[FOREIGN LANGUAGE] Good morning, and good evening. First of all, thank you all for joining this conference call and now we will begin the conference of the fiscal year 2013 second quarter earnings results by KEPCO. This conference will start with a presentation, followed by a brief Q&A session. (Operator Instructions). Now we shall commence the presentation on the fiscal year 2013 second quarter earnings results by KEPCO.

[FOREIGN LANGUAGE] Good afternoon. This is the Changyoung Ji, Senior IR Manager of KEPCO. On behalf of KEPCO, I would like to thank you all for participating in today's conference call to announce earnings result for the first half of 2013. [FOREIGN LANGUAGE] We will begin with a brief presentation on the earnings results, which will be followed by a Q&A session. Today's call will be proceeded in both Korean and English. [FOREIGN LANGUAGE] Please note that the financial information to be disclosed today is only preliminary, unaudited, unconsolidated basis in accordance with KIFRS. Any comparison will be on a year-on-year basis between 2012 and 2013. Business, strategies, plans, financial estimates, and other forward-looking statements included in today's call will be made based on our current expectations and plans. Please be noted that such statements may involve certain risks and uncertainties. [FOREIGN LANGUAGE] Now let's begin with an overview of earnings results of the first half of 2013, first in Korean and repeated in English. [FOREIGN LANGUAGE] Now we will provide the overview in English starting with operating income. In the first half of 2013, KEPCO reported a net operating loss of KRW 436 billion, improved by 81% from net operating loss of KRW 2.3 trillion for 2012 and in the second quarter KEPCO reported a net operating loss of KRW 1.09 trillion improved by 46.9% from net operating loss of KRX 2.06 trillion in 2012 Taking a closer look, operating revenues increase 10.7% to KRW 25.48 trillion. This was attributable mainly to 11.2% increase in power sales revenue, totaling in KRW 23.72 trillion and a 5.4% increase in revenue from the overseas business amounting to KRW 1.08 trillion. Moving on to main operating costs, cost of goods sold, SG&A expenses increased 2.4% to KRW 25.91 trillion. Fuel costs declined…

[FOREIGN LANGUAGE] Now Q&A session will begin. (Operator Instructions). [FOREIGN LANGUAGE] Currently one participant is waiting. It will be his question. So first question will be given by Pierre Lau from Citigroup. Please go ahead, sir.

This is Pierre Lau from Citigroup. I have three questions. The first question is, would you mind to let us know how many unit coal and unit LNG cost in second half 2013? This is the first question. The second question is, recently, we have some rumors about tariff hike. So I would like to know what would be the tariff hike outlook in second half this year? Thirdly, the last question is, in the second quarter this year, the nuclear unit KEPCO's utilization was only 67.9%. I would like to know what would be the utilizations expected in the third quarter and fourth quarter this year? Also, we have up to 10 nuclear units with their operations suspended in the second quarter. So how many of these units will resume in third quarter and how many would resume in fourth quarter? Thank you.

[FOREIGN LANGUAGE]

[FOREIGN LANGUAGE] Allow me to answer the first question. Regarding coal and LNG prices forecast for second half of this year, coal would be, in our case, bituminous coal and versus last year, it is true that on the international market, bituminous coal prices have been decreased. However, since the gencos have already concluded long term contract with their coal suppliers last year, and those contracts remain in place, it is true that the unit price of coal has not been lowered as much as what we see on the actual market prices because of that reason. I believe that that situation will more or less persist for the second half as well. On the whole, coal prices on the international market tends to be on the lowering trend and stabilizing and we foresee that to continue in the near future. As for LNG prices, LNG for power generation is supplied through coal gas and therefore depending on what kind of purchase agreement coal gas has in place and will have in place in the future, depending on that we may foresee some changes of LNG prices. But it depends on what happens through coal gas.

[FOREIGN LANGUAGE]

[FOREIGN LANGUAGE] I would like to answer the question regarding the tariff hike. It is true that there has been a lot of discussion, specifically in the press, about the possibility of tariff hike. The reason behind that is that a while ago, the Minister of Industry of the Republic of Korea has mentioned about how there is a need to reform the current tariff system. However, what he was mentioning in that announcement was mostly in terms of strengthening the current system in order to better manage the demand rather than anything else. Therefore, although all is in agreement about the necessity for tariff increase, we are not yet in any specific discussions with the government regarding possible tariff hikes in the near future.

[FOREIGN LANGUAGE] I would like to answer the question on the utilization rate of nuclear power plants and the forecast that we have regarding that. It is true that as you mentioned in your question, for the second quarter, utilization rate was somewhere at around 68% to 69% range. In the third quarter, we expect that to be 78% and for fourth quarter we expect it to be 92%. So that on the full, yearly average will turn out to be somewhere around 80% level. [FOREIGN LANGUAGE] And I would like to correct one thing in your question that the nuclear power plants that are currently not being operated due to maintenance is not 10 units but five units. [FOREIGN LANGUAGE] As for the additional question that you had, the nuclear power plants in question. For example, Hanul #4 will be resuming operations from mid-August. That is to say, this month. Also for the different power plants in question such as Shin-Kori #1 and #2 and Shin-Wolsong #1, that has been related to the component related incident that have been mentioned in the press. We expect those units to resume operation in early October.

Okay. Thanks for your reply. So two follow-ups. One is, for the unit coal cost, can I assume the unit coal cost in second half this year to be same as that in the first half, that is KRW 103,000 per ton? The second follow-up question is, you just replied that some nuclear units will resume operation in August. Is it one unit or two unit? Thank you.

[FOREIGN LANGUAGE]

[FOREIGN LANGUAGE] I would like the answer the question that you had for the coal unit cost. As for coal, it is true that quite a bit is fixed up into the long-term contract but there is a certain volume that is being purchased in the spot market. So that question exists as well. So even for the first half of this year versus the previous year, we have seen coal unit cost decrease of around 20%. We expect similar things to be applied to the second half as well.

[FOREIGN LANGUAGE] And for the nuclear power plant that will resume operation in mid-August, it is one unit, Hanul #4.

Okay. Thank you.

Okay. Now, next question please?

[FOREIGN LANGUAGE] Currently two participants are waiting with their questions. The following question is by Mr. Yang Ji-hwan from Daishin Securities. Please go ahead, sir.

[FOREIGN LANGUAGE] Good afternoon. I have a couple of questions. First one regarding maintenance cost. We see that for the second quarter of this year already maintenance cost related to Shin-Kori #1 and #2 as well as Shin-Wolsong #1 could be seen quite visibly. So do you expect, for the third quarter, that maintenance related expenses will become higher? That's my first question. Secondly is regarding actually the coal fired plants as well. In those cases, we see that the number of maintenance days is quite significant. So in the second half, do you believe that this will increase, if at all? Last question is, there are forecasts about coal gas getting more financing. Is KEPCO planning to participate in investing in this event?

[FOREIGN LANGUAGE] First of all, regarding your question about for the forecast regarding maintenance, their cost and activity. That will, as plans for the coal fired power plants maintenance activities, we will need to confirm with the genco, then therefore we will get back to you with a follow-up later afterwards. [FOREIGN LANGUAGE]

[FOREIGN LANGUAGE] Regarding the question about coal gas, nothing has been decided to be announced as of yet because coal gas itself has not come up with an accurate announcement about its plans for the financing. Therefore, once coal gas makes its announcement then we will have to go through the review of that announcement and then we may come up with some decision at a later date. But as of yet, there is nothing to announce.

[FOREIGN LANGUAGE] For your reference, there is an add-on answer relating the maintenance and repair cost. Maintenance and repair cost for the first half of this year has been increased about 25% but that does not come from KEPCO's activities itself but mostly due to increased planned maintenance days of the genco.

[FOREIGN LANGUAGE] The following question is by Mr. Cha Hung San from Chemical Energy Investment Advisor. Please go ahead, sir.

[FOREIGN LANGUAGE] I would like to interpret the two questions, first of all. First question is, the tariff of electricity for Korea is only at around one third the level of that of Europe or Japan. So would there not be the possibility that Europe and Japan see this a way of Korean government trying to protect its own industries? The second question is related to the generation fuel mix. With the current increase of development in shale gas that is happening, we see that trends are moving more and more towards gas, away from coal. So what is the case for KEPCO in the future? Will the generation fuel mix change in the future so that gas will take up a bigger portion while coal and nuclear will be decreased?

[FOREIGN LANGUAGE] I would like to answer the first question. It is true that the electricity tariff for the industrial usage is quite low here in Korea. Due to this, there has been some voices of concern about how the other customers are having to cost subsidize for industry. However, we have not had any complaints or those types of voices of concern being pressed from the international arena.

[FOREIGN LANGUAGE] I would like to answer the second question. As for shale gas, it is true that there is a lot of talk currently about introducing shale gas. However, this issue is something that needs to be discussed under the big umbrella theme of national energy policy. It is not something that we at KEPCO alone can establish as our own plan or policy. Therefore it would need to be discussed with the government. Within the overall framework of plans for establishing the national energy policy. As for plans for introduction of shale gas or reducing the proportion of nuclear and coal, that is something also that needs to be discussed and agreed upon with the government. As of now, we have not had any specific discussions regarding this issue.

[FOREIGN LANGUAGE] Currently six participants are waiting with their questions. Thee following question is by Ms. Cathy Chan from Citigroup. Please go ahead, ma'am.

Hi, this is Cathy from Citigroup. I have two questions. The first question is, can you tell us why the average tariff in second quarter is lower than that in first quarter 2013? My second question is, can you tell us the coal proportion which was purchased from the long-term contract and the percentage of coal which you have purchased from the spot market? Thank you.

So, what was your first question, again? Are you asking the average tariff?

Yes. That's correct. My first question is about the average tariff rate in second quarter 2013 is lower than that in first quarter? Taking industrial as an example, the tariff for industrial user is KRW 89.67 per kilowatt hour in the second quarter but in first quarter, the rate is much higher at KRW 103.25. So can I know the reason? [FOREIGN LANGUAGE]

[FOREIGN LANGUAGE] Yes, I would like to answer your first question regarding the difference between the first quarter and the second quarter industrial usage electricity tariff. This is due to our seasonal and time based tariff system. In cases of specific seasons and timing, the unit price is higher than other times.

[FOREIGN LANGUAGE] Yes. I would like to answer your second question regarding the percentage or the rate between long-term contract based coal purchase and spot market purchase. In general, it is our goal to have a ratio of 80:20, approximately. 80% from long-term contracts and 20% fro the spot market. We have continued to strive to maintain that percentage rate and that has been the case until now and I believe currently that is the case as well.

Okay, that's all for my question. Thank you.

Thank you. [FOREIGN LANGUAGE]

[FOREIGN LANGUAGE] The following question is by Ms. Bum Sujin from Samsung Securities. Please go ahead, ma'am.

[FOREIGN LANGUAGE] Yes, I have two questions. First of all, regarding maintenance and repair cost. Is components replacement cost included in that overall item? Can I know the year-end budget for this item? Secondly, it seems that the equity income loss from affiliates has been changed. So could you explain what are the reasons behind that?

[FOREIGN LANGUAGE] Yes, I would like to answer your two questions. First of all, regarding maintenance and repair cost. Yes, indeed nuclear power plant components and parts replacement cost is included in that cost item. Secondly, regarding the equity loss of affiliates that you see currently, that is mostly due to the fact that the earnings for coal gas has been decreased somewhat with last year. Last year, it was around KRW 450 billion whereas this year it has been decreased to KRW 250 billion.

[FOREIGN LANGUAGE] The following question is by Mr. Yoo Deok-sang from Dongbu Securities. Please go ahead, sir.

[FOREIGN LANGUAGE] I have two questions. The first one is, up to early October, that is to say, the October 3, that due to the nuclear power plants, I believe four months has been affected and that amounts to about KRW 950 billion. We are assuming that that can be naturally broken down each month to about KRW 250 billion each. Could you elaborate on the actual breakdown of what you see as the effects coming from the suspended operation of nuclear power plants? Secondly, for the compensation of fuel cost, how is that going to be dealt with in terms of marking in a consolidated system?

[FOREIGN LANGUAGE]

[FOREIGN LANGUAGE] Yes, to clarify the second question. The second question was regarding, due to the suspended operation of nuclear power plant, how will that cost be introduced or reflected in the overall accounting? That is true. For KHNP that would mean a loss of revenue and for KEPCO it will mean a reduction of the purchase power. So how is that going to be reflected in the overall consolidated results?

[FOREIGN LANGUAGE] To answer your first question, due to the suspended operation of nuclear power plants, it is true that for us, fuel cost related to coal and LNG will be increased and purchased power from IPPs will also be increased. We do not have exact breakdown of what we forecast as the increased cost but we expect it to be somewhere around the KRW 1 trillion level. [FOREIGN LANGUAGE] And it is important to note that that KRW 1 trillion figure will not be affected only for the second quarter results but it will be spread out across the year. [FOREIGN LANGUAGE] As to your second question, the penalty amount that will come from KHNP can be included as revenue for KEPCO on an independent accounting basis. However, for consolidated, it will be offset. Therefore it will have no effect. [FOREIGN LANGUAGE]

[FOREIGN LANGUAGE] An add-on question is, compared to last year, for this year do you see the maintenance and repair number of days reduced, compared to last year?

[FOREIGN LANGUAGE] Well, as I have mentioned earlier, to answer that question, three nuclear power plants so far have been suspended since the end of June. We expect the reoperation to begin on October 4. So we expect about three months of that maintenance and repair work. [FOREIGN LANGUAGE] Four months, I am sorry, starting from end of May, four months.

[FOREIGN LANGUAGE] The following question is by Mr. Ho Min Oh [ph] from China Investment Corporation. Please go ahead, sir.

[FOREIGN LANGUAGE] Yes, I have two questions. First of all, regarding maintenance related cost. I think that quite a bit of that came not from KHNP but from South-East and East-West power plants. So these will be coal fired. So the operating or utilization rates for these power plants have been quite high but nevertheless maintenance related cost items were quite high. So could you explain why this happened? Secondly, I would like to ask about the accounts receivable. In the first quarter, how did the accounts receivable improve and what you expect for the second quarter? Accounts payable. I am sorry.

[FOREIGN LANGUAGE] Regarding your first question about maintenance cost, I think we will have to get back to you after confirming with the genco.

[FOREIGN LANGUAGE] Regarding your second question about accounts payable. In the first quarter of 2013, it was at KRW 560 billion and for the second quarter, KRW 360 billion.

[FOREIGN LANGUAGE] Lastly, I would like to ask about tariff hikes. I believe that there is talk about discussions with the government regarding tariff hikes going on from September of this year. Does this mean that it is possible to have an earlier tariff hike foreseeable in, maybe, the October timeframe? Or will it be as expected at the timeframe of late this year, that is, I think December or early next year?

[FOREIGN LANGUAGE] As I mentioned earlier, there are no concrete plans as of yet about any timing or specific plans for tariff hike. However, it is important to note that government seems to have a very strong commitment on reforming the current tariff system.

[FOREIGN LANGUAGE] The following question is by Mr. Pierre Lau from Citigroup. Please go ahead, sir.

I would like to have two follow-up minor questions. The first question is, what is the company forecast of the sales of your electricity sales volume growth in 2013? The second question is, what would be the reserve margin in this year? The last question, number three, is what would be the generation mix in 2013 by fuel type? Thank you. [FOREIGN LANGUAGE]

[FOREIGN LANGUAGE] First of all, regarding your first question about sales volume forecast. Our forecast, based upon the assumption that the Korean national GDP growth rate will be at 2.7%, we expect our sales volume increase to be at 3.1%.

[FOREIGN LANGUAGE] As for the reserve margin, as of end of June, our reserve rate was 9.4%.

[FOREIGN LANGUAGE] Lastly, concerning your question about 2013 generation mix. We forecast it to be nuclear 31%, coal 42%, LNG the remaining 19% for the year.

[FOREIGN LANGUAGE] The following question is by Mr. Shin Ji-Yoon from KTB Investment Securities. Please go ahead, sir.

[FOREIGN LANGUAGE] I would like to ask four questions. First of all, concerning the electricity sales revenue. It seems that the Excel sheet data, from my perspective, seems a little bit misleading, because the figures don't seem to match. The calculations that I have made, based upon the second quarter results of this year and last year's comparison of that, it seems that it would come to a net positive of KRW 300 billion, but in the Excel sheet, in the delta column, it is at KRW 68.7 billion. So, is this my mistake in calculation? Could you clarify why that mismatch is occurring in the figures? The second question is regarding the utilization of nuclear power plants. Once again, looking at the Excel sheet, it says that Shin-Wolsong #2, it's operation has been postponed to November but I have heard that after completion of the construction, which will happen in October, when I made a telephone call earlier, it seems that there is a possibility of delay of actually commercial operation for about a three months period. So could somebody clarify that? Third question that I have is, we keep talking about coal prices and we have questions about coal occurring again and again Due to the fact that, I think, that the answers were not as clear as what we had heard in previous sessions. In previous times, in these types of announcements of results, you have always given us information about how many months of coal supply you already have in hand and what your forecasts are to be for prices and unit prices, whether it be $96 or $97 but this time around, the answers were not very clear. So could you give some more specific figures about the unit price of coal? Fourthly, regarding tariffs. I know that the overall line of policy is in terms of pursuing strengthening season and time varied tariffs but according to my calculation, my guess is that the necessary amount of tariff hike will somewhere around the 6% to 7%. So could you clarify if that calculation is correct? I am sure that there are ways of absorbing that by reduction of costs or any other types of measures that can be taken internally. So taking all of that into consideration, could you specify what level of tariff increase can be expected?

[FOREIGN LANGUAGE] Yes, I would like to clarify regarding your first question. If you look at the Excel spreadsheet, I think you will be able to see that the initial line for the revenue is based upon the meter figures but after that you have additional adjustments and also revenue coming in from sales of pump storage and then there is also the deduction that is taken for the electricity utilized within the company itself. So taking those three elements into consideration, compared to the first half of 2012, in 2013 it has been increased by KRW 68.7 billion, which is the figure that you see in the column in the spreadsheet. Additionally, if you look at the independent and the consolidated figures, in the consolidated, it is at KRW 36.3 billion. This is deducting the internal transactions as well as the pump storage that we mentioned earlier. So all of that taken into consideration, it has been a bit lower versus 2012. So, in 2013, it is at KRW 36.3 billion.

[FOREIGN LANGUAGE] Regarding your second question about the commercial operation start of Shin-Wolsong #2, when we had discussed earlier on the phone some time ago, at the time there was some mention that postponement or delay could happen until December. However, when we had recent discussions, we heard that it is possible to have operations from November. So we will have to wait and see the actual timeline but it will be somewhere around the November to December period, we believe.

[FOREIGN LANGUAGE] Additionally, for your reference, what we are referring to, in terms of the timeframe of late November to early December, that will be test running of Shin-Wolsong #2.

[FOREIGN LANGUAGE] I would like to answer your third question about coal prices. For the first half of last year, the coal price or unit price, was $118 per ton but for the first half of 2013, it was at $94 per ton. We expect for the second half that to be maintained at similar rates to what we have seen in the first half of this year.

[FOREIGN LANGUAGE] Regarding your fourth question about tariff hikes, I would like to answer. The internal calculation and review work has already been completed for, what we believe is, the required tariff hike rate for 2013. However we still have not gone through the review with the government and have not had a validation process with the external parties. So we are waiting for that process to be completed. As for the range, it would not be very different from what the range that you have mentioned and although I would like to be able to give you some accurate figures, there are still a lot of variables and elements to be taken into consideration during the discussion process with the government. So we are not at liberty to give you any accurate figures as of yet. I ask for your kind understanding.

[FOREIGN LANGUAGE] The following question is by Mr. Han Sun Son [ph] from Citizen Securities. Please go ahead, sir.

[FOREIGN LANGUAGE] Yes, I have three questions. First of all, do you have the expected timeline for the commissioning of the Shin-Kori #5 and #6? Second question is regarding the equity income and loss of affiliates. You mentioned earlier in the answer to a previous question that that is due to coal gas. Could you explain more specifically, in figures, how much that was? The third question is, the fuel cost pass through system. When do you believe it will be actually introduced? Do you have any forecast internally as to when that system will be fully introduced?

[FOREIGN LANGUAGE] Concerning your first question Shin-Kori #5 and #6, I think that the answer we can give you is not very different from what we had mentioned in the first quarter earnings result session. Based upon the main equipment, we expect that the commissioning of the project may begin from a timeline of September but it will have to go through approval process with the government planning authorities and therefore we will have to wait and see when that will take place.

[FOREIGN LANGUAGE] Yes, I would like to answer second question. As we have introduced earlier in a previous answer, the equity loss of affiliates is mainly due to coal gases earning reduction that took place. Last year, it was KRW 450 billion but this year coal gas was KRW 250 billion. So there is a KRW 200 billion loss factor that has been taken into consideration and we have applied that to our equity rate of 24.5% and that comes to about KRW 50 billion to KRW 60 billion that has been los incurred due to coal gases loss. The other remaining portions are coming from the other affiliates.

[FOREIGN LANGUAGE] I would like to answer your third question regarding the fuel costs pass through system. As you probably know, in January 2013, the Ministry of Knowledge Economy has given us the request to review the overall fuel costs pass through system. So we have been going through an internal process of complementing and improving the proposed system. However, as of now, the most urgent issue on hand is the adequate supply and demand that needs to be established. So, right now, all of our efforts are focused on the supply and demand matching issue and not on many activities are being pursued as of now regarding the fuel cost pass through system.

[FOREIGN LANGUAGE] The following question is by Mr. Pierre Lau from Citigroup. Please go ahead, sir.

I have two follow up questions. The first one is, you have 5% of this borrowing in U.S. dollars. May I know how many percent of them have been hashed by currency swap? So that means no impact from Korean Won depreciation. The second question is, in the first half of this year your power purchase amount from IPP increased by 5% year-on-year. What would be the full year out of all the power purchase volume in 2013? Thank you.

What was the first question again?

The first question is you have 5% of your borrowing in U.S. dollar. What is the proportion of those U.S. dollar loan with currency swap? Which means that, no ForEx gain or loss from those loans due to currency depreciation. [FOREIGN LANGUAGE]

[FOREIGN LANGUAGE] Allow me to answer your first question regarding borrowings. The total amount for borrowing is KRW 57.6 trillion and among that about 5% is denominated in foreign currency. But that is based on asset swap.

[FOREIGN LANGUAGE] Regarding your second question for the 2013 year forecast for purchases from IPP, we expect this to be increasing to about 14% higher than what we saw in the previous year. For your reference, last year this figure was 60,392 gigawatts and this year we expect it to be 69,140 gigawatts.

Currently there are no participants. (Operator Instructions). [FOREIGN LANGUAGE] The last question will be given by Mr. Han Min Ho [ph] from Shinhan Securities. Please go ahead, sir.

[FOREIGN LANGUAGE]

[FOREIGN LANGUAGE] The last question was a clarification on the nuclear power plant utilization rate for third quarter and fourth quarter. What that refers to, those figures?

Those figures refer to the nuclear power plant utilization rate.