SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the Month of September 2004
KOREA ELECTRIC POWER CORPORATION
(Translation of registrant's name into English)
167, Samseong-dong, Gangnam-gu, Seoul 135-791, Korea
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1): _______
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7): _______
Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-_______.
This Report of Foreign Private Issuer on Form 6-K is deemed filed for
all purposes under the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended, including by reference in the Registration
Statement on Form F-3 (Registration No. 33-99550) and the Registration Statement
on Form F-3 (Registration No. 333-9180).
KOREA ELECTRIC POWER CORPORATION
Non-consolidated Financial Statements
(Unaudited)
As of June 30, 2004
(With Independent Accountants' Review Report Thereon)
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Based on a report originally issued in Korean
The Board of Directors and Stockholders
Korea Electric Power Corporation:
We have reviewed the accompanying non-consolidated balance sheet of Korea
Electric Power Corporation (the "Company") as of June 30, 2004 and the related
non-consolidated statements of income and cash flows for the three-month and
six-month periods then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to issue a report on these
financial statements based on our review. We did not review the financial
statements of Korea Southern Power Co., Ltd., Korea Midland Power Co., Ltd. and
Korea South-East Power Co., Ltd. whose total assets constituted 10.7% of the
total non-consolidated assets as of June 30, 2004, and whose total income
constituted 13.9% of non-consolidated income before income tax for the six-month
period then ended. These financial statements were reviewed by other accountants
whose reports have been furnished to us, and our report, insofar as it relates
to the amounts included for Korea Southern Power Co., Ltd., Korea Midland Power
Co., Ltd. and Korea South-East Power Co., Ltd., is based solely on the reports
of the other accountants.
We conducted our review in accordance with the Review Standards for Semiannual
Financial Statements established by the Securities and Futures Commission of the
Republic of Korea. These Standards require that we plan and perform the review
to obtain moderate assurance as to whether the financial statements are free of
material misstatement. A review consists principally of inquiries of company
personnel and analytical procedures applied to financial data and, thus provides
less assurance than an audit. We have not performed an audit and, accordingly,
we do not express an audit opinion.
Based on our review and the reports of the other accountants, nothing has come
to our attention that causes us to believe that the financial statements
referred to above are not presented fairly, in all material respects, in
accordance with the Korea Electric Power Corporation Act, the Accounting
Regulations for Government Invested Enterprises and the Financial Accounting
Standards, as established by the Financial Supervisory Commission of the
Republic of Korea.
The accompanying non-consolidated statements of income and cash flows for the
three-month and six-month periods ended June 30, 2003, presented for comparative
purpose, were reviewed by other accountants, whose report dated August 1, 2003
stated that they were not aware of any material modifications that should have
been made to the financial statements in order for them to be in conformity with
the Korea Electric Power Corporation Act, the Accounting Regulations for
Government Invested Enterprises and the Financial Accounting Standards as
established by the Financial Supervisory Commission of the Republic of Korea.
The accompanying non-consolidated balance sheet of the Company as of December
31, 2003 and the related non-consolidated statements of income, changes in
stockholders' equity and cash flows for the year then ended, which are not
accompanying this report were audited by other accountants and their report
thereon, dated February 11, 2004, expressed an unqualified opinion. The
accompanying non-consolidated balance sheet of the Company as of December 31,
2003, presented for comparative purposes is not different from the above-stated
balance sheet audited by other accountants in all material respects.
The accompanying financial statements have been translated into United States
dollars solely for the convenience of the reader and have been translated on the
basis set forth in Note 2 to the non-consolidated financial statements.
The following matters may be helpful to the readers in their understanding of
the financial statements:
As discussed in Note 1(b) to the financial statements, accounting principles and
review standards and their application in practice vary among countries. The
accompanying financial statements are not intended to present the financial
position, results of operations and cash flows in accordance with accounting
principles and practices generally accepted in countries other than the Republic
of Korea. In addition, the procedures and practices utilized in the Republic of
Korea to review such financial statements may differ from those generally
accepted and applied in other countries. Accordingly, this report and the
accompanying financial statements are for use by those knowledgeable about
Korean accounting principles, Korean Electric Power Corporation Act, the
Accounting Regulations for Government Invested Enterprises, and Korean review
standards and their application in practice.
As discussed in Note 26, sales and purchases with related parties, including the
six power generation subsidiaries, amounted to KRW160,912 million and
KRW7,545,116 million, respectively, for the six-month period ended June 30,
2004. Related receivables and payables amounted to KRW31,571 million and
KRW1,098,593 million, respectively, as of June 30, 2004. In addition, the
Company is providing debt guarantees to its foreign subsidiaries in amounts not
exceeding US$ 265,308 thousand including KEPCO Ilijan Co.
The Company and its six power generation companies including Korea Hydro &
Nuclear Power Co., Ltd. are jointly and severally liable for outstanding debts
as of June 30, 2004 assumed by each company at the time of spin-off on April 2,
2001 under the Commercial Code of the Republic of Korea. The Company is
providing joint and several liability guarantee for debts of its six power
generation companies amounting to KRW1,584,466 million and the six power
generation companies are providing such a guarantee for debts of the Company
amounting to KRW354,702 million. The Company is also provided with guarantees
for its certain foreign currency debt by the Korea Development Bank, one of its
major shareholders.
KPMG Samjong Accounting Corp.
Seoul, Korea
August 4, 2004
This report is effective as of August 4, 2004, the review report date. Certain
subsequent events or circumstances, which may occur between the review report
date and the time of reading this report, could have a material impact on the
accompanying financial statements and notes thereto. Accordingly, the readers of
the review report should understand that there is a possibility that the above
review report may have to be revised to reflect the impact of such subsequent
events or circumstances, if any.
Korea Electric Power Corporation
NON-CONSOLIDATED BALANCE SHEETS
June 30, 2004 and December 31, 2003
(Unaudited)
(In millions of Won and in thousands of U.S. dollars)
Won U.S. dollars (note 2)
--------------------------------- ---------------------------------
Assets 2004 2003 2004 2003
------ --------------- ---------------- --------------- ---------------
Property, Plant and Equipment
(notes 1, 3, 5 and 16):
Utility plant KRW 37,993,048 37,235,281 $ 32,965,768 32,308,270
Less: accumulated depreciation (8,283,089) (7,472,373) (7,187,062) (6,483,621)
Less: construction grants (2,951,648) (2,758,789) (2,561,083) (2,393,743)
--------------- --------------- --------------- ---------------
26,758,311 27,004,119 23,217,623 23,430,906
Construction in-progress 2,950,196 2,266,928 2,559,823 1,966,966
--------------- --------------- --------------- ---------------
29,708,507 29,271,047 25,777,446 25,397,872
--------------- --------------- --------------- ---------------
Investments and others:
Investment securities (note 6) 24,031,361 23,865,370 20,851,507 20,707,479
Long-term loans (note 7) 153,794 142,368 133,444 123,530
Long-term other accounts receivable,
less discount on present value of
KRW 6,625 in 2004 and KRW 35,576 in 2003
and allowance for doubtful accounts of
KRW15,500 in 2004 and 2003 (note 19) 235,375 213,924 204,230 185,617
Currency and interest rate swaps (note 21) 205,585 124,345 178,382 107,892
Intangibles, net (note 4) 137,480 144,367 119,288 125,264
Other non-current assets (notes 8 and 17) 150,571 143,110 130,647 124,174
--------------- --------------- --------------- ---------------
24,914,166 24,633,484 21,617,498 21,373,956
--------------- --------------- --------------- ---------------
Current assets:
Cash and cash equivalents (notes 9 and 17) 383,136 366,817 332,439 318,279
Trade receivables,
less allowance for doubtful accounts of
KRW 30,300 in 2004 and KRW 27,787 in 2003
(notes 17 and 26) 1,405,631 1,501,949 1,219,636 1,303,209
Other account receivables,
less allowance for doubtful accounts of
KRW14,185 in 2004 and KRW14,184 in 2003
and present value discount of KRW18,229
in 2004 (notes 17, 19 and 26) 356,927 434,648 309,698 377,135
Short-term financial instruments (note 10) 46,000 61,000 39,913 52,928
Inventories (note 11) 79,028 78,796 68,571 68,370
Other current assets (notes 7 and 12) 154,644 121,921 134,182 105,788
--------------- --------------- --------------- ---------------
2,425,366 2,565,131 2,104,439 2,225,709
--------------- --------------- --------------- ---------------
Total assets KRW 57,048,039 56,469,662 $ 49,499,383 48,997,537
=============== =============== =============== ===============
Korea Electric Power Corporation
NON-CONSOLIDATED BALANCE SHEETS, CONTINUED
June 30, 2004 and December 31, 2003
(Unaudited)
(In millions of Won and in thousands of U.S. dollars, except share data)
Won U.S. dollars (note 2)
--------------------------------- ---------------------------------
Liabilities and Shareholders' Equity 2004 2003 2004 2003
------------------------------------ --------------- --------------- --------------- ---------------
Stockholders' equity:
Common stock of KRW 5,000 par value
Authorized - 1,200,000,000 shares
Issued and outstanding
- 640,748,573 shares KRW 3,203,743 3,203,743 $ 2,779,820 2,779,820
Capital surplus (notes 3 and 13) 14,370,357 14,373,779 12,468,857 12,471,826
Retained earnings (note 14)
Appropriated 19,554,340 17,899,939 16,966,890 15,531,400
Unappropriated 1,464,442 2,315,938 1,270,665 2,009,491
Capital adjustments (note 15) (175,428) (150,681) (152,215) (130,743)
--------------- --------------- --------------- ---------------
Total shareholders' equity 38,417,454 37,642,718 33,334,017 32,661,794
--------------- --------------- --------------- ---------------
Long-term liabilities:
Long-term borrowings (notes 16 and 26) 10,110,053 9,641,037 8,772,279 8,365,326
Reserve for retirement and severance
benefits, net (note 18) 341,935 316,408 296,690 274,541
Reserve for self insurance 87,603 87,926 76,011 76,292
Currency and interest rate swaps (note 21) 139,954 178,283 121,435 154,692
Deferred income tax liabilities (note 24) 1,492,557 1,462,016 1,295,061 1,268,561
Other long-term liabilities 461,477 486,981 400,414 422,542
--------------- --------------- --------------- ---------------
12,633,579 12,172,651 10,961,890 10,561,954
--------------- --------------- --------------- ---------------
Current liabilities:
Trade payables (note 26) 1,142,326 1,256,526 991,172 1,090,261
Other accounts payable (note 26) 493,286 571,772 428,014 496,114
Short-term borrowings - 16,245 - 14,095
Current portion of long-term debt (note 16) 3,271,208 4,030,652 2,838,359 3,497,312
Income tax payable 442,880 164,170 384,278 142,447
Accrued expenses 156,070 146,094 135,419 126,763
Dividends payable 1,781 2,324 1,545 2,016
Other current liabilities (note 20) 489,455 466,510 424,689 404,781
--------------- --------------- --------------- ---------------
5,997,006 6,654,293 5,203,476 5,773,789
--------------- --------------- --------------- ---------------
Total liabilities 18,630,585 18,826,944 16,165,366 16,335,743
--------------- --------------- --------------- ---------------
Commitments and contingencies (note 27)
Total shareholders' equity
and liabilities KRW 57,048,039 56,469,662 $ 49,499,383 48,997,537
=============== =============== =============== ===============
See accompanying notes to non-consolidated financial statements.
Korea Electric Power Corporation
NON-CONSOLIDATED STATEMENTS OF INCOME
For the three-month and six-month periods ended June 30, 2004 and 2003
(Unaudited)
(In millions of Won, except earnings per share)
2004 2003
--------------------------------- ---------------------------------
three-month six-month three-month six-month
period period period period
--------------- --------------- --------------- ---------------
Operating revenues:
Sale of electricity (note 26) KRW 5,261,558 11,114,608 KRW 5,016,238 10,552,070
Other operating revenues (note 27) 51,546 64,695 80,163 156,036
--------------- --------------- --------------- ---------------
5,313,104 11,179,303 5,096,401 10,708,106
--------------- --------------- --------------- ---------------
Operating expenses (notes 22, 23 and 26):
Power generation, transmission
and distribution 875,235 1,593,881 872,183 1,589,093
Purchased power 3,897,412 8,116,992 3,755,413 7,927,836
Other operating costs 51,552 63,504 80,201 155,405
Selling and administrative expenses 245,225 467,148 232,532 437,688
--------------- --------------- --------------- ---------------
5,069,424 10,241,525 4,940,329 10,110,022
--------------- --------------- --------------- ---------------
Operating income 243,680 937,778 156,072 598,084
Other income (expense):
Interest income 9,602 19,546 9,061 19,595
Interest expense (146,465) (298,721) (156,110) (304,176)
Gain (loss) on foreign currency transactions
and translation, net 53,423 241,433 335,241 50,865
Donations (64,583) (70,454) (5,819) (7,534)
Rental income 31,011 63,081 29,972 55,845
Equity income of affiliates (note 6) 288,282 991,731 541,170 1,251,307
Gain on disposal of investments, net - 7,472 587 45,214
Gain (loss) on disposal of utility plant, net 251 742 (1,589) (5,474)
Valuation gain on currency and interest
rate swaps, net (note 21) 23,643 36,846 22,453 5,131
Other, net 12,599 6,446 31,865 45,688
--------------- --------------- --------------- ---------------
207,763 998,122 806,831 1,156,461
--------------- --------------- --------------- ---------------
Income before income taxes 451,443 1,935,900 962,903 1,754,545
Income taxes (note 24) (34,931) (471,458) (233,720) (471,319)
--------------- --------------- --------------- ---------------
Net income KRW 416,512 1,464,442 KRW 729,183 1,283,226
=============== =============== =============== ===============
Basic earnings per share (note 25) KRW 661 2,325 KRW 1,159 2,032
=============== =============== =============== ===============
Diluted earnings per share (note 25) KRW 652 2,291 KRW 1,159 2,032
=============== =============== =============== ===============
See accompanying notes to non-consolidated financial statements.
Korea Electric Power Corporation
NON-CONSOLIDATED STATEMENTS OF INCOME, CONTINUED
For the three-month and six-month periods ended June 30, 2004 and 2003
(Unaudited)
(In thousands of U.S. dollars (note 2), except earnings per share)
2004 2003
--------------------------------- ---------------------------------
three-month six-month three-month six-month
period period period period
--------------- --------------- --------------- ---------------
Operating revenues:
Sale of electricity (note 26) $ 4,565,343 9,643,911 $ 4,352,484 9,155,809
Other operating revenues (note 27) 44,726 56,135 69,556 135,389
--------------- --------------- --------------- ---------------
4,610,069 9,700,046 4,422,040 9,291,198
--------------- --------------- --------------- ---------------
Operating expenses (notes 22, 23 and 26):
Power generation, transmission
and distribution 759,423 1,382,977 756,774 1,378,823
Purchased power 3,381,702 7,042,943 3,258,493 6,878,816
Other operating costs 44,730 55,101 69,590 134,842
Selling and administrative expenses 212,777 405,336 201,763 379,773
--------------- --------------- --------------- ---------------
4,398,632 8,886,357 4,286,620 8,772,254
--------------- --------------- --------------- ---------------
Operating income 211,437 813,689 135,420 518,944
Other income (expense):
Interest income 8,331 16,959 7,862 17,002
Interest expense (127,085) (259,194) (135,453) (263,927)
Gain (loss) on foreign currency transactions
and translation, net 46,354 209,486 290,882 44,134
Donations (56,038) (61,132) (5,049) (6,537)
Rental income 26,908 54,734 26,006 48,456
Equity income of affiliates (note 6) 250,136 860,504 469,562 1,085,733
Gain on disposal of investments, net - 6,483 509 39,231
Gain (loss) on disposal of utility plant, net 218 644 (1,379) (4,750)
Valuation gain on currency and interest
rate swaps, net (note 21) 20,515 31,971 19,482 4,453
Other, net 10,932 5,595 27,649 39,643
--------------- --------------- --------------- ---------------
180,271 866,050 700,071 1,003,438
--------------- --------------- --------------- ---------------
Income before income taxes 391,708 1,679,739 835,491 1,522,382
Income taxes (note 24) (30,310) (409,074) (202,794) (408,954)
--------------- --------------- --------------- ---------------
Net income $ 361,398 1,270,665 $ 632,697 1,113,428
=============== =============== =============== ===============
Basic earnings per share (note 25) $ 0.57 2.02 $ 1.01 1.76
=============== =============== =============== ===============
Diluted earnings per share (note 25) $ 0.57 1.99 $ 1.01 1.76
=============== =============== =============== ===============
See accompanying notes to non-consolidated financial statements.
Korea Electric Power Corporation
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three-month and six-month periods ended June 30, 2004 and 2003
(Unaudited)
(In millions of Won)
2004 2003
--------------------------------- ---------------------------------
three-month six-month three-month six-month
period period period period
--------------- --------------- --------------- ---------------
Cash flows from operating activities:
Net income KRW 416,512 1,464,442 KRW 729,183 1,283,226
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 409,405 811,024 384,535 760,587
Utility plant removal cost 46,763 70,912 49,689 90,890
Provision for severance
and retirement benefits 18,462 30,922 23,528 30,407
Bad debt expense 2,939 8,184 2,614 5,722
Interest income (5,364) (10,722) (5,350) (10,641)
Interest expense 4,211 8,593 2,220 4,349
Gain on foreign currency
translation, net (41,847) (214,698) (335,491) (55,778)
Equity income of affiliates (288,282) (991,731) (541,170) (1,251,307)
Gain on disposal of investments, net - (7,472) (587) (45,214)
Loss (gain) on disposal of utility plant, net (251) (742) 1,589 5,474
Deferred income tax expense (benefit) (158,415) 30,541 (25,785) 148,270
Valuation gain on currency
and interest rate swaps (23,643) (36,846) (22,453) (5,131)
Changes in assets and liabilities:
Decrease in trade receivables 92,585 88,116 69,638 81,310
Decrease (increase) in other accounts
receivable 35,173 66,956 (2,840) 17,387
Decrease (increase) in inventories 25,159 30,840 (159) 25,509
Increase in other current assets (2,136) (32,476) (15,087) (49,628)
Decrease in trade payables (79,553) (114,200) (92,548) (157,568)
Increase (decrease) in other accounts
payable 169,479 (78,491) 110,310 (27,546)
Increase (decrease) in income tax payable 87,255 278,710 (132,642) (373,610)
Increase (decrease) in accrued expenses 31,439 9,976 (18,815) 2,995
Increase (decrease) in other
current liabilities (11,167) 22,944 15,495 60,715
Decrease in other long-term liabilities (202) (25,503) (1,013) (2,025)
Payment of severance and
retirement benefits (3,463) (5,395) (3,630) (4,374)
Payment of self-insurance (143) (323) (191) (526)
Other, net (2,628) (3,678) 4,414 6,258
--------------- --------------- --------------- ---------------
Net cash provided by operating activities 722,288 1,399,883 195,454 539,751
--------------- --------------- --------------- ---------------
Korea Electric Power Corporation
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
For the three-month and six-month periods ended June 30, 2004 and 2003
(Unaudited)
(In thousands of U.S. dollars (note 2))
2004 2003
--------------------------------- ---------------------------------
three-month six-month three-month six-month
period period period period
--------------- --------------- --------------- ---------------
Cash flows from operating activities:
Net income $ 361,398 1,270,665 $ 632,697 1,113,428
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 355,232 703,708 333,653 659,945
Utility plant removal cost 40,552 61,529 43,114 78,863
Provision for severance
and retirement benefits 16,019 26,830 20,415 26,384
Bad debt expense 2,550 7,101 2,268 4,965
Interest income (4,655) (9,303) (4,642) (9,233)
Interest expense 3,655 7,456 1,926 3,774
Gain on foreign currency
translation, net (36,310) (186,289) (291,098) (48,397)
Equity income of affiliates (250,136) (860,504) (469,562) (1,085,733)
Gain on disposal of investments, net - (6,483) (509) (39,232)
Loss (gain) on disposal of utility plant, net (218) (644) 1,379 4,750
Deferred income tax expense (benefit) (137,453) 26,500 (22,373) 128,651
Valuation gain on currency
and interest rate swaps (20,515) (31,971) (19,482) (4,452)
Changes in assets and liabilities:
Decrease in trade receivables 80,334 76,456 60,423 70,551
Decrease (increase) in other accounts
receivable 30,519 58,096 (2,464) 15,086
Decrease (increase) in inventories 21,830 26,759 (138) 22,134
Increase in other current assets (1,853) (28,179) (13,091) (43,061)
Decrease in trade payables (69,026) (99,089) (80,302) (136,718)
Increase (decrease) in other
accounts payable 147,053 (68,105) 95,714 (23,901)
Increase (decrease) in income tax payable 75,709 241,831 (115,091) (324,174)
Increase (decrease) in accrued expenses 27,279 8,656 (16,325) 2,599
Increase (decrease) in other
current liabilities (9,689) 19,908 13,445 52,681
Decrease in other long-term liabilities (175) (22,128) (879) (1,757)
Payment of severance and
retirement benefits (3,005) (4,681) (3,150) (3,795)
Payment of self-insurance (124) (280) (166) (456)
Other, net (2,257) (3,189) 3,830 5,428
--------------- --------------- --------------- ---------------
Net cash provided by operating activities 626,714 1,214,650 169,592 468,330
--------------- --------------- --------------- ---------------
Korea Electric Power Corporation
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
For the three-month and six-month periods ended June 30, 2004 and 2003
(Unaudited)
(In millions of Won)
2004 2003
--------------------------------- ---------------------------------
three-month six-month three-month six-month
period period period period
--------------- ---------------- --------------- --------------
Cash flows from investing activities:
Proceeds from disposal of utility plant KRW 2,846 3,882 KRW 10,072 28,501
Additions to utility plant (1,069,409) (1,624,289) (1,189,596) (1,975,701)
Receipt of construction grants 165,123 282,616 156,222 279,460
Proceeds from disposal of investment
securities 786,492 806,941 478,571 542,961
Acquisition of investment securities (1,869) (1,892) (4,750) (12,750)
Increase in long-term loans (4,423) (16,301) (241) (12,356)
Acquisition of intangibles (3,505) (3,677) (1,159) (3,685)
Collection of short-term loans 2,314 4,623 2,105 4,215
Decrease in other non-current assets 14,603 7,531 3,996 5,714
--------------- --------------- --------------- ---------------
Net cash used in investing activities (107,828) (540,566) (544,780) (1,143,641)
--------------- --------------- --------------- ---------------
Cash flows from financing activities:
Proceeds from long-term debt 1,511,265 1,881,446 1,150,346 1,580,045
Repayment of short-term borrowings - (16,245) - -
Repayment of long-term debt (1,768,436) (1,965,267) (311,614) (449,089)
Acquisition of treasury stock - - - (180,120)
Dividends paid (661,524) (661,537) (511,744) (511,753)
Payments under currency swap contracts - (81,395) (6,042) (87,013)
--------------- --------------- --------------- ---------------
Net cash provided by (used in)
financing activities (918,695) (842,998) 320,946 352,070
--------------- --------------- --------------- ---------------
Net increase (decrease) in cash
and cash equivalents (304,235) 16,319 (28,380) (251,820)
Cash and cash equivalents,
at beginning of the period 687,371 366,817 386,616 610,056
--------------- --------------- --------------- ---------------
Cash and cash equivalents,
at end of the period KRW 383,136 383,136 KRW 358,236 358,236
=============== =============== =============== ===============
See accompanying notes to non-consolidated financial statements.
Korea Electric Power Corporation
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
For the three-month and six-month periods ended June 30, 2004 and 2003
(Unaudited)
(In thousands of U.S. dollars (note 2))
2004 2003
--------------------------------- ---------------------------------
three-month six-month three-month six-month
period period period period
--------------- --------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from disposal of utility plant $ 2,469 3,368 $ 8,739 24,730
Additions to utility plant (927,904) (1,409,361) (1,032,187) (1,714,274)
Receipt of construction grants 143,274 245,220 135,551 242,482
Proceeds from disposal of investment
securities 682,423 700,166 415,246 471,116
Acquisition of investment securities (1,622) (1,642) (4,121) (11,063)
Increase in long-term loans (3,657) (14,144) (209) (10,721)
Acquisition of intangibles (3,041) (3,190) (1,006) (3,197)
Collection of short-term loans 2,008 4,011 1,826 3,657
Decrease in other non-current assets 12,670 6,534 3,468 4,958
--------------- --------------- --------------- ---------------
Net cash used in investing activities (93,560) (469,038) (472,693) (992,312)
--------------- --------------- --------------- ---------------
Cash flows from financing activities:
Proceeds from long-term debt 1,311,293 1,632,491 998,131 1,370,972
Repayment of short-term borrowings - (14,095) - -
Repayment of long-term debt (1,534,435) (1,705,221) (270,381) (389,665)
Acquisition of treasury stock - - - (156,286)
Dividends paid (573,990) (574,002) (444,030) (444,037)
Payments under currency swap contracts - (70,625) (5,243) (75,500)
--------------- --------------- --------------- ---------------
Net cash provided by (used in)
financing activities (797,132) (731,452) 278,477 305,484
--------------- --------------- --------------- ---------------
Net increase (decrease) in cash
and cash equivalents (263,978) 14,160 (24,624) (218,498)
Cash and cash equivalents,
at beginning of the period 596,417 318,279 335,459 529,333
--------------- --------------- --------------- ---------------
Cash and cash equivalents,
at end of the period $ 332,439 332,439 $ 310,835 310,835
=============== =============== =============== ===============
See accompanying notes to non-consolidated financial statements.
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and 2003
(Unaudited)
(1) Summary of Significant Accounting Policies and Basis of Presenting
Financial Statements
(a) Description of Business
Korea Electric Power Corporation (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 was given a status of government-invested
enterprise on December 31, 1983 following the enactment of the
Government-Invested Enterprise Management Basic Act. 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 June 30, 2004, the Government of the Republic of Korea,
Korea Development Bank and foreign investors hold 27.03%, 26.93%
and 29.61%, respectively, of the Company's shares.
The Company spun off its power generation division on April 2,
2001, resulting in the establishment of six new power generation
subsidiaries. The Company has been considering the gradual
privatization of the Company's power generation subsidiaries and
distribution business, which is in accordance with the
restructuring plan, dated January 21, 1999, of the electricity
industry in the Republic of Korea announced by the Ministry of
Commerce, Industry and Energy ("Restructuring Plan"). This
Restructuring Plan, which is intended to introduce a competitive
system in the electricity industry, is expected to affect the
determination of utility rates, result in changes in management
structure, related laws and regulations, and affect electricity
supply and demand policy.
(b) Basis of Presenting Financial Statements
The Company maintains its accounting records in Korean Won and
prepares statutory financial statements in the Korean language
(Hangul) in conformity with the Korea Electric Power Corporation
Act ("KEPCO Act"), the Accounting Regulations for Government
Invested Enterprises, which have been approved by the Korean
Ministry of Finance and Economy and, in the absence of
specialized accounting regulations for utility companies, the
accounting principles generally accepted in the Republic of
Korea. Certain accounting principles applied by the Company that
conform with financial accounting standards and accounting
principles in the Republic of Korea may not conform with
generally accepted accounting principles in other countries.
Accordingly, these financial statements are intended for use
only by those who are informed about Korean accounting
principles and practices, KEPCO Act and Accounting Regulations
for Government Invested Enterprises. The accompanying financial
statements have been condensed, restructured and translated into
English (with certain expanded descriptions) from the Korean
language financial statements.
2
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Summary of Significant Accounting Policies and Basis of Presenting
Financial Statements, Continued
(b) Basis of Presenting Financial Statements, Continued
Certain information included in the Korean language financial
statements, but not required for a fair presentation of the
Company's financial position, results of operations or cash
flows, is not presented in the accompanying financial
statements.
The accompanying financial statements include only the accounts
of the Company, and do not include the accounts of any of its
subsidiaries. Instead, these entities are accounted for under
the equity method of accounting (note 6).
Effective January 1, 2004, the Company adopted Statements of
Korea Accounting Standards No. 10, 12 and 13. The adoption of
these standards did not have any impact on the accompanying
financial statements.
(c) Property, Plant and Equipment
Property, plant and equipment are stated at cost, except in the
case of revaluation made in accordance with the KEPCO Act and
the Assets Revaluation Law of Korea. Plant and equipment under
capital leases are stated at an amount equal to the lower of
their fair value or the present value of minimum lease payments
at inception of lease. Significant additions or improvements
extending useful lives of assets are capitalized. However,
normal maintenance and repairs are charged to expense as
incurred.
The Company capitalizes interest cost and other financial
charges on borrowing associated with the manufacture, purchase,
or construction of property, plant and equipment, incurred prior
to completing the acquisition, as part of the cost of such
assets. The calculation of capitalized interest includes
exchange differences arising from foreign borrowings to the
extent that they are regarded as an adjustment to interest
costs, which is limited to the extent of interest cost
calculated by the weighted average interest rate of local
currency borrowings. For the six-month periods ended June 30,
2004 and 2003, the amounts of capitalized interest were
KRW32,529 million and KRW45,897 million, respectively. The net
foreign currency transactions and translation gains excluded
from the calculation of capitalized interest rate amounted to
KRW 112,962 million and nil, respectively for the six-month
periods ended June 30, 2004 and 2003.
3
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Summary of Significant Accounting Policies and Basis of Presenting
Financial Statements, Continued
(c) Property, Plant and Equipment, Continued
The impact on the Company's financial position as of and for the
six-month period ended June 30, 2004, if the interest and other
borrowing costs were expensed instead of being capitalized, is
as follows.
Won (millions)
-----------------------------------------------------
Construction Total Interest Income before
in-progress assets expense income taxes
------------- ---------- -------- -------------
Capitalized KRW 2,950,197 57,048,039 298,721 1,935,900
Expensed 2,917,668 57,015,510 331,250 1,903,371
------------- ---------- -------- -------------
KRW 32,529 32,529 (32,529) 32,529
============= ========== ======== =============
Depreciation is computed by the declining-balance method
(straight-line method for buildings and structures) using rates
based on the estimated useful lives described in the Korean
Corporate Income Tax Law and as permitted under the Accounting
Regulations for Government Invested Enterprises as follows:
Estimated useful life
---------------------
Buildings 8, 15, 30
Structures 8, 15, 30
Machinery 16
Ships 9
Vehicles 4
Others 4
The Company records the following funds and materials, which
relate to the construction of transmission and distribution
facilities as construction grants:
. Grants from the government or public institutions
. Funds, construction materials or other items contributed
by customers
Construction grants are initially recorded and presented in the
accompanying financial statements as deductions from the assets
acquired under such grants and are offset against depreciation
expense during the estimated useful lives of the related assets.
The Company received KRW282,616 million and KRW279,460 million
of construction grants, and offset KRW71,424 million and
KRW61,285 million against depreciation expense, and KRW18,333
million and KRW18,274 million against utility plant removal cost
for the six-month periods ended June 30, 2004 and 2003,
respectively.
4
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Summary of Significant Accounting Policies and Basis of Presenting
Financial Statements, Continued
(d) Leases
The Company accounts for and classifies its lease transactions
as either operating or capital leases, depending on the terms of
the lease under Korea Lease Accounting Standards. If a lease is
substantially noncancellable and meets any of the criteria
listed below, the present value of future minimum lease payments
is reflected as an obligation under capital lease.
- Ownership of the leased property shall be transferred to
the lessee at the end of the lease term without
additional payment or for a contract price.
- The lease has a bargain purchase option.
- The lease term is equal to 75% or more of the estimated
economic useful life of the leased property.
- The present value at the beginning of the lease term of
the minimum lease payments equals or exceeds 90% of the
fair value of the leased property.
If the above criteria are not met, the lease is classified as an
operating lease and lease payments are expensed on a
straight-line basis over the lease term.
(e) Investments in Securities
Debt and equity securities are classified into one of the three
categories of held-to-maturity, available-for-sale, or trading
securities at the time of acquisition and such determination is
reassessed at each balance sheet date. Investments in debt
securities that the Company has the positive intent and ability
to hold to maturity are classified as held-to-maturity.
Securities that are bought and held principally for the purpose
of selling them in the near term (thus held for only a short
period of time) are classified as trading securities. Trading
generally reflects active and frequent buying and selling, and
trading securities are generally used to generate profit on
short-term differences in price. Investments not classified as
either held-to-maturity or trading securities are classified as
available-for-sale securities.
Trading securities are carried at fair value, with unrealized
holding gains and losses included in earnings.
Available-for-sale securities are carried at fair value, with
unrealized holding gains and losses reported as a capital
adjustment. Investments in equity securities that do not have
readily determinable fair values are stated at cost. Declines in
value judged to be other-than-temporary on available-for-sale
securities are charged to current results of operations.
Investments in debt securities that are classified into
held-to-maturity are reported at amortized cost at the balance
sheet date and such amortization is included in interest income.
Marketable securities are at the quoted market prices as of the
period end. Non-marketable debt securities are recorded at the
fair values derived from the discounted cash flows by using an
interest rate deemed to approximate the market interest rate.
The market interest rate is determined by the issuers' credit
rate announced by the accredited credit rating agencies in
Korea. Money market funds are recorded at the fair value
determined by the investment management companies.
5
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Summary of Significant Accounting Policies and Basis of Presenting
Financial Statements, Continued
(e) Investments in Securities, Continued
Trading securities are classified as current assets, whereas
available-for-sale securities and held-to-maturity securities
are classified as long-term investments. However,
available-for-sale securities whose maturity dates are due
within one year from the balance sheet date or whose likelihood
of being disposed of within one year from the balance sheet date
is probable are classified as current assets. Likewise,
held-to-maturity securities whose maturity dates are due within
one year from the balance sheet date are classified as current
assets.
(f) Investment Securities under the Equity Method of Accounting
Investments in affiliated companies owned 20% or more or over
which the Company has significant management control are stated
at an amount as determined using the equity method.
Under the equity method of accounting, the Company's initial
investment is recorded at cost and is subsequently increased to
reflect the Company's share of the investee income and reduced
to reflect the Company's share of the investee losses or
dividends received. Any excess in the Company's acquisition cost
over the Company's share of the investee's identifiable net
assets is generally recorded as goodwill or other intangibles
and amortized by the straight-line method over the estimated
useful life. The amortization of goodwill is recorded against
the equity income of affiliates. When events or circumstances
indicate that carrying amount may not be recoverable, the
Company reviews goodwill for any impairment.
Under the equity method of accounting, the Company does not
record its share of losses of affiliate companies when such
losses would make the Company's investment in such entity less
than zero.
(g) Intangible Assets
Intangible assets are stated at cost less accumulated
amortization, as described below.
(i) Research and Development Costs
Expenditure on research activities, undertaken with the
prospects of gaining new scientific or technical
knowledge and understanding, is recognized in the
statement of income as an expense as incurred.
Expenditure on development incurred in conjunction with
new products or technologies, in which the elements of
costs can be identified and future economic benefits are
clearly expected, is capitalized and amortized on a
straight-line basis over 5 years. The capitalized
expenditure includes the cost of materials, direct labor
and an appropriate proportion of overheads.
(ii) Other Intangible Assets
Other intangible assets, which consist of industrial
rights, land rights and others, are stated at cost less
accumulated amortization and impairment losses. Such
intangible assets are amortized using the straight-line
method over a reasonable period, from 4 years to 20
years, based on the nature of the asset.
6
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Summary of Significant Accounting Policies and Basis of Presenting
Financial Statements, Continued
(h) Cash Equivalents
The Company considers short-term financial instruments with
maturities of three months or less at the acquisition date to be
cash equivalents.
(i) Financial Instruments
Short-term financial instruments are financial instruments
handled by financial institutions which are held for short-term
cash management purposes or will mature within one year,
including time deposits, installment savings deposits,
restricted bank deposits.
(j) Allowance for Doubtful Accounts
Allowance for doubtful accounts is estimated based on an
analysis of individual accounts and past experience of
collection.
(k) Inventories
Inventories are stated at the lower of cost or net realizable
value, cost being determined using the weighted average method
for raw materials, moving average method for supplies and
specific identification method for other inventories. The
Company maintains perpetual inventory records, which are
adjusted through physical counts at the end of year. In
accordance with the Company's policy for physical inventory
counts, the Company did not perform a physical count of the
inventory as of June 30, 2004 and 2003.
Effective January 1, 2004, the Company adopted Statement of
Korea Accounting Standards No. 10, "Inventories". Through 2003,
a valuation loss incurred when the market value of inventory
falls below its carrying amount was reported as non-operating
expense. In 2004, in accordance with SKAS No. 10, the Company
included inventory valuation loss in its power generation,
transmission and distribution costs ("a component of operating
expenses").
(l) Long-Lived Assets
The Company reviews for the impairment of long-lived assets,
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An
impairment loss would be recognized when estimated undiscounted
future net cash flows expected to result from the use of the
asset and its eventual disposition are less than its carrying
amount. If such assets are considered to be impaired, the
impairment to be recognized is measured at the amount by which
the carrying amount of the assets exceeds the fair value of the
assets.
7
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Summary of Significant Accounting Policies and Basis of Presenting
Financial Statements, Continued
(m) Valuation of Receivables and Payables at Present Value
Receivables and payables arising from long-term installment
transactions, long-term cash loans/borrowings and other similar
loan/borrowing transactions are stated at present value. The
difference between nominal value and present value is deducted
directly from the nominal value of related receivables or
payables and is amortized using the effective interest method.
The amount amortized is included in interest expense or interest
income.
(n) Convertible Bonds
When issuing convertible bonds or bonds with stock purchase
warrants, the values of the conversion rights or stock warrants
shall be recognized separately. Considerations for conversion
rights or stock warrants shall be measured by deducting the
present value of ordinary or straight debt securities from the
gross proceeds of the convertible bonds or bonds with stock
purchase warrants received at the date of issue.
The value of the common shares issued pursuant to the exercise
of the conversion rights shall be measured as the sum of the
carrying amount, at the time of conversion, and the amount of
consideration received for such rights, at the time of issuance,
of those convertible bonds that are actually related to the
exercise.
When the conversion rights are exercised during an accounting
period, the value of common shares issued pursuant to the
exercise shall be measured based on the carrying amount of the
convertible bonds determined on the actual date such rights have
been exercised.
(o) Discount (Premium) on Debentures
Discount (premium) on debenture issued, which represents the
difference between the face value and issuance price of
debentures, is amortized using the effective interest method
over the life of the debentures. The amount amortized is
included in interest expense.
(p) Retirement and Severance Benefits
Employees and directors who have been with the Company for more
than one year are entitled to lump-sum payments based on current
rates of pay and length of service when they leave the Company.
The Company's estimated liability under the plan which would be
payable if all employees left on the balance sheet date is
accrued in the accompanying balance sheets.
Through March 1999, under the National Pension Scheme of Korea,
the Company transferred a certain portion of retirement
allowances of employees to the National Pension Fund. The amount
transferred will reduce the retirement and severance benefit
amount to be payable to the employees when they leave the
Company and is accordingly reflected in the accompanying
financial statements as a reduction from the retirement and
severance benefit liability. Since April 1999, however, a new
regulation applies and such transfers to the National Pension
Fund are no longer required.
8
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Summary of Significant Accounting Policies and Basis of Presenting
Financial Statements, Continued
(q) Reserve for Self-Insurance
The Company provides a self-insurance reserve for liability to
third parties that may arise in connection with the Company's
non-insured facilities. Payments made to settle applicable
claims are charged to this reserve.
(r) Foreign Currency Translation
Monetary assets and liabilities denominated in foreign
currencies are translated into Korean Won at the balance sheet
date, with the resulting gains and losses recognized in current
results of operations. Monetary assets and liabilities
denominated in foreign currencies are translated into Korean Won
at KRW1,152.5 to US$1, the rate of exchange on June 30, 2004
that is permitted by the Financial Accounting Standards.
Non-monetary assets and liabilities denominated in foreign
currencies, which are stated at historical cost, are translated
into Korean Won at the foreign exchange rate ruling at the date
of the transaction.
Foreign currency assets and liabilities of foreign-based
operations and companies accounted for using the equity method
are translated at current rate of exchange at the balance sheet
date while profit and loss items in the statement of income are
translated at average rate and capital account at historical
rate. The translation gains and losses arising from collective
translation of the foreign currency financial statements of
foreign-based operations are offset and the balance is
accumulated as capital adjustment.
(s) Derivatives
Derivative instruments are presented as assets or liabilities
valued principally at the fair value of rights or obligations
associated with the derivative contracts. The unrealized gain or
loss from derivative transactions is recognized in current
operations.
However, for derivative instruments with the purpose of hedging
the exposure to variability in expected future cash flows of a
forecasted transaction, the hedge-effective portion of the
derivative's gain or loss is deferred as a capital adjustment, a
component of stockholder's equity. The ineffective portion of
the gain or loss is charged or credited to current results of
operations.
(t) Contingent Liabilities
Contingent losses are generally recognized as a liability when
probable and reasonably estimable.
(u) Revenue Recognition
The Company recognizes revenue from the sale of electric power
based on meter readings made on a monthly basis. The Company
does not accrue revenue for power sold after the meter readings
but prior to the end of the accounting period. The Company
recognizes revenue on long-term contacts, which are related to
the construction of power plants in the Democratic People's
Republic of Korea (North Korea), based on the
percentage-of-completion method. Revenue other than sale of
electric power and revenue on long-term contracts is recognized
when the Company's revenue-earning activities have been
substantially completed, the amount of revenue can be measured
reliably, and it is probable that the economic benefits
associated with the transaction will flow to the Company.
9
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Summary of Significant Accounting Policies and Basis of Presenting
Financial Statements, Continued
(v) Income Taxes
Income tax on the earnings or loss for the period comprises
current and deferred tax. Income tax is recognized in the
statement of income except to the extent that it relates to
items recognized directly to equity, in which case it is
recognized in equity.
Deferred tax is provided using the asset and liability method,
providing for temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and
the amounts used for taxation purposes. The amount of deferred
tax provided is based on the expected manner of realization or
settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantially enacted at the balance
sheet date.
Deferred tax assets are recognized only to the extent that it is
probable that future taxable earnings will be available against
which the unused tax losses and credits can be utilized.
Deferred tax assets are reduced to the extent that it is no
longer probable that the related tax benefit will be realized.
(w) Dividends payable
Dividends are recorded when approved by the board of director
and shareholders.
(x) Prior Period Adjustments
Prior period adjustments resulting from other than fundamental
errors are charged or credited to result of operations for the
current period. The fundamental errors are defined as errors
with such a significant effect on the financial statements for
one or more prior periods that those financial statements can no
longer be considered to have been reliable at the date of their
issue. The prior period adjustments resulting from the
fundamental errors are charged or credited to the beginning
balance of retained earnings, and the financial statements of
the prior year are restated.
(y) Earnings Per Share
Earnings per common share are calculated by dividing net
earnings by the weighted-average number of shares of common
stock outstanding during each period.
(z) Use of Estimates
The preparation of financial statements in accordance with
accounting principles generally accepted in the Republic of
Korea requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
related notes to financial statements. Actual results could
differ from those estimates.
10
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(2) Basis of Translating Financial Statements
The financial statements are expressed in Korean Won and, solely for the
convenience of the reader, have been translated into U.S. dollars at the
rate of KRW1,152.5 to US$1, the basic exchange rate on June 30, 2004.
These translations 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.
(3) Property, Plant and Equipment
(a) Asset revaluation
The Company revalued its property, plant and equipment in
accordance with the KEPCO Act and the Asset Revaluation Law (the
latest revaluation date was January 1, 1999), and recorded a
revaluation gain of KRW12,552,973 million as a reserve for asset
revaluation, a component of capital surplus.
(b) Officially Declared Value of Land
The officially declared value of land at June 30, 2004, as
announced by the Minister of Construction and Transportation, is
as follows:
Won (millions)
--------------------------------
Purpose Book value Declared value
----------------------------------- --------------- --------------
Transmission and distribution sites
and other KRW 3,333,030 3,429,396
The officially declared value, which is used for government
purposes, is not intended to represent fair value.
(c) Utility plant
Utility plants and accumulated depreciation as of June 30, 2004
and December 31, 2003 are as follows:
(i) Cost
Won (millions)
-----------------------------------
2004 2003
----------------- ---------------
Land KRW 3,333,030 3,327,851
Buildings 2,362,522 2,323,204
Structures 24,665,148 24,120,887
Machinery 7,290,030 7,136,620
Vehicles 57,850 59,011
Ships 252 252
Others 284,216 267,456
----------------- ---------------
37,993,048 37,235,281
Construction in-progress 2,950,196 2,266,928
----------------- ---------------
40,943,244 39,502,209
================= ===============
11
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(3) Property, Plant and Equipment, Continued
(c) Utility Plant, Continued
(ii) Accumulated depreciation
Won (millions)
-----------------------------------
2004 2003
----------------- ---------------
Buildings KRW 530,130 465,338
Structures 4,068,600 3,686,719
Machinery 3,405,495 3,055,912
Vehicles 46,111 46,313
Ships 211 205
Others 232,542 217,886
----------------- ---------------
KRW 8,283,089 7,472,373
================= ===============
(4) Intangibles
Changes of intangibles for the six-month period ended June 30, 2004 are
as follows:
Won (millions)
---------------------------------------------------------------
December 31, Acquisition June 30,
2003 and transfers Amortization 2004
------------- ------------- ------------- -------------
Development costs
Others KRW 106,834 12,253 18,004 101,083
37,533 6,362 7,498 36,397
------------- ------------- ------------- -------------
KRW 144,367 18,615 25,502 137,480
============= ============= ============= =============
In addition, the Company expensed ordinary development expenses
amounting to KRW45,738 million and KRW39,848 million for the six-month
periods ended June 30, 2004 and 2003, respectively.
12
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(5) Insured Assets
Insured assets as of June 30, 2004 are as follows:
Won (millions)
Insured assets Insurance type Insured value Insurer
------------------------ ----------------------- -------------- ----------------------------
Buildings and machinery Fire insurance KRW 386,458 Samsung Insurance Co., Ltd.
and others
Buildings General insurance 145,383 Dongyang Insurance Co., Ltd.
and others
Construction in progress Assemble insurance 365,312 LG Fire Insurance Co., Ltd.
and others
Construction in progress Construction insurance 90,417 Hyundai Marine Fire Insurance
Co., Ltd. and others
In addition, the Company carries damage insurance for construction of
its light-water nuclear reactor in North Korea, general insurance for
vehicles and movables, marine cargo insurance for inventories, group
casualty insurance for its employees and compensation liability
insurance for its directors.
(6) Investments
(a) Investments other than those under the equity method as of June
30, 2004 and December 31, 2003 are summarized as follows:
Won (millions)
---------------------------------------------------------------
2004
---------------------------------------------------------------
Unrealized
Acquisition holding Fair Book
% cost losses value value
---------- ----------- ---------- ---------- ----------
Available-for-sale:
Equity securities:
Energy Savings
Investment Cooperatives 25.0~48.0 KRW 5,000 - (*1) 5,000
Korea Power Exchange 50.0 64,476 - (*1) 64,476
Hwan Young Steel Co., Ltd. (*2) 0.14 1,364 - - 120
Investment securities in
treasury stock fund (*3) - 18,271 6,504 11,767 11,767
----------- ---------- ---------- ----------
89,111 6,504 11,767 81,363
----------- ---------- ---------- ----------
Held-to-maturity:
Government bonds 58 - - 58
----------- ---------- ---------- ----------
Total KRW 89,169 6,504 11,767 81,421
=========== ========== ========== ==========
(*1) Fair values are not available
(*2) The Company recognized an impairment loss of KRW1,244
million that was deemed as an other-than-temporary
decline.
(*3) The Company has an investment in a treasury stock fund
composed of treasury stock and other investment
securities. The other investment securities are recorded
as available-for-sale securities. The treasury stock is
recorded as a capital adjustment (note 15).
13
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Losses on valuation of these available-for-sale
securities recorded as a capital adjustment, amount to
KRW6,504 million and KRW8,714 million as of June 30,
2004 and December 31, 2003, respectively.
14
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(6) Investments, Continued
Won (millions)
---------------------------------------------------------------
2003
---------------------------------------------------------------
Unrealized
Acquisition holding Fair Book
% cost losses value value
---------- ----------- ---------- ---------- ----------
Available-for-sale:
Equity securities:
Securities Market
Stabilization Fund 7.64 KRW 7,763 - (*) 7,763
Energy Savings
Investment Cooperatives 25.0~48.0 5,000 - (*) 5,000
Korea Power Exchange 50.0 62,606 - (*) 62,606
Hwan Young Steel Co., Ltd. 0.14 1,364 - - 120
Investment securities in
Treasury stock fund - 26,295 8,714 17,581 17,581
----------- ---------- ---------- ----------
103,028 8,714 17,581 93,070
----------- ---------- ---------- ----------
Held-to-maturity:
Government bonds 36 - - 36
----------- ---------- ---------- ----------
Total KRW 103,064 8,714 KRW 17,581 93,106
=========== ========== ========== ==========
(*) Fair values are not available
(b) Investments in affiliated companies accounted for using the
equity method as of June 30, 2004 are as follows:
Won (millions)
-----------------------------------------------------------
2004
-----------------------------------------------------------
Percentage Acquisition Net asset
Affiliate of ownership Cost value Book value
----------------------------- ------------ -------------- ------------ -------------
Korea Hydro & Nuclear Power Co., Ltd. (*1) 100.0 KRW 9,364,799 11,204,514 11,204,514
Korea South-East Power Co., Ltd. (*1) 100.0 1,232,004 1,931,375 1,931,375
Korea Midland Power Co., Ltd. (*1) 100.0 1,325,891 2,047,731 2,047,731
Korea Western Power Co., Ltd. (*1) 100.0 1,442,638 1,987,417 1,987,417
Korea Southern Power Co., Ltd. (*1) 100.0 1,797,378 2,106,073 2,106,073
Korea East-West Power Co., Ltd. (*1) 100.0 2,322,905 2,440,284 2,440,284
Korea Power Engineering Co., Ltd. (*1) 97.9 4,991 198,837 61,783
Korea Plant Service & Engineering Co., Ltd.(*1) 100.0 6,000 268,567 268,567
KEPCO Nuclear Fuel Co., Ltd. (*1) 96.4 89,757 164,468 150,956
Korea Electric Power Data Network Co., Ltd. (*1) 100.0 64,000 133,989 109,661
Korea Electric Power Industrial
Development, Ltd. (*1) 49.0 7,987 20,591 20,591
Powercomm Corporation (*1) 43.1 323,470 374,389 374,389
Korea Gas Corporation (*1) 24.5 94,500 778,824 778,824
Korea District Heating Co. (*1) 26.1 5,660 168,996 168,996
KEPCO International Hong Kong Ltd. (*1, *2) 100.0 20,000 186,913 186,913
KEPCO International Philippines Inc. (*1, *2) 100.0 91,716 111,866 111,866
-------------- ------------ -------------
KRW 18,193,696 24,124,834 23,949,940
============== ============ =============
15
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(6) Investments, Continued
(*1) The Company used unaudited financial statements of the above
affiliated companies when applying the equity method of
accounting.
The Company eliminated the unrealized gains arising from the
transactions with the above affiliates. The eliminated
unrealized gain arising from transactions with Korea Power
Engineering Co., Ltd., KEPCO Nuclear Fuel Co., Ltd. and Korea
Electric Power Data Network Co., Ltd. amounted to KRW137,054
million, KRW13,512 million and KRW24,328 million, respectively,
for the six-month period ended June 30, 2004
(*2) As KEPCO International Hong Kong Ltd. owns 100 percent of the
shares of KEPCO Philippines Corporation ("KEPHILCO") and KEPCO
International Philippines Inc. holds 51 percent of the shares of
KEPCO Ilijan Corporation ("KEILCO"), when applying the equity
method, the Company accounts for equity incomes from KEPCO
International Hong Kong Ltd. and KEPCO International Philippines
Inc., that include the changes in the net equity of KEPHILCO and
KEILCO, respectively.
Investments in affiliated companies accounted for using equity method as
of December 31, 2003 are as follows:
Won (millions)
-----------------------------------------------------------
2003
-----------------------------------------------------------
Percentage Acquisition Net asset
Affiliate of ownership Cost value Book value
----------------------------- ------------ -------------- ------------ -------------
Korea Hydro & Nuclear Power Co., Ltd. 100.0 KRW 9,364,799 11,014,714 11,014,714
Korea South-East Power Co., Ltd. 100.0 1,232,004 1,990,715 1,990,715
Korea Midland Power Co., Ltd. 100.0 1,325,891 2,080,695 2,080,695
Korea Western Power Co., Ltd. 100.0 1,442,638 1,988,052 1,988,052
Korea Southern Power Co., Ltd. 100.0 1,797,378 2,092,460 2,092,460
Korea East-West Power Co., Ltd. 100.0 2,322,905 2,424,164 2,424,164
Korea Power Engineering Co., Ltd. 97.9 4,991 195,624 69,038
Korea Plant Service & Engineering Co., Ltd. 100.0 6,000 267,041 267,041
KEPCO Nuclear Fuel Co., Ltd. 96.4 89,757 157,701 145,098
Korea Electric Power Data Network Co., Ltd. 100.0 64,000 129,724 115,382
Korea Electric Power Industrial
Development, Ltd. 49.0 7,987 22,092 22,092
Powercomm Corporation 43.1 323,470 363,687 363,687
Korea Gas Corporation 24.5 94,500 740,280 740,280
Korea District Heating Co. 26.1 5,660 159,165 159,165
KEPCO International Hong Kong Ltd. 100.0 20,000 173,629 173,629
KEPCO International Philippines Inc. 100.0 91,716 126,052 126,052
-------------- ------------ -------------
KRW 18,193,696 23,925,795 23,772,264
============== ============ =============
16
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(6) Investments, Continued
(c) Changes in investments in affiliated companies under the equity
method for the six-month period ended June 30, 2004 are as
follows:
Won (millions)
-------------------------------------------------------------------------------
2004
-------------------------------------------------------------------------------
Book value as of Equity income Capital Book value as of
Affiliate January 1, 2004 (loss) adjustment Others(*) June 30, 2004
--------------------- ---------------- ------------- ----------- ----------- -----------------
Korea Hydro & Nuclear
Power Co., Ltd. KRW 11,014,714 427,426 - (237,626) 11,204,514
Korea South-East Power Co., Ltd. 1,990,715 107,010 - (166,350) 1,931,375
Korea Midland Power Co., Ltd. 2,080,695 84,861 (53) (117,772) 2,047,731
Korea Western Power Co., Ltd. 1,988,052 88,322 (2,717) (86,240) 1,987,417
Korea Southern Power Co., Ltd. 2,092,460 77,930 335 (64,652) 2,106,073
Korea East-West Power Co., Ltd. 2,424,164 48,916 1,018 (33,814) 2,440,284
Korea Power Engineering Co., Ltd. 69,038 6,849 - (14,104) 61,783
Korea Plant Service &
Engineering Co., Ltd. 267,041 20,326 - (18,800) 268,567
KEPCO Nuclear Fuel Co., Ltd. 145,098 7,881 - (2,023) 150,956
Korea Electric Power Data
Network Co., Ltd. 115,382 (3,741) 420 (2,400) 109,661
Korea Electric Power Industrial
Development, Ltd. 22,092 2,419 - (3,920) 20,591
Powercomm Corporation 363,687 11,418 578 (1,294) 374,389
Korea Gas Corporation 740,280 65,287 4,441 (31,184) 778,824
Korea District Heating Co. 159,165 10,887 (1) (1,055) 168,996
KEPCO International Hong Kong Ltd. 173,629 23,497 (10,213) - 186,913
KEPCO International
Philippines Inc. 126,052 12,443 (16,158) (10,471) 111,866
---------------- ------------- ----------- ----------- -----------------
KRW 23,772,264 991,731 (22,350) (791,705) 23,949,940
================ ============= =========== =========== =================
(*) Others represent dividends from the affiliates.
17
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(6) Investments, Continued
Changes in investments in affiliated companies under the equity method
for the year ended December 31, 2003 are as follows:
Won (millions)
-------------------------------------------------------------------------------
2003
-------------------------------------------------------------------------------
Book value as of Capital Book value as of
Affiliate January 1, 2003 Equity income adjustment Others(*) December 31, 2003
--------------------- ---------------- ------------- ----------- ----------- -----------------
Korea Hydro & Nuclear
Power Co., Ltd. KRW 10,577,527 652,182 - (214,995) 11,014,714
Korea South-East Power Co., Ltd. 1,679,117 345,669 (801) (33,270) 1,990,715
Korea Midland Power Co., Ltd. 1,781,127 345,230 223 (45,885) 2,080,695
Korea Western Power Co., Ltd. 1,772,973 254,077 5,002 (44,000) 1,988,052
Korea Southern Power Co., Ltd. 1,953,743 182,849 (261) (43,871) 2,092,460
Korea East-West Power Co., Ltd. 2,373,207 84,995 (3,298) (30,740) 2,424,164
Korea Power Engineering Co., Ltd. 51,991 28,800 - (11,753) 69,038
Korea Plant Service &
Engineering Co., Ltd. 238,947 37,094 - (9,000) 267,041
KEPCO Nuclear Fuel Co., Ltd. 134,538 12,487 - (1,927) 145,098
Korea Electric Power Data
Network Co., Ltd. 118,075 1,807 - (4,500) 115,382
Korea Electric Power Industrial
Development, Ltd. 40,730 3,114 - (21,752) 22,092
Powercomm Corporation 359,090 10,421 1,188 (7,012) 363,687
Korea Gas Corporation 690,705 73,329 4,596 (28,350) 740,280
Korea District Heating Co. 147,898 13,304 (1,358) (679) 159,165
KEPCO International Hong Kong Ltd. 124,808 56,817 (7,996) - 173,629
KEPCO International
Philippines Inc. 108,255 21,343 (4,769) 1,223 126,052
---------------- ------------- ----------- ----------- -----------------
KRW 22,152,731 2,123,518 (7,474) (496,511) 23,772,264
================ ============= =========== =========== =================
(*) Other are composed of acquisition (disposal) amounts of
investment securities and dividends from the affiliates.
(7) Loans to employees
The Company has provided housing and tuition loans to employees as
follows as of June 30, 2004 and December 31, 2003:
Won (millions)
---------------------------------
2004 2003
--------------- --------------
Short-term loans KRW 9,518 9,267
Long-term loans 153,794 142,368
--------------- --------------
KRW 163,312 151,635
=============== ==============
18
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(8) Other Non-current Assets
Other non-current assets as of June 30, 2004 and December 31, 2003 are
as follows:
Won (millions)
---------------------------------
2004 2003
--------------- --------------
Long-term trade receivable, net KRW 2,509 2,509
Deposit received 65,976 58,135
Others 82,086 82,466
--------------- --------------
KRW 150,571 143,110
=============== ==============
(9) Cash and Cash Equivalents
Cash and cash equivalents as of June 30, 2004 and December 31, 2003 are
summarized as follows:
Won (millions)
---------------------------------
2004 2003
--------------- --------------
Cash and cash equivalents:
Cash on hand KRW 81 71
Sundry deposits 335,500 366,558
Cash equivalents (*) 47,555 188
--------------- --------------
383,136 366,817
=============== ==============
(*) Cash equivalents consist of money market funds, money market
deposit accounts and time deposits with maturities of three
months or less at the acquisition date.
(10) Short-term financial Instruments
Short-term financial instruments as of June 30, 2004 and December 31,
2003 are summarized as follows:
Won (millions)
---------------------------------
2004 2003
--------------- --------------
Time Deposits - 13,000
Trust accounts - 43,000
Repurchase agreements 46,000 5,000
--------------- --------------
46,000 61,000
=============== ==============
19
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(11) Inventories
Inventories as of June 30, 2004 and December 31, 2003 are summarized as
follows:
Won (millions)
---------------------------------
2004 2003
--------------- --------------
Raw materials KRW 3,240 1,991
Supplies 70,021 73,066
Other 5,767 3,739
--------------- --------------
KRW 79,028 78,796
=============== ==============
(12) Other Current Assets
Other current assets at June 30, 2004 and December 31, 2003 are
summarized as follows:
Won (millions)
---------------------------------
2004 2003
--------------- --------------
Held-to-maturity securities (*) KRW 2 5
Short-term loans to
employees (note 7) 9,518 9,267
Accrued interest income 1,297 2,777
Advance payments 1,536 297
Prepaid expenses 19,675 3,244
Other current assets 122,616 106,331
--------------- --------------
KRW 154,644 121,921
=============== ==============
(*) Held-to-maturity securities consist of government and municipal
bonds
(13) Capital Surplus
Capital surplus as of June 30, 2004 and December 31, 2003 are as
follows:
Won (millions)
---------------------------------
2004 2003
--------------- --------------
Paid-in capital in excess of
par value KRW 811,296 811,301
Reserves for asset revaluation 12,552,973 12,552,973
Other capital surplus 1,006,088 1,009,505
--------------- --------------
KRW 14,370,357 14,373,779
=============== ==============
The Company revalued its property, plant and equipment in accordance
with the KEPCO Act and the Asset Revaluation Law, and recorded a
revaluation gain of KRW12,552,973 million as a reserve for asset
revaluation. The reserve for asset revaluation may be credited to
paid-in capital or offset against any accumulated deficit by resolution
of the shareholders.
20
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(14) Retained Earnings
Appropriated retained earnings as of June 30, 2004 and December 31, 2003
are summarized as follows:
Won (millions)
---------------------------------
2004 2003
--------------- --------------
Legal reserve KRW 1,601,871 1,600,252
Reserve for business
rationalization 31,900 31,900
Reserve for business expansion 12,438,120 10,925,338
Reserve for investment on social
overhead capital 5,092,449 5,012,449
Reserve for research and human
development 180,000 120,000
Voluntary reserve 210,000 210,000
--------------- --------------
KRW 19,554,340 17,899,939
=============== ==============
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 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.
Under the Special Tax Treatment Control Law, investment tax credit was
allowed for certain investments. The Company was, however, required to
appropriate from retained earnings the amount of tax benefits obtained
and transfer such amount into a reserve for business rationalization.
Effective December 11, 2002, the Company is no longer required to
establish a reserve for business rationalization despite tax benefits
received for certain investments and, consequently, the existing balance
is now regarded as a voluntary reserve.
The reserves for the investment on social overhead capital and research
and human development are appropriated by the Company to avail itself of
qualified tax credits to reduce corporate tax liabilities. This reserve
is not available for cash dividends for a certain period as defined in
the Tax Incentive Control Law.
(15) Capital Adjustments
Capital adjustments as of June 30, 2004 and December 31, 2003 are as
follows:
Won (millions)
---------------------------------
2004 2003
--------------- --------------
Treasury stock KRW (199,985) (195,379)
Loss on valuation of available-
for-sale securities (6,504) (8,714)
Equity income of affiliates 31,061 53,412
--------------- --------------
KRW (175,428) (150,681)
=============== ==============
The Company has shares held as treasury stock amounting to KRW 199,985
million (11,068,050 shares) and KRW 195,379 million (10,713,050 shares)
as of June 30, 2004 and December 31, 2003, respectively, for the purpose
of stock price stabilization.
21
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(16) Long-term borrowings
Long-term borrowings as of June 30, 2004 and December 31, 2003 are as
follows:
(a) Local currency long-term borrowings
Won (millions)
Annual ------------------------------
Lender Type interest rate (%) 2004 2003
------------------- ---------------- ----------------- -------------- -------------
Korea Development Bank Industrial facility 4.76~7.50 KRW 4,004,834 3,505,628
Others 5.50~6.00 34 35
-------------- -------------
Less: Current portion (728,281) (715,775)
-------------- -------------
KRW 3,276,587 2,789,888
============== =============
(b) Foreign currency long-term borrowings
Won (millions)
Annual ------------------------------
Lender Type interest rate (%) 2004 2003
------------------- ------------- ----------------- -------------- -------------
Barclays International
Financial Services 6 month Libor
(Ireland) Ltd. Commercial +0.45 KRW 90,528 187,851
Less: Current portion (90,528) (187,851)
-------------- -------------
KRW - -
============== =============
(c) Debentures
Won (millions)
Annual ------------------------------
Lender interest rate (%) 2004 2003
------------------- ----------------- -------------- -------------
Local currency debentures
(Electricity bonds) 4.59~9.67 KRW 3,855,000 4,235,000
Foreign currency debentures(*) 1.18~8.28 5,218,686 5,530,157
-------------- -------------
9,073,686 9,765,157
-------------- -------------
Less: Current portion (2,451,855) (3,122,750)
Discount (45,093) (46,056)
-------------- -------------
KRW 6,576,738 6,596,351
============== =============
22
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(16) Long-term borrowings, Continued
(*) In 2003, the Company sold debentures of US$ 250,000 thousand to
KEPCO Cayman Company Limited. These debentures have the right to be
exchanged with the shares of Powercomm Corporation held by the Company.
Based on these assets, KEPCO Cayman Company Limited issued foreign
debentures of US$ 250,000 thousand, the details of which are as follows:
- Maturity date: November 26, 2008
- Qualifying Public Offering (QPO): QPO means the first listing on
the Korea Stock Exchange, New York Stock Exchange or National
Association of Securities Dealers Automated Quotations (NASDAQ)
meeting certain requirements. It is not required that Powercomm
Corporation must perform QPO prior to the maturity of the
debentures, neither the Company guarantees the QPO of Powercomm
Corporation.
- Shares to be exchanged: Powercomm Corporations shares or Deposit
Receipt (DR)
- Exchangeable period: From 10th day after the listing of
Powercomm Corporation to 10th day before its maturity
- Exchange price: 120% of lower amount of market price on listing
day or weighted average price for 10 days after its listing.
- Early redemption: When certain conditions are met or after 3
years from the listing, outstanding debentures are redeemable at
the guaranteed return of 2.88% (102.74% of issuance amount)
- Repayment at the maturity: Repayment will be made with the
guaranteed return of 3.68% (109.13% of issuance amounts).
The Company has provided payment guarantees to KEPCO Cayman Company
Limited for the principal and interest of the above foreign debentures.
(d) Exchangeable bonds
Won (millions)
Annual ------------------------------
Description interest rate (%) 2004 2003
------------------------------------ ----------------- -------------- -------------
Overseas exchangeable bonds 0.00 KRW 277,256 277,256
Plus: Premium on debentures issued 18,870 20,987
Less: Conversion right adjustment (39,398) (43,817)
-------------- -------------
256,728 254,426
============== =============
On November 4, 2003, the Company issued overseas exchangeable bonds of
Japanese Yen 28,245,468 thousand at a premium value. The details of the
bonds are as follows:
- Maturity date: November 4, 2008
- Amount to be paid at maturity: JPY 25,935,061 thousand
- Exchange period: From December 15, 2003 to 10th day prior to its
maturity
- Shares to be exchanged: Common stock held by the Company or its
equivalent Deposit Receipt (DR).
- Exchange price: (pound) 30,000 per share
- Put option: Bond holders have the put option that they can
request redemption at JPY 26,834,000 thousand on November 6,
2006.
23
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(16) Long-term borrowings, Continued
(e) Leases
(i) The Company entered into a capital lease agreement with
Korea Development Leasing Corporation for certain
computer systems, of which book value is KRW 1,727
million as of June 30, 2004. Depreciation of the leased
assets amounted to KRW 2,099 million for the six-month
period ended June 30, 2004
(ii) Annual payments under capital and operating lease
agreements as of June 30, 2004 are as follows:
Won (millions)
--------------------------------------
Year ended June 30 Capital lease Operating lease
------------------- ----------------- -----------------
2005 KRW 1,474 587
=================
Less : Interest (29)
Current portion (1,445)
-----------------
KRW -
=================
(f) Foreign currency debts, by currency, as of June 30, 2004 and
December 31, 2003 are as follows:
Won (millions), USD, JPY, EUR and GBP (thousands)
--------------------------------------------------------------------------
2004 2003
--------------------------------------------------------------------------
Foreign Won Foreign Won
currency equivalent currency equivalent
---------------- --------------- ---------------- --------------
Current portion of long-term
borrowings USD 75,000 KRW 90,528 USD 150,000 KRW 187,851
--------------- --------------
Debentures USD 3,180,360 3,669,562 USD 2,902,030 3,480,249
JPY 137,500,000 1,463,041 JPY 175,060,000 1,959,972
EUR 25,183 35,097 EUR 25,183 37,839
GBP 24,467 50,986 GBP 24,467 52,097
--------------- --------------
5,218,686 5,530,157
Exchangeable bond JPY 25,935,061 277,256 JPY 25,935,061 277,256
--------------- --------------
KRW 5,586,470 KRW 5,995,264
=============== ==============
24
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(16) Long-term borrowings, Continued
(g) Aggregate maturities of the Company's long-term debt as of June
30, 2004 are as follows:
Won (millions)
-------------------------------------------------------------------------------------------------
Local Foreign Capital
Year ended currency currency Electricity Foreign Exchangeable lease
June 30 borrowings borrowings bonds debentures bonds obligations Total
----------- ------------- ----------- ----------- ------------ ------------- ----------- ----------
2005 KRW 728,281 90,528 1,290,000 1,161,855 - 1,445 3,272,109
2006 1,040,453 - 390,000 916,091 - - 2,346,544
2007 834,147 - 580,000 52,495 - - 1,466,642
2008 559,043 - 600,000 1,146,094 - - 2,305,137
2009 177,735 - 875,000 527,810 277,256 - 1,857,801
Thereafter 665,209 - 120,000 1,414,341 - - 2,199,550
------------- ----------- ---------- ----------- ------------- ----------- -----------
KRW 4,004,868 90,528 3,855,000 5,218,686 277,256 1,445 13,447,783
============= =========== ========== =========== ============= =========== ===========
(17) Assets and Liabilities Denominated in Foreign Currencies
There are no significant liabilities denominated in foreign currencies
other than those mentioned in Note 16(f). Major assets denominated in
foreign currencies as of June 30, 2004 and December 31, 2003 are as
follows:
2004 2003
---------------------------- -------------------------
Foreign Won Foreign Won
currency equivalent currency equivalent
(thousands) (millions) (thousands) (millions)
------------- ----------- ----------- ----------
Cash and cash equivalents USD 190 KRW 219 USD 4,578 KRW 5,484
JPY 788,659 8,392 JPY - -
Trade receivables USD 398 459 USD 4,959 5,940
Other account receivables USD - - USD 607 727
Other non-current USD 98 112 USD 12 14
assets JPY 9,706 103 JPY 5,860 66
EUR 8 11 EUR - -
----------- ----------
KRW 9,296 KRW 12,231
=========== ==========
25
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(18) Retirement and Severance Benefits
Changes in retirement and severance benefits for six-month period ended
June 30, 2004 and for the year ended December 31, 2003 are summarized as
follows:
Won (millions)
--------------------------------
2004 2003
-------------- ------------
Estimated severance liability at beginning of year KRW 316,503 226,708
Provision for retirement and severance benefits 30,922 98,150
Payments (5,395) (8,355)
-------------- ------------
Estimated severance liability at end of year 342,030 316,503
Transfer to National Pension Fund (95) (95)
-------------- ------------
Net balance at end of year KRW 341,935 316,408
============== ============
(19) Receivables at Prevent Value
Present value discounts on receivables as of June 30, 2004 are as
follows:
Won (millions)
----------------------------------------
Present
Interest rate (%) Period Nominal value Discount value
----------------- ------ ------------- ----------- -----------
Other accounts
receivable 5.24, 6.00 2002.12~2005.12 KRW 177,729 18,229 159,500
Long-term other
accounts receivable 5.24, 6.00 2002.12~2005.12 257,500 6,625 250,875
------------ ------------ -----------
KRW 435,229 24,854 410,375
============ ============ ===========
(20) Other Current Liabilities
Other current liabilities as of June 30, 2004 and December 31, 2003 are
as follows:
Won (millions)
--------------------------------
2004 2003
-------------- ------------
Advance received KRW 40,457 281
Withholdings 124,682 141,623
Unearned revenue 9,863 3,304
Others 314,453 321,302
-------------- ------------
KRW 489,455 466,510
============== ============
26
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STAEMENTS
(Unaudited)
(21) Derivative Instruments Transactions
The Company has entered into the various swap contracts to hedge risks
involving exchange rate and interest rate of foreign currency debts.
These contracts are recorded at fair value with the unrealized gains and
losses being recorded in the statement of income.
(a) Currency swap contracts as of June 30, 2004 are as follows:
Contract amounts Contract interest rate
in millions per annum
Contract Settlement ----------------------- --------------------------
Year Year Pay Receive Pay (%) Receive (%)
-------- ---------- ----------- ---------- ------------- -----------
The Sumitomo Bank Ltd. 1995 2005 US$ 286 JPY 27,000 7.68 4.15
Mizuho Co., Ltd. 1995 2005 US$ 149 JPY 14,425 6M Libor 3.40
(formerly The Fuji Bank, Ltd.) + 0.155
Canadian Imperial Bank of Commerce 1996 2006 US$ 97 JPY 10,000 Libor+ 0.13 3.80
J.P. Morgan Chase Bank 1996 2006 US$ 200 JPY 21,000 Libor+ 0.14 4.00
Deutsche Bank 1998 2004 JPY 1,705 US$ 55 6.41 7.11
(formerly Bankers Trust Co.) EUR 13
CHF 20
CAD 20
Deutsche Bank 1998 2004 JPY 2,945 US$ 95 6.36 7.05
(formerly Bankers Trust Co.) EUR 22
CHF 35
CAD 34
J.P. Morgan Chase Bank & Deutsche 2002 2007 JPY 76,700 US$ 650 1.18 4.25
Bank (*1, *3)
Barclays Bank PLC, London 2002 2007 JPY 30,400 US$ 250 1.04 3M Libor
+ 0.75
Deutsche Bank(*2) 2003 2013 KRW 178,350 US$ 150 CD+3.3 7.75
Union Bank of Switzerland (*2) 2003 2013 KRW 148,625 US$ 125 CD+3.3 7.75
Credit Swiss First Boston(*2) 2003 2013 KRW 89,175 US$ 75 CD+3.3 7.75
(*1) If the Republic of Korea declares default on its debts, KEPCO is
entitled to receive Korean government bonds instead of cash. Valuation
for these embedded derivatives is reflected in the valuation of the
currency swap.
(*2) The Company has purchased call option in addition to these swaps,
under which the Company can exchange each KRW 5,945 million with the
amounts of KRW 5,000,000 multiplied by Spot FX rate (US$/KRW) until
December 22, 2004, and the valuation for this call option is considered
in the valuation of the swaps.
(*3) The Company pays JPY 7,670 million which is 10% of the contract
amount every March and September and will receive US$ 650 million in
September 2007.
27
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STAEMENTS
(Unaudited)
(21) Derivative Instruments Transactions, Continued
(b) Interest rate swap contracts as of June 30, 2004 are as follows
Contract interest rate per annum
Notional amount -----------------------------------
in millions Pay (%) Receive (%) Term
--------------- ---------------- ---------------- ---------
J.P. Morgan Chase Bank US$ 149 6.91 Libor+0.155 1995-2005
Barclays Bank PLC, London US$ 150 6M Libor-1 6M Libor+0.45 1997-2004
Shinhan Bank US$ 100 6.50 6.75 1997-2004
Deutsche Bank US$ 55 6.93 1998-2004
(formerly Bankers Trust Co.) JPY 1,705 6.41
EUR 13 6.41
CHF 20 6.41
CAD 20 6.41
Deutsche Bank US$ 95 6.87 1998-2004
(formerly Bankers Trust Co.) JPY 2,945 6.36
EUR 22 6.36
CHF 35 6.36
CAD 34 6.36
Deutsche Bank US$ 100 Max Max 1998-2007
(formerly Bankers Trust Co.) (6,074-Libor, 0) (Libor-6.074, 0)
Deutsche Bank US$ 100 Max Max 1998-2007
(formerly Bankers Trust Co.) (Libor-6.074,0) (6.074-Libor, 0)
Deutsche Bank KRW 178,350 5%+2X[JPY/ CD+3.3 2003-2013
KRW-11.03%]
Union Bank of Switzerland KRW 148,625 5%+2X[JPY/ CD+3.3 2003-2013
KRW-11.03%]
Credit Swiss First Boston KRW 89,175 5%+2X[JPY/ CD+3.3 2003-2013
KRW-11.03%]
(c) Valuation gains and losses on swap contracts recorded as other
income or expense for the six-month periods ended June 30, 2004
and 2003 are as follows:
Won (millions)
----------------------------------
2004 2003
--------------- --------------
Currency swap
Gains KRW 16,239 29,801
Losses (34,335) (27,347)
Interest rate swap
Gains 56,517 11,205
Losses (1,575) (8,528)
--------------- --------------
KRW 36,846 5,131
=============== ==============
28
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STAEMENTS
(Unaudited)
(22) Power Generation, Transmission and Distribution Expenses
Power generation, transmission and distribution expenses for the
six-month periods ended June 30, 2004 and 2003 are as follows:
Won (millions)
-------------------------------
2004 2003
-------------- --------------
Material expenses:
Oil KRW 9,089 5,388
-------------- --------------
Labor expenses:
Salaries 254,135 229,794
Severance and retirement benefits 17,785 17,350
-------------- --------------
271,920 247,144
Overhead expenses:
Employee benefits 40,649 35,772
Taxes and dues 2,182 1,700
Rent 14,647 12,907
Depreciation 789,405 740,485
Maintenance 276,348 339,814
Commission and consultation fees 40,288 31,275
Compensation expense 7,731 16,760
Ordinary development expenses 37,858 33,531
Utility plant removal costs 72,387 90,890
Others 31,377 33,427
-------------- --------------
1,312,872 1,336,561
-------------- --------------
KRW 1,593,881 1,589,093
============== ==============
(23) Selling, General and Administrative Expenses
Details of selling, general and administrative expenses for the
six-month periods ended June 30, 2004 and 2003 are as follows:
Won (millions)
-------------------------------
2004 2003
-------------- --------------
Salaries KRW 171,111 156,205
Employee benefits 30,311 24,834
Taxes and dues 2,189 1,811
Rent 5,798 8,282
Depreciation and amortization 16,695 20,088
Maintenance 6,101 5,459
Commission and consultation fees 32,972 39,299
Ordinary development 7,840 6,289
Promotion 9,682 8,636
Bad debts 8,184 5,722
Communication 13,328 12,153
Insurance 494 4,462
Rewards 922 296
Miscellaneous 161,521 144,152
-------------- --------------
KRW 467,148 437,688
============== ==============
29
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STAEMENTS
(Unaudited)
(24) Income Taxes
(a) The Company is subject to a number of income taxes based on
taxable at the following normal tax rates:
Taxable earnings Prior to 2005 Thereafter
-------------------- ------------- ----------
Up to KRW100 million 16.5% 14.3%
Over KRW100 million 29.7% 27.5%
In December 2003, the Korean government reduced the corporate income tax
rate beginning in 2005. Specifically, effective from January 1, 2005,
the income tax rate will be reduced from 29.7% to 27.5%.
The components of income tax expense for the six-month periods ended
June 30, 2004 and 2003 are summarized as follows:
Won (millions)
-------------------------------
2004 2003
-------------- --------------
Current income tax expense KRW 443,436 309,167
Deferred income tax expense 28,022 162,152
-------------- --------------
KRW 471,458 471,319
============== ==============
(b) The provision for income taxes calculated using the normal tax
rates differs from the actual provision for the six-month
periods ended June 30, 2004 and 2003 for the following reasons:
Won (millions)
-----------------------------
2004 2003
------------- -------------
Provision for income taxes at normal tax rates KRW 574,919 521,087
Tax effects of permanent differences, primarily
dividend income (104,497) (49,648)
Tax credit (1,035) -
Other, net - (120)
------------- -------------
Actual provision for income taxes KRW 471,458 471,319
============= =============
The effective tax rates, after adjustments for certain differences
between amounts reported for financial accounting and income tax
purposes, were approximately 24.35 % and 26.86 % for the six-month
periods ended June 30, 2004 and 2003, respectively.
30
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STAEMENTS
(Unaudited)
(24) Income Taxes, Continued
(c) The tax effects of temporary differences that result in
significant portions of the deferred income tax assets and
liabilities as of June 30, 2004 and December 31, 2003 are
presented below:
Won (millions)
-------------------------------
2004 2003
-------------- --------------
Deferred tax assets:
Loss on valuation of derivatives KRW 123,124 115,270
Retirement and severance benefits 56,640 52,379
Deferred foreign exchange translation loss 12,759 14,655
Other 161,532 266,562
-------------- --------------
Total deferred tax assets 354,055 448,866
-------------- --------------
Deferred tax liabilities:
Gain on valuation of derivatives 106,059 86,309
Deferred foreign exchange translation gain 31,461 37,176
Reserve for social overhead capital investment 136,927 270,239
Gain on valuation of investment securities
using the equity method 1,572,165 1,517,158
-------------- --------------
Total deferred tax liabilities 1,846,612 1,910,882
-------------- --------------
Net deferred tax liabilities KRW (1,492,557) (1,462,016)
============== ==============
(25) Earnings Per Share
Earnings per common share are calculated by dividing net earnings by the
weighted-average number of shares of common stock outstanding.
Won
-------------------------------
2004 2003
-------------- --------------
Net income in million Won KRW 1,464,442 1,283,226
Weighted-average number of common shares
outstanding 629,858,023 631,387,812
-------------- --------------
Earnings per common share in Won KRW 2,325 2,032
============== ==============
31
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STAEMENTS
(Unaudited)
(25) Earnings Per Share, Continued
Diluted earnings per share for the six-month periods ended June 30, 2004
and 2003 are calculated as follows:
Won
-------------------------------
2004 2003
-------------- --------------
Net income in million Won KRW 1,464,442 1,283,226
Exchangeable bond interest in million Won 1,617 -
-------------- --------------
1,466,059 1,283,226
-------------- --------------
Weighted-average number of common shares and
diluted securities outstanding 639,857,870 631,387,812
-------------- --------------
Diluted earnings per share in Won KRW 2,291 2,032
============== ==============
(26) Transactions and Balances with Related Companies
(a) Transactions with related parties for the six-month periods
ended June 30, 2004 and 2003 are as follows:
Won (millions)
-----------------------------
Related party Transaction 2004 2003
--------------------------------------- --------------------------------------- ------------- -------------
Sales and other income:
Korea Hydro & Nuclear Power Co., Ltd. Sales of electricity and others KRW 65,380 50,845
Korea South-East Power Co., Ltd. " 13,814 17,148
Korea Midland Power Co., Ltd. " 9,902 13,431
Korea Western Power Co., Ltd. " 12,995 17,268
Korea Southern Power Co., Ltd. " 8,241 8,588
Korea East-West Power Co., Ltd. " 2,012 19,290
Others " 48,568 39,483
------------- -------------
KRW 160,912 166,053
============= =============
Purchases and others:
Korea Hydro & Nuclear Power Co., Ltd. Purchase of electricity and others KRW 2,348,664 2,417,162
Korea South-East Power Co., Ltd. " 753,578 735,508
Korea Midland Power Co., Ltd. " 969,316 968,803
Korea Western Power Co., Ltd. " 992,947 1,052,707
Korea Southern Power Co., Ltd. " 1,387,712 1,000,022
Korea East-West Power Co., Ltd. " 986,583 1,010,237
Korea Power Engineering Co., Inc. Designing of the power plant and others 6,803 78,917
Korea Plant Service & Engineering
Co., Ltd. Utility plant maintenance 20,320 20,595
Korea Electric Power Data Network,
Co., Ltd. Maintenance of computer system 10,255 98,094
Others Commissions for service and others 68,938 86,487
------------- -------------
KRW 7,545,116 7,468,532
============= =============
32
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STAEMENTS
(Unaudited)
(26) Transactions and Balances with Related Companies, Continued
(b) Receivables arising from related parties transactions as of June
30, 2004 and December 31, 2003 are as follows:
Won (millions)
------------------------------------------------
2004
------------------------------------------------
Trade Other
Related party receivables receivables Total
--------------------------------------- -------------- -------------- --------------
Korea Hydro & Nuclear Power Co., Ltd. 656KRW - 369 369
Korea South-East Power Co., Ltd. 1,731 672 2,403
Korea Midland Power Co., Ltd. 1,288 10,146 11,434
Korea Western Power Co., Ltd. 1,992 375 2,367
Korea Southern Power Co., Ltd. 1,278 422 1,700
Korea East-West Power Co., Ltd. 2,638 147 2,785
Others 473 10,040 10,513
-------------- -------------- --------------
KRW 9,400 22,171 31,571
============== ============== ==============
Won (millions)
------------------------------------------------
2003
------------------------------------------------
Trade Other
Related party receivables receivables Total
--------------------------------------- -------------- -------------- --------------
Korea Hydro & Nuclear Power Co., Ltd. KRW - 319 319
Korea South-East Power Co., Ltd. 1,778 367 2,145
Korea Midland Power Co., Ltd. 1,107 2,232 3,339
Korea Western Power Co., Ltd. 1,940 248 2,188
Korea Southern Power Co., Ltd. 1,157 360 1,517
Korea East-West Power Co., Ltd. 1,978 213 2,191
Others 1,990 9,607 11,597
-------------- -------------- --------------
KRW 9,950 13,346 23,296
============== ============== ==============
33
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STAEMENTS
(Unaudited)
(26) Transactions and Balances with Related Companies, Continued
(c) Payables arising from related parties transactions as of June
30, 2004 and December 31, 2003 are as follows:
Won (millions)
------------------------------------------------
2004
------------------------------------------------
Trade Other
Related party payables payables Total
--------------------------------------- -------------- -------------- --------------
Korea Hydro & Nuclear Power Co., Ltd. KRW 351,023 8,210 359,233
Korea South-East Power Co., Ltd. 91,968 122 92,090
Korea Midland Power Co., Ltd. 117,440 5,713 123,153
Korea Western Power Co., Ltd. 150,635 4,154 154,789
Korea Southern Power Co., Ltd. 171,479 3,797 175,276
Korea East-West Power Co., Ltd. 131,104 621 131,725
Korea Power Engineering Co., Inc. - 7,129 7,129
Korea Plant Service & Engineering
Co., Ltd. - 6,630 6,630
Korea Electric Power Data Network
Co., Ltd. - 31,158 31,158
Others - 17,410 17,410
-------------- -------------- --------------
KRW 1,013,649 84,944 1,098,593
============== ============== ==============
Won (millions)
------------------------------------------------
2003
------------------------------------------------
Trade Other
Related party payables payables Total
--------------------------------------- -------------- -------------- --------------
Korea Hydro & Nuclear Power Co., Ltd. KRW 379,121 1,954 381,075
Korea South-East Power Co., Ltd. 117,954 4,411 122,365
Korea Midland Power Co., Ltd. 145,548 9,387 154,935
Korea Western Power Co., Ltd. 167,876 140 168,016
Korea Southern Power Co., Ltd. 179,803 93 179,896
Korea East-West Power Co., Ltd. 142,776 223 142,999
Korea Power Engineering Co., Inc. - 5,909 5,909
Korea Plant Service & Engineering
Co., Ltd. - 5,509 5,509
Korea Electric Power Data Network
Co., Ltd. - 56,334 56,334
Others 4,363 19,619 23,982
-------------- -------------- --------------
KRW 1,137,441 103,579 1,241,020
============== ============== ==============
34
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STAEMENTS
(Unaudited)
(26) Transactions and Balances with Related Companies, Continued
(d) The guarantees the Company has provided for related companies as
of June 30, 2004 are as follows:
Won (millions),
Type Loan type Guaranteed company Financial institutions US$ (thousands)
---------------- ------------ -------------------- ---------------------- ---------------
Payment Foreign KEPCO International Nippon Life Insurance US$ 82,006
guarantee currency Hong Kong Ltd.
loan
" Norinchukin Bank 35,000
" Korea Development Bank 6,954
KEPCO International Korea Development Bank 36,348
Philippines Inc. ---------------
US$ 160,308
---------------
Joint liability Spin-off of six power generation Korea Development Bank
on guarantee(*) power subsidiaries and others KRW 1,584,466
generation
subsidiaries
(*) The Company has the joint and several responsibilities with
the subsidiaries to repay those debts, which were transferred
and outstanding at the time of spin-off on April 2, 2001, under
the Commercial Code of the Republic of Korea. The balance of the
power generation subsidiaries' debts for which the Company has
those joint and several responsibilities as of June 30, 2004 is
KRW 1,584,466 million.
KEPCO Ilijan Corporation, which is the subsidiary of KEPCO
International Philippines Inc., is engaged in the power
generation business in the Philippines and borrowed US$374,721
thousand as project financing from Japan Bank of International
Cooperation and others for that business. The Company has
provided Japan Bank of International Cooperation and others with
the guarantees to the extent not exceeding US$ 72,000 thousand
for performance of the power generation business of KEPCO Ilijan
Corporation as well as with the partial guarantees to the extent
not exceeding US$ 33,000 thousand for the repayment of that
borrowing.
35
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STAEMENTS
(Unaudited)
(26) Transactions and Balances with Related Companies, Continued
(e) The guarantees provided by related companies for the Company as
of June 30, 2004 are as follows:
Won (millions), USD, JPY, EUR and GBP (thousands)
-------------------------------------------------------
Balance of
borrowing as of
Guaranteed Type of June, 30
Type Related party Currency amounts borrowings 2004
------------------ ------------- -------- ----------- --------------- ---------------
Payment Korea USD 75,634 Commercial USD 75,000
guarantee (*1) Development borrowings
Bank
USD 2,155,966 Foreign USD 1,707,535
currency bond
JPY 115,605,003 " JPY 112,500,000
EUR 26,627 EUR 25,183
GBP 30,706 " GBP 24,467
Joint liability six power KRW 114,702 Long-term debts KRW 114,702
on guarantee (*2) generation KRW 240,000 Domestic KRW 240,000
subsidiaries debentures
(*1) Korea Development Bank has also provided the repayment
guarantee for some of foreign currency debentures of the
Company, which existed at the time of spin-off, but not redeemed
as of June 30, 2004, instead of the collective responsibilities
of the power generation subsidiaries to facilitate the
Restructuring Plan.
(*2) As described note 26(d), the balance of the Company's
borrowings for which six power generation subsidiaries have the
joint and several responsibilities is KRW354,702 million as of
June 30, 2004.
(27) Commitments and Contingencies
The Company is engaged in 224 lawsuits as a defendant and 31 lawsuits as
a plaintiff. The total amount claimed against the Company is KRW102,790
million and the total amount claimed by the Company is KRW12,490 million
as of June 30, 2004. The outcome of these lawsuits cannot presently be
determined. In the opinion of management, the ultimate results of these
lawsuits will not have a material adverse effect on the Company's
financial position, results of operation, or liquidity.
Two banks including the National Agricultural Cooperative Federation
have provided the Company a credit (overdraft) line amounting to
KRW110,000 million as of June 30, 2004.
The Company entered into a turnkey contract with the Korea Peninsula
Energy Development Organization (KEDO) on December 15, 1999, to
construct two 1,000,000 KW-class pressurized light-water reactor units
in North Korea. The contract amount is US$ 4,182 million and subject to
adjustment to cover any changes in the price level. The construction
projects have been temporarily suspended from December 1, 2003 due to
the political environments surrounding the Korean peninsula.
The Company entered into the Power Purchase Agreement with LG Energy
Co., Ltd. and other independent power producers for power purchases in
accordance with the Electricity Business Act and power purchased from
these companies amounted to KRW497,858 million for the six-month period
ended June 30, 2004.
36
Korea Electric Power Corporation
NOTES TO NON-CONSOLIDATED FINANCIAL STAEMENTS
(Unaudited)
(28) Employee Welfare and Contributions to Society
For employee welfare, the Company maintains a refectory, an infirmary,
athletic facilities, a scholarship fund, workmen's accident compensation
insurance, unemployment insurance and medical insurance.
The Company donated KRW70,454 million and KRW7,534 million to the fund
for the welfare of the Company's employees and others for the six-month
periods ended June 30, 2004 and 2003, respectively.
(29) Economic Environment
In common with other Asian countries, the economic environment in the
Republic of Korea continues to be volatile. In addition, the Korean
government and the private sector continue to implement structural
reforms to historical business practices including corporate governance.
The Company may be either directly or indirectly affected by these
economic conditions and the reform program described above. The
accompanying financial statements reflect management's assessment of the
impact to date of the economic environment on the financial position and
results of operations of the Company. Actual results may differ
materially from management's current assessment.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
KOREA ELECTRIC POWER CORPORATION
By: /s/ Kim, Myung Whan
----------------------------------
Name: Kim, Myung-Whan
Title: General Manager of International
Finance Dept.
Date : Sep. 1, 2004