3.13%   1,160.80  

RBS

  2010    2015   KRW116,080   USD100,000    3.97 3.13%  1,160.80     2010~2015     116,080     USD 100,000    3.97%  3.13%   1,160.80  

HSBC

  2010��   2015   KRW116,080   USD100,000    3.23 3.13%  1,160.80     2010~2015     116,080     USD 100,000    3.23%  3.13%   1,160.80  

UBS

  2010    2015   KRW116,080   USD100,000    3.23 3.13%  1,160.80     2010~2015     116,080     USD 100,000    3.23%  3.13%   1,160.80  

Citibank

   2012~2022     112,930     USD 100,000    2.79%  3.00%   1,129.30  

JP Morgan

   2012~2022     112,930     USD 100,000    2.79%  3.00%   1,129.30  

Bank of America

   2012~2022     112,930     USD 100,000    2.79%  3.00%   1,129.30  

Goldman Sachs

   2012~2022     112,930     USD 100,000    2.79%  3.00%   1,129.30  

HSBC

   2012~2022     111,770     USD 100,000    2.89%  3.00%   1,117.70  

Hana Bank

   2012~2022     111,770     USD 100,000    2.87%  3.00%   1,117.70  

Standard Chartered

   2012~2022     111,770     USD 100,000    2.89%  3.00%   1,117.70  

Deutsche Bank

   2012~2022     55,885     USD 50,000    2.79%  3.00%   1,117.70  

DBS

   2013~2018     108,140     USD 100,000    2.63%  3M Libor+0.84%   1,081.40  

DBS

   2013~2018     108,140     USD 100,000    2.57%  3M Libor+0.84%   1,081.40  

DBS

   2013~2018     108,140     USD 100,000    2.57%  3M Libor+0.84%   1,081.40  

HSBC

   2013~2018     107,450     USD 100,000    3.41%  2.88%   1,074.50  

Standard Chartered

   2013~2018     107,450     USD 100,000    3.44%  2.88%   1,074.50  

JP Morgan

   2013~2018     107,450     USD 100,000    3.48%  2.88%   1,074.50  

HSBC

   2013~2020     USD 92,940     AUD 100,000    3M Libor+1.22%  5.75%   0.93  

HSBC

   2013~2020     USD 93,480     AUD 100,000    3M Libor+1.18%  5.75%   0.93  

Standard Chartered

   2013~2020     USD 117,250     AUD 125,000    3M Libor+1.25%  5.75%   0.94  

(5)(3)Currency swap contracts which are designated as hedge instruments as of December 31, 20112013 are as follows(KRW in millions, USD in thousands):follows:

 

Counterparty

  Contract year   Contract amounts   Contract interest rate  Contract
exchange  rate
   Contract
year
   Contract amount   

Contract interest rate

  Contract
exchange rate
 
  Pay   Receive   Pay Receive     Pay   Receive   

Pay (%)

  

Receive (%)

  
  In millions of won and thousands of foreign currencies 

Citibank

   2006~2016     113,200     USD 100,000    1.05%  6.00%   1,132.00  

Barclays Bank PLC

   2006~2016     113,200     USD 100,000    1.05%  6.00%   1,132.00  

Credit Suisse

   2009     2013    KRW 197,475    USD 150,000     5.12 4.75%   1,316.50     2006~2016     113,200     USD 100,000    1.05%  6.00%   1,132.00  

Goldman Sachs

   2011~2017     105,260     USD 100,000    3.99%  3.63%   1,052.60  

Barclays Bank PLC

   2011~2017     105,260     USD 100,000    3.99%  3.63%   1,052.60  

Citibank

   2011~2017     105,260     USD 100,000    3.99%  3.63%   1,052.60  

HSBC

   2012~2014     45,264     USD 40,000    3.25%  3M Libor+1.50%   1,131.60  

Citibank

   2012~2014     33,948     USD 30,000    3.25%  3M Libor+1.50%   1,131.60  

RBS

   2012~2014     22,632     USD 20,000    3.25%  3M Libor+1.50%   1,131.60  

UOB

   2012~2014     33,948     USD 30,000    3.25%  3M Libor+1.50%   1,131.60  

DBS

   2012~2014     56,580     USD 50,000    3.20%  3M Libor+1.50%   1,131.60  

ANZ

   2012~2014     22,632     USD 20,000    3.20%  3M Libor+1.50%   1,131.60  

Citibank

   2012~2014     20,369     USD 18,000    3.20%  3M Libor+1.50%   1,131.60  

Credit Suisse

   2006     2016    KRW94,735    USD100,000     5.26 6.00%   947.35     2012~2014     45,264     USD 40,000    2.77%  3M Libor+1.50%   1,131.60  

Barclays

   2006     2016    KRW94,735    USD100,000     5.26 6.00%   947.35  

RBS

   2012~2014     58,843     USD 52,000    2.77%  3M Libor+1.50%   1,131.60  

Citibank

   2006     2016    KRW94,735    USD100,000     5.24 6.00%   947.35     2013~2018     54,570     USD 50,000    2.90%  3M Libor+1.01%   1,091.40  

Goldman Sachs

   2011     2017    KRW105,260    USD100,000     3.99 3.63%   1,052.60  

Citibank

   2011     2017    KRW105,260    USD100,000     3.99 3.63%   1,052.60  

Barclays

   2011     2017    KRW105,260    USD100,000     3.99 3.63%   1,052.60  

UBS

   2006     2016    KRW98,100    USD100,000     5.48 5.50%   981.00  

Standard Chartered

   2013~2018     54,570     USD 50,000    2.90%  3M Libor+1.01%   1,091.40  

Credit Suisse

   2006     2016    KRW98,100    USD100,000     5.48 5.50%   981.00     2013~2018     111,410     USD 100,000    3.22%  3M Libor+1.50%   1,114.10  

Citi Group

   2008     2013    KRW113,304    USD120,000     4.96 5.38%   944.20  

Goldman Sachs

   2008     2013    KRW113,304    USD120,000     4.96 5.38%   944.20  

Barclays

   2008     2013    KRW56,652    USD60,000     4.96 5.38%   944.20  

Barclays

   2006     2016    KRW71,888    USD75,000     4.81 5.50%   958.51  

Deutsche Bank

   2006     2016    KRW71,888    USD75,000     4.81 5.50%   958.51  

Barclays

   2004     2014    KRW172,875    USD150,000     5.10 5.75%   1,152.50  

UBS AG

   2006~2016     98,100     USD 100,000    5.48%  5.50%   981  

Credit Suisse

   2006~2016     98,100     USD 100,000    5.48%  5.50%   981  

Barclays Bank PLC

   2006~2016     71,888     USD 75,000    4.81%  5.50%   958.51  

Deutsche Bank AG

   2006~2016     71,888     USD 75,000    4.81%  5.50%   958.51  

Barclays Bank PLC

   2012~2017     142,500     USD 125,000    3.83%  3.13%   1,140.00  

Morgan Stanley

   2012~2017     142,500     USD 125,000    3.83%  3.13%   1,140.00  

RBS

   2012~2017     142,500     USD 125,000    3.83%  3.13%   1,140.00  

JP Morgan

   2012~2017     142,500     USD 125,000    3.83%  3.13%   1,140.00  

RBS

   2013~2019     118,343     CHF 100,000    3.47%  1.63%   1,183.43  

Barclays Bank PLC

   2013~2019     59,172     CHF 50,000    3.47%  1.63%   1,183.43  

Nomura

   2013~2019     59,172     CHF 50,000    3.47%  1.63%   1,183.43  

Barclays Bank PLC

   2013~2018     107,360     USD 100,000    3.34%  2.88%   1,073.60  

RBS

   2013~2018     107,360     USD 100,000    3.34%  2.88%   1,073.60  

JP Morgan

   2013~2018     161,040     USD 150,000    3.34%  2.88%   1,073.60  

Standard Chartered

   2013~2018     161,040     USD 150,000    3.34%  2.88%   1,073.60  

Barclays Bank PLC

   2004~2014     172,875     USD 150,000    5.10%  5.75%   1,152.50  

Barclays Bank PLC

   2013~2018     81,188     USD 75,000    2.65%  1.88%   1,082.50  

RBS

   2008     2013    KRW149,040    USD150,000     5.03 5.38%   993.60     2013~2018     81,188     USD 75,000    2.65%  1.88%   1,082.50  

Deutsche Bank

   2008     2013    KRW149,040    USD150,000     5.03 5.38%   993.60     2013~2018     81,188     USD 75,000    2.65%  1.88%   1,082.50  

Citibank

   2013~2018     81,188     USD 75,000    2.65%  1.88%   1,082.50  

BTMU

   2010     2013    KRW113,200    USD100,000     4.11 3M USD Libor
+ 0.80%
   1,132.00     2010~2015     55,900     USD 50,000    4.03%  3M Libor+1.20%   1,118.00  

BTMU

   2010     2015    KRW55,900    USD50,000     4.03 3M USD Libor
+ 1.20%
   1,118.00  

RBS

   2012~2017     115,140     USD 100,000    3.38%  2.50%   1,151.40  

BNP Paribas

   2012~2017     115,140     USD 100,000    3.38%  2.50%   1,151.40  

Hana Bank

   2012~2017     115,140     USD 100,000    3.38%  2.50%   1,151.40  

Barclays Bank PLC

   2012~2017     57,570     USD 50,000    3.38%  2.50%   1,151.40  

Standard Chartered

   2012~2017     57,570     USD 50,000    3.38%  2.50%   1,151.40  

Nomura

   2012~2017     57,570     USD 50,000    3.38%  2.50%   1,151.40  

Credit Agricole

   2012~2017     57,570     USD 50,000    3.38%  2.50%   1,151.40  

Societe Generale

   2013~2018     106,190     USD 100,000    3.48%  2.63%   1,061.90  

BNP Paribas

   2013~2018     53,095     USD 50,000    3.48%  2.63%   1,061.90  

Hana Bank

   2013~2018     53,095     USD 50,000    3.48%  2.63%   1,061.90  

Standard Chartered

   2013~2018     106,030     USD 100,000    3.48%  2.63%   1,060.30  

Barclays Bank PLC

   2013~2018     53,015     USD 50,000    3.48%  2.63%   1,060.30  

Hana Bank

   2013~2018     31,809     USD 30,000    3.48%  2.63%   1,060.30  

Societe Generale

   2013~2018     21,206     USD 20,000    3.48%  2.63%   1,060.30  

HSBC

   2013~2018     53,015     USD 50,000    3.47%  2.63%   1,060.30  

Nomura

   2013~2018     53,015     USD 50,000    3.47%  2.63%   1,060.30  

(6)(4)Interest rate swap contracts which are not designated as hedge instruments as of December 31, 20112013 are as follows (KRW in millions):follows:

 

Counterparty

  Contract year       Contract interest rate per annum   Contract
year
   Contract
amount
   Contract interest rate per annum 
  Contract amounts           Pay                 Receive                Pay (%)         Receive (%)     

Korea Exchange Bank

   2010     2013     100,000     4.18  3M CD + 0.58
  In millions of won 

Nonghyup Bank

   2010     2015     100,000     4.90  3M CD + 1.05   2010~2015     100,000     4.90  3M CD + 1.05

Nonghyup Bank

   2010     2015     100,000     4.83  3M CD + 0.90   2010~2015     100,000     4.83  3M CD + 0.90

Nonghyup Bank

   2010     2015     50,000     4.77  3M CD + 0.90   2010~2015     50,000     4.77  3M CD + 0.90

Korea Development Bank

   2012~2016     200,000     3.57  3M CD + 0.26

Nonghyup Bank

   2012~2016     100,000     3.49  3M CD + 0.25

Korea Development Bank

   2012~2016     50,000     3.49  3M CD + 0.25

HSBC

   2012~2016     50,000     3.49  3M CD + 0.25

Standard Chartered

   2012~2016     200,000     3.55  3M CD + 0.26

Standard Chartered

   2012~2017     160,000     3.57  3M CD + 0.32

JP Morgan

   2013~2018     150,000     3.58  3M CD + 0.31

Korea Exchange Bank

   2011~2014     100,000     4.08  3M CD + 0.03

Korea Exchange Bank

   2011~2014     100,000     3.89  3M CD + 0.05

Shinhan Bank

   2011~2014     100,000     3.63  3M CD + 0.18

Korea Exchange Bank

   2011     2014     100,000     4.08  3M CD + 0.03   2011~2014     200,000     3.66  3M CD + 0.24

Korea Exchange Bank

   2011     2012     100,000     3.93  3M CD + 0.04   2012~2015     100,000     3.58  3M CD + 0.15

Korea Exchange Bank

   2011     2014     100,000     3.89  3M CD + 0.05   2012~2015     200,000     3.65  3M CD + 0.10

Korea Exchange Bank

   2011     2013     100,000     3.89  3M CD + 0.07   2012~2015     100,000     2.86  3M CD + 0.05

Shinhan Bank

   2011     2014     100,000     3.63  3M CD + 0.18

Korea Exchange Bank

   2011     2013     100,000     3.85  3M CD + 0.43

Woori Bank

   2011     2013     150,000     3.92  3M CD + 0.43

Kookmin Bank

   2011     2013     100,000     3.84  3M CD + 0.44

Hana Bank

   2011     2013     50,000     3.67  3M CD + 0.25

Korea Exchange Bank

   2011     2014     200,000     3.66  3M CD + 0.24   2013~2016     100,000     2.82  3M CD + 0.04

Korea Exchange Bank

   2011     2013     100,000     3.53  3M CD + 0.14   2013~2016     200,000     2.57  3M CD + 0.04

Korea Exchange Bank

   2011     2013     100,000     3.56  3M CD + 0.19   2013~2016     100,000     2.75  3M CD + 0.03

Shinhan Bank

   2011     2012     100,000     3.60  3M CD + 0.08

Korea Exchange Bank

   2009     2012     100,000     4.88  3M CD + 0.54

RBS

   2009     2012     100,000     4.79  3M CD + 0.55

Korea Exchange Bank

   2010     2013     100,000     4.11  3M CD + 0.25

(7)(5)Interest rate swap contracts which are designated as hedge instruments, as of December 31, 20112013 are as follows ( JOD in thousands, MXN in thousands):

Counterparty

  Contract year   

Contract amounts

 Contract interest rate per annum
     Pay 

Receive

BNP Paribas

   2009     2027    JOD 119,335 4.16% 6M USD Libor

KFW

   2009     2027    JOD 119,335 4.16% 6M USD Libor

Credit Agricole

   2011     2012    MXN 33,750 1.33% 6M USD Libor

SMBC

   2011     2012    MXN 41,250 1.33% 6M USD Libor

Credit Agricole

   2011     2012    MXN 4,990 3.98% 6M USD Libor

SMBC

   2011     2012    MXN 4,990 4.06% 6M USD Libor

Credit Agricole

   2011     2012    MXN 6,604 4.10% 6M USD Libor

SMBC

   2011     2012    MXN 6,604 4.18% 6M USD Libor

Credit Agricole

   2011     2012    MXN 13,355 4.10% 6M USD Libor

SMBC

   2011     2012    MXN 13,355 4.05% 6M USD Libor

(6)Currency forward contracts which are not designated as hedge instruments as of December 31, 2011 are as follows (KRW in millions, USD in thousands):

Counterparty

  Contract
date
   Maturity
date
   Contract amounts   Contract
exchange  rate
 
      Pay   Receive   

RBS

   2011.10.25     2012.01.03     KRW 11,835     USD 10,664     1,109.80  

RBS

   2011.10.25     2012.01.04     KRW 13,928     USD 12,550     1,109.80  

RBS

   2011.10.25     2012.01.09     KRW 6,524     USD 5,878     1,109.80  

RBS

   2011.10.25     2012.01.10     KRW 13,185     USD 11,881     1,109.80  

RBS

   2011.10.25     2012.01.17     KRW 49,319     USD 44,440     1,109.80  

RBS

   2011.10.25     2012.02.09     KRW 13,078     USD 11,784     1,109.80  

RBS

   2011.10.25     2012.02.14     KRW 14,229     USD 12,822     1,109.80  

RBS

   2011.10.25     2012.02.27     KRW 8,097     USD 7,296     1,109.80  

RBS

   2011.10.25     2012.03.19     KRW 28,421     USD 25,610     1,109.80  

RBS

   2011.10.25     2012.03.20     KRW 11,133     USD 10,032     1,109.80  

RBS

   2011.10.25     2012.03.22     KRW 6,067     USD 5,467     1,109.80  

RBS

   2011.10.25     2012.03.27     KRW 13,024     USD 11,735     1,109.80  

RBS

   2011.10.25     2012.04.02     KRW 8,878     USD 8,000     1,109.80  

RBS

   2011.10.25     2012.04.09     KRW 12,448     USD 11,216     1,109.80  

Credit Suisse

   2011.12.29     2012.02.03     KRW 5,764     USD 5,000     1,152.70  

HSBC

   2011.11.21     2012.02.29     USD 10,000     KRW 11,460     1,146.00  

HSBC

   2011.11.10     2012.01.31     USD 10,000     KRW 11,401     1,140.10  

HSBC

   2011.11.23     2012.03.30     USD 20,000     KRW 23,130     1,156.50  

Barclays

   2011.11.22     2012.03.30     USD 20,000     KRW 23,100     1,155.00  

RBS

   2011.11.03     2012.01.31     USD 10,000     KRW 11,396     1,139.60  

RBS

   2011.11.10     2012.01.31     USD 10,000     KRW 11,400     1,140.00  

Deutsche Bank

   2011.11.03     2012.01.31     USD 20,000     KRW 22,729     1,136.47  

Credit Agricole

   2011.11.03     2012.01.31     USD 20,000     KRW 22,748     1,137.40  

Credit Agricole

   2011.11.10     2012.01.31     USD 10,000     KRW 11,404     1,140.40  

UBS

   2011.12.15     2012.02.29     USD 20,000     KRW 23,292     1,164.60  

Credit Agricole

   2011.11.21     2012.02.29     USD 10,000     KRW 11,465     1,146.50  

RBS

   2011.11.28     2012.01.31     KRW 1,516     USD 1,308     1,158.90  

Korea Exchange Bank

   2011.12.29     2012.01.06     KRW 9,254     USD 8,000     1,156.73  

Korea Exchange Bank

   2011.12.28     2012.01.09     KRW 8,107     USD 7,000     1,158.15  

UBS

   2011.12.29     2012.02.03     KRW 5,771     USD 5,000     1,154.25  

Credit Suisse

   2011.12.29     2012.02.03     KRW 11,540     USD 10,000     1,154.00  

RBS

   2011.12.29     2012.02.03     KRW 11,549     USD 10,000     1,154.85  

(7)Other derivatives which are not designated as hedge instruments as of December 31, 2011 are as follows (KRW in millions, USD in thousands):follows:

 

(a)Currency Options

Counterparty

  Contract
date
   Maturity
date
   Contract amounts(*1)       Contract    
exercise price
      Barrier    
      Call-Purchase
price
   Put-Sale price     

RBS

   2011.06.14     2012.11.13     USD     85,000     USD     170,000    1,036
KRW/USD
  1,118
KRW/USD

Barclays

   2011.06.14     2012.11.13     USD     40,000     USD     80,000      

BNP Paribas

   2011.06.14     2012.11.13     USD     25,000     USD     50,000      

Counterparty

Contract
year
Contract
amount

Contract interest rate per annum

  (*1)According to the currency option contracts, the Company must purchase

Pay (%)

Receive (%)
In thousands of U.S. dollars

BNP Paribas

2009~2027USD 2 million if the foreign exchange rate is below 1,036 KRW/108,6334.16%6M USD each week. If foreign exchange rate exceeds the barrier, there will be no purchase amount.Libor

KFW

2009~2027USD 108,6334.16%6M USD Libor

CA-CIB (Credit Agricole)

2012~2033USD 106,6843.98%~4.10%6M USD Libor

SMBC

2012~2033USD 139,5104.05%~4.18%6M USD Libor

 

(8)(b)Target Redemption Forwards and others

Counterparty

  Contract
date
   Maturity
date
   Contract
exercise  price
   Contract amounts     

RBS

   2011.12.19     2012.01.27     1,146.00     KRW     40,000     (*1)  

CS

   2011.11.02     2012.02.23     1,140.10     KRW     160,000     (*2)  

Barclays

   2011.10.04     2012.10.02     1,156.50     KRW     5,000     (*3)  

Credit Agricole

   2011.10.06     2012.10.04     1,155.00     KRW     5,000     (*3)  

(*1)American knock out forward (upper barrier exchange rate = 1,200)

American Knock out Forward is a type of barrier option and an exotic derivative typically an option on the underlying asset whose price breaching the pre-set barrier level either springs the option into existence or extinguishes an already existing option.

(*2)FX option (USD Call / KRW Put)

A foreign-exchange option, a derivative financial instrument that gives the owner the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. The Company has the option to take short positions.

(*3)Target redemption forward

FX target redemption forward is an option that consists of a series of forward contracts .Each forward settlement depends on the exchange rate of two currencies. Also, if the accumulated settlement reaches a pre-defined cap (target), the contract is terminated immediately.

(c)Heat Rate Options

Counterparty

 Contract
Date
  Maturity
Date
  Position  Contract  size
(MW/HR)
  Contract condition
     Heat rate
(MMBtu/MWh)
 

Additional cost

Sempra Energy Trading Corp.

  2008.01.01    2012.12.31    BUY    90   9.2 (First four
hours : 9.3)
 

Natural Gas : $0.25/MMBtu

Electricity : $3.00/MWh

Sempra Energy Trading Corp.

  2012.06.01    2012.10.30    SELL    45   9.7 Natural Gas : $0.25/MMBtu

The Company entered into “Physically Settled Heat Rate Options” contracts with Sempra Energy Trading Corporation to supply electric power by fixed heat rate. In addition, the Company entered into an additional “Financially Settled Heat Rate Options” contract to offset the financial risk caused by plant downtime when demand for electricity is unstable in summer.

(8)The gainGain and loss on valuation and transaction of derivatives for the years ended December 31, 20112012 and 20102013 are as follows (KRWand included in millions)finance income and costs in the accompanying consolidated statements of comprehensive income (loss):

 

  Net income effects of
valuation gain(loss)
  Net income effects of
valuation gain(loss)
  Accumulated other
comprehensive income
 
  2011  2010  2011  2010  2011  2010 

Currency forward

 (Won)3,910   (Won)1,667   (Won)(3,329 (Won)20,162   (Won)—     (Won)—    

Currency swap

  148,299    (197,672  (47,799  1,225    7,358    (59,055

Interest swap

  (23,426  (13,011  1,209    (9,914  (35,494  772  

Other derivatives

  (3,767  1,209    210    —      —      —    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)125,016   (Won)(207,807 (Won)(49,709 (Won)11,473   (Won)(28,136 (Won)(58,283
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income(loss) on valuation of derivatives using cash flow hedge accounting is reflected within accumulated other comprehensive income amounting to (Won)7,344 million, net of tax as of December 31, 2011.

     Net income effects of
valuation loss
  Net income effects of
transaction gain (loss)
  Accumulated other
comprehensive
income (loss) (*)
 
     2012  2013      2012          2013      2012  2013 
     In millions of won 

Currency option

      (9,492  (41,181  —      13,765    —      —    

Currency forward

   (3,789  (1,420  (964  (3,952  (4,004  4,004  

Currency swap

   (539,883  (217,361  (19,734  48,685    7,883    (19,086

Interest rate swap

   (21,384  13,112    (11,000  (5,806  (65,884  37,998  

Other derivatives

   —      —      8,618    (39,326  —      —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
      (574,548  (246,850  (23,080  13,366    (62,005  22,916  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

13.(*)As of December 31, 2013, the accumulated net gain on valuation of derivatives using cash flow hedge accounting of ₩29,332 million, net of tax, is included in accumulated other comprehensive income (loss).

12.OTHER FINANCIAL ASSETS:Other Financial Assets

Other financial assets as of December 31, 2011, December 31, 2010 and January 1, 2010 are as follows (KRW in millions):

  Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 
  Current  Non-Current  Current  Non-Current  Current  Non-Current 

Loans and receivables

 (Won)216,635   (Won)651,037   (Won)47,457   (Won)817,877   (Won)70,412   (Won)590,296  

Present value discount

  (995  (73,651  (749  (75,180  (556  (74,965

Long-term/short- term financial instruments

  531,388    334    571,310    8,017    366,137    474  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)747,028   (Won)577,719   (Won)618,019   (Won)750,714   (Won)435,992   (Won)515,805  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

14.(1)INVENTORIES:Other financial assets as of December 31, 2012 and 2013 are as follows:

     2012  2013 
      Current  Non-current  Current  Non-current 
     In millions of won 

Loans and receivables

      72,888    668,733    51,503    616,389  

Present value discount

   (1,224  (67,009  (1,094  (58,559

Long-term/short-term financial instruments

   468,351    1,042    384,199    1,183  
  

 

 

  

 

 

  

 

 

  

 

 

 
      540,015    602,766    434,608    559,013  
  

 

 

  

 

 

  

 

 

  

 

 

 

(2)Loans and receivables as of December 31, 2012 and 2013 are as follows:

     2012 
      Face
value
   Present value
discount
  Book
value
 
     In millions of won 

Short-term loans and receivables

     

Loans for tuition

      29,432     (1,224  28,208  

Loans for housing

   13,272     —      13,272  

Loans for related parties

   676     —      676  

Fisheries loan

   7,720     —      7,720  

Other loans

   21,788     —      21,788  
  

 

 

   

 

 

  

 

 

 
   72,888     (1,224  71,664  
  

 

 

   

 

 

  

 

 

 

Long-term loans and receivables

     

Loans for tuition

   340,122     (64,435  275,687  

Loans for housing

   123,088     —      123,088  

Loans for related parties

   185,532     —      185,532  

Fisheries loan

   19,760     (2,574  17,186  

Other loans

   231     —      231  
   668,733     (67,009  601,724  
  

 

 

   

 

 

  

 

 

 
      741,621     (68,233  673,388  
  

 

 

   

 

 

  

 

 

 

     2013 
     Face
value
   Present value
discount
  Book
value
 
     In millions of won 

Short-term loans and receivables

     

Loans for tuition

      25,296     (1,094  24,202  

Loans for housing

   12,505     —      12,505  

Loans for related parties

   890     —      890  

Fisheries loan

   6,000     —      6,000  

Other loans

   6,812     —      6,812  
  

 

 

   

 

 

  

 

 

 
   51,503     (1,094  50,409  
  

 

 

   

 

 

  

 

 

 

Long-term loans and receivables

     

Loans for tuition

   352,554     (56,956  295,598  

Loans for housing

   108,564     —      108,564  

Loans for related parties

   141,191     —      141,191  

Fisheries loan

   13,760     (1,603  12,157  

Other loans

   320     —      320  
  

 

 

   

 

 

  

 

 

 
   616,389     (58,559  557,830  
  

 

 

   

 

 

  

 

 

 
      667,892     (59,653  608,239  
  

 

 

   

 

 

  

 

 

 

(3)Long-term and short-term financial instruments as of December 31, 2012 and 2013 are as follows:

      2012   2013 
      Current   Non-current   Current   Non-current 
      In millions of won 

Time deposits

       398,351     654     256,173     453  

Installment deposits

    —       78     —       93  

Deposit for treasury stock in trust

    25,000     —       64,940     —    

Special money in trust

    —       —       30,086     —    

Repurchase agreement

    —       —       18,000     —    

CD

    40,000     —       10,000     —    

MMT

    5,000     —       —       —    

Others

    —       310     5,000     637  
   

 

 

   

 

 

   

 

 

   

 

 

 
       468,351     1,042     384,199     1,183  
   

 

 

   

 

 

   

 

 

   

 

 

 

13.Inventories

Inventories as of December 31, 2011,2012 and 2013 are as follows:

      2012 
      Acquisition cost   Valuation
allowance
  Book value 
      In millions of won 

Raw materials

       2,285,822     (65  2,285,757  

Merchandises

    379     —      379  

Work-in-progress

    68,127     —      68,127  

Finished goods

    53,640     —      53,640  

Supplies

    523,397     (4,496  518,901  

Inventories in transit

    506,547     —      506,547  

Other inventories

    6,990     —      6,990  
   

 

 

   

 

 

  

 

 

 
       3,444,902     (4,561  3,440,341  
   

 

 

   

 

 

  

 

 

 

      2013 
      Acquisition cost   Valuation
allowance
  Book value 
      In millions of won 

Raw materials

       2,904,722     (46  2,904,676  

Merchandises

    373     —      373  

Work-in-progress

    89,883     —      89,883  

Finished goods

    55,056     —      55,056  

Supplies

    683,699     (4,089  679,610  

Inventories in transit

    541,154     —      541,154  

Other inventories

    8,841     —      8,841  
   

 

 

   

 

 

  

 

 

 
       4,283,728     (4,135  4,279,593  
   

 

 

   

 

 

  

 

 

 

The valuation allowances were ₩3,599 million and ₩10,129 million as of December 31, 2010 and January 1, 2010 are as follows (KRW2011, respectively. In addition, the reversals of the allowance for loss on inventory valuation due from increases in millions):

   Dec. 31, 2011 
   Acquisition cost   Write-down of
Inventory
  Book value 

Raw materials

  (Won)2,590,921    (Won)(65 (Won)2,590,856  

Merchandises

   407     —      407  

Work-in-progress

   55,880     —      55,880  

Finished goods

   43,859     (4,256  39,603  

Supplies

   491,979     (5,807  486,172  

Inventories in transit

   675,262     —      675,262  

Other inventories

   3,571     —      3,571  
  

 

 

   

 

 

  

 

 

 
  (Won)3,861,879    (Won)(10,128 (Won)3,851,751  
  

 

 

   

 

 

  

 

 

 

   Dec. 31, 2010 
   Acquisition cost   Write-down  of
inventory
  Book value 

Raw materials

  (Won)2,350,570    (Won)(76 (Won)2,350,494  

Merchandises

   1,783     —      1,783  

Work-in-progress

   53,879     —      53,879  

Finished goods

   50,014     —      50,014  

Supplies

   597,167     (3,523  593,644  

Inventories in transit

   428,684     —      428,684  

Other inventories

   4,917     —      4,917  
  

 

 

   

 

 

  

 

 

 
  (Won)3,487,014    (Won)(3,599 (Won)3,483,415  
  

 

 

   

 

 

  

 

 

 

   Jan. 1, 2010 
   Acquisition cost   Write-down  of
inventory
  Book value 

Raw materials

  (Won)2,138,386    (Won)(76 (Won)2,138,310  

Merchandises

   2,581     —      2,581  

Work-in-progress

   44,935     —      44,935  

Finished goods

   11,576     —      11,576  

Supplies

   625,766     (182  625,584  

Inventories in transit

   632,320     —      632,320  

Other inventories

   6,123     —      6,123  
  

 

 

   

 

 

  

 

 

 
  (Won)3,461,687    (Won)(258 (Won)3,461,429  
  

 

 

   

 

 

  

 

 

 

Costthe net realizable value of inventory recognized as an expensesand fluctuations in foreign exchange rates deducted from cost of sales were ₩211 million, ₩5,568 and ₩687 million, for the years ended December 31, 2011, 2012 and 2010 were (Won)11,686,476 million and (Won)10,051,426 million,2013, respectively.

The total write - downsamounts of inventoriesloss from inventory valuation included in cost of sales for the years ended December 31, 2011, 2012 and 2010 are(Won)6,7412013 were ₩6,747 million, ₩6,920 million and (Won)5,487₩261 million, respectively.

15.14.FINANCE LEASE RECEIVABLES:Finance Lease Receivables

 

(1)(1)Finance lease contract:contracts

The Company providesentered into a power purchase agreement (“PPA”) with Jordan Electric Power Company to provide a 373MW level Qatrana gas combined power plant over a 25 year lease term, and accounts for the PPA as a finance lease. Also, the Company has fly-ash pipe conduit finance leases with an average lease term of 7 years. In addition the Company entered into a PPA with the Comisión Federal de Electricidad in Mexico to Jordan Electric Power Company under power purchase agreements (“PPA”),provide for 25 years which is accounted for as a finance lease.of all electricity generated from the power plant after completion of its construction and collect rates consisting of fixed costs (to recover the capital) and variable costs during the contracted period.

 

(2)(2)Finance leaseslease receivables as of December 31, 20112012 and 2013 are as follows (KRWand included in millions):current and non-current trade and other receivables, net, in the accompanying consolidated statements of financial position:

 

    2012   2013 
  2011     Minimum lease
payments
   Present value
of minimum
lease payments
   Minimum lease
payments
   Present value
of minimum
lease payments
 
  Minimum lease payment   Present value of
minimum  lease payment
     In millions of won 

Less than 1 year

  (Won)28,606    (Won)9,279         46,758     4,134     81,484     4,569  

1 ~ 5 years

   108,486     31,324      192,651     27,422     356,874     36,710  

More than 5 years

   278,040     334,938      783,314     361,904     1,782,639     809,002  
  

 

   

 

    

 

   

 

   

 

   

 

 
  (Won)415,132    (Won)375,541         1,022,723     393,460     2,220,997     850,281  
  

 

   

 

    

 

   

 

   

 

   

 

 

 

(3)(3)There isare no impaired finance lease receivables as of December 31, 2011.

16.NON-FINANCIAL ASSETS:2012 and 2013.

(4)There are no changes in valuation allowance for finance lease receivables for the years ended December 31, 2012 and 2013.

15.Non-Financial Assets

Non-financial assets as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

   Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010 
   Current   Non-Current   Current   Non-Current   Current   Non-Current 

Advanced payment

  (Won)103,424    (Won)30,239    (Won)23,788    (Won)26,418    (Won)44,748    (Won)50,815  

Prepaid expense

   229,593     82,523     164,114     68,342     39,209     63,989  

Others

   114,376     137,049     56,228     182,413     75,491     180,996  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (Won)447,393    (Won)249,811    (Won)244,130    (Won)277,173    (Won)159,448    (Won)295,800  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      2012   2013 
      Current   Non-current   Current   Non-current 
      In millions of won 

Advance payment

       146,042     4,607     110,541     12,760  

Prepaid expenses

    230,260     100,804    ��150,852     102,823  

Others(*)

    287,745     35,027     309,452     15,928  
   

 

 

   

 

 

   

 

 

   

 

 

 
       664,047     140,438     570,845     131,511  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

17.(*)Details of others as of December 31, 2012 and 2013 are as follows:

      2012   2013 
      Current   Non-current   Current   Non-current 
      In millions of won 

Tax refund receivables

       177,930     1,797     228,857     1,349  

Other quick assets and others

    109,815     33,230     80,595     14,579  
   

 

 

   

 

 

   

 

 

   

 

 

 
       287,745     35,027     309,452     15,928  
   

 

 

   

 

 

   

 

 

   

 

 

 

16.CONSOLIDATED SUBSIDIARIESInvestments in Subsidiaries

 

(1)(1)The Company’s consolidatedInvestments in subsidiaries as of December 31, 2011, December 31, 2010,2012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

      Ownership(%) 

Consolidated subsidiaries(*1)

 

Key Operation
Activities

 

Location

 Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 

Korea Hydro & Nuclear Power Co., Ltd.

 Power generation KOREA  100.00  100.00  100.00

Korea South-East Power Co., Ltd.

 Power generation KOREA  100.00  100.00  100.00

Korea Midland Power Co., Ltd.

 Power generation KOREA  100.00  100.00  100.00

Korea Western Power Co., Ltd.

 Power generation KOREA  100.00  100.00  100.00

Korea Southern Power Co., Ltd.

 Power generation KOREA  100.00  100.00  100.00

Korea East-West Power Co., Ltd.

 Power generation KOREA  100.00  100.00  100.00

KEPCO Engineering & Construction Company, Inc.

 

Architectural engineering for utility plant

 

KOREA

 

  

 

77.94

 

 

  

 

77.94

 

 

  

 

77.94

 

 

Korea Plant Service & Engineering Co., Ltd.

 

Utility plant maintenance

 

KOREA

  
75.00

  
75.00

  
80.00

Korea Nuclear Fuel Co., Ltd.

 Nuclear fuel KOREA  96.36  96.36  96.36

Korea Electric Power Data Network Co., Ltd.

 

Information services

 

KOREA

  
100.00

  
100.00

  
100.00

Garorim Tidal Power Plant Co.,Ltd. (*2)

 Power generation KOREA  49.00  49.00  49.00

Korea Power Engineering & Power Services Co., Ltd.

 

Operation and maintenance of utility plant

 

KOREA

 

  

 

54.00

 

 

  

 

0.00

 

 

  

 

0.00

 

 

Dongducheon Dream Power Co., Ltd. (*2)

 Power generation KOREA  49.00  0.00  0.00

KEPCO International HongKong Ltd.

 

Holding Company

 HONG KONG  100.00  100.00  100.00

KEPCO International Philippines Inc.

 Holding Company PHILIPPINES  100.00  100.00  100.00
      Percentage of ownership (%) 

Subsidiaries

 

Key operation activities

 

Location

     2012          2013     

Korea Hydro & Nuclear Power Co., Ltd.

 Power generation KOREA  100.00  100.00

Korea South-East Power Co., Ltd.

 Power generation KOREA  100.00  100.00

Korea Midland Power Co., Ltd.

 Power generation KOREA  100.00  100.00

Korea Western Power Co., Ltd.

 Power generation KOREA  100.00  100.00

Korea Southern Power Co., Ltd.

 Power generation KOREA  100.00  100.00

Korea East-West Power Co., Ltd.

 Power generation KOREA  100.00  100.00

KEPCO Engineering & Construction Company, Inc.(*1)

 

Architectural engineering for utility plant and others

 

KOREA

 

 

74.86

 

 

70.86

KEPCO Plant Service & Engineering Co., Ltd.(*1)

 

Utility plant maintenance and Others

 

KOREA

 

 

70.00

 

 

63.00

KEPCO Nuclear Fuel Co., Ltd.

 Nuclear fuel KOREA  96.36  96.36

KEPCO KDN Co., Ltd.

 Electric Power information technology and others KOREA  100.00  100.00

Garorim Tidal Power Plant Co., Ltd.(*2)

 Power generation KOREA  49.00  49.00

Korea Engineering & Power Services Co., Ltd.

 

Operation and maintenance of utility plant

 

KOREA

 

 

52.43

 

 

52.43

Dongducheon Dream Power Co., Ltd.(*3)

 Power generation KOREA  49.00  —    

KEPCO International Hong Kong Ltd.

 Holding company HONG KONG  100.00  100.00

KEPCO International Philippines Inc.

 Holding company PHILIPPINES  100.00  100.00

KEPCO Gansu International Ltd.

 Holding company HONG KONG  100.00  100.00

KEPCO Philippines Holdings Inc.

 Holding company PHILIPPINES  100.00  100.00

KEPCO Philippines Corporation

 Construction and operation of utility plant PHILIPPINES  100.00  100.00

KEPCO Ilijan Corporation

 Utility plant rehabilitation and operation PHILIPPINES  51.00  51.00

KEPCO Lebanon SARL

 Operation of utility plant LEBANON  100.00  100.00

KEPCO Neimenggu International Ltd.

 Holding company HONG KONG  100.00  100.00

KEPCO Shanxi International Ltd.

 Holding company HONG KONG  100.00  100.00

KOMIPO Global Pte Ltd.

 Holding company SINGAPORE  100.00  100.00

KEPCO Canada Energy Ltd.

 Resources development CANADA  100.00  100.00

KEPCO Netherlands B.V.

 Holding company NETHERLANDS  100.00  100.00

KOREA Imouraren Uranium Investment Corp..

 Uranium mine development FRANCE  100.00  100.00

KEPCO Australia Pty., Ltd.

 Resources development AUSTRALIA  100.00  100.00

KOSEP Australia Pty., Ltd.

 Resources development AUSTRALIA  100.00  100.00

KOMIPO Australia Pty., Ltd.

 Resources development AUSTRALIA  100.00  100.00

KOWEPO Australia Pty., Ltd.

 Resources development AUSTRALIA  100.00  100.00

KOSPO Australia Pty., Ltd.

 Resources development AUSTRALIA  100.00  100.00

KEPCO Middle East Holding Company

 Holding company BAHRAIN  100.00  100.00

Qatrana Electric Power Company

 Construction and operation of utility plant JORDAN  80.00  80.00

KHNP Canada Energy Ltd.

 Resources development CANADA  100.00  100.00

KEPCO Bylong Australia Pty., Ltd.

 Resources development AUSTRALIA  100.00  100.00

Korea Waterbury Uranium Limited Partnership

 

Resources development

 

CANADA

 

 

79.64

 

 

79.64

KEPCO Canada Uranium Investment Limited Partnership

 

Resources development

 

CANADA

 

 

100.00

 

 

100.00

Sylardus Holding B.V.(*4)

 Holding company NETHERLANDS  100.00  —    

      Ownership(%) 

Consolidated subsidiaries(*1)

 

Key Operation
Activities

 

Location

 Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 

KEPCO Gansu International Ltd.

 Holding Company HONG KONG  100.00  100.00  100.00

KEPCO Philippines Holdings Inc.

 Holding Company PHILIPPINES  100.00  100.00  100.00

KEPCO Philippines Corporation

 Utility plant rehabilitation and operation PHILIPPINES  100.00  100.00  100.00

KEPCO Iliyan Corporation

 Construction and operation of utility plant PHILIPPINES  51.00  51.00  51.00

KEPCO Lebanon SARL

 Operation of utility plant LEBANON  100.00  100.00  100.00

KEPCO Neimenggu International Ltd.

 Holding Company HONG KONG  100.00  100.00  100.00

KEPCO Shanxi International Ltd.

 Holding Company HONG KONG  100.00  100.00  100.00

KOMIPO Global Pte Ltd.

 Construction and operation of utility plant SINGAPOLE  100.00  100.00  100.00

KEPCO Canada Energy Ltd.

 Holding Company CANADA  100.00  100.00  100.00

KEPCO Netherlands B.V.

 Holding Company NETHERLANDS  100.00  100.00  100.00

KOREA Imouraren Uranium Investment Ltd.

 

Uranium mine development

 

FRANCE

 

 

100.00

 

 

100.00

 

 

100.00

KEPCO Australia Pty., Ltd.

 Resources development AUSTRALIA  100.00  100.00  100.00

KOSEP Australia Pty., Ltd.

 Resources development AUSTRALIA  100.00  100.00  100.00

KOMIPO Australia Pty., Ltd.

 Resources development AUSTRALIA  100.00  100.00  100.00

KOWEPO Australia Pty., Ltd.

 Resources development AUSTRALIA  100.00  100.00  100.00

KOSPO Australia Pty., Ltd.

 Resources development AUSTRALIA  100.00  100.00  100.00

KEPCO Middle East Holding Company

 Holding Company BAHRAIN  100.00  100.00  100.00

Qatrana Electric Power Company

 Construction and operation of utility plant JORDAN  80.00  80.00  80.00

KHNP Canada Energy Inc.

 Resources development CANADA  100.00  100.00  0.00

KEPCO Bylong Australia Pty., Ltd.

 

Resources development

 

AUSTRALIA

 

 

100.00

 

 

100.00

 

 

0.00

Korea Waterbury Uranium Limited Partnership

 

Resources development

 

CANADA

 

 

79.64

 

 

79.64

 

 

79.64

KEPCO Canada Uranium Investment Limited Partnership

 

Resources development

 

CANADA

 

 

100.00

 

 

100.00

 

 

100.00

      Percentage of ownership (%) 

Subsidiaries

 

Key operation activities

 

Location

     2012          2013     

Akkuyu Finance B.V.(*4)

 Construction and operation of utility plant NETHERLANDS  100.00  —    

Akkuyu Fuel B.V.(*4)

 Construction and operation of utility plant NETHERLANDS  100.00  —    

Akkuyu Operations B.V.(*4)

 Construction and operation of utility plant NETHERLANDS  100.00  —    

Korea Electric Power Nigeria Ltd.

 Operation of utility plant NIGERIA  100.00  100.00

KEPCO Holdings de Mexico

 Holding company MEXICO  100.00  100.00

KST Electric Power Company

 Construction and operation of utility plant MEXICO  56.00  56.00

KEPCO Energy Service Company

 Operation of utility plant MEXICO  100.00  100.00

KEPCO Netherlands S3 B.V.

 Holding company NETHERLANDS  100.00  100.00

PT. KOMIPO Pembangkitan Jawa Bali

 Operation of utility plant INDONESIA  51.00  51.00

PT. Cirebon Power Service(*2)

 Operation of utility plant INDONESIA  27.50  27.50

KOWEPO International Corporation

 Operation of utility plant PHILIPPINES  99.99  99.99

KOSPO Jordan LLC

 Operation of utility plant JORDAN  100.00  100.00

EWP Philippines Corporation (Formerly, EWP Cebu Corporation)

 

Operation of utility plant

 

PHILIPPINES

 

 

100.00

 

 

100.00

EWP Philippine Holdings Corporation

 Holding company PHILIPPINES  100.00  100.00

EWP America Inc.

 Holding company USA  100.00  100.00

EWP Renewable Co.

 Holding company USA  100.00  100.00

DG Fairhaven Power, LLC

 Power generation USA  100.00  100.00

DG Kings Plaza Holdings, LLC

 Holding company USA  100.00  100.00

DG Kings Plaza, LLC

 Power generation USA  100.00  100.00

DG Kings Plaza II, LLC

 Holding company USA  100.00  100.00

DG Whitefield, LLC

 Power generation USA  100.00  100.00

Springfield Power, LLC

 Power generation USA  100.00  100.00

KNF Canada Energy Limited

 Resources development CANADA  96.36  96.36

PT KEPCO Resource Indonesia

 Resources development INDONESIA  100.00  100.00

EWP Barbados 1 SRL

 Holding company BARBADOS  100.00  100.00

California Power Holdings, LLC

 Power generation USA  100.00  100.00

Gyeonggi Green Energy Co., Ltd.

 Power generation KOREA  49.00  62.01

PT. Tanggamus Electric Power

 Power generation INDONESIA  60.00  60.00

Gyeongju Wind Power Co., Ltd.

 Power generation KOREA  70.00  70.00

KOMIPO America Inc.

 Holding company USA  100.00  100.00

Boulder Solar Power, LLC

 Solar photovoltaic power generation USA  75.00  75.00

EWPRC Biomass Holdings, LLC

 Holding company USA  100.00  100.00

KOSEP USA, INC.

 Power generation USA  100.00  100.00

Nepal Water & Energy Development Company Pty Ltd.

 

Construction and operation of utility plant

 NEPAL  50.00  —    

PT. EWP Indonesia

 Holding company INDONESIA  100.00  100.00

KOWEPO America LLC.

 Solar photovoltaic power generation USA  100.00  100.00

KEPCO Netherlands J3 B.V.

 Holding company NETHERLANDS  100.00  100.00

Korea Offshore Wind Power Co., Ltd.

 Power generation KOREA  100.00  100.00

EWP Barbados 2 SRL

 Holding company BARBADOS  100.00  —    

Global One Pioneer B.V.

 Holding company NETHERLANDS  100.00  100.00

Global Energy Pioneer B.V.

 Holding company NETHERLANDS  100.00  100.00

KOSEP Wind Power, LLC.

 Power generation USA  100.00  100.00

Mira Power Limited(*5)

 Power generation PAKISTAN  76.00  76.00

KOSEP Material Co., Ltd.

 Power generation KOREA  —      77.04

      Ownership(%) 

Consolidated subsidiaries(*1)

 

Key Operation
Activities

 

Location

 Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 

Sylardus Holding B.V.

 Holding Company NETHERLANDS  100.00  100.00  100.00

Akkuyu Finance B.V.

 Construction and operation of utility plant NETHERLANDS  100.00  100.00  100.00

Akkuyu Fuel B.V.

 Construction and operation of utility plant NETHERLANDS  100.00  100.00  100.00

Akkuyu Operations B.V.

 Construction and operation of utility plant NETHERLANDS  100.00  100.00  100.00

Korea Electric Power Nigeria Ltd.

 

Operation of utility plant

 

NIGERIA

  
100.00

  
100.00

  
100.00

KEPCO Holdings de Mexico

 Holding Company MEXICO  100.00  100.00  0.00

KST Electric Power Company

 Construction and operation of utility plant MEXICO  56.00  56.00  0.00

KEPCO Energy Service Company

 

Operation of utility plant

 

MEXICO

  
100.00

  
100.00

  
0.00

KEPCO Netherlands S3 B.V.

 Holding Company NETHERLANDS  100.00  100.00  0.00

PT. KOMIPO Pembangkitan Jawa Bali

 

Operation of utility plant

 

INDONESIA

 

 

51.00

 

 

51.00

 

 

0.00

PT. Cirebon Power Service(*2)

 Operation of utility plant INDONESIA  27.50  27.50  0.00

KOWEPO International Corporation

 

Operation of utility plant

 

PHILIPPINES

 

 

99.99

 

 

99.99

 

 

99.99

KOSPO Jordan LLC

 Operation of utility plant JORDAN  100.00  100.00  100.00

EWP Cebu Corporation

 Operation of utility plant PHILIPPINES  100.00  100.00  100.00

EWP Philippine Holdings Corporation

 Holding Company PHILIPPINES  100.00  100.00  0.00

EWP America Inc.

 Holding Company USA  100.00  100.00  0.00

EWP Renewable Co.

 Holding Company USA  100.00  100.00  0.00

DG Fairhaven Power, LLC

 Power generation USA  100.00  100.00  0.00

DG Kings Plaza Holdings, LLC

 Power generation USA  100.00  100.00  0.00

DG Kings Plaza, LLC

 Power generation USA  100.00  100.00  0.00

DG Kings Plaza II, LLC

 Power generation USA  100.00  100.00  0.00

DG Whitefield, LLC

 Power generation USA  100.00  100.00  0.00

Springfield Power, LLC

 Power generation USA  100.00  100.00  0.00

KNF Canada Energy Limited

 Resources development CANADA  96.36  96.36  0.00

PT KEPCO Resource Indonesia

 Resources development INDONESIA  100.00  0.00  0.00

EWP Barbados 1 SRL

 Holding Company BARBADOS  100.00  0.00  0.00

California Power Holdings, LLC

 Power generation USA  100.00  0.00  0.00

      Ownership(%) 

Consolidated subsidiaries(*1)

 

Key Operation
Activities

 

Location

 Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 

Gyeonggi Fuel Cell Power Plant Co., Ltd.(*2)

 Power generation KOREA  49.00  0.00  0.00

PT. Tanggamus Electric Power

 Power generation INDONESIA  60.00  0.00  0.00
      Percentage of ownership (%) 

Subsidiaries

 

Key operation activities

 

Location

     2012          2013     

Commerce and Industry Energy Co., Ltd.

 Power generation KOREA  29.51  59.03

KEPCO Singapore Holding Pte., Ltd.

 Holding company SINGAPORE  —      100.00

KOWEPO India Private Limited

 Holding company INDIA  —      100.00

KEPCO KPS Philippines Corp.

 Utility plant maintenance and others PHILIPPINES  —      100.00

KOSPO Chile SpA

 Holding company Chile  —      100.00

 

(*1)As4% of the shares of KEPCO Engineering & Construction Company, Inc. and 7% of the shares of KEPCO Plant Service & Engineering Co., Ltd. were disposed for the year ended December 31, 2011, the reporting period end date of all consolidated subsidiaries is December 31.2013.

 

(*2)The Company owns less than 50% ofThese subsidiaries are included in the shares of the respective entities, howeverconsolidated financial statements as the Company has obtainedobtains the majority of the voting power through the shareholders’ agreement.

 

(*3)(2)As the Company lost its control over the entities in the current year, the investments are reclassified to investment in associates and joint ventures and the related disposal gain of ₩1,056 million is included in gain or loss related to investment in associates and joint ventures.

(*4)TheThese entities were liquidated during the year ended December 31, 2013, and disposal losses in the amount of ₩112 million is recognized in gain or loss related to investment in associates and joint ventures.

(*5)As of December 31, 2013, the reporting period end date of all consolidated subsidiaries that areis December 31, except for Mira Power Limited.

(2)Subsidiaries newly included andin or excluded from the consolidation for the year ended December 31, 20112013 are as follows.follows:

<Newly inncluded in consolidated subsidiaries for 2011>

(i)Subsidiaries newly included in consolidation

 

Subsidiary

  

CausesReason

Korea Power Engineering & Power ServicesKOSEP Material Co., Ltd.

  New investment

Commerce and Industry Energy Co., Ltd.

Step acquisition

KEPCO Singapore Holding Pte., Ltd.

New investment

KOWEPO India Private Limited

New investment

KEPCO KPS Philippines Corp.

New investment

KOSPO Chile SpA

New investment

(ii)Subsidiaries excluded from consolidation

Subsidiary

Reason

Dongducheon Dream Power Co., Ltd.

  New investmentDecrease of voting power to appoint directors

PT KEPCO Resource IndonesiaNepal Water & Energy Development Company Pty Ltd.

  New investmentDecrease of the percentage of ownership

EWP Barbados 12 SRL

  New investmentLiquidation

Sylardus Holding B.V.

Liquidation

Akkuyu Finance B.V.

Liquidation

Akkuyu Fuel B.V.

Liquidation

Akkuyu Operations B.V.

Liquidation

(3)Summary of financial information of consolidated subsidiaries as of and for the years ended December 31, 2012 and 2013 are as follows:

2012

 

Subsidiaries

     Total
assets
   Total
liabilities
   Sales   Profit (loss)
for the period
 
      In millions of won 

Korea Hydro & Nuclear Power Co., Ltd.

       45,061,851     24,638,944     6,717,341     126,181  

Korea South-East Power Co., Ltd.

    7,218,552     3,564,786     4,672,289     179,139  

Korea Midland Power Co., Ltd.

    5,767,527     2,828,679     5,427,872     132,306  

Korea Western Power Co., Ltd.

    5,716,612     2,615,447     5,967,870     118,319  

Korea Southern Power Co., Ltd.

    6,441,594     3,038,450     6,955,053     103,368  

Korea East-West Power Co., Ltd.

    6,069,774     2,593,576     5,950,683     164,489  

KEPCO Engineering & Construction Company, Inc.

    861,882     435,913     785,586     134,310  

KEPCO Plant Service & Engineering Co., Ltd.

    756,214     224,674     1,006,609     117,888  

KEPCO Nuclear Fuel Co., Ltd.

    500,744     221,196     238,627     30,844  

KEPCO KDN Co., Ltd.

    320,860     96,911     338,769     3,714  

Garorim Tidal Power Plant Co., Ltd.

    37,476     1,546     —       (1,404

Korea Engineering & Power Services Co., Ltd.

    7,093     2,043     10,381     3,206  

Dongducheon Dream Power Co., Ltd.

    235,002     856     —       (4,289

KEPCO International Hong Kong Ltd.

    246,889     35     —       25,262  

KEPCO International Philippines Inc.

    102,564     728     —       13,264  

KEPCO Gansu International Ltd.

    15,934     493     —       (8

KEPCO Philippines Holdings Inc.

    125,971     162     —       1,650  

KEPCO Philippines Corporation

    18,020     826     —       (573

KEPCO Ilijan Corporation

    678,488     109,610     146,295     83,647  

KEPCO Lebanon SARL

    7,111     8,850     —       (1,846

KEPCO Neimenggu International Ltd.

    182,669     —       —       22,307  

KEPCO Shanxi International Ltd.

    496,410     223,186     —       (2,960

KOMIPO Global Pte Ltd.

    111,765     115     —       (4,780

KEPCO Canada Energy Ltd.

    81,560     13,602     —       (43

KEPCO Netherlands B.V.

    219,828     31     —       10,345  

KOREA Imouraren Uranium Investment Corp.

    241,481     114     —       (51

KEPCO Australia Pty., Ltd.

    547,886     168,837     5,446     1,034  

KOSEP Australia Pty., Ltd.

    19,878     495     5,301     2,067  

KOMIPO Australia Pty., Ltd.

    19,869     957     5,307     1,142  

KOWEPO Australia Pty., Ltd.

    20,036     491     5,301     1,636  

KOSPO Australia Pty., Ltd.

    20,112     959     5,309     1,146  

KEPCO Middle East Holding Company

    105,319     102,250     —       2,526  

Qatrana Electric Power Company

    467,457     432,000     19,172     24,499  

KHNP Canada Energy Ltd.

    55,238     705     —       (20

KEPCO Bylong Australia Pty., Ltd.

    73,016     252     —       (4,007

Korea Waterbury Uranium Limited Partnership

    22,623     701     —       (39

KEPCO Canada Uranium Investment Limited Partnership

    89,223     —       —       (5

Sylardus Holding B.V.

    103     178     —       (52

Akkuyu Finance B.V.

    6     80     —       (27

Akkuyu Fuel B.V.

    7     75     —       (26

Akkuyu Operations B.V.

    6     74     —       (26

Korea Electric Power Nigeria Ltd.

    6     5     252     (39

KEPCO Holdings de Mexico

    31     13     —       (13

KST Electric Power Company

    345,416     387,121     —       (8,498

KEPCO Energy Service Company

    73     53     296     13  

KEPCO Netherlands S3 B.V.

    480     10     —       (88

PT. KOMIPO Pembangkitan Jawa Bali

    19,175     8,449     21,439     5,714  

2012

 

Subsidiaries

     Total
assets
   Total
liabilities
   Sales   Profit (loss)
for the period
 
      In millions of won 

PT. Cirebon Power Service

       1,182     277     7,256     541  

KOWEPO International Corporation

    2,080     34     —       (182

KOSPO Jordan, LLC.

    6,375     1,108     14,186     2,606  

EWP Cebu Corporation

    10,329     1,441     9,991     2,744  

EWP Philippine Holdings Corporation

    241     6     —       (1

EWP America Inc. (*)

    117,971     87,346     44,618     (6,113

KNF Canada Energy Limited

    2,412     5     —       (38

PT KEPCO Resource Indonesia

    1,715     —       —       1  

EWP Barbados 1 SRL

    309,581     138     2,817     1,696  

Gyeonggi Green Energy Co., Ltd.

    103,342     68,991     —       (465

PT. Tanggamus Electric Power

    12,583     386     —       (3,199

Gyeongju Wind Power Co., Ltd.

    48,501     34,355     1,605     980  

KOMIPO America Inc.

    6,427     —       —       —    

Boulder Solar Power, LLC.

    8,553     6     —       (24

KOSEP USA, INC.

    30,734     249     —       (424

Nepal Water & Energy Development Company Pty Ltd.

    21,114     12,114     —       (2,901

PT. EWP Indonesia

    882     —       —       (289

KOWEPO America, LLC.

    4,517     346     —       (2,147

KEPCO Netherlands J3 B.V.

    33,138     31     —       (31

Korea Offshore Wind Power Co., Ltd.

    4,966     76     —       (37

EWP Barbados 2 SRL

    779     —       —       (614

Global One Pioneer B.V.

    71     —       —       (1

Global Energy Pioneer B.V.

    71     —       —       (1

KOSEP Wind Power, LLC.

    213     —       —       (1

Mira Power Limited

    1,841     11     —       (2

(*)Financial information of EWP America Inc. includes that of nine other subsidiaries, EWP Renewable Co., Ltd., DG Fairhaven Power, LLC., DG Kings Plaza Holdings, LLC., DG Kings Plaza, LLC., DG Whitefield, LLC., Springfield Power, LLC., California Power Holdings, LLCLLC., EWPRC Biomass Holdings, LLC. and DG Kings Plaza II, LLC.

2013

 

Subsidiaries

    Total
assets
  Total
liabilities
  Sales  Profit (loss)
for the period
 
     In millions of won 

Korea Hydro & Nuclear Power Co., Ltd.

      46,717,706    26,482,646    6,378,280    (180,160

Korea South-East Power Co., Ltd.

   8,294,384    4,634,288    4,157,175    116,001  

Korea Midland Power Co., Ltd.

   6,189,836    3,266,269    5,658,612    40,815  

Korea Western Power Co., Ltd.

   7,160,956    4,010,759    5,762,386    106,829  

Korea Southern Power Co., Ltd.

   7,360,191    3,906,329    7,120,621    102,670  

Korea East-West Power Co., Ltd.

   7,449,723    4,014,477    5,368,299    27,021  

KEPCO Engineering & Construction Company, Inc.

   760,504    378,454    755,484    34,407  

KEPCO Plant Service & Engineering Co., Ltd.

   839,067    217,404    1,121,717    151,524  

KEPCO Nuclear Fuel Co., Ltd.

   509,057    221,023    233,638    15,401  

KEPCO KDN Co., Ltd.

   354,577    115,604    372,830    8,561  

Garorim Tidal Power Plant Co., Ltd.

   43,592    3,350    —      (2,502

Korea Engineering & Power Services Co., Ltd.

   15,555    4,781    29,066    5,764  

KEPCO International Hong Kong Ltd.

   243,898    —      —      12,746  

KEPCO International Philippines Inc.

   101,832    819    —      705  

KEPCO Gansu International Ltd.

   15,689    486    —      (10

KEPCO Philippines Holdings Inc.

   116,825    13    —      2,861  

KEPCO Philippines Corporation

   14,226    150    —      493  

KEPCO Ilijan Corporation

   705,425    76,329    140,782    71,194  

KEPCO Lebanon SARL

   6,836    9,417    —      (895

KEPCO Neimenggu International Ltd.

   177,649    —      —      1,255  

KEPCO Shanxi International Ltd.

   491,681    226,543    —      (4,526

KOMIPO Global Pte Ltd.

   131,874    30    —      14,423  

KEPCO Canada Energy Ltd.

   75,197    12,358    —      (164

KEPCO Netherlands B.V.

   209,885    21    —      2,844  

KOREA Imouraren Uranium Investment Corp.

   248,300    161    —      (45

KEPCO Australia Pty., Ltd.

   498,742    2,173    4,979    162,325  

KOSEP Australia Pty., Ltd.

   18,592    931    4,728    1,578  

KOMIPO Australia Pty., Ltd.

   18,190    537    4,728    1,574  

KOWEPO Australia Pty., Ltd.

   18,724    929    4,728    1,577  

KOSPO Australia Pty., Ltd.

   18,789    929    4,728    1,578  

KEPCO Middle East Holding Company

   107,802    100,742    —      4,190  

Qatrana Electric Power Company

   516,637    436,210    17,471    20,850  

KHNP Canada Energy Ltd.

   50,314    23    —      (51

KEPCO Bylong Australia Pty., Ltd.

   145,704    169,014    —      (136,027

Korea Waterbury Uranium Limited Partnership

   20,380    21    —      (70

KEPCO Canada Uranium Investment Limited Partnership

   81,945    25    —      (46

Korea Electric Power Nigeria Ltd.

   1,859    1,449    3,602    427  

KEPCO Holdings de Mexico

   10    9    —      (14

KST Electric Power Company

   498,705    483,339    456    4,616  

KEPCO Energy Service Company

   835    437    3,733    407  

KEPCO Netherlands S3 B.V.

   514    18    —      (64

PT. KOMIPO Pembangkitan Jawa Bali

   14,884    5,548    20,162    6,143  

PT. Cirebon Power Service

   1,646    642    7,143    406  

KOWEPO International Corporation

   1,897    31    —      —    

KOSPO Jordan, LLC.

   15,938    9,790    7,817    2,389  

EWP Philippines Corporation (Formerly, EWP Cebu Corporation)

   7,067    290    212    (914

2013

 

Subsidiaries

    Total
assets
  Total
liabilities
  Sales  Profit (loss)
for the period
 
     In millions of won 

EWP Philippine Holdings Corporation

      211    1    —      (2

EWP America Inc.(*)

   104,186    77,105    53,087    (3,184

KNF Canada Energy Limited

   2,254    19    —      (71

PT KEPCO Resource Indonesia

   1,609    —      —      (84

EWP Barbados 1 SRL

   284,111    145    2,738    (21,771

Gyeonggi Green Energy Co., Ltd.

   338,394    263,608    26,944    (161

PT. Tanggamus Electric Power

   9,784    626    —      (3,640

Gyeongju Wind Power Co., Ltd.

   49,264    32,580    7,440    2,507  

KOMIPO America Inc.

   7,604    6    —      0  

Boulder Solar Power, LLC.

   7,639    6    —      (2,131

KOSEP USA, INC.

   31,121    233    —      (757

PT. EWP Indonesia

   771    14    —      (334

KOWEPO America, LLC.

   6,057    21    —      (1,295

KEPCO Netherlands J3 B.V.

   102,295    31    —      (86

Korea Offshore Wind Power Co., Ltd.

   4,052    1,598    —      (2,436

Global One Pioneer B.V.

   46    19    —      (44

Global Energy Pioneer B.V.

   47    19    —      (42

KOSEP Wind Power, LLC.

   1,219    688    2,053    332  

Mira Power Limited

   13,607    244    —      (742

KOSEP Material Co., Ltd

   13,349    280    —      (431

Commerce and Industry Energy Co., Ltd.

   104,739    87,628    13,450    (2,959

KEPCO Singapore Holding Pte., Ltd.

   —      11    —      (11

KOWEPO India Private Limited

   1,370    4    —      (377

KEPCO KPS Philippines Corp.

   4,396    3,409    5,923    659  

KOSPO Chile SpA

   4,180    4,180    —      —    

(*)Financial information of EWP America Inc. includes that of nine other subsidiaries, EWP Renewable Co., Ltd., DG Fairhaven Power, LLC., DG Kings Plaza Holdings, LLC., DG Kings Plaza, LLC., DG Whitefield, LLC., Springfield Power, LLC., California Power Holdings, LLC., EWPRC Biomass Holdings, LLC. and DG Kings Plaza II, LLC.

(4)Significant restrictions on its abilities to subsidiaries are as follows:

Company

 New investment

Nature and extent of any significant restrictions

Gyeonggi Fuel Cell Power PlantGreen Energy Co., Ltd.

 New investmentAcquisition or disposal of assets more than ₩35 billion, change in the capacity of cogeneration units (except for the change due to performance improvement of equipment, maintenance) will require unanimous consent of all directors.

PT. Tanggamus Electric Power

(5)
New investmentDetails of non-controlling interest prior to inter-group eliminations as of and for the years ended December 31, 2012 and 2013 are as follows:

<Excluded

2012 

Description

    KEPCO Ilijan
Corporation
  KEPCO Plant
Service &
Engineering
Co., Ltd.
  Dongducheon
Dream Power
Co., Ltd.
  KEPCO
Engineering &
Construction
Company, Inc.
  Garorim Tidal
Power Plant
Co., Ltd.
  Others  Total 
     In millions of won 

Percentage of ownership

   49.00  37.00  51.00  28.95  51.00  

Current assets

      198,536    406,454    49,216    637,560    3,702    390,147    1,685,615  

Non-current assets

   479,951    349,759    185,786    224,322    33,774    1,163,374    2,436,966  

Current liabilities

   (67,762  (173,630  (765  (394,426  (1,492  (235,801  (873,876

Non-current liabilities

   (41,848  (51,044  (92  (41,488  (54  (925,458  (1,059,984

Net assets

   568,877    531,540    234,146    425,969    35,930    392,262    2,188,724  

Book value of non-controlling interest

   278,750    159,462    119,414    107,089    18,324    553,472    1,236,511  

Sales

   146,295    1,006,609    —      785,586    —      298,479    2,236,969  

Profit (loss) for the period

   83,647    117,888    (4,289  134,310    (1,404  47,670    377,822  

Profit (loss) for the period attributable to non-controlling interest

   40,987    35,366    (2,188  33,766    (716  4,213    111,428  

Cash flows from operating activities

   40,173    49,350    (6,639  23,764    125    50,305    157,078  

Cash flows from investing activities

   (5,455  (24,105  (88,471  7,417    (310  (147,804  (258,728

Cash flows from financing activities before dividends to non-controlling interest

   (25,889  (3,648  101,502    40    —      97,177    169,182  

Dividends to non-controlling interest

   (12,358  (18,222  —      (20,425  —      (4,249  (55,254

Effect of exchange rate fluctuation

   (4,031  (137  —      (127  —      (2,201  (6,496

Net increase (decrease) of cash and cash equivalents

   (7,560  3,238    6,392    10,668    (185  (6,773  5,780  

2013 

Description

    KEPCO
Ilijan
Corporation
  KEPCO Plant
Service &
Engineering
Co., Ltd.
  Dongducheon
Dream Power
Co., Ltd.
  KEPCO
Engineering &
Construction
Company, Inc.
  Garorim Tidal
Power Plant
Co., Ltd.
  Others  Total 
     In millions of won 

Percentage of ownership

   49.00  37.00  51.00  28.95  51.00  

Current assets

      251,147    438,272    —      478,851    7,002    476,286    1,651,558  

Non-current assets

   454,278    400,794    —      281,653    36,591    1,644,436    2,817,752  

Current liabilities

   (44,046  (182,871  —      (336,046  (3,272  (243,826  (810,061

Non-current liabilities

   (32,282  (34,533  —      (42,407  (78  (1,296,242  (1,405,542

Net assets

   629,097    621,662    —      382,051    40,243    580,654    2,253,707  

Book value of non- controlling interest

   308,257    230,015    —      110,603    20,523    599,434    1,268,832  

Sales

   140,782    1,121,717    —      755,484    —      361,692    2,379,675  

Profit (loss) for the period

   71,194    151,524    —      34,407    (2,502  55,763    310,386  

Profit (loss) for the period attributable to non-controlling interest

   34,885    45,457    —      8,650    (1,276  33,989    121,705  

Cash flows from operating activities

   57,785    40,805    —      11,367    (665  (4,871  104,421  

Cash flows from investing activities

   (2,524  (21,412  (20,006  4,854    (186  (126,946  (166,220

Cash flows from financing activities before dividends to non-controlling interest

   (22,735  2,657    —      1,716    3,475    189,313    174,426  

Dividends to non- controlling interest

   —      (19,440  —      (18,564  —      (20,037  (58,041

Effect of exchange rate fluctuation

   (1,953  (220  —      (33  —      (2,529  (4,735

Net increase (decrease) of cash and cash equivalents

   30,573    2,390    (20,006  (660  2,624    34,930    49,851  

(6)Business combination

On April 29, 2013, the Company has obtained control of Commerce and Industry Energy Co., Ltd. which engages in the integrated commerce and industry energy business, by acquiring an additional 29.5% of its equity shares,. As a result, the Company’s ownership for Commerce and Industry Energy Co., Ltd. has increased from consolidated subsidiaries29.5% to 59.0%. The acquisition was accounted for 2011>as follows:

 

   

CausesAmount

In millions of won

Akkuyu Electricity Production CompanyI. Fair value of consideration transferred

  Liquidation of subsidiary

KEPCO Asia International Ltd.Carrying value of the equity method investees previously owned

  Liquidation of subsidiary5,829

DG Fairhaven Power Holdings, LLCFair value adjustment(*1)

  Liquidation(1,022

Cash and cash equivalents paid

2

Fair value of subsidiaryrelated commitments(*2)

4,806

9,615

II. Fair value of non-controlling interest(*3)

4,882

14,497

III. Recognized amounts of identifiable assets acquired and liabilities assumed

<Assets>

Cash and cash equivalents

7,292

Trade and other receivables

1,631

Inventories

515

Property people & equipment

82,733

Other assets

3,460

<Liabilities>

Trade and other payables

(1,777

Borrowings

(81,752

Other liabilities

(187

Fair value of net assets

11,915

IV. Goodwill

2,582

 

18.(*1)Prior to business combination, 29.5% of the Company’s equity shares re-measured to fair value. As a result, the differences incurred from the re-measurement amounted to ₩1,022 million is recognized as a loss on the disposal of its interest in associates and joint ventures.

(*2)The Company guarantees a certain rate of return on investment to Hana Power Co., Ltd. and one other investor, the financial investors of Commerce and Industry Energy Co., Ltd., holding 39.3% of the 2,260,000 shares of equity in Commerce and Industry Energy Co., Ltd. The investors may request the Company to purchase their investment shares after 58 months have elapsed from the date of investment. The Company has included the fair value valuation of the purchase commitment in consideration transferred.

(*3)Non-controlling interest is measured by proportionate share of non-controlling of the identifiable net assets.

If the Company had acquired the equity shares of Commerce and Industry Energy Co., Ltd. on January 1, 2013, the sales and loss for the period would have been ₩54,044,024 million and ₩182,218 million, respectively. From the date of the acquisition, the subsidiary incurred sales and loss for the period ₩13,450 million and ₩2,959 million, respectively.

The net cash outflows from the business combination are as follows:

INVESTMENTS IN ASSOCIATES AND JOINT VENTURESIn millions of won

Consideration paid in cash

2

Less : acquired cash and cash equivalents.

(7,292

(7,290

(7)Changes in goodwill

 

 (1)(i)Details of goodwill as of December 31, 2012 and 2013 are as follows:

       2012   2013 
      In millions of won 

Acquisition cost

       —       2,582  

Accumulated impairment

    —       —    
   

 

 

   

 

 

 

Carrying book value

       —       2,582  
   

 

 

   

 

 

 

(ii)Changes in goodwill for the year ended December 31, 2013 are as follows:

2013
In millions of won

Beginning balance

—  

Changes

Newly recognized

2,582

Elimination due to disposal

—  

Others

—  

Ending balance

2,582

(8)Cash dividends received from subsidiaries for the years ended December 31, 2011, 2012 and 2013 respectively are as follows:

Subsidiaries

     2011   2012   2013 
      In millions of won 

Korea Hydro & Nuclear Power Co., Ltd.

       249,620     463,308     63,035  

Korea South-East Power Co., Ltd.

    74,221     98,879     89,569  

Korea Midland Power Co., Ltd.

    39,056     40,940     66,153  

Korea Western Power Co., Ltd.

    73,879     31,386     59,160  

Korea Southern Power Co., Ltd.

    56,428     47,120     51,680  

Korea East-West Power Co., Ltd.

    72,471     69,400     82,200  

KEPCO Engineering & Construction Company, Inc.

    55,019     60,831     55,280  

KEPCO Plant Service & Engineering Co., Ltd.

    37,127     54,678     45,363  

KEPCO Nuclear Fuel Co., Ltd.

    12,614     15,891     16,346  

KEPCO KDN Co., Ltd.

    13,947     6,279     2,043  

Korea Engineering & Power Services Co., Ltd.

    —       540     1,458  

KEPCO International Hong Kong Ltd.

    52,542     42,750     12,132  

KEPCO International Philippines Inc.

    4,209     25,100     0  

KEPCO Philippines Corporation

    101,387     14,762     1,986  

KEPCO Ilijan Corporation

    15,824     12,644     0  

KEPCO Gansu International Ltd.

    298     —       0  

KEPCO Philippines Holdings Inc.

    —       1,502     6,678  

KEPCO Neimenggu International Ltd.

    13,357     —       3,629  

KEPCO Netherlands B.V.

    10,982     8,453     8,923  

KOSPO Jordan LLC

    51     358     129  

PT. KOMIPO Pembangkitan Jawa Bali

    383     2,074     1,663  
   

 

 

   

 

 

   

 

 

 
       883,415     996,895     567,427  
   

 

 

   

 

 

   

 

 

 

17.Investments in Associates and Joint Ventures

(1)Investments in associates and joint ventures as of December 31, 2011, December 31, 2010,2012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

Dec. 31, 2011

 

Investee

 

Key Operating activities

 Location Owner-
ship(%)
 Acquisition
cost
 Book value 

ASSOCIATES

       
20122012 

Investees

 Key operation activities Location Percentage of
ownership
   Acquisition
cost
 Book
value
 
     In millions of won 

<Associates>

      

Daegu Green Power Co., Ltd.

 Power generation KOREA  41 (Won)12,300   (Won)12,621   Power generation KOREA  48      57,360    56,007  

Korea Gas Corporation

 

Importing and wholesailing LNG

 KOREA  24  94,500    1,968,886   Importing and wholesaling
LNG
 KOREA  24   94,500    2,049,340  

Korea Electric Power Industrial Development Co., Ltd.

 Electricity metering KOREA  29  4,727    20,968   Electricity metering KOREA  29   4,727    18,936  

YTN Co. Ltd.

 Broadcasting KOREA  21  59,000    36,977  

YTN Co., Ltd.

 Broadcasting KOREA  21   59,000    37,876  

Cheongna Energy Co., Ltd.

 

Generating and distributing vapor and hot/cold water

 KOREA  30  30,000    24,576   Generating and
distributing vapor and hot/
cold water
 KOREA  30   43,900    33,379  

Gangwon Wind Power Co., Ltd.(*1)

 Wind power generation KOREA  15  5,725    10,112   Wind power generation KOREA  15   5,725    12,113  

Hyundai Green Power Co., Ltd.

 Power generation KOREA  29  64,235    84,109   Power generation KOREA  29   88,885    110,346  

Korea Power Exchange(*5)

 Management of power
market
 KOREA  100   127,839    176,264  

AMEC Partners Korea(*2)

 Resources development KOREA  19   707    141  

Hyundai Energy Co., Ltd.(*8)

 Power generation KOREA  29   57,150    49,463  

Ecollite Co., Ltd.

 Artificial light-weight
aggregate
 KOREA  29   168    1,266  

Taebaek Wind Power Co., Ltd.

 Power generation KOREA  25   3,810    3,728  

Alternergy Philippine Investments Corporation

 Power generation PHILIPPINES  50   3,313    1,600  

Muju Wind Power Co., Ltd.

 Power generation KOREA  25   2,850    2,711  

Pyeongchang Wind Power Co., Ltd.

 Power generation KOREA  25   638    613  

Daeryun Power Co., Ltd.

 Power generation KOREA  20   25,477    25,017  

JinanJangsu Wind Power Co., Ltd.

 Power generation KOREA  25   100    78  

Changjuk Wind Power Co., Ltd.

 Power generation KOREA  30   3,801    3,926  

Commerce and industry energy Co., Ltd.

 Power generation KOREA  30   8,500    7,066  

KNH Solar Co., Ltd.

 Power generation KOREA  27   1,296    1,089  

SPC Power Corporation

 Power generation PHILIPPINES  38   20,635    36,760  

Gemeng International Energy Co., Ltd.

 Power generation CHINA  34   413,153    549,730  

PT. Cirebon Electric Power

 Power generation INDONESIA  28   39,217    17,022  

KNOC Nigerian East Oil Co., Ltd.(*3)

 Resources development NIGERIA  15   12    —    

KNOC Nigerian West Oil Co., Ltd.(*3)

 Resources development NIGERIA  15   12    —    

Dolphin Property Limited(*3)

 Rental company NIGERIA  15   12    —    

E-Power S.A.

 Operation of utility plant
and sales of electricity
 HAITI  30   3,779    5,646  

PT Wampu Electric Power

 Power generation INDONESIA  46   18,935    15,644  

PT. Bayan Resources TBK

 Resources development INDONESIA  20   615,860    642,636  

S-Power Co., Ltd.

 Power generation KOREA  40   82,000    81,679  

Pioneer Gas Power Limited(*7)

 Power generation INDIA  40   39,899    37,875  

Eurasia Energy Holdings

 Power generation and
resources development
 RUSSIA  40   461    —    

Xe-Pian Xe-Namnoy Power Co., Ltd.

 Power generation LAOS  25   29    27  

Busan Solar Co., Ltd.(*2)

 Power generation KOREA  20   643    546  

Hadong Mineral Fiber Co., Ltd.

 Recycling fly ashes KOREA  25   50    5  

Green Biomass Co., Ltd.

 Power generation KOREA  34   714    637  

Gumi-ochang Photovoltaic Power Co.,
Ltd.(*1)

 Power generation KOREA  10   288    282  

Chungbuk Photovoltaic Power Co.,
Ltd.(*1)

 Power generation KOREA  10   166    159  

Cheonan Photovoltaic Power Co.,
Ltd.(*1)

 Power generation KOREA  10   122    109  

PT. Mutiara Jawa

 Manufacturing and
operating floating coal
terminal
 INDONESIA  29   2,978    2,624  
     

 

  

 

 
      1,828,711    3,982,340  
     

 

  

 

 

Dec. 31, 2011

 

Investee

 

Key Operating activities

 Location Owner-
ship(%)
  Acquisition
cost
  Book value 

Korea Power Exchange(*5)

 

Management of power market

 KOREA  100  127,839    163,041  

AMEC Partners Korea(*2)

 

Resources development

 KOREA  19  707    176  

Hyundai Energy Co., Ltd.

 Power generation KOREA  29  33,147    53,281  

Ecollite Co., Ltd.

 

Artificial light- weight aggregate

 KOREA  34  168    1,219  

Taebaek Wind Power Co., Ltd.

 

Construction and service

 KOREA  25  3,810    3,680  

Alternergy Philippine Investments Corporation

 Power generation PHILIPPINES  50  2,261    1,078  

Muju Wind Power Co., Ltd.

 Power generation KOREA  25  2,850    2,735  

Pyeongchang Wind Power Co., Ltd.

 Power generation KOREA  25  638    627  

Daeryun Power co., Ltd.

 

Power generation and support

 KOREA  20  20,790    20,227  

JinanJangsu Wind Power CO., Ltd.

 Power generation KOREA  25  100    78  

Changjuk Wind Power Co., Ltd.

 Power generation KOREA  30  3,801    3,749  

Commerce and industry energy Co., Ltd

 Power generation KOREA  30  8,500    8,497  

Gyeongju Wind Power Co., Ltd.

 Power generation KOREA  30  1,440    1,430  

KNH Solar Co., Ltd.

 Power generation KOREA  27  1,296    1,295  

SPC Power Corporation

 Power generation PHILIPPINES  40  20,635    37,660  

Gemeng International Energy Group Co., Ltd.

 Power generation CHINA  34  413,153    555,104  

PT. Cirebon Electric Power

 Power generation INDONESIA  28  39,217    15,513  

KNOC Nigerian East Oil Co., Ltd.(*3)

 

Resources development

 NIGERIA  15  12    —    

KNOC Nigerian West Oil Co., Ltd.(*3)

 Resources development NIGERIA  15  12    —    

Dolphin Property Limited(*3)

 Rental company NIGERIA  15  12    —    

E-Power S.A

 

Operation of utility plant and sales of electricity

 HAITI  30  3,779    3,967  

PT Wampu Electric Power

 Power generation INDONESIA  46  17,360    16,452  

PT. Bayan Resources TBK

 

Resources development

 INDONESIA  20  615,860    671,096  
    

 

 

  

 

 

 
     1,587,874    3,718,154  
    

 

 

  

 

 

 

JOINT VENTURES(*7)

             

KEPCO-Uhde Inc. (*6)

 Power generation KOREA  66  11,355    11,172  

Eco Biomass Energy Sdn. Bhd.

 Power generation MALAYSIA  40  9,661    9,783  

Datang Chaoyang Renewable Power Co., Ltd.

 Power generation CHINA  40  27,660    29,971  

Shuweihat Asia Power Investment B.V.

 Holding company NETHER-LANDS  49  285    —    

Shuweihat Asia Operation & Maintenance Company (*6)

 

Maintenance of utility plant

 CAYMAN
  
55

  
30
  
  
—  
  

Waterbury Lake Uranium LP

 

Resources development

 CANADA  40  21,786    21,691  

ASM-BG Investicii AD

 Power generation BULGARIA  50  14,731    14,921  

RES Technology AD

 Power generation BULGARIA  50  14,698    14,563  

KV Holdings, Inc.

 Power generation PHILIPPINES  40  2,103    2,044  

Dec. 31, 2011

 

Investee

 

Key Operating activities

 Location Owner-
ship(%)
 Acquisition
cost
 Book value 

Kings Plaza JV, LLC(*6)

 Power generation USA  75  8,820    8,651  
20122012 

Investees

 Key operation activities Location Percentage of
ownership
   Acquisition
cost
 Book
value
 
     In millions of won 

<Joint ventures>

      

KEPCO-Uhde Inc.(*6)

 Power generation KOREA  66      11,355    10,269  

Eco Biomass Energy Sdn. Bhd.(*6)

 Power generation MALAYSIA  62   9,661    —    

Datang Chaoyang Renewable Power Co., Ltd.

 Power generation CHINA  40   27,660    28,705  

Shuweihat Asia Power Investment B.V.

 Holding company NETHERLANDS  49   398    —    

Shuweihat Asia Operation & Maintenance Company(*6)

 

Maintenance of utility
plant

 

CAYMAN

 

 

55

  

 

30

  

 

 

29

  

Waterbury Lake Uranium L.P.

 Resources development CANADA  40   25,839    24,906  

ASM-BG Investicii AD

 Power generation BULGARIA  50   14,731    16,024  

RES Technology AD

 Power generation BULGARIA  50   14,698    14,637  

KV Holdings, Inc.

 Power generation PHILIPPINES  40   2,103    2,023  

KEPCO SPC Power Corporation(*6)

 

Construction and operation of utility plant

 PHILIPPINES

 

  

 

76

 

 

  

 

94,579

 

  

 

  

 

98,943

 

  

 

 Construction and
operation of utility
plant
 PHILIPPINES  75   94,579    121,737  

Canada Korea Uranium Limited Partnership(*4)

 Resources development CANADA  13  5,404    5,348   Resources development CANADA  13   5,404    5,083  

KEPCO Energy Resource Nigeria Limited

 Holding company NIGERIA  30  8,463    6,056   Holding company NIGERIA  30   8,463    5,663  

Gansu Datang Yumen Wind Power Company Ltd.

 Power generation CHINA  40  16,621    22,368  

Gansu Datang Yumen Wind Power Co., Ltd.

 Power generation CHINA  40   16,621    20,381  

Datang Chifeng Renewable Power Co., Ltd.

 Power generation CHINA  40  121,928    183,455   Power generation CHINA  40   121,928    156,449  

Datang KEPCO Chaoyang Renewable Power

 Power generation CHINA  40  10,858    6,931  

Datang KEPCO Chaoyang Renewable Power Co., Ltd.

 Power generation CHINA  40   10,858    10,125  

Rabigh Electricity Company

 

Construction of utility plant and sales of elecricity

 SAUDI
ARABIA
  40  1,357    —     Construction of utility
plant and sales of
electricity
 SAUDI
ARABIA
  40   1,357    —    

Rabigh Operation & Maintenance Company

 

Maintenance of utility plant

 SAUDI
ARABIA
  
40

  
70
  
  
137
  
 Maintenance of utility
plant
 SAUDI
ARABIA
  40   70    814  

Jamaica Public Service Company Limited

 Power generation JAMAICA  40  301,910    311,750   Power generation JAMAICA  40   301,910    293,007  

KW Nuclear Components Co., Ltd.

 R&D KOREA  43  833    —     R&D KOREA  43   833    1,222  

Busan shinho Solar power Co., Ltd.

 Power generation KOREA  20  2    2   Power generation KOREA  25   2,100    2,056  

STX Electric Power Co., Ltd.

 Power generation KOREA  49  19,601    19,416   Power generation KOREA  49   98,000    96,698  

YEONGAM Wind Power Co., Ltd.

 Power generation KOREA  49   11,584    11,563  

Global Trade Of Power System Co., Ltd.

 Exporting products and
technology of small or
medium sized business
by proxy
 KOREA  29   290    213  

Expressway Solar-light Power Generation Co., Ltd.

 Power generation KOREA  29   3,132    3,132  

Yeongam F1 Solar Power Plant

 Power generation KOREA  29   1,740    1,673  

KODE NOVUS 1 LLC.

 Power generation USA  50   19,213    17,691  

KODE NOVUS 2 LLC.

 Power generation USA  49   12,498    11,550  

Daejung Offshore Wind Power Co., Ltd.

 Power generation KOREA  50   4,990    4,844  

Arman Asia Electric Power Company(*6)

 Power generation JORDAN  60   981    687  

KEPCO-ALSTOM Power Electronics Systems, Inc.(*6)

 R&D KOREA  51   5,629    5,629  

Dongbu Power Dangjin Corporation

 Power generation KOREA  40   40,000    40,000  

Honam Wind Power Co., Ltd.

 Power generation KOREA  30   1,783    1,783  
    

 

  

 

      

 

  

 

 
     692,755    767,202        870,438    908,593  
    

 

  

 

      

 

  

 

 
    (Won)2,280,629   (Won)4,485,356           2,699,149    4,890,933  
    

 

  

 

      

 

  

 

 

 

(*1)The Company holds less than 20% of the equity shares of this investment. However, the Company can exercise significant influence by virtue of its contractual right to appoint directors to the board of directors of the entity, and by strict decision criteria of the company’sCompany’s financial and operating policy of the board of directors.

(*2)The Company holds less than 20% of the equity shares of this investment. However, the Company can exercise significant influence by virtue of its contractual right to appoint a director to the board of directors of the entity.

 

(*3)The Company holds less than 20% of the equity shares of these investments in associates. However, the Company can exercise significant influence by virtue of its contractual right to appoint one out of four members of the steering committee of the entity. Moreover, the companyCompany has significant financial transactions with the associate which can affect its influence on the entity.

 

(*4)The Company holds less than 20% of the equity shares of the entity. However, the Company has joint control on the associates by virtue of its contractual right to appoint directors to the board of directors of the entity, and by strict decision criteria of the company’sCompany’s financial and operating policy of the board of directors.

(*5)The Company holds 100% of the equity shares of the investments in associate. However, the Government regulates the Company’s ability to make operating and financial decisions over the entity, as the Government’sGovernment requires maintaining arms-length transactions between KPX and the Company’s other subsidiaries. The companyCompany can exercise significant influence by its right to nominate directors to the board of directors of the entity.

 

(*6)The Company holds more than 50% of the equity shares of the entities. However, accordingAccording to the shareholder agreement, all critical financial and operating decisions must be agreed to by all ownership parties. For these reasons, the entities are classified as joint ventures.

 

(*7)DespiteAs of reporting date, the ownership percentage, when the strategic financialreporting period end of all associates and operating policy decisions relating to the activities of the investee require the unanimous consent of the parties sharing control, the Company classified those investments as investments in joint ventures in statement of financial position.ends on December 31, except for Pioneer Gas Power Limited, whose reporting period ends on March 31.

 

Dec. 31, 2010

 

Investee

 

Key Operating Activities

 Location Owner-
ship(%)
  Acquisition
Cost
  Book value 

ASSOCIATES

             

Daegu Green Power Co., Ltd.

 Power generation KOREA  41 (Won)6,150   (Won)5,810  

Korea Gas Corporation

 

Importing and wholesailing LNG

 KOREA  24  94,500    1,890,437  

Korea Electric Power Industrial Development Co., Ltd.

 Electricity metering KOREA  29  7,987    17,473  

YTN Co. Ltd.

 Broadcasting KOREA  21  59,000    35,569  

Cheongna Energy Co., Ltd.

 

Generating and distributing vapor and hot/cold water

 KOREA  30  30,000    26,092  

Gangwon Wind Power Co., Ltd.(*1)

 Wind power generation KOREA  15  5,725    8,576  

Hyundai Green Power Co., Ltd.

 Power generation KOREA  29  38,135    43,113  

Korea Power Exchange

 

Management of power market

 KOREA  100  127,839    156,057  

The 3rd energy fund

 Holding company KOREA  48  1,680    2,220  

Korea Solar Holding Co., Ltd.

 Power generation KOREA  40  25    —    

AMEC Partners Korea(*2)

 Resources development KOREA  19  498    151  

Hyundai Energy Co., Ltd.

 Power generation KOREA  36  33,147    31,968  

Ecollite Co. Ltd.

 

Artificial light-weight aggregate

 KOREA  34  168    1,450  

Taebaek Wind Power Co., Ltd.

 

Construction and service

 KOREA  25  2,513    2,461  

Alternergy Philippine Investments Corporation

 Power generation PHILIPPINES  50  1,331    788  

Muju Wind Power Co., Ltd.

 Power generation KOREA  25  2,850    2,803  

Pyeongchang Wind Power Co., Ltd.

 Power generation KOREA  25  13    11  

Daeryun Power

 

Power generation and support

 KOREA  20  2,970    2,930  

JinanJangsu Wind Power CO., Ltd.

 Power generation KOREA  25  100    79  

Changjuk Wind Power Co., Ltd.

 Power generation KOREA  30  120    119  

Commerce and industry energy Co., Ltd

 Power generation KOREA  30  8,500    8,497  

SPC Power Corporation

 Power generation PHILIPPINES  40  20,635    33,053  
(*8)As of December 31, 2012, 21% of ownership of Hyundai Energy Co., Ltd. is held by NH Power ll Co., Ltd. and NH Bank. According to the shareholders’ agreement reached in March 2011, not only does the Company have a call option to acquire the investment in Hyundai Energy Co., Ltd. from NH Power ll Co., Ltd. and NH Bank with a certain rate of return, NH Power ll Co., Ltd. and NH Bank also have put options to dispose of their investment to the Company. In connection with this agreement, the Company applied the equity method on the investment in Hyundai Energy Co., Ltd. with 50% of ownership.

2013

 

Investees

 

Key operation activities

 Location Percentage of
ownership
   Acquisition
cost
  Book value 
          In millions of won 

<Associates>

      

Daegu Green Power Co., Ltd.

 Power generation KOREA 48%   76,193    74,878  

Korea Gas Corporation

 Importing and wholesaling LNG KOREA 20%   94,500    1,926,800  

Korea Electric Power Industrial Development Co., Ltd.

 Electricity metering KOREA 29%   4,727    22,450  

YTN Co., Ltd.

 Broadcasting KOREA 21%   59,000    38,426  

Cheongna Energy Co., Ltd.

 Generating and distributing vapor and hot/cold water KOREA 44%   43,900    28,114  

Gangwon Wind Power
Co., Ltd.(*1)

 Wind power generation KOREA 15%   5,725    13,185  

Hyundai Green Power Co., Ltd.

 Power generation KOREA 29%   88,885    110,157  

Korea Power Exchange(*5)

 Management of power market KOREA 100%   127,839    189,544  

AMEC Partners Korea(*2)

 Resources development KOREA 19%   707    189  

Hyundai Energy Co., Ltd.(*8)

 Power generation KOREA 29%   71,070    43,386  

Ecollite Co., Ltd.

 Artificial light-weight aggregate KOREA 36%   1,516    —    

Taebaek Wind Power Co., Ltd.

 Power generation KOREA 25%   3,810    5,553  

Alternergy Philippine Investments Corporation

 Power generation PHILIPPINES 50%   3,881    1,500  

Muju Wind Power Co., Ltd.

 Power generation KOREA 25%   2,850    2,707  

Pyeongchang Wind Power Co., Ltd.

 Power generation KOREA 25%   638    600  

Daeryun Power Co., Ltd.

 Power generation KOREA 20%   25,477    24,599  

JinanJangsu Wind Power Co., Ltd.

 Power generation KOREA 25%   100    77  

Changjuk Wind Power Co., Ltd.

 Power generation KOREA 30%   3,801    6,344  

KNH Solar Co., Ltd.

 Power generation KOREA 27%   1,296    1,372  

SPC Power Corporation

 Power generation PHILIPPINES 38%   20,635    47,661  

Gemeng International Energy
Co., Ltd.

 Power generation CHINA 34%   413,153    608,674  

Dec. 31, 2010

 

Investee

 

Key Operating Activities

 Location Owner-
ship(%)
  Acquisition
Cost
  Book value 

ASSOCIATES

             

Gemeng International Energy Group Co., Ltd.

 Power generation CHINA  34  413,153    543,147  

PT. Cirebon Electric Power

 Power generation INDONESIA  28  39,217    20,985  

KNOC Nigerian East Oil Co., Ltd.(*3)

 Resources development NIGERIA  15  12    —    

KNOC Nigerian West Oil Co., Ltd.(*3)

 Resources development NIGERIA  15  12    —    

Dolphin Property Limited(*3)

 Rental company NIGERIA  15  12    —    

E-Power S.A

 

Operation of utility plant and sales of electricity

 HAITI  30  3,779    2,814  

PT Wampu Electric Power

 Power generation INDONESIA  46  12,518    12,518  

PT. Bayan Resources TBK

 Resources development INDONESIA  20  615,860    641,389  
    

 

 

  

 

 

 
     1,528,449    3,490,510  
    

 

 

  

 

 

 

JOINT VENTURES(*7)

             

Eco Biomass Energy Sdn. Bhd.

 Power generation MALAYSIA  40  9,661    9,661  

Datang Chaoyang Renewable Power Co., Ltd.

 Power generation CHINA  40  17,619    15,138  

Shuweihat Asia Power Investment B.V.

 Holding company NETHERLANDS  49  13    13  

Kings Plaza JV, LLC

 Power generation USA  75  8,820    8,820  

KEPCO SPC Power Corporation(*6)

 

Construction and operation of utility plant

 PHILIPPINES

 

  

 

76

 

 

  

 

80,986

 

  

 

  

 

72,663

 

  

 

Canada Korea Uranium Limited Partnership(*4)

 Resources development CANADA  13  5,404    5,408  

KEPCO Energy Resource Nigeria Limited

 Holding company NIGERIA  30  8,463    6,867  

Gansu Datang Yumen Wind Power Company Ltd.

 Power generation CHINA  40  16,621    21,555  

Datang Chifeng Renewable Power Co., Ltd.

 Power generation CHINA  40  98,664    134,790  

Rabigh Electricity Company

 

Construction of utility plant and sales of elecricity

 SAUDI
ARABIA
  40  1,357    —    

Rabigh Operation & Maintenance Company

 

Maintenance of utility plant

 SAUDI
ARABIA
  
40

  
70
  
  
61
  

KW Nuclear Components Co., Ltd.

 R&D KOREA  43  834    345  
    

 

 

  

 

 

 
     248,512    275,321  
    

 

 

  

 

 

 
    (Won)1,776,961   (Won)3,765,831  
    

 

 

  

 

 

 

2013

 

Investees

 

Key operation activities

 Location Percentage of
ownership
    Acquisition
cost
  Book value 
           In millions of won 

PT. Cirebon Electric Power

 Power generation INDONESIA  28%     39,217    32,826  

KNOC Nigerian East Oil
Co., Ltd.(*3)

 Resources development NIGERIA  15%     12    —    

KNOC Nigerian West Oil
Co., Ltd.(*3)

 Resources development NIGERIA  15%     12    —    

Dolphin Property Limited(*3)

 Rental company NIGERIA  15%     12    —    

E-Power S.A.

 Operation of utility plant and sales of electricity HAITI  30%     3,779    5,284  

PT Wampu Electric Power

 Power generation INDONESIA  46%     18,935    15,121  

PT. Bayan Resources TBK

 Resources development INDONESIA  20%     615,860    579,534  

S-Power Co., Ltd.

 Power generation KOREA  40%     108,000    107,264  

Pioneer Gas Power Limited(*7)

 Power generation INDIA  40%     48,709    43,666  

Eurasia Energy Holdings

 Power generation and resources development RUSSIA  40%     461    —    

Xe-Pian Xe-Namnoy Power Co., Ltd.

 Power generation LAOS  25%     18,928    18,058  

Busan Solar Co., Ltd.(*2)

 Power generation KOREA  20%     793    741  

Hadong Mineral Fiber Co., Ltd.

 Recycling fly ashes KOREA  25%     50    3  

Green Biomass Co., Ltd.

 Power generation KOREA  34%     714    171  

Gumi-ochang Photovoltaic Power Co., Ltd.(*1)

 Power generation KOREA  10%     288    389  

Chungbuk Photovoltaic Power Co., Ltd.(*1)

 Power generation KOREA  10%     166    184  

Cheonan Photovoltaic Power Co., Ltd.(*1)

 Power generation KOREA  10%     122    148  

PT. Mutiara Jawa

 Manufacturing and operating floating coal terminal INDONESIA  29%     2,978    1,666  

Hyundai Asan Solar Power Co., Ltd.

 Power generation KOREA  10%     471    462  

Heang Bok Do Si Photovoltaic Power Co., Ltd.

 Power generation KOREA  28%     92    91  

Jeonnam Solar Co., Ltd.

 Power generation KOREA  10%     700    696  

DS POWER Co., Ltd.

 Power generation KOREA  11%     17,900    17,900  

D Solarenergy Co., Ltd(*1)

 Power generation KOREA  10%     400    364  

Dongducheon Dream Power Co., Ltd.

 Power generation KOREA  44%     140,079    134,398  

KS Solar Corp. Ltd.(*2)

 Power generation KOREA  19%     637    537  

KOSCON Photovoltaic
Co., Ltd(*1)

 Power generation KOREA  19%     245    315  

Yeongwol Energy Station Co., Ltd(*1)

 Power generation KOREA  13%     1,862    908  

Yeonan Photovoltaic Co., Ltd(*1)

 Power generation KOREA  19   157    123  

Q1 Solar Co., Ltd

 Power generation KOREA  28   1,005    983  

Jinbhuvish Power Generation(*1)

 Power generation INDIA  5   9,000    8,495  

Best Solar Energy Co., Ltd.

 Power generation KOREA  23   1,242    898  

Seokcheon Solar Power
Co., Ltd.(*1)

 Power generation KOREA  10   970    1,046  

SE Green Energy Co., Ltd.

 Power generation support KOREA  48   3,821    3,745  

Daegu Photovoltaic Co., Ltd.

 Power generation KOREA  29   1,230    1,334  

Jeongam Wind Power Co., Ltd.

 Power generation KOREA  40   800    324  

Korea Power Engineering Service Co., Ltd.

 Construction and service KOREA  29   290    585  

2013

 

Investees

 

Key operation activities

 Location Percentage of
ownership
     Acquisition
cost
  Book value 
            In millions of won 

Golden Route J Solar Power Co., Ltd.(*1)

 

Photovoltaic power generation

 KOREA  10      82    99  
     

 

 

  

 

 

 
      2,089,722    4,124,574  
     

 

 

  

 

 

 

<Joint ventures>

      

KEPCO-Uhde Inc.(*6)

 Power generation KOREA  66   11,355    9,537  

Eco Biomass Energy Sdn.
Bhd.(*6)

 Power generation MALAYSIA  62   9,661    —    

Datang Chaoyang Renewable Power Co., Ltd.

 Power generation CHINA  40   27,660    28,161  

Shuweihat Asia Power Investment B.V.

 Holding company NETHERLANDS  49   507    64  

Shuweihat Asia Operation & Maintenance Company(*6)

 

Maintenance of utility plant

 CAYMAN  55   30    29  

Waterbury Lake Uranium L.P.

 Power generation CANADA  40   25,839    23,042  

ASM-BG Investicii AD

 Power generation BULGARIA  50   16,101    20,088  

RES Technology AD

 Power generation BULGARIA  50   15,595    16,045  

KV Holdings, Inc.

 Power generation PHILIPPINES  40   2,103    1,842  

KEPCO SPC Power
Corporation(*6)

 

Construction and operation of utility plant

 PHILIPPINES  75   94,579    143,294  

Canada Korea Uranium Limited Partnership(*4)

 Resources development CANADA  13   5,404    —    

KEPCO Energy Resource Nigeria Limited

 Holding company NIGERIA  30   8,463    2,202  

Gansu Datang Yumen Wind Power Co., Ltd.

 Power generation CHINA  40   16,621    19,237  

Datang Chifeng Renewable Power Co., Ltd.

 Power generation CHINA  40   121,928    166,330  

Datang KEPCO Chaoyang Renewable Power Co., Ltd.

 Power generation CHINA  40   10,858    10,604  

Rabigh Electricity Company

 Sales of electricity SAUDI ARABIA  40   109,743    —    

Rabigh Operation & Maintenance Company

 

Maintenance of utility plant

 SAUDI
ARABIA
  40   70    4,082  

Jamaica Public Service Company Limited

 Power generation JAMAICA  40   301,910    268,022  

KW Nuclear Components Co., Ltd.

 R&D KOREA  45   833    2,476  

Busan shinho Solar power Co., Ltd.

 Power generation KOREA  25   2,100    2,871  

STX Electric Power Co., Ltd.

 Power generation KOREA  49   176,400    173,915  

YEONGAM Wind Power Co., Ltd.

 Power generation KOREA  49   11,584    11,424  

Global Trade Of Power System Co., Ltd.

 

Exporting products and technology of small or medium business by proxy

 KOREA  29   290    249  

Expressway Solar-light Power Generation Co., Ltd

 Power generation KOREA  29   3,132    1,863  

KODE NOVUS 1 LLC.

 Power generation USA  50   19,213    14,237  

KODE NOVUS 2 LLC.

 Power generation USA  49   12,498    9,510  

Daejung Offshore Wind Power
Co., Ltd.

 Power generation KOREA  50   4,990    4,135  

Arman Asia Electric Power Company(*6)

 Power generation JORDAN  60   104,721    111,315  

2013

 

Investees

 

Key operation activities

 Location Percentage of
ownership
     Acquisition
cost
  Book value 
            In millions of won 

KEPCO-ALSTOM Power Electronics Systems, Inc.(*6)

 R&D KOREA  51      5,629    4,758  

Dongbu Power Dangjin Corporation

 Power generation KOREA  40   40,000    39,102  

Honam Wind Power Co., Ltd.

 Power generation KOREA  46   3,600    1,933  

Nepal Water & Energy Development Company Pty Ltd.

 Power generation NEPAL  44   10,550    10,409  

Kelar S.A(*6)

 Power generation CHILE  65   4,180    4,180  

PT. Tanjung Power Indonesia

 Power generation INDONESIA  35   388    361  

Incheon New Power Co., Ltd.

 Power generation KOREA  29   461    449  

Seokmun Energy Co., Ltd.

 Integrated energy business KOREA  34   680    415  
     

 

 

  

 

 

 
      1,179,676    1,106,181  
     

 

 

  

 

 

 
         3,269,398    5,230,755  
     

 

 

  

 

 

 

 

(*1)The Company holds less than 20% of the equity shares of this investment. However, the Company can exercise significant influence by virtue of its contractual right to appoint directors to the board of directors of the entity, and by strict decision criteria of the company’sCompany’s financial and operating policy of the board of directors.

 

(*2)The Company holds less than 20% of the equity shares of this investment. However, the Company can exercise significant influence by virtue of its contractual right to appoint a director to the board of directors of the entity.

 

(*3)The Company holds less than 20% of the equity shares of these investments in associates. However, the Company can exercise significant influence by virtue of its contractual right to appoint one out of four members of the steering committee of the entity. Moreover, the companyCompany has significant financial transactions with the associate which can affect its influence on the entity.

 

(*4)The Company holds less than 20% of the equity shares of the entity. However, the Company has joint control on the associates by virtue of its contractual right to appoint directors to the board of directors of the entity, and by strict decision criteria of the company’sCompany’s financial and operating policy of the board of directors.

 

(*5)The Company holds 100% of the equity shares of the investments in associate. However, the Government regulates the Company’s ability to make operating and financial decisions over the entity, as the Government’s measurement to keepGovernment requires maintaining arms-length transactions between KPX and the Company’s other subsidiaries. The companyCompany can exercise significant influence by its right to nominate directors to the board of directors of the entity.

 

(*6)The Company holds more than 50% of the equity shares of the entities. However, accordingAccording to the shareholder agreement, all critical financial and operating decisions must be agreed to by all ownership parties. For these reasons, the entities are classified as joint ventures.

 

(*7)DespiteAs of reporting date, the ownership percentage, when the strategic financialreporting period end of all associates and operating policy decisions relating to the activities of the investee require the unanimous consent of the parties sharing control, the Company classified those investments as investments in joint ventures in statement of financial position.

Jan. 1, 2010

 

Investee

  

Key Operating Activities

  Location  Owner-
ship(%)
  Acquisition
Cost
   Book value 

ASSOCIATES

                 

Korea Gas Corporation

  

Importing and wholesailing LNG

  KOREA   24 (Won)94,500    (Won)1,836,888  

Korea District Heating Corporation

  District heating  KOREA   26  5,660     226,597  

LG Uplus Corp.

  Telecommunication  KOREA   39  323,470     326,125  

Korea Electric Power Industrial Development Co., Ltd.

  Electricity metering  KOREA   49  7,987     26,553  

YTN Co. Ltd.

  Broadcasting  KOREA   21  59,000     35,077  

Cheongna Energy Co., Ltd.

  

Generating and distributing vapor and hot/cold water

  KOREA   30  18,200     16,945  

Gangwon Wind Power Co., Ltd.(*1)

  Wind power generation  KOREA   15  5,725     7,410  

Hyundai Green Power Co., Ltd.

  Power generation  KOREA   29  38,135     36,253  

Korea Power Exchange

  

Management of power market

  KOREA   100  127,839     146,530  

The 3rd energy fund

  Holding company  KOREA   48  1,680     1,310  

Korea Solar Holding Co., Ltd.

  Power generation  KOREA   40  25     25  

Jan. 1, 2010

 

Investee

 

Key Operating Activities

 Location Owner-
ship(%)
  Acquisition
Cost
  Book value 

AMEC Partners Korea(*2)

 

Resources development

 KOREA  19  247    174  

Hyundai Energy Co., Ltd.

 Power generation KOREA  29  4,988    4,827  

Ecollite Co. Ltd.

 

Artificial light-weight aggregate

 KOREA  34  168    792  

Taebaek Wind Power Co., Ltd.

 

Construction and service

 KOREA  25  2,513    2,488  

Alternergy Philippine Investments Corporation

 Power generation PHILIPPINES  50  1,041    778  

SPC Power Corporation

 Power generation PHILIPPINES  40  20,635    29,802  

Gemeng International Energy Group Co.,Ltd.

 Power generation CHINA  34  413,153    546,300  

PT. Cirebon Electric Power

 Power generation INDONESIA  28  39,217    38,233  

KNOC Nigerian East Oil Co.,Ltd.

 

Resources development

 NIGERIA  15  12    —    

KNOC Nigerian West Oil Co.,Ltd.

 

Resources development

 NIGERIA  15  12    —    

Dolphin Property Limited

 Rental company NIGERIA  15  12    —    

E-Power S.A

 

Operation of utility plant and sales of electricity

 HAITI  30  1,108    1,108  
    

 

 

  

 

 

 
     1,165,327    3,284,215  
    

 

 

  

 

 

 

JOINT VENTURES(*7)

             

Eco Biomass Energy Sdn. Bhd.

 Power generation MALAYSIA  40  5,641    5,641  

Datang Chaoyang Renewable Power Co.,Ltd.

 Power generation CHINA  40  6,811    2,386  

KEPCO SPC Power Corporation

 

Construction and operation of utility plant

 PHILIPPINES

 

  

 

76

 

 

  

 

75,215

 

  

 

  

 

52,347

 

  

 

Canada Korea Uranium Limited Partnership

 

Resources development

 CANADA  13  3    3  

KEPCO Energy Resource Nigeria Limited

 Holding company NIGERIA  30  8,463    7,267  

Gansu Datang Yumen Wind Power Company Ltd.

 Power generation CHINA  40  16,500    18,202  

Datang Chifeng Renewable Power Co.,Ltd.

 Power generation CHINA  40  73,152    108,966  

Rabigh Electricity Company

 

Construction of utility plant and sales of elecricity

 SAUDI
ARABIA
  40  1,357    —    

Rabigh Operation & Maintenance Company

 

Maintenance of utility plant

 SAUDI
ARABIA
  
40

  
70
  
  
62
  

KW Nuclear Components Co., Ltd.

 R&D KOREA  43  834    721  
    

 

 

  

 

 

 
     188,046    195,595  
    

 

 

  

 

 

 
    (Won)1,353,373   (Won)3,479,810  
    

 

 

  

 

 

 

(*1)The Company holds less than 20% of the equity shares of this investment. However, the Company can exercise significant influence by virtue of its contractual right to appoint directors to the board of directors of the entity, and by strict decision criteria of the company’s financial and operating policy of the board of directors.ends on December 31, except for Pioneer Gas Power Limited, whose reporting period ends on March 31.

 

(*2)8)TheAs of December 31, 2013, 16% of ownership of Hyundai Energy Co., Ltd. is held by NH Power ll Co., Ltd. and NH Bank. According to the shareholders’ agreement reached on March 2011, not only does the Company holds less than 20%have a call option to acquire the investment in Hyundai Energy Co., Ltd. from NH Power ll Co., Ltd. and NH Bank with a certain rate of return, NH Power ll Co., Ltd. and NH Bank also have put options to dispose of their investment to the Company. In connection with this agreement, the Company applied the equity shares of this investment. However, the Company can exercise significant influence by virtue of its contractual right to appoint a director to the board of directors of the entity.

(*3)The Company holds less than 20% of the equity shares of these investments in associates. However, the Company can exercise significant influence by virtue of its contractual right to appoint one out of four members of the steering committee of the entity. Moreover, the company has significant financial transactions with the associate which can affect its influencemethod on the entity.investment in Hyundai Energy Co., Ltd. with 45% of ownership.

(*4)(2)The Company holds less than 20% of the equity shares of the entity. However, the Company has joint control on the associates by virtue of its contractual right to appoint directors to the board of directors of the entity, and by strict decision criteria of the company’s financial and operating policy of the board of directors.

(*5)The Company holds 100% of the equity shares of the investments in associate. However, the Government regulates the Company’s ability to make operating and financial decisions over the entity, as the Government’s measurement to keep arms-length transactions between KPX and the Company’s other subsidiaries. The company can exercise significant influence by its right to nominate directors to the board of directors of the entity.

(*6)The Company holds more than 50% of the equity shares of the entities. However, according to the shareholder agreement, all critical financial and operating decisions must be agreed to by all ownership parties. For these reasons, the entities are classified as joint ventures.

(*7)Despite of the ownership percentage, when the strategic financial and operating policy decisions relating to the activities of the investee require the unanimous consent of the parties sharing control, the Company classified those investments as investments in joint ventures in statement of financial position.

(2)The fair value of associates and joint ventures which are actively traded on the open market and have a readily available market value as of December 31, 2011, December 31, 2010,2012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

Associates

  Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010 

Korea Electric Power Industrial Development Co., Ltd.

  (Won)63,815    (Won)124,320    (Won)—    

Korea Gas Corporation

   788,130     916,650     918,540  

YTN Co. Ltd.

   24,840     33,120     41,310  

PT. Bayan Resources TBK

   1,533,601     1,492,801     —    

LG Uplus Corp.

   —       —       326,096  

Investees

     2012   2013 
      In millions of won 

<Associates>

     

Korea Electric Power Industrial Development Co., Ltd.

       49,066     39,423  

Korea Gas Corporation(*)

    1,419,390     1,258,740  

YTN Co., Ltd.

    31,770     25,110  

PT. Bayan Resources TBK

    625,864     489,600  

 (3)(*)The carrying amount of Korea Gas Corporation (“KOGAS”) is ₩1,926,800 million as of December 31, 2013 and management has determined that there is objective evidence of impairment. As a result of the impairment test, the Company has not recognized any impairment loss as the value in use of ₩2,867,400 million is greater than the carrying amount. The recoverable amount of KOGAS based on value in use is calculated by considering the long-term natural gas supply and demand programs of future cash flow approved by Ministry of Trade, Industry & Energy and the discount rate of 4.20%.

(3)Changes in investmentinvestments in associates and joint ventures for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

   2011 

Investee

 Jan. 1,
2011
  Acquisition  Disposal  Dividend
received
  Share in
Income (loss)
  Changes in
equity
  Others  Dec. 31,
2011
 

ASSOCIATES

                        

Daegu Green Power Co., Ltd.

 (Won)5,810   (Won)6,150   (Won)—     (Won)—     (Won)(314 (Won)(30 (Won)5   (Won)11,621  

Korea Gas Corporation

  1,890,437    —      —      (11,718  44,391    48,331    (2,555  1,968,886  

Korea Electric Power Industrial Development Co., Ltd.

  17,473    —      —      (1,475  7,917    10    (2,957  20,968  

YTN

  35,569    —      —      (135  2,182    35    (674  36,977  

Cheongna Energy Co., Ltd.

  26,092    —      —      —      (1,516  —      —      24,576  

Gangwon Wind Power Co., Ltd.

  8,576    —      —      (852  2,624    (236  —      10,112  

Hyundai Green Power Co., Ltd.

  43,113    26,100    —      (5,541  20,207    56    174    84,109  

Korea Power Exchange

  156,057    —      —      —      6,984    —      —      163,041  

The 3rd energy fund

  2,220    —      (1,680  (536  (4  —      —      —    

AMEC Partners Korea

  151    209    —      —      (181  (3  —      176  

Hyundai Energy Co., Ltd.

  31,968    —      —      —      (2,970  —      24,283    53,281  

Ecollite Co. Ltd.

  1,450    —      —      —      (231  —      —      1,219  

Taebaek Wind Power Co., Ltd.

  2,461    1,298    —      —      (79  —      —      3,680  

Alternergy Philippine Investments Corporation

  788    929    —      —      (651  12    —      1,078  

Muju Wind Power Co., Ltd.

  2,803    -    -    -    (68  -    -    2,735  

Pyeongchang Wind Power Co., Ltd.

  11    625    —      —      (9  —      —      627  

Daeryun Power

  2,930    17,820    —      —      (424  (78  (21  20,227  

JinanJangsu Wind Power CO., Ltd.

  79    —      —      —      (1  —      —      78  

Changjuk Wind Power Co., Ltd.

  119    3,681    —      —      (51  —      —      3,749  

Commerce and industry energy Co., Ltd

  8,497    —      —      —      —      —      —      8,497  

Gyeongju Wind Power Co., Ltd.

  —      1,440    —      —      (10  —      —      1,430  

KNH Solar Co., Ltd.

  —      1,296    —      —      (1  —      —      1,295  

SPC Power Corporation

  33,053    —      (1,022  —      6,001    605    (977  37,660  

Gemeng International Energy Group Co., Ltd.

  543,147    —      —      —      (18,490  30,447    —      555,104  

PT. Cirebon Electric Power

  20,985    —      —      —      (516  (4,997  41    15,513  

KNOC Nigerian East Oil Co., Ltd.(*1)

  —      —      —      —      (2,071  233    1,838    —    

KNOC Nigerian West Oil Co., Ltd.(*1)

  —      —      —      —      (1,827  213    1,614    —    

Dolphin Property Limited(*1)

  —      —      —      —      (245  30    215    —    

E-Power S.A

  2,814    —      —      —      1,077    76    —      3,967  

PT Wampu Electric Power

  12,518    4,842    —      —      (1,214  —      306    16,452  

PT. Bayan Resources TBK

  641,389    —      —      (6,637  29,161    7,348    (165  671,096  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  3,490,510    64,390    (2,702  (26,894  89,671    82,052    21,127    3,718,154  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

JOINT VENTURES

                        

KEPCO-Uhde Inc.

  —      11,355    —      —      (183  —      —      11,172  

Eco Biomass Energy Sdn. Bhd.

  9,661    —      —      —      —      —      122    9,783  

Datang Chaoyang Renewable Power Co., Ltd.

  15,138    10,041    —      —      2,199    2,561    32    29,971  

Shuweihat Asia Power Investment B.V.

  13    271    —      —      (180  (104  —      —    

Shuweihat Asia Operation & Maintenance Company

  —      30    —      —      (30  —      —      —    

Waterbury Lake Uranium LP

  —      4,446    (4,335  —      —      (75  21,655    21,691  

ASM-BG Investicii AD

  —      14,731    —      —      775    (585  —      14,921  

RES Technology AD

  —      14,698    —      —      484    (619  —      14,563  

KV Holdings, Inc.

  —      2,103    —      —      (4  (55  —      2,044  

Kings Plaza JV, LLC

  8,820    —      —      (694  547    —      (22  8,651  

KEPCO SPC Power Corporation

  72,663    13,593    —      —      10,691    2,050    (54  98,943  
     2012 

Investees

    Beginning
balance
  Acquisition  Disposal  Dividends
received
  Share of
income
(loss)
  Other
comprehensive
income
(loss)
  Others  Ending
balance
 
     In millions of won 

<Associates>

         

Daegu Green Power Co., Ltd.

      11,621    45,060    —      —      (316  (343  (15  56,007  

Korea Gas Corporation

   1,968,886    —      —      (14,364  89,689    5,697    (568  2,049,340  

Korea Electric Power Industrial Development Co., Ltd.

   20,968    —      —      (2,467  788    —      (353  18,936  

YTN Co., Ltd.

   36,977    —      —      (225  1,454    (10  (320  37,876  

Cheongna Energy Co., Ltd.

   24,576    13,900    —      —      (5,097  —      —      33,379  

Gang won Wind Power Co., Ltd.

   10,112    —      —      (852  2,682    171    —      12,113  

Hyundai Green Power Co., Ltd.

   84,109    24,650    —      (11,014  12,601    42    (42  110,346  

Korea Power Exchange

   163,041    —      —      —      13,223    —      —      176,264  

AMEC Partners Korea

   176    —      —      —      (35  —      —      141  

Hyundai Energy Co., Ltd.

   53,281    —      —      —      (3,758  —      (60  49,463  

Ecollite Co., Ltd.

   1,219    —      —      —      (283  330    —      1,266  

Taebaek Wind Power Co., Ltd.

   3,680    —      —      —      48    —      —      3,728  

Alternergy Philippine Investments Corporation

   1,078    1,052    —      —      (498  (32  —      1,600  

Muju Wind Power Co., Ltd.

   2,735    —      —      —      (24  —      —      2,711  

Pyeongchang Wind Power Co., Ltd.

   627    —      —      —      (14  —      —      613  

Daeryun Power Co., Ltd.

   20,227    4,687    —      —      127    (24  —      25,017  

JinanJangsu Wind Power Co., Ltd.

   78    —      —      —      —      —      —      78  

Changjuk Wind Power Co., Ltd.

   3,749    —      —      —      177    —      —      3,926  

Commerce and industry energy Co., Ltd.

   8,497    —      —      —      (1,431  —      —      7,066  

Gyeongju Wind Power Co., Ltd.

   1,430    —      —      —      —      —      (1,430  —    

KNH Solar Co., Ltd.

   1,295    —      —      —      (206  —      —      1,089  

SPC Power Corporation

   37,660    —      —      (1,512  1,035    (617  194    36,760  

Gemeng International Energy Co., Ltd.

   555,104    —      —      —      27,918    (33,292  —      549,730  

PT. Cirebon Electric Power

   15,514    —      —      —      4,252    (1,502  (1,242  17,022  

KNOC Nigerian East Oil Co., Ltd.

   —      —      —      —      1,286    650    (1,936  —    

KNOC Nigerian West Oil Co., Ltd.

   —      —      —      —      1,915    565    (2,480  —    

Dolphin Property Limited

   —      —      —      —      64    17    (81  —    

E-Power S.A

   3,967    —      —      (96  2,083    (308  —      5,646  

PT Wampu Electric Power

   16,453    1,557    —      —      (1,173  —      (1,193  15,644  

PT. Bayan Resources TBK

   671,097    —      —      (15,594  (450  (11,946  (471  642,636  

S-Power Co., Ltd.

   —      82,000    —      —      (57  (260  (4  81,679  

Pioneer Gas Power Limited

   —      39,899    —      —          (2,024  —      37,875  

Eurasia Energy Holdings

   —      461    —      —      (461  —      —      —    

Xe-Pian Xe-Namnoy Power Co., Ltd.

   —      29    —      —          (2  —      27  

Busan Solar Co., Ltd.

   —      643    —      —      (97  —      —      546  

Hadong Mineral Fiber Co., Ltd.

   —      50    —      —      (45  —      —      5  

Green Biomass Co., Ltd.

   —      714    —      —      (77  —      —      637  

Gumi-ochang Photovoltaic Power Co., Ltd.

   —      288    —      —      (6  —      —      282  

Chungbuk Photovoltaic Power Co., Ltd

   —      166    —      —      (7  —      —      159  

Cheonan Photovoltaic Power Co., Ltd

   —      122    —      —      (13  —      —      109  

PT. Mutiara Jawa

   —      2,978    —      —      (110  (244  —      2,624  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   3,718,157    218,256    —      (46,124  145,186    (43,132  (10,001  3,982,340  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 2011    2012 

Investee

 Jan. 1,
2011
 Acquisition Disposal Dividend
received
 Share in
Income (loss)
 Changes in
equity
 Others Dec. 31,
2011
 

Investees

   Beginning
balance
 Acquisition Disposal Dividends
received
 Share of
income
(loss)
 Other
comprehensive
income
(loss)
 Others Ending
balance
 
   In millions of won 

<Joint ventures>

         

KEPCO-Uhde Inc.

      11,172    —      —      —      (894  —      (9  10,269  

Eco Biomass Energy Sdn. Bhd.

   9,783    —      —      —      (2,064  1,263    (8,982  —    

Datang Chaoyang Renewable Power Co., Ltd.

   29,971    —      —      (2,479  1,905    (1,704  1,012    28,705  

Shuweihat Asia Power Investment B.V.

   —      114    —      —      (98  (16  —      —    

Shuweihat Asia Operation & Maintenance Company

   —      —      —      —      30    (1  —      29  

Waterbury Lake Uranium L.P.

   21,691    4,053    —      —      —      (667  (171  24,906  

ASM-BG Investicii AD

   14,921    —      —      —      2,765    (1,662  —      16,024  

RES Technology AD

   14,563    —      —      —      1,298    (1,224  —      14,637  

KV Holdings, Inc.

   2,044    —      —      (89  79    (11  —      2,023  

Kings Plaza JV, LLC

   8,651    —      (9,150  —      499    —      —      —    

KEPCO SPC Power Corporation

   98,943    —      —      —      24,591    (1,875  78    121,737  

Canada Korea Uranium Limited Partnership

  5,408    —      —      —      (19  —      (41  5,348     5,348    —      —      —      (12  —      (253  5,083  

KEPCO Energy Resource Nigeria Limited

  6,867    —      —      —      (461  (350  —      6,056     6,056    —      —      —      (186  (207  —      5,663  

Gansu Datang Yumen Wind Power Company Ltd.

  21,555    —      —      (305  (134  1,288    (36  22,368  

Gansu Datang Yumen Wind Power Co., Ltd.

   22,368    —      —      —      (715  (1,272  —      20,381  

Datang Chifeng Renewable Power Co., Ltd.

  134,790    23,265    —      (13,926  22,645    16,366    315    183,455     183,455    —      —      (22,561  3,077    (10,225  2,703    156,449  

Datang KEPCO Chaoyang Renewable Power Co., Ltd.

  —      10,858    —      —      —      121    (4,048  6,931     6,931    —      —      —      634    (1,488  4,048    10,125  

Rabigh Electricity Company(*1)

  —      —      —      —      (9,616  (35,836  45,452    —    

Rabigh Electricity Company

   —      —      —      —      6,143    (32,009  25,866    —    

Rabigh Operation & Maintenance Company

  61    —      —      —      72    4    —      137     137    —      —      —      722    (45  —      814  

Jamaica Public Service Company Limited

  —      301,910    —      (20,350  4,470    (3,174  28,894    311,750     311,750    —      —      (2,216  3,680    46    (20,253  293,007  

KW Nuclear Components Co., Ltd.

  345    —      —      —      (345  —      —      —       —      —      —      —      1,222    —      —      1,222  

Busan shinho Solar power Co., Ltd.

  —      2    —      —      —      —      —      2     2    2,098    —      —      (44  —      —      2,056  

STX Electric Power Co., Ltd.

  —      19,600    —      —      (184  —      —      19,416     19,415    78,400    —      —      (741  (376  —      96,698  

YEONGAM Wind Power Co., Ltd.

   —      11,583    —      —      (20  —      —      11,563  

Global Trade Of Power System Co., Ltd

   —      290    —      —      (77  —      —      213  

Expressway Solar-light Power Generation Co., Ltd

   —      3,132    —      —      —      —      —      3,132  

Yeongam F1 Solar Power Plant

   —      1,740    —      —      (67  —      —      1,673  

KODE NOVUS 1 LLC.

   —      19,213    —      —      (485  (1,037  —      17,691  

KODE NOVUS 2 LLC.

   —      12,498    —      —      (189  (759  —      11,550  

Daejung Offshore Wind Power Co., Ltd.

   —      4,990    —      —      (146  —      —      4,844  

Arman Asia Electric Power Company

   —      981    —      —      (232  (62  —      687  

KEPCO-ALSTOM Power Electronics Systems, Inc.

   —      5,629    —      —      —      —      —      5,629  

Dongbu Power Dangjin Corporation

   —      40,000    —      —      —      —      —      40,000  

Honam Wind Power Co., Ltd.

   —      1,783    —      —      —      —      —      1,783  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 
  275,321    426,903    (4,335  (35,275  30,727    (18,408  92,269    767,202     767,201    186,504    (9,150  (27,345  40,675    (53,331  4,039    908,593  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 
 (Won)3,765,831   (Won)491,293   (Won)(7,037 (Won)(62,169 (Won)120,398   (Won)63,644   (Won)113,396   (Won)4,485,356        4,485,358    404,760    (9,150  (73,469  185,859    (96,463  (5,962  4,890,933  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

(3)Changes in investments in associates and joint ventures for the years ended December 31, 2012 and 2013 are as follows:

     2013 

Investees

    Beginning
balance
  Acquisition  Disposal  Dividends
received
  Share of
income
(loss)
  Other
comprehensive
income (loss)
  Others  Ending
balance
 
     In millions of won 

<Associates>

         

Daegu Green Power Co., Ltd.

      56,007    18,833    —      —      160    (91  (31  74,878  

Korea Gas Corporation

   2,049,340    —      —      (30,996  (26,848  1,541    (66,237  1,926,800  

Korea Electric Power Industrial Development Co., Ltd.

   18,936    —      —      (255  3,477    —      292    22,450  

YTN Co., Ltd.

   37,876    —      —      (90  472    40    128    38,426  

Cheongna Energy Co., Ltd.

   33,379    —      —      —      (5,217  —      (48  28,114  

Gangwon Wind Power Co., Ltd.

   12,113    —      —      (1,988  3,005    55    —      13,185  

Hyundai Green Power Co., Ltd.

   110,346    —      —      (8,107  8,038    —      (120  110,157  

Korea Power Exchange

   176,264    —      —      —      10,283    —      2,997    189,544  

AMEC Partners Korea

   141    —      —      —      48    —      —      189  

Hyundai Energy Co., Ltd.

   49,463    13,920    —      —      (19,834  —      (163  43,386  

Ecollite Co., Ltd.(*1)

   1,266    1,349    —      —      (896  —      (1,719  —    

Taebaek Wind Power Co., Ltd.

   3,728    —      —      —      1,825    —       5,553  

Alternergy Philippine Investments Corporation

   1,600    569    —      —      (508  (161  —      1,500  

Muju Wind Power Co., Ltd.

   2,711    —      —      —      (4  —      —      2,707  

Pyeongchang Wind Power Co., Ltd.

   613    —      —      —      (13  —      —      600  

Daeryun Power Co., Ltd.

   25,017    —      —      —      (270  (19  (129  24,599  

JinanJangsu Wind Power Co., Ltd.

   78    —      —      —      (1  —      —      77  

Changjuk Wind Power Co., Ltd.

   3,926    —      —      —      2,418    —      —      6,344  

Commerce and industry energy Co., Ltd

   7,066    —      —      —      (1,237  —      (5,829  —    

KNH Solar Co., Ltd.

   1,089    —      —      —      290    —      (7  1,372  

SPC Power Corporation

   36,760    —      —      —      15,599    (4,501  (197  47,661  

Gemeng International Energy Co., Ltd.

   549,730    —      —      —      53,120    5,824    —      608,674  

PT. Cirebon Electric Power

   17,022    —      —      —      10,300    6,361    (857  32,826  

KNOC Nigerian East Oil Co., Ltd.

   —      —      —      —      (348  127    221    —    

KNOC Nigerian West Oil Co., Ltd.

   —      —      —      —      (933  113    820    —    

Dolphin Property Limited

   —      —      —      —      344    (3  (341  —    

E-Power S.A.

   5,646    —      —      (1,878  (359  (28  1,903    5,284  

PT Wampu Electric Power

   15,644    —      —      —      (303  —      (220  15,121  

PT. Bayan Resources TBK(*2)

   642,636    —      —      —      (54,399  (8,703  —      579,534  

S-Power Co., Ltd.

   81,679    26,000    —      —      (158  (125  (132  107,264  

Pioneer Gas Power Limited

   37,875    8,811    —      —      377    (3,316  (81  43,666  

Eurasia Energy Holdings

   —      —      —      —      (171  57    114    —    

Xe-Pian Xe-Namnoy Power Co., Ltd

   27    18,898    —      —      (363  (504  —      18,058  

Busan Solar Co., Ltd.

   546    150    —      —      45    —      —      741  

Hadong Mineral Fiber Co., Ltd.

   5    —      —      —      (1  —      (1  3  

Green Biomass Co., Ltd.

   637    —      —      —      (466  —      —      171  

Gumi-ochang Photovoltaic Power
Co., Ltd.

   282    —      —      —      107    —      —      389  

Chungbuk Photovoltaic Power Co., Ltd.

   159    —      —      —      25    —      —      184  

Cheonan Photovoltaic Power Co., Ltd.

   109    —      —      —      39    —      —      148  

PT. Mutiara Jawai

   2,624    —      —      —      (573  (456  71    1,666  

Hyundai Asan Solar Power Co., Ltd.

   —      471    —      —      (9  —      —      462  

Heang Bok Do Si Photovoltaic Power
Co., Ltd.

   —      92    —      —      1    (2  —      91  

Jeonnam Solar Co., Ltd.

   —      700    —      —      —      (4  —      696  

DS POWER Co., Ltd.

   —      17,900    —      —      —      —      —      17,900  

D Solarenergy Co., Ltd.

   —      400    —      —      (36  —      —      364  

Dongducheon Dream Power Co., Ltd.

   —      —      —      —      (5,677  52    140,023    134,398  

     2013 

Investees

    Beginning
balance
  Acquisition  Disposal  Dividends
received
  Share of
income
(loss)
  Other
comprehensive
income
(loss)
  Others  Ending
balance
 
     In millions of won 

KS Solar Corp. Ltd.

      —      637    —      —      (100  —      —      537  

KOSCON Photovoltaic Co., Ltd.

   —      245    —      —      70    —      —      315  

Yeongwol Energy Station Co., Ltd.

   —      1,862    —      —      (926  (28  —      908  

Yeonan Photovoltaic Co., Ltd.

   —      157    —      —      (34  —      —      123  

Q1 Solar Co., Ltd.

   —      1,005    —      —      (10  —      (12  983  

Jinbhuvish Power Generation

   —      9,000    —      —      (145  (360  —      8,495  

Best Solar Energy Co., Ltd.

   —      1,242    —      —      (344  —      —      898  

Seokcheon Solar Power Co., Ltd.

   —      970    —      —      76    —      —      1,046  

SE Green Energy Co., Ltd.

   —      3,821    —      —      (57  (19  —      3,745  

Daegu Photovoltaic Co., Ltd.

   —      1,230    —      —      111    (7  —      1,334  

Jeongam Wind Power Co., Ltd.

   —      800    —      —      (476  —      —      324  

Korea Power Engineering Service Co., Ltd.

   —      290    —      —      295    —      —      585  

Golden Route J Solar Power Co., Ltd.

   —      82    —      —      17    —      —      99  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   3,982,340    129,434    —      (43,314  (10,174  (4,157  70,445    4,124,574  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

<Joint ventures>

         

KEPCO-Uhde Inc.

   10,269    —      —      —      (751  —      19    9,537  

Eco Biomass Energy Sdn. Bhd.

   —      —      —      —      —      —      —      —    

Datang Chaoyang Renewable Power Co., Ltd.

   28,705    —      —      (1,300  549    395    (188  28,161  

Shuweihat Asia Power Investment B.V.

   —      109    —      —      (42  (7  4    64  

Shuweihat Asia Operation & Maintenance Company

   29    —      —      —      —      —      —      29  

Waterbury Lake Uranium L.P.

   24,906    —      —      —      —      (1,374  (490  23,042  

ASM-BG Investicii AD

   16,024    1,371    —      —      2,301    392    —      20,088  

RES Technology AD

   14,637    897    —      —      157    354    —      16,045  

KV Holdings, Inc.

   2,023    —      —      (319  307    (169  —      1,842  

KEPCO SPC Power Corporation

   121,737    —      —      (2,304  20,196    3,665    —      143,294  

Canada Korea Uranium Limited Partnership(*3)

   5,083    —      —      —      —      —      (5,083  —    

KEPCO Energy Resource Nigeria Limited

   5,663    —      —      —      (3,386  (75  —      2,202  

Gansu Datang Yumen Wind Power Co., Ltd.

   20,381    —      —      —      (1,365  221    —      19,237  

Datang Chifeng Renewable Power Co., Ltd.

   156,449    —      —      (3,545  11,837    1,838    (249  166,330  

Datang KEPCO Chaoyang Renewable Power Co., Ltd.

   10,125    —      —      (506  893    155    (63  10,604  

Rabigh Electricity Company(*4)

   —      108,385    —      —      15,539    41,458    (165,382  —    

Rabigh Operation & Maintenance Company

   814    —      —      (1,831  5,188    (89  —      4,082  

Jamaica Public Service Company Limited(*5)

   293,007    —      —      —      (2,242  (3,544  (19,199  268,022  

KW Nuclear Components Co., Ltd.

   1,222    —      —      (457  1,711    —      —      2,476  

Busan shinho Solar power Co., Ltd.

   2,056    —      —      —      815    —      —      2,871  

STX Electric Power Co., Ltd.

   96,698    78,400    —      —      (806  (377  —      173,915  

YEONGAM Wind Power Co., Ltd.

   11,563    —      —      —      (76  —      (63  11,424  

Global Trade Of Power System
Co., Ltd.

   213    —      —      —      36    —      —      249  

Expressway Solar-light Power Generation Co., Ltd.

   3,132    —      —      —      (1,257  (12  —      1,863  

Yeongam F1 Solar Power Plant

   1,673    —      (2,002  —      329    —      —      —    

     2013 

Investees

    Beginning
balance
  Acquisition  Disposal  Dividends
received
  Share of
income
(loss)
  Other
comprehensive
income (loss)
  Others  Ending
balance
 
     In millions of won 

KODE NOVUS 1 LLC.

      17,691    —      —      —      (3,661  (64  271    14,237  

KODE NOVUS 2 LLC.

   11,550    —      —      —      (1,940  (100  —      9,510  

Daejung Offshore Wind Power Co., Ltd.

   4,844    —      —      —      (709  —      —      4,135  

Arman Asia Electric Power Company

   687    103,740    —      —      (1,501  10,685    (2,296  111,315  

KEPCO-ALSTOM Power Electronics Systems, Inc.

   5,629    —      —      —      (871  —      —      4,758  

Dongbu Power Dangjin Corporation

   40,000    —      —      —      (980  —      82    39,102  

Honam Wind Power Co., Ltd.

   1,783    1,817    —      —      (395  (1,272  —      1,933  

Nepal Water & Energy Development Company Pty Ltd.

   —      —      —      —      (10  (131  10,550    10,409  

Kelar S.A

   —      4,180    —      —      —      —      —      4,180  

PT. Tanjung Power Indonesia

   —      388    —      —      (9  (18  —      361  

Incheon New Power Co., Ltd.

   —      461    —      —      (4  (23  15    449  

Seokmun Energy Co., Ltd.

   —      680    —      —      (265  —      —      415  
   908,593    300,428    (2,002  (10,262  39,588    51,908    (182,072  1,106,181  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
      4,890,933    429,862    (2,002  (53,576  29,414    47,751    (111,627  5,230,755  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(*1)Due toThe Company recognized the accumulated deficit,difference between the Company’s investment balance in KNOC Nigerian East Oil Co., Ltd., KNOC Nigerian West Oil Co., Ltd., Dolphin Property Limited.carrying amount and Rabigh Electricity Company, are zero. However, the Company’srecoverable amount of ₩1,719 million as impairment losses on investments in these entities were through a loanassociates and joint ventures due to the entities in addition to a direct investment in their equity. As a result, the Company continues to recognize its share in loss and the changes in equity of these entities in the statement of comprehensive income by recording a provision allowance against the Company’s loans from overseas business (due from the respective entities).

   2010 

Investee

 Jan. 1,
2010
  Acquisition  Disposal  Dividend
received
  Share in
income(loss)
  Changes in
equity
  Others  Dec. 31,
2010
 

ASSOCIATES

 

Daegu Green Power Co., Ltd.

 (Won)—     (Won)6,150   (Won)—     (Won)—     (Won)(307 (Won)(33 (Won)—     (Won)5,810  

Korea Gas Corporation

  1,836,888    —      —      (14,553  67,713    2,147    (1,758  1,890,437  

Korea District Heating Corporation(*1)

  226,597    —      —      —      —      1,804    (228,401  —    

LG Uplus Corp.(*2)

  326,125    —      —      —      —      —      (326,125  —    

Korea Electric Power Industrial Development Co., Ltd.

  26,553    —      (12,894  (5,586  9,410    (10  —      17,473  

YTN

  35,077    —      —      (270  768    (6  —      35,569  

Cheongna Energy Co., Ltd.

  16,945    11,800    —      —      (2,535  (118  —      26,092  

Gangwon Wind Power Co., Ltd.

  7,410    —      —      (284  1,596    (146  —      8,576  

Hyundai Green Power Co., Ltd.

  36,253    —      —      —      6,860    —      —      43,113  

Korea Power Exchange

  146,530    —      —      —      9,527    —      —      156,057  

The 3rd energy fund

  1,310    —      —      —      910    —      —      2,220  

Korea Solar Holding Co., Ltd.

  25    —      —      —      (25  —      —      —    

AMEC Partners Korea

  174    251    —      —      (274  —      —      151  

Hyundai Energy Co., Ltd.

  4,827    28,159    —      —      (1,030  —      12    31,968  

Ecollite Co. Ltd.

  792    —      —      —      (172  830    —      1,450  

Taebaek Wind Power Co., Ltd.

  2,488    —      —      —      (27  —      —      2,461  

Alternergy Philippine Investments Corporation

  778    291    —      —      (297  16    —      788  

Muju Wind Power Co., Ltd

  —      2,850    —      —      (47  —      —      2,803  

   2010 

Investee

 Jan. 1,
2010
  Acquisition  Disposal  Dividend
received
  Share in
income(loss)
  Changes in
equity
  Others  Dec. 31,
2010
 

Pyeongchang Wind Power Co., Ltd.

  —      13    —      —      (2  —      —      11  

Daeryun Power

  —      2,970    —      —      (113  —      73    2,930  

JinanJangsu Wind Power CO., Ltd.

  —      100    —      —      (21  —      —      79  

Changjuk Wind Power Co., Ltd.

  —      120    —      —      (1  —      —      119  

Commerce and industry energy Co., Ltd

  —      8,500    —      —      (3  —      —      8,497  

SPC Power Corporation

  29,802    —      —      (3,775  6,231    1,037    (242  33,053  

Gemeng International Energy Group Co., Ltd.

  546,300    —      —      —      (13,594  10,441    —      543,147  

PT. Cirebon Electric Power

  38,233    —      —      —      (2,586  (12,333  (2,329  20,985  

KNOC Nigerian East Oil Co., Ltd.(*3)

  —      —      —      —      (3,586  —      3,586    —    

KNOC Nigerian West Oil Co., Ltd.(*3)

  —      —      —      —      (3,339  —      3,339    —    

Dolphin Property Limited

  —      —      —      —      (357  34    323    —    

E-Power S.A(*3)

  1,108    2,671    —      —      (870  (95  —      2,814  

PT Wampu Electric Power

  —      13,492    —      —      (1,346  —      372    12,518  

PT. Bayan Resources TBK

  —      615,860    —      —      30,736    (5,207  —      641,389  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  3,284,215    693,227    (12,894  (24,468  103,219    (1,639  (551,150  3,490,510  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

JOINT VENTURES

  —      —      —      —      —      —      —      —    

Eco Biomass Energy Sdn. Bhd.

  5,641    5,366    —      —      —      —      (1,346  9,661  

Datang Chaoyang Renewable Power Co., Ltd.

  2,386    15,237    —      —      617    (3,102  —      15,138  

Shuweihat Asia Power Investment B.V.

  —      13    —      —      —      —      —      13  

Kings Plaza JV, LLC

  —      —      —      —      —      —      8,820    8,820  

KEPCO SPC Power Corporation

  52,347    22,392    —      —      (4,525  2,449    —      72,663  

Canada Korea Uranium Limited Partnership

  3    —      —      —      4    —      5,401    5,408  

KEPCO Energy Resource Nigeria Limited

  7,267    —      —      —      (136  (264  —      6,867  

Gansu Datang Yumen Wind Power Company Ltd.

  18,202    120    —      —      3,090    143    —      21,555  

Datang Chifeng Renewable Power Co., Ltd

  108,966    20,088    —      (11,020  22,940    1,521    (7,705  134,790  

Rabigh Electricity Company(*3)

  —      —      —      —      (20,765  (25,498  46,263    —    

Rabigh Operation & Maintenance Company

  62    —      —      —      —      (1  —      61  

KW Nuclear Components Co., Ltd.

  721    —      —      —      (376  —      —      345  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  195,595    63,216    —      (11,020  849    (24,752  51,433    275,321  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)3,479,810   (Won)756,443   (Won)(12,894 (Won)(35,488 (Won)104,068   (Won)(26,391 (Won)(499,717 (Won)3,765,831  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(*1)Since prior to 2010, the Company held interest in Korea District Heading Co., Ltd.(the “KDHC”) which completed its public offering on the Korea Exchange on January 29, 2010. However, the Company did not participate in KDHC’s paid-in capital increase as part of its IPO, resulting in a decrease in ownership from 26.07% to 19.55%. As the Company no longer has significant influence over KDHC, the Company reclassified the remaining balance in KDHC from an investment in associates to available-for-sale financial assetsdiscontinued operation during the year ended December 31, 2010.2013.

 

(*2)As LG Uplus Corporation (formerly LG Telecom) mergedIn accordance with LG Powercom on January 5, 2010, shares of LG Powercom whichthe interpretation, the Company owns was exchanged for shareshas applied it prospectively beginning January 1, 2013. However PT Bayan Resources TBK (PT Bayan), one of LG Uplus Corporation. As a result, the Company’s ownership interest decreased from a 39% in LG Powercom to a 7.5% interest in LG Uplus Corporation. Asequity method investments of the Company, no longer has significant influenceretrospectively applied the interpretation and has restated its comparative financial statements to adjust the stripping activity costs that do not meet the criteria for asset recognition in LG Uplus Corporation; the interpretation. The Company reclassifiedreflected this adjustment of ₩31,529 million due to the remaining balancechange in LG Uplus Corporation from anaccounting policy as a loss on its equity method investment in associates to available-for-sale financial assets during the year ended December 31, 2010.2013.

(*3)Due toCanada Korea Uranium Limited Partnership could not find a mining area in which the accumulated deficit, the Company’s investment balance in KNOC Nigerian East Oil Co., Ltd., KNOC Nigerian West Oil Co., Ltd., Dolphin Property Limited.economic feasibility was proven and Rabigh Electricity Company, are zero. However, as the Company’s investments in these entities were through a loan to the entities in addition to a direct investment in their equity.seeks an exit strategy. As a result, the Company continues to recognize its sharerecognizes impairment losses on investments in associates and joint ventures of ₩4,680 million as profit or loss andduring the changes in equity of these entities in the statement of comprehensive income by recording a provision allowance against the Company’s loans from overseas business (due from the respective entities).year ended December 31, 2013.

 

(4)(*4)During the year ended December 31, 2013, partial of the loans to Rabigh Electricity Company was converted to equity, causing the investment to increase by ₩108,385 million.

(*5)It has been determined that there is objective evidence of impairment as a result of one or more events that a financial institution granted Jamaica Public Service Company Limited (“JPS”) a concession that the financial institution would not otherwise consider. As of December 31, 2013, as a result of the impairment test, the recoverable amount of JPS is less than its carrying amount and an impairment loss of ₩19,199 million is recognized as profit or loss. The recoverable amount of JPS is based on value in use calculated based on the most recent financial budget of future cash flow for a period of 9 years approved by management and the discount rate used to calculate the value in use is 10.27%.

(4)Summary of financial information of investments in associates and joint ventures as of and for the years ended December 31, 20112012 and December 31, 2010, and as of January 1, 20102013 are as follows (KRW in millions):follows:

 

  Dec. 31, 2011     2012 

Investee

  Total assets   Total liabilities   Sales   Net income 

ASSOCIATES

                

Investees

    Total assets   Total liabilities   Sales   Profit (loss) for
the period
 
    In millions of won 

<Associates>

         

Daegu Green Power Co., Ltd.

  (Won)28,557    (Won)213    (Won)—      (Won)(609       148,814     31,645     5     (707

Korea Gas Corporation

   36,016,009     27,966,599     28,493,663     181,484      40,631,086     32,252,753     35,714,565     366,675  

Korea Electric Power Industrial Development Co., Ltd.

   122,578     50,273     266,418     17,861      125,614     60,319     250,183     1,822  

YTN Co. Ltd.

   338,084     165,537     124,798     9,539  

YTN Co., Ltd.

    345,862     169,119     124,276     5,735  

Cheongna Energy Co., Ltd.

   388,189     306,594     14,643     (5,131    446,396     376,358     31,125     (11,556

Gangwon Wind Power Co., Ltd.(*1)

   148,265     81,178     29,199     13,276  

Gangwon Wind Power Co., Ltd.

    145,628     65,203     34,342     18,770  

Hyundai Green Power Co., Ltd.

   743,829     453,799     278,804     63,902      952,240     572,151     283,539     43,555  

Korea Power Exchange

   186,240     23,200     80,885     6,983      189,548     13,284     82,667     14,308  

AMEC Partners Korea

   1,230     305     825     (952    1,119     375     1,045     (181

Hyundai Energy Co., Ltd.

   201,781     92,109     —       (828    201,781     92,109     —       —    

Ecollite Co. Ltd.

   3,679     40     —       (690

Ecollite Co., Ltd.

    5,283     880     —       (878

Taebaek Wind Power Co., Ltd.

   38,452     23,732     —       (315    51,901     36,988     3,849     194  

Alternergy Philippine Investments Corporation

   2,186     29     —       (973    3,207     8     —       (899

Muju Wind Power Co., Ltd.

   10,970     32     —       (274    10,843     —       —       (96

Pyeongchang Wind Power Co., Ltd.

   2,922     415     —       (36    2,455     1     —       (53

Daeryun Power

   151,684     50,083     —       (2,144

JinanJangsu Wind Power CO., Ltd.

   313     —       —       (2

Daeryun Power Co., Ltd.

    366,059     240,264     —       (559

JinanJangsu Wind Power Co., Ltd.

    310     —       —       —    

Changjuk Wind Power Co., Ltd.

   23,521     11,026     —       (172    40,922     27,835     1,749     591  

Commerce and industry energy Co., Ltd

   88,361     60,197     —       —    

Gyeongju Wind Power Co., Ltd.

   4,770     4     —       (34

Commerce and industry energy Co., Ltd.

    101,001     77,685     14,075     (4,083

KNH Solar Co., Ltd.

   4,800     2     —       (2    30,665     26,657     1,385     (764

SPC Power Corporation

   111,564     12,467     13,020     7,043      104,886     8,150     11,851     6,131  

Gemeng International Energy Group Co., Ltd.

   4,980,501     3,347,843     1,280,069     (100,414

Gemeng International Energy Co., Ltd.

    5,234,058     3,617,205     1,575,590     75,650  

PT. Cirebon Electric Power

   913,213     856,798     —       (5,386    1,009,607     947,711     159,655     15,462  

KNOC Nigerian East Oil Co., Ltd.

   257,837     322,590     —       (8,496    239,810     291,330     —       (7,636

KNOC Nigerian West Oil Co., Ltd.

   155,815     214,588     —       (7,883    145,322     187,148     —       (6,704

Dolphin Property Limited

   6,511     10,205     1,067     (471    6,264     9,415     506     (101

E-Power S.A

   75,211     65,289     54,633     4,267  

E-Power S.A.

    73,829     58,312     60,416     6,931  

PT Wampu Electric Power

   38,922     3,156     —       (2,598    80,850     46,842     —       (2,549

PT. Bayan Resources TBK

   1,610,547     990,782     1,612,046     239,030  

PT. Bayan Resources TBK(*)

    1,789,276     1,233,329     1,645,400     76,426  

S-Power Co., Ltd.

    205,853     1,985     —       (142

Pioneer Gas Power Limited

    65,000     16,371     —       —    

Eurasia Energy Holdings

    3,421     3,562     —       (1,275

Xe-Pian Xe-Namnoy Power Co., Ltd.

    13,539     13,432     —       —    

Busan Solar Co., Ltd.

    12,991     10,233     444     (492

Hadong Mineral Fiber Co., Ltd.

    19     —       —       (181

Green Biomass Co., Ltd.

    8,034     6,160     —       (226

Gumi-ochang Photovoltaic Power Co., Ltd.

    20,136     17,316     1,314     (60

Chungbuk Photovoltaic Power Co., Ltd.

    8,599     7,014     302     (77

Cheonan Photovoltaic Power Co., Ltd.

    6,252     5,154     173     (121

PT. Mutiara Jawa

    9,068     16     —       (380

<Joint ventures>

         

KEPCO-Uhde Inc.

    16,063     504     —       (1,354

Eco Biomass Energy Sdn. Bhd.

    17,494     3,888     —       —    

Datang Chaoyang Renewable Power Co., Ltd.

    195,746     123,983     19,117     5,179  

Shuweihat Asia Power Investment B.V.

    65     65     —       (189

    Dec. 31, 2011 

Investee

  Total assets   Total liabilities   Sales   Net income 

JOINT VENTURES

                

KEPCO-Uhde Inc.(*6)

   16,964     36     —       (277

Eco Biomass Energy Sdn. Bhd.

   15,957     2,581     —       (776

Datang Chaoyang Renewable Power Co., Ltd.

   213,751     138,823     9,203     5,498  

Shuweihat Asia Power Investment B.V.

   103     129     —       (297

Shuweihat Asia Operation & Maintenance Company

   208     254     —       (100

Waterbury Lake Uranium LP

   54,477     250     —       —    

ASM-BG Investicii AD

   120,829     87,903     —       817  

RES Technology AD

   121,543     88,730     —       41  

KV Holdings, Inc.

   5,109     —       —       (11

Kings Plaza JV, LLC

   25,910     14,807     10,440     778  

KEPCO SPC Power Corporation

   546,503     383,068     111,705     10,272  

Canada Korea Uranium Limited Partnership

   42,931     60     —       (12

KEPCO Energy Resource Nigeria Limited

   26,673     6,488     741     (1,335

Gansu Datang Yumen Wind Power Company Ltd.

   133,980     78,236     10,104     (335

Datang Chifeng Renewable Power Co., Ltd

   1,130,479     671,765     121,277     56,725  

Datang KEPCO Chaoyang Renewable Power

   25,973     8,646     —       —    

Rabigh Electricity Company

   1,815,708     1,976,274     —       (372

Rabigh Operation & Maintenance Company

   863     520     650     235  

Jamaica Public Service Company Limited

   1,191,391     769,188     553,196     13,711  

KW Nuclear Components Co., Ltd.

   8,922     9,767     —       (1,609

Busan shinho Solar power Co., Ltd.

   10     —       —       —    

STX Electric Power Co., Ltd.

   44,967     5,345     —       (377

   Dec. 31, 2010 

Investee

 Total assets  Total liabilities  Sales  Net income 

ASSOCIATES

            

Daegu Green Power Co., Ltd.

 (Won)14,358   (Won)186   (Won)—     (Won)(748

Korea Gas Corporation

  30,023,269    22,294,581    22,740,460    276,831  

Korea Electric Power Industrial Development Co., Ltd.

  107,529    47,278    241,644    18,208  

YTN Co. Ltd.

  316,535    150,558    116,676    5,121  

Cheongna Energy Co., Ltd.

  332,163    245,437    6,963    (7,467

Gangwon Wind Power Co., Ltd.

  162,533    105,684    19,949    7,106  

Hyundai Green Power Co., Ltd.

  509,667    361,000    76,224    24,167  

Korea Power Exchange

  169,212    13,155    77,033    9,527  

The 3rd energy fund

  4,626    —      —      —    

AMEC Partners Korea

  1,221    428    496    (1,454

Hyundai Energy Co., Ltd.

  113,512    24,571    —      (2,881

Ecollite Co. Ltd.

  4,350    22    —      (515

Taebaek Wind Power Co., Ltd.

  9,858    13    —      (111

Alternergy Philippine Investments Corporation

  1,607    31    —      (594

Muju Wind Power Co., Ltd.

  11,250    38    —      (188

Pyeongchang Wind Power Co., Ltd.

  43    —      —      (7

Daeryun Power

  22,212    41    —      (573

Dec. 31, 2010

 

Investee

 Total assets  Total liabilities  Sales  Net income 

JinanJangsu Wind Power CO., Ltd.

  319    2    —      (81

Changjuk Wind Power Co., Ltd.

  399    1    —      (2

Commerce and industry energy

Co., Ltd

  31,554    3,390    —      (10

SPC Power Corporation

  95,436    12,805    24,239    15,605  

Gemeng International Energy Group Co., Ltd.

  4,286,124    2,688,636    768,528    (53,547

PT. Cirebon Electric Power

  730,804    654,495    —      (9,402

KNOC Nigerian East Oil Co., Ltd.

  254,420    304,057    —      (8,311

KNOC Nigerian West Oil Co., Ltd.

  153,399    198,800    —      (7,865

Dolphin Property Limited

  5,594    7,857    1,155    (642

E-Power S.A

  48,948    42,868    —      (1,377

PT Wampu Electric Power

  27,770    558    —      (3,014

PT. Bayan Resources TBK

  1,048,244    664,435    1,111,654    37,673  

JOINT VENTURES

            

Eco Biomass Energy Sdn. Bhd.

  14,976    574    —      (2,157

Datang Chaoyang Renewable Power Co., Ltd.

  76,531    38,685    3,547    1,544  

Shuweihat Asia Power Investment B.V.

  27    —      —      —    

Kings Plaza JV, LLC

  25,910    14,807    10,440    778  

KEPCO SPC Power Corporation

  436,653    312,627    —      (5,954

Canada Korea Uranium Limited Partnership

  43,265    43    —      (1

KEPCO Energy Resource Nigeria Limited

  31,524    8,634    5,843    493  

Gansu Datang Yumen Wind Power Company Ltd.

  135,697    81,810    14,712    4,676  

Datang Chifeng Renewable Power Co., Ltd.

  1,040,214    703,151    116,416    42,942  

Rabigh Electricity Company

  1,193,950    1,262,867    —      —    

Rabigh Operation & Maintenance Company

  152    —      —      —    

KW Nuclear Components Co., Ltd.

  6,455    5,691    —      (840

Jan. 1, 2010

 

Investee

  Total assets   Total liabilities 

ASSOCIATES

        

Korea Gas Corporation

  (Won)28,624,441    (Won)21,114,676  

Korea District Heating Corporation

   2,902,148     2,032,962  

LG Uplus Corp.

   2,043,231     1,137,621  

Korea Electric Power Industrial Development Co., Ltd.

   108,496     54,307  

YTN Co. Ltd.

   329,655     165,974  

Cheongna Energy Co., Ltd.

   223,220     166,985  

Gangwon Wind Power Co., Ltd.(*1)

   148,096     99,025  

Hyundai Green Power Co., Ltd.

   376,924     251,915  

Korea Power Exchange

   156,991     10,460  

The 3rd energy fund

   2,805     77  

Korea Solar Holding Co., Ltd.

   8,809     9,291  

AMEC Partners Korea(*2)

   1,074     157  

Hyundai Energy Co., Ltd.

   19,981     3,335  

Ecollite Co. Ltd.

   2,365     —    

Taebaek Wind Power Co., Ltd.

   9,950     —    

Alternergy Philippine Investments Corporation

   1,594     38  

SPC Power Corporation

   87,873     13,369  

Gemeng International Energy Group Co.,Ltd.

   1,611,481     4,714  

PT. Cirebon Electric Power.

   434,928     301,536  

Jan. 1, 2010

 

Investee

  Total assets   Total liabilities 

KNOC Nigerian East Oil Co.,Ltd.

   256,243     283,919  

KNOC Nigerian West Oil Co.,Ltd.

   153,075     177,994  

Dolphin Property Limited.

   6,633     6,741  

E-Power S.A

   48,948     42,868  

JOINT VENTURES

        

Eco Biomass Energy Sdn. Bhd.

   13,434     3,924  

Datang Chaoyang Renewable Power Co.,Ltd.

   5,966     —    

KEPCO SPC Power Corporation

   347,803     258,366  

Canada Korea Uranium Limited Partnership

   34,181     34  

KEPCO Energy Resource Nigeria Limited

   33,990     9,767  

Gansu Datang Yumen Wind Power Company Ltd.

   135,760     90,256  

Datang Chifeng Renewable Power Co.,Ltd.

   877,027     604,504  

Rabigh Electricity Company

   790,210     795,382  

Rabigh Operation & Maintenance Company

   156     —    

KW Nuclear Components Co., Ltd.

   1,610     6  
        2012 

Investees

      Total assets   Total liabilities   Sales   Profit (loss) for
the period
 
       In millions of won 

Shuweihat Asia Operation & Maintenance Company

        70     17     —       (45

Waterbury Lake Uranium L.P.

     62,885     621     —       —    

ASM-BG Investicii AD

     99,485     67,437     15,453     3,551  

RES Technology AD

     98,036     68,762     9,428     (704

KV Holdings, Inc.

     5,057     —       —       198  

KEPCO SPC Power Corporation

     527,718     333,972     159,412     33,100  

Canada Korea Uranium Limited Partnership

     40,866     41     —       (10

KEPCO Energy Resource Nigeria Limited

     24,732     5,855     —       (898

Gansu Datang Yumen Wind Power Co., Ltd.

     125,198     74,422     9,619     (1,789

Datang Chifeng Renewable Power Co., Ltd.

     945,001     553,772     103,162     10,445  

Datang KEPCO Chaoyang Renewable Power Co., Ltd.

     70,554     45,241     4,046     1,586  

Rabigh Electricity Company

     2,383,131     2,579,352     6,479     44,518  

Rabigh Operation & Maintenance Company

     4,350     2,315     9,002     1,810  

Jamaica Public Service Company Limited

     1,167,350     761,650     1,286,441     19,694  

KW Nuclear Components Co., Ltd.

     25,540     22,824     8,990     3,560  

Busan shinho Solar power Co., Ltd.

     35,324     27,140     —       (176

STX Electric Power Co., Ltd.

     203,754     6,411     —       (1,490

YEONGAM Wind Power Co., Ltd.

     23,470     —       —       (58

Global Trade Of Power System Co., Ltd.

     754     20     —       (266

Expressway Solar-light Power Generation Co., Ltd.

     12,451     1,650     —       1  

Yeongam F1 Solar Power Plant

     55,011     49,241     —       (230

KODE NOVUS 1 LLC.

     122,061     95,603     166     (1,222

KODE NOVUS 2 LLC.

     87,303     63,731     —       (387

Daejung Offshore Wind Power Co., Ltd.

     9,750     42     —       (292

Arman Asia Electric Power Company

     55,119     53,973     —       (386

KEPCO-ALSTOM Power Electronics Systems, Inc.

     11,473     435     —       —    

Dongbu Power Dangjin Corporation

     94,967     532     —       (3,942

Honam Wind Power Co., Ltd.

     9,112     3,243     —       (72

 

(*)The associates have restated the comparative financial statement as the criteria for asset recognition has changed for the current year.

        
       2013 

Investees

     Total assets   Total liabilities   Sales   Profit (loss) for
the period
 
      In millions of won 

<Associates>

         

Daegu Green Power Co., Ltd.

       461,503     305,157     295     (52

Korea Gas Corporation

    43,666,375     34,733,597     37,458,950     (200,707)��

Korea Electric Power Industrial Development Co., Ltd.

    139,764     62,350     289,085     12,658  

YTN Co., Ltd.

    410,384     230,977     120,124     3,090  

Cheongna Energy Co., Ltd.

    429,095     370,940     44,455     (11,278

Gangwon Wind Power Co., Ltd.

    141,572     54,000     38,973     20,035  

Hyundai Green Power Co., Ltd.

    1,217,193     837,339     339,567     29,580  

Korea Power Exchange

    214,012     24,469     84,257     13,592  

AMEC Partners Korea

    1,594     600     1,650     251  

Hyundai Energy Co., Ltd.

    548,467     449,949     33,010     (41,604

       2013 

Investees

     Total assets   Total liabilities   Sales   Profit (loss) for
the period
 
      In millions of won 

Ecollite Co., Ltd.

       5,085     2,005     —       (2,663

Taebaek Wind Power Co., Ltd.

    58,705     36,495     11,595     6,986  

Alternergy Philippine Investments Corporation

    3,088     89     —       (664

Muju Wind Power Co., Ltd.

    10,830     —       —       (13

Pyeongchang Wind Power Co., Ltd.

    2,400     1     —       (55

Daeryun Power Co., Ltd.

    608,267     484,032     —       (1,321

JinanJangsu Wind Power Co., Ltd.

    310     —       —       (1

Changjuk Wind Power Co., Ltd.

    51,653     30,506     11,818     7,635  

KNH Solar Co., Ltd.

    29,530     24,449     4,940     1,073  

SPC Power Corporation

    140,236     15,138     53,862     29,730  

Gemeng International Energy Co., Ltd.

    5,758,480     3,968,262     1,642,121     102,631  

PT. Cirebon Electric Power

    1,004,891     885,522     300,011     37,466  

KNOC Nigerian East Oil Co., Ltd.

    237,211     290,240     —       (7,445

KNOC Nigerian West Oil Co., Ltd.

    143,874     191,302     —       (5,363

Dolphin Property Limited

    6,173     7,053     558     (159

E-Power S.A.

    66,262     51,951     35,601     5,218  

PT Wampu Electric Power

    122,733     89,862     27,048     (659

PT. Bayan Resources TBK

    1,525,745     1,194,968     1,256,526     (19,401

S-Power Co., Ltd.

    614,591     346,429     —       (388

Pioneer Gas Power Limited

    199,974     135,845     135     65  

Eurasia Energy Holdings

    540     963     3,414     (297

Xe-Pian Xe-Namnoy Power Co., Ltd.

    127,858     75,138     70     (1,239

Busan Solar Co., Ltd.

    25,244     21,501     2,666     256  

Hadong Mineral Fiber Co., Ltd.

    12     —       —       (4

Green Biomass Co., Ltd.

    6,962     6,458     —       (1,298

Gumi-ochang Photovoltaic Power Co., Ltd.

    20,091     16,197     3,885     1,068  

Chungbuk Photovoltaic Power Co., Ltd.

    7,553     5,709     1,133     20  

Cheonan Photovoltaic Power Co., Ltd.

    6,032     4,554     1,024     228  

PT. Mutiara Jawa

    13,939     8,435     —       (1,987

Hyundai Asan Solar Power Co., Ltd.

    26,298     22,169     —       (90

Heang Bok Do Si Photovoltaic Power Co., Ltd.

    324     —       —       —    

Jeonnam Solar Co., Ltd.

    7,591     632     —       (2

DS POWER Co., Ltd.

    184,783     61,135     6,831     (352

D Solarenergy Co., Ltd.

    29,537     25,909     29     (361

Dongducheon Dream Power Co., Ltd.

    1,159,917     845,337     —       (9,713

KS Solar Corp. Ltd.

    22,433     19,756     188     (524

KOSCON Photovoltaic Co., Ltd.

    13,213     11,556     1,411     367  

Yeongwol Energy Station Co., Ltd.

    89,122     82,292     —       (6,747

Yeonan Photovoltaic Co., Ltd.

    8,111     7,463     411     (178

Q1 Solar Co., Ltd.

    25,771     22,259     1,906     (36

Jinbhuvish Power Generation

    63,830     4,798     —       —    

Best Solar Energy Co., Ltd.

    25,490     21,583     86     (1,495

Seokcheon Solar Power Co., Ltd.

    14,602     3,847     1,873     786  

SE Green Energy Co., Ltd.

    8,148     307     —       (119

Daegu Photovoltaic Co., Ltd.

    22,580     17,980     1,829     439  

Jeongam Wind Power Co., Ltd.

    855     44     —       (1,189

Korea Power Engineering Service Co., Ltd.

    2,123     107     4,658     1,016  

Golden Route J Solar Power Co., Ltd.

    5,623     4,637     711     171  

<Joint ventures>

         

KEPCO-Uhde Inc.

    16,136     1,686     —       (1,137

Eco Biomass Energy Sdn. Bhd.

    —       —       —       —    

Datang Chaoyang Renewable Power Co., Ltd.

    168,058     97,656     21,013     2,392  

       2013 

Investees

     Total assets   Total liabilities   Sales   Profit (loss) for
the period
 
      In millions of won 

Shuweihat Asia Power Investment B.V.

       152     23     —       (70

Shuweihat Asia Operation & Maintenance Company

    181     128     —       —    

Waterbury Lake Uranium L.P.

    57,600     131     —       —    

ASM-BG Investicii AD

    108,869     68,692     15,364     5,249  

RES Technology AD

    100,140     68,050     10,110     699  

KV Holdings, Inc.

    4,606     —       —       768  

KEPCO SPC Power Corporation

    499,241     308,691     170,681     26,856  

Canada Korea Uranium Limited Partnership

    41,636     42     —       —    

KEPCO Energy Resource Nigeria Limited

    416,632     409,294     —       (11,328

Gansu Datang Yumen Wind Power Co., Ltd.

    113,565     65,472     10,397     (3,245

Datang Chifeng Renewable Power Co., Ltd.

    932,146     516,236     115,588     26,302  

Datang KEPCO Chaoyang Renewable Power Co., Ltd.

    71,338     44,827     9,755     2,316  

Rabigh Electricity Company

    2,684,208     2,486,086     237,775     34,116  

Rabigh Operation & Maintenance Company

    17,857     7,651     25,636     13,243  

Jamaica Public Service Company Limited

    1,270,886     762,970     1,194,263     (784

KW Nuclear Components Co., Ltd.

    24,401     18,898     9,785     3,551  

Busan shinho Solar power Co., Ltd.

    56,191     44,746     8,944     3,025  

STX Electric Power Co., Ltd.

    367,307     12,378     —       (1,646

YEONGAM Wind Power Co., Ltd.

    94,823     71,509     939     (144

Global Trade Of Power System Co., Ltd.

    866     6     2,393     148  

Expressway Solar-light Power Generation Co., Ltd.

    21,435     15,009     2,804     (4,293

KODE NOVUS 1 LLC.

    115,450     96,442     2,819     (7,416

KODE NOVUS 2 LLC.

    57,931     38,523     1,530     (3,959

Daejung Offshore Wind Power Co., Ltd.

    8,299     12     —       (1,017

Arman Asia Electric Power Company

    669,925     484,400     —       (1,506

KEPCO-ALSTOM Power Electronics Systems, Inc.

    9,972     643     387     (1,649

Dongbu Power Dangjin Corporation

    94,768     2,578     —       (3,235

Honam Wind Power Co., Ltd.

    25,887     19,519     —       (1,310

Nepal Water & Energy Development Company
Pty Ltd.

    36,040     14,382     —       (1,572

Kelar S.A

    1,019     —       —       1,573  

PT. Tanjung Power Indonesia

    1,061     27     —       22  

Incheon New Power Co., Ltd.

    4,531     2,984     —       (13

Seokmun Energy Co., Ltd.

    1,647     426     —       (779

(5)Financial information of associates and joint ventures converted to the Company’s shares in net assets as of December 31, 2012 and 2013 are as follows:

     2012 

Investees

    Net assets  Percentage
of
ownership
  Share in
net assets
  Investment
differential
  Intercompany
transaction
  Others  Book value 
     In millions of won 

<Associates>

        

Daegu Green Power Co., Ltd.

      117,169    47.80  56,007    —      —      —      56,007  

Korea Gas Corporation

   8,378,333    24.46  2,049,340    —      —      —      2,049,340  

Korea Electric Power Industrial Development Co., Ltd.

   65,295    29.00  18,936    —      —      —      18,936  

YTN Co., Ltd.

   176,744    21.43  37,876    —      —      —      37,876  

Cheongna Energy Co., Ltd.

   70,038    43.90  30,747    2,584    —      48    33,379  

Gangwon Wind Power Co., Ltd.

   80,425    15.00  12,064    —      —      49    12,113  

Hyundai Green Power Co., Ltd.

   380,089    29.00  110,226    —      —      120    110,346  

Korea Power Exchange

   176,264    100.00  176,264    —      —      —      176,264  

AMEC Partners Korea

   743    19.00  141    —      —      —      141  

Hyundai Energy Co., Ltd.

   101,158    50.00  50,579    —      (1,116  —      49,463  

Ecollite Co., Ltd.

   4,403    28.76  1,266    —      —      —      1,266  

Taebaek Wind Power Co., Ltd.

   14,913    25.00  3,728    —      —      —      3,728  

Alternergy Philippine Investments Corporation

   3,199    50.00  1,600    —      —      —      1,600  

Muju Wind Power Co., Ltd.

   10,843    25.00  2,711    —      —      —      2,711  

Pyeongchang Wind Power Co., Ltd.

   2,454    25.00  613    —      —      —      613  

Daeryun Power Co., Ltd.

   125,795    19.80  24,907    —      —      110    25,017  

JinanJangsu Wind Power Co., Ltd.

   310    25.00  78    —      —      —      78  

Changjuk Wind Power Co., Ltd.

   13,086    30.00  3,926    —      —      —      3,926  

Commerce and industry energy Co., Ltd.

   23,316    29.51  6,881    185    —      —      7,066  

KNH Solar Co., Ltd.

   4,008    27.00  1,082    —      —      7    1,089  

SPC Power Corporation

   96,736    38.00  36,760    —      —      —      36,760  

Gemeng International Energy Co., Ltd.

   1,616,853    34.00  549,730    —      —      —      549,730  

PT. Cirebon Electric Power

   61,897    27.50  17,022    —      —      —      17,022  

KNOC Nigerian East Oil Co., Ltd.

   (51,520  15.00  (7,728  —      —      7,728    —    

KNOC Nigerian West Oil Co., Ltd.

   (41,826  15.00  (6,274  —      —      6,274    —    

Dolphin Property Limited

   (3,151  15.00  (473  —      —      473    —    

E-Power S.A.

   15,518    30.00  4,655    991    —      —      5,646  

PT Wampu Electric Power

   34,008    46.00  15,644    —      —      —      15,644  

PT. Bayan Resources TBK

   568,850    20.00  113,770    528,866    —      —      642,636  

S-Power Co., Ltd.

   203,868    40.00  81,547    —      —      132    81,679  

Pioneer Gas Power Limited

   48,629    40.00  19,452    18,306    —      117    37,875  

Eurasia Energy Holdings

   (141  40.00  (56  —      —      56    —    

Xe-Pian Xe-Namnoy Power Co., Ltd.

   107    25.00  27    —      —      —      27  

Busan Solar Co., Ltd.

   2,758    19.80  546    —      —      —      546  

Hadong Mineral Fiber Co., Ltd.

   19    25.00  5    —      —      —      5  

Green Biomass Co., Ltd.

   1,874    34.00  637    —      —      —      637  

Gumi-ochang Photovoltaic Power Co., Ltd.

   2,820    10.00  282    —      —      —      282  

Chungbuk Photovoltaic Power Co., Ltd.

   1,585    10.00  159    —      —      —      159  

Cheonan Photovoltaic Power Co., Ltd.

   1,098    10.00  110    —      —      —      110  

PT. Mutiara Jawa

   9,052    29.00  2,625    —      —      —      2,625  

     2012 

Investees

 

  

  Net assets  Percentage
of
ownership
  Share in
net assets
  Investment
differential
  Intercompany
transaction
  Others  Book value 
     In millions of won 

<Joint ventures>

        

KEPCO-Uhde Inc.

      15,559    66.00  10,269    —      —      —      10,269  

Eco Biomass Energy Sdn. Bhd.

   13,606    62.00  8,435    —      —      (8,435  —    

Datang Chaoyang Renewable Power
Co., Ltd.

   71,763    40.00  28,705    —      —      —      28,705  

Shuweihat Asia Power
Investment B.V.

   1    49.00  —      —      —      —      —    

Shuweihat Asia Operation & Maintenance Company

   53    55.00  29    —      —      —      29  

Waterbury Lake Uranium L.P.

   62,264    40.00  24,906    —      —      —      24,906  

ASM-BG Investicii AD

   32,048    50.00  16,024    —      —      —      16,024  

RES Technology AD

   29,275    50.00  14,637    —      —      —      14,637  

KV Holdings, Inc.

   5,057    40.00  2,023    —      —      —      2,023  

KEPCO SPC Power Corporation

   193,745    75.20  145,697    —      —      (23,960  121,737  

Canada Korea Uranium Limited Partnership

   40,826    12.50  5,103    —      —      (20  5,083  

KEPCO Energy Resource Nigeria Limited

   18,877    30.00  5,663    —      —      —      5,663  

Gansu Datang Yumen Wind Power
Co., Ltd.

   50,776    40.00  20,311    —      —      70    20,381  

Datang Chifeng Renewable Power
Co., Ltd.

   391,229    40.00  156,492    —      —      (43  156,449  

Datang KEPCO Chaoyang Renewable Power Co., Ltd.

   25,313    40.00  10,125    —      —      —      10,125  

Rabigh Electricity Company

   (196,221  40.00  (78,488  —      —      78,488    —    

Rabigh Operation & Maintenance Company

   2,035    40.00  814    —      —      —      814  

Jamaica Public Service Company Limited

   405,701    40.00  162,280    130,727    —      —      293,007  

KW Nuclear Components Co., Ltd.

   2,715    45.00  1,222    —      —      —      1,222  

Busan shinho Solar power Co., Ltd.

   8,184    25.00  2,046    —      —      10    2,056  

STX Electric Power Co., Ltd.

   197,343    49.00  96,698    —      —      —      96,698  

YEONGAM Wind Power Co., Ltd.

   23,470    49.00  11,500    —      —      63    11,563  

Global Trade Of Power System Co., Ltd.

   734    29.00  213    —      —      —      213  

Expressway Solar-light Power Generation Co., Ltd.

   10,801    29.00  3,132    —      —      —      3,132  

Yeongam F1 Solar Power Plant

   5,770    29.00  1,673    —      —      —      1,673  

KODE NOVUS 1 LLC.

   26,458    50.00  13,229    4,732    —      (270  17,691  

KODE NOVUS 2 LLC.

   23,572    49.00  11,550    —      —      —      11,550  

Daejung Offshore Wind Power Co., Ltd.

   9,708    49.90  4,844    —      —      —      4,844  

Arman Asia Electric Power Company

   1,145    60.00  687    —      —      —      687  

KEPCO-ALSTOM Power Electronics Systems, Inc.

   11,038    51.00  5,629    —      —      —      5,629  

Dongbu Power Dangjin Corporation

   94,434    40.00  37,774    2,226    —      —      40,000  

Honam Wind Power Co., Ltd.

   5,869    30.00  1,761    22    —      —      1,783  

     2013 

Investees

    Net
assets
  Percentage
of
ownership
  Share in
net assets
  Investment
differential
  Intercompany
transaction
  Others  Book
value
 
     In millions of won 

<Associates>

        

Daegu Green Power Co., Ltd.

      156,346    47.80  74,733    145    —      —      74,878  

Korea Gas Corporation

   8,932,779    21.57  1,926,800    —      —      —      1,926,800  

Korea Electric Power Industrial Development Co., Ltd.

   77,414    29.00  22,450    —      —      —      22,450  

YTN Co., Ltd.

   179,407    21.43  38,447    —      (21  —      38,426  

Cheongna Energy Co., Ltd.

   58,155    43.90  25,530    2,584    —      —      28,114  

Gangwon Wind Power Co., Ltd.

   87,572    15.00  13,136    —      —      49    13,185  

Hyundai Green Power Co., Ltd.

   379,853    29.00  110,157    —      —      —      110,157  

Korea Power Exchange

   189,544    100.00  189,544    —      —      —      189,544  

AMEC Partners Korea

   994    19.00  189    —      —      —      189  

Hyundai Energy Co., Ltd.

   98,518    45.26  44,589    —      (1,203  —      43,386  

Ecollite Co., Ltd.

   3,080    36.10  1,112    —      —      (1,112  —    

Taebaek Wind Power Co., Ltd.

   22,210    25.00  5,553    —      —      —      5,553  

Alternergy Philippine Investments Corporation

   3,000    50.00  1,500    —      —      —      1,500  

Muju Wind Power Co., Ltd.

   10,830    25.00  2,707    —      —      —      2,707  

Pyeongchang Wind Power Co., Ltd.

   2,399    25.00  600    —      —      —      600  

Daeryun Power Co., Ltd.

   124,235    19.80  24,599    —      —      —      24,599  

JinanJangsu Wind Power Co., Ltd.

   309    25.00  77    —      —      —      77  

Changjuk Wind Power Co., Ltd.

   21,147    30.00  6,344    —      —      —      6,344  

KNH Solar Co., Ltd.

   5,081    27.00  1,372    —      —      —      1,372  

SPC Power Corporation

   125,098    38.00  47,537    —      —      124    47,661  

Gemeng International Energy Co., Ltd.

   1,790,218    34.00  608,674    —      —      —      608,674  

PT. Cirebon Electric Power

   119,369    27.50  32,826    —      —      —      32,826  

KNOC Nigerian East Oil Co., Ltd.

   (53,029  14.63  (7,758  —      —      7,758    —    

KNOC Nigerian West Oil Co., Ltd.

   (47,429  14.63  (6,939  —      —      6,939    —    

Dolphin Property Limited

   (880  15.00  (132  —      —      132    —    

E-Power S.A.

   14,311    30.00  4,293    991    —      —      5,284  

PT Wampu Electric Power

   32,871    46.00  15,121    —      —      —      15,121  

PT. Bayan Resources TBK

   330,776    20.00  66,155    513,379    —      —      579,534  

S-Power Co., Ltd.

   268,161    40.00  107,264    —      —      —      107,264  

Pioneer Gas Power Limited

   64,129    40.00  25,652    18,014    —      —      43,666  

Eurasia Energy Holdings

   (423  40.00  (169  —      —      169    —    

Xe-Pian Xe-Namnoy Power Co., Ltd.

   52,720    25.00  13,180    4,878    —      —      18,058  

Busan Solar Co., Ltd.

   3,743    19.80  741    —      —      —      741  

Hadong Mineral Fiber Co., Ltd.

   12    25.00  3    —      —      —      3  

Green Biomass Co., Ltd.

   504    34.00  171    —      —      —      171  

Gumi-ochang Photovoltaic Power
Co., Ltd.

   3,894    10.00  389    —      —      —      389  

Chungbuk Photovoltaic Power Co., Ltd.

   1,844    10.00  184    —      —      —      184  

Cheonan Photovoltaic Power Co., Ltd.

   1,478    10.00  148    —      —      —      148  

PT. Mutiara Jawa

   5,504    29.00  1,596    70    —      —      1,666  

Hyundai Asan Solar Power Co., Ltd.

   4,129    10.00  413    49    —      —      462  

Heang Bok Do Si Photovoltaic Power
Co., Ltd.

   324    28.00  91    —      —      —      91  

Jeonnam Solar Co., Ltd.

   6,960    10.00  696    —      —      —      696  

DS POWER Co., Ltd.

   123,648    10.91  13,495    —      —      4,405    17,900  

D Solarenergy Co., Ltd.

   3,627    10.00  363    1    —      —      364  

Dongducheon Dream Power Co., Ltd.

   314,580    43.61  137,188    (2,790  —      —      134,398  

KS Solar Corp. Ltd.

   2,677    19.00  509    28    —      —      537  

KOSCON Photovoltaic Co., Ltd.

   1,657    19.00  315    —      —      —      315  

Yeongwol Energy Station Co., Ltd.

   6,829    13.30  908    —      —      —      908  

Yeonan Photovoltaic Co., Ltd.

   648    19.00  123    —      —      —      123  

Q1 Solar Co., Ltd.

   3,512    28.00  983    —      —      —      983  

Jinbhuvish Power Generation

   59,032    5.16  3,046    5,449    —      —      8,495  

Best Solar Energy Co., Ltd.

   3,906    23.00  898    —      —      —      898  

Seokcheon Solar Power Co., Ltd.

   10,755    9.73  1,046    —      —      —      1,046  

SE Green Energy Co., Ltd.

   7,841    47.76  3,745    —      —      —      3,745  

Daegu Photovoltaic Co., Ltd.

   4,600    29.00  1,334    —      —      —      1,334  

     2013 

Investees

    Net
assets
  Percentage
of
ownership
  Share
in net
assets
  Investment
differential
  Intercompany
transaction
  Others  Book
value
 
     In millions of won 

Jeongam Wind Power Co., Ltd.

      811    40.00  324    —      —      —      324  

Korea Power Engineering Service Co., Ltd.

   2,016    29.00  585    —      —      —      585  

Golden Route J Solar Power Co., Ltd.

   987    10.00  99    —      —      —      99  

<Joint ventures>

      

KEPCO-Uhde Inc.

   14,450    66.00  9,537    —      —      —      9,537  

Eco Biomass Energy Sdn. Bhd.

   —      61.53  —      —      —      —      —    

Datang Chaoyang Renewable Power Co., Ltd.

   70,402    40.00  28,161    —      —      —      28,161  

Shuweihat Asia Power Investment B.V.

   129    49.00  63    —      —      —      63  

Shuweihat Asia Operation & Maintenance Company

   53    55.00  29    —      —      —      29  

Waterbury Lake Uranium L.P.

   57,469    40.00  22,988    —      —      54    23,042  

ASM-BG Investicii AD

   40,177    50.00  20,088    —      —      —      20,088  

RES Technology AD

   32,090    50.00  16,045    —      —      —      16,045  

KV Holdings, Inc.

   4,606    40.00  1,842    —      —      —      1,842  

KEPCO SPC Power Corporation

   190,551    75.20  143,294    —      —      —      143,294  

Canada Korea Uranium Limited Partnership

   41,594    12.50  5,199    —      —      (5,199  —    

KEPCO Energy Resource Nigeria Limited

   7,338    30.00  2,202    —      —      —      2,202  

Gansu Datang Yumen Wind Power Co., Ltd.

   48,093    40.00  19,237    —      —      —      19,237  

Datang Chifeng Renewable Power Co., Ltd.

   415,910    40.00  166,364    —      —      (34  166,330  

Datang KEPCO Chaoyang Renewable Power Co., Ltd.

   26,510    40.00  10,604    —      —      —      10,604  

Rabigh Electricity Company

   198,123    40.00  79,249    —      (79,249  —      —    

Rabigh Operation & Maintenance Company

   10,206    40.00  4,082    —      —      —      4,082  

Jamaica Public Service Company Limited

   507,916    40.00  203,166    130,726    —      (65,870  268,022  

KW Nuclear Components Co., Ltd.

   5,503    45.00  2,476    —      —      —      2,476  

Busan shinho Solar power Co., Ltd.

   11,445    25.00  2,861    —      —      10    2,871  

STX Electric Power Co., Ltd.

   354,929    49.00  173,915    —      —      —      173,915  

YEONGAM Wind Power Co., Ltd.

   23,315    49.00  11,424    —      —      —      11,424  

Global Trade Of Power System Co., Ltd.

   860    29.00  249    —      —      —      249  

Expressway Solar-light Power Generation Co., Ltd.

   6,426    29.00  1,863    —      —      —      1,863  

KODE NOVUS 1 LLC.

   19,009    50.00  9,504    4,733    —      —      14,237  

KODE NOVUS 2 LLC.

   19,408    49.00  9,510    —      —      —      9,510  

Daejung Offshore Wind Power Co., Ltd.

   8,287    49.90  4,135    —      —      —      4,135  

Arman Asia Electric Power Company

   185,525    60.00  111,315    —      —      —      111,315  

KEPCO-ALSTOM Power Electronics Systems, Inc.

   9,329    51.00  4,758    —      —      —      4,758  

Dongbu Power Dangjin Corporation

   92,190    40.00  36,876    2,226    —      —      39,102  

Honam Wind Power Co., Ltd.

   6,368    30.00  1,910    23    —      —      1,933  

Nepal Water & Energy Development Company Pty Ltd.

   21,659    43.57  9,437    972    —      —      10,409  

Kelar S.A

   1,019    65.00  663    3,517    —      —      4,180  

PT. Tanjung Power Indonesia

   1,034    35.00  361    —      —      —      361  

Incheon New Power Co., Ltd.

   1,548    29.00  449    —      —      —      449  

Seokmun Energy Co., Ltd.

   1,221    34.00  415    —      —      —      415  

(6)As of December 31, 2011, December 31, 2010 and January 1, 2010,2013, there is no unrecognized equity interest related toin investments in associates and joint ventures whose book value has been reduced to zero due to accumulated losses.

 

19.(7)PROPERTY, PLANT AND EQUIPMENT:As of December 31, 2013, shareholders’ agreements on investments in associates and joint ventures that may cause future economic costs or cash outflows are as follows:

 

 (1)(i)Gemeng International Energy Co., Ltd.

KEPCO Shanxi International Ltd., a consolidated subsidiary of the Company, established a consortium with two other investors, Deutsche Capital Hong Kong Limited and Shanxi International Energy Company Co.,

Ltd. with the Company’s percentage of ownership of the consortium being 34%. This consortium, in order for business in Chinese power generating industry, established Gemeng International Energy Co., Ltd., which is an associate of the Company with the Company’s percentage of ownership being 34%. KEPCO Shanxi International Ltd. has entered into an agreement(“Put Option”) that if Gemeng International Co., Ltd. fails to be listed within 5 years after the initial capital paid in, Deutsche Capital Hong Kong Limited can require KEPCO Shanxi International Ltd. to acquire or recommend 3rd party to acquire its own investment in Gemeng International Co., Ltd. at the investment principal of USD 106,861,924 with an interest of 3M Libor-0.25% during the period from July 10, 2012 to July 9, 2014. However, Put Option Extension Agreement has changed this period; June 19, 2014 to July 9, 2014, and as of December 31, 2013, the Company guarantees this Put Option Agreement.

(ii)Eco Biomass Energy Sdn. Bhd.

Eco Biomass Energy Sdn. Bhd., issued put options on preferred stock to its financial investors. An agreement was made between financial investors and shareholders that if Eco Biomass Energy Sdn. Bhd., the first obligator, fails to accept the put options when exercised, all shareholders of Eco Biomass Energy Sdn. Bhd., should fulfill their obligation as the second obligators and acquire the preferred stock from financial investors in proportion to each shareholder’s percentage of ownership up to ₩4,050 million.

(iii)Hyundai Energy Co., Ltd.

As of December 31, 2013, Hyundai Energy Co., Ltd., an associate of the Company, which engages in the integrated energy business, carries long-term borrowings for project financing amounting to ₩450 billion from Korea Development Bank and others.

Related to the above project financing, NH Power II Co., Ltd. and Daewoo Securities Co., Ltd., has entered into an agreement with Yeocheon TPL Co., Ltd. to acquire shares in Hyundai Energy Co., Ltd. held by Yeocheon TPL Co., Ltd. The Company had placed guarantees for a fixed return on investment to the financial institutions and had obtained the rights to acquire the investment securities in return preferentially.

In addition, NH Power II Co., Ltd. and Daewoo Securities Co., Ltd. have a right, which can be exercised for 30 days starting from 2 months to 1 month prior to 17 years after the termination date of contract to sell their shares to the Company. If dividends to shareholders exceed annual revenue, the exceeding amount shall be evenly distributed to Yeocheon TPL Co., Ltd. and the Company.

(iv)Taebaek Wind Power Co., Ltd.

In case non-controlling shareholders decide to dispose of their shares in Taebaek Wind Power Co., Ltd. after the warrant period of defect repair for wind power generator has expired, the Company is obligated to acquire those shares at fair value. The acquisition is to be made after the conditions of the acquisition are discussed among the parties involved, with the careful consideration of various factors such as financial status and business situation.

(v)Pyeongchang Wind Power Co., Ltd.

In case non-controlling shareholders decide to dispose of their shares in Pyeongchang Wind Power Co., Ltd. after commercial operation of the power plant has started, the Company is obligated to acquire those shares at fair value. The acquisition is to be made after the conditions of the acquisition are discussed among the parties involved, with the careful consideration of various factors such as financial status and business situation.

(vi)Daeryun Power Co., Ltd.

All shareholders of Daeryun Power Co., Ltd. except for POSCO Construction Co., Ltd., have agreed to acquire the shares held by POSCO Construction Co., Ltd. This acquisition shall be made at issuance price of the share in proportion to each shareholder’s percentage of ownership within two months after

the completion of EPC construction. In connection with this agreement, the company, one of the shareholders of Daeryun Power Co., Ltd., is obligated to acquire 1,210,772 shares of POSCO Construction Co., Ltd.’s investment, which amounts to ₩6,054 million. In case of a merger of Daeryun Power Co., Ltd., remaining shareholders are obligated to pay the dissident shareholders’ share for their purchased price.

(vii)Jeongam Wind Power Co., Ltd.

In case non-controlling shareholders except for financial investors decide to dispose of their shares in Jeongam Wind Power Co., Ltd. after the construction of the power plant has been completed, the Company is obligated to acquire those shares at fair value.

(viii)Daejung Offshore Wind Power Co., Ltd.

In case Samsung Heavy Industries Co., Ltd., a co-participant of the joint venture agreement, decides to dispose of its shares in Daejung Offshore Wind Power Co., Ltd., the Company is obligated to acquire those shares after evaluating the economic feasibility of the facilities installed by Samsung Heavy Industries Co., Ltd.

(ix)Dongducheon Dream Power Co., Ltd.

In case financial investors decide to dispose of their shares in Dongducheon Dream Power Co., Ltd. 5 years after the commencement of commercial operation of the power plant, the Company is obligated to acquire those shares at fair value.

(x)DS Power Co., Ltd.

The Company has a right to sell all shares and bonds of DS POWER Co., Ltd to Daesung Industrial Co., Ltd and Daesung Industrial Co., Ltd. or an authoritative person appointed by Daesung Industrial Co., Ltd.

(8)Significant restrictions on its abilities to associates or joint ventures are as follows:

Company

Nature and extent of any significant restrictions

KNOC Nigerian East Oil Co., Ltd.

The company has stopped its operation in Nigeria due to an ongoing litigation and payment or retrieval of investments, loans and advances are restricted until the legal dispute is resolved.

KNOC Nigerian West Oil Co., Ltd.

The company has stopped its operation in Nigeria due to an ongoing litigation and payment or retrieval of investments, loans and advances are restricted until the legal dispute is resolved.

Dolphin Property Limited

The company has stopped its operation in Nigeria due to an ongoing litigation and payment or retrieval of investments, loans and advances are restricted until the legal dispute is resolved.

Daeryun Power Co., Ltd.

Principals on subordinated loans or dividends can only be paid to shareholders when all conditions of the loan agreement are satisfied or prior written consent of a financial institution is obtained.

Changjuk Wind Power Co., Ltd.

Principals on subordinated loans or dividends can only be paid to shareholders when all conditions of the loan agreement are satisfied or prior written consent of a financial institution is obtained.

Busan Solar Co., Ltd.

Dividends cannot be declared or paid without the prior written consent of an agency, Consus Asset Management Co., Ltd. based on the loan agreement until the principal of a loan is paid off in full.

Taebaek Wind Power Co., Ltd.

Financial institutions can reject or defer an approval with regard to the request for fund executions on subordinated loans of shareholders in order to pay senior loans based on the loan agreement.

Daegu Green Power Co., Ltd.

Only if the condition is met with the loan agreement signed by financial institutions, the investors of subordinated credit facility loans can receive payments of principal and interest and dividend. Korea Exchange Bank, the deputy, permits the amount of the payments and dividend.

KS Solar Corp. Ltd.

Dividends can only be paid to shareholders when all conditions of a loan agreement are satisfied.

Jeonnam Solar Co., Ltd.

Dividends can only be paid to shareholders when all conditions of a loan agreement are satisfied.

18.Property, Plant and Equipment

(1)Property, plant and equipment as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

  Dec. 31, 2011 
  Acquisition
cost
  Government
grants
  Accumulated
depreciation
  Accmulated
impairment

losses(*1)
  Book value 

Land

 (Won)13,161,848   (Won)(3,106 (Won)—     (Won)—     (Won)13,158,742  

Buildings

  11,176,328    (46,097  (2,976,955  (853  8,152,423  

Structures

  47,437,594    (170,474  (10,737,933  (1,183  36,528,004  

Machinery

  36,967,714    (97,725  (6,847,662  (11,229  30,011,098  

Ships

  4,199    —      (2,959  —      1,240  

Vehicles

  166,188    (2  (127,969  —      38,217  

Equipment

  700,265    (301  (527,506  —      172,458  

Tools

  609,581    (448  (492,678  —      116,455  

Construction in- progress

  20,001,400    (89,600  —      —      19,911,800  

Finance lease assets

  2,385,276    —      (1,393,076  —      992,200  

Asset retirement costs

  3,369,869    —      (1,644,423  —      1,725,446  

Others

  6,117,233    —      (4,540,435  —      1,576,798  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)142,097,495   (Won)(407,753 (Won)(29,291,596 (Won)(13,265 (Won)112,384,881  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

    2012 
 Dec. 31, 2010     Acquisition
cost
   Government
grants
 Accumulated
depreciation
 Accumulated
impairment

losses(*)
 Book value 
 Acquisition
cost
 Government
grants
 Accumulated
depreciation
 Accumulated
impairment

losses(*1)
 Book value     In millions of won 

Land

 (Won)12,894,296   (Won)(3,099 (Won)—     (Won)—     (Won)12,891,197         13,504,739     (3,106  —      —      13,501,633  

Buildings

  10,378,964    (45,365  (2,372,706  (853  7,960,040      12,093,805     (44,387  (3,538,059  (853  8,510,506  

Structures

  44,800,178    (159,848  (9,437,529  (1,183  35,201,618      49,877,698     (177,173  (12,462,959  (1,183  37,236,383  

Machinery

  31,565,887    (82,632  (3,668,691  (11,229  27,803,335      42,782,904     (105,112  (10,087,349  (11,229  32,579,214  

Ships

  4,494    —      (2,975  —      1,519      5,011     —      (3,225  —      1,786  

Vehicles

  164,545    (9  (125,467  —      39,069      173,373     (128  (136,128  —      37,117  

Equipment

  631,998    (393  (472,999  —      158,606      801,679     (922  (618,524  —      182,233  

Tools

  582,339    (638  (465,145  —      116,556      659,851     (192  (537,720  —      121,939  

Construction in- progress

  19,346,114    (92,736  —      —      19,253,378  

Construction-in- progress

    21,279,062     (94,676  —      —      21,184,386  

Finance lease assets

  2,385,007    —      (1,264,602  —      1,120,405      2,385,238     —      (1,521,561  —      863,677  

Asset retirement costs

  3,232,407    —      (1,491,485  —      1,740,922      7,720,913     —      (1,757,747  —      5,963,166  

Others

  5,123,727    —      (4,003,906  —      1,119,821      7,286,289     —      (5,092,189  —      2,194,100  
 

 

  

 

  

 

  

 

  

 

    

 

   

 

  

 

  

 

  

 

 
 (Won)131,109,956   (Won)(384,720 (Won)(23,305,505 (Won)(13,265 (Won)107,406,466         158,570,562     (425,696  (35,755,461  (13,265  122,376,140  
 

 

  

 

  

 

  

 

  

 

    

 

   

 

  

 

  

 

  

 

 

 

    2013 
 Jan. 1, 2010     Acquisition
cost
   Government
grants
 Accumulated
depreciation
 Accumulated
impairment

losses(*)
 Book value 
 Acquisition
cost
 Government
grants
 Accumulated
depreciation
 Accumulated
impairment

losses(*1)
 Book value     In millions of won 

Land

 (Won)12,894,536   (Won)(2,967 (Won)—     (Won)—     (Won)12,891,569         13,784,026     (3,137  —      —      13,780,889  

Buildings

  9,776,164    (44,204  (1,670,889  (5,458  8,055,613      12,672,055     (45,396  (4,121,506  (852  8,504,301  

Structures

  42,080,670    (150,602  (7,564,006  (2,880  34,363,182      52,080,007     (193,189  (14,259,717  (1,183  37,625,918  

Machinery

  28,496,913    (80,698  (378,795  (14,597  28,022,823      47,073,366     (101,808  (13,297,596  (46,231  33,627,731  

Ships

  4,209    —      (2,406  —      1,803      5,014     —      (3,592  —      1,422  

Vehicles

  147,634    (16  (120,979  —      26,639      195,045     (83  (149,326  —      45,636  

Equipment

  561,594    (427  (445,958  —      115,209      866,999     (707  (679,842  —      186,450  

Tools

  532,560    (375  (428,515  —      103,670      716,749     (312  (577,085  —      139,352  

Construction in- progress

  15,146,989    (98,041  —      —      15,048,948  

Construction-in- progress

    27,452,032     (117,728  —      —      27,334,304  

Finance lease assets

  2,384,746    —      (1,136,142  —      1,248,604      2,385,231     —      (1,650,046  —      735,185  

Asset retirement costs

  3,121,752    —      (1,415,877  —      1,705,875      7,787,832     —      (2,133,236  —      5,654,596  

Others

  4,680,043    —      (3,512,406  —      1,167,637      7,679,146     —      (5,677,334  —      2,001,812  
 

 

  

 

  

 

  

 

  

 

    

 

   

 

  

 

  

 

  

 

 
 (Won)119,827,810   (Won)(377,330 (Won)(16,675,973 (Won)(22,935 (Won)102,751,572         172,697,502     (462,360  (42,549,280  (48,266  129,637,596  
 

 

  

 

  

 

  

 

  

 

    

 

   

 

  

 

  

 

  

 

 

 

 (*1))The Company separately recognizes impairment loss on each asset, seperately, reflecting various factors such as physical impairment during the replacement.

(2)(2)Changes in property, plant and equipment for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

    2012 
 2011     Beginning
balance
 Acquisition Disposal Depreciation Others Ending
balance
 
 Jan.1, 2011 Acquisition Disposal Depreciation Impairment Others Dec.31, 2011     In millions of won 

Land

 (Won)12,891,197   (Won)53,250   (Won)(11,872 (Won)—     (Won)—     (Won)226,167   (Won)13,158,742         13,161,848    151,350    (3,580  —      195,121    13,504,739  

(Government grants)

    (3,106  —      —      —      —      (3,106

Buildings

  7,960,040    75,970    (10,505  (637,947  —      764,865    8,152,423      8,198,520    12,350    (7,055  (563,782  914,860    8,554,893  

(Government grants)

    (46,097  —      —      3,713    (2,003  (44,387

Structures

  35,201,618    55,187    (313,009  (1,768,899  —      3,353,107    36,528,004      36,698,478    712    (299,053  (1,891,978  2,905,398    37,413,557  

(Government grants)

    (170,474  —      1,393    8,560    (16,653  (177,174

Machinery

  27,803,335    754,350    (200,053  (3,244,487  —      4,897,953    30,011,098      30,108,823    352,216    (102,347  (3,338,006  5,663,640    32,684,326  

(Government grants)

    (97,725  —      360    9,162    (16,909  (105,112

Ships

  1,519    —      —      (279  —      —      1,240      1,240    —      (6  (294  846    1,786  

Vehicles

  39,069    3,379    (123  (15,066  —      10,958    38,217      38,219    3,526    (49  (16,747  12,296    37,245  

(Government grants)

    (2  —      —      46    (172  (128

Equipment

  158,606    51,023    (127  (70,595  —      33,551    172,458      172,759    43,291    (760  (86,574  54,440    183,156  

(Government grants)

    (301  —      —      244    (866  (923

Tools

  116,556    31,505    (119  (49,065  —      17,578    116,455      116,903    26,159    (78  (54,910  34,058    122,132  

Construction in- progress

  19,253,378    9,564,163    —      —      —      (8,905,741  19,911,800  

(Government grants)

    (448  —      —      255    —      (193

Construction-in-progress

    20,001,400    10,846,629    —      —      (9,568,970  21,279,059  

(Government grants)

    (89,600  (5,414  —      —      341    (94,673

Finance lease assets

  1,120,405    5,894    —      (151,305  —      17,206    992,200      992,200    —      —      (128,451  (72  863,677  

Asset retirement costs

  1,740,922    —      —      (92,140  —      76,664    1,725,446  

Asset retirement cost

    1,725,446    —      —      (291,867  4,529,587    5,963,166  

Others

  1,119,821    15,681    (6  (751,951  —      1,193,253    1,576,798      1,576,798    16,015    —      (551,747  1,153,034    2,194,100  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

    

 

  

 

  

 

  

 

  

 

  

 

 
 (Won)107,406,466   (Won)10,610,402   (Won)(535,814 (Won)(6,781,734 (Won)—     (Won)1,685,561   (Won)112,384,881         112,384,881    11,446,834    (411,175  (6,902,376  5,857,976    122,376,140  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

    

 

  

 

  

 

  

 

  

 

  

 

 

 

    2013 
 2010     Beginning
balance
 Acquisition Disposal Depreciation Others Ending
balance
 
 Jan.1, 2010 Acquisition Disposal Depreciation Impairment Others Dec.31, 2010     In millions of won 

Land

 (Won)12,891,569   (Won)33,337   (Won)(75,332 (Won)—     (Won)—     (Won)41,623   (Won)12,891,197         13,504,739    23,651    (60,971  —      316,607    13,784,026  

(Government grants)

    (3,106  —      —      —      (31  (3,137

Buildings

  8,055,613    27,539    (9,599  (708,518  —      595,005    7,960,040      8,554,893    10,009    (21,296  (583,106  589,197    8,549,697  

(Government grants)

    (44,387  —      —      3,943    (4,952  (45,396

Structures

  34,363,182    11,821    (253,845  (1,676,189  —      2,756,649    35,201,618      37,413,557    2,645    (194,106  (1,967,475  2,564,487    37,819,108  

(Government grants)

    (177,174  —      1,733    8,389    (26,138  (193,190

Machinery

  28,022,823    322,565    (191,961  (3,102,059  —      2,751,967    27,803,335      32,684,326    343,445    (135,269  (3,334,480  4,171,517    33,729,539  

(Government grants)

    (105,112  —      376    9,507    (6,579  (101,808

Ships

  1,803    —      —      (284  —      —      1,519      1,786    —      —      (367  3    1,422  

Vehicles

  26,639    3,426    (7  (12,033  —      21,044    39,069      37,245    2,579    (111  (18,653  24,659    45,719  

(Government grants)

    (128  —      —      45    —      (83

Equipment

  115,209    36,168    (187  (54,152  —      61,568    158,606      183,156    45,087    (200  (87,040  46,155    187,158  

(Government grants)

    (923  —      —      311    (96  (708

Tools

  103,670    27,849    (69  (42,225  —      27,331    116,556      122,132    31,234    (226  (56,143  42,668    139,665  

Construction in- progress

  15,048,948    9,704,947    —      —      —      (5,500,517  19,253,378  

(Government grants)

    (193  —      —      155    (275  (313

Construction-in-progress

    21,279,059    13,888,637    (1,515  —      (7,714,152  27,452,029  

(Government grants)

    (94,673  (48,721  —      —      25,669    (117,725

Finance lease assets

  1,248,604    157    (6  (207,577  —      79,227    1,120,405      863,677    —      (7,456  (133,133  12,097    735,185  

Asset retirement costs

  1,705,875    —      —      (86,648  —      121,695    1,740,922  

Asset retirement cost

    5,963,166    —      —      (559,624  251,054    5,654,596  

Others

  1,167,637    16,228    658    (688,406  —      623,704    1,119,821      2,194,100    7,531    (128  (585,418  385,727    2,001,812  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

    

 

  

 

  

 

  

 

  

 

  

 

 
 (Won)102,751,572   (Won)10,184,037   (Won)(530,348 (Won)(6,578,091 (Won)—     (Won)1,579,296   (Won)107,406,466         122,376,140    14,306,097    (419,169  (7,303,089  677,617    129,637,596  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

    

 

  

 

  

 

  

 

  

 

  

 

 

20.19.INVESTMENT PROPERTIESInvestment Properties

 

(1)(1)Investment properties as of December 31, 2011, December 31, 2010,2012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

   Dec. 31, 2011 
   Acquisition
cost
   Government
grants
   Accumulated
amortization
   Accumulated
impairment  losses
   Book
value
 

Land

  (Won)498,280    (Won)—      (Won)—      (Won)—      (Won)498,280  

Building

   29,909     (246   (10,794   —       18,869  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (Won)528,189    (Won)(246  (Won)(10,794  (Won)—      (Won)517,149  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

    2012 
  Dec. 31, 2010     Acquisition
cost
   Government
grants
 Accumulated
depreciation
 Accumulated
impairment  losses
   Book
value
 
  Acquisition
cost
   Government
grants
 Accumulated
amortization
 Accumulated
impairment  losses
   Book value     In millions of won 

Land

  (Won)507,170    (Won)—     (Won)—     (Won)—      (Won)507,170         564,195     —      —      —       564,195  

Building

   39,948     (17  (13,935  —       25,996  

Buildings

    42,460     (243  (16,189  —       26,028  
  

 

   

 

  

 

  

 

   

 

    

 

   

 

  

 

  

 

   

 

 
  (Won)547,118    (Won)(17 (Won)(13,935 (Won)—      (Won)533,166         606,655     (243  (16,189  —       590,223  
  

 

   

 

  

 

  

 

   

 

    

 

   

 

  

 

  

 

   

 

 

 

    2013 
  Jan. 1, 2010     Acquisition
cost
   Government
grants
 Accumulated
depreciation
 Accumulated
impairment  losses
   Book
value
 
  Acquisition
cost
   Government
grants
   Accumulated
amortization
 Accumulated
impairment  losses
   Book value     In millions of won 

Land

  (Won)485,560    (Won)—      (Won)—     (Won)—      (Won)485,560         516,440     —      —      —       516,440  

Building

   32,477     —       (10,078  —       22,399  

Buildings

    37,120     (13  (15,220  —       21,887  
  

 

   

 

   

 

  

 

   

 

    

 

   

 

  

 

  

 

   

 

 
  (Won)518,037    (Won)—      (Won)(10,078 (Won)—      (Won)507,959         553,560     (13  (15,220  —       538,327  
  

 

   

 

   

 

  

 

   

 

    

 

   

 

  

 

  

 

   

 

 

 

(2)(2)Changes in investment properties for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

    2012 
 2011     Beginning
balance
 Acquisition Disposal Depreciation Impairment Others Ending
balance
 
 Jan. 01,
2011
 Acquisition Disposal Depreciation Impairment Others Dec.31,
2011
     In millions of won 

Land

 (Won)507,170   (Won)—     (Won)(63 (Won)—     (Won)—     (Won)(8,827 (Won)498,280         498,280    —      —      —      —      65,915    564,195  

Buildings

  25,996    —      (942  (927  —      (5,258  18,869      19,115    —      —      (981  —      8,136    26,270  

(Government grants)

    (246  —      —      7    —      (3  (242
 

 

  

 

  

 

  

 

  

 

  

 

  

 

    

 

  

 

  

 

  

 

  

 

  

 

  

 

 
 (Won)533,166   (Won)—     (Won)(1,005 (Won)(927 (Won)—     (Won)(14,085 (Won)517,149         517,149    —      —      (974  —      74,048    590,223  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

    

 

  

 

  

 

  

 

  

 

  

 

  

 

 

 

    2013 
 2010     Beginning
balance
 Acquisition Disposal Depreciation Impairment Others Ending
balance
 
 Jan. 01,
2010
 Acquisition Disposal Depreciation Impairment Others Dec.31,
2010
     In millions of won 

Land

 (Won)485,560   (Won)—     (Won)—     (Won)—     (Won)—     (Won)21,610   (Won)507,170         564,195    —      —      —      —      (47,755  516,440  

Buildings

  22,399    —      —      (1,129  —      4,726    25,996      26,270    —      —      (911  —      (3,460  21,899  

(Government grants)

    (242  —      —      3    —      227    (12
 

 

  

 

  

 

  

 

  

 

  

 

  

 

    

 

  

 

  

 

  

 

  

 

  

 

  

 

 
 (Won)507,959   (Won)—     (Won)—     (Won)(1,129 (Won)—     (Won)26,336   (Won)533,166         590,223    —      —      (908  —      (50,988  538,327  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

    

 

  

 

  

 

  

 

  

 

  

 

  

 

 

 

(3)(3)Income and expenses related to investment properties for the yearyears ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

   2011  2010 

Rent income

  (Won)8,639   (Won)7,593  

Operating and maintenance expenses (related to investment property which incurs rental income)

   (927  (1,129
  

 

 

  

 

 

 
  (Won)7,712   (Won)6,464  
  

 

 

  

 

 

 
       2012  2013 
      In millions of won 

Rental income

       10,365    8,517  

Operating and maintenance expenses

    (974  (908
   

 

 

  

 

 

 
       9,391    7,609  
   

 

 

  

 

 

 

(4)(4)The details of fairFair value of major investment properties as of December 31, 2011, December 31, 2010,2012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

   Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010 
   Book value   Fair value   Book value   Fair value   Book value   Fair value 

Land

  (Won)498,280    (Won)529,532    (Won)507,170    (Won)571,059    (Won)485,560    (Won)485,560  

Buildings

   18,869     18,067     25,996     25,559     22,399     22,399  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (Won)517,149    (Won)547,599    (Won)533,166    (Won)596,618    (Won)507,959    (Won)507,959  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

       2012   2013 
      Book value   Fair value   Book value   Fair value 
      In millions of won 

Land

       564,195     596,197     516,440     541,564  

Buildings

    26,028     26,918     21,887     22,680  
   

 

 

   

 

 

   

 

 

   

 

 

 
       590,223     623,115     538,327     564,244  
   

 

 

   

 

 

   

 

 

   

 

 

 

AsThe fair values of January 1, 2010, the Company assessed the fair value of its’ investment property using an independent third party. The independent third party has adequate experiences and qualifications to assess investment properties as of the reporting date were determined in Republicconsideration of Korea. The independent third party used benchmarking methods considering the economic value and similar other properties influctuation on the market. Valuation techniques used conform topublicly notified individual land price after the International Valuation Standards, based on both the income and market valuation approach.IFRS adoption date.

 

21.(5)CONSTRUCTION CONTRACTS:All of the Company’s investment property is held under freehold interests.

 

20.Construction Services Contracts

(1)Changes in balance of construction service contracts for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

    2012 
  2011     Beginning
balance
   Increase and
decrease(*)
 Recognized
revenue
 Ending
balance
 
  Jan. 1, 2011   Increase  and
decrease(*1)
   Recognized
revenue
 Dec. 31, 2011     In millions of won 

Nuclear power plant construction in UAE

  (Won)23,857,073    (Won)—      (Won)(1,167,433 (Won)22,689,640         22,689,640     (839,900  (1,490,055  20,359,685  

Kazakhstan EPC and others

   573,014     579,622     (287,699  864,937      864,937     108,283    (365,990  607,230  
  

 

   

 

   

 

  

 

    

 

   

 

  

 

  

 

 
  (Won)24,430,087    (Won)579,622    (Won)(1,455,132 (Won)23,554,577         23,554,577     (731,617  (1,856,045  20,966,915  
  

 

   

 

   

 

  

 

    

 

   

 

  

 

  

 

 

 

 (*1))TheFor the year ended December 31, 2012, the increased balance of contracts from new orders and others for the year ended December 31, 2011 is (Won) 593,979₩201,823 million and the decreased balance of contracts from changes in scalemodifications of construction for 2011contracts and others is (Won) 14,357₩933,440 million.

 

    2013 
  2010     Beginning
balance
   Increase and
decrease(*)
 Recognized
revenue
 Ending
balance
 
  Jan. 1, 2011   Increase  and
decrease(*1)
   Recognized
revenue
 Dec. 31, 2011     In millions of won 

Nuclear power plant construction in UAE

  (Won)24,458,442    (Won)—      (Won)(601,369 (Won)23,857,073         20,359,685     (135,311  (1,701,963  18,522,411  

Kazakhstan EPC and others

   471,388     255,470     (153,844  573,014      607,230     754,895    (551,120  811,005  
  

 

   

 

   

 

  

 

    

 

   

 

  

 

  

 

 
  (Won)24,929,830    (Won)255,470    (Won)(755,213 (Won)24,430,087         20,966,915     619,584    (2,253,083  19,333,416  
  

 

   

 

   

 

  

 

    

 

   

 

  

 

  

 

 

 

 (*1))TheFor the year ended December 31, 2013, the increased balance of contracts from new orders and others for the year ended December 31, 2011other is (Won) 277,950₩777,955 million and the decreasedincreased balance of contracts from changes in scalesize of construction and others for 2011 is (Won)22,480₩158,371 million.

(2)(2)Accumulated earned revenue, expense and others related to the Company’s construction as of December 31, 2011, December 31, 2010,2012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

    2012 
  2011     Accumulated
earned revenue
   Accumulated
expense
   Accumulated
profit
   Unearned advance
receipts
 
  Accumulated
earned
revenue
   Accumulated
expense
   Accumulated
profit
   Unearned
advance

receipts
   Retention     In millions of won 

Nuclear power plant construction in UAE

  (Won)1,768,802    (Won)1,739,023    (Won)29,779    (Won)—      (Won)—           3,258,857     3,090,859     167,998     —    

Kazakhstan EPC and others

   399,549     364,150     35,399     4,289     —        629,980     592,340     37,640     541  
  

 

   

 

   

 

   

 

   

 

    

 

   

 

   

 

   

 

 
  (Won)2,168,351    (Won)2,103,173    (Won)65,178    (Won)4,289    (Won)—           3,888,837     3,683,199     205,638     541  
  

 

   

 

   

 

   

 

   

 

    

 

   

 

   

 

   

 

 

    2013 
  2010     Accumulated
earned revenue
   Accumulated
expense
   Accumulated
profit
   Unearned advance
receipts
 
  Accumulated
earned
revenue
   Accumulated
expense
   Accumulated
profit
   Unearned
advance

receipts
   Retention     In millions of won 

Nuclear power plant construction in UAE

  (Won)601,369    (Won)601,281    (Won)88    (Won)—      (Won)—           4,960,820     4,708,008     252,812     —    

Kazakhstan EPC and others

   244,128     225,781     18,347     2,770     —        1,087,779     1,024,156     63,623     —    
  

 

   

 

   

 

   

 

   

 

    

 

   

 

   

 

   

 

 
  (Won)845,497    (Won)827,062    (Won)18,435    (Won)2,770    (Won)—           6,048,599     5,732,164     316,435     —    
  

 

   

 

   

 

   

 

   

 

    

 

   

 

   

 

   

 

 

 

(3)(3)The grossGross amount due from customers recognized as assets and due to customers recognized as liabilities for contract work as of December 31, 2011, December 31, 2010,2012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

    2012   2013 
 Dec. 31, 2011 Dec. 31, 2010 Jan. 1, 2010     Assets(*1)   Liabilities(*2)   Assets(*1)   Liabilities(*2) 
 Assets(*1) Liabilities(*2) Assets(*1) Liabilities(*2) Assets(*1) Liabilities(*2)     In millions of won 

Nuclear power plant construction in UAE

 (Won)—     (Won)320,612   (Won)6,212   (Won)—     (Won)—     (Won)—           —       464,489     —       812,642  

Kazakhstan EPC and others

  37,301    16,926    12,001    4,263    12,007    5,714  

Kazakhstan EPC and Others

    136,760     11,085     98,726     30,907  
 

 

  

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

 
 (Won)37,301   (Won)337,538   (Won)18,213   (Won)4,263   (Won)12,007   (Won)5,714         136,760     475,574     98,726     843,549  
 

 

  

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

 

 

 (*1)Accounted for as accountsIncluded in trade and other receivables, net, in the Company’saccompanying consolidated statements of financial statements.position.

 

 (*2)Accounted for asIncluded in non-financial liabilities in the Company’saccompanying consolidated statements of financial statements.position.

22.21.INTANGIBLE ASSETSIntangible Assets other than Goodwill

 

(1)(1)Intangible assets as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

  Dec. 31, 2011 
  Acquisition
cost
  Government
grants
  Accumulated
amortization
  Accumulated
impairment  losses
  Book
value
 

Software

 (Won)290,846   (Won)(409 (Won)(197,366 (Won)—     (Won)93,071  

Licences and franchises

  3,398    —      (1,911  —      1,487  

Copyrights, patents rights and other industrial rights

  6,816    —      (2,741  —      4,075  

Mining rights

  470,958    —      (76  —      470,882  

Development expenses

  655,222    (11,653  (571,061  —      72,508  

Intangible assets under development

  56,556    (10,653  —      —      45,903  

Usage rights of donated assets and other

  278,919    (75  (198,865  —      79,979  

Leasehold rights

  19,112    —      (18,232  —      880  

Others

  141,605    (16  (49,787  (11,878  79,924  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)1,923,432   (Won)(22,806 (Won)(1,040,039 (Won)(11,878 (Won)848,709  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

    2012 
 Dec. 31, 2010     Acquisition
cost
   Government
grants
 Accumulated
amortization
 Accumulated
impairment
losses
 Book
value
 
 Acquisition
cost
 Government
grants
 Accumulated
amortization
 Accumulated
impairment  losses
 Book
value
     In millions of won 

Software

 (Won)233,985   (Won)(584 (Won)(157,145 (Won)—     (Won)76,256         319,044     (198  (235,675  —      83,171  

Licences and franchises

  3,399    —      (1,269  —      2,130  

Licenses and franchises

    3,398     —      (2,554  —      844  

Copyrights, patents rights and other industrial rights

  4,034    —      (2,334  —      1,700      20,621     —      (4,140  —      16,481  

Mining rights

  464,587    —      —      —      464,587      530,169     —      (4,363  —      525,806  

Development expenses

  597,137    (25,735  (488,677  —      82,725  

Development expenditures

    691,918     (12,371  (611,229  —      68,318  

Intangible assets under development

  12,257    —      —      —      12,257      44,316     (7,305  —      —      37,011  

Usage rights of donated assets and other

  371,855    (87  (278,140  —      93,628      372,145     (64  (299,802  —      72,279  

Leasehold rights

  19,113    —      (18,196  —      917      19,112     —      (18,265  —      847  

Others

  302,562    (41  (101,928  (11,657  188,936      148,738     (1  (57,244  (12,436  79,057  
 

 

  

 

  

 

  

 

  

 

    

 

   

 

  

 

  

 

  

 

 
 (Won)2,008,929   (Won)(26,447 (Won)(1,047,689 (Won)(11,657 (Won)923,136         2,149,461     (19,939  (1,233,272  (12,436  883,814  
 

 

  

 

  

 

  

 

  

 

    

 

   

 

  

 

  

 

  

 

 

 

    2013 
 Jan. 1, 2010     Acquisition
cost
   Government
grants
 Accumulated
amortization
 Accumulated
impairment
losses
 Book
value
 
 Acquisition
cost
 Government
grants
 Accumulated
amortization
 Accumulated
impairment  losses
 Book
value
     In millions of won 

Software

 (Won)203,438   (Won)(665 (Won)(141,802 (Won)—     (Won)60,971         335,489     (428  (269,740  —      65,321  

Licences and franchises

  3,399    —      (589  —      2,810  

Licenses and franchises

    3,398     —      (3,190  —      208  

Copyrights, patents rights and other industrial rights

  3,746    —      (2,061  —      1,685      31,218     —      (6,265  —      24,953  

Mining rights

  —      —      —      —      —        476,844     —      (6,286  —      470,558  

Development expenses

  609,877    (29,848  (479,508  —      100,521  

Development expenditures

    722,082     (11,705  (645,928  —      64,449  

Intangible assets under development

  9,994    —      —      —      9,994      52,050     (7,792  —      —      44,258  

Usage rights of donated assets and other

  371,942    (99  (250,186  —      121,657      373,376     (53  (308,666  —      64,657  

Leasehold rights

  19,112    —      (18,150  —      962      19,112     —      (18,300  —      812  

Others

  292,217    (66  (78,579  (11,036  202,536      152,917     (1  (64,889  (12,579  75,448  
 

 

  

 

  

 

  

 

  

 

    

 

   

 

  

 

  

 

  

 

 
 (Won)1,513,725   (Won)(30,678 (Won)(970,875 (Won)(11,036 (Won)501,136         2,166,486     (19,979  (1,323,264  (12,579  810,664  
 

 

  

 

  

 

  

 

  

 

    

 

   

 

  

 

  

 

  

 

 

(2)(2)Changes in intangible assets for the years ended December 31, 2011 and 2010 are as follows (KRW in millions):

  Jan. 1,
2011
  2011 
   Acquisition  Disposal  Amortization  Impairment  Others  Dec. 31,
2011
 

Software

 (Won)76,256   (Won)9,979   (Won)(23 (Won)(34,093 (Won)—     (Won)40,952   (Won)93,071  

Licenses and franchises

  2,130    —      —      (643  —      —      1,487  

Copyrights, patents rights and other industrial rights

  1,700    201    (5  (373  —      2,552    4,075  

Mining rights

  464,587    —      —      —      —      6,295    470,882  

Development expenses

  82,725    636    —      (40,023  —      29,170    72,508  

Intangible assets under development

  12,257    29,018    —      —      —      4,628    45,903  

Usage rights of donated assets and other

  93,628    —      —      (13,602  —      (47  79,979  

Leasehold rights

  917    —      —      (37  —      —      880  

Others

  188,936    2,765    (444  (5,958  (221  (105,154  79,924  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)923,136   (Won)42,599   (Won)(472 (Won)(94,729 (Won)(221 (Won)(21,604 (Won)848,709  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  Jan. 1,
2010
  2010 
   Acquisition  Disposal  Amortization  Impairment  Others  Dec. 31,
2010
 

Software

 (Won)60,971   (Won)7,196   (Won)—     (Won)(21,672 (Won)—     (Won)29,761   (Won)76,256  

Licenses and franchises

  2,810    —      —      (680  —      —      2,130  

Copyrights, patents rights and other industrial rights

  1,685    72    —      (318  —      261    1,700  

Mining rights

  —      426,719    —      —      —      37,868    464,587  

Development expenses

  100,521    7,478    —      (42,206  —      16,932    82,725  

Intangible assets under development

  9,994    25,514    —      —      —      (23,251  12,257  

Usage rights of donated assets and other

  121,657    —      —      (27,982  —      (47  93,628  

Leasehold rights

  962    —      —      (45  —      —      917  

Others

  202,536    3,434    (210  (24,541  (451  8,168    188,936  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)501,136   (Won)470,413   (Won)(210 (Won)(117,444 (Won)(451 (Won)69,692   (Won)923,136  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(3)Specific intangible assets which are significant as of December 31, 2011,2012 and 2013 are as follows:

     2012 
     Beginning
balance
  Acquisition  Disposal  Amortization  Impairment  Others  Ending
balance
 
     In millions of won 

Software

      93,480    7,214    (3  (38,812  —      21,491    83,370  

(Government grants)

   (409  —      —      264    —      (54  (199

Licenses and franchises

   1,487    —      —      (643  —      —      844  

Copyrights, patents rights and other industrial rights

   4,075    2,356    (294  (634  (6  10,984    16,481  

Mining rights

   470,882    22,510    —      (4,188  —      36,602    525,806  

Development expenditures

   84,161    2,463    —      (39,016  —      33,081    80,689  

(Government grants)

   (11,653  —      —      5,395    —      (6,113  (12,371

Intangible assets under development

   56,556    31,906    —      —      (13  (44,133  44,316  

(Government grants)

   (10,653  (3,326  —      —      —      6,674    (7,305

Usage rights of donated assets and other

   80,054    —      —      (8,955  —      1,244    72,343  

(Government grants)

   (75  —      —      143    —      (132  (64

Leasehold rights

   880    —      —      (34  —      1    847  

Others

   79,925    4,592    (2,311  (6,883  (440  4,175    79,058  

(Government grants)

   (1  —      —      3    —      (3  (1
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
      848,709    67,715    (2,608  (93,360  (459  63,817    883,814  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

     2013 
     Beginning
balance
  Acquisition  Disposal  Amortization  Impairment  Others  Ending
balance
 
     In millions of won 

Software

      83,370    12,311    —      (39,419  —      9,489    65,751  

(Government grants)

   (199  —      —      160    —      (391  (430

Licenses and franchises

   844    —      —      (636  —      —      208  

Copyrights, patents rights and other industrial rights

   16,481    587    (1  (2,130  —      10,016    24,953  

Mining rights

   525,806    27,429    —      (1,698  —      (80,979  470,558  

Development expenditures

   80,689    651    —      (34,892  —      29,706    76,154  

(Government grants)

   (12,371  —      —      5,686    —      (5,020  (11,705

Intangible assets under development

   44,316    30,608    —      —      (4  (22,870  52,050  

(Government grants)

   (7,305  (5,845  —      —      —      5,358    (7,792

Usage rights of donated assets and other

   72,343    —      —      (8,798  —      1,165    64,710  

(Government grants)

   (64  —      —      11    —      —      (53

Leasehold rights

   847    —      —      (35  —      —      812  

Others

   79,058    3,266    (35  (6,628  (263  51    75,449  

(Government grants)

   (1  —      —      —      —      —      (1
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
      883,814    69,007    (36  (88,379  (267  (53,475  810,664  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(3)Significant specific intangible assets as of December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions, AUD in thousands):follows:

 

Dec. 31, 20112012

Type

 

DescriptionsDescription

 Currency  Amount  Remaining useful years
In millions of won and thousands of Australian dollars

Software

 ERP system  KRW    25,40013,417   45 months ~ 43 years
and 2 months

Mining rights

 Mining right of Bylong mine  AUD    401,225   —  (*)

Development expensesexpenditures

 

Development of manufacturing technology Zircaloy tube (21103)

  KRW    4,9192,460   2 years1 year

Development expensesexpenditures

 

WH type improved nuclear fuel (21506)

  KRW    2,659532   1 year3 months

Development expenditures

KOSPO Evolutionary Efficient & Powerful System (KEEPS)

KRW11,3674 years and 36 months

Intangible assets under development

 

Smart technology verification and standard design project conducting right

  KRW    10,0002,816   —  

Usage rights of donated assets

 

Songdo international business district (sector 1, 3) Sharing charge

  KRW    8,8877,363   54 years and 10 months

Usage rights of donated assets

 

Dangjin power plant load facility usage right

  KRW    58,24051,944   109 years

Others

 Shingwangju electricity supply facility usage right  KRW    4,9864,314   76 years and 5 months

 

(*)Mining rights are amortized using the production method.

Dec. 31, 20102013

Type

 

DescriptionsDescription

 Currency  Amount  Remaining useful years
In millions of won and thousands of Australian dollars

Software

 ERP system and others  KRW    29,1618,163   1 year and 411 months ~

32 years and 52 months

Copyrights, patents rights and other industrial rights

Smart technology verification and standard design project conducting right

KRW8,7504 years and 9 months

Mining rights

 Mining right of Bylong mine  AUD    401,225   —  (*)

Development expensesexpenditures

 Development of manufacturing technology Zircaloy tube (21103)

KOSPO Evolutionary Efficient & Powerful System (KEEPS)

  KRW    7,3798,629   3 years and 6 months

Development expensesexpenditures

 WH type improved nuclear fuel (21506)

Development of maintenance system for utility plant

  KRW    4,7852,212   23 years and 311 months

Intangible assets under development

 Contributions to APR NRC DCKRW18,252—  

Intangible assets under development

CHF testing for best representative of HIPER/X2-Gen Fuel and development of best explanatory CHF correlation

KRW7,448—  

Usage rights of donated assets

Songdo international business district (sector 1, 3) Sharingsharing charge

  KRW    10,4105,840   63 years and 10 months

Usage rights of donated assets

 

Dangjin power plant load facility usage right

  KRW    64,53745,648   117 years

Usage rights of donated assets

Boryung dam industrial water usage right

KRW2,4682 years and 3 months

Others

 Shingwangju electricity supply facility usage right  KRW    5,6713,641   85 years and 5 months

Jan. 1, 2010

Type

Descriptions

CurrencyAmountRemaining useful years

Software

ERP systemKRW32,2542 years and 4 months ~
4 years

Development expenses

Development of manufacturing technology Zircaloy tube (21103)KRW9,8394 years

Development expenses

WH type improved nuclear fuel (21506)KRW6,9123 years and 3 months

Usable and profitable donation assets

Songdo international business district (sector 1, 3) Sharing charge

KRW11,9347 years and 10 months

Usage rights of donated assets

Dangjin power plant load facility usage right

KRW70,83312 years

Usage rights of donated assets

Boryung dam industrial water usage right

KRW12,3383 years

Others

 ShingwangjuSillim electricity supply facility usage right  KRW    6,3303,536   97 years and 511 months

(*)Mining rights are amortized using the production method.

(4)For the years ended December 201131, 2012 and 2010,2013, the Company recognized research and development expenseexpenses of (Won)523,920504,104 million and (Won)448,754577,133 million, respectively.

23.ACCOUNT AND OTHER PAYABLES

 

22.(1)Trade and Other PayablesAccount

Trade and other payables as of December 31, 2012 and 2013 are as follows:

      2012   2013 
      Current   Non-current   Current   Non-current 
      In millions of won 

Trade payables

       3,282,240     —       3,107,082     —    

Other trade payables

    1,203,830     3,147,010     1,475,048     3,068,631  

Accrued expenses

    927,612     1,700     1,076,868     2,318  

Leasehold deposits received

    1,627     —       1,636     —    

Other deposits received

    63,104     83,376     115,216     90,055  

Finance lease liabilities

    121,804     885,365     115,308     769,658  

Dividends payable

    1,605     —       1,605     —    

Others(*)

    30     56,240     —       40,857  
   

 

 

   

 

 

   

 

 

   

 

 

 
       5,601,852     4,173,691     5,892,763     3,971,519  
   

 

 

   

 

 

   

 

 

   

 

 

 

(*)Details of others as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

  Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 
  Current  Non-current  Current  Non-current  Current  Non-current 

Account payables

 (Won)3,132,744   (Won)—     (Won)2,427,327   (Won)2,250   (Won)1,927,617   (Won)—    

Non-trade payables

  2,128,989    3,019,479    950,804    4,009,673    1,169,992    3,873,315  

Accrued expenses

  1,142,440    1,596    986,632    1,368    845,409    1,552  

Leasehold deposits received

  1,397    100    1,197    400    1,633    200  

Other deposits received

  42,593    91,594    80,046    76,525    32,063    66,761  

Finance lease liabilities

  127,033    1,007,976    123,666    1,135,536    117,592    1,259,060  

Dividend payable

  962    —      1,473    —      17,923    —    

Others

  —      57,392    —      55,172    53,999    44,602  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)6,576,158   (Won)4,178,137   (Won)4,571,145   (Won)5,280,924   (Won)4,166,228   (Won)5,245,490  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
      2012   2013 
      Current   Non-current   Current   Non-current 
      In millions of won 

Advance received from local governments

       —       56,215     —       40,834  

Others

    30     25     —       23  
   

 

 

   

 

 

   

 

 

   

 

 

 
       30     56,240     —       40,857  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

24.23.BORROWINGS AND DEBENTURESBorrowings and Debt Securities

 

(1)(1)Borrowings and debenturesdebt securities as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

   Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 

Current liabilities:

    

Short-term borrowings

  (Won)1,173,568   (Won)457,931   (Won)592,875  

Current portion of long-term borrowings

   929,508    1,353,890    1,853,368  

Current portion of long-term debentures

   4,906,203    4,885,287    3,777,048  

Current portion of exchangeable bonds

   —      76,490    —    

Less: Current portion of present value discount

   (1,486  (38  (66

Less: Discount on debentures

   (1,748  (4,450  (1,395
  

 

 

  

 

 

  

 

 

 
   7,006,045    6,769,110    6,221,830  

Non-current liabilities:

    

Long-term borrowings

   4,650,986    2,832,668    2,509,245  

Debentures

   34,643,312    30,100,625    25,511,656  

Exchangeable bonds

   —      —      75,460  

Less: Present value discount

   (9,667  (9,766  (17,753

Less: Discount on debentures

   (86,132  (75,603  (81,321
  

 

 

  

 

 

  

 

 

 
   39,198,499    32,847,924    27,997,287  
  

 

 

  

 

 

  

 

 

 
  (Won)46,204,544   (Won)39,617,034   (Won)34,219,117  
  

 

 

  

 

 

  

 

 

 
      2012  2013 
      In millions of won 

Current liabilities

    

Short-term borrowings

       689,310    579,327  

Current portion of long-term borrowings

    1,528,237    893,532  

Current portion of debt securities

    5,480,331    6,625,007  

Less: Current portion of discount on long-term borrowings

    (1,586  (1,997

Less: Current portion of discount on debt securities

    (1,611  (8,371
   

 

 

  

 

 

 
    7,694,681    8,087,498  
   

 

 

  

 

 

 

Non-current liabilities

    

Long-term borrowings

    4,695,358    4,555,769  

Debt securities

    40,944,992    48,367,149  

Less : Discount on long-term borrowings

    (20,423  (17,379

Less : Discount on debt securities

    (95,199  (105,240

Add: Premium on debt securities

    —      353  
   

 

 

  

 

 

 
    45,524,728    52,800,652  
   

 

 

  

 

 

 
       53,219,409    60,888,150  
   

 

 

  

 

 

 

 

(2)(2)Short-term borrowings as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

2012

 

Type

  

Creditor

  

Interest rate (%)

  Foreign
currency
      Local
currency
 
   In millions of won 

Local short-term borrowings

  Nonghyup Bank  4.15   —           32,350  

Local commercial paper

  Shinhan Bank and others  2.95 ~ 3.80   —        429,000  

Foreign short-term borrowings

  DBS and Others  0.78 ~ 1.25   USD 212,828      227,960  
         

 

 

 
             689,310  
         

 

 

 

2013

 

Type

  

Creditor

  

Interest rate (%)

  Foreign
currency
   Local
currency
 
   In millions of won 

Local short-term borrowings

  Shinhan Bank and others  2.78   —      70,000  

Local commercial paper

  

 

Korea Exchange Bank and others

  2.80 ~ 2.85   —       297,500  

Foreign short-term borrowings

  ANZ and others  0.67 ~ 6.50  USD 154,313     162,846  

Foreign short-term borrowings

  Scotia Bank  TIIE + 1.25  USD5,447     5,748  

Local bank overdraft

  Woori Bank  

 

Standard overdraft rate + 1.27

   —       43,233  
        

 

 

 
        579,327  
        

 

 

 

Dec. 31, 2011(3)

Type

Creditor

Interest rate(%)Amount

Local short-term borrowings

Shinhan bank and others3.53 ~ 4.87(Won)533,046

Foreign short-term borrowings

Korea exchange bank and others0.96 ~ 2.08633,866

Bank overdrafts

Nonghyup bank—  6,656

(Won)1,173,568

Dec. 31, 2010

 

Type

  

Creditor

  Interest rate(%)  Amount 

Local short-term borrowings

  Shinhan bank and others  2.81  (Won)50,000  

Foreign short-term borrowings

  Standard chartered bank and others  0.01 ~ 1.80   407,931  
      

 

 

 
      (Won)457,931  
      

 

 

 

Jan. 1, 2010

Type

Creditor

Interest rate(%)Amount

Local short-term borrowings

Shinhan bank and others2.81 ~ 3.24(Won)307,000

Foreign short-term borrowings

BNP Paribas and others1.15~2.13, 3M
Libor+1.40~1.45
285,875

(Won)592,875

(3)Long-term borrowings as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions, USD in thousands):follows:

 

Dec. 31, 2011

 

Financial

institution

 

Type

 Interest rate(%) Maturity Foreign currency  Local currency 

Korea development bank

 Others 0.50 2012~2044  —      11,247  

Korea exchange bank

 Commercial paper 3.81~4.79,
3M CD +
0.03~0.58
 2012~2014  —      2,200,000  

Korea exchange bank

 Energy rationalization 2.50 2019  —      1,450  

Korea exchange bank

 

Development of

power resources

 3yr KTB
rate - 2.25
 2013  —      12,000  

Korea exchange bank

 Facility 3yr KTB
rate - 1.25
 2014  —      38,551  

Korea exchange bank

 Others 2.75 2011~2021  —      5,200  

Samsung securities

 Commercial paper 3M CD +
0.10
 2012  —      100,000  

Korea industrial bank

 

Development of

power resources

 4.00, 3yr
KTB rate -
2.25
 2012~2016  —      50,666  

Korea industrial bank

 Facility 3yr KTB
rate - 1.25
 2012  —      7,000  

Korea industrial bank

 

Development of

power resources

 3yr KTB
rate - 1.25
 2016  —      2,994  

Kookmin bank

 

Development of

power resources

 4.00 2015  —      25,080  

Hana bank

 

Development of

power resources

 4.00, 3yr
KTB rate -
2.25
 2014  —      60,900  

Export-import Bank of Korea

 

Project loans

 

2.00

 

2026

 

 

—  

  

 

 

38,300

  

2012

 

Type

 Interest rate (%) Maturity Foreign currency  Local currency 
  In millions of won and thousands of foreign currencies 

Local long-term borrowings

     

Korea Development Bank

 Others 0.5 2013~2044  —     9,393  
 Facility 5.80 2026  —      21,800  
 Facility 3yr KTB

rate - 1.25

 2027  —      9,000  
Korea Exchange Bank Commercial Paper 3.63 2013  —      100,000  
 Commercial Paper 3M CD +
0.03~0.58
 2013~2015  —      1,900,000  
 Facility 3yr KTB

rate - 1.25

 2013~2021  —      5,843  
 Facility 3yr KTB

rate - 1.25

 2013~2015  —      16,000  
 Energy rationalization 3yr KTB

rate - 1.25

 2019  —      1,250  
 Development of
power resources
 3yr KTB

rate - 1.25

 2013  —      6,000  
 Others 3M CD + 0.25 2013  —      100,000  
 Others 2.75 2014  —      5,200  
Korea Industrial Bank Development of
power resources
 4.00 2016  —      18,933  
 Development of
power resources
 3yr KTB

rate - 1.25

 2016  —      16,000  
Kookmin Bank Development

of power

resources

 4.00 2015  —      18,810  
Hana Bank Development

of power

resources

 4.00 2014  —      16,000  
 Development of
power resources
 3yr KTB

rate - 1.25

 2014  —      24,600  

 

Export-Import Bank of Korea

 

 

Project loans

 

 

2.00

 

 

2026

 

 

 

 

—  

 

  

 

 

 

 

38,300

 

  

Korea Finance Corporation Facility 1yr KoFC bond
rate + 0.08 ~

0.31

 2017~2019  —      2,300,000  

Korea Resources Corporation

 

 

Development

of power

resources

 

 

3yr KTB

rate - 2.25

 

 

2013~2027

 

 

 

 

—  

 

  

 

 

 

 

67,651

 

  

 Project loans —   —    —      8,677  
Others Others 3yr KTB

rate - 2.25

 2023~2025  —      3,754  
    

 

 

  

 

 

 
     —      4,687,211  
    

 

 

  

 

 

 

Dec. 31, 2011

 

Financial

institution

 

Type

 Interest rate(%) Maturity Foreign currency  Local currency 

Korea Finance Corporation

 Facility 1yr KoFC
bond rate +
0.08~0.31
 2012~2018  —      1,712,222  

Korea Resources Corporation

 

Development of

power resources

 

3yr KTB
rate - 2.25

 

2013~2026

 

 

—  

  

 

 

82,485

  

Korea Resources Corporation

 

Project loans

 

—  

 

—  

 

 

—  

  

 

 

11,290

  

Korea national oil corporation

 

Project loans

 

3yr KTB
rate - 2.25

 

2021~2023

 

USD

8,784

  

 

 

10,131

  

Korea Finance Corporation and others

 

Project loans

 

 

3M Libor +
1.63

 

 

2013

 

 

USD

 

157,967

 

  

 

 

 

 

182,183

 

  

Export-import Bank of US and others

 

Project loans

 

4.48~8.28

 

2014

 

USD

93,653

  

 

 

108,010

  

Export-import Bank of Korea

 

Direct Loan

 

3M Libor +
2.60~3.70

 

2027

 

USD

319,742

  

 

 

368,759

  

SMBC and others

 Others 3M Libor +
1.10~2.30
 2013~2033 USD158,461    182,753  

DBS

 Facility 3M Libor +
0.25
 2013 USD200,000    230,660  

Others

 Facility 8.00~14.00 2017~2031 USD3,714    4,283  

Woori bank

 Syndicated Loan 3M Libor +
0.27~0.30
 2017 USD116,475    134,330  
    

 

 

  

 

 

 
    USD1,058,796    5,580,494  
    

 

 

  

 

 

 

Less: Present value discount

    —      (11,153

Less: Current portion of long-term borrowings

    —      (929,508

Less: Current portion of present value discount

    —      1,486  
     

 

 

 
     —     (Won)4,641,319  
     

 

 

 

2012

 

Type

 Interest rate (%) Maturity Foreign currency  Local
currency
 
     In millions of won and thousands of foreign currencies 
Foreign long-term borrowings 

Korea National Oil Corporation

  Project loans 3yr KTB rate -
2.25
 2021~2023 USD8,784   9,409  

Korea Finance Corporation

  

Project loans and others

 3M Libor + 1.63 2014 USD 138,240    147,962  

Export-Import Bank of US and others

  Project loans 4.48~8.28 2014 USD56,177    60,171  

Export-Import Bank of Korea and others

  

Direct loans and others

 3M Libor + 2.60~

3.70

 2015 USD299,769    320,857  

SMBC and others

  Senior loan and others 3M Libor + 1.10~

2.30

 2013~2033 USD309,160    331,126  

DBS Bank

  Facility 3M Libor + 0.25 2013 USD200,000    214,220  

PT PJB

  Share holder’s loan 12.75 2017 IDR 29,329,121    3,258  

Others

  Facility and others 5.00~8.00 2013~2031 USD24,259    25,976  

Woori Bank

  Syndicated loan 3M Libor +
0.27~1.50
 2014~2017 USD395,299    423,405  
      

 

 

 
       1,536,384  
      

 

 

 
       6,223,595  
      

 

 

 

Less : Discount of long-term borrowings

     (22,009

Less : Current portion of long-term borrowings

     (1,528,237

Add : Current portion of discount of long-term borrowings

     1,586  
      

 

 

 
  4,674,935  
      

 

 

 

 

Dec. 31, 2010

 

Financial

institution

 

Type

 Interest rate(%) Maturity Foreign currency  Local currency 

Korea development bank

 

Others

 

0.50

 

2011~2044

 

 

—  

  

 

(Won)

13,301

  

Korea development bank

 

Facility

 

3M CD + 0.66

 

2011

 

 

—  

  

 

 

66,667

  

Korea exchange bank

 Commercial paper 3.16~4.79, 3M CD +
0.15~0.58
 2011~2013  —      1,800,000  

Korea exchange bank

 Energy rationalization 2.25 2011~2019  —      2,850  

Korea exchange bank

 

Development of

power resources

 4.00 2011  —      18,000  

Korea exchange bank

 Facility 3yr KTB rate - 1.25 2011~2021  —      55,082  

2013

 

Type

  Interest rate (%)  Maturity  Foreign currency   Local currency 
      In millions of won and thousands of foreign currencies 

Local long-term borrowings

  

Korea Development Bank

  Others  0.50  2014~2044   —      8,109  
  Facility  4.60  2028   —       43,600  
  Facility  3yr KTB

rate - 1.25

  2027   —       9,000  

Korea Exchange Bank

  Commercial Paper  3M CD +
0.03~0.54
  2014~2016   —       1,300,000  
  Facility  3yr KTB

rate - 1.75

  2021   —       11,779  
  Facility  4.60  2028   —       20,000  
  Energy rationalization  3yr KTB

rate - 1.75

  2015~2019   —       1,050  
  Energy rationalization  2.75~3.20  2015~2016   —       7,381  

Korea Industrial Bank

  

Development of
power resources

  4.00  2016   —       14,200  
  Others  3yr KTB

rate - 1.25

  2016   —       12,000  

Dec. 31, 2010

 

Financial

institution

 

Type

 Interest rate(%) Maturity Foreign currency  Local currency 

Korea industrial bank

 

Development of

power resources

 

4.00

 

2012~2016

 

 

—  

  

 

(Won)

57,666

  

Korea industrial bank

 Facility 3yr KTB rate - 1.25 2012  —      14,000  

Korea industrial bank

 

Development of

power resources

 

3yr KTB rate - 1.25

 

2016

 

 

—  

  

 

 

2,994

  

Kookmin bank

 

Development of

power resources

 4.00 2015  —      31,350  

Hana bank

 

Development of

power resources

 4.00 2014  —      81,200  

Export-import Bank of Korea

 Project loans 2.00 2026  —      38,300  

Korea Finance Corporation

 

Facility

 

1yr KoFC bond rate +
0.08~0.31

 

2011~2012

 

 

—  

  

 

 

867,222

  

Korea Resources Corporation

 

Development of

power resources

 

3yr KTB rate - 2.25

 

2013~2026

 

 

—  

  

 

 

77,260

  

Korea Resources Corporation

 Project loans —   —    —      10,017  

Nonghyup bank

 

Development of

power resources

 3yr KTB rate + 0.16 2011  —      10,000  

Nonghyup bank

 Facility 4.00 2011  —      9,375  

Woori bank

 Facility 3yr KTB rate- 1.25 2011  —      3,580  

Korea national Oil corporation

 Project loans 3yr KTB rate - 2.25 2021~2023  USD 9,005    10,256  

Korea Finance Corporation and others

 Project loans 3M Libor + 1.63 2013  USD 162,672    185,267  

Export-import Bank of US and others

 Project loans 4.48~8.28 2014  USD 89,875    102,359  

Export-import Bank of Korea

 Direct Loan 3M Libor + 3.70 2027~2031  USD 262,253    298,680  

SMBC and others

 Others 3M Libor + 1.10~2.30 2013~2033  USD 37,476    42,681  

DBS

 Facility 3M Libor + 0.25 2013  USD 200,000    227,780  

Others

 Facility 8.00~14.00 2017~2031  USD 3,427    3,903  

Woori bank

 Syndicated Loan 3M Libor + 0.27~0.50 2017  USD 137,649    156,768  
    

 

 

  

 

 

 
     USD 902,357    4,186,558  
    

 

 

  

 

 

 

Less: Present value discount

    —      (9,804

Less: Current portion of long-term borrowings

    —      (1,353,890

Less: Current portion of present value discount

    —      38  
     

 

 

 
     —     (Won)2,822,902  
     

 

 

 

2013

 

Type

  Interest rate (%) Maturity  Foreign currency   Local currency 
      In millions of won and thousands of foreign currencies 
Kookmin Bank  Development of
power resources
  4.00 2015   —      12,540  
Hana Bank  Development of
power resources
  4.00 2014   —       8,000  
  Others  3yr KTB

rate - 1.25

 2024~2025   —       12,300  
  PF Refinancing  CD+1.7% 2026   —       21,613  
  PF Refinancing  4.80 2026   —       11,991  

Export-Import Bank of Korea

  Project loans  2.00 2026   —       36,827  

Korea Finance Corporation

  

Facility

  1yr KoFC
bond rate
+ 0.20~0.31
 2018~2019   —       2,300,000  

Korea Resources Corporation

  

Development of
power resources

  3yr KTB

rate - 2.25

 2014~2027   —       64,202  
  Facility  0.75~1.75 2023   —       5,355  
  Project loans  —   —     —       8,677  
  Others  3yr KTB

rate - 2.25

 2024~2025     13,707  

Shinhan Bank and others

  

Facility

  3yr AA- CB
rate + 1.10
 2028   —       30,000  
Woori Bank  PF Refinancing  CD+1.7% 2026   —       21,613  
  PF Refinancing  4.80 2026   —       11,991  
Others  Facility  4.60~5.80 2025~2028   —       159,200  
  PF Refinancing  4.80 2026   —       17,267  
  PF Refinancing  CD+1.7% 2026     524  
  Others  3yr KTB

rate - 2.25

 2023~2028   —       30,774  
       

 

 

   

 

 

 
        —       4,193,700  
       

 

 

   

 

 

 

2013

 

Type

  Interest rate (%)  Maturity  Foreign currency   Local currency 
   In millions of won and thousands of foreign currencies 
Foreign long-term borrowings              

Korea National Oil Corporation

  Project loans  

3yr KTB

rate - 2.25

  —    USD8,784    9,270  

Export-Import Bank of US

  Project loans  4.48  2014  USD5,598     5,908  

JBIC

  Project loans  6M Libor +
0.012
  2014  USD10,301     10,870  

Export-Import Bank of Korea and others

  

Project loans

  7.20  2014  USD2,803     2,958  
  

Term loan

  LIBOR + 2.25  2033  USD151,921     160,322  
  

Direct loan and others

  LIBOR +
2.6~3.7
  2027  JOD129,975     194,062  

Proparco and others

  Shareholder’s loan  LIBOR + 3.7  2027  USD106,249     112,125  

PT PJB

  Shareholder’s loan  8.00  2031  JOD8,498     12,688  
  

Shareholder’s loan

  6.50  —    USD31,876    33,639  
  

Shareholder’s loan

  12.75  2017  IDR 22,446,293     1,939  

Jan. 1, 2010

 

Financial

institution

 

Type

 Interest rate(%) Maturity Foreign currency  Local currency 

Korea development bank

 Others 0.50 2010~2044  —     (Won)15,481  

Korea development bank

 

Facility

 

1yr KDB bond rate
+ 0.08~0.33, 3M
CD + 0.66

 

2010~2012

 

 

—  

  

 

 

1,922,221

  

Korea exchange bank

 

Commercial paper

 

4.79, 3M CD +
0.21~0.54

 

2010~2013

 

 

—  

  

 

 

1,300,000

  

Korea exchange bank

 

Energy rationalization

 

2.25

 

2011~2019

 

 

—  

  

 

 

4,250

  

Korea exchange bank

 

Development of

power resources

 

4.00

 

2013

 

 

—  

  

 

 

24,000

  

Korea exchange bank

 

Facility

 

3yr KTB rate - 1.25

 

2011~2021

 

 

—  

  

 

 

71,082

  

Korea industrial bank

 

Development of

power resources

 

4.00

 

2012~2016

 

 

—  

  

 

 

64,666

  

Korea industrial bank

 

Facility

 

3yr KTB rate - 1.25

 

2012

 

 

—  

  

 

 

21,000

  

Korea industrial bank

 

Development of

power resources

 

3yr KTB rate - 1.25

 

2016

 

 

—  

  

 

 

2,994

  

Kookmin bank

 

Development of

power resources

 4.00 2015  —      31,350  

Hana bank

 

Development of

power resources

 4.00 2014  —      101,500  

Export-import Bank of Korea

 Project loans 2.00 2026  —      38,300  

Korea Resources Corporation

 

Development of

power resources

 

3yr KTB rate - 2.25

 

2013~2025

 

 

—  

  

 

 

53,534

  

Korea Resources Corporation

 Project loans —   —    —      7,039  

Nonghyup bank

 

Development of

power resources

 4.00 2011  —      20,000  

Nonghyup bank

 Facility 3yr KTB rate + 0.16 2011  —      46,875  

Woori bank

 Facility 3M CD + 0.29 2010  —      100,000  

Woori bank

 Facility 3yr KTB rate - 1.25 2011  —      7,160  

Ministry of knowledge and economy

 

 

Development of

power resources

 

 

4.00

 

 

2010

 

 

 

 

—  

 

  

 

 

 

 

10,000

 

  

Korea national Oil corporation

 

Project loans

 

3yr KTB rate - 2.25

 

2021~2023

 

 

USD 8,784

  

 

 

10,256

  

Korea Finance Corporation and others

 

Project loans

 

 

3M Libor + 1.63

 

 

2013

 

 

 

 

—  

 

  

 

 

 

 

—  

 

  

Export-import Bank of US and others

 

 

Project loans

 

 

4.48~8.28

 

 

2014

 

 

 

 

USD168,604

 

  

 

 

 

 

196,862

 

  

Export-import Bank of Korea

 

Direct Loan

 

3M Libor + 2.60~3.70

 

2027~2031

 

 

USD110,140

  

 

 

128,600

  

2013

 

Type

  Interest rate (%)  Maturity  Foreign currency   Local currency 
   In millions of won and thousands of foreign currencies 

SMB and others

  Commercial loan and others  LIBOR +
1.5~2.5
  2030~2033  USD131,603     138,881  

HSBC and others

  Syndicated loan  3M
Libor+0.27~1.50
  2014~2017  USD 374,124     394,813  

Others

  Others  —    2019~2031  USD11,276     11,900  
  

Others

  LIBOR + 0.95  —    USD 157,516     166,226  
          

 

 

 
           1,255,601  
          

 

 

 
     5,449,301  
          

 

 

 

Less : Discount of long-term borrowings

         (19,376

Less : Current portion of long-term borrowings

         (893,532

Add : Current portion of discount of long-term borrowings

         1,997  
          

 

 

 
    4,538,390  
          

 

 

 

(4)Local debt securities as of December 31, 2012 and 2013 are as follows:

  Issue date  Maturity  Interest rate (%)    2012  2013 
  In millions of won 

Electricity Bonds

  
 
2008.06.05 ~
2013.06.28
  
  
  
 
2013.07.31 ~
2032.08.20
  
  
 2.77 ~ 7.19      25,590,000    27,290,000  

Electricity Bonds

  
 
2010.05.28 ~
2013.06.25
  
  
  
 
2015.05.28 ~
2018.06.25
  
  
 3M CD + 0.25 ~ 1.05   1,010,000    1,160,000  

Corporate Bonds

  
 
2009.02.26 ~
2013.11.26
  
  
  
 
2014.02.26 ~
2040.12.10
  
  
 2.60 ~ 7.18   10,080,010    15,150,010  
     

 

 

  

 

 

 
      36,680,010    43,600,010  
     

 

 

  

 

 

 

Less : Discount on local debt securities

  

    (29,436  (37,675

Less : Current portion of local debt securities

   

    (3,980,000  (4,250,000

Add : Current portion of discount on local debt securities

   

    814    679  
     

 

 

  

 

 

 
      32,671,388    39,313,014  
     

 

 

  

 

 

 

Jan. 1, 2010

 

Financial

institution

 

Type

 Interest rate(%) Maturity Foreign currency  Local currency 

SMBC and others

 Others 3M Libor +
1.10~2.30
 2013~2033  —      —    

DBS

 Facility 3M Libor +
0.25
 2013  —      —    

Others

 Facility 8.00~14.00 2017~2031  —      —    

Woori bank

 Syndicated Loan 3M Libor +
0.27~0.30
 2017  USD158,825    185,443  
    

 

 

  

 

 

 
     USD446,353    4,362,613  
    

 

 

  

 

 

 

Less: Present value discount

    —      (17,819

Less: Current portion of long-term borrowings

    —      (1,853,368

Less: Current portion of present value discount

    —      66  
    

 

 

  

 

 

 
     —     (Won)2,491,492  
    

 

 

  

 

 

 
(5)Foreign debt securities as of December 31, 2012 and 2013 are as follows:

    2012 

Type

  Issue date   Maturity   Interest rate (%)  Foreign currency   Local currency 
   In millions of won 

FY-93

   1993.04.14     2013.04.14    7.75  USD 350,000    374,886  

FY-96

   1996.04.01     2096.04.01    6.00~8.37  USD250,760     268,589  

FY-97

   1997.01.31     2027.08.04    6.75~7.00  USD314,717     337,093  

FY-03

   2003.05.25     2013.05.25    4.75~6.00  USD150,000     160,665  

FY-04(*)

   2004.04.21     2034.04.21    5.13~5.75  USD450,000     481,995  

FY-06

   2006.03.14     2016.09.29    4.81~5.50  USD650,000     696,215  

FY-08

   2008.11.27     2018.11.27    4.19  JPY 20,000,000     249,500  
   2008.02.11     2013.04.18    5.38  USD600,000     642,660  

FY-09

   2009.06.17     2014.07.21    5.5~6.25  USD1,500,000     1,606,650  

FY-10

   2010.09.16     2015.10.05    3~3.13  USD1,200,000     1,285,320  

FY-10

   2010.04.15     2015.11.18    3M USD
Libor+0.80~1.64
  USD550,000     589,105  

FY-11

   2011.07.13     2021.07.13    3.63~4.75  USD800,000     856,880  

FY-11

   2011.02.18     2014.09.17    3M USD
Libor+0.80~1.00
  USD300,000     321,330  

FY-12

   2012.05.10     2022.09.19    2.5~3.83  USD1,750,000     1,874,425  
          

 

 

 
   9,745,313  
          

 

 

 

Less : Discount on foreign debt securities

  

       (67,374

Less : Current portion of foreign debt securities

   

       (1,500,331

Add : Current portion of discount on foreign debt securities

   

       797  
      

 

 

 
      8,178,405  
      

 

 

 

 

 (4)(*)Debentures as of December 31, 2011, December 31, 2010 and January 1, 2010 are as follows (KRWGlobal 4 in millions):FY-04 can be redeemed on April 23, 2014 if bond holders claim the redemption from February 7, 2014 (75 days) to February 22, 2014 (60 days).

Type

 Contract period  Annual
interest rate(%)
 Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 

Electricity bonds

  2003 ~ 2021   3.35~7.19 (Won)22,080,000   (Won)19,690,000   (Won)15,500,000  

Electricity bonds

  2010 ~ 2015   3M CD+0.90~1.05  250,000    350,000    —    

Corporate bonds

  2005 ~ 2040   3.85~7.58  7,990,010    6,000,010    5,840,010  
   

 

 

  

 

 

  

 

 

 
    30,320,010    26,040,010    21,340,010  
   

 

 

  

 

 

  

 

 

 

Less: Discount on debentures

  

   (25,425  (21,629  (23,348

Less: Current portion of long-term debentures

   

   (4,180,010  (3,780,000  (2,650,000

Less: Current portion of discount on debentures

   

   860    1,310    861  
   

 

 

  

 

 

  

 

 

 
   (Won)26,115,435   (Won)22,239,691   (Won)18,667,523  
   

 

 

  

 

 

  

 

 

 
  2013 

Type

 Issue date Maturity Interest rate (%) Foreign currency  Local
currency
 
  In millions of won 

FY-96

 1996.04.01~1996.12.06 2026.12.06~2096.04.01 6.00~8.37 USD 250,022   263,848  

FY-97

 1997.01.31~1997.08.04 2027.01.31~2027.08.04 6.75~7.00 USD314,717    332,121  

FY-04(*)

 2004.04.21~2004.07.21 2014.07.21~2034.04.21 5.13~5.75 USD450,000    474,885  

FY-06

 2006.03.14~2006.09.29 2016.03.14~2016.09.29 5.50~6.00 USD650,000    685,945  

FY-08

 2008.11.27 2018.11.27 4.19 JPY 20,000,000    200,932  

FY-09

 2009.06.17~2009.07.21 2014.06.17~2014.07.21 5.50~6.25 USD1,500,000    1,582,950  

FY-10

 2010.09.16~2010.10.05 2015.09.16~2015.10.05 3.00~3.13 USD1,200,000    1,266,360  

FY-10

 2010.07.29~2010.11.18 2015.07.29~2015.11.18 3M USD
Libor+1.00~1.64
 USD250,000    263,825  

FY-11

 2011.07.13~2011.07.29 2017.01.29~2021.07.13 3.63~4.75 USD800,000    844,240  

FY-11

 2011.02.18~2011.04.15 2014.04.15~2014.09.17 3M USD
Libor+0.80~1.00
 USD300,000    316,590  

FY-12

 2012.05.10~2012.09.19 2017.05.10~2022.09.19 2.50~3.00 USD1,750,000    1,846,775  

FY-13

 2013.02.20~2013.07.25 2018.02.20~2018.07.25 3M USD
Libor+0.84~1.5
 USD500,000    527,650  

FY-13

 2013.09.25 2020.09.25 5.75 AUD325,000    305,487  

FY-13

 2013.09.26~2013.10.23 2019.03.26~2019.04.23 1.50~1.63 CHF400,000    475,468  

FY-13

 2013.02.05~2013.11.27 2018.02.05~2018.11.27 1.88~3.16 USD1,900,000    2,005,070  
     

 

 

 
  11,392,146  
     

 

 

 

Less : Discount on foreign debt securities

    (75,936

Add : Premium on debt securities

    353  

Less : Current portion of foreign debt securities

    (2,375,007

Add : Current portion of discount on foreign debt securities

    7,692  
     

 

 

 
   8,949,248  
     

 

 

 

 

 (5)(*)Foreign debentures as of December 31, 2011, December 31, 2010 and January 1, 2010 are as follows (KRWGlobal 4 in millions):FY-04 can be redeemed on April 23, 2014 if bond holders claim the redemption from February 7, 2014 (75 days) to February 22, 2014 (60 days).

 

Type

  Issue
date
   Maturity
date
   Interest rate(%)  Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010 

FY-93

   1993.04.14     2013.04.14    7.75  (Won)403,655    (Won)398,615    (Won)408,660  

FY-96

   1996.04.01     2096.04.01    6.00~8.28   290,229     287,762     296,313  

FY-97

   1997.01.31     2027.08.04    6.75~7.00   362,963     358,431     367,464  

FY-03

   2003.05.25     2016.05.25    4.75~6.00   518,985     512,505     525,420  

FY-04

   2004.04.21     2034.04.21    4.875~5.75   518,985     968,065     992,460  

FY-05

   2005.07.25     2012.11.15    3.13~5.25   345,990     341,670     768,850  

FY-06

   2006.03.14     2016.09.29    5.5   403,655     398,615     408,660  

FY-07

   2007.08.31     2010.10.25    1.02~1.65   —       —       353,590  

Type

 Issue date  Maturity date  I nterest rate(%) Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 

FY-07

  2007.10.29    2010.11.22   3M Tibor+0.50,

3M Euro Yen
Libor+0.05

  —      —      353,590  

FY-08

  2008.02.11    2018.11.27   4.15~5.38  989,012    1,076,646    1,069,884  

FY-08

  2008.04.18    2011.08.20   3M USD
Libor+1.50~1.80,

3M JPY
Libor+1.70

  —      534,679    526,123  

FY-09

  2009.06.17    2014.07.21   5.5~6.25  1,729,950    1,708,350    1,751,400  

FY-09

  2009.05.08    2012.05.08   Euro Yen
Tibor+2.50
  148,516    139,708    126,280  

FY-10

  2010.09.16    2015.10.05   3.00~3.13  1,383,960    1,366,680    —    

FY-10

  2010.04.15    2015.11.18   3M USD
Libor+0.80~1.90
  864,975    854,176    —    

FY-11

  2011.07.13    2021.07.13   3.63~4.75  922,640    —      —    

FY-11

  2011.02.18    2014.09.17   3M USD
Libor+0.80~1.00
  345,990    —      —    
    

 

 

  

 

 

  

 

 

 
     9,229,505    8,945,902    7,948,694  
    

 

 

  

 

 

  

 

 

 

Less: Discount on debentures

  

   (62,455  (55,891  (53,011

Less: Current portion of long-term liabilities

   

   (726,193  (1,105,287  (1,127,048

Less: Current portion of discount on debentures

   

   888    607    534  
    

 

 

  

 

 

  

 

 

 
    (Won)8,441,745   (Won)7,785,331   (Won)6,769,169  
    

 

 

  

 

 

  

 

 

 

(6)Exchangeable bonds as of December 31, 2011, December 31, 2010 and January 1, 2010 are as follows (KRW in millions):

Type

 Maturity date  Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 

Foreign exchangable bonds 2-1

  2011.11.23   (Won)—     JPY 3,238   (Won)45,241   JPY3,238   (Won)40,893  

Foreign exchangable bonds 2-2

  2011.11.23    —     EUR 20,646    31,249   EUR 20,646    34,567  
  

 

 

   

 

 

   

 

 

 
   —       76,490     75,460  
  

 

 

   

 

 

   

 

 

 

Less: Discount on debentures

   —       (2,533   (6,357

Less: Current portion of exchangeable bonds

   —       (76,490   —    

Less: Current portion of discount on debentures

   —       2,533     —    
  

 

 

   

 

 

   

 

 

 
  (Won)—      (Won)—      (Won)69,103  
  

 

 

   

 

 

   

 

 

 

On November 21, 2006, the Company issued foreign exchangeable bonds in the amount of JPY 61,345,128 thousand and EUR 463,321 thousand, at a discounted value of JPY 60,810,000 thousand and EUR 401,700 thousand, respectively. The main terms of the bonds are as follows:

Maturity date: November 23, 2011

Exchange period: From January 4, 2007 to 10th day prior to its maturity.

Shares to be exchanged: Common shares of the Company or its equivalent DR

Exchange price: (Won)51,000 per share.

On November 23, 2009, the bondholders exercised a put option, 94.72% of JPY 60,810,000 thousand and 95.54% of EUR 401,700 thousand.

In accordance with Article 17 “Issuance of Convertible Bonds” and Article 11 “Calculation of Dividend for New Shares” of the Articles of Incorporation of the Company, distribution of dividends on new shares resulting from conversion of exchangeable bonds is deemed to have been issued at the beginning of the fiscal year.

(7)Details of exchangeable bonds as of December 31, 2011, December 31, 2010 and January 1, 2010 are as follows (KRW in millions):

   Issued date   Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010 

Issue price

   2006.11.21    (Won)—      (Won)76,490    (Won)75,460  

Liability component

   2006.11.21     —       76,490     75,460  

Equity component

   2006.11.21     —       —       —    

Liability component is measured at effective interest method. According to effective interest rate 2.57% (5.72% for prior tear), for the years ended December, 2011 and 2010, of interest expenses, (Won)168 million and (Won) 252 million, respectively, is recognized.

The exchangeable bonds above were redeemed during the year ended December 31, 2011.

25.24.FINANCE LEASE LIABILITIESFinance Lease Liabilities

 

(1)(1)Lease contracts :

The Company enters into a power purchase agreements (“PPA”) under which the Company is committed to purchase an aggregate capacity of 3,770 megawatts for approximately twenty years from independent power producers, such as, GS EPS and three other providers. The Company recognizes these PPAs as finance leases; under the PPAs, there is no transfer of ownership or bargain purchase option of the plants at the end of the agreement, however, the present value of the future minimum power purchase payments equals substanitallysubstantially all of the plants’ respective fair values over a twenty yeartwenty-year period which makes up the major part of the respective plants’ economic life.

(2)(2)Finance lease liabilities as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRWand are included in millions):current and non-current trade and other payables, net, in the accompanying consolidated statements of financial position:

 

    2012   2013 
 Dec. 31, 2011 Dec. 31, 2010 Jan. 1, 2010     Minimum lease
payments
   Present value of
minimum lease
payments
   Minimum lease
payments
   Present value of
minimum lease
payments
 
 Minimum  lease
payment
 Present Value of
minimum lease
payments
 Minimum  lease
payment
 Present Value of
minimum lease
payments
 Minimum  lease
payment
 Present Value of
minimum lease
payments
     In millions of won 

Less than 1 year

 (Won)239,007   (Won)127,033   (Won)247,393   (Won)123,666   (Won)253,609   (Won)117,592         221,381     121,804     202,309     115,308  

1 ~ 5 years

  790,571    577,172    847,507    619,212    910,091    662,538      744,702     542,688     716,928     521,031  

More than 5 years

  731,788    430,804    913,860    516,324    1,098,669    596,522      556,276     342,677     381,742     248,627  
 

 

  

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

 
 (Won)1,761,366   (Won)1,135,009   (Won)2,008,760   (Won)1,259,202   (Won)2,262,369   (Won)1,376,652         1,522,359     1,007,169     1,300,979     884,966  
 

 

  

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

 

 

(3)(3)Current and non-current portion of financefinancial lease liabilities as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

    2012   2013 
  Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010     In millions of won 

Current finance lease liabilities

  (Won)127,033    (Won)123,666    (Won)117,592         121,804     115,308  

Non-current finance lease liabilities

   1,007,976     1,135,536     1,259,060      885,365     769,658  
  

 

   

 

   

 

    

 

   

 

 
  (Won)1,135,009    (Won)1,259,202    (Won)1,376,652         1,007,169     884,966  
  

 

   

 

   

 

    

 

   

 

 

(4)(4)Lease payments recognized as an expense from a lessee position for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

    2012 2013 
  2011 2010     In millions of won 

Minimum lease payment

  (Won)282,042   (Won)304,656         274,309    266,381  

Contingent rent payment

   (8,838  1,972      (10,028  (15,033
  

 

  

 

    

 

  

 

 
  (Won)273,204   (Won)306,628         264,281    251,348  
  

 

  

 

    

 

  

 

 

 

(5)(5)The Company does not have any non-cancelableirrevocable operating lease contracts as of December 31, 20112012 and 2010.2013.

 

26.25.RETIREMENT BENEFIT OBLIGATIONS:Employment Benefits

The Company has both defined benefit plans and defined contribution plans it offers to its employees. Details regarding both plans and the Company’s retirement benefit obligations as of December 31, 2011, December 31, 2010 and January 1, 2010 are as follows.

(1)The principal assumptions used on actuarial valuation are as follows:

 

(1)Dec.Employment benefit obligations as of December 31, 2011Dec. 31, 2010Jan. 1, 2010

Discount rate

4.27%~4.35%5.10%~5.15%5.83%~5.94%

Expected rate of return on plan assets

3.17%~6.75%3.23%~5.28%3.23%~5.11%

Future salary2012 and benefit levels

2.10%~15.17%2.10%~15.17%2.10%~15.17%2013 are as follows:

 

      2012   2013 
      In millions of won 

Defined benefit obligations

       2,069,864     2,064,505  

Other long-term employee benefit obligations

    74,470     72,791  
   

 

 

   

 

 

 
       2,144,334     2,137,296  
   

 

 

   

 

 

 

(2)(2)Principal assumptions on actuarial valuation as of December 31, 2012 and 2013 are as follows:

   

2012

  

2013

Discount rate

  3.51% ~ 3.58%  3.72% ~ 4.12%

Future salary and benefit levels

  1.80% ~ 15.30%  1.77% ~ 7.97%

Weighted average duration

  14.24 years  12.90 years

(3)Details of the Company’s expense relating to its defined benefit plans for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

 

  

 2012 2013 
  2011 2010    In millions of won 

Current service cost

  (Won)278,792   (Won)267,457        325,016    348,945  

Interest cost

   117,901    128,953     99,473    100,315  

Expected return on plan assets

   (20,781  (21,030   (19,600  (15,975

Others

   435    552     (18  —    
  

 

  

 

   

 

  

 

 
  (Won)376,347   (Won)375,932        404,871    433,285  
  

 

  

 

   

 

  

 

 

ForExpenses as described above are recognized in those items below in the financial statements.

   

  

 2012   2013 
    In millions of won 

Cost of sales

   292,548     308,642  

Selling and administrative expenses

   72,365     75,681  

Others (Construction-in-progress and others)

   39,958     48,962  
  

 

 

   

 

 

 
   404,871     433,285  
  

 

 

   

 

 

 

In addition, for the years ended December 31, 20112012 and 2010, the retirement2013, employee benefit obligations expenseexpenses of (Won)308,629₩41,265 million and (Won)297,082₩41,289 million, respectively, is recognized as cost of sales, and (Won) 66,955₩5,067 million and (Won)62,482₩5,370 million, respectively, is recognized as selling and administrative expenes,expenses, and (Won) 44,994 and (Won)34,722 million, respectively, is recognized as others (eg. Construction in-progress, etc.)

In addition, for the years ended December 31, 2011 and 2010, retirement benefit obligations expenses of (Won)44,231₩9,994 million and (Won)19,254₩11,092 million, respectively relates to the Company’s defined contribution plans.

(4)(3)RetirementDetails of defined benefit obligations as of December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

   2012 2013 
  Dec. 31, 2011 Dec. 31, 2010 Jan. 1, 2010    In millions of won 

Present value of defined benefit obligation from funded plans

  (Won)2,327,095   (Won)2,327,753   (Won)2,411,620        2,540,264    2,629,057  

Fair value of plan assets

   (459,342  (433,339  (490,149   (472,342  (564,552
  

 

  

 

 
   2,067,922    2,064,505  
  

 

  

 

 

Present value of defined benefit obligation from unfunded plans

   1,423    669    1,090     1,942    —    
  

 

  

 

  

 

   

 

  

 

 

Net retirement obligations from defined benefit plans

   1,869,176    1,895,083    1,922,561  

Net liabilities incurred from defined benefit plans

      2,069,864    2,064,505  
  

 

  

 

  

 

   

 

  

 

 

 

(5)(4)Changes in retirementthe present value of defined benefit obligationobligations for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

   2012 2013 
  2011 2010    In millions of won 

Beginning balance

  (Won)2,328,423   (Won)2,412,710        2,328,518    2,542,207  

Current service cost

   278,792    267,457     325,016    348,945  

Interest cost

   117,901    128,953  

Actuarial losses

   215,922    109,252  

Interest cost(*)

   99,473    100,315  

Remeasurement component

   75,697    (204,478

Actual payments

   (629,403  (574,430   (286,501  (157,711

Others

   16,882    (15,519   4    (221
  

 

  

 

   

 

  

 

 

Ending balance

  (Won)2,328,517   (Won)2,328,423        2,542,207    2,629,057  
  

 

  

 

   

 

  

 

 

 

 (5)(*)Corporate bond (AAA rated) yield at year-end is applied to the interest cost on employee benefit obligations.

(6)Changes in the presentfair value of the plan assets for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

   2012 2013 
  2011 2010    In millions of won 

Beginning balance

  (Won)433,339   (Won)490,149        459,342    472,342  

Expected return

   20,781    21,030     19,600    15,975  

Actuarial losses

   (3,148  (561

Remeasurement component

   (1,136  243  

Contributions by the employers

   291,339    96,751     94,763    90,011  

Contributions by the employees

   —      11,709  

Actual payments

   (283,629  (173,287   (100,227  (25,532

Others

   660    743     —      (196
  

 

  

 

   

 

  

 

 

Ending balance

  (Won)459,342   (Won)433,339        472,342    564,552  
  

 

  

 

   

 

  

 

 

In addition, gain or loss on accumulated remeasurement component amounted to ₩(76,088) million and ₩39,591 million and has been recognized as other comprehensive income for the years ended December 31, 2012 and 2013, respectively.

 

(7)(6)The amount of major categoriesDetails of the fair value of plan assets and expected rate of return on plan assets as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

   Fair value of plan assets 
   Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010 

Equity instruments

  (Won)52,285    (Won)48,993    (Won)39,761  

Debt instruments

   130,346     176,025     163,723  

Bank deposit

   152,387     113,423     83,459  

Others

   124,324     94,898     203,206  
  

 

 

   

 

 

   

 

 

 
  (Won)459,342    (Won)433,339    (Won)490,149  
  

 

 

   

 

 

   

 

 

 

     2012   2013 
     In millions of won 

Equity instruments

      58,972     35,463  

Debt instruments

   93,812     124,056  

Bank deposit

   109,800     117,626  

Others

   209,758     287,407  
  

 

 

   

 

 

 
      472,342     564,552  
  

 

 

   

 

 

 

   Expected rate of return on plan assets 
   Dec. 31,
2011
  Dec. 31,
2010
  Jan. 1,
2010
 

Equity instruments

   5.18  5.67  5.08

Debt instruments

   4.79  4.90  4.98

Bank deposit

   4.81  4.74  5.09

Others

   4.88  5.31  3.70

Weighted average

   4.86  5.03  4.49

Expected rate of return on plan assets is weighted average of expected rate of return on each category. The managements estimate expected rate of return based on historical trend of yield and market forecasting analysis for the period during defined benefit obligations exist.

In addition, forFor the years ended December 201131, 2012 and 2010,2013, actual returns on plan assets are (Won)17,633amounted to ₩18,464 million and (Won)20,469₩16,218 million, respectively.

 

(8)(7)Other long-term employee benefits obligations as ofRemeasurement component recognized in other comprehensive income for the years ended December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

   Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010 

Other long-term employee benefit obligations

  (Won)73,818    (Won)69,072    (Won)62,570  
     2012  2013 
     In millions of won 

Actuarial gain from changes in demographic assumptions

      —      100,715  

Actuarial gain (loss) from changes in financial assumptions

   152,358    (351,257

Experience adjustments

   (76,661  46,064  

Expected return

   1,136    (243
  

 

 

  

 

 

 
      76,833    (204,721
  

 

 

  

 

 

 

Remeasurement component recognized as other comprehensive income is recorded in retained earnings.

26.Provisions

 

27.(1)PROVISIONS:

Litigation

The Company is involved in legal proceedings regarding matters arising in the ordinary course of business. Related to these matters, as of December 31, 2011, the Company was engaged in 429 lawsuits as a defendant and 103 lawsuits as a plaintiff. The total amount claimed against the Company was (Won)138,498 million and the total amount claimed by the Company was (Won)21,403 million as of December 31, 2011. As of December 31, 2011, the Company had an accrual for loss contingencies of (Won)44,409 million. The Company records liabilities for estimated loss contingencies when the Company assesses that a loss is probable and the amount of the loss can be reasonably estimated. The determination for a loss contingency is based on management judgment and estimates with respect to the likely outcome of the matter, including the analysis of different scenarios. Liabilities are recorded or adjusted when events or circumstances cause these judgments or estimates to change. In assessing whether a loss is a reasonable possibility, the Company may consider the following factors: the nature of the litigation, claim or assessment, available information, opinions or views of legal counsel and other advisors, and the experience gained from similar cases. The Company provides disclosures for material contingencies when there is a reasonable possibility that a loss or an additional loss may be incurred.

As new developments occur or more information becomes available, our assumptions and estimates of these liabilities may change. Revisions to contingent liabilities are generally reflected in income when new or different facts or information become known or circumstances change that affect previous assumptions with respect to the likelihood or amount of loss. If changes in these or other assumptions or the anticipated outcomes the Company uses to estimate contingencies cause a loss to become more likely, it could materially affect future results of operations for any particular quarterly or annual period.

Actual amounts realized upon settlement of contingencies may be different than amounts recorded and disclosed and could have a significant impact on the liabilities and expenses recorded on the consolidated financial statements.

Provion for decommissioning cost

Under the Korean Electricity Business Act (EBA) Article 94, the Company is required to record a liability for the dismantling of nuclear power plants and disposal of spent fuel and low & intermediate radioactive wastes. In addition, under the Korean Atomic Energy Act (AEA), an entity which constructs and operates a nuclear power reactor and related facilities must obtain permission from the Ministry of Education, Science and Technology (the “MEST”, formerly the Ministry of Science and Technology).

Accretion expense consists of period-to-period changes in the liability for decommissioning costs resulting from passage of time and changes in estimate related to either the timing or the amount of the initial estimate of undiscounted cash flows. This cost is included in cost of electric power in the accompanying statements of operations.

Provisions of decontanmination of transfomer—PCBs

Under the regulation of Persistent Organic Pollutants Management Act, enacted in 2007, the Company is required to remove polychlorinated biphenyls (PCBs), a toxin, from the insulating oil of its transformers by 2025. As a result of the enactments, the Company is required to inspect the PCBs contents of transformers and dispose of PCBs in excess of safety standards under the legally settled procedures. The Company’s estimates and assumptions used to determine fair value can be affected by many factors, such as the estimated costs of inspection and disposal, inflation rate, discount rate, regulations and the general economy.

(1)Provisions as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

 Dec. 31, 2011 Dec. 31, 2010 Jan. 1, 2010    2012   2013 
 Current Non-current Current Non-current Current Non-current    Current   Non-current   Current   Non-current 
   In millions of won 

Employment benefits

      816,612     —       777,419     —    

Provision for employment benefits

   816,612     —       777,419     —    

Litigation

         —       26,697     —       23,720  

Litigation provision

 (Won)—     (Won)44,409   (Won)—     (Won)79,116   (Won)—     (Won)45,317  

Litigation provisions

   —       26,697     —       23,720  

Decommissioning cost

         —       12,133,393     —       12,568,622  

Nuclear plants

  —      5,061,265    —      4,694,607    —      4,498,716     —       9,462,723     —       9,887,621  

Spent fuel

  —      869,549    —      834,247    —      743,103     —       1,207,842     —       1,211,440  

Waste

  —      796,521    —      447,473    —      453,404     —       1,242,396     —       1,249,062  

PCBs

  —      215,082    —      278,011    —      231,470     —       219,669     —       219,704  

Other recovery provisions

  —      —      —      —      —      —       —       763     —       795  

Others

         158,303     10,716     336,398     9,972  

Power plant regional support program

  91,987    —      76,955    —      65,360    —       106,763     —       112,498     —    

Provision for tax

  —      2,013    —      8,219    —      8,119  

Provision for financial guarantee

  —      11,300    —      —      —      —    

Provisions for tax

   2,644     1,256     —       649  

Provisions for financial guarantee

   —       9,086     —       8,789  

Provisions for RPS

   48,795     —       223,259     —    

Others

  396    96    324    688    398    1,507     101     374     641     534  
 

 

  

 

  

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

 
 (Won)92,383   (Won)7,000,235   (Won)77,279   (Won)6,342,361   (Won)65,758   (Won)5,981,636        974,915     12,170,806     1,113,817     12,602,314  
 

 

  

 

  

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

 

(2)(2)Changes in provisions for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

   2011    2012 
 Jan. 1,
2011
 Liabilities
incurred
 Accretion
expense
 Payment Reversal Other Dec. 31,
2011
    Beginning
balance
   Accretion
expenses
   Payment Reversal Other Ending
balance
 
   In millions of won 

Employment benefits

      608,716     859,342     (627,570  (32,176  8,300    816,612  

Provision for employment benefits

   608,716     859,342     (627,570  (32,176  8,300    816,612  

Litigation

          44,409     17,367     (16,784  (18,295  —      26,697  

Litigation provision

 (Won)79,116   (Won)40,144   (Won)628   (Won)(7,373 (Won)(39,124 (Won)(28,982 (Won)44,409  

Litigation provisions

   44,409     17,367     (16,784  (18,295  —      26,697  

Decommissioning cost

          6,942,418     4,862,306     (337,991  —      2,562    12,133,393  

Nuclear plants

  4,694,607    155,718    210,940    —      —      —      5,061,265     5,061,265     4,401,458     —      —      —      9,462,723  

Spent fuel

  834,247    197,596    122,004    (284,298  —      —      869,549     869,549     646,487     (310,458  —      2,264    1,207,842  

Waste(*1)

  447,473    —      279,330    (13,026  —      82,744    796,521  

Waste

   796,522     460,848     (15,272  —      298    1,242,396  

PCBs

  278,011    22,153    16,351    (16,276  (85,157  —      215,082     215,082     16,848     (12,261  —      —      219,669  

Other recovery provisions

   —       763     —      —      —      763  

Others

          105,791     43,845     (99,794  (2,882  15,493    169,019  

Power plant regional support program

  76,955    —      39,437    (42,299  —      17,895    91,987     91,987     41,661     (42,386  —      15,501    106,763  

Provision for tax

  8,219    205    —      —      (6,411  —      2,013  

Provision for financial guarantee

  —      11,300    —      —      —      —      11,300  

Provisions for tax

   2,013     2,184     —      (297  —      3,900  

Provisions for financial guarantee

   11,300     —       —      (2,214  —      9,086  

Provisions for RPS

   —       105,857     (57,062  —      —      48,795  

Others

  1,012    211    —      (70  (53  (609  492     491     709     (346  (371  (8  475  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

  

 

  

 

 
 (Won)6,419,640   (Won)427,327   (Won)668,690   (Won)(363,342 (Won)(130,746 (Won)71,049   (Won)7,092,618        7,701,334     6,553,524     (1,082,139  (53,353  26,355    13,145,721  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

  

 

  

 

 

     2013 
     Beginning
balance
  Accretion
expenses
  Payment  Reversal  Other  Ending
balance
 
     In millions of won 

Employment benefits

      816,612    625,921    (574,900  (90,214  —      777,419  

Provision for employment benefits

   816,612    625,921    (574,900  (90,214  —      777,419  

Litigation

   26,697    17,610    (8,874  (11,713  —      23,720  

Litigation provisions

   26,697    17,610    (8,874  (11,713  —      23,720  

Decommissioning cost

   12,133,393    872,465    (437,859   623    12,568,622  

Nuclear plants

   9,462,723    424,910    (12  —      —      9,887,621  

Spent fuel

   1,207,842    407,236    (403,638  —      —      1,211,440  

Waste

   1,242,396    29,490    (23,447  —      623    1,249,062  

PCBs

   219,669    10,797    (10,762  —      —      219,704  

Other recovery provisions

   763    32    —      —      —      795  

Others

   169,019    261,076    (97,788  (3,153  17,217    346,371  

Power plant regional support program

   106,763    35,952    (43,325  —      13,108    112,498  

Provisions for tax

   3,900    —      (3,251  —      —      649  

Provisions for financial guarantee

   9,086    1,667    —      (1,964  —      8,789  

Provisions for RPS

   48,795    222,824    (51,451  (1,130  4,222    223,260  

Others

   475    633    239    (59  (113  1,175  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
      13,145,721    1,777,072    (1,119,421  (105,080  17,840    13,716,132  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(*1)For the year ended December 31, 2011, the Company recorded a change in estimate related to the KHNP’s, a subsidiary, asset retirement obligation related to its low and intermediate radioactive waste disposal

     2010 
  Jan. 1,
2010
  Liabilities
incurred
  Accretion
expense
  Payment  Reversal  Other  Dec. 31,
2010
 

Litigation

       

Litigation provision

 (Won)45,317   (Won)52,594   (Won)1,271   (Won)(5,307 (Won)(14,759 (Won)—     (Won)79,116  

Decommissioning cost

       

Nuclear plants

  4,498,716    —      196,164    (273  —      —      4,694,607  

Spent fuel

  743,103    247,248    95,568    (251,671  —      —      834,248  

Waste

  453,404    —      17,361    (23,294  —      —      447,472  

PCBs

  231,470    69,969    15,022    (38,450  —      —      278,011  

Others

       

Power plant regional support program

  65,360    —      38,536    (45,443  —      18,502    76,955  

Provision for tax

  8,119    101    —      —      —      —      8,220  

Provision for financial guarantee

  —      —      —      —      —      —      —    

Others

  1,905    105    616    (66  (1,443  (105  1,012  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)6,047,394   (Won)370,017   (Won)364,538   (Won)(364,504 (Won)(16,202 (Won)18,397   (Won)6,419,640  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

28.27.DEFERRED REVENUEGovernment Grants

 

(1)(1)Deferred revenue related to the Company’s construction contractsGovernment grants as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

   Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010 

Deferred revenue

  (Won)5,428,993    (Won)5,003,994    (Won)4,637,085  
   

  

  2012  2013 
     In millions of won 

Cash

      (29,741  —    

Land

   (3,106  (3,137

Buildings

   (44,387  (45,396

Structures

   (177,173  (193,189

Machinery

   (105,112  (101,808

Vehicles

   (128  (83

Equipment

   (922  (707

Tools

   (192  (312

Construction-in-progress

   (94,676  (117,728

Investment properties

   (243  (13

Software

   (198  (428

Development expenditures

   (12,371  (11,705

Intangible assets under development

   (7,305  (7,792

Usage rights of donated assets and other

   (64  (53

Others

   (1  (1
  

 

 

  

 

 

 
      (475,619  (482,352
  

 

 

  

 

 

 

29.(2)NON-FINANCIAL LIABILITIESChanges in government grants for the years ended December 31, 2012 and 2013 are as follows:

      2012 
     Beginning
balance
  Receipt  Acquisition   Offset the
items of
depreciation
expense and
others
   Disposal   Others  Ending
balance
 
     In millions of won 

Cash

      (17,653  (49,618  —       —       —       37,530    (29,741

Land

   (3,106  —      —       —       —       —      (3,106

Buildings

   (46,097  —      —       3,713     —       (2,003  (44,387

Structures

   (170,474  —      —       8,560     1,394     (16,653  (177,173

Machinery

   (97,725  —      —       9,162     360     (16,909  (105,112

Vehicles

   (2  —      —       46     —       (172  (128

Equipment

   (301  —      —       245     —       (866  (922

Tools

   (448  —      —       256     —       —      (192

Construction-in-progress

   (89,600  —      338     —       —       (5,414  (94,676

Investment properties

   (246  —      —       7     —       (4  (243

Software

   (409  —      —       264     —       (53  (198

Development expenditures

   (11,653  —      —       5,395     —       (6,113  (12,371

Intangible assets under development

   (10,653  —      3,348     —       —       —      (7,305

Usage rights of donated assets and other

   (75  —      —       143     —       (132  (64

Others

   (1  —      —       3     —       (3  (1
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 
      (448,443)    (49,618  3,686     27,794     1,754     (10,792  (475,619
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

     2013 
     Beginning
balance
  Receipt  Acquisition   Offset the
items of
depreciation
expense and
others
   Disposal   Others  Ending
balance
 
     In millions of won 

Cash

      (29,741  (92,000  —       —       —       121,741    —    

Land

   (3,106  —      —       —       —       (31  (3,137

Buildings

   (44,387  —      —       3,943     —       (4,952  (45,396

Structures

   (177,173  —      —       8,389     1,733     (26,138  (193,189

Machinery

   (105,112  —      —       9,507     376     (6,579  (101,808

Vehicles

   (128  —      —       45     —       —      (83

Equipment

   (922  —      —       311     —       (96  (707

Tools

   (192  —      —       155     —       (275  (312

Construction-in-progress

   (94,676  —      25,669     —       —       (48,721  (117,728

Investment properties

   (243  —      —       3     —       227    (13

Software

   (198  —      —       160     —       (390  (428

Development expenditures

   (12,371  —      —       5,686     —       (5,020  (11,705

Intangible assets under development

   (7,305  —      5,358     —       —       (5,845  (7,792

Usage rights of donated assets and other

   (64  —      —       11     —       —      (53

Others

   (1  —      —       —       —       —      (1
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 
      (475,619)    (92,000  31,027     28,210     2,109     23,921    (482,352
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

28.Deferred Revenues

Deferred revenue related to the Company’s construction contracts as of December 31, 2012 and 2013 are as follows and included in current and non-current non-financial liabilities in the accompanying consolidated statements of financial position:

      2012  2013 
     In millions of won 

Beginning balance

      5,428,993    6,031,311  

Increase during the current year

   903,322    800,618  

Offset during the current year

   (301,004  (325,290
  

 

 

  

 

 

 

Ending balance

      6,031,311    6,506,639  
  

 

 

  

 

 

 

29.Non-financial Liabilities

Non-financial liabilities as of December 31, 2012 and 2013 are as follows:

      2012   2013 
     Current   Non-current   Current   Non-current 
     In millions of won 

Advance received

      3,095,628     407,819     3,533,965     632,661  

Unearned revenue

   31,660     130,426     46,546     108,222  

Deferred revenue

   293,792     5,737,519     323,463     6,183,176  

Withholdings

   254,700     3,886     257,365     43,280  

Others

   441,660     19,000     569,292     18,302  
  

 

 

   

 

 

   

 

 

   

 

 

 
      4,117,440     6,298,650     4,730,631     6,985,641  
  

 

 

   

 

 

   

 

 

   

 

 

 

30.Contributed Capital

 

(1)Non-financial liabilities as of December 31, 2011, December 31, 2010 and January 1, 2010 are as follows (KRW in millions):

  Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 
  Current  Non-current  Current  Non-current  Current  Non-current 

Advance received

 (Won)2,866,238   (Won)6,607   (Won)1,752,595   (Won)9,847   (Won)1,235,140   (Won)388,903  

Unearned revenue

  47,620    152,750    91,362    175,021    88,543    197,332  

Deferred revenue

  —      5,428,993    —      5,003,994    —      4,637,085  

Withholdings

  236,834    4,911    215,464    6,515    197,030    6,875  

Others

  390,870    17,749    323,882    26,479    307,988    20,987  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)3,541,562   (Won)5,611,010   (Won)2,383,303   (Won)5,221,856   (Won)1,828,701   (Won)5,251,182  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

30.CONTRIBUTED CAPITAL:

(1)CompositionDetails of shares issued as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

  Dec. 31, 2011 
  Shares
authorized
  Shares issued  Par value
per share
  Owned by
Government
  Others  Total 

Common shares

  1,200,000,000    641,964,077   (Won)5,000   (Won)1,640,385   (Won)1,569,435   (Won)3,209,820  

  Dec. 31, 2010 
  Shares
authorized
  Shares issued  Par value
per share
  Owned by
Government
  Others  Total 

Common shares

  1,200,000,000    641,567,712   (Won)5,000   (Won)1,638,404   (Won)1,569,435   (Won)3,207,839  

  Jan. 1, 2010 
  Shares
authorized
  Shares issued  Par value
per share
  Owned by
Government
  Others  Total 

Common shares

  1,200,000,000    641,567,712   (Won)5,000   (Won)1,638,404   (Won)1,569,435   (Won)3,207,839  
  2012 
  Shares
authorized
  Shares issued  Par value
per share
  Owned by
government(*)
  Owned by
others
  Total 
  In millions of won except share information 

Common shares

  1,200,000,000    641,964,077   5,000    1,640,385    1,569,435    3,209,820  

 

 (2)(*)ChangesKorea Finance Corporation ownership of ₩960,800 million are included.

  2013 
  Shares
authorized
  Shares issued  Par value
per share
  Owned by
government(*)
  Owned by
others
  Total 
  In millions of won except share information 

Common shares

  1,200,000,000    641,964,077   5,000    1,640,385    1,569,435    3,209,820  

(2)There were no changes in number of outstanding capital stock for the years ended December.December 31, 20112012 and 2010 :

   2011   2010 

Beginning balance

   641,567,712     641,567,712  

Increased shares issued(*1)

   396,365     —    
  

 

 

   

 

 

 

Ending balance

   641,964,077     641,567,712  
  

 

 

   

 

 

 

(*1)On April 21, 2011, the Board of Directors of KEPCO approved the issuance of 396,365 shares of common stock to the Korean government. The Company issued new shares in consideration for the Korean government’s capital contribution to the Company; the Korean government transferred electricity transmission lines and related equipments from the Korean military to the Company.2013.

 

(3)(3)CompositionDetails of Shareshare premium as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

   Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010 

Share premium

  (Won)843,758    (Won)835,140    (Won)835,140  
      2012   2013 
     In millions of won 

Share premium

      843,758     843,758  

31.RETAINED EARNINGS AND DIVIDENDS PAIDRetained Earnings and Dividends Paid

 

(1)(1)CompositionsDetails of retained earnings as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

  Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010    2012   2013 

Legal reserve(*1)

  (Won)1,603,919    (Won)1,603,919    (Won)1,603,919  
   In millions of won 

Legal reserve(*)

      1,603,919     1,603,919  

Voluntary reserves

   21,766,678     21,828,100     21,905,812     25,961,315     22,753,160  

Retained earnings before appropriations

   12,398,497     15,864,213     15,987,364     4,999,049     8,409,007  
  

 

   

 

   

 

   

 

   

 

 

Retained earnings

  (Won)35,769,094    (Won)39,296,232    (Won)39,497,095        32,564,283     32,766,086  
  

 

   

 

   

 

   

 

   

 

 

 

 (*1))The KEPCO Act requires the Company to appropriate a legal reserve equal to at least 20 percent of net income for each accounting period until the reserve equals 50 percent of the Company’s common stock. The legal reserve is not available for cash dividends; however, this reserve may be credited to paid-in capital or offset against accumulated deficit by the resolution of the shareholders.

 

(2)(2)CompositionsDetails of voluntary reserves as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

   2012   2013 
  Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010    In millions of won 

Reserve for investment on social overhead capital

  (Won)5,277,449    (Won)5,277,449    (Won)5,277,449        5,277,449     5,277,449  

Reserve for research and human development(*1)

   330,000     330,000     330,000  

Reserve for research and human development(*)

   330,000     330,000  

Reserve for business expansion

   15,949,229     16,010,651     16,088,363     20,143,866     16,935,711  

Reserve for equalizing dividends

   210,000     210,000     210,000     210,000     210,000  
  

 

   

 

   

 

   

 

   

 

 
  (Won)21,766,678    (Won)21,828,100    (Won)21,905,812        25,961,315     22,753,160  
  

 

   

 

   

 

   

 

   

 

 

 

 (*1))The reserve for research and human development is appropriated by the Company to use as qualified tax credits to reduce corporate tax liabilities. The reserve is available for cash dividends for a certain period as defined by the Tax Incentive Control Law of Korea.

 

(3)(3)Changes in retained earnings for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

   2012 2013 
  2011 2010    In millions of won 

Beginning balance

  (Won)39,296,232   (Won)39,497,095        35,769,094    32,564,283  

Net income(loss) attributable to Owners of the parent Company

   (3,370,464  (119,931

Net loss for the period attributed to owner of the Company

   (3,166,616  60,011  

Changes in equity method retained earnings

   (5,002  (2,056   (846  7,671  

Actuarial losses

   (151,672  (78,876

Actuarial profits (losses)

   (37,349  134,121  
  

 

  

 

   

 

  

 

 

Ending balance

  (Won)35,769,094   (Won)39,296,232        32,564,283    32,766,086  
  

 

  

 

   

 

  

 

 

 

(4)(4)Dividends paid for the years ended December 31, 20112012 and 20102013 are as follows :follows:

 

2011

 
    Number of
shares issued
   Number of
treasury shares
   Number of
shares
eligible for

dividends
   Dividends
Paid
   Dividends paid
per share
 

Common shares

   641,964,077     18,929,995     623,034,082     —       —    

Preferred shares

   —       —       —       —       —    

2010

 
    Number of
shares issued
   Number of
treasury shares
   Number of
shares
eligible for

dividends
   Dividends
Paid
   Dividends paid
per share
 

Common shares

   641,567,712     18,929,995     622,637,717     —       —    

Preferred shares

   —       —       —       —       —    
   2012 
   Number of
shares issued
   Number of
treasury stocks
   Number of
shares
eligible for
dividends
   Dividends
Paid
   Dividends paid
per share
 

Common shares

   641,964,077     18,929,995     623,034,082            

 

   2013 
   Number of
shares issued
   Number of
treasury stocks
   Number of
shares
eligible for
dividends
   Dividends
Paid
   Dividends paid
per  share
 

Common shares

   641,964,077     18,929,995     623,034,082            

(5)(5)Changes in retained earnings of investmentinvestments in associates and joint ventures for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follow:

 

   2012 2013 
  2011 2010    In millions of won 

Beginning balance

  (Won)(2,056 (Won)—          (7,058  (7,904

Changes

   (9,189  (3,380   (1,155  7,671  

Income tax effect

   4,187    1,324     309    —    
  

 

  

 

   

 

  

 

 

Ending balance

  (Won)(7,058 (Won)(2,056      (7,904  (233
  

 

  

 

   

 

  

 

 

 

(6)Changes in actuarial losses on retirement benefit obligations for the years ended December 31, 2011 and 2010 are as follows (KRW in millions):

   2011  2010 

Beginning balance

  (Won)85,605   (Won)—    

Changes

   219,070    109,813  

Income tax effect

   (66,873  (24,208
  

 

 

  

 

 

 

Ending balance

  (Won)237,802   (Won)85,605  
  

 

 

  

 

 

 

32.STATEMENT OF APPROPRIATION OF RETAINED EARNINGSStatement of Appropriation of Retained Earnings

For the year ended December 31, 2011,2012, the Company’s retained earnings were appropriated on March 29, 2013.

For the year ended December 31, 2013, the Company’s retained earnings are expected to be appropriatedappropriate on March 30, 2012. For the year ended December 31, 2010, the Company’s retained earnings were appropriated on March 11, 2011.

28, 2014. Statements of appropriation of retained earnings of KEPCO, the parent, for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

   2011  2010 

I. RETAINED EARNINGS BEFORE APPROPRIATIONS:

   

Retained earnings carried over from prior year

  (Won)7,826,305   (Won)—    

Effect of transition to IFRS

   —      9,317,382  

Loss for the period

   (3,514,130  (1,478,227

Actuarial losses

   (117,538  (74,271
  

 

 

  

 

 

 
   4,194,637    7,764,884  
  

 

 

  

 

 

 

II. TRANSFER FROM VOLUNTARY RESERVES:

   

Transfer from reserve for business expansion

   —      61,421  
  

 

 

  

 

 

 
   —      61,421  
  

 

 

  

 

 

 

III. SUBTOTAL(I + II )

  (Won)4,194,637   (Won)7,826,305  
  

 

 

  

 

 

 

IV. APPROPRIATIONS OF RETAINED EARNINGS:

   

Transfer to reserve for business expansion

   (4,194,637  —    
  

 

 

  

 

 

 
   (4,194,637  —    
  

 

 

  

 

 

 

V. UNAPPROPRIATED RETAINED EARNINGS TO BE

   

Carried forward to subsequent year

  (Won)—     (Won)7,826,305  
  

 

 

  

 

 

 
      2012  2013 
     In millions of won except
for dividends per share
 

I. Retained Earnings Before Appropriations

   

Unappropriated retained earnings carried over from prior years

      —      —    

Net income (loss)

   (3,226,597  238,307  

Remeasurements of the defined benefit plan

   18,442    64,956  
  

 

 

  

 

 

 
   (3,208,155  303,263  
  

 

 

  

 

 

 

II. Transfer from voluntary reserves

   3,208,155    —    
  

 

 

  

 

 

 

III. Subtotal (I+II)

   —      303,263  
  

 

 

  

 

 

 

IV. Appropriations of retained earnings

   —      (303,263

Legal reserve

   —      (991

Dividends (government, individual)

   

(Amount of dividends per share (%) : Current year—₩90 (1.8%)

Prior year—none )

   —      (56,073

Reserve for business expansion

   —      (246,199

V. Unappropriated retained earnings to be carried over forward to subsequent year

   —      —    

33.OTHER COMPONENTS OF EQUITYHybrid Bonds

Korea Western Power Co., Ltd. and Korea South-East Power Co., Ltd. which are wholly owned subsidiaries of the Company, issued bond-type hybrid bonds for the year ended December 31, 2013. Bond-type hybrid securities classified as equity (non-controlling interest) as of December 31, 2013 are as follows:

Issuer

 

Hybrid Bond

 Issued date  Maturity   Yield (%) Amount 
  In millions of won 

Korea Western
Power Co., Ltd.

 

1st bond-type hybrid bond

  2012.10.18    2042.10.18    5yr government
bond rate + 1.20
 100,000  

Korea South-East
Power Co., Ltd.

 

1st bond-type hybrid bond

  2012.12.07    2042.12.06    4.38  170,000  

Korea South-East
Power Co., Ltd.

 

2nd bond-type hybrid bond

  2012.12.07    2042.12.06    4.44  230,000  

Expense of Issuance

  (1,340
      

 

 

 
      498,660  
      

 

 

 

Although these instruments have contractual maturity dates, the contractual agreements allow the Company to indefinitely extend the maturity dates and defer the payment of interest without modification to the other terms of the instruments. When the Company decides to not pay dividends on ordinary shares, the Company is not required to pay interest on the hybrid bonds.

Substantially, as these instruments have no contractual obligation to pay principal and interest, these instruments have been classified as equity (non-controlling interest).

34.Other Components of Equity

 

(1)(1)Other components of equity of the parent as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows(KRW in millions):follows:

 

   2012 2013 
  Dec. 31, 2011 Dec. 31, 2010 Jan. 1, 2010    In millions of won 

Other capital surpluses

  (Won)639,028   (Won)569,630   (Won)471,708        705,448    830,982  

Accumulated other comprehensive income

   255,095    355,626    306,235     11,957    55,538  

Treasury shares

   (741,489  (741,489  (741,489

Treasury stocks

   (741,489  (741,489

Other equity

   13,294,990    13,295,000    13,295,000     13,294,990    13,294,973  
  

 

  

 

  

 

   

 

  

 

 
  (Won)13,447,624   (Won)13,478,767   (Won)13,331,454        13,270,906    13,440,004  
  

 

  

 

  

 

   

 

  

 

 

 

(2)(2)Changes in other capital surplus of the parentsurpluses for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

   2012 2013 
  2011 2010    Gains on
disposal of
treasury
stocks
   Others Subtotal Gains on
disposal of
treasury
stocks
   Others Subtotal 
Gains on disposal  of
treasury shares
   Others Gains on disposal  of
treasury shares
   Others    In millions of won 

Beginning balance

  (Won)—      (Won)569,630   (Won)—      (Won)471,708        303,028     336,000    639,028    303,028     402,420    705,448  

Disposal of subsidiary

   —       91,541    —       129,185     —       87,624    87,624    —       183,522    183,522  

Increase of shares issued

   —       —      —       —    

Reduction of shares issued

   —       —      —       —    

Issuance of share

capital of subsidiary

   —       —      —      —       (155  (155

Change in consolidation scope

   —       —      —      —       (10,224  (10,224

Income tax effect

   —       (22,143  —       (31,263   —       (21,204  (21,204  —       (47,609  (47,609
  

 

   

 

  

 

   

 

   

 

   

 

  

 

  

 

   

 

  

 

 

Ending balance

  (Won)—      (Won)639,028   (Won)—      (Won)569,630        303,028     402,420    705,448    303,028     527,954    830,982  
  

 

   

 

  

 

   

 

   

 

   

 

  

 

  

 

   

 

  

 

 

(3)(3)Changes in accumulated other comprehensive income (loss) of the parent for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

   2011 
   Available-for-sale
financial asset
valuation reserve
  Share in other
comprehensive
income of
investments in
associates and joint
ventures
   Reverse for
overseas  operations
translation credit
  Reverse for
gains(loss)
on valuation of
derivatives
 

Beginning balance

  (Won)148,753   (Won)188,566    (Won)(7,685 (Won)25,992  

Net change in fair value of available- for-sale financial assets

   (174,937  —       —      —    

Valuation of investments in associates and joint ventures

   —      50,881     —      —    

Overseas operations translation

   —      —       42,173    —    

Valuation of derivatives

   —      —       —      (18,648
  

 

 

  

 

 

   

 

 

  

 

 

 

Ending balance

  (Won)(26,184 (Won)239,447    (Won)34,488   (Won)7,344  
  

 

 

  

 

 

   

 

 

  

 

 

 

  2010 
  Available-for-sale
financial asset
valuation reserve
  Share in other
comprehensive
income of
investments in
associates and joint
ventures
  Reverse for
overseas  operations
translation credit
  Reverse  for
gains(loss)
on valuation  of
derivatives
 

Beginning balance

 (Won)24,430   (Won)220,807   (Won)—     (Won)60,997  

Net change in fair value of available- for-sale financial assets

  124,323    —      —      —    

Valuation of investments in associates and joint ventures

  —      (32,241  —      —    

Overseas operations translation

  —      —      (7,685  —    

Valuation of derivatives

  —      —      —      (35,005
 

 

 

  

 

 

  

 

 

  

 

 

 

Ending balance

 (Won)148,753   (Won)188,566   (Won)(7,685 (Won)25,992  
 

 

 

  

 

 

  

 

 

  

 

 

 
     2012 
     Available-for-sale
financial asset
valuation reserve
  Shares in other
comprehensive
income of
investments in
associates and
joint ventures
  Reserve for
overseas
operations
translation credit
  Reserve for
gain (loss)
on valuation of
derivatives
  Total 
     In millions of won 

Beginning balance

      (26,184  239,447    34,488    7,344    255,095  

Changes in the unrealized fair value of available- for-sale financial assets, net of tax

   2,255    —      —      —      2,255  

Shares in other comprehensive income of associates and joint ventures, net of tax

   —      (95,889  —      —      (95,889

Foreign currency translation of foreign operations, net of tax

   —      —      (104,595  —      (104,595

Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax

   —      —      —      (44,909  (44,909
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending balance

      (23,929  143,558    (70,107  (37,565  11,957  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

     2013 
     Available-for-sale
financial asset
valuation reserve
  Shares in other
comprehensive
income of
investments in
associates and
joint ventures
  Reserve for
overseas
operations
translation credit
  Reserve for
gain (loss) on
valuation of
derivatives
  Total 
     In millions of won 

Beginning balance

      (23,929  143,558    (70,107  (37,565  11,957  

Changes in the unrealized fair value of available- for-sale financial assets, net of tax

   86,543    —      —      —      86,543  

Shares in other comprehensive income of associates and joint ventures, net of tax

   —      38,703    —      —      38,703  

Foreign currency translation of foreign operations, net of tax

   —      —      (100,572  —      (100,572

Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax

   —      —      —      18,907    18,907  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending balance

      62,614    182,261    (170,679  (18,658  55,538  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(4)(4)ChangesThere were no changes in treasury sharesstocks for the years ended December 31, 20112012 and 2010 are as follows (KRW in millions):2013.

 

   2011  2010 

Beginning balance

  (Won)(741,489 (Won)(741,489

Changes

   —      —    
  

 

 

  

 

 

 

Ending balance

  (Won)(741,489 (Won)(741,489
  

 

 

  

 

 

 

(5)(5)Changes in other equity for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

   2011  2010 

Beginning balance

  (Won)13,295,000   (Won)13,295,000  

Changes

   (10  —    
  

 

 

  

 

 

 

Ending balance

  (Won)13,294,990   (Won)13,295,000  
  

 

 

  

 

 

 
     2012  2013 
     In millions of won 

Statutory revaluation reserve

      13,295,098    13,295,098  

Changes in other equity

   (108  (125
  

 

 

  

 

 

 
      13,294,990    13,294,973  
  

 

 

  

 

 

 

 

34.35.SALESSales

 

 (1)DetailsDetails of sales for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

   2011 2012 2013 
  2011   2010    Domestic Overseas Domestic Overseas Domestic Overseas 
  Domestic   Overseas   Domestic   Overseas    In millions of won 

Sales of goods

              41,135,735    261,734    46,667,133    239,454    50,876,783    256,020  

Sales of electricity

   40,859,998     —       37,202,310     —    

Sales of heat supply

   190,336     —       229,960     —    

Electricity

   40,502,913    —      45,979,601    —      50,170,178    —    

Heat supply

   190,336    —      216,417    —      244,455    —    

Others

   442,486     261,734     327,859     244,196     442,486    261,734    471,115    239,454    462,150    256,020  

Sales of service

   186,837    135,779    215,887    141,990    198,932    127,687  

Sales of construction services

   171,411    1,283,721    98,883    1,757,162    238,924    2,014,159  
  

 

   

 

   

 

   

 

   

 

  

 

  

 

  

 

  

 

  

 

 
  (Won)41,492,820    (Won)261,734    (Won)37,760,129    (Won)244,196        41,493,983    1,681,234    46,981,903    2,138,606    51,314,639    2,397,866  
  

 

   

 

   

 

   

 

   

 

  

 

  

 

  

 

  

 

  

 

 

Sales of service

   186,837     135,779     230,787     516,257  

Sales of construction contracts

   171,411     1,283,721     97,656     657,557  
  

 

   

 

   

 

   

 

 
  (Won)41,851,068    (Won)1,681,234    (Won)38,088,572    (Won)1,418,010  
  

 

   

 

   

 

   

 

 

35.36.SELLING AND ADMINISTRATIVE EXPENSESSelling and Administrative Expenses

 

(1)(1)Composition of selling and administrative expenses for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

   2011   2012   2013 
  2011   2010    In millions of won 

Salaries

  (Won)537,137    (Won)532,502        537,137     579,305     566,748  

Retirement benefit expense

   66,955     62,482     66,955     77,432     81,051  

Welfare and benefit expense

   104,588     91,731     104,588     103,088     107,342  

Insurance expense

   3,066     2,310     3,066     4,048     7,408  

Depreciation

   41,900     31,560     41,900     46,498     68,222  

Amortization of intangible assets

   53,525     42,448     53,525     51,779     50,266  

Bad debt expense

   14,269     13,098     14,269     37,447     40,446  

Commission

   509,846     499,728     509,846     442,961     510,309  

Advertising expense

   21,918     22,371     21,918     23,270     28,127  

Training expense

   5,125     3,994     5,125     5,853     5,332  

Vehicle maintenance expense

   11,690     10,276     11,690     12,417     12,358  

Publishing expense

   2,858     2,591     2,858     2,883     3,190  

Business promotion expense

   3,171     3,198     3,171     3,322     3,707  

Rent expense

   26,550     27,429     26,550     34,505     39,652  

Telecommunication expense

   23,722     24,627     23,722     23,811     24,468  

Transportation expense

   226     351     226     387     347  

Taxes and dues

   64,707     56,268     64,707     46,950     43,648  

Expendable supplies expense

   3,720     3,600     3,720     4,999     4,453  

Water, light and heating expense

   8,683     8,797     8,683     10,384     9,669  

Repairs and maintenance expense

   12,232     9,659     12,232     13,199     25,512  

Ordinary development expense

   134,929     118,767     134,929     142,264     166,106  

Travel expense

   11,019     9,350     11,019     12,984     13,146  

Clothing expense

   2,356     2,242     2,356     6,438     4,374  

Survey and analysis expense

   769     722     769     815     623  

Membership fee

   609     523     609     672     774  

Sales promotional expense

   —       —       5  

Others

   86,127     64,136     86,126     92,457     105,909  
  

 

   

 

   

 

   

 

   

 

 
  (Won)1,751,697    (Won)1,644,760        1,751,696     1,780,168     1,923,192  
  

 

   

 

   

 

   

 

   

 

 

 

36.(2)OTHER OPERATING INCOME AND EXPENSEOther selling and administrative expenses for the years ended December 31, 2011, 2012 and 2013 are as follows:

     2011   2012   2013 
     In millions of won 

Sales promotional expenses

      21,771     19,929     22,061  

Miscellaneous wages

   17,971     25,437     34,284  

Litigation and filing expenses

   9,180     7,931     9,501  

Compensation for damages

   8,381     1,634     2,289  

Outsourcing expenses

   2,138     5,081     4,002  

Reward expenses

   3,014     3,222     2,507  

Others

   23,672     29,223     31,265  
  

 

 

   

 

 

   

 

 

 
      86,127     92,457     105,909  
  

 

 

   

 

 

   

 

 

 

37.Other Income and Expense

 

(1)(1)Other operating income for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

   2011   2012   2013 
  2011   2010    In millions of won 

Reversal of other provisions

  (Won)110    (Won)14,754        110     18,472     11,743  

Reversal of allowance for doubtful accounts

   460     6,952     460     152     —    

Gains on assets contributed

   4,392     1,390     4,392     16,486     14,392  

Gains on liabilities exempted

   4,578     5,679     4,578     2,329     2,425  

Compensation and reparations revenue

   30,350     12,501     30,350     82,021     94,064  

Electricity infrastructure development fund

   48,154     41,189  

Gains on electricity infrastructure development fund

   48,154     35,804     50,808  

Revenue from research contracts

   6,124     542     6,124     8,922     10,815  

Revenue related to transfer of assets from customers

   280,458     257,505     280,458     301,004     325,290  

Rental income

   180,563     168,386     180,562     185,735     187,351  

Others

   43,114     28,017     43,114     24,075     28,569  
  

 

   

 

   

 

   

 

   

 

 
  (Won)598,303    (Won)536,915        598,302     675,000     725,457  
  

 

   

 

   

 

   

 

   

 

 

(2)(2)Details of others of other income for the years ended December 31, 2011, 2012 and 2013 are as follows:

     2011   2012   2013 
     In millions of won 

Refund of claim for rectification

      19,420     12,417     9,796  

Adjustment of research project

   1,003     2,492     3,891  

Maintenance expenses on lease building

   876     1,110     2,320  

Training expenses

   1,157     934     3,657  

Deposit redemption

   1,427     2,154     142  

Reversal of expenses on litigation

   —       —       2,340  

Compensation for land incorporation

   1,001     924     —    

Revenue on royalty fee

   —       —       2,471  

Harbor facilities dues of DangJin thermal power plant

   880     1,002     —    

Others

   17,350     3,042     3,952  
  

 

 

   

 

 

   

 

 

 
      43,114     24,075     28,569  
  

 

 

   

 

 

   

 

 

 

(3)Other operating expense for the years ended December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):

   2011   2010 

Compensation and reparations expense

  (Won)2,000    (Won)—    

Transfer to other provisions

   238     22,004  

Depreciation expenses on investment properties

   927     1,129  

Depreciation expenses on assets not in use

   6,619     6,723  

Other bad debt expense

   867     471  

Donations

   100,352     30,874  

Others

   36,592     8,586  
  

 

 

   

 

 

 
  (Won)147,595    (Won)69,787  
  

 

 

   

 

 

 

37.OTHER INCOME (LOSS)follows:

 

      2011   2012   2013 
     In millions of won 

Compensation and reparations expense

      2,000     —       —    

Accretion expenses of other provisions

   238     498     443  

Depreciation expenses on investment properties

   927     974     908  

Depreciation expenses on idle assets

   6,619     9,699     6,661  

Other bad debt expense

   867     3,994     8,665  

Donations

   100,352     34,550     57,970  

Others

   36,592     24,852     25,164  
  

 

 

   

 

 

   

 

 

 
      147,595     74,567     99,811  
  

 

 

   

 

 

   

 

 

 

(4)(1)CompositionDetails of others of other income and lossexpense for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

   2011   2010 

Other income

    

Gains on disposition of property plant, and equipment

  (Won)38,776    (Won)42,037  

Reversal of Impairment loss on intangible assets

   —       16  

Gains on foreign currency translation(*1)

   1,659     4,634  

Gains on foreign currency transaction(*1)

   100,811     90,452  

Insurance proceeds

   —       34  

Others

   213,624     219,110  

Other loss

    

Loss on disposition of property plant, and equipment

   31,228     46,882  

Loss on disposition of intangible assets

   5     12  

Impairment loss on property, plant, and equipment

   —       26,648  

Impairment loss on intangible assets

   221     451  

Loss on foreign currency translation(*1)

   5,402     3,603  

Loss on foreign currency transaction(*1)

   98,806     97,210  

Others

   53,505     63,270  
  

 

 

   

 

 

 
  (Won)165,703    (Won)118,207  
  

 

 

   

 

 

 
      2011   2012   2013 
     In millions of won 

Operating expenses related to the idle assets

      1,230     1,254     1,034  

Research grants

   4,223     877     551  

Supporting expenses on farming and fishing village

   —       11,727     16,162  

Operating expenses on fitness center

   1,823     2,240     2,382  

Expenses on adjustment of research and

development grants

   625     2,860     1,272  

Forfeit of taxes and dues

   —       —       2,442  

Expenses on unauthorized provision payment of

decommissioning cost

   23,475     1,307     —    

Others

   5,216     4,587     1,321  
  

 

 

   

 

 

   

 

 

 
      36,592     24,852     25,164  
  

 

 

   

 

 

   

 

 

 

38.Other Gains (Losses)

(1)Composition of other gains (losses) for the years ended December 31, 2011, 2012 and 2013 are as follows:

      2011  2012  2013 
     In millions of won 

Other gains

    

Gains on disposal of property plant, and equipment

      38,776    32,797    59,345  

Gains on disposal of intangible assets

   —      15    4  

Gains on disposal of other non-current assets

   —      584    —    

Reversal of impairment loss on intangible assets

   —      7    121  

Gains on foreign currency translation

   1,659    5,174    2,835  

Gains on foreign currency transaction

   100,811    67,006    62,817  

Insurance proceeds

   —      5,375    1,700  

Others

   213,624    168,270    208,554  

Other losses

    

Losses on disposal of property plant and equipment

   (31,228  (39,942  (58,852

Losses on disposal of intangible assets

   (5  (44  (1

Impairment loss on property, plant and equipment

   —      —      (1,161

Impairment loss on intangible assets

   (221  (459  (267

Impairment loss on other non-current non-financial assets(*)

   —      (1,877,371  —    

Losses on foreign currency translation

   (5,402  (1,312  (9,978

Losses on foreign currency transaction

   (98,806  (65,892  (59,907

Others

   (53,505  (76,043  (76,696
  

 

 

  

 

 

  

 

 

 
      165,703    (1,781,835  128,514  
  

 

 

  

 

 

  

 

 

 

 

 (*1))RelatesThe impairment on other non-current non-financial assets was recognized for the full fuel cost pass-through adjustment (FCPTA) amounts. Although the Regulation for Electricity Service states that recognized FCPTA amounts are to Company’s operating activitiesbe settled in the following year, the Company recognized full impairment of the FCPTA amounts as it concluded that the collectability of the FCPTA amounts could no longer be certain since the Government had not lifted the hold-order for more than one year. See note 49 (5).

(2)Details of others of other gains for the years ended December 31, 2011, 2012 and 2013 are as follows:

 

      2011   2012   2013 
     In millions of won 

Gains on disposal of inventories

      12,901     13,434     11,387  

Gains on valuation of inventories

   1     19     903  

Gains on proxy collection of TV license fee

   35,443     36,036     36,706  

Gains on compensation of impaired electric poles

   11,323     11,628     5,407  

Gains on compensation for infringement on contract

   6,910     2,353     4,311  

Gains on harbor facilities dues

   5,047     4,804     4,745  

Technical fees

   3,432     1,442     3,940  

Reversal of occupation development training fees

   1,761     2,465     2,369  

Gains on disposal of waste

   3,652     2,915     9,979  

Gains on insurance

   11,764     3,071     12,828  

Gains on litigation

   2,568     870     5,813  

Interests on tax rebate

   1,166     1,522     9,258  

Gains on other commission

   18,154     19,414     14,288  

Gains on settlement and others

   26,350     2,868     11,205  

Others

   73,152     65,429     75,415  
  

 

 

   

 

 

   

 

 

 
      213,624     168,270     208,554  
  

 

 

   

 

 

   

 

 

 

38.(3)FINANCE INCOMEDetails of others of other losses for the years ended December 31, 2011, 2012 and 2013 are as follows:

     2011   2012   2013 
     In millions of won 

Losses on valuation of inventories

      6,747     6,920     1,604  

Losses on disposal of inventories

   4,944     2,360     1,778  

Losses due to disaster

   11,203     29,090     4,456  

Losses on rounding adjustment of electric charge surtax

   1,129     1,168     1,174  

Losses on adjustments of levies

   6,075     3,023     41,176  

Losses on write-off

   —       —       3,627  

Penalty on taxes and dues

   244     2,742     2,116  

Commission and others

   —       3,962     821  

Others

   23,163     26,778     19,944  
  

 

 

   

 

 

   

 

 

 
      53,505     76,043     76,696  
  

 

 

   

 

 

   

 

 

 

39.Finance Income

 

(1)(1)Finance income for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

   2011   2012   2013 
  2011   2010    In millions of won 

Interest income

  (Won)291,625    (Won)120,422        291,625     204,123     182,161  

Dividends income

   18,894     3,341     18,894     10,452     9,870  

Gains on disposition of financial assets

   —       1,137  

Gains on disposal of financial assets

   —       189     196  

Gains on valuation of derivatives

   171,341     27,387     171,341     3,289     16,927  

Gains on transaction of derivatives

   30,660     98,809     30,660     38,745     120,948  

Gains on foreign currency translation(*1)

   8,172     209,245  

Gains on foreign currency transaction(*1)

   86,778     131,150  

Gains on foreign currency translation

   8,172     786,139     263,311  

Gains on foreign currency transaction

   86,779     85,420     36,129  

Other finance income

   122     —       121     —       —    
  

 

   

 

   

 

   

 

   

 

 
  (Won)607,592    (Won)591,491        607,592     1,128,357     629,542  
  

 

   

 

   

 

   

 

   

 

 

(2)(*1)Gains on foreign currency translation and gains on foreign currency transaction are arising from financing activities.

(2)Interest income included in finance income for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

   2011   2012   2013 
  2011   2010    In millions of won 

Cash and cash equivalents

  (Won)72,534    (Won)63,518        43,822     63,456     60,301  

Held-to-maturity investments

   85     90     85     69     64  

Available-for-sale financial assets

   —       —       1,150  

Loans and receivables

   202,104     35,291     188,457     47,028     42,418  

Accounts and other receivables

   16,902     21,523  

Trade and other receivables

   16,902     70,304     60,237  

Other financial assets

   —       —       1,082  

Short-term financial instrument

   42,359     23,250     16,896  

Long-term financial instrument

   —       16     13  
  

 

   

 

   

 

   

 

   

 

 
  (Won)291,625    (Won)120,422        291,625     204,123     182,161  
  

 

   

 

   

 

   

 

   

 

 

 

39.40.FINANCE EXPENSEFinance expenses

 

(1)(1)Finance expenseexpenses for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

   2011   2010 

Interest expense

  (Won)2,123,579    (Won)2,045,684  

Loss on disposition of financial assets

   —       227  

Loss on valuation of derivatives

   46,325     235,194  

Loss on transaction of derivatives

   80,369     87,336  

Loss on foreign currency translation(*1)

   230,441     100,118  

Loss on foreign currency transaction(*1)

   38,136     89,866  
  

 

 

   

 

 

 
  (Won)2,518,850    (Won)2,558,425  
  

 

 

   

 

 

 
     2011   2012   2013 
     In millions of won 

Interest expense

      2,123,579     2,344,328     2,381,900  

Losses on sale of financial assets

   —       —       4,202  

Impairment of available-for-sale financial assets

   —       40,156     12,592  

Losses on valuation of derivatives

   46,325     577,837     263,777  

Losses on transaction of derivatives

   80,369     61,825     107,582  

Losses on foreign currency translation

   230,441     23,138     60,597  

Losses on foreign currency transaction

   38,136     21,037     100,972  
  

 

 

   

 

 

   

 

 

 
      2,518,850     3,068,321     2,931,622  
  

 

 

   

 

 

   

 

 

 

 

(2)(*1)Loss on foreign currency translation and loss on foreign currency transaction are arising from financing activities.

(2)Interest expense included in finance expenseexpenses for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

  2011 2010    2011 2012 2013 

Accounts and other payables

  (Won)147,882   (Won)268,120  
   In millions of won 

Trade and other payables

      147,882    118,372    102,388  

Short-term borrowings

   101,304    21,449     101,304    52,025    32,928  

Long-term borrowings

   201,252    150,902     201,252    221,917    191,638  

Debentures

   1,936,682    1,764,938  

Debt securities

   1,936,682    2,154,599    2,234,148  

Exchangeable bonds

   2,533    2,515     2,533    —      —    

Other financial liabilities

   307,272    274,187     307,272    398,717    564,139  
  

 

  

 

   

 

  

 

  

 

 
   2,696,925    2,482,111     2,696,925    2,945,630    3,125,241  
  

 

  

 

   

 

  

 

  

 

 

Capitalized borrowing costs

   (573,346  (436,427

Less: Capitalized borrowing costs

   (573,346  (601,302  (743,341
  

 

  

 

   

 

  

 

  

 

 
  (Won)2,123,579   (Won)2,045,684        2,123,579    2,344,328    2,381,900  
  

 

  

 

   

 

  

 

  

 

 

Capitalization rates for the years ended December 31, 2011, 2012 and 20102013 are 3.67% to~ 5.30%, 3.25% ~ 5.31% and 3.28% to 5.36%3.71% ~ 4.33%, respectively.

40.41.INCOME TAX EXPENSEIncome Taxes

 

(1)(1)Income tax expense for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

   2011 2012 2013 
 2011 2010    In millions of won 

Current income tax expense

      

Payment of income tax

 (Won)575,973   (Won)393,983        569,746    140,969    172,574  

Adjustment recognized in the period for current tax of prior period

  (44,524  (65,184   (44,524  28,271    (11,833

Current income tax directly recognized in equity

  35,799    18,600     35,799    36,175    (151,076

Change in tax reserve for uncertain tax position

  (6,226  100  
 

 

  

 

   

 

  

 

  

 

 
  561,022    347,499     561,021    205,415    9,665  
 

 

  

 

   

 

  

 

  

 

 

Deferred income tax expense

      

Generation and realization of temporary differences

  (1,572,623  (244,349   468,133    (224,069  (532,604

Reclassified from equity to income

  —      —    

Recognition of unrecognized tax losses in the past, tax credit and temporary differences prior to previous period

  (231,528  1,130  

Recognition of unrecognized tax losses in the past, tax credit and temporary differences before prior year

   (231,527  245,914    (201,420

Changes in deferred tax on tax losses incurred in the period

  1,020,378    316,722     (1,020,378  (1,212,610  93,668  

Impairment of deferred tax assets

  697,779    —    

Tax credit carry back

  (3,525  13,037  

Unrecognized deferred tax assets

   697,779    (27  103,555  

Tax credit carry forwards

   (3,525  —      (43,658

Changes in tax rates or tax laws

  348,368    4,740     348,368    —      —    

Changes in accounting policy that cannot be applied retroactively

  —      —    
 

 

  

 

   

 

  

 

  

 

 
  258,849    91,280     258,850    (1,190,792  (580,459
 

 

  

 

   

 

  

 

  

 

 

Income tax expense

 (Won)819,871   (Won)438,779  

Income tax expense (benefit)

      819,871    (985,377  (570,794
 

 

  

 

   

 

  

 

  

 

 

 

(2)(2)Reconciliation between actual income tax expense (benefit) and accountingamount computed by applying the statutory tax rate of 24.2% to loss before income taxes for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

  2011  2010 

Income before income tax expenses

 (Won)(2,473,126 (Won)369,612  

Income tax expense in accordance with applicable tax rate
(tax rate: 24.2%)

  (598,496  89,446  

Adjustments

  

Additional payment of income taxes and income tax refunds

  (36,544  (74,412

Effect of applying gradual tax rate

  (101  (123

Effect of non-taxable revenue

  (153,928  (79,880

Effect of nondeductible expenses

  315,536    69,357  

Effect of tax losses not recognized as deferred tax assets

  697,779    —    

Effects of tax credits and deduction

  (38,367  (21,846

Recognition of unrecognized tax losses in the past, tax credit, and temporary differences prior to previous period

  (237,686  13,314  

Effect of changes in deferred tax according to changes in tax rates (From 22% to 24.2%, effective after Dec. 31, 2011)

  320,244    12,794  

Consolidated deferred income tax

  567,134    505,065  

Tax reserve for uncertain tax position

  (6,915  —    

Others

  (8,785  (74,936
 

 

 

  

 

 

 
 (Won)1,418,367   (Won)349,333  
 

 

 

  

 

 

 

Income tax expense recognized in income (loss) for the period

  819,871    438,779  
 

 

 

  

 

 

 

Mean effective tax rate

  —      118.71
 

 

 

  

 

 

 
     2011  2012  2013 
     In millions of won 

Loss before income tax (expense) benefits

      (2,473,126  (4,063,346  (396,488
  

 

 

  

 

 

  

 

 

 

Income tax benefit computed at applicable tax rate of 24.2%

   598,496    983,330    95,950  
  

 

 

  

 

 

  

 

 

 

Adjustments

    

Additional payment of income taxes or receipt of income tax refunds

   36,544    (18,530  36,003  

Effect of applying gradual tax rate

   101    2,332    2,357  

Effect of non-taxable revenue

   153,928    159,843    82,810  

Effect of non-deductible expenses

   (315,536  (29,744  (13,698

Effect of tax losses not recognized as deferred tax assets

   (697,779  —      —    

Effects of tax credits and deduction

   38,367    82,669    335,710  

Recognition of unrecognized tax losses in the past, tax credit, and temporary differences before prior year

   237,686    108,511    179,147  

Unrecognized deferred tax assets

   —      —      (123,227

Consolidated deferred income tax

   (567,134  (321,041  (93,984

The effect of changes in tax rates (from 22% to 24.2%)

   (320,244  —      —    

Others, net

   15,700    18,007    69,726  
  

 

 

  

 

 

  

 

 

 
   (1,418,367  2,047    474,844  
  

 

 

  

 

 

  

 

 

 

Income tax (expense) benefit

      (819,871  985,377    570,794  
  

 

 

  

 

 

  

 

 

 

Effective tax rate

   (-)33  24  144

The corporate tax rates applied to taxable income in 2011 and 2010 are 24.2%, 22%, respectively which is applied in Republic of Korea in which the parent company is located.

(3)(3)Deferred income tax directly adjusted to shareholders’ equity (except for accumulated other comprehensive income) for the years ended December 31, 2011, 2012 and 20102013 are as follows.follows:

 

   2011  2010 

Deferred income tax

  (Won)—     (Won)—    

Gains on disposition of subsidiary

   (22,143  (31,263
  

 

 

  

 

 

 
  (Won)(22,143 (Won)(31,263
  

 

 

  

 

 

 
      2011  2012  2013 
     In millions of won 

Dividends of hybrid securities

      —      —      5,455  

Loss on disposal of subsidiaries and associates

   (22,143  (21,204  (47,609
  

 

 

  

 

 

  

 

 

 
      (22,143)    (21,204  (42,154
  

 

 

  

 

 

  

 

 

 

 

(4)(4)Income tax recognized as cumulativeaccumulated other comprehensive income for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

   2011  2010 

Income tax recognized as cumulative other comprehensive income

   

Gains(Loss) on valuation of available-for-sale financial assets

  (Won)3,369   (Won)8,335  

Gain(Loss) on valuation of derivatives using cash flow hedge accounting

   137    23,278  

Actuarial losses on retirement benefit obligations

   66,873    24,208  

Investment of associates

   (12,763  (5,958

Others

   326    —    
  

 

 

  

 

 

 
  (Won)57,942   (Won)49,863  
  

 

 

  

 

 

 
      2011  2012  2013 
     In millions of won 

Income tax recognized as accumulated other comprehensive income

    

Gain (loss) on valuation of available-for-sale financial assets

      3,369    22,774    (31,367

Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax

   137    (1,845  6,416  

Actuarial losses on employee benefit obligations

   66,873    34,704    (73,647

Investments in associates

   (12,763  (1,377  (10,324

Others

   326    3,123    —    
  

 

 

  

 

 

  

 

 

 
      57,942    57,379    (108,922
  

 

 

  

 

 

  

 

 

 

(5)(5)Changes in deferred income tax assets(liabilities)assets (liabilities) recognized in the statements of financial position as offor the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

   2012 
 2011    Beginning
balance
 Amounts
recognized
in profit or
loss
 Amount
recognized in
other
comprehensive
income
 Amounts
recognized
directly
in equity
 Ending
balance
 
 Beginning
balance
 Amounts
recognized
in
income(loss)

for the period
 Amounts
recognized in
cumulative
other
comprehensive
income
 Amounts
recognized
directly
in equity
 Reclassified
from equity
to
income(loss)

for the period
 Disposition Others Ending
Balance
    In millions of won 

Deferred income tax on temporary differences

              

Long term Employee benefits

 (Won)336,321   (Won)48,005   (Won)66,873   (Won)—     (Won)—     (Won)(2,145 (Won)4,030   (Won)453,084  

Employee benefits

      453,084    59,327    34,704    —      547,115  

Cash flow hedge

  (79,511  7,915    137    —      —      —      —      (71,459   (71,459  61,940    (1,845  —      (11,364

Investment in associates or subsidiaries

  (4,519,001  (587,283  (12,763  (22,143  —      —      —      (5,141,190

Property, plant and equipment, net

  (4,799,034  (141,587  —      —      —      622    (424  (4,940,423

Investments in associates or subsidiaries

   (5,141,190  (110,133  (1,377  (21,204  (5,273,904

Property, plant and equipment

   (4,940,423  (1,385,778  —      —      (6,326,201

Finance lease

  (170,075  43,290    —      —      —      (5  (90  (126,880   (126,880  (33,077  —      —      (159,957

Intangible assets

  30,247    2,145    —      —      —      —      157    32,549     32,549    (24,015  —      —      8,534  

Financial assets at fair value through profit or loss

  26,302    694    —      —      —      —      —      26,996     26,996    3,152    —      —      30,148  

Available-for-sale financial assets

  (110,749  (12,211  3,369    —      —      —      —      (119,591   (119,591  22,950    22,774    —      (73,867

Deferred revenue

  32,562    13,976    —      —      —      —      —      46,538     46,538    (2,786  —      —      43,752  

Provisions

  1,437,030    306,827    —      —      —      —      (962  1,742,895     1,742,895    1,260,594    —      —      3,003,489  

Doubtful receivables

  54    (45  —      —      —      —      —      9     9    50    —      —      59  

Other finance liabilities

  2,701    4,556    —      —      —      (191  —      7,066     7,066    3,728    —      —      10,794  

Others

  —      —      —      —      —      —      —      —    

Gains(loss) on foreign exchange translation

  118,189    (21,111  —      —      —      —      —      97,078  

Allowance for bad debts

  (1,401  (245  —      —      —      —      —      (1,646

Gain (loss) on foreign exchange translation

   97,078    (91,061  —      —      6,017  

Allowance for doubtful accounts

   (1,646  1,561    —      —      (85

Accrued income

  (1,831  (323  —      —      —      —      —      (2,154   (2,154  813    —      —      (1,341

Special deduction

  (177,527  (17,081  —      —      —      48    (88  (194,648   (194,648  (277  —      —      (194,925

Reserve for research And human development

  (35,158  1,631    —      —      —      89    (125  (33,563

Reserve for Investment on social overhead capital

  (12,348  12,348    —      —      —      117    (117  —    

Reserve for research and human

development

   (33,563  (6,922  —      —      (40,485

Others

  203,479    83,511    326    —      —      —      (916  286,400     286,400    109,347    3,123    —      398,870  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

 
  (7,719,750  (254,988  57,942    (22,143  —      (1,465  1,465    (7,938,939   (7,938,939  (130,587  57,379    (21,204  (8,033,351
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

 

Deferred income tax on unused tax losses and tax credit

              

Tax losses

  1,546,395    (56,592  —      —      —      —      —      1,489,803     1,489,803    1,206,362    —      —      2,696,165  

Tax credit

  17,903    14,577    —      —      —      —      —      32,480     32,480    64,716    —      —      97,196  

Others

  —      2,355    —      —      —      —      —      2,355     2,355    14,126    —      —      16,481  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

 
  1,564,298    (39,661  —      —      —      —      —      1,524,638     1,524,638    1,285,204    —      —      2,809,842  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

 
 (Won)(6,155,452 (Won)(294,648 (Won)57,942   (Won)(22,143 (Won)—     (Won)(1,465 (Won)1,465   (Won)(6,414,301      (6,414,301  1,154,617    57,379    (21,204  (5,223,509
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

 

   2013 
 2010    Beginning
balance
 Amounts
recognized
in profit or
loss
 Amount
recognized in
other
comprehensive
income
 Amounts
recognized
directly
in equity
 Ending
balance
 
 Beginning
balance
 Amounts
recognized
in
income(loss)

for the period
 Amounts
recognized in
cumulative
other
comprehensive
income
 Amounts
Recognized
directly
in equity
 Reclassified
from equity
to
income(loss)

for the period
 Disposition Others Ending
Balance
    In millions of won 

Deferred income tax on temporary differences

              

Long term Employee benefits

 (Won)305,124   (Won)6,989   (Won)24,208   (Won)—     (Won)—     (Won)—     (Won)—     (Won)336,321  

Employee benefits

      547,115    45,213    (73,647  —      518,681  

Cash flow hedge

  (188,537  85,748    23,278    —      —      —      —      (79,511   (11,364  56,939    6,416    —      51,991  

Investment in associates or subsidiaries

  (4,251,193  (230,587  (5,958  (31,263  —      —      —      (4,519,001

Property, plant and equipment, net

  (4,913,627  114,593    —      —      —      —      —      (4,799,034

Investments in associates or subsidiaries

   (5,273,904  104,803    (10,324  (47,609  (5,227,034

Property, plant and equipment

   (6,326,201  264,588    —      —      (6,061,613

Finance lease

  (100,508  (69,567  —      —      —      —      —      (170,075   (159,957  17,876    —      —      (142,081

Intangible assets

  7,426    22,821    —      —      —      —      —      30,247     8,534    1,708    —      —      10,242  

Financial assets at fair value through profit or loss

  2,598    23,704    —      —      —      —      —      26,302     30,148    53,497    —      —      83,645  

Available-for-sale financial assets

  (5,787  (113,297  8,335    —      —      —      —      (110,749   (73,867  4,146    (31,367  —      (101,088

Deferred revenue

  26,489    6,073    —      —      —      —      —      32,562     43,752    201,054    —      —      244,806  

Provisions

  1,363,117    73,913    —      —      —      —      —      1,437,030     3,003,489    147,419    —      —      3,150,908  

Doubtful receivables

  717    (663  —      —      —      —      —      54     59        —      —      59  

Other finance liabilities

  7,887    (5,186  —      —      —      —      —      2,701     10,794    9,607    —      5,455    25,856  

Others

  —      —      —      —      —      —      —      —    

Gains(loss) on foreign exchange translation

  210,854    (92,665  —      —      —      —      —      118,189  

Allowance for bad debts

  (1,759  358    —      —      —      —      —      (1,401

Gains (losses) on foreign exchange translation

   6,017    (25,181  —      —      (19,164

Allowance for doubtful accounts

   (85  7,399    —      —      7,314  

Accrued income

  (1,629  (202  —      —      —      —      —      (1,831   (1,341  93    —      —      (1,248

Special deduction

  (180,666  3,139    —      —      —      —      —      (177,527   (194,925  140    —      —      (194,785

Reserve for research And human development

  (38,884  3,726    —      —      —      —      —      (35,158

Reserve for Investment on social overhead capital

  (36,973  24,625    —      —      —      —      —      (12,348

Impairment of non-current assets

       86,720    —      —      86,720  

Reserve for research and human development

   (40,485  (2,658  —      —      (43,143

Others

  98,427    105,052    —      —      —      —      —      203,479     398,870    10,566    —      —      409,436  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

 
  (7,696,924  (41,426  49,863    (31,263  —      —      —      (7,719,750   (8,033,351  983,929    (108,922  (42,154  (7,200,498
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

 

Deferred income tax on unused tax losses and tax credit

              

Tax losses

  1,609,365    (62,970  —      —      —      —      —      1,546,395     2,696,165    (194,816  —      —      2,501,349  

Tax credit

  23,387    (5,484  —      —      —      —      —      17,903     97,196    (41,097  —      —      56,099  

Others

  —      —      —      —      —      —      —      —       16,481    (16,481  —      —      —    
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

 
  1,632,752    (68,454  —      —      —      —      —      1,564,298     2,809,842    (252,394  —      —      2,557,448  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

 
 (Won)(6,064,172 (Won)(109,880 (Won)49,863   (Won)(31,263 (Won)—     (Won)—     (Won)—     (Won)(6,155,452      (5,223,509  731,535    (108,922  (42,154  (4,643,050
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

 

(6)(6)Deferred income tax assets (liabilities) recognized in the statements of financial position as of December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

    2012 2013 
  2011 2010     In millions of won 

Deferred income tax assets

  (Won)372,478   (Won)151,870         209,783    359,535  

Deferred income tax liabilities

   (6,786,779  (6,307,322    (5,433,292  (5,002,585
  

 

  

 

    

 

  

 

 
  (Won)(6,414,301 (Won)(6,155,452       (5,223,509  (4,643,050
  

 

  

 

    

 

  

 

 

(7)(7)CompositionDetails of deductible temporary differences, tax losses and unused tax credits not recognized in the deferred income tax assets (liabilities) as of December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

    2012   2013 
  2011   2010     In millions of won 

Deductible temporary differences

  (Won)300,517    (Won)300,517         300,517     441,955  

Tax losses

   2,883,384     —    

Tax losses and tax credits carryback

    2,883,385     29,775  
  

 

   

 

    

 

   

 

 
  (Won)3,183,901    (Won)300,517         3,183,902     471,730  
  

 

   

 

    

 

   

 

 

 

(8)(8)ExpireExpiration dates of deductible temporary differences, tax losses and unused tax credits not recognized in the deferred income tax assets (liabilities) as of December 31, 20112012 and 2013 are as follows (KRW in millions):

   2011   2010 
   Tax losses   Tax  credits
Carryback
   Tax losses   Tax  credits
Carryback
 

Less than 1 year

  (Won)—      (Won)—      (Won)—      (Won)—    

1~ 2 years

   2,883,384     —       —       —    

2~ 3 years

   —       —       —       —    

More than 3 years

   300,517     —       300,517     —    
  

 

 

   

 

 

   

 

 

   

 

 

 
  (Won)3,183,901    (Won)—      (Won)300,517    (Won)—    
  

 

 

   

 

 

   

 

 

   

 

 

 

(9)As of December 31, 2011, there are no taxable temporary differences which are not recognized as deferred income tax liabilities regarding investments in subsidiaries, affiliates and joint ventures except partial temporary differences concerning dividends as of December 31, 2011.

41.OPERATING INCOME (LOSS)follows:

 

(1)Major components of operating income (loss).

Operating income (loss) is calculated from gross profit (loss) with adjustments of other operating income, selling and administrative expenses, other operating expenses and other income (loss).

      2012   2013 
      Tax losses   Tax credits
carryback
   Tax losses   Tax credits
carryback
 
      In millions of won 

Less than 1 year

       2,883,385     —       —       4,484  

1 ~ 2 years

    —       —       —       5,134  

2 ~ 3 years

    —       —       —       16,945  

More than 3 years

    —       —       —       3,212  
   

 

 

   

 

 

   

 

 

   

 

 

 
       2,883,385     —       —       29,775  
   

 

 

   

 

 

   

 

 

   

 

 

 

(2)Differences in operating income (loss) between IFRS and Korean GAAP

Components classified as operating income (loss) under IFRS but classified as non-operating income (loss) under Korean GAAP in the past for period for the years ended December 31, 2011 and 2010 are as follows (KRW in millions):

   2011  2010 

Reversal of other provisions

  (Won)110   (Won)14,754  

Reversal of allowance for doubtful accounts

   460    6,951  

Gains on assets contributed

   4,392    1,390  

Gains from liabilities exempted

   4,578    5,679  

Compensation and reparations revenue

   30,350    12,501  

Electricity infrastructure development fund

   48,154    41,189  

Revenue from research contracts

   6,124    542  

Rental income

   180,563    168,386  

Others (other income)

   43,114    28,018  

Compensation and reparations expense

   (2,000  —    

Transfer to other provisions

   (238  (22,004

Depreciation expenses on investment properties

   (927  (1,129

Depreciation expenses on assets not in use

   (6,619  (6,723

Other bad debt expense

   (867  (471

Donations

   (100,352  (30,874

Others (other expenses)

   (36,592  (8,586

Gains on disposition of property, plant and equipment

   38,776    42,037  

Gains on disposition of intangible assets

   —      —    

Reversal of impairment loss on intangible assets

   —      16  

Gains on foreign currency translation (related to operating activities)

   1,659    4,634  

Gains on foreign currency transaction (related to operating activities)

   100,811    90,452  

Insurance proceeds

   —      34  

Others (other income)

   213,624    219,110  

Loss on disposition of property, plant and equipment

   (31,228  (46,882

Loss on disposition of intangible assets

   (5  (12

Loss on impairment of property, plant and equipment

   —      (26,648

Loss on impairment of intangible assets

   (221  (450

Loss on foreign currency translation (related to operating activities)

   (5,402  (3,603

Loss on foreign currency transaction (related to operating activities)

   (98,806  (97,210

Others

   (53,505  (63,271

Gains (losses) on foreign currency transactions and translations are considered as non-operating income (loss) from financing activities under both Korean GAAP and IFRS.

42.EXPENSES CLASSIFIED BY NATURE:Expenses Classified by Nature

Expenses classified by nature for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

  2011     2011 

Type

  Selling and
administrative expenses
   Cost of sales   Total 
    Selling and
administrative
expenses
   Cost of sales   Total 
    In millions of won 

Raw materials used

  (Won)—      (Won)21,220,052    (Won)21,220,052         —       20,959,380     20,959,380  

Salaries

   537,137     2,510,370     3,047,507      537,137     2,510,370     3,047,507  

Retirement benefit expense

   66,955     308,629     375,584      66,955     308,629     375,584  

Welfare and benefit expense

   104,588     371,475     476,063      104,588     371,475     476,063  

Insurance expense

   3,066     42,847     45,913      3,065     42,847     45,912  

Depreciation

   41,900     6,733,215     6,775,115      41,900     6,733,214     6,775,114  

Amortization of intangible assets

   53,525     41,204     94,729      53,525     41,204     94,729  

Bad debt expense

   14,269     —       14,270      14,270     —       14,270  

Commission

   509,846     307,861     817,707      509,846     307,861     817,707  

Advertising expense

   21,918     6,046     27,964      21,918     6,046     27,964  

Training expense

   5,125     7,889     13,014      5,125     7,889     13,014  

Vehicle maintenance expense

   11,690     6,604     18,294      11,690     6,604     18,294  

Publishing expense

   2,858     5,070     7,928      2,858     5,070     7,928  

Business promotion expense

   3,171     4,213     7,384      3,171     4,213     7,384  

Rent expense

   26,550     80,454     107,004      26,550     80,454     107,004  

Telecommunication expense

   23,722     74,426     98,148      23,722     74,426     98,148  

Transportation expense

   226     3,791     4,017      226     3,791     4,017  

Taxes and dues

   64,707     183,636     248,343      64,707     183,636     248,343  

Expendable supplies expense

   3,720     22,506     26,226      3,720     22,506     26,226  

Water, light and heating expense

   8,683     15,509     24,192      8,683     15,509     24,192  

Repairs and maintenance expense

   12,232     1,415,673     1,427,905      12,232     1,415,673     1,427,905  

Ordinary development expense

   134,929     388,990     523,919      134,929     388,990     523,919  

Travel expense

   11,019     33,567     44,586      11,019     33,567     44,586  

Clothing expense

   2,356     6,735     9,091      2,356     6,736     9,092  

Survey and analysis expense

   769     3,004     3,773      769     3,004     3,773  

Membership fee

   609     3,936     4,545      609     3,936     4,545  

Power purchase and others

   86,127     9,284,277     9,370,403  

Power purchase

    —       7,403,716     7,403,716  

Others

    86,126     1,784,148     1,870,274  
  

 

   

 

   

 

    

 

   

 

   

 

 
  (Won)1,751,697    (Won)43,081,979    (Won)44,833,676         1,751,696     42,724,894     44,476,590  
  

 

   

 

   

 

    

 

   

 

   

 

 

  2010     2012 

Type

  Selling and
administrative expenses
   Cost of sales   Total 
    Selling and
administrative
expenses
   Cost of sales   Total 
    In millions of won 

Raw materials used

  (Won)—      (Won)18,065,042    (Won)18,065,042         —       23,307,996     23,307,996  

Salaries

   532,502     2,506,211     3,038,713      579,305     2,661,869     3,241,174  

Retirement benefit expense

   62,482     297,982     360,464      77,432     333,813     411,245  

Welfare and benefit expense

   91,731     340,011     431,742      103,088     382,098     485,186  

Insurance expense

   2,310     39,560     41,870      4,048     49,915     53,963  

Depreciation

   31,560     6,539,808     6,571,368      46,498     6,846,179     6,892,677  

Amortization of intangible assets

   42,448     74,996     117,444      51,779     41,581     93,360  

Bad debt expense

   13,098     —       13,098      37,447     —       37,447  

Commission

   499,728     349,862     849,590      442,961     325,152     768,113  

Advertising expense

   22,371     6,230     28,601      23,270     6,818     30,088  

Training expense

   3,994     7,566     11,560      5,853     8,499     14,352  

Vehicle maintenance expense

   10,276     6,015     16,291      12,417     10,045     22,462  

Publishing expense

   2,591     4,232     6,823      2,883     4,095     6,978  

Business promotion expense

   3,198     3,822     7,020      3,322     3,973     7,295  

Rent expense

   27,429     76,934     104,363      34,505     86,648     121,153  

Telecommunication expense

   24,627     69,553     94,180      23,811     67,819     91,630  

Transportation expense

   351     4,586     4,937      387     3,635     4,022  

Taxes and dues

   56,268     177,609     233,877      46,950     187,617     234,567  

Expendable supplies expense

   3,600     20,886     24,486      4,999     22,816     27,815  

Water, light and heating expense

   8,797     27,198     35,995      10,384     24,620     35,004  

Repairs and maintenance expense

   9,659     1,335,445     1,345,104      13,199     1,409,917     1,423,116  

Ordinary development expense

   118,767     329,986     448,753      142,264     361,750     504,014  

Travel expense

   9,350     31,817     41,167      12,984     44,346     57,330  

Clothing expense

   2,242     6,920     9,162      6,438     3,286     9,724  

Survey and analysis expense

   722     3,338     4,060      815     2,513     3,328  

Membership fee

   523     3,089     3,612      672     4,483     5,155  

Power purchase and others

   64,136     5,858,539     5,922,675  

Power purchase

    —       9,800,760     9,800,760  

Others

    92,457     2,457,019     2,549,476  
  

 

   

 

   

 

    

 

   

 

   

 

 
  (Won)1,644,760    (Won)36,187,237    (Won)37,831,997         1,780,168     48,459,262     50,239,430  
  

 

   

 

   

 

    

 

   

 

   

 

 

      2013 
      Selling and
administrative
expenses
   Cost of sales   Total 
      In millions of won 

Raw materials used

       —       23,778,430     23,778,430  

Salaries

    566,748     2,583,032     3,149,780  

Retirement benefit expense

    81,051     349,931     430,982  

Welfare and benefit expense

    107,342     366,234     473,576  

Insurance expense

    7,408     63,125     70,533  

Depreciation

    68,222     7,228,205     7,296,427  

Amortization of intangible assets

    50,266     38,113     88,379  

Bad debt expense

    40,446     —       40,446  

Commission

    510,309     359,879     870,188  

Advertising expense

    28,127     7,133     35,260  

Training expense

    5,332     10,146     15,478  

Vehicle maintenance expense

    12,358     9,683     22,041  

Publishing expense

    3,190     4,088     7,278  

Business promotion expense

    3,707     4,340     8,047  

Rent expense

    39,652     93,001     132,653  

Telecommunication expense

    24,468     69,885     94,353  

Transportation expense

    347     4,139     4,486  

Taxes and dues

    43,648     195,076     238,724  

Expendable supplies expense

    4,453     25,554     30,007  

Water, light and heating expense

    9,669     27,879     37,548  

Repairs and maintenance expense

    25,512     1,431,441     1,456,953  

Ordinary development expense

    166,106     411,027     577,133  

Travel expense

    13,145     45,928     59,073  

Clothing expense

    4,374     4,207     8,581  

Survey and analysis expense

    623     3,471     4,094  

Membership fee

    774     5,478     6,252  

Power purchase

    —       11,328,898     11,328,898  

Others

    105,915     2,147,315     2,253,230  
   

 

 

   

 

 

   

 

 

 
       1,923,192     50,595,638     52,518,830  
   

 

 

   

 

 

   

 

 

 

 

43.EARNINGS (LOSS) PER SHARE:Earnings (Loss) Per Share

 

(1)(1)Basic earnings(loss)earnings (loss) per share for the years ended December 31, 2011, 2012 and 20102013 are as follows:

 

Type

  2011 2010     2011 2012 2013 
    In won 

Basic earnings (loss) per share

  (Won)(5,411 (Won)(193       (5,411  (5,083      96  

 

(2)(2)Diluted earnings(loss)earnings (loss) per share for the years ended December 31, 2011, 2012 and 20102013 are as follows:

 

Type

  2011 2010     2011 2012 2013 
    In won 

Diluted earnings (loss) per share

  (Won)(5,411 (Won)(193       (5,411  (5,083      96  

(3)(3)Basic earnings (loss) per share

Net income (loss) and weighted average number of common shares used in the calculation of basic earnings(loss)earnings (loss) per share for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions except number of shares):follows:

 

Type

  2011 2010  

  

 2011 2012 2013 
   In millions of won except number of shares 

Controlling interest in net income (loss)

  (Won)(3,370,464 (Won)(119,931      (3,370,464  (3,166,616  60,011  

Earning used in the calculation of total basic earnings(loss) per share

   (3,370,464  (119,931

Profit (loss) used in the calculation of total basic earnings (loss) per share

   (3,370,464  (3,166,616  60,011  

Weighted average number of common shares

   622,884,223    622,637,717     622,884,223    623,034,082    623,034,082  

 

(4)(4)Diluted earnings (loss) per share

Diluted earnings (loss) per share is calculated by applying adjusted weighted average number of common shares under the assumption that all dilutive potential common shares are converted to common shares.

Earnings used in the calculation of total diluted earnings (loss) per share for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

Type

  2011 2010  

  

 2011 2012 2013 

Earning used in the calculation of total diluted earnings (loss) per share

  (Won)(3,370,464 (Won)(119,931
 In millions of won except number of shares 

Earnings (loss) used in the calculation of total diluted earnings (loss) per share

   (3,370,464  (3,166,616  60,011  

Weighted average common shares used in calculating diluted earnings (loss) per share are adjusted from weighted average common shares used in calculating basic earnings (loss) per share. DetailDetailed information of the adjustment for the years ended December 31, 2011, 2012 and 2010 is as follows. (KRW in millions):

Type

  Dec. 31, 2011   Dec. 31, 2010 

Weighted average number of common shares

   622,884,223     622,637,717  

Diluted weighted average number of shares

   622,884,223     622,637,717  

Potential common shares below have no dilutive effect. The shares excluded from calculation in diluted earnings (loss) per share for the years ended December 31, 2011 and 20102013 are as follows:

 

Type

Dec. 31, 2011Dec. 31, 2010

Foreign exchangeable bonds 2nd

—  919,908

Type

  2011   2012   2013 
   In number of shares 

Weighted average number of common shares

   622,884,223     623,034,082     623,034,082  

Diluted weighted average number of shares

   622,884,223     623,034,082     623,034,082  

 

44.(5)RISK MANAGEMENT:There are no potential common shares for the years ended December 31, 2011, 2012 and 2013.

 

44.Risk Management

(1)Capital risk management

The Company manages its capital to ensure that entities in the Company will be able to continue while maximizing the return to shareholder through the optimization of the debt and equity balance. The capital structure of the Company consists of net debt (offset by cash and cash equivalents) and equity. The Company’s overall capital risk management strategy remains unchanged from that of the prior year.

Details of the Company’s capital management accounts as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

  Dec. 31, 2011 Dec. 31, 2010 Jan. 1, 2010    2012 2013 

Total borrowings

  (Won)46,204,543   (Won)39,617,034   (Won)34,219,117  
   In millions of won 

Total borrowings and debt securities

      53,219,409    60,888,150  

Cash and cash equivalents

   1,387,921    2,090,051    1,475,684     (1,954,949  (2,232,313

Net borrowings and debentures

   44,816,622    37,526,983    32,743,433  
  

 

  

 

 

Net borrowings and debt securities

   51,264,460    58,655,837  
  

 

  

 

 

Total shareholder’s equity

   53,803,950    57,276,537    57,287,338     51,064,202    51,450,736  
  

 

  

 

  

 

 

Debt to equity ratio

   83.30  65.52  57.16   100.39  114.00
  

 

  

 

  

 

 

(2)(2)Financial risk management

The Company is exposed to various risks related to its financial instruments, such as, market risk (currency risk, interest rate risk, price risk), credit risk. The Company monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyseanalyze exposures by degree and magnitude of risks. The Company uses derivative financial instruments to certain hedge risk exposures. The Company’s overall financial risk management strategy remains unchanged from that of the prior year.

 

 1)(i)Credit risk

Credit risk is the risk of finance loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises primarily from the Company’s loan, card assetssales activities, securities and securities.derivatives. In addition, credit risk exposure may exist within financial guarantees and unused line of credits. As these financial institutions the Company makes transactions with are reputable financial institutions, the credit risk from them are considered limited. The Company decides credit transaction limits based on evaluation of client’s credit, through information obtained from the credit bureau and disclosed financial position at committing contracts.

 

 i)Credit risk management

Electricity sales, the main operations of the Company are the necessity for daily life and industrial activities of Korean nationals, and have importance as one of the national key industries. The Company dominates the domestic market supplying electricity to 20 million customers (20,050,000).customers. The companyCompany is not exposed to credit risk as customers of the Company are from various industries and areas. The Company uses publicly available information and its own internal data related to accountstrade receivables, to rate its major customers and to measure the credit risk that a counter party will default on a contractual obligation. For the incurred but not recognized loss, it is measured considering overdue period.

 

 ii)Impariment &Impairment and allowance account

In accordance with the Company policies, individual material financial assets are assessed on a regular basis, trade receivables that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Value of the acquired collateral (including the confirmation of feasibility) and estimated collectable amounts are included in this assessment.

Allowance for bad debts assessed on a collective basis are recognized for (i) the groupCompany of assets which individually are not material and (ii) incurred but not recognized losses that are assessed using statistical methods, judgment and historicalpast experience.

Book values of the financial assets represent the maximum exposed amounts of the credit risk. Details of the Company’s level of maximum exposure to credit risk as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

Type

  Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010 

Cash and cash equivalents

  (Won)1,387,921    (Won)2,090,051    (Won)1,475,684  

Derivative assets (trading)

   147,748     128,847     214,382  

Available-for-sale financial assets

   1,173,085     1,343,204     735,195  

Held-to-maturity investments

   2,320     2,651     2,771  

Loans and receivables

   793,025     789,405     585,186  

Long-term/Short-term financial instruments

   531,722     579,328     366,611  

Derivative assets (using hedge accounting)

   321,671     337,419     665,715  

Accounts and other receivables

   8,917,029     7,458,695     7,008,672  

Financial guarantee contracts(*1)

   321,637     —       —    

      2012   2013 
      In millions of won 

Cash and cash equivalents

       1,954,949     2,232,313  

Derivative assets (trading)

    55,891     4,118  

Available-for-sale financial assets

    1,141,194     1,256,765  

Held-to-maturity investments

    2,216     2,285  

Loans and receivables

    673,388     608,239  

Long-term/short-term financial instruments

    469,393     385,382  

Derivative assets (using hedge accounting)

    187,811     82,376  

Trade and other receivables

    8,438,955     9,170,644  

Financial guarantee contracts(*)

    262,624     261,565  

 

 (*1))Maximum exposure associated with the financial guarantee contracts is the maximum amounts of the obligation.

Financial guarantee contracts as of December 31, 2011 and 20102013 are as follows (KRW in millions):follows:

 

Type

  Company  Foreign currencyCurrency   Amounts 
In thousands of U.S. dollars

Joint ventures

  KepcoKEPCO SPC Power Co.Corporation   USD     220,590189,565  

OthersOther

  UAE Shuweihat S3   USD     58,294  

247,859

As of the reporting date, there are no financial assets and non-financial assets that were acquired through the exercise of the right of collateralized assets and reinforcement of credit arrangement.

 

2)(ii)Market risk

Market risk is the risk that the Company’s fair valuevalues of the financial instruments or future cashflowscash flows are affected by the changes in the market. Market risk consists of interest rate risk, currency risk and other price risk.

 

3)(iii)Sensitivity analysis

Significant assets and liabilities with uncertainties in underlying assumptions

i)Major Assets and Liabilities with Uncertanties in Underlying Assumptions

 

 Defined benefit obligation

The following is a sensitivity analysis of defined benefit obligation assuming a 1% increase and decrease movements in the actuarial valuation assumptions as of December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

      2011 2010 
      1%        2012 2013 

Type

  Accounts   Increase Decrease Increase Decrease   Accounts    1%
Increase
 1% Decrease 1% Increase 1% Decrease 
  In millions of won 

Future salary increases

   Defined benefit obligation    (Won)302,743   (Won)(262,861 (Won)289,602   (Won)(252,886  

 

Defined benefit
obligation

       309,178    (273,048  257,512    (316,563

Discount rate

   Defined benefit obligation     (270,109  322,332    (258,197  277,224    Defined benefit
obligation
    (279,062  332,023    (236,761  274,619  

Expected rate of return on plan assets

   Post-employment benefits     (4,474  4,474    (4,679  4,679  

Changes of employee benefits assuming a 1% increase and decrease movements in discount rate on plan asset for the years ended December 31, 2012 and 2013 are ₩4,300 million and ₩4, 776 million, respectively.

 

 ProvisionProvisions

Changes in provisions due to movements in underlying assumptions as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

Type

  Accounts  Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 

Discount rate

  PCBs   5.84  6.49  6.49

  Nuclear plants   4.36  4.36  4.36

  Spent fuel   4.36  4.36  4.36

Inflation rate

  PCBs   3.34  2.81  3.08

  Nuclear plants   2.30  2.30  2.30

  Spent fuel   2.30  2.30  2.30

Type

  Accounts  2012  2013 

PCBs

  Inflation rate   3.10  3.10
  Discount rate   4.92  4.92

Nuclear plants

  Inflation rate   2.93  2.93
  Discount rate   4.49  4.49

Spent fuel

  Inflation rate   2.93  2.93
  Discount rate   4.49  4.49

The following is a sensitivity analysis of provisions assuming a 0.1% increase and decrease movements in the underlying assumptions as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

     Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 
     0.1% 

TYPE

  

Accounts

 Increase  Decrease  Increase  Decrease  Increase  Decrease 

Discount rate

  PCBs (Won)(1,291 (Won)1,302   (Won)(760 (Won)764   (Won)(733 (Won)737  

  Nuclear plants  (111,132  114,140    (104,473  107,275    (104,320  107,208  

  Spent fuel  (21,386  21,946    (21,297  21,876    (19,663  20,217  

Inflation rate

  PCBs  1,332    (1,323  790    (788  761    (758

  Nuclear plants  150,939    (146,083  136,532    (132,273  130,828    (126,747

  Spent fuel  29,371    (28,439  28,179    (27,284  25,100    (24,303
          2012  2013 

Type

  Accounts     0.1% Increase  0.1% Decrease  0.1% Increase  0.1% Decrease 
   In millions of won 

Discount rate

  PCBs       (1,262  1,273    (1,086  1,095  
  Nuclear plants    (220,842  227,158    (221,516  227,667  
  Spent fuel    (45,385  47,128    (46,164  47,953  

Inflation rate

  PCBs    1,295    (1,285  1,113    (1,106
  Nuclear plants    230,431    (224,364  240,778    (234,438
  Spent fuel    48,219    (46,492  48,646    (46,895

Management judgment effected by uncertainties in underlying assumptions

ii)Management Judgment Effected by Uncertainties in Underlying Assumptions

 

 Foreign currency risk

The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the endas of the reporting periodDecember 31, 2012 and 2013 are as follows (USD, EUR, GBP, Other foreign currency in thousands):follows:

 

  Assets   Liabilities   Assets   Liabilities 

Type

  2011   2010   2011   2010   2012   2013   2012   2013 
  In thousands of foreign currencies 

AUD

   1,140     87     156,196     160,984     1,188     1,460     152,692     321,444  

CAD

   164     —       18     708     2,314     4     4     611  

CNY

   1     —       —       —       1     1     —       —    

EUR

   8,076     683     1,441     21,512     9,091     27,946     18,792     33,398  

IDR

   1,074,528     163,498     —       —       711,304     546,902     1,726     2,973  

MXN

   703     5,064     —       426  

PHP

   —       —       —       —       1,043,932     248,623     31,675     22,954  

SAR

   232,281     246,125     21,073     17,205     1,309     1,565     —       —    

USD

   1,037     —       —       —       292,256     627,504     9,866,661     11,207,483  

INR

   374,193     342,325     9,459,038     8,721,523     417,544     362,996     52,755     500,933  

PKR

   282,510     315,165     68,966     55,487     63,445     116,847     277     650  

MGA

   25,475     22,748     4,503     1,704     240,233     2,124,218     92,979     101,503  

JPY

   2,223,307     768,894     —       —       520     176,921     20,006,730     22,521,580  

KZT

   520     520     30,012,000     46,185,435     720,121     164,790     —       16,517  

GBP

   722,691     —       —       —       6     —       253     4  

CHF

   —       —       160     59     —       143,120     223     400,012  

AED

   —       —       —       1,042     220     288     1,829     809  

SEK

   247     —       1,383     —       —       —       1,105     —    

JOD

   —       132     —       1  

BDT

   —       34,753     —       2,977  

CLP

   —       93     —       —    

A sensitivity analysis on the Company’s income for the period assuming a 10% increase and decrease in currency exchange rates as of December 31, 2011, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

   2011   2010 
   10% 

TYPE

  Increase  Decrease   Increase  Decrease 

Increase(Decrease) of income before income tax

   (Won)(1,107,751  (Won)1,107,751     (Won)(1,055,889  (Won)1,055,889  

Increase(Decrease) of shareholder’s equity

   (1,107,751  1,107,751     (1,055,889  1,055,889  
      2012   2013 

Type

     10% Increase  10% Decrease   10% Increase  10% Decrease 
      In millions of won 

Increase (decrease) of income before income tax

       (1,064,578  1,064,578     (1,199,673  1,199,673  

Increase (decrease) of shareholder’s equity(*)

    (1,064,578  1,064,578     (1,199,673  1,199,673  

(*)The effect on the shareholders’ equity excluding the impact of income taxes.

Sensitivity analysis above is conducted for monetary assets and liabilities denominated in foreign currencies other than functional currency, without consideration of hedge effect of related derivatives, as of December 31, 2011, December 31, 20102012 and January 1, 2010.2013.

To manage its foreign currency risk related to foreign currency denominated receivables and payables, the Company has a policy to enter into currency forward agreements. In addition, to manage its foreign currency risk related to foreign currency denominated expected sales transactions and purchase transactions, the Company enters into cross-currency swap agreements.

 

 Interest rate risk

The Company is exposed to interest rate risk due to its borrowing with floating interest rates. A 1% increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

The Company’s long-term borrowings and debenturesdebt securities with floating interest rates as of December 31, 20112012 and 2013 are as follows (KRW in millions):follows:

 

Type

  2011   2010     2012   2013 
    In millions of won 

Short-term borrowings

  (Won)100,000    (Won)—           —       48,981  

Long-term borrowings

   5,402,164     4,018,679      5,897,076     5,029,163  

Debentures

   1,609,481     1,878,562  

Debt securities

    1,920,435     2,268,065  
  

 

   

 

    

 

   

 

 
  (Won)7,111,645    (Won)5,897,241         7,817,511     7,346,209  
  

 

   

 

    

 

   

 

 

A sensitivity analysis on the Company’s long-term borrowings and debenturesdebt securities assuming a 1% increase and decrease in interest rates, aswithout consideration of hedge effect of related derivatives for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

   2011   2010 
   1% 

Type

  Increase  Decrease   Increase  Decrease 

Increase (Decrease) of net income

   (Won)(71,116)    (Won)71,116     (Won)(58,972)    (Won)58,972  

Increase (Decrease) of shareholder’s equity

   (71,116  71,116     (58,972  58,972  
      2012  2013 

Type

     1% Increase  1% Decrease  1% Increase  1% Decrease 
      In millions of won 

Increase (decrease) of profit before income tax

       (78,175  78,175    (73,462  73,462  

Increase (decrease) of shareholder’s equity(*)

    (78,175  78,175    (73,462  73,462  

(*)The effect on the shareholders’ equity excluding the impact of income taxes.

To manage its interest rate risks, the Company in addition to maintainingenters into certain interest swap agreements or maintains an appropriate mix of fixed and floating rate loans, it has entered into certain interest rate swap agreements.borrowings.

 

 ƒElectricity rates risk

The Company is exposed to electricity rates risk due to the rate regulation of the government which considers the effect of electricity rate on the national economy.

A sensitivity analysis on the Company’s income for the period assuming a 1% increase and decrease in price of electricity as offor the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

   2011  2010 
   1% 

Type

  Increase   Decrease  Increase   Decrease 

Increase (Decrease) of income before income tax

  (Won)309,719     (Won)(309,719)    (Won)290,178     (Won)(290,178)  

Increase (Decrease) of shareholder’s equity

   309,719     (309,719  290,178     (290,178
     2012  2013 

Type

    1% Increase  1% Decrease  1% Increase  1% Decrease 
     In millions of won 

Increase (decrease) of profit before income tax

      469,732    (469,732  511,121    (511,121

Increase (decrease) of shareholder’s equity(*)

   469,732    (469,732  511,121    (511,121

(*)The effect on the shareholders’ equity excluding the impact of income taxes.

 4)(iv)Liquidity risk

The Company has established an appropriate liquidity risk management framework for the management of the Company’s short, medium and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecastforecasted and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

In addition, the Company has established credit lines on its trade financing and bank overdrafts, and through payment guarantees it has received, it maintains an adequate credit (borrowing) line. In addition, in case of major construction investment, theThe Company has the ability to use reserveutilize excess cash or utilize long-term borrowings.borrowings for major construction investments.

The following table shows the details of remaining expiries formaturities of non-derivative financial liabilities.liabilities as of December 31, 2012 and 2013. This table, based on the undiscounted cash flowflows of the non-derivative financial liabilities, has been completed based on the respective liabilities’ earliest maturity date for the Company. Contractually remaining expiries for non-derivative financial liabilities as of December 31, 2011 are as follows (KRW in millions):date.

 

  Dec. 31, 2011 

Type

 Less than
1 year
  1~2 Years  2~5 Years  More than
5 years
  Total 

Borrowings and debentures

 (Won)7,009,279   (Won)7,118,819   (Won)18,540,565   (Won)13,634,914   (Won)46,303,577  

Finance lease liabilities

  239,007    221,381    569,190    731,788    1,761,366  

Accounts and other payables

  6,449,572    259,999    2,893,631    16,885    9,620,087  

Financial guarantee contract

  26,780    26,780    147,569    120,508    321,637  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)13,724,638   (Won)7,626,979   (Won)22,150,955   (Won)14,504,095   (Won)58,006,667  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
     2012 

Type

    Less than
1 year
  1~2 Years  2~5 Years  More than
5 years
  Total 
     In millions of won 

Borrowings and debt securities

      7,697,878    7,782,782    18,710,343    19,147,225    53,338,228  

Finance lease liabilities

   221,381    202,309    542,393    556,276    1,522,359  

Trade and other payables

   5,480,048    375,567    792,829    2,119,930    8,768,374  

Financial guarantee contracts(*)

   24,871    87,309    74,614    75,830    262,624  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
      13,424,178    8,447,967    20,120,179    21,899,261    63,891,585  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 Dec. 31, 2010    2013 

Type

 Less than
1 year
 1~2 Years 2~5 Years More than
5 years
 Total    Less than
1 year
 1~2 Years 2~5 Years More than
5 years
 Total 

Borrowings and debentures

 (Won)6,773,598   (Won)6,508,671   (Won)17,791,526   (Won)8,633,096   (Won)39,706,891  
   In millions of won 

Borrowings and debt securities

      9,676,694    8,052,432    25,845,951    29,021,954    72,597,031  

Finance lease liabilities

  247,393    239,008    608,499    913,860    2,008,760     202,309    184,809    532,119    381,742    1,300,979  

Accounts and other payables

  4,447,778    250,824    3,890,693    4,101    8,593,396  

Trade and other payables

   5,777,455    397,279    751,577    2,053,005    8,979,316  

Financial guarantee contracts(*)

   88,190    26,673    80,019    66,683    261,565  
 

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

 
 (Won)11,468,769   (Won)6,998,503   (Won)22,290,718   (Won)9,551,057   (Won)50,309,047        15,744,648    8,661,193    27,209,666    31,523,384    83,138,891  
 

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

 

 

  Jan. 1, 2010 

Type

 Less than
1 year
  1~2 Years  2~5 Years  More than
5 years
  Total 

Borrowings and debentures

 (Won)6,223,291   (Won)5,568,030   (Won)16,254,946   (Won)6,273,385   (Won)34,319,652  

Finance lease liabilities

  253,609    247,394    662,697    1,098,669    2,262,369  

Accounts and other payables

  4,533,422    229,043    3,754,633    2,888    8,519,986  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)11,010,322   (Won)6,044,467   (Won)20,672,276   (Won)7,374,942   (Won)45,102,007  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The Company is required to include the information on non-derivative financial liabilities to understand the liquidity risk management as the management is based on net assets and net liabilities.

(*)Total guarantee amounts associated with the financial guarantee contracts. Financial guarantee liabilities which are recognized as of December 31, 2012 and 2013 are ₩9,086 million and ₩8,789 million, respectively.

The expected maturities for non-derivative financial assets as of December 31, 2011, December 31, 20102012 and January 1, 20102013 in detail are as follows (KRW in millions):follows:

 

 Dec. 31, 2011     2012 

Type

 Less than
1 year
 1~5 Years More than
5 years
 Other(*) Total     Less than
1 year
   1~5 Years   More than
5 years
   Other(*)   Total 
    In millions of won 

Cash and cash equivalents

 (Won)1,387,921   (Won)—     (Won)—     (Won)—     (Won)1,387,921         1,954,949     —       —       —       1,954,949  

Available-for-sale financial assets

  —      —      —      1,173,085    1,173,085      —       —       —       1,141,194     1,141,194  

Held-to-maturity investments

  334    1,143    842    —      2,319      196     1,912     —       108     2,216  

Loans and receivables

  216,635    650,188    849    —      867,672      72,888     351,320     271,725     45,688     741,621  

Financial instruments

  531,389    334    —      —      531,723  

Accounts and other receivables

  7,635,161    957,250    334,938    —      8,927,349  

Long-term/short-term financial instruments

    468,351     734     —       308     469,393  

Trade and other receivables

    7,187,490     621,050     640,287     —       8,448,827  
 

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

   

 

 
 (Won)9,771,440   (Won)1,608,915   (Won)336,629   (Won)1,173,085   (Won)12,890,069         9,683,874     975,016     912,012     1,187,298     12,758,200  
 

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

   

 

 

 Dec. 31, 2010     2013 

Type

 Less than
1  year
 1~5 Years More than
5 years
 Other(*) Total     Less than
1 year
   1~5 Years   More than
5 years
   Other(*)   Total 
    In millions of won 

Cash and cash equivalents

 (Won)2,090,051   (Won)—     (Won)—     (Won)—     (Won)2,090,051         2,232,313     —       —       —       2,232,313  

Available-for-sale financial assets

  —      —      —      1,343,204    1,343,204      —       76     —       1,256,689     1,256,765  

Held-to-maturity investments

  509    1,645    497    —      2,651      168     2,105     12     —       2,285  

Loans and receivables

  47,457    179,419    638,459    —      865,335      51,503     242,827     298,397     75,165     667,892  

Financial instruments

  571,310    8,017    —      —      579,327  

Accounts and other receivables

  6,613,250    852,003    —      —      7,465,253  

Long-term/short-term financial instruments

    384,199     —       615     568     385,382  

Trade and other receivables

    7,528,508     731,914     802,752     115,849     9,179,023  
 

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

   

 

 
 (Won)9,322,577   (Won)1,041,084   (Won)638,956   (Won)1,343,204   (Won)12,345,821         10,196,691     976,922     1,101,776     1,448,271     13,723,660  
 

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

   

 

 
 Jan. 1, 2010 

Type

 Less than
1 year
 1~5 Years More than
5  years
 Other(*) Total 

Cash and cash equivalents

 (Won)1,475,684   (Won)—     (Won)—     (Won)—     (Won)1,475,684  

Available-for-sale financial assets

  —      —      —      735,195    735,195  

Held-to-maturity investments

  440    1,481    850    —      2,771  

Loans and receivables

  70,412    251,632    338,664    —      660,708  

Financial instruments

  366,137    474    —      —      366,611  

Accounts and other receivables

  5,983,358    1,027,375    —      —      7,010,733  
 

 

  

 

  

 

  

 

  

 

 
 (Won)7,896,031   (Won)1,280,962   (Won)339,514   (Won)735,195   (Won)10,251,702  
 

 

  

 

  

 

  

 

  

 

 

 

 (*)Amount represents available-for-sale securitiesassets whose maturities cannot be presently determined.

Derivative financial liabilities classified by maturity periods which from reporting date to maturity date of contract as of December 31, 20112012 and 2013 are as follows (KRW in millions):follows:

 

  Dec. 31, 2011     2012 

Type

  Less than
1 Year
 1~2 Years 2~5 Years More than
5 Year
 Total     Less than
1 year
 1~2 Years 2~5 Years More than
5 years
 Total 
    In millions of won 

Net settlement

             

—Trading

  (Won)(487 (Won)(263 (Won)—     (Won)—     (Won)(750       (449  —      —      —      (449

Gross settlement

             

—Trading

   (37,909  (4,221  (89,607  —      (131,737    (89,554  (214,501  (64,634  —      (368,689

—Hedging

   (4,002  1,286    (22,268  (67,473  (92,457    (53,091  (16,246  (88,147  (93,554  (251,038
  

 

  

 

  

 

  

 

  

 

    

 

  

 

  

 

  

 

  

 

 
   (Won)(42,398 (Won)(3,198 (Won)(111,875 (Won)(67,473 (Won)(224,944       (143,094  (230,747  (152,781  (93,554  (620,176
  

 

  

 

  

 

  

 

  

 

    

 

  

 

  

 

  

 

  

 

 

 

   Dec. 31, 2010 

Type

  Less than
1 Year
  1~2 Years  2~5 Years  More than
5 Year
  Total 

Net settlement

      

—Trading

  (Won)(595 (Won)(9 (Won)67   (Won)—     (Won)(537

Gross settlement

      

—Trading

   (42,602  (26,894  (102,877  —      (172,373

—Hedging

   (8,206  (3,422  (24,786  (8,991  (45,405
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  (Won)(51,403 (Won)(30,325 (Won)(127,596 (Won)(8,991 (Won)(218,315
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  Jan. 1, 2010     2013 

Type

  Less than
1 Year
 1~2 Years 2~5 Years More than
5 Year
 Total     Less than
1 year
 1~2 Years 2~5 Years More
than
5 years
 Total 

Net settlement

      

—Trading

  (Won)—     (Won)—     (Won)—     (Won)—     (Won)—    
    In millions of won 

Gross settlement

             

—Trading

   (8,529  (586  (11,993  —      (21,108       (314,891  (134,050  (33,831  (44,343  (527,115

—Hedging

   —      —      (17,758  (1,103  (18,861    (64,794  (26,409  (187,689  (49,071  (327,963
  

 

  

 

  

 

  

 

  

 

    

 

  

 

  

 

  

 

  

 

 
  (Won)(8,529 (Won)(586 (Won)(29,751 (Won)(1,103 (Won)(39,969       (379,685  (160,459  (221,520  (93,414  (855,078
  

 

  

 

  

 

  

 

  

 

    

 

  

 

  

 

  

 

  

 

 

 

(3)(3)Fair value risk

The fair value of the Company’s actively-traded financial instruments (i.e. short-term financial assets AFS,held for trading, available-for-sale financial assets, etc.) is based on the traded market-price as of the reporting period end. The fair value of the Company’s financial assets is the amount which the asset could be exchanged for or the amount a liability could be settled for.

The fair values of financial instruments where no active market exists or where quoted prices are not otherwise available are determined by using valuation techniques. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. If there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, the Company uses that technique.

For accountstrade receivables and payables, the Company considers the carrying value net of impairment as fair value. While for disclosure purposes, the fair value of financial liabilities is estimated by discounting a financial instruments with similar contractual cashflowscash flows based on the effective interest method.

 1)(i)Fair value and book value of financial assets and liabilities as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

 Dec. 31, 2011 Dec. 31, 2010 Jan. 1, 2010     2012   2013 

Type

 Book value Fair value Book value Fair value Book value Fair value     Book value   Fair value   Book value   Fair value 
    In millions of won 

Assets recognized at fair value

               

Available-for-sale financial assets

 (Won)1,173,085   (Won)1,173,085   (Won)1,343,204   (Won)1,343,204   (Won)735,195   (Won)735,195  

Divatives assets (trading)

  147,748    147,748    128,847    128,847    214,382    214,382  

Derivatives assets (using hedge accounting)

  321,671    321,671    337,419    337,419    665,715    665,715  

Available-for-sale financial assets(*1)

       1,141,194     1,141,194     1,256,765     1,256,765  

Derivative assets (trading)

    55,891     55,891     4,118     4,118  

Derivative assets (using hedge accounting)

    187,811     187,811     82,376     82,376  

Long-term financial instruments

  334    334    8,017    8,017    474    474      1,042     1,042     1,183     1,183  

Short-term financial instruments

  531,388    531,388    571,310    571,310    366,137    366,137      468,351     468,351     384,199     384,199  
 

 

  

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

 
  2,174,226    2,174,226    2,388,797    2,388,797    1,981,903    1,981,903      1,854,289     1,854,289     1,728,641     1,728,641  
 

 

  

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

 

Assets carried at amortized cost

               

Held-to-maturity investments

  2,320    2,320    2,651    2,651    2,771    2,771      2,216     2,216     2,285     2,285  

Loans and receivables

  793,025    793,025    789,405    789,405    585,186    585,186      673,388     673,388     608,239     608,239  

Accounts and other receivables

  8,917,029    8,917,029    7,458,695    7,458,695    7,008,672    7,008,672  

Trade and other receivables

    8,438,955     8,438,955     9,170,644     9,170,644  

Cash and cash equivalents

  1,387,921    1,387,921    2,090,051    2,090,051    1,475,684    1,475,684      1,954,949     1,954,949     2,232,313     2,232,313  
 

 

  

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

 
  11,100,295    11,100,295    10,340,802    10,340,802    9,072,313    9,072,313      11,069,508     11,069,508     12,013,481     12,013,481  
 

 

  

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

 

Liabilities recognized at fair value

               

Derivatives liabilities (trading)

  129,969    129,969    172,733    172,733    21,108    21,108  

Derivatives Liabilities (using hedge accounting)

  94,975    94,975    45,582    45,582    18,863    18,863  

Derivative liabilities (trading)

    369,138     369,138     491,035     491,035  

Derivative assets (using hedge accounting)

    251,038     251,038     209,440     209,440  
 

 

  

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

 
  224,944    224,944    218,315    218,315    39,971    39,971      620,176     620,176     700,475     700,475  
 

 

  

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

 

Liabilities carried at amortized cost

               

Secured borrowings

    —       —       582,053     579,111  

Unsecured bond

  39,461,634    40,770,061    34,982,349    35,847,029    29,281,450    29,818,264      46,328,513     48,557,218     54,878,897     57,226,079  

Finance lease liabilities

  1,135,009    1,135,009    1,259,202    1,259,202    1,376,652    1,376,652      1,007,169     1,007,169     884,966     884,966  

Unsecured borrowings

  6,736,114    6,745,198    4,634,686    4,685,113    4,937,670    4,924,487      6,890,896     6,898,344     5,383,966     5,493,786  

Accounts and other payables

  9,619,286    9,619,286    8,592,867    8,592,867    8,035,066    8,035,066  

Commitments on Bank-overdraft

  6,795    6,795    —      —      —      —    

Trade and other payables(*2)

    9,584,986     9,584,986     8,979,316     8,979,316  

Bank overdraft

    —       —       43,233     43,233  
 

 

  

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

 
 (Won)56,958,838   (Won)58,276,349   (Won)49,469,104   (Won)50,384,211   (Won)43,630,838   (Won)44,154,469         63,811,564     66,047,717     70,752,431     73,206,491  
 

 

  

 

  

 

  

 

  

 

  

 

    

 

   

 

   

 

   

 

 

 2)(*1)The discount rate used for calculatingBook values of equity securities held by the Company that were measured at cost as of December 31, 2012 and 2013 are ₩296,897 million and ₩330,001 million, respectively, as a quoted market price does not exist in an active market and its fair value is derived from interest rates which are observable from the market, such as Government Bond interest rate, after considering its credit spread.cannot be measured reliably.

 

 3)(*2)Excludes finance lease liabilities.

(ii)Interest rates used for determining fair value

The interest rates used to discount estimated cash flows, when applicable, are based on the government yield curve at the reporting date plus an adequate credit spread.

The discount rate used for calculating fair value as of December 31, 2012 and 2013 are as follows:

Type

  2012   2013 

Derivatives

   0.34%~2.64%     0.17%~4.34%  

Borrowings and debt securities

   2.85%~3.75%     1.40%~4.11%  

Finance lease

   9.00%~10.80%     9.00%~10.80%  

(iii)Fair value hierarchy

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, classified as Level 1, 2, or 3, based on the degree to which the fair value is observable.

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

Level 3: Inputs that are not based on observable market data.

Fair values of financial instruments by hierarchy level as of December 31, 2011, December 31, 20102012 and January 01, 20102013 are as follows (KRW in millions):follows:

 

   Dec. 31, 2011 

Type

  Level 1   Level 2   Level 3   Total 

Financial assets at fair value:

        

Available-for-sale financial assets

  (Won)640,593    (Won)—      (Won)532,492    (Won)1,173,085  

Other financial instruments

   —       10,121     —       10,121  

Derivatives assets

   —       469,419     —       469,419  

Financial liabilities at fair value:

        

Derivatives liabilities

   —       217,165     7,779     224,944  
   Dec. 31, 2010 

Type

  Level 1   Level 2   Level 3   Total 

Financial assets at fair value:

        

Available-for-sale financial assets

  (Won)864,963    (Won)—      (Won)478,241    (Won)1,343,204  

Other financial instruments

   —       —       —       —    

Derivatives assets

   —       466,266     —       466,266  

Financial liabilities at fair value:

        

Derivatives liabilities

   —       218,315     —       218,315  
   Jan. 1, 2010 

Type

  Level 1   Level 2   Level 3   Total 

Financial assets at fair value:

        

Available-for-sale financial assets

  (Won)206,180    (Won)—      (Won)529,015    (Won)735,195  

Other financial instruments

   —       15,022     —       15,022  

Derivatives assets

   —       880,097     —       880,097  

Financial liabilities at fair value:

        

Derivatives liabilities

   —       39,971     —       39,971  
      2012 

Type

     Level 1   Level 2   Level 3   Total 
      In millions of won 

Financial assets at fair value

         

Available-for-sale financial assets

       652,142          192,155     844,297  

Derivative assets

         243,702          243,702  
   

 

 

   

 

 

   

 

 

   

 

 

 
    652,142     243,702     192,155     1,087,999  
   

 

 

   

 

 

   

 

 

   

 

 

 

Financial liabilities at fair value

         

Derivative liabilities

         610,685     9,491     620,176  
   

 

 

   

 

 

   

 

 

   

 

 

 

      2013 

Type

     Level 1   Level 2   Level 3   Total 
      In millions of won 

Financial assets at fair value

         

Available-for-sale financial assets

       740,805          185,959     926,764  

Derivative assets

         86,494          86,494  
   

 

 

   

 

 

   

 

 

   

 

 

 
    740,805     86,494     185,959     1,013,258  
   

 

 

   

 

 

   

 

 

   

 

 

 

Financial liabilities at fair value

         

Derivative liabilities

         700,475          700,475  
   

 

 

   

 

 

   

 

 

   

 

 

 

Changes of financial assets and liabilities which are classified as level 3 for the years ended December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

      2012 
      Beginning
balance
   Acquisition   Valuation  Disposal  Other(*)   Ending
balance
 
      In millions of won 

Financial assets at fair value

           

Available-for-sale financial assets

           

Unlisted securities

       238,561     —       (68,924  —      —       169,637  

Debt securities

    —       22,518     —      —      —       22,518  

Financial liabilities at fair value

           

Derivative liabilities

           

Derivative liabilities (trading)

    7,779     —       9,491    (7,779  —       9,491  

 

(*)
Financial assets
measured  at
fair value
Financial liabilities
measured at
fair value

Balance at Jan. 1, 2010

(Won)529,015(Won)—  

Total comprehensive income

Recognized in income(loss)

—  —  

Recognized in other comprehensive income

(33,993—  

Addition

10,562—  

Disposal

—  —  

Others

(27,343—  

Balance at December 31, 2010

(Won)478,241(Won)—  

Amount due to foreign currency translation.

   Financial assets
measured at
fair value
  Financial liabilities
measured at
fair value
 

Balance at Jan. 1, 2011

  (Won)478,241   (Won)—    

Total comprehensive income

   

Recognized in income(loss)

   —      7,779  

Recognized in other comprehensive income

   43,299    —    

Addition

   17,057    —    

Disposal

   (2,800  —    

Others

   (3,305  —    
  

 

 

  

 

 

 

Balance at December 31, 2011

  (Won)532,492   (Won)7,779  
  

 

 

  

 

 

 
       2013 
       Beginning
balance
  Acquisition  Reclassified
category
  Valuation  Disposal  Other(*)  Ending
balance
 
       In millions of won 

Financial assets at fair value

          

Available-for-sale financial assets

          

Unlisted securities

        169,637    —      784    883    —      —      171,304  

Debt securities

     22,518    —      —      —      —      (7,863  14,655  

Financial liabilities at fair value

          

Derivative liabilities

          

Derivative liabilities (trading)

     9,491    —      —      —      (9,491  —      —    

 

45.SERVICE CONCESSION ARRANGEMENTS:Service Concession Arrangements

 

(1)(1)Significant terms &and concession period of the arrangement

The Company entershas entered into a contract with National Power Corporation (the “NPC”), based onin the Republic of the Philippines whereby the Company can collect the electricity rates which are composed of fixed costs and variable costs during the certain concession period after building, rehabilitating, and operating the power plant.

 

(2)(2)Rights &and classification of the arrangement

The Company has the rights to use and own the power plant during the concession period from 2002 to 2022. At the end of the concession period, the Company has an obligation to transfer its ownership of the power plant to NPC.

 

(3)(3)At the end of concession period, the company has obligation to transfer its ownership of power plant to NPC.

(4)The Company’s expected future collections of service concession arrangements as of December 31, 20112013 are as follows (KRW in millions):follows:

 

Type

  Amounts 
In millions of won

Less than 1 year

  (Won)115,747206,997  

1~ 2 years

   115,747206,997  

2~ 3 years

   115,747206,997  

More than 3 yearsEach year thereafter through 2022

   858,455

(Won)1,205,696

250,121
  

46.RELATED PARTY TRANSACTIONS:

 

46.Related Parties

(1)Related partyparties of consolidated entitythe Company as of December 31, 20112013 are as follows:

 

Type

  

Related party

Parent

  Korean Government

Subsidiaries

(80 subsidiaries)

  

Korea Hydro & Nuclear Power Co., Ltd.

, Korea South-East Power Co., Ltd.

, Korea Midland Power Co., Ltd.

, Korea Western Power Co., Ltd.

, Korea Southern Power Co., Ltd.

, Korea East-West Power Co., Ltd.

, KEPCO Engineering & Construction Company, Inc.

Korea, KEPCO Plant Service & Engineering Co., Ltd.

Korea, KEPCO Nuclear Fuel Co., Ltd.

Korea Electric Power Data Network, KEPCO KDN Co., Ltd.

, Garorim Tidal Power Plant Co., Ltd., Korea Engineering & Power Services Co., Ltd., KEPCO International Hong Kong Ltd.

, KEPCO International Philippines Inc.

, KEPCO Gansu International Ltd.

, KEPCO Philippines Holdings Inc.,

KEPCO Lebanon S.A.R.L.

Type

KEPCO Neimenggu International Ltd.

KEPCO Shanxi International Ltd.

KEPCO Australia Pty Ltd.

KEPCO Canada Energy Ltd.

KEPCO Netherlands B.V.

Korea Imouraren Uranium Investment Corp.

KEPCO Middle East Holding Company

KEPCO Electric Power Nigeria Ltd.

Sylardus Holdings B.V.

KEPCO Netherlands B.V.

KEPCO Holdings de Mexico and 40 other entities.Related party

KEPCO Philippines Corporation, KEPCO Ilijan Corporation, KEPCO Lebanon SARL, KEPCO Neimenggu International Ltd., KEPCO Shanxi International Ltd., KOMIPO Global Pte Ltd., KEPCO Canada Energy Ltd., KEPCO Netherlands B.V., KOREA Imouraren Uranium Investment Corp. KEPCO Australia Pty., Ltd., KOSEP Australia Pty., Ltd., KOMIPO Australia Pty., Ltd., KOWEPO Australia Pty., Ltd., KOSPO Australia Pty., Ltd. KEPCO Middle East Holding Company, Qatrana Electric Power Company, KHNP Canada Energy Ltd., KEPCO Bylong Australia Pty., Ltd., Korea Waterbury Uranium Limited Partnership, KEPCO Canada Uranium Investment Limited Partnership, Korea Electric Power Nigeria Ltd., KEPCO Holdings de Mexico, KST Electric Power Company, KEPCO Energy Service Company, KEPCO Netherlands S3 B.V., PT. KOMIPO Pembangkitan Jawa Bali, PT. Cirebon Power Service, KOWEPO International Corporation, KOSPO Jordan LLC, EWP Philippines Corporation (Formerly, EWP Cebu Corporation), EWP Philippine Holdings Corporation, EWP America Inc., EWP Renewable Co., DG Fairhaven Power, LLC, DG Kings Plaza Holdings, LLC, DG Kings Plaza, LLC, DG Kings Plaza II, LLC, DG Whitefield, LLC, Springfield Power, LLC, KNF Canada Energy Limited, PT KEPCO Resource Indonesia, EWP Barbados 1 SRL, California Power Holdings, LLC, Gyeonggi Green Energy Co., Ltd., PT. Tanggamus Electric Power, Gyeongju Wind Power Co., Ltd., KOMIPO America Inc., Boulder Solar Power, LLC, EWPRC Biomass Holdings, LLC, KOSEP USA, INC., PT. EWP Indonesia, KOWEPO America LLC., KEPCO Netherlands J3 B.V., Korea Offshore Wind Power Co., Ltd., Global One Pioneer B.V., Global Energy Pioneer B.V., KOSEP Wind Power, LLC., Mira Power Limited, KOSEP Material Co., Ltd., Commerce and Industry Energy Co., Ltd., KEPCO Singapore Holding Pte., Ltd., KOWEPO India Private Limited, KEPCO KPS Philippines Corp., KOSPO Chile SpA.

AffiliatesAssociates

(58 associates)

  

Daegu Green Power Co., Ltd.

, Korea Gas Corporation,

Korea Electric Power Industrial Development Co., Ltd.

, YTN Co., Ltd., Cheongna Energy Co., Ltd.

, Gangwon Wind Power Co., Ltd.

, Hyundai Green Power Co., Ltd.

, Korea Power Exchange,

AMEC Partners Korea, Hyundai Energy Co., Ltd.

, Ecollite Co., Ltd., Taebaek Wind Power Co., Ltd., Alternergy Philippine Investments Corporation, Muju Wind Power Co., Ltd., Pyeongchang Wind Power Co., Ltd., Daeryun Power Co., Ltd.

, JinanJangsu Wind Power Co., Ltd., Changjuk Wind Power Co., Ltd., KNH Solar Co., Ltd., SPC Power Corporation,

Gemeng International Energy Group Co.,Ltd.

, PT. Cirebon Electric Power,

KNOC Nigerian East Oil Co., Ltd., KNOC Nigerian West Oil Co., Ltd., Dolphin Property Limited, E-Power S.A., PT Wampu Electric Power,

PT. Bayan Resources T.B.K. and 15 other entities.TBK, S-Power Co., Ltd., Pioneer Gas Power Limited, Eurasia Energy Holdings, Xe-Pian Xe-Namnoy Power Co., Ltd., Busan Solar Co., Ltd., Hadong Mineral Fiber Co., Ltd., Green Biomass Co., Ltd., Gumi-ochang Photovoltaic Power Co., Ltd., Chungbuk Photovoltaic Power Co., Ltd., Cheonan Photovoltaic Power Co., Ltd., PT. Mutiara Jawa, Hyundai Asan Solar Power Co., Ltd., Heang Bok Do Si Photovoltaic Power Co., Ltd., Jeonnam Solar Co., Ltd., DS POWER Co., Ltd., D Solarenergy Co., Ltd., Dongducheon Dream Power Co., Ltd.,

Type

Related party

KS Solar Corp. Ltd., KOSCON Photovoltaic Co., Ltd., Yeongwol Energy Station Co., Ltd., Yeonan Photovoltaic Co., Ltd., Q1 Solar Co., Ltd., Jinbhuvish Power Generation, Best Solar Energy Co., Ltd., Seokcheon Solar Power Co., Ltd., SE Green Energy Co., Ltd., Daegu Photovoltaic Co., Ltd., Jeongam Wind Power Co., Ltd., Korea Power Engineering Service Co., Ltd., Golden Route J Solar Power Co., Ltd.

Joint ventures

(36 joint ventures)

  

KEPCO-UndeKEPCO-Uhde Inc.

, Eco Biomass Energy Sdn. Bhd., Datang Chaoyang Renewable Power Co.,Ltd.

, Shuweihat Asia Power Investment B.V., Shuweihat Asia Operation & Maintenance Company, Waterbury Lake Uranium L.P., ASM-BG Investicii AD, RES Technology AD, KV Holdings, Inc., KEPCO SPC Power Corporation,

Canada Korea Uranium Limited Partnership, KEPCO Energy Resource Nigeria Limited, Gansu Datang Yumen Wind Power CompanyCo., Ltd.

, Datang Chifeng Renewable Power Co., Ltd.

, Datang KEPCO Chaoyang Renewable Power Co., Ltd., Rabigh Electricity Company, Rabigh Operation & Maintenance Company, Jamaica Public Service Company Limited, and 16 other entities.

KW Nuclear Components Co., Ltd., Busan shinho Solar power Co., Ltd., STX Electric Power Co., Ltd., YEONGAM Wind Power Co., Ltd., Global Trade Of Power System Co., Ltd., Expressway Solar-light Power Generation Co., Ltd, KODE NOVUS 1 LLC., KODE NOVUS 2 LLC., Daejung Offshore Wind Power Co., Ltd., Arman Asia Electric Power Company, KEPCO-ALSTOM Power Electronics Systems, Inc., Dongbu Power Dangjin Corporation, Honam Wind Power Co., Ltd., Nepal Water & Energy Development Company Pty Ltd., Kelar S.A, PT. Tanjung Power Indonesia, Incheon New Power Co., Ltd., Seokmun Energy Co., Ltd.

Others

  Korea Finance Corporation

(2)(2)All transactionsTransactions between KEPCOthe Company and its consolidated subsidiaries are eliminated in consolidation. Transactions with other related partiesthe consolidation and will not be shown as notes.

(3)Related party transactions for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

     Sales and others  Purchase and others 

Company name

 

Transaction type

 2011  2010  2011  2010 

Korea GAS Corporation

 

Purchase of power

generation fuel

 (Won)42,138   (Won)47,070   (Won)9,377,458   (Won)7,139,758  

Korea Electric Power Industrial Development Co., Ltd.

 Electricity metering  5,778    7,998    188,481    210,502  

Korea Power Exchange

 Electricity purchase  9,576    9,296    66,894    64,830  

PT.Cirebon Electric Power

 

Architectural engineering

and education service

  1,092    1,449    —      —    

KW Nuclear Components Co., Ltd

 Sales of service  87    382    —      —    

STX Electric Power Co., Ltd.

 Architectural engineering  4,441    —      —      —    

Sanggong Energy Co., Ltd.

 Architectural engineering  632    212    —      —    

AMEC Partners Korea

 Architectural engineering  24    86    —      —    

Pyeongchang Wind Power Co., Ltd

 Architectural engineering  246    —      —      —    

Korea District heating Corp.

 Heat supplying service  —      —      —      53,571  

Hyundai Green Power Co., Ltd

 

Architectural engineering

and technical advisory

  10,190    3,494    —      —    

Hyundai Energy Co., Ltd

 Power generation service  9,079    —      —      —    

Daegu Green Power Co., Ltd.

 Architectural engineering  —      313    —      —    

Cheongna Energy Co., Ltd.

 Rental income and others  7,940    1,274    —      —    

YTN

 Service  978    1,324    915    628  

Gangwon Wind Power Co., Ltd

 Service  115    —      —      —    

Ecollite Co. Ltd

 Service  35    —      —      —    

Daeryun Power Co., Ltd.

 Service  68    —      —      —    

KEPCO SPC Power Corporation

 Service  12,428    4,781    —      —    

Kings Plaza JV, LLC

 Service  6,543    —      —      —    

Jamaica Public Service Company Limited

 Service  1,189    —      392    —    

SPC Power Corporation

 Service  9    37    —      —    

Datang Chifeng Renewable Power Co., Ltd.

 Interest income  4,642    3,926    —      —    
        Sales and others 

Company name

 Transaction type    2011   2012  2013 
       In millions of won 

<Associates>

      

Daegu Green Power Co., Ltd.

 Electricity sales      —       4    121  

Dongducheon Dream Power Co., Ltd.

 Rental income
and others
   —       —      11,603  

Korea Gas Corporation

 Electricity sales   42,138     63,882    124,244  

SE Green Energy Co., Ltd.

 Service   —       —      1  

Daegu Photovoltaic Co., Ltd.

 Service   —       —      5  

Jeongam Wind Power Co., Ltd.

 Service   —       —      3  

Yeongwol Energy Station Co., Ltd.

 Service   —       —      27,900  

KOSCON Photovoltaic Co., Ltd.

 Service   —       —      1  

Yeonan Photovoltaic Co., Ltd.

 Service   —       —      52  

Q1 Solar Co., Ltd.

 Service   —       —      262  

Best Solar Energy Co., Ltd.

 Service   —       —      39  

Incheon New Power Co., Ltd.

 Construction
revenue
   —       —      1,435  

Korea Electric Power Industrial Development Co., Ltd.

 Service   5,778     12,417    13,014  

         Sales and others 

Company name

 Transaction type     2011   2012  2013 
        In millions of won 

YTN Co., Ltd.

 Electricity sales       978     1,714    4,070  

Cheongna Energy Co., Ltd.

 Rental income and others    7,940     3,434    13,117  

Gangwon Wind Power Co., Ltd.

 Dividend income    115     134    2,133  

Hyundai Green Power Co., Ltd.

 Dividend income    10,190     16,185    15,896  

Korea Power Exchange

 Service    9,576     29,351    26,710  

Hyundai Energy Co., Ltd.

 Service    9,079     13,740    21,535  

Ecollite Co., Ltd.

 Interest income    35     1    866  

Taebaek Wind Power Co., Ltd.

 Service    —       —      626  

Pyeongchang Wind Power Co., Ltd.

 Architectural engineering    246     356    65  

Daeryun Power Co., Ltd.

 Electricity sales    68     49    780  

Changjuk Wind Power Co., Ltd.

 Service    —       6    751  

KNH Solar Co., Ltd.

 Electricity sales    —       7    19  

Busan Solar Co., Ltd.

 Service    —       —      2  

SPC Power Corporation

 Dividend income    9     194    —    

PT. Cirebon Electric Power

 Service    1,092     442    —    

Dolphin Property Limited

 Service    —       —      32  

E-POWER S.A.

 Dividend income    —       623    1,902  
     —       

<Joint ventures>

       

KEPCO SPC Power Corporation

 Interest income    12,428     20,222    15,921  

KEPCO-ALSTOM Power Electronics Systems, Inc

 Service    —       —      796  

Dongbu Power Dangjin Corporation

 Technical fee    —       —      1,431  

Seokmun Energy Co., Ltd.

 Technical fee    —       —      1,138  

KW Nuclear Components Co., Ltd.

 Service    87     900    829  

STX Electric Power Co., Ltd.

 Architectural engineering    4,441     11,201    3,484  

YEONGAM Wind Power Co., Ltd.

 Service    —       —      255  

Expressway Solar-light Power Generation Co., Ltd

 Service    —       —      215  

Datang Chifeng Renewable Power Co., Ltd.

 Interest income    4,642     3,248    2,460  

Rabigh Electricity Company

 Service    —       —      676  

Rabigh Operation & Maintenance

Company

 Rental income and others    —       —      2,091  

Jamaica Public Service Company Limited

 Service    1,189     2,817    2,798  

KV Holdings, Inc.

 Dividend income    —       —      319  

Arman Asia Electric Power Company

 Service    —       —      18,092  

         Purchase and others 

Company name

  

Transaction type

     2011   2012   2013 
         In millions of won 

<Associates>

         

Korea Gas Corporation

  Purchase of power generation fuel       9,377,458     11,644,660     12,936,962  

Gumi-ochang Photovoltaic Power Co., Ltd.

  REC Purchase    —       1,367     6,498  

Chungbuk Photovoltaic Power Co., Ltd.

  REC Purchase    —       139     1,214  

Cheonan Photovoltaic Power Co., Ltd.

  REC Purchase    —       65     1,039  

        Purchase and others 

Company name

  

Transaction type

    2011   2012   2013 
        In millions of won 

Daegu Photovoltaic Co., Ltd.

  Electricity purchase      —       —       1,943  

Golden Route J Solar Power Co., Ltd.

  Service   —       —       983  

KOSCON Photovoltaic Co., Ltd.

  Electricity purchase   —       —       549  

Yeonan Photovoltaic Co., Ltd.

  Electricity purchase   —       —       162  

Q1 Solar Co., Ltd.

  Electricity purchase   —       —       904  

Best Solar Energy Co., Ltd.

  Electricity purchase   —       —       86  

Seokcheon Solar Power Co., Ltd.

  Service   —       —       2,003  

D Solarenergy Co., Ltd.

  Electricity purchase   —       —       29  

Korea Electric Power Industrial Development Co., Ltd.

  Electricity metering   188,481     175,644     188,551  

YTN Co., Ltd.

  Service   915     776     785  

Gangwon Wind Power Co., Ltd.

  Electricity purchase   —       34,342     38,980  

Hyundai Green Power Co., Ltd.

  Electricity purchase   —       269,199     313,164  

Korea Power Exchange

  Electricity purchase   66,894     77,448     80,279  

Hyundai Energy Co., Ltd.

  Electricity purchase   —       —       1,643  

Taebaek Wind Power Co., Ltd.

  REC Purchase   —       3,097     11,680  

Changjuk Wind Power Co., Ltd.

  Electricity purchase   —       1,473     11,893  

KNH Solar Co., Ltd.

  REC Purchase   —       657     5,406  

Busan Solar Co., Ltd.

  Electricity purchase   —       —       4,433  

Green Biomass Co., Ltd.

  Woodchip purchase   —       518     869  

<Joint ventures>

        

KEPCO-ALSTOM Power Electronics Systems, Inc

  Service   —       —       143  

Busan shinho Solar power Co., Ltd.

  Electricity purchase   —       —       8,944  

Global Trade of Power System Co., Ltd.

  Plant facility purchase   —       —       574  

Expressway Solar-light Power Generation Co., Ltd

  Electricity purchase   —       —       1,319  

Jamaica Public Service Company Limited

  Service   392     207     104  

(4)(3)Receivables and payables arising from related party transactions as of December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

    Receivables  Payables 

Company name

 Type Dec.31, 2011  Dec.31, 2010  Jan.1, 2010  Dec.31, 2011  Dec.31, 2010  Jan.1, 2010 

Korea GAS Corporation

 Account Receivables (Won)5,506   (Won)5,391   (Won)4,537   (Won)—     (Won)—     (Won)—    
 Other Receivables  —      —      189    —      —      —    
 Account Payables  —      —      —      1,224,877    1,085,530    777,597  
 Other Payables  —      —      —      64    57    38,084  

Korea Power Exchange

 Account Receivables  1,662    293    105    —      —      —    
 Other Payables  —      —      —      3,023    1,085    658  

Korea Electric Power Industrial Development Co., Ltd.

 Account Receivables  227    3    3    —      —      —    
 Other Receivables  1,002    187    748    —      —      —    
 Account Payables  —      —      —      211    162    18  
 Other Payables  —      —      —      22,134    20,892    18,083  

Hyundai Green Power Co., Ltd.

 Account Receivables  2,179    1,514    101    —      —      —    

Hyundai Energy Co., Ltd.

 Account Receivables  148    —      —      —      —      —    

Pyeongchang Wind Power Co., Ltd.

 Account Receivables  414    —      —      —      —      —    

Sanggong Energy Co., Ltd.

 Account Receivables  284    212    —      —      —      —    

LG U Plus (formerly LG Powercom)

 Account Receivables  —      —      344    —      —      —    
 Other Receivables  —      —      1,992    —      —      —    
 Other Payables  —      —      —      —      —      2,826  

PT.Cirebon Electric Power

 Account Receivables  438    102    —      —      —      —    

STX Electric Power Co., Ltd.

 Account Receivables  2,087    —      —      —      —      —    

YTN Co., Ltd.

 Account Receivables  78    —      —      —      —      —    

Gangwon Wind Power Co., Ltd

 Account Receivables  10    —      —      —      —      —    

Daeryun Power Co., Ltd.

 Account Receivables  1    —      —      —      —      —    

Ecollite Co. Ltd

 Account Receivables  1    —      —      —      —      —    

KW Nuclear Components

 Account Receivables  262    175    —      —      —      —    
 Other Payables  —      —      —      262    —      —    

E-Power S.A

 Account Payables  —      —      2,627    —      —      —    

Korea District heating Corp.

 Account Receivables  —      —      1,906    —      —      —    
 Other Receivables  —      —      226    —      —      —    
 Account Payables  —      —      —      —      —      45,718  
 Other Payables  —      —      —      —      —      2,133  

Daegu Green Power Co., Ltd.

 Account Receivables  —      191    —      —      —      —    

Cheongna Energy Co., Ltd.

 Account Receivables  109    —      —      —      —      —    
 Other Receivables  119    1,402    1,041    —      —      —    
 Other Payables  —      —      —      —      —      198  

AMEC Partners Korea

 Account Receivables  —      20    —      —      —      —    

Kings Plaza JV, LLC

 Account Receivables  477    83    —      —      —      —    

Jamaica Public Service Company Limited

 Account Receivables  681    —      —      —      —      —    

KEPCO SPC Power Corporation

 Account Receivables  3,732    67    —      —      —      —    
 Other Receivables  7,623    3,408    4,954    —      —      —    

SPC Power Corporation

 Account Payables  —      —      —      353    349    340  

Datang Chifeng Renewable Power Co., Ltd

 Other Receivables  4,831    3,867    2,902    —      —      —    
          Receivables   Payables 

Company name

  Type     2012   2013   2012   2013 
         In millions of won 

Daegu Green Power Co., Ltd.

  Trade receivables       3     35     —       —    
  Non-trade receivables
and others
    9,900  ��  —       —       —    

Korea Gas Corporation

  Trade receivables    4,585     8,237     —       —    
  Non-trade receivables
and others
    204     1,507     —       —    
  Trade payables    —       —       1,409,650     1,208,072  
  Non-trade payables
and others
    —       —       101     101  

         Receivables   Payables 

Company name

  Type    2012   2013   2012   2013 
        In millions of won 

Chungbuk Photovoltaic Power Co., Ltd.

  Non-trade payables
and others
      —       —       22     57  

Cheonan Photovoltaic Power Co., Ltd

  Non-trade payables
and others
   —       —       7     —    

Daegu Photovoltaic Co., Ltd.

  Non-trade payables
and others
   —       —       —       212  

Jeongam Wind Power Co., Ltd.

  Non-trade payables
and others
   —       —       —       6  

Golden Route J Solar Power Co., Ltd.

  Non-trade payables
and others
   —       —       —       48  

Yeongwol Energy Station Co., Ltd.

  Trade receivables   —       11,413     —       —    

KOSCON Photovoltaic Co., Ltd.

  Non-trade payables
and others
   —       —       —       45  

Yeonan Photovoltaic Co., Ltd.

  Trade receivables   —       23     —       —    
  Non-trade payables
and others
   —       —       —       20  

Best Solar Energy Co., Ltd.

  Non-trade payables
and others
   —       —       —       21  

Seokcheon Solar Power Co., Ltd.

  Non-trade payables
and others
   —       —       —       154  

D Solarenergy Co., Ltd.

  Non-trade payables
and others
   —       —       —       29  

Incheon New Power Co., Ltd.

  Non-trade payables
and others
   —       —       —       1,483  

Korea Electric Power Industrial Development Co., Ltd.

  Trade receivables   40     590     —       —    
  Non-trade
receivables and
others
   552     129     —       —    
  Non-trade payables
and others
   —       —       15,004     24,357  

DS Power Co., Ltd.

  Non-trade payables
and others
   —       —       —       1  

YTN Co., Ltd.

  Trade receivables   1     51     —       —    
  Non-trade payables
and others
   —       —       28     110  

Cheongna Energy Co., Ltd.

  Trade receivables   158     133     —       —    
  Non-trade
receivables and
others
   2,093     1,805     —       —    

Gangwon Wind Power Co., Ltd.

  Trade receivables   9     7     —       —    
  Trade payables   —       —       3,679     3,720  

Hyundai Green Power Co., Ltd.

  Trade receivables   676     1,311     —       —    
  Trade payables   —       —       23,553     28,427  

Korea Power Exchange

  Trade receivables   2,296     3,810     —       —    
  Non-trade
receivables and
others
   41     147     —       —    
  Trade payables   —       —       3,910     3,497  
  Non-trade payables
and others
   —       —       3,490     6,709  

       Receivables   Payables 

Company name

  Type  2012   2013   2012   2013 
      In millions of won 

Hyundai Energy Co., Ltd.

  Trade receivables  150     60     —       —    
  Non-trade receivables
and others
   4,018     17,936     —       —    
  Non-trade payables
and others
   —       —       —       8,823  

Taebaek Wind Power Co., Ltd.

  Trade receivables   —       129     —       —    
  Non-trade payables
and others
   —       —       677     703  

Pyeongchang Wind Power Co., Ltd.

  Trade receivables   —       186     —       —    

Daeryun Power Co., Ltd.

  Trade receivables   9     208     —       —    

Changjuk Wind Power Co., Ltd.

  Trade receivables   —       92     —       —    
  Non-trade payables
and others
   —       —       509     797  

Busan Solar Co., Ltd.

  Trade payables   —       —       135     —    
  Non-trade payables
and others
   —       —       —       3  

KNH Solar Co., Ltd.

  Trade receivables   1     1     —       —    

Green Biomass Co., Ltd.

  Non-trade receivables

and others

   —       258     —       —    
  Non-trade payables
and others
   —       —       —       45  

SPC Power Corporation

  Non-trade receivables
and others
   —       6     —       —    

E-POWER S.A.

  Non-trade receivables
and others
   2     2     —       —    

<Joint ventures>

          

KEPCO SPC Power Corporation

  Trade receivables   3,673     10,237     —       —    
  Non-trade receivables
and others
   9,934     —       —       —    

KEPCO-ALSTOM Power Electronics Systems, Inc

  Non-trade receivables
and others
   —       473     —       —    

Dongbu Power Dangjin Corporation

  Non-trade receivables
and others
   —       1,575     —       —    

Seokmun Energy Co., Ltd.

  Non-trade receivables
and others
   —       196     —       —    

STX Electric Power Co., Ltd.

  Trade receivables   8,470     323     —       —    
  Non-trade receivables
and others
   79     100     —       —    

Busan Shinho Solar power Co., Ltd.

  Non-trade payables
and others
   —       —       —       1,132  

YEONGAM Wind Power Co., Ltd.

  Trade receivables   —       252     —       —    

Datang Chifeng Renewable Power Co., Ltd.

  Trade receivables   —       613     —       —    
  Non-trade receivables
and others
   931     —       —       —    

Jamaica Public Service Company Limited

  Trade receivables   984     537     —       —    
  Non-trade receivables
and others
   —       59     —       —    

(5)(4)Loans and others arising from related party transactions as of December 31, 20112012 and 20102013 are as follows (KRW in millions):follows:

 

Type

  

Company name

  Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010 

Joint ventures

  KEPCO SPC Power Corporation  (Won)96,647    (Won)43,805    (Won)44,909  

Affiliates

  Datang Chifeng Renewable Power Co., Ltd.   54,590     80,862     105,084  

Affiliates

  

KNOC Nigerian East Oil Co., Ltd.

KNOC Nigerian West Oil Co., Ltd.

   26,504     25,593     24,192  

Affiliates

  Dolphin Property Limited   987     981     993  

Type

 

Company name

    Beginning
balance
  Loans  Collection  Allowance
for
doubtful

accounts
  Others  Ending
balance
 
       In millions of won 

Joint ventures

 KEPCO SPC Power Corporation      89,758    —      (39,890  —      (1,324  48,544  

Joint ventures

 Datang Chifeng Renewable Power Co., Ltd.   43,456    —      (7,136  —      (641  35,679  

Joint ventures

 Jamaica Public Service Company Limited   —      2,111    —      —      —      2,111  

Associates

 KNOC Nigerian East Oil Co., Ltd. KNOC Nigerian West Oil Co., Ltd.   25,208    536    —      (13,586  (391  11,767  

Associates

 Dolphin Property Limited   952    —      —      (354  2    600  

Associates

 Rabigh Electricity Company   208,796    —      —      —      (105,375  103,421  

Associates

 Xe-Pian Xe-Namnoy Power Co., Ltd.   3,768    —      (11,695  —      7,927    —    

Associates

 PT. Cirebon Electric Power   53,013    3,510    —      —      (782  55,741  
   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
       424,951    6,157    (58,721  (13,940  (100,584  257,863  
   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(6)(5)Borrowings arising from related party transactions as of December 31, 2011, December 31, 2010,2012 and January 1, 20102013 are as follows (KRW in millions):follows:

 

Related parties

  Type   Dec. 31, 2011   Dec. 31, 2010   Jan. 1, 2010 

Korea Finance Corporation

   Facility    (Won)1,712,222    (Won)867,222    (Won)1,922,221  
   Project Loan     159,432     157,442     —    

Type

 

Company name

 Transaction
type
  Beginning
balance
  Borrowings  Repayment  Others  Ending
balance
 
    In millions of won 

Other related parties

 Korea Finance Corporation  Facility   2,300,000    —      —      —      2,300,000  
   Project Loan    147,735    —      (147,735  —      —    

 

(7)(6)Guarantees provided to an affiliatesassociates or joint ventures as of December 31, 20112013 are as follows (USD and AED in thousands, KRW in millions):follows:

 

Primary guarantor

(Providing company)

 

Secondary guarantor

(Provided company)

 

Type of
guarantees

Foreign
Currency
 Credit limit  

Guarantee

(Final provided company)In millions of won and thousands of foreign currencies

Korea Electric Power Corporation

 

KNOC Nigerian East Oil Co., Ltd.

KNOC Nigerian West Oil Co., Ltd.KEPCO SPC Power Corporation

 

PerformanceDebt guarantees

 

USD

 

34,650189,565

  

 

Korea National Oil Corporation

(Nigerian government)SMBC and others

Korea Electric Power Corporation

 

Shuweihat Asia Power Investment B.V.

 

Performance guarantees

 

USD

 

17,94417,900

  

 

ADWEA

Korea Electric Power Corporation

 

Shuweihat Asia O&M Co.Co, Ltd.

 

Performance guarantees

 

USD

11,000

  

 

ADWEA

Korea Electric Power Corporation

 

KEPCO SPC PowerKNOC Nigerian East Oil Co., Ltd. and KNOC Nigerian West Oil Co., Ltd.

 Debt

Performance guarantees

USD

34,650

Korea National Oil Corporation (Nigerian government)

Primary guarantor

Secondary guarantor

Type of guarantees

 USDCredit limit
  

220,590Guarantee


SMBC, ADB, Export-import Bank of Korea

Korea Electric Power Corporation

 

Rabigh ElectricityAmman Asia Electric Power Company

 

Performance guarantees

SAR

100,000

 

Saudi ElectricityUSD

Company (SEC)19,800

Standard Chartered Bank

Korea Western Power Co., Ltd.

 

Cheongna Energy Co., Ltd.

Collateralized money invested

KRW

42,646

Hana Bank, Korea Exchange Bank

Guarantees for supplemental funding(*)—  

Korea Western Power Co., Ltd.

Xe-Pian Xe-Namnoy Power Co., Ltd.

Performance guarantees

USD

 2,310

Krung Thai Bank

 Collateralized money invested USD16,934

Korea Western Power Co., Ltd.

Rabigh O&M Co., Ltd.

Performance guarantees

SAR

 4,800

Saudi Arabia British Bank

Korea Western Power Co., Ltd.

Deagu Photovoltaic Co., Ltd.

Collateralized money invested

KRW

1,229

Shinhan Capital Co., Ltd.

Korea Western Power Co., Ltd.

Dongducheon Dream Power Co., Ltd.

Collateralized money invested

KRW

 144,200

Kookmin Bank and others

Korea Western Power Co., Ltd.

PT Mutiara Jawa

Collateralized money invested

USD

2,610

Shinhan Bank Singapore

Korea East-West Power Co., Ltd.

Busan shinho Solar power Co., Ltd.

Collateralized money invested

KRW

2,100

KT Capital Co., Ltd.

Korea East-West Power Co., Ltd.

STX Electric Power Co., Ltd.

Collateralized money invested

KRW

176,400

Korea Development Bank

Korea East-West Power Co., Ltd.

Honam Wind Power Co., Ltd.

Collateralized money invested

KRW

3,600

Shinhan Bank and others

Korea Southern Power Co., Ltd.

KNH Solar Co., Ltd.

Collateralized money invested

KRW

1,296

Shinhan Bank, Kyobo Life Insurance Co., Ltd.

Performance guarantees and guarantees for supplemental funding(*)  30,000—  

Korea Southern Power Co., Ltd.

Daeryun Power Co., Ltd.

Collateralized money invested

KRW

25,477

Korea Development Bank, Dongbu Insurance Co., Ltd. and others

Guarantees for supplemental funding(*)—  

Korea Southern Power Co., Ltd.

Changjuk Wind Power Co., Ltd.

Collateralized money invested

KRW

3,801

Shinhan Bank, Woori Bank

Guarantees for supplemental funding(*)—  

Primary guarantor

Secondary guarantor

Type of guarantees

Credit limit  

HanaGuarantee

Korea Southern Power Co., Ltd.

Busan Solar Co., Ltd.

Collateralized money invested

KRW

793

NH Bank

Korea Southern Power Co., Ltd.

Taebaek Wind Power Co., Ltd.

Guarantees for supplemental funding(*)

—  

Shinhan Bank, Bank of Cheju

Korea Southern Power Co., Ltd.

Daegu Green Power Co., Ltd.

Collateralized money invested

KRW

76,193

Korea Exchange Bank and others

Performance guarantees and guarantees for supplemental funding(*)
—  

Korea Southern Power Co., Ltd.

KS Solar Corp. Ltd.

Collateralized money invested

KRW

637

Shinhan Capital Co., Ltd.

Korea Southern Power Co., Ltd.

Jeonnam Solar Co., Ltd.

Collateralized money invested

KRW

700

Shinhan Capital Co., Ltd.

Korea Southern Power Co., Ltd.

Kelar S.A.

Performance guarantees

USD

 13,000

Korea Exchange Bank

KEPCO Engineering & Construction Company, Inc.

DS Power Co., Ltd.

Collateralized money invested

KRW

2,900

Korea Exchange Bank and Daewoo Securities Co., Ltd.

Korea Southern Power Co., Ltd.

KRW

15,000

KEPCO Engineering & Construction Company, Inc.

Performance guarantees and guarantees for supplemental funding(*)

—  

Korea Southern Power Co., Ltd.

—  

Korea Midland Power Co., Ltd.

Hyundai Green Power Co.

Collateralized money invested

KRW

87,003

Korea Development Bank and others

Guarantees for supplemental funding(*)—  

Korea Midland Power Co., Ltd.

Gangwon Wind Power Co., Ltd.

Collateralized money invested

KRW

7,410

Industrial Bank of Korea

Korea Midland Power Co., Ltd.

Cheonan Photovoltaic Power Co., Ltd.

Collateralized money invested

KRW

122

KT Capital Corporation

Korea Midland Power Co., Ltd.

Gumi-ochang Photovoltaic Power Co., Ltd.

Collateralized money invested

KRW

288

Shinhan Capital Co., Ltd.

Primary guarantor

Secondary guarantor

Type of guarantees

Credit limit

Guarantee

Korea Midland Power Co., Ltd.

Chungbuk Photovoltaic Power Co., Ltd.

Collateralized money invested

KRW

166

KT Capital Corporation

Korea Midland Power Co., Ltd.

Golden Route J Solar Power Co., Ltd.

Collateralized money invested

KRW

82

Shinhan Capital Co., Ltd.

Korea Midland Power Co., Ltd.

PT. Cirebon Electric Power

Debt guarantees

USD

8,091

Hana Bank

Korea Midland Power Co., Ltd.

 PT Cirebon Electric PowerPerformance guarantees for foreign businessIDR24,750,000

D Solarenergy Co., Ltd.

 

ANZ PANINCollateralized money invested

Bank IndonesiaKRW

400

Shinhan Capital Co., Ltd.

Korea Midland Power Co., Ltd.

 Sanggong

Hyundai Asan Solar Power Co., Ltd.

Collateralized money invested

KRW

471

Shinhan Capital Co., Ltd.

Korea South-East Power Co., Ltd.

Hyundai Energy Co., Ltd.

Collateralized money invested

KRW

71,070

Korea Development Bank and others

 Performance guarantees and guarantees for businessKRWsupplemental funding(*)  65,000—     Hana

Korea South-East Power Co., Ltd.

RES Technology AD

Collateralized money invested

KRW

15,595

Korea Development Bank and others

Debt guaranteesEUR4,271

Korea South-East Power Co., Ltd.

ASM-BG investicii AD

Collateralized money invested

KRW

16,101

Korea Development Bank and others

Debt guaranteesEUR4,175

Korea South-East Power Co., Ltd.

Express solar-light Power Generation Co., Ltd.

Collateralized money invested

KRW

3,132

Woori Bank and others

Guarantees for supplemental funding(*)—  

Korea South-East Power Co., Ltd.

S-Power Co., Ltd.

Collateralized money invested

KRW

108,000

Korea Development Bank and others

Performance guarantees and guarantees for supplemental funding(*)—  

Korea South-East Power Co., Ltd.

YEONGAM Wind Power Co., Ltd.

Collateralized money invested

KRW

11,584

Kookmin Bank and others

Guarantees for supplemental funding(*)—  

Korea South-East Power Co., Ltd.

Coscon Photovoltaic Co., Ltd.

Collateralized money invested

KRW

245

Shinhan Capital Co., Ltd.

Korea South-East Power Co., Ltd.

Yeonan Solar Co., Ltd.

Collateralized money invested

KRW

157

Shinhan Capital Co., Ltd.

Primary guarantor

Secondary guarantor

Type of guarantees

Credit limit

Guarantee

Korea South-East Power Co., Ltd.

Q1 Solar Energy Co., Ltd.

Collateralized money invested

KRW

1,005

Shinhan Bank and others

Korea South-East Power Co., Ltd.

Best Solar Energy Co., Ltd.

Collateralized money invested

KRW

1,242

Shinhan Bank and others

KOSEP USA, INC.

KODE NOVUS II LLCGuarantees for supplemental funding(*)—  Korea Development Bank and others

KOSEP USA, INC.

 (7)KODE NOVUS I LLCAs of December 31, 2011, there are no guarantees provided from related party.

 (8)Guarantees for supplemental funding(*)On January 1, 2011, the Company restructured its the pumped storage power businesses from five power generation subsidiaries (Korea—  Daewoo Shipbuilding & Marine Engineering Co., Ltd.

Korea South-East Power Co., Ltd., Korea Midland Power

Yeong Wol Energy

Station Co., Ltd., Korea Western Power

Collateralized money invested

KRW

462

Daewoo Securities Co., Ltd., Korea Southern Power Co., Ltd., and Korea East-West Power Co., Ltd.) and merged them under others

Korea Hydro & Nuclear Power Co., Ltd. (“KHNP”).

As of December 31, 2011, the Company has joint and several obligations for liabilities in pumped storage power business segment with 5 power generation subsidiaries and KHNP, for the obligations related to the periods prior to the restructuring.

 (9)As of December 31, 2011, Hyundai EnergyKRW1,400

KEPCO Plant Service & Engineering Co., Ltd., an associate which is engaged in the integrated energy business, carried long-term borrowings for project financing amounting to (Won)450 billion from Korea Development Bank (“KDB”) and others. In connection with these borrowings, the Company pledged its investment securities in Hyundai Energy

Incheon New Power Co., Ltd. amounting to (Won)30,878 million to secure the long-term borrowings amounting to (Won)390 billion on behalf of its investee. In addition, the Company placed guarantees

Collateralized money invested

KRW

461

Shinhan Bank

Guarantees for the business performance of Hyundai Energy Co., Ltd., and had a payment guarantee in relation to the repayment of the principal and interest in arrears of unsubordinated borrowings amounting to (Won)60 billion. Related to above project financing, NH Power II Co., Ltd. and Daewoo Securities Co., Ltd. entered into an agreement with Yeocheon TPL Co., Ltd. to acquire shares in Hyundai Energy Co., Ltd. held by Yeocheon TPL Co., Ltd. The Company placed guarantees for a fixed return on investment to the financial institutions and obtained the rights to acquire preferential investment securities in return.supplemental funding(*)—  

 

 (10)(*)AsThe Company guarantees to provide supplemental funding for business with respect to excessive business expenses or insufficient repayment of December 31, 2011, RES Technology AD (“RES”) and ASM-BG Investicii AD (“ASM”), related parties, were engaged in the photovoltaic power generation business in Bulgaria and had long-term borrowings for project financing amounting to EUR 59,243 thousand and EUR 59,469 thousand from KDB and others, respectively. In connection with these borrowings, the Company pledged its investment securities in RES and ASM to secure the long-term borrowings.

 

 (11)(8)The salariesAs of December 31, 2013, there are no guarantees provided by related parties.

(9)Salaries and other compensations to the key members of management of the Company for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

Type

  2011   2010     2011   2012   2013 
    In millions of won 

Salaries

  (Won)1,301    (Won)1,393         1,301     1,180     1,114  

Retirement and severance benefits

   56     43      56     51     63  
  

 

   

 

    

 

   

 

   

 

 
  (Won)1,357    (Won)1,436         1,357     1,231     1,177  
  

 

   

 

    

 

   

 

   

 

 

 

47.NON-CASH TRANSACTIONS:Non-Cash Transactions

MajorSignificant non-cash investment and finance transactions excluded from statements of cash flows for the years ended December 31, 2011, 2012 and 20102013 are as follows (KRW in millions):follows:

 

Transactions

  2011   2010     2011   2012   2013 

Transfer from long-term borrowings to current portion of long-term borrowings

  (Won)3,765,287    (Won)4,062,930  
    In millions of won 

Transfer from construction in-progress to other assets

   9,643,265     6,428,855         8,905,741     9,568,629     6,507,426  

Appropriation asset retirement obligation due to decommissioning cost incurred

    353,315     4,537,338     251,054  

Transfer from decommissioning cost of spent fuel to accrued expense

    73,994     86,436     403,638  

Transfer from property, plant and equipment to finance lease receivables

    —       —       470,867  

48.COMMITMENTS FOR EXPENDITURE:Commitments for Expenditure

 

(1)(1)The agreements for acquisition of property, plant and equipment as of December 31, 2011, December 31, 20102012 and January 1, 20102013 are as follows. (KRW in millions):follows:

 

  Dec. 31, 2011  Dec. 31, 2010  Jan. 1, 2010 

Contracts

 Amounts  Balance  Amounts  Balance  Amounts  Balance 

Construction of new Uljin #3,4

 (Won)8,261,817   (Won)8,260,185   (Won)—     (Won)—     (Won)—     (Won)—    

Construction of new Uljin #5,6

  7,616,807    7,606,378    7,616,807    7,612,870    —      —    

Construction of new Kori #3,4

  6,481,107    2,471,894    6,481,107    3,014,247    6,481,107    3,905,498  

Construction of new Uljin #1,2

  6,298,124    5,064,092    6,298,124    5,540,672    —      —    

Construction of new Kori #1,2

  4,913,442    232,278    4,913,442    470,217    4,913,442    2,783,254  

Construction of new Wolseong #3,4

  4,717,241    594,210    4,717,241    1,264,078    4,717,241    2,482,104  

Construction for main equipment of Yeongheung #5,6 and 47 others

  1,569,402    1,100,120    1,569,402    1,440,104    —      —    

Architectural engineering for improvement facilities of Yeosu #2 and 35 others

  895,858    207,318    895,858    698,663    895,858    895,858  

Construction for main equipment of Dangjin #9,10

  800,729    800,729    —      —      —      —    

Purchase connecting wire of Yeogheung #5,6 and 53 others

  540,321    506,198    —      —      —      —    

Purchase main equipment of Sejong city combined heat & power plant

  305,360    277,640    —      —      —      —    

Engineering and construction of Dangjin #9,10

  304,129    292,921    —      —      —      —    

Engineering and construction of new Boryeong #9,10

  246,964    246,964    —      —      —      —    

Construction of Incheon #3

  130,476    69,913    130,476    129,631    —      —    

Construction of Sejong city combined heat & power plant

  114,531    114,531    —      —      —      —    

Architectural engineering of new Boryeong #1,2

  114,433    97,307    —      —      —      —    

Architectural engineering of Dangjin #9,10

  105,399    60,051    103,595    69,429    101,271    76,908  

Architectural engineering of Taean #9,10

  103,000    91,449    —      —      —      —    

Construction of boiler of Yeongheung #1,2 and regular overhaul of Yeongdong and 3 others

  93,110    28,752    —      —      —      —    

Construction inspection of head office building and 7 others

  58,818    34,003    —      —      —      —    

765KV steel tower LAA-32P 5 units and 18 things

  49,372    15,101    49,372    26,858    49,372    37,339  

345kV Optical Fiber Composite Electric Power Cable (PVC,1C,2500SQ)

  46,432    38,921    46,432    46,432    46,432    46,432  

765KV steel tower AAS-31P 1 unit and 14 things

  43,858    12,644    43,858    27,993    43,858    35,992  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 (Won)43,810,730   (Won)28,223,599   (Won)32,865,714   (Won)20,341,194   (Won)17,248,581   (Won)10,263,385  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
      2012   2013 

Contracts

     Amounts   Balance   Amounts   Balance 
      In millions of won 

Construction of New Uljin units

       14,559,941     12,671,159     14,559,941     11,756,580  

Construction of New Kori units

    14,097,914     8,927,535     14,097,914     8,306,938  

Construction of New Wolseong units

    4,717,241     100,230     5,310,003     449,958  

Construction of Dangjin units

    1,204,875     1,311,486     952,729     486,809  

Construction of New Boryeong units

    369,347     326,074     1,801,718     1,613,529  

Construction of Samcheok units

    2,229,255     2,036,492     2,273,156     1,772,954  

Construction of Taean IGCC units

    805,222     715,365     688,817     391,330  

Construction of Taean units

    847,464     810,228     937,954     852,254  

Construction of Incheon units

    167,566     11,355     167,566     —    

Construction of office building (KDN)

    106,493     102,620     106,493     68,283  

Construction of office building (KOPEC)

    —       —       210,021     167,563  

Construction of Sejong city cogeneration units

    425,459     293,938     468,153     63,485  

Purchase of Wonju cogeneration units

    50,400     35,360     50,400     50,241  

Purchase of Ulsan combined cycle power units

    565,151     539,324     256,760     63,514  

Purchase of Pyeongtaek combined cycle power units

    434,200     394,864     169,793     31,884  

Purchase of Andong main machine

    126,946     97,689     685,335     28,194  

Purchase of diesel for generation

    69,014     69,014     54,177     54,177  

Construction of New Yeongheung units

    1,654,572     883,331     1,639,047     286,727  

Construction of New Yeosu units

    401,474     383,228     417,733     337,926  

Construction of New Seoul units

    —       —       586,493     550,493  

Purchase of Concrete Poles (10M,350KGF)

    —       —       77,209     71,111  

Other purchase contracts

    96,748     77,866     135,761     65,394  
   

 

 

   

 

 

   

 

 

   

 

 

 
       42,929,282     29,787,158     45,647,173     27,469,344  
   

 

 

   

 

 

   

 

 

   

 

 

 

(2)(2)As of December 31, 2011,2013, details of contracts for inventory purchase are as follows:

The Company imports all of its uranium ore concentrates from sources outside Korea (including the United States, United Kingdom, Kazakhstan, France, Russia, South Africa, Canada and Australia) which are paid for with currencies other than Won, primarily in U.S. dollars. In order to ensure stable supply, the Company entered into long-term and medium-term contracts with various suppliers, and supplements such supplies with purchases of fuels on spot markets. The long-term and medium-term contract periods vary among contractors and the stages of fuel manufacturing process. Contract prices for processing of uranium are generally based on market prices. Contract periods for ore concentrates, conversion, enrichment and design and fabrication are as follows:

(a)The Company has purchase commitment contracts for bituminous coal, anthracite coal, oil and LNG with domestic and foreign suppliers including Korea Gas Corporation (a related party). Under these contracts, the Company must purchase an annual quantity of coal. The purchase price is determined based on market prices. In addition, related to its coal imports, the Company has entered into long-term transportation contracts with Hanjin Shipping Co., Ltd. and others as of December 31, 2011. Purchase contract for bituminous coal as of December 31, 2011 are as follows (thousand tons):

Fuel type

Contract period

Quantity

Indonesia Coal

2004 ~ 202230,082

Australia Coal

2005 ~ 202725,540

America Coal

2009 ~ 20154,470

Russia Coal

2008 ~ 20122,770

Republic of South Africa Coal

2010 ~ 20132,260

Others

2007 ~ 20123,682

Total

68,804

(b)The Company imports all of its uranium ore concentrates from sources outside Korea (including the United States, United Kingdom, Kazakhstan, France, Russia, South Africa, Canada and Australia) which are paid for with currencies other than Won, primarily in U.S. dollars. In order to ensure stable supply, the Company entered into long-term and medium-term contracts with various suppliers, and supplements such supplies with purchases of fuels on spot markets. The long-term and medium-term contract periods vary among contractors and the stages of fuel manufacturing process. Contract prices for processing of uranium are generally based on market prices. Contract periods for ore concentrates, conversion, enrichment and design and fabrication are as follows:

 

Type

  

Periods

  Contracted amounts

Concentrate

  20112014 ~ 20192030  18,555 ton36,288 Ton U3O8

Transformed

  2011~ 20202014 ~ 2022  9,391 ton19,511 Ton U

Enrichment

  2011~2014 ~ 2029  39,768 ton39,058 Ton SWU

Enriched uranium

2011 ~ 20221,321 ton U(4.65% enriched)

Molded

  2011 ~ 20152014  1,348 ton999 Ton U

(3)In April 2010, in order to deal with the long-term shortage of fuel and other resources and also to comply with various environmental standards, the Korean government announced a plan to adopt the Renewable Portfolio Standard (“RPS”) policy. Under the plan, the Company’s generation subsidiaries will be required to supply 2.0% and 10.0% of the total electricity generated from renewable energy by 2012 and 2022, respectively, with fines being levied on any generation failing to do so in the prescribed timeline. As of December 31, 2011, the Company’s generation subsidiaries generated approximately 1% of its total electricity from renewable energy.

49.CONTINGENCIES AND CONTRACTS:Contingencies and Commitments

 

(1)(1)Ongoing litigations related with contingent liabilities and assets as of December 31, 2011, December 31, 2010,2012 and January 1, 2010 is2013 are as follows (KRW in millions):follows:

    Dec. 31, 2011   Dec. 31, 2010   Jan. 01, 2010 

Type

  Number
of cases
   Claim
amount
   Number
of cases
   Claim
amount
   Number
of cases
   Claim
amount
 

As the defendant

  (Won)429    (Won)138,498    (Won)442    (Won)126,886    (Won)404    (Won)187,102  

As the plaintiff

   103     21,403     112     144,511     85     55,885  
The Company is the defendant against a number of claims. The following are potentially significant claims pertaining to the Company:

 (2)Korea Electric Power Corporation (KEPCO) contracted with LS Cable & System Ltd. for 250kv submarine cables installed in the 105km section between Jindo (Mainland) and Jeju Island in September 2009. LS Cable & System Ltd. notified KEPCO of the completion of construction and requested the issuance of a certificate of completion, however KEPCO disagreed that LS Cable & System Ltd. had completed construction in accordance with the conditions of their contract. As a result, KEPCO rejected the goods (submarine cables installed) delivered and refused to pay LS Cable & System Ltd.

LS Cable & System Ltd. filed for arbitration (seeking a total amount of ₩194 billion from KEPCO) with the Korean Commercial Arbitration Board in April 2013 in order to demand unpaid invoices and extra payments relating to claims of rejection of the test on completion and goods (submarine cables installed) delivered.

At this time, management believes the Company does not have a present obligation for this matter and has not recognized any provision as of December 31, 2013 due to the fact that LS Cable & System did not fully perform its obligations according to the contract terms. It is not possible to estimate an amount of potential loss because the Korean Commercial Arbitration Board is in the early stage of the process of examining the factual accuracy of the claims of each party by hiring third party experts.

Korea Nuclear Technology Co., Ltd. was qualified to supply Korea Hydro & Nuclear Power Co., Ltd., a subsidiary of KEPCO, Passive Autocatalytic Recombiners (PAR) which had been developed under a cooperative research and development agreement and designated as items to be developed over a period of three years through a negotiated contract. Korea Nuclear Technology Co., Ltd. filed a lawsuit for damages and compensation against Korea Hydro & Nuclear Power Co., Ltd. relating to claims of contracting with another company through open bid.

The lower court ruled against the plaintiff based on the principle of freedom of contract and principle of competitive bid preference in October 2013. The plaintiff has filed an appeal as of December 31, 2013.

At this time, management believes the Company does not have a present obligation for this matter and has not recognized any provision as of December 31, 2013 since the Company does not have any legal obligation to have a contract with the plaintiff which is supported by the decision of the lower court.

ƒIn December 2013, the Supreme Court of Korea ruled that regular bonuses also fall under the category of ordinary wages on the condition that those bonuses are paid regularly and uniformly. The Supreme Court ruled that, “employees shall not retroactively demand the difference in overtime pay as additional wages, in the event that the demand itself causes an unexpected increase in spending for their company, and thus lead the company to financial difficulty. In that case, the request is not acceptable, since it is unjust, and it is in breach of the principle of good faith.”

Prior to the ruling of the Supreme Court, the Company determined wages in accordance with budget instructions from the Ministry of Strategy and Finance, which excluded bonuses from ordinary wages and was with the consent of the Company’s labor unions. Any request for the retroactive demand for the difference in overtime pay as additional wages may be limited based on the principle of good faith.

At this time, management believes that the Company does not have a present obligation for this matter and has not recognized any provision as of December 31, 2013 because the application of the Supreme Court’s ruling is not clear and it is highly unpredictable to estimate the timing of payment and the amount since the Company is required to follow the Korean government’s guidance, as a government entity. It is not possible to estimate the amount of potential loss because it will be

dependant upon the future agreement between the management of the Company and the labor unions or the outcome of any similar lawsuits.

In addition, Korean Power Plant Industry Union and others filed lawsuits (worth ₩44.6 billion) against six generation subsidiaries of KEPCO, including Korea Western Power Co., Ltd., relating to claims that ordinary wages have been paid without including certain items of wages that should have been included in ordinary wages.

(2)Guarantees of borrowings provided to other companycompanies as of December 31, 20112012 and 2013 are as follows (USD in thousands):follows:

 

Guarantees

Financial and
non-financial
institutions
Contracts datePeriod of
guarantees
Foreign
currency
Dec. 31, 2011Dec. 31, 2010

Repayment guarantees For UAE shuweihat S3 borrowings

Mizuho,
SMBC,
HSBC
May 16,
2011
May 16, 2011 ~

February 28, 2014

USD58,294—  

Guarantees

 

Financial or
non-financial institution

  Date of
contract
   Period of
contract
  2012   2013 
            In thousands of U.S. dollars 

Repayment guarantees for UAE Shuweihat S3 borrowings

 Mizuho, SMBC, HSBC   2011-05-16    2011-05-16 ~
2014-02-28
  USD 58,294    USD 58,294  

Guarantee of UAE Shuweihat S3 interest swap agreement

 SMBC   2011-05-16    2011-05-16 ~
2014-02-28
  USD1,500    USD 1,500  

The Company provides (Won)5,200 million performance guarantee related to construction completion to Kookmin Bank. As such performance guarantee does not meet the definition of financial guarantee contract in IAS 39,No. 1039 ‘Financial Instruments; Recognition and Measurement’, no related liability is recognized.

 

(3)(3)Credit lines provided by financial institutions as of December 31, 20112013 are as follows (KRW in millions, USD in thousands):follows:

Commitments

  

Financial institutions

  Currency  Guarantee
limit
   Outstanding
amount
 
      In millions of won and thousands of
foreign currencies
 

Commitments on Bank-overdraft

  Nonghyup Bank and others  KRW   1,845,000     43,233  

Commitments on Bank-daylight overdraft

  Nonghyup Bank  KRW   280,000     —    

Limit amount available for CP

  Korea Exchange Bank and others  KRW   1,129,000     197,500  

Limit amount available for card

  Hana Bank and others  KRW   71,500     273  

Certification of payment on payables from foreign country

  Korea Development Bank  USD   420,009     342,040  

Loan limit

  Hana Bank and others  KRW   195,996     108,892  
  BNP Paribas and others  USD   2,646,059     152,150  

Certification of payment on L/C

  Korea Exchange Bank and others  USD   2,053,328     252,256  
  Korea Exchange Bank  GBP   61,169     15,803  
  Korea Exchange Bank  EUR   3,100     2,506  
  Nonghyup Bank and others  JPY   18,914,670     14,301,596  

Certification of performance guarantee on contract

  Seoul Guarantee Insurance and others  KRW   159,426     156,129  
  Korea Exchange Bank  AED   54,880     54,880  
  Standard Chartered Bank and others  USD   843,811     711,553  
  Kookmin Bank  EUR   37,082     37,082  
  HSBC and others  INR   236,443     185,077  

Certification of bidding

  SMBC and others  USD   11,470     10,816  

Commitments

  

Financial institutions

  Currency  Guarantee
limit
  Outstanding
amount
 
      In millions of won and thousands of
foreign currencies
 

Advance payment bond, Warranty bond, Retention bond and others

  Shinhan Bank  EUR  54,880   5,438  
  HSBC  USD  252,140   38,832  
  Katumandu Bank and others  NPR  85,289   85,289  

Others

  Korea Exchange Bank and others  KRW  9,503   4,669  
  BNP Paribas and others  USD  1,409,500   6,500  
  Hana Bank  INR  157,830   157,830  

Inclusive credit

  Korea Exchange Bank and others  KRW  1,176,600   340,297  
  HSBC and others  USD  545,512   17,079  

(4)As of December 31, 2013, the blank check and assets provided as collaterals or pledges to financial institutions by the Company are follows:

 

CommitmentsGuarantor

 

Financial institutionsGuarantee

Type of guarantee

 Foreign
currenciesCurrency
 AmountsAmount Description
In millions of won and thousands of U.S. dollars

Commitments on Bank-overdraftKEPCO Nuclear Fuel Co., Ltd.

 Kookmin Bank and othersKorea Resources CorporationBlank check KRW   1,254,000—    Collateral for borrowings

Commitments on Bank-daylight overdraftKEPCO International Philippines Inc.

 NonghyupCitibank New YorkAll shareholdings of KEPCO llijan CorporationUSD90,623Required pursuant to
Pledge Agreement
between KIPI, KEILCO
and Citibank New York
re: KEILCO Project

Financing in Nov. 2000

Korea East-West Power Co., Ltd.

Korea Development Bank and othersAll shareholdings of Gyeongju Wind Power Co., Ltd. KRW   280,0009,240  Collateral for borrowings

Limit amount available for CPKorea Hydro & Nuclear Power Co., Ltd.

 ShinhanKorea Development Bank and othersAll shareholdings of Gyeonggi Green Energy Co., Ltd. KRW   2,049,00047,000  Collateral for borrowings

Limit amount available for cardKorea Midland Power Co., Ltd.

 IndustrialHana Bank of Korea and othersAll shareholdings of Commerce and Industry Energy Co., Ltd. KRW   71,570

Certification of payment on payables from foreign country

Korea Development BankUSD13,570   583,993

Certification of payment on L/C

Korea Exchange BankGBP61,169
Suhyup Bank and othersKRW99,213
Korea Exchange Bank and othersUSD1,616,063

Inclusive credit

Korea Exchange BankKRW387,500
HSBC and othersUSD547,012

Loan limit

Korea Exchange BankKRW506,830
HSBC and othersUSD1,233,000

Certification of performance of business on overseas oilfield or electricity

Bank of KathmanduNPR155,448
SABBSAR100,000
Export-import Bank of Korea and othersUSD223,708
Hana BankKRW65,000

Certification of performance guarantee on contracts

Korea Exchange BankAED54,880
Bhutan National BankBTN11,857
HSBC and othersINR244,333
Seoul Guarantee Insurance and othersKRW16,592
Standard Chartered Bank and othersUSD653,230

Certification of bidding

HSBC and othersINR82,700
Standard Chartered BankTHB72,000
Shinhan Bank and othersUSD81,016

Advance payment bond, warranty bond, retention bond and others

Korea Exchange BankBDT10,206
Bhutan National BankBTN11,857
Shinhan BankEUR5,438
HSBCINR139,690
Nonghyup BankUSD20,212

Others

Shinhan BankJPY750

50.SUBSEQUENT EVENTS:Collateral for borrowings

 

(5)(1)Fuel cost adjustment, a new electric tariff system was enacted by the Ministry of Knowledge Economy (newly named the Ministry of Trade Industry and Energy), which went into effect on July 2011. Adjusted unit fuel rate, which is multiplies fuel price variance, which is the deduction of base fuel rate from actual fuel rate with conversion coefficient. However, due to inflationary and other policy considerations relating to protecting the consumers from sudden and substantial rises in electricity tariff, the Ministry of Knowledge Economy issued a hold order on July 29, 2011 to suspending billing and collecting the amounts.

The accumulated difference as of December 31, 2013 is ₩728,308 million, which has decreased by ₩1,149,063 million from ₩1,877,371 million as of December 31, 2012.

There is no assurance as to when the Government will lift the hold order and allow the Company to bill and collect the FCPTA amounts. The Company concluded that, in consideration of the prolonged unbilled period and consultation with, and information from, the Ministry, the Company would not be able to bill and collect the unbilled FCPTA amounts for the foreseeable future. As a result, there were no FCPTA amounts remaining in the consolidated statement of financial position as of December 31, 2013.

(6)Korea Hydro & NuclearThe Company has a potential obligation to reimburse approximately ₩8.3 billion to KEPCO SPC Power Co., Ltd., a subsidiary, issued corporate bondsCorporation, one of its joint ventures of the Company, for the turbine accident on Philippine Unit 2 power plant. Due to the uncertainties of who is the responsible party for the accident, the Company has not recognized for the expected financial effect in subsequent period and details arethe consolidated statement of financial position as follows (KRW in millions):of December 31, 2013.

 

Type

  Interest rate (%)   Issued date   Maturity date   Amounts 

30-1st unsecured bond

   3.84     2012.01.19     2017.01.19    (Won)100,000  

30-2nd unsecured bond

   4.04     2012.01.19     2022.01.19     150,000  

30-3rd unsecured bond

   4.24     2012.01.19     2032.01.29     50,000  

31-1st unsecured bond

   4.01     2012.03.20     2017.03.20     50,000  

31-2nd unsecured bond

   4.15     2012.03.20     2022.03.20     100,000  

31-3rd unsecured bond

   4.32     2012.03.20     2032.03.20     150,000  

32-1st unsecured bond

   3.80     2012.04.26     2017.04.26     70,000  

32-2nd unsecured bond

   3.97     2012.04.26     2022.04.26     100,000  

32-3rd unsecured bond

   4.14     2012.04.26     2032.04.26     130,000  

50.(2)Korea South-East Power Co., Ltd., a subsidiary, issued 27th unsecured bonds in subsequent period and details are as follows. (KRW in millions):Subsequent Events

Subsequent to the reporting date, the subsidiaries of the Company, Korea Hydro & Nuclear Power Co., Ltd., Korea Southern Power Co., Ltd. and Korea Midland Power Co., Ltd., Korea East-West Power Co., Ltd. have issued new debt securities for funds of facilities and operation as follows:

Type

  Interest rate (%)   Issued date   Maturity date   Amounts 

27-1st unsecured bond

   3.70     2012.02.23     2015.02.23    (Won)130,000  

27-2nd unsecured bond

   3.85     2012.02.23     2017.02.23     50,000  

27-3rd unsecured bond

   4.09     2012.02.23     2022.02.23     170,000  

 

(3)Korea Midland Power Co., Ltd., a subsidiary, issued 20th unsecured bond in subsequent period and details are as follows. (KRW in millions):

Type

  Interest rate (%)   Issued date   Maturity date   Amounts 

20-1st unsecured bond

   3.85     2012.02.28     2017.02.28    (Won)150,000  

22-2nd unsecured bond

   3.89     2012.02.28     2019.02.28     50,000  

(4)Korea East West Power Co., Ltd., a subsidiary, issued 16th unsecured bond in subsequent period and details are as follows. (KRW in millions):

Type

  Interest rate (%)   Issued date   Maturity date   Amounts 

16-1st unsecured bond

   4.05     2012.03.22     2017.03.22    (Won)100,000  

16-2nd unsecured bond

   4.21     2012.03.22     2022.03.22     200,000  

(5)In March 2012, Korea Western Power Co., Ltd., a subsidiary, purchased a 22.7 % equity interest in Pioneer Gas Power for a purchase price of approximately USD 20,202 thousand to construct a 388-megawatt combined-cycle power plant in Maharashtra, India.

Company name

  

Type

  

Interest rate

  Issue date   Maturity   Currency   Amounts 
      In millions of won and thousands of U.S. dollars 

Korea Hydro & Nuclear Power Co., Ltd.

  41-1st Unsecured bond  3.12%   2014.01.17     2017.01.17     KRW     170,000  
  41-2nd Unsecured bond  3.86%   2014.01.17     2024.01.17     KRW     130,000  

Korea Southern Power Co., Ltd.

  24-1st Unsecured bond  3.49%   2014.01.21     2019.01.21     KRW     150,000  
  24-2nd Unsecured bond  3.80%   2014.01.21     2024.01.21     KRW     50,000  
  26-1st Unsecured bond  3.31%   2014.03.06     2019.03.06     KRW     50,000  
  26-2nd Unsecured bond  3.71%   2014.03.06     2024.03.06     KRW     160,000  
  26-3rd Unsecured bond  3.92%   2014.03.06     2034.03.06     KRW     90,000  
  25thDollar-denominated corporate bond  Libor + 1.05%   2014.01.28     2017.01.28     USD     100,000  

Korea Midland Power Co., Ltd.

  

4th Global bond

(Reg S only)

  2.75%   2014.02.10     2019.02.11     KRW     321,570  

Korea East-West Power Co., Ltd.

  21-1st Unsecured bond  3.04%   2014.01.28     2017.01.28     KRW     200,000  
  21-2nd Unsecured bond  3.40%   2014.01.28     2019.01.28     KRW     100,000  
  22 Unsecured bond  3.01%   2014.02.24     2017.02.24     KRW     100,000  

INDEX OF EXHIBITS

 

  1.1  Articles of Incorporation, as last amended on April 16, 2012November 6, 2013 (in English)
  2.1  Form of Deposit Agreement*
  8.1  List of Subsidiaries
12.1  Certifications of our Chief Executive Officer required by Rule 13a-14(a) of the Exchange Act (Certifications under Section 302 of the Sarbanes-Oxley Act of 2002)
12.2  Certifications of our Chief Financial Officer required by Rule 13a-14(a) of the Exchange Act (Certifications under Section 302 of the Sarbanes-Oxley Act of 2002)
13.1  Certifications of our Chief Executive Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of the United States Code (18 U.S.C. 1350) (Certifications under Section 906 of the Sarbanes-Oxley Act of 2002)
13.2  Certifications of our Chief Financial Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of the United States Code (18 U.S.C. 1350) (Certifications under Section 906 of the Sarbanes-Oxley Act of 2002)
15.1  The Korea Electric Power Corporation Act, as amended on March 23, 2013 (in Korean and English)**
15.2  Enforcement Decree of the Korea Electric Power Corporation Act, as amended on March 23, 2013 (in Korean and English)***
15.3  The Public Agencies Management Act, of 2007, as amended on July 25, 2011March 23, 2013 (in English)**
15.4  Enforcement Decree of the Public Agencies Management Act, of 2007, as amended on October 14, 2011March 23, 2013 (in English)**
15.5Letter from Deloitte Anjin LLC

 

*Incorporated by reference to the Registrant’s Registration Statement on Form F-6 with respect to the ADSs, registered under Registration No. 33-84612.
**Incorporated by reference to the Registrant’s Annual Reportannual report on Form 20-F for the fiscal year ended December 31, 2002.
***Incorporated by reference to the Registrants Registration Statement on Form F-3(No. 001-13372) previously filed on March 8, 2000, registered under Registration No. 333-9180.April 30, 2013.

 

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