Korea Electric Power Corporation

Good morning and good evening. First of all, thank you all for joining this conference call. And now we will begin the conference of the Fiscal Year 2024 Third Quarter Earnings Results by KEPCO. This conference will start with a presentation followed by a divisional Q&A session. If you have a question, please press star 1 on your phone during the Q&A. Now we shall commence the presentation on the Fiscal Year 2024 Third Quarter Earnings Results by KEPCO.

Today's conference call will be conducted in Korean and English. First, we will receive a brief answer after the performance announcement. The performance data to be announced today IFRS 연결 기준 잠정 수치이며 모든 비교는 별도의 언급이 없는 한 전년 동기 대비입니다. 아울러 실적 발표 회의 내용 중 언급될 수 있는 경영 계획 및 목표 추정 재무 수치 등은 현 시점에서의 목표 또는 전망 수임으로 불확실성 및 투자 위험 요소가 있음을 양지하시기 바랍니다. 지금부터 2024년도 3분기 누적 손익 Good afternoon.

My name is Jang Nam-Yeon. I am the head of Finance and Accounting Department of Korea Power Corporation. I would like to thank you for taking time out of your busy schedules to attend the IA Conference Call of the third quarter 2024 of CAPCO. Today's conference call is going to be provided in both Korean and English. I'm going to report to you the financial results and then take your questions. The financial results that we will present today are consolidated estimates based on IFRS and all comparisons are based on year-on-year basis unless otherwise mentioned. The business plan and targets and estimates that we may mention during this conference call are the estimates at current points, so please understand there is uncertainty and risk in investment. Now I'm going to present to you the accumulated profit and loss of the third quarter 2024 in Korean and in English afterwards.

Hello, I'm Yang Si-young, the Director of IR. First, let's look at the sales ranking. In the third quarter of 2024, the profit of the joint business was recorded at 5,9457 won. If we look at the details, the revenue increased by 6.4% and was recorded at 69,8698 won. The net sales profit increased by 8% and was recorded at 66,7279 won. The other profits, such as overseas business profits, were recorded at 19.5%, 3,419,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 8,534.8 billion won. The interest rate of the main business sector increased by 1,125 billion won compared to the previous year due to the increase in the increase in the increase in the increase in the increase in the increase in the increase in the increase in the increase in Good afternoon.

I am Yang Shiyoung. I'm the head of IR. Let us now look at the operating profit. The accumulated consolidated operating profit in the third quarter 2024 recorded $5,945.7 billion won. Let's look at the details. Our sales recorded $69,869.8 billion won, up 6.4%. Among this, income from electricity sales, $66,727.9 billion won, up 8.0%. And other income, including income from overseas business, $3,141.9 billion won, down 19.5%. Cost of sales and selling administrative expenses recorded $63,924.1 billion, down 11.4%. Among this, fuel cost and power purchase cost respectively recorded $17,641.1 billion and 26,819.3 billion won, which are down 18.6% and 11.6%, respectively, due to fuel cost decrease. Depreciation recorded 8,534.8 billion won, down 0.2%. Among a major non-operating profit and loss, interest expense recorded $3,422.9 billion won, which is a YOY increase of $112.5 billion won due to an increase in average balance of borrowings. Due to the reasons that I mentioned so far, the accumulated consolidated operating profit in the 24 third quarter recorded $5,945.7 billion won, Net income recorded $2,590,000,000. Hello, I'm Um Tae-seop, I.R.

Director. Next, I would like to talk about the main interests. First, I would like to talk about the performance and outlook of the power sales. The total power sales of the third quarter are 421 TWh in total, which is a total of 421 TWh, which is a total of 421 TWh, Good afternoon. I am Aum Tae-suk, also in charge of IR.

Now I would like to report to you the major concerns. Now let me first start by the power sales performance and the outlook. Our power sales accumulated in the third quarter increase YOY by 1.7% to 421 terawatt hour thanks to better export of semiconductors and higher demand for summer cooling. And in the annual basis, we believe that the power sales will slightly increase due to an increase in demand for heating and cooling.

Next, I would like to talk about the cost of fuel. In the 3rd quarter of 2014, the fuel cost per ton was 190,000 won per ton, per ton per LNG, and per liter was 974 won per liter. In the year 2024, the fuel cost was 180,000 won per ton, per ton per LNG, and per liter was 970,000 won per liter, excluding the fuel cost. We hope that this trend will change depending on the international fuel price.

Now let me report to you the fuel cost by fuel source. The third quarter of 2024, the quarterly fuel cost was 190,000 won per ton for coal, 1.09 million won per ton for LNG, and 974 won per liter for oil. In the 2024 annual fuel cost, other than all the unloading cost, The coal cost is about 180,000 won per ton, LNG 1.1 million won per ton, and the oil about 907 won per liter. Please understand that this outlook may differ according to global fuel price trends.

In the case of accumulated power generation in the third quarter, the power generation has increased due to the introduction of a new power generation. In the case of coal, the power generation has decreased rapidly due to the decline in the use of coal. LNG's equipment capacity has increased rapidly, but the power generation has been maintained due to the increase in base power generation. In the case of 2024, it is expected that the increase in the use of power generation and the increase in the power generation will increase due to the introduction of new power generation Sinanul-2, which started with the rise in the use of coal in April. Now look at the power generation mix of our power generation companies.

If you look at the power generation mix of accumulated third quarter, The nuclear power plant's share increased thanks to the operation of newly built reactors. Coal share slightly decreased because of a decrease in coal utilization rate. LNG's capacity slightly increased, but their mix was maintained due to an increase in base load. In 2024 as a whole, We believe that the nuclear power plant's share will increase due to the outlook of increase in utilization rate and the operation of newly built reactors such as Shinhanul Unit 2, which started commercial operation in April. The coal's share will remain similarly, and LNG's share will decrease. The utilization rate outlook of 2024 annually by power source is for nuclear power plants early to mid 80%, coal early to mid 50%, and LNG later 20% range.

In the 3rd quarter of 2014, the RPS cost was 2,7638,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,

Now let me report to you the costs related to RPS and ETS. The RPS-related costs accumulated to the third quarter of 2024 was $2,763.8 billion won on a consolidated basis and $3,269,000,000 won on a non-consolidated basis. ETS-related costs minus 30.2 billion won consolidated, or 0 million won non-consolidated. And lastly, let me report to you on our capital finance. The consolidated borrowing accumulated to the third quarter of 2024 was 132 trillion won, and the borrowing of non-consolidated was 88 trillion won.

이어서 질의응답 시간을 갖도록 하겠습니다. 국영문 순차통역으로 진행되므로 질문과 답변을 간단하고 분명하게 해주시면 감사하겠습니다. 그럼 이제 질문을 시작해주시기 바랍니다.

Now we are going to have a question and answer session. Since the Q&A session will be conducted through consecutive interpretation between Korean and English, so please make your questions concise and clear. We are ready to entertain your questions.

Now, Q&A session will begin.

Please press star 1 if you have any questions. For cancellation, please press star 2 on your phone.

The first question will be given by Mr. Pierre Lau of Citigroup.

Please go ahead.

Hello. Good morning, Capital Management. Thanks for your time. I have three questions. The first one is, what was the key reason for the finance expense drop by 80% a year in the third quarter? The second question is, Do you expect more terror pipes in the next six months? And the third question, what is your guidance for your fuel costs in four quarters this year and 2025? Thank you.

Your second question, please.

Second question, what is your expectation with having more general rights in fourth quarter this year or first quarter next year.

Thank you for your time. First of all, I'm curious about the reason why the interest rate was 80% in the third quarter, and I'm also curious about what you expect from the remaining time and fuel cost in 2025. Secondly, First, I'd like to explain the interest rate.

Oh, yeah. Yeah. Yeah. Let me now try to answer your first question about interest expense.

Our borrowings did decrease on a consolidated basis. However, the average balance of borrowing increased year-on-year basis. So on an accumulated basis to third quarter, the interest expense was $3.4 trillion, which is up by $110 billion from the same quarter last year.

Excuse me. I'm asking for the finance expense in the third quarter. The number was $300 34 billion won and it's dropped 80% year-on-year from last year 1,674,000,000 won. So I'm asking about the finance expense. Why it's dropped 80% year-on-year in the third quarter?

Thank you. I have a question. Why did the payment cost increase by 80% compared to last year?

Last year,

I'll give you the answer again.

Not only the cost of interest, but also the cost of evaluation of foreign-made products are included. Due to the decrease in the rate of return for the previous year, the loss of foreign-made products and the loss of products were greatly reduced. So, including the cost of interest and the loss of foreign-made products, the cost of interest was reduced by about 1.3 billion won compared to the previous year.

The loss of foreign-made products... The financial expenses is not only influenced by the interest rate. It is also influenced by the loss derived from foreign exchange. Because the range of increase of foreign exchange decreased from the last year, our loss derived from foreign exchange also decreased. That is why we are down from the last year 1.321.

On October 24th, the total amount of cash was 16.1 won. The total amount of cash was 8.5 won on average. Well, your question

on the guidance of tariffs into the fourth quarter and next year. We increased the tariff of industrial service power by 16.11 on October 24th. And the effect of this tariff increase on average is equivalent to an increase of 8.51. It has not been a month since the last increase in October, so we do not foresee any more increase in the near future. We are going to closely monitor the financial impact of this increase in energy prices and foreign exchange market. About your questions on the fuel cost outlook, CAPCO does not present any official outlook on fuel cost. If that answers your question, we would like to take the next question.

The following question is by Song Jung-hwa of LS Securities.

Please go ahead. Is it going to be the same as before? Or is it going to be the same as before?

Thank you for the opportunity to ask a question. My question is about dividend. We understand that still you have sizable accumulated operating loss, but this year net income was positive. So we want to know whether KEPCO is planning to resume paying out dividend. If so, will the guideline be same as the past, about 10% dividend of the net income? Or, because still you have accumulated operating loss, are you going to pay out less than previous guideline and pay out more dividend as time goes by?

Yes, we are going to review the performance of the dividend if there is a possibility of a dividend based on the relevant performance. We have not yet reviewed the dividend policy including the dividend tendency.

In answering your question, we will consider the plan to pay out dividends if there is the funds to pay out dividends depending on our annual performance, and we do not have any set plan or policy on how much dividends to pay out.

I'm sorry, but I can hear you very well in the Q&A. The volume was low from the Korean speaker's side, so we would like to ask the Korean speaker to repeat your answer, please.

Next question, please.

The next question is from Mr. Yoo Jae-hyun of Media Asset Securities. Please go ahead.

Hello, this is Yoo Jae-hyun. Please tell us about the financial income of minus 4,600 billion won. I think there was a similar question earlier. I would like you to tell us about the income. And if you look at the mid-term plan of the power plant, the third quarter of the year is I'd like to ask a question about your financial income being minus $460 billion won.

Could you tell us why? And my second question is about the completion plan of nuclear power plants. You announced that the Seoul Unit 3 is planned to be completed in the fourth quarter. Is it still the case, or is there any possibility of postponing this? And when this is completed, when will it start operation?

Yes, I will answer the financial income question. Financial income is also included in the interest rate, foreign exchange rate, and evaluation rate. In contrast to the previous year,

To give you an answer on the financial income, the financial income is also influenced by a number of factors such as interest rate, foreign exchange, and the derived products or evaluation profits. And just like my last answer, This year, the increase of the foreign exchange was lower than the last year. The derived valuation profit also came down.

Thank you, Ms. Choi. In terms of the mid-term period, we haven't officially confirmed the termination of the exchange or the cash flow.

And your questions about the plan for Sewol Unit 3, the completion plan for Sewol Unit 3, we have not been officially notified by either KHMP or KPX that this plan will be postponed, but we understand they are considering postponing this process because of a delayed construction process.

Next question, please.

The next questioner is Mr. Moon Kyung-won from Merit Securities.

Please go ahead. rather expanded the range. What is the reason for the increase in the gap between these connections? Specifically, if there was an increase in the number of real estate adjustment numbers compared to the last quarter, and if there was an increase in the number of real estate adjustment numbers, please tell us the current real estate adjustment numbers. Two questions. Although your consolidated operating profit improved a lot,

We see an enlarged deficit on a non-consolidated basis. Can you tell us why the gap is getting bigger between consolidated operating profit and non-consolidated operating profit and loss? Is it because you increased the adjusted coefficient? And if you did so, how much did you mark up the adjusted coefficient? My second question, the other operating expenses is down by 300 billion won.

Can you tell us why? Our non consolidated operating profit is smaller because the S&P

relatively increased in the third quarter. It led to a less profit on both consolidated and non-consolidated basis. The consolidated operating profit increased because it includes not only CAPCO's operating profit, but also the operating profits of our GENCOs and other subsidiaries. Other operating expenses became smaller because of the decrease in the fuel supply cost in Southeast Power.

I'm sorry, but I don't think you mentioned the budget adjustment number.

I'll answer the question now.

I'll tell you about the budget adjustment number. The budget adjustment number set for the first time in 24 years was about 0.4 and 0.5 carbon-fuel capacity. The first quarter was applied in the first quarter, from January to March. The second quarter, from April to September, was about 0.1 carbon-fuel capacity and 0.5 carbon-fuel capacity. The fourth quarter was already adjusted to 0.4 carbon-fuel capacity and 0.5 carbon-fuel capacity.

To give you the number of adjusted co-efficient, the first determination of the adjusted co-efficient in 2024 was applied to months from January to March. They were determined as 0.4 for nuclear power and 0.5 for coal. And the co-efficient got adjusted for April through September 1, 4, coal and 0.5 for nuclear power.

They got readjusted again for the fourth quarter to 0.5 for coal and 0.4 for nuclear power.

And to add a little more point on the adjusted coefficient, the current coefficient, which is determined for the fourth quarter, may be update one more, may be adjusted one more after updating our performance derived from the last adjusted coefficient.

Yes, thank you. We will take the next question.

Next question, please.

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The next question is from Mr. Hominho of Daeshin Securities.

Please go ahead.

Hello. First of all, I would like to ask about the raw material cost. In the first quarter, there was a consensus that it would increase by about 3,000 billion won per quarter, but in the second quarter, it decreased by about 22 billion won, and in the third quarter, it decreased by about 7.5 billion won. In the first quarter, You said it was going up, but I'm curious why it's decreasing in the afternoon. I think it's because I didn't hear it well, but I'm curious about the cause of the decrease in the second quarter and the third quarter this year. I don't know if you can figure it out. My first question is about the fuel cost for nuclear power plants.

In the first quarter, there was a consensus and you also let us know that there will be an increase of the fuel cost for nuclear power plants for about $300 billion, but actually they decreased by $220 billion in the second quarter, YOY, and again by $75 billion. Could you tell us why they are going down after you said that they may go up in the first quarter? And again, other operating expenses are going down, By $500 billion won in the second quarter and $300 billion won in the third quarter, do you believe that they will continue to go down in the fourth quarter? And the last question, the S&P dropped a lot more than the drop of the fuel cost in October. Can you tell us why? We would like to answer your first question about the fuel cost for nuclear power plant later through a different format.

And my answer to your question, the second question is about other operating expenses.

As I already answered two other questions, The fuel supply business cost for Southeast power generation company is going down because this is influenced by the decrease of the fuel cost. And that is why the other operating expenses are going down.

I want to ask you again. I asked about other business expenses. Does that have anything to do with fuel cost and fuel cost of Namdong Development?

My question is related to other operating expenses. Does that have much to do with the fuel cost of Southeast Power Generation Company?

Yes, I will answer your question. The fuel cost mentioned in the performance announcement is the fuel cost of the power plant, and the material cost included in other sales is the fuel cost of the power plant Yes, try to answer the question.

In the conference call, IA conference call, when we refer to fuel costs by Capco, this refers to the pure fuel cost that goes into our power generation business, whereas the fuel expenses and other operating expenses refer to the fuel cost of Our power generation facility is overseas, and Gen4 is a health power.

And the additional question is, how much was the cost of RPS and carbon extraction in the three-minute period?

To give you the RPS-related costs, on a consolidated basis, the RTS cost was $2 trillion,

763.8 billion, and on a non-consolidated basis, 3,269,000,000. The ETS related expenses, minus 30.2 billion won consolidated and zero non-consolidated.

And in the previous question, you said that S&P is falling a little more rapidly than the drop in fuel costs. Of course, S&P has been greatly affected by the drop in fuel costs, but S&P itself has been greatly affected by demand, supply, and supply, so I think the fall in S&P in October will have a great impact on demand reduction after the downfall of the trend.

And your last question is about why the S&P dropped much larger than the fuel cost drop. S&P, of course, is influenced by the trend of fuel cost, but it is also influenced by the demand and supply. The October S&P dropped a lot because the demand for power decreased a lot after the hot season.

Any other questions, please?

The next questioner is Mr. Jiarin Luo of BlackRock.

Please go ahead.

Oh, hi. Can you hear me?

Yes, we hear you.

Yes, I thank you for taking the questions. I have two. One is, again, S&P price down a lot. Does that mean the costs, your procurement costs in fourth quarter would also drop proportionately due to this S&P decline. And the second question is regarding dividend. What's the current dividend payout policy? And given you are profitable this year, can we expect at least some dividend pay to shareholders?

Thank you for the opportunity to ask questions, and I will ask two questions. I would like to ask about the drop in the S&P. Since the S&P has dropped significantly, can we assume that it means that the payment cost has also decreased? The second question is about the dividend. How much of the dividend policy is out there, and to what extent can the shareholders expect the dividend this year? In your S&P related question, what do you exactly mean by procurement cost?

The cost when you purchase power from third-party power plants.

S&P is the standard price of power in the power market. If the S&P goes down, the purchasing power is bound to fall.

S&P sets the standards of settlement in the power market. So when the S&P goes down, then it is natural that our procurement cost, which is the power purchase cost, also goes down.

In the previous report,

Once again, about our policy for dividend payout, at the point of announcing the annual closing of our finances, we will check whether we have profits that are payable as dividends and to make a decision for dividend payout. At the moment, we do not have any official consideration for dividend policy.

Oh, sorry. Do you mind if I follow up on this? How do you define profit payable?

Any difference, for instance, reported net profit? This dividend payable profit is calculated as on a non-consolidated net income, we subtract the deferred loss and the reserve.

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다음으로 질문해 주실 분은 대신증권의 허민호님입니다. 질문해 주십시오.

The next question is from Mr. 허민호 of National Securities. Please go ahead.

하나만 여쭤보겠습니다. 전력 구입량은 얼마 정도였나요?

How much power did you purchase?

In the third quarter, we purchased about 156 terawatt-hour.

Among these, we purchased 104 terawatt-hour from our Genco's.

Next question, please. Currently, there is no participant waiting with questions. Please press star 1 to give your question.

The next question is from Park Yoo-shin of HSBC. Please go ahead.

Hello, I'm Park Yoo-shin of HSBC. Thank you for the question. I have two questions. First of all, you are making a lot of efforts to improve our financial situation. If there is anything else that you are working on to improve our financial situation, please share it with us. The second question is, recently, there has been a lot of tax cuts, and I would like to ask you I have two questions.

I understand that KEPCO is making many efforts, including tariff increase, to improve the financial structure. Other than tariff increase, what other measures is KEPCO taking? And secondly, in the market, currently the won is depreciating. Can you please tell us the impact of the value of won in the foreign exchange market?

is Asian plan worth 30 trillion won for the next what might I see okay Capco is implementing a 30 trillion won of financial stabilization plan for five years from 2022 to 2026.

In this plan, we are taking a lot of measures such as selling our assets and reducing our cost of investment, and trying to increase the income other than from power sales, and we are beating this target by 110%.

Second, I would like to talk about the exchange rate. The exchange rate can affect our company in two ways. First of all, it can affect interest rates, and secondly, it can affect our raw materials. However, in the case of our interest rates, most of them are disbursed, so you can see that there is some risk disbursed. Regarding raw materials, when we buy LNG or buy raw materials, the exchange rate is corrected, so it is true that some of the exchange rate is exposed.

And to answer your questions about foreign exchange fluctuation impact on us, foreign exchange fluctuation can impact our business in two ways. First, on the borrowing, and second, on the fuel cost. However, our borrowings are hedged, so we are hedged from risk somewhat. And secondly, the impact on the fuel cost. We are exposed to some foreign exchange fluctuation risk when we buy LNG or other fuel, but the details of this impact varies from the fluctuation range and the cost of global fuel.

I'll take the next question.

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다음으로 질문해 주실 분은 UBS의 조윤행 님입니다. 질문해 주십시오.

The next question is from 조윤행 of UBS. Please go ahead.

Yes, thank you for the question. I have one thing to ask. When we look at the national security inspection and other reports, there are some stories that the head office is trying to re-evaluate assets. If you are in the process of promoting asset re-evaluation for capital compensation, please share with us when and how this will affect our financial situation.

For the information, if you look at our report of national investigation, we understand that CAPCO is planning asset revaluation to improve its financial standing. And if it's planning so, when will this asset revaluation have an impact on your financial position?

We have a plan to re-evaluate our land as part of our financial stabilization plan and we are considering

by looking at the possible impact of this land reevaluation.

Next question, please.

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Once again, if you have any questions, please press star 1.

Since there is no further question, we would like to conclude our IR conference call for the third quarter 2024. If you have further questions, please do not hesitate to contact the IR team.

Thank you for your attention.

This concludes the fiscal year 2024 third quarter earnings result by KIPCO. Thank you for your participation.