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 November, 2003
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
AS OF SEPTEMBER 30, 2003 AND 2002
TOGETHER WITH INDEPENDENT ACCOUNTANTS'
REVIEW REPORT
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
English Translation of a Report Originally Issued in Korean
To the Shareholders and Board of Directors of
Korea Electric Power Corporation
We have reviewed the accompanying non-consolidated balance sheet of Korea
Electric Power Corporation (the "Company") as of September 30, 2003 and the
related non-consolidated statements of income and cash flows for the three-month
and nine-month periods ended September 30, 2003 and the non-consolidated
statements of income for the three-month and nine-month periods ended September
30, 2002, all expressed in Korean won. 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 were furnished with the report of other accountants on their review of the
financial statements of Korea Hydro & Nuclear Power Co., Ltd. and Korea
South-East Power Co., Ltd.. The investments on these companies constituted 22.9
percent of the total non-consolidated assets as of September 30, 2003 and gain
on valuation using the equity method constituted 29.0 percent of
non-consolidated income before income tax for the nine-month period then ended.
We conducted our review in accordance with standards established by 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 of interim
financial statements consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the Republic of Korea,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review and the reports of other accountants, we are not aware of
any material modifications that should be made to such financial statements
referred above, 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 in the Republic of Korea.
We have previously audited, in accordance with auditing standards generally
accepted in the Republic of Korea, the non-consolidated balance sheet of the
Company as of December 31, 2002, which is presented in this report, and the
related non-consolidated statements of income, appropriations of retained
earnings and cash flows for the year then ended (not presented herein); and in
our report dated February 7, 2003, we expressed an unqualified opinion on those
financial statements. In our opinion, the information set forth in the
accompanying balance sheet as of December 31, 2002 is fairly stated, in all
material respects, in relation to the non-consolidated balance sheet from which
it has been derived.
The translated amounts in the accompanying financial statements have been
translated into U.S. dollars, solely for the convenience of the reader, on the
basis set forth in Note 2.
As discussed in Note 17, sales and purchases to and from related parties,
including the six power generation subsidiaries, amounted to KRW263,574 million
and KRW11,013,997 million, respectively, for the nine-month period ended
September 30, 2003 and KRW255,132 million and KRW9,988,924 million,
respectively, for the nine-month period ended September 30, 2002. Related
receivables and payables amounted to KRW14,106 million and KRW966,465 million,
respectively, as of September 30, 2003 and KRW31,954 million and KRW1,172,012
million, respectively, as of December 31, 2002.
As discussed in Note 1, the Company has been considering the gradual
privatization of the Company's power generation subsidiaries and distribution
business, 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.
As discussed in Note 2, in 2003, the Company adopted Statements of Korean
Accounting Standards ("SKAS") No. 2, 3, 4, 5, 6, 7, 8 and 9, which are effective
from January 1, 2003. Those statements provide accounting and reporting
standards for the interim financial statements, intangible assets, revenue
recognition, tangible assets, events occurring after the balance sheet date,
capitalization of financing cost, investments in securities and convertible
securities. The prior year financial statements, which are presented for
comparative purposes, were restated to conform to the provisions of those
standards. As a result of the adoption of SKAS No. 6 - "Events Occurring After
the Balance Sheet Date", shareholders' equity increased and current liabilities
decreased by KRW511,350 million as of December 31, 2002.
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. The Company's financial statements
are prepared in accordance with the Korea Electric Power Corporation Act, the
Accounting Regulations for Government Invested Enterprises as well as generally
accepted accounting principles in 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
procedures, review standards and their application in practice as well as the
Korea Electric Power Corporation Act and the Accounting Regulations for
Government Invested Enterprises.
Anjin & Co.
(An Associate Member Firm of Deloitte Touche Tohmatsu)
Seoul, Korea
October 31, 2003
KOREA ELECTRIC POWER CORPORATION
NON-CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
(See Independent Accountants' Review Report)
Translation into
Korean Won U.S. Dollars (Note 2)
------------------------------- ------------------------------
2003 2002 2003 2002
------------- ------------- ----------- -----------
(In millions) (In thousands)
ASSETS
Property, Plant and Equipment (Notes 3 and 5):
Utility plant KRW35,861,865 KRW34,432,036 $31,178,808 $29,935,695
Less: accumulated depreciation (7,088,363) (5,939,624) (6,162,722) (5,163,992)
construction grants (2,595,336) (2,321,138) (2,256,421) (2,018,030)
------------- ------------- ----------- -----------
26,178,166 26,171,274 22,759,665 22,753,673
Construction in-progress 2,888,198 1,986,138 2,511,040 1,726,776
------------- ------------- ----------- -----------
29,066,364 28,157,412 25,270,705 24,480,449
------------- ------------- ----------- -----------
Investments and others:
Investment securities (Note 6) 23,570,646 22,239,278 20,492,650 19,335,140
Long-term loans (Note 7) 144,455 128,656 125,591 111,855
Long-term other account receivables 394,244 388,924 342,761 338,136
Currency and interest rate swaps (Note 13) 338,152 320,641 293,994 278,770
Intangibles (Note 4) 89,190 94,874 77,543 82,485
Other non-current assets (Note 12) 134,713 130,074 117,121 113,088
------------- ------------- ----------- -----------
24,671,400 23,302,447 21,449,660 20,259,474
------------- ------------- ----------- -----------
Current assets:
Cash and cash equivalents (Note 12) 779,954 610,056 678,102 530,391
Trade receivables, net of allowance for
doubtful accounts of KRW26,693 million in
2003 and KRW21,588 million in 2002
(Notes 12 and 17) 1,474,444 1,400,411 1,281,902 1,217,537
Other account receivables, net of allowance for
doubtful accounts of KRW 3,559 million in
2003 and KRW 3,007 million in 2002
(Notes 12 and 17) 215,686 228,101 187,520 198,314
Short-term financial instruments 79,000 79,000 68,684 68,684
Short-term loans (Note 7) 9,110 8,450 7,920 7,347
Inventories (Note 8) 69,867 65,217 60,743 56,701
Other current assets (Note 6) 122,264 94,519 106,300 82,175
------------- ------------- ----------- -----------
2,750,325 2,485,754 2,391,171 2,161,149
------------- ------------- ----------- -----------
Total Assets KRW56,488,089 KRW53,945,613 $49,111,536 $46,901,072
============= ============= =========== ===========
(continued)
KOREA ELECTRIC POWER CORPORATION
NON-CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
(See Independent Accountants' Review Report)
Translation into
Korean Won U.S. Dollars (Note 2)
------------------------------- ------------------------------
2003 2002 2003 2002
------------- ------------- ----------- -----------
(In millions) (In thousands)
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity (Notes 6 and 9):
Common stock KRW 3,200,504 KRW 3,200,504 $ 2,782,563 $ 2,782,563
Capital surplus 14,314,075 14,311,579 12,444,857 12,442,687
Retained earnings
Appropriated 17,899,940 15,351,474 15,562,459 13,346,787
Unappropriated (Net income of KRW2,289,056
million for the nine-month period ended
September 30, 2003 and KRW3,059,815
million for the year ended December 31, 2002) 2,289,056 3,059,815 1,990,138 2,660,246
Capital adjustments (175,352) 35,707 (152,453) 31,044
------------- ------------- ----------- -----------
Total Shareholders' Equity 37,528,223 35,959,079 32,627,564 31,263,327
------------- ------------- ----------- -----------
Long-term liabilities:
Long-term debt (Note 10) 8,570,417 9,973,313 7,451,241 8,670,938
Accrued severance indemnities, net 281,697 226,609 244,911 197,017
Reserve for self insurance 81,882 82,537 71,189 71,759
Currency and interest rate swaps (Note 13) 355,749 468,900 309,293 407,668
Financial lease liabilities (Note 11) 934 4,993 812 4,341
Deferred income tax liabilities (Note 16) 1,635,660 1,354,128 1,422,066 1,177,298
Other long-term liabilities 322,533 325,533 280,414 283,023
------------- ------------- ----------- -----------
11,248,872 12,436,013 9,779,926 10,812,044
------------- ------------- ----------- -----------
Current liabilities:
Trade payables (Note 17) 1,055,362 1,238,749 917,547 1,076,986
Other accounts payable (Note 17) 412,342 552,350 358,496 480,221
Current portion of long-term debt (Note 10) 4,856,599 2,454,722 4,222,395 2,134,170
Current portion of financial lease liabilities (Note 11) 5,610 8,538 4,877 7,423
Income tax payable 614,091 682,777 533,899 593,616
Accrued expenses 185,024 166,144 160,862 144,448
Dividends payable 1,743 2,153 1,515 1,872
Other current liabilities 580,223 445,088 504,455 386,965
------------- ------------- ----------- -----------
7,710,994 5,550,521 6,704,046 4,825,701
------------- ------------- ----------- -----------
Total Liabilities 18,959,866 17,986,534 16,483,972 15,637,745
------------- ------------- ----------- -----------
Total Shareholders' Equity and Liabilities KRW56,488,089 KRW53,945,613 $49,111,536 $46,901,072
============= ============= =========== ===========
See accompanying notes to non-consolidated financial statements.
KOREA ELECTRIC POWER CORPORATION
NON-CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(See Independent Accountants' Review Report)
Korean Won
-------------------------------------------------------------------
2003 2002
------------------------------- -------------------------------
Three-month Nine-month Three-month Nine-month
------------ ------------- ------------ -------------
(In millions, except per share amounts)
OPERATING REVENUES (Note 17):
Sale of electricity KRW6,033,825 KRW16,585,895 KRW5,798,142 KRW15,472,247
Other operating revenues 83,979 240,014 83,991 241,031
------------ ------------- ------------ -------------
6,117,804 16,825,909 5,882,133 15,713,278
------------ ------------- ------------ -------------
OPERATING EXPENSES (Notes 14, 15, 17 and 19):
Power generation, transmission, distribution 895,111 2,484,204 856,003 2,295,850
Purchased power 3,756,697 11,684,532 3,625,871 10,602,076
Other operating costs 83,287 238,692 83,072 237,479
Selling and administrative expenses 251,705 689,393 264,092 669,575
------------ ------------- ------------ -------------
4,986,800 15,096,821 4,829,038 13,804,980
------------ ------------- ------------ -------------
OPERATING INCOME 1,131,004 1,729,088 1,053,095 1,908,298
OTHER INCOME (EXPENSES):
Interest income 9,934 29,529 5,159 17,073
Interest expense (170,934) (475,110) (152,079) (455,716)
Gain (loss) on foreign currency transactions
and translation, net 125,159 176,027 (114,563) 338,469
Donations (67,658) (75,192) (56,630) (65,889)
Rent 29,139 84,983 22,965 79,071
Gain on valuation using the equity method of
accounting (Note 6) 606,488 1,857,795 517,021 1,755,873
Gain on disposal of investments, net (Note 6) - 45,214 - -
Gain (loss) on disposal of utility plant, net 483 (4,990) (397) (5,090)
Valuation gain (loss) on currency and interest
rate swaps, net (Note 13) (26,809) (21,679) 3,857 54,192
Other, net (Note 18) (138,204) (92,518) 17,786 65,442
------------ ------------- ------------ -------------
367,598 1,524,059 243,119 1,783,425
------------ ------------- ------------ -------------
ORDINARY INCOME 1,498,602 3,253,147 1,296,214 3,691,723
INCOME TAX EXPENSE (Note 16) 492,772 964,091 386,070 1,091,170
------------ ------------- ------------ -------------
NET INCOME KRW1,005,830 KRW 2,289,056 KRW 910,144 KRW 2,600,553
============ ============= ============ =============
ORDINARY INCOME PER SHARE (Note 2) KRW 1,598 KRW 3,630 KRW 1,424 KRW 4,070
============ ============= ============ =============
EARNINGS PER SHARE (Note 2) KRW 1,598 KRW 3,630 KRW 1,424 KRW 4,070
============ ============= ============ =============
(continued)
KOREA ELECTRIC POWER CORPORATION
NON-CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(See Independent Accountants' Review Report)
Translation into U.S. Dollars (Note 2)
--------------------------------------------------------------------
2003 2002
------------------------------ ------------------------------
Three-month Nine-month Three-month Nine-month
----------- ----------- ----------- -----------
(In thousands, except per share amounts)
OPERATING REVENUES (Note 17):
Sale of electricity $5,245,892 $14,420,010 $5,040,986 $13,451,788
Other operating revenues 73,013 208,672 73,023 209,556
---------- ----------- ---------- -----------
5,318,905 14,628,682 5,114,009 13,661,344
---------- ----------- ---------- -----------
OPERATING EXPENSES (Notes 14, 15, 17 and 19):
Power generation, transmission, distribution 778,222 2,159,802 744,221 1,996,044
Purchased power 3,266,125 10,158,696 3,152,383 9,217,593
Other operating costs 72,411 207,522 72,224 206,468
Selling and administrative expenses 218,836 599,368 229,605 582,138
---------- ----------- ---------- -----------
4,335,594 13,125,388 4,198,433 12,002,243
---------- ----------- ---------- -----------
OPERATING INCOME 983,311 1,503,294 915,576 1,659,101
OTHER INCOME (EXPENSES):
Interest income 8,637 25,673 4,485 14,844
Interest expense (148,612) (413,067) (132,220) (396,206)
Gain (loss) on foreign currency transactions
and translation, net 108,815 153,040 (99,603) 294,270
Donations (58,823) (65,373) (49,235) (57,285)
Rent 25,334 73,885 19,966 68,745
Gain on valuation using the equity method of
accounting (Note 6) 527,289 1,615,194 449,505 1,526,581
Gain on disposal of investments, net (Note 6) - 39,310 - -
Gain (loss) on disposal of utility plant, net 420 (4,338) (345) (4,425)
Valuation gain (loss) on currency and interest
rate swaps, net (Note 13) (23,308) (18,848) 3,353 47,115
Other, net (120,156) (80,437) 15,463 56,896
---------- ----------- ---------- -----------
319,596 1,325,039 211,369 1,550,535
---------- ----------- ---------- -----------
ORDINARY INCOME 1,302,907 2,828,333 1,126,945 3,209,636
INCOME TAX EXPENSE (Note 16) 428,423 838,195 335,655 948,678
---------- ----------- ---------- -----------
NET INCOME $ 874,484 $ 1,990,138 $ 791,290 $ 2,260,958
========== =========== ========== ===========
ORDINARY INCOME PER SHARE (Note 2) $ 1.39 $ 3.16 $ 1.24 $ 3.54
========== =========== ========== ===========
EARNINGS PER SHARE (Note 2) $ 1.39 $ 3.16 $ 1.24 $ 3.54
========== =========== ========== ===========
See accompanying notes to non-consolidated financial statements.
KOREA ELECTRIC POWER CORPORATION
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2003
(See Independent Accountants' Review Report)
Translation into
Korean Won U.S. Dollars (Note 2)
---------------------------- ----------------------------
Three-month Nine-month Three-month Nine-month
------------ ------------ ----------- ----------
(In millions) (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income KRW1,005,830 KRW2,289,056 $ 874,484 $1,990,138
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 395,802 1,156,390 344,116 1,005,382
Utility plant removal cost 53,966 144,857 46,919 125,941
Provision for severance and retirement benefits 27,958 58,366 24,307 50,744
Allowance for doubtful accounts 4,243 9,964 3,689 8,663
Interest income, net (3,126) (9,417) (2,718) (8,187)
Gain on foreign currency translation, net (125,527) (181,319) (109,135) (157,641)
Gain on valuation using the equity method of
accounting (606,488) (1,857,796) (527,289) (1,615,194)
Gain on disposal of investment, net - (45,214) - (39,310)
Loss (gain) on disposal of utility plant, net (483) 4,990 (420) 4,338
Valuation gain on currency and interest rate swaps 26,809 21,679 23,308 18,848
Decrease in trade receivables (165,409) (84,099) (143,809) (73,117)
Decrease (increase) in other account receivables (6,031) 11,356 (5,243) 9,873
Decrease in inventories 20,197 45,706 17,560 39,737
Increase in other current assets (29,317) (78,947) (25,489) (68,638)
Decrease in trade payables (25,819) (183,387) (22,447) (159,439)
Decrease in other accounts payable (112,462) (140,008) (97,776) (121,725)
Increase (decrease) in income tax payable 304,924 (68,685) 265,105 (59,716)
Increase in accrued expenses 15,886 18,880 13,812 16,415
Increase in other current liabilities 74,419 135,137 64,701 117,490
Increase in deferred income tax liabilities 133,262 281,532 115,860 244,768
Decrease in other long-term liabilities (976) (3,001) (849) (2,609)
Payment of severance and retirement benefits (1,289) (5,662) (1,121) (4,923)
Payment of self-insurance (129) (655) (112) (569)
Others (5,433) 822 (4,725) 714
------------ ------------ --------- ----------
Net cash provided by operating activities 980,807 1,520,545 852,728 1,321,983
------------ ------------ --------- ----------
(continued)
KOREA ELECTRIC POWER CORPORATION
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2003
(See Independent Accountants' Review Report)
Translation into
Korean Won U.S. Dollars (Note 2)
----------------------------- -----------------------------
Three-month Nine-month Three-month Nine-month
----------- ------------- ----------- -----------
(In millions) (In thousands)
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposal of utility plant KRW 1,859 KRW 30,360 $ 1,616 $ 26,395
Additions to utility plant (654,164) (2,629,864) (568,739) (2,286,441)
Receipt of construction grants 118,424 397,884 102,959 345,926
Proceeds from disposal of investment securities 12,981 555,941 11,286 483,343
Acquisition of investment securities - (12,750) - (11,085)
Collection of long-term loans 1,344 3,733 1,168 3,246
Increase of long-term loans (11,782) (26,526) (10,243) (23,062)
Acquisition of intangibles (123) (3,809) (107) (3,312)
Collection of short-term loans 2,119 6,334 1,842 5,507
Decrease in other non-current assets 380 6,093 330 5,296
----------- ------------- --------- -----------
Net cash used in investing activities (528,962) (1,672,604) (459,888) (1,454,187)
----------- ------------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 215,797 1,789,200 187,617 1,555,556
Payment of long-term debt (167,070) (611,388) (145,253) (531,549)
Acquisition of treasury stock - (180,120) - (156,599)
Cash dividends (8) (511,760) (7) (444,931)
Other, net (78,846) (163,975) (68,550) (142,562)
----------- ------------- --------- -----------
Net cash provided by (used in) financing
activities (30,127) 321,957 (26,193) 279,915
----------- ------------- --------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 421,718 169,898 366,647 147,711
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 358,236 610,056 311,455 530,391
----------- ------------- --------- -----------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD KRW 779,954 KRW 779,954 $ 678,102 $ 678,102
=========== ============= ========= ===========
See accompanying notes to non-consolidated financial statements.
KOREA ELECTRIC POWER CORPORATION.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002
(See Independent Accountants' Review Report)
1. THE COMPANY:
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. The Company was given a government
investment status 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 September 30, 2003, the Government of the Republic of Korea, Korea
Development Bank and foreign investors hold 32.35 percent, 21.57 percent and
28.46 percent, 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 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.
In response to general unstable economic conditions, the Korean government and
the private sector have been implementing structural reforms to historical
business practices. Implementation of these reforms is progressing slowly,
particularly in the areas of restructuring private enterprises and reforming the
banking industry. The Korean government continues to apply pressure to Korean
companies to restructure into more efficient and profitable firms. The Company
may be either directly or indirectly affected by these general unstable economic
conditions and the reform program described above. The accompanying financial
statements reflect management's current assessment of the impact to date of the
economic situation on the financial position of the Company. Actual results may
differ materially from management's current assessment
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Financial Statement Presentation
The Company maintains its official accounting records in Korean won and prepares
statutory non-consolidated financial statements in the Korean language (Hangul)
in conformity with 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, the accompanying financial statements are intended for
use by for those who are informed about Korean accounting principles and
practices, Korea Electric Power Corporation 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. Certain information
included in the Korean language financial statements, but not required for a
fair presentation of the Company's financial position and results of operations,
is not presented in the accompanying financial statements.
In 2003, the Company adopted Statements of Korean Accounting Standards ("SKAS")
No 2, 3, 4, 5, 6, 7, 8 and 9, which are effective from January 1, 2003. Those
statements provide accounting and reporting standards for the interim financial
statements, intangible assets, revenue recognition, tangible assets, events
occurring after the balance sheet date, capitalization of financing cost,
investment in securities and convertible securities. The prior year financial
statements, which are presented for comparative purposes, were restated to
conform to the provisions of those standards. As a result of the adoption of
SKAS No. 6 - "Events Occurring After the Balance Sheet Date", shareholders'
equity increased and current liabilities decreased by KRW511,350 million as of
December 31, 2002.
The U.S. dollar amounts presented in these financial statements were computed by
translating the Korean won into U.S. dollars based on the Bank of Korea Basic
Rate of KRW1,150.20 to US $1.00 at September 30, 2003, solely for the
convenience of the reader. This convenience translation into U.S. dollars should
not be construed as representations that the Korean won amounts have been, could
have been, or could in the future be, converted at this or any other rate of
exchange.
The significant accounting policies followed by the Company in the preparation
of its non-consolidated financial statements are summarized below.
Property, Plant and Equipment
Property, plant and equipment are stated at cost except for assets revalued
upward in accordance with the KEPCO Act and the Assets Revaluation Law of Korea.
Expenditures incurred after the acquisition of the property, plant and equipment
that increases the future economic benefits beyond the property's most recently
measured performance are capitalized as additions to property, plant and
equipment.
The Company capitalizes interest and other borrowing costs on debt issued to
finance capital expenditures as part of the acquisition cost of major facilities
and equipment. For the nine-month periods ended September 30, 2003 and 2002, the
amounts of capitalized interest was KRW55,556 million and KRW52,790 million,
respectively, and net foreign currency transactions and translation gains
deducted from the capitalized interest amounted to KRW38,747 million for the
nine-month period ended September 30, 2002.
The impact on the Company's financial position as of and for the nine-month
period ended September 30, 2003, if the interest and other borrowing costs were
expensed instead of being capitalized, are shown below (won in millions).
Construction Income before
in-progress Total assets Interest expense Income tax expense
------------ ------------- ---------------- ------------------
Capitalized KRW2,888,198 KRW56,488,089 KRW475,110 KRW3,253,147
Expensed 2,832,642 56,432,533 530,666 3,197,591
------------ ------------- ---------- ------------
KRW 55,556 KRW 55,556 KRW(55,556) KRW 55,556
============ ============= ========== ============
Depreciation is computed using the declining-balance method (straight-line
method for buildings and structures) 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:
Years
------
Buildings 15, 30
Structures 15, 30
Machinery 16
Ships 9
Vehicles 4
Others 4
-2-
The Company assesses any possible recognition of impairment loss when there is
an indication that expected future economic benefits of a tangible asset is
considerably less than its carrying amount as a result of technological
obsolescence or rapid decline in market value. When it is determined that a
tangible asset may have been impaired and that its estimated total future cash
flows from continued use or disposal is less than its carrying amount, the
carrying amount of a tangible asset is reduced to its recoverable amount and the
difference is recognized as an impairment loss. If the recoverable amount of the
impaired asset exceeds its carrying amount in subsequent reporting period, the
amount equal to the excess is treated as reversal of the impairment loss;
however, it cannot exceed the carrying amount that would have been determined
had no impairment loss were recognized.
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 KRW397,884 million of construction
grants, and offset KRW93,170 million against depreciation expense and KRW30,516
million against utility plant removal cost for the nine-month period ended
September 30, 2003.
Accounting for Leases
Lease agreements that include a bargain purchase option, result in the transfer
of ownership by the end of the lease term, have a term equal to at least 75
percent of the estimated economic life of the leased property or where the
present value of the minimum lease payments at the beginning of the lease term
equals or exceeds 90 percent of the fair value of the leased property are
accounted for as financial or capital leases. All other leases are accounted for
as operating leases. Assets and liabilities related to financial leases are
recorded as property and equipment and long-term debt, respectively, and the
related interest is calculated using the effective interest rate method. In
respect to operating leases, the future minimum lease payments are expensed
ratably over the lease term while contingent rentals are expensed as incurred.
Investment Securities other than those Accounted for Using the Equity Method
Classification of Securities
At acquisition, the Company classifies securities into one of the three
categories: trading, held-to-maturity or available-for-sale. Trading securities
are those that were acquired principally to generate profits from short-term
fluctuations in prices. Held-to-maturity securities are those with fixed and
determinable payments and fixed maturity that an enterprise has the positive
intent and ability to hold to maturity. Available-for-sale securities are those
not classified either as held-to-maturity or trading securities.
Valuation of Securities
Securities are recognized initially at cost determined using the weighted
average method. The cost includes the market value of the consideration given
and incidental expenses. If the market price of the consideration given is not
available, the market prices of the securities purchased are used as the basis
for measurement. If neither the market prices of the consideration given nor
those of the acquired securities are available, the acquisition cost is measured
at the best estimates of its fair value.
-3-
After initial recognition, held-to-maturity securities are valued at amortized
cost. The difference between face value and acquisition cost is amortized over
the remaining term of the security using the effective interest method. Trading
securities are valued at fair value, with unrealized gains and losses reflected
in current operations. Available-for-sale securities are also valued at fair
value, with unrealized gains and losses reflected in capital adjustments, until
the securities are sold or if the securities are determined to be impaired and
the lump-sum cumulative amount of capital adjustments are reflected in current
operations. However, available-for-sale equity securities that are not traded in
an active market and whose fair values cannot be reliably estimated are
accounted for at their acquisition cost. For those securities that are traded in
an active market, fair values refers to those quoted market prices, which are
measured as the closing price at the balance sheet date. The fair value of
non-marketable debt securities are measured at the discounted future cash flows
by using the discount rate that appropriately reflects the credit rating of
issuing entity assessed by a publicly reliable independent credit rating agency.
If application of such measurement method is not feasible, estimates of the fair
values may be made using a reasonable valuation model or quoted market prices of
similar debt securities issued by entities conducting similar business in
similar industries.
Securities are evaluated at each balance sheet date to determine whether there
is any objective evidence of impairment loss. When any such evidence exists,
unless there is a clear counter-evidence that recognition of impairment is
unnecessary, the Company estimates the recoverable amount of the impaired
security and recognizes any impairment loss in current operations. The amount of
impairment loss of the held-to-maturity security or non-marketable equity
security is measured as the difference between the recoverable amount and the
carrying amount. The recoverable amount of held-to maturity security is the
present value of expected future cash flows discounted at the securities'
original effective interest rate. For available-for-sale debt or equity security
stated at fair value, the amount of impairment loss to be recognized in the
current period is determined by subtracting the amount of impairment loss of
debt or equity security already recognized in prior period from the amount of
amortized cost in excess of the recoverable amount for debt security or the
amount of the acquisition cost in excess of the fair value for equity security.
For non-marketable equity security accounted for at acquisition cost, the
impairment loss is equal to the difference between the recoverable amount and
the carrying amount.
If the realizable value subsequently recovers, in case of a security stated at
fair value, the increase in value is recorded in current operation, up to the
amount of the previously recognized impairment loss, while for the security
stated at amortized cost or acquisition cost, the increase in value is recorded
in current operation, so that its recovered value does not exceed what its
amortized cost would be as of the recovery date if there had been no impairment
loss.
If the intent and ability to hold the securities change, transferred securities
are accounted for at fair value. In case held-to-maturity securities are
reclassified into available-for-sale securities, unrealized gain or loss between
the book value and fair value is reported in shareholders' equity as a capital
adjustment. In case the available for sale securities are reclassified into
held-to maturity securities, the unrealized gain or loss at the date of the
transfer continues to be reported in shareholder's equity as a capital
adjustment, but it is amortized over the remaining term of the security using
the effective interest method.
Investment Securities Using the Equity Method
Investments in equity securities of companies in which the Company is able to
exercise significant influence over the operating and financial policies of the
investees are accounted for using the equity method. The change in the Company's
share of an investee's net equity resulting from a change in an investee's net
equity is reflected in current operations, retained earnings, and capital
adjustment in accordance with the causes of the change which consist of the
investee's net income (loss), changes in retained earnings and changes in
capital surplus and capital adjustments.
Intangibles
Intangible assets are stated at cost, net of accumulated amortization computed
using the straight-line method over the estimated useful lives, from 4 years to
20 years, of related assets.
-4-
If the recoverable amount of an intangible asset becomes less than its carrying
amount as a result of obsolescence, sharp decline in market value or other
causes of impairment, the carrying amount of an intangible asset is reduced to
its recoverable amount and the reduced amount is recognized as impairment loss.
If the recoverable amount of a previously impaired intangible asset exceeds its
carrying amount in subsequent periods, an amount equal to the excess shall be
recorded as reversal of impairment loss; however, it cannot exceed the carrying
amount that would have been determined had no impairment loss were recognized in
prior years.
Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts based on management's
estimated loss on uncollectible accounts and prior year collection experience.
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 count at the end of year.
Discount on Debentures
Discounts on debentures issued are amortized over the redemption period of
debentures using the effective interest rate method. Amortization of discounts
is recognized as interest expense.
Accrued Severance Indemnities
Employees and directors with more than one year of service are entitled to
receive a lump-sum payment upon termination of their service with the Company,
based on their length of service and rate of pay at the time of termination. The
accrued severance indemnities that would be payable assuming all eligible
employees were to resign are KRW281,792 million and KRW226,708 million as of
September 30, 2003 and December 31, 2002, respectively. Actual severance
payments were KRW5,662 million and KRW4,522 million for the nine-month periods
ended September 30, 2003 and 2002, respectively.
Before April 1999, the Company and its employees paid 3 percent and 6 percent,
respectively, of monthly pay (as defined) to the National Pension Fund in
accordance with the National Pension Law of Korea. The Company paid half of the
employees' 6 percent portion and is paid back at the termination of service by
offsetting the receivable against the severance payments. Such receivables, with
a balance of KRW95 million and KRW99 million as of September 30, 2003 and
December 31, 2002, respectively, are presented as a deduction from accrued
severance indemnities. Starting April 1999, the Company and its employees each
pay 4.5 percent of monthly pay to the Fund under the revised National Pension
Law of Korea.
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.
Foreign Currency Transactions and Translation
The Company maintains its accounts in Korean won. Transactions in foreign
currencies are recorded in Korean won based on the prevailing rates of exchange
on the transaction date. Monetary assets and liabilities with balances
denominated in foreign currencies are recorded and reported in the accompanying
financial statements at the exchange rates prevailing at the balance sheet date.
The balances have been translated using the Bank of Korea Basic Rate, which was
KRW1,150.20 and KRW1,200.40 to US$ 1.00 at September 30, 2003 and December 31,
2002, respectively. The translation gains or losses are reflected in current
operations.
-5-
Accounting for Derivative Instruments
All derivative instruments are accounted for at fair value with the valuation
gain or loss recorded as an asset or liability. If the derivative instrument is
not part of a transaction qualifying as a hedge, the adjustment to fair value is
reflected in current operations. The accounting for derivative transactions that
are part of a qualified hedge based both on the purpose of the transaction and
on meeting the specified criteria for hedge accounting differs depending on
whether the transaction is a fair value hedge or a cash flow hedge. Fair value
hedge accounting is applied to a derivative instrument designated as hedging the
exposure to changes in the fair value of an asset or a liability or a firm
commitment (hedged item) that is attributable to a particular risk. The gain or
loss both on the hedging derivative instruments and on the hedged item
attributable to the hedged risk is reflected in current operations. Cash flow
hedge accounting is applied to a derivative instrument designated as hedging the
exposure to variability in expected future cash flows of an asset or a liability
or a forecasted transaction that is attributable to a particular risk. The
effective portion of gain or loss on a derivative instrument designated as a
cash flow hedge is recorded as a capital adjustment and the ineffective portion
is recorded in current operations. The effective portion of gain or loss
recorded as a capital adjustment is reclassified to current earnings in the same
period during which the hedged forecasted transaction affects earnings. If the
hedged transaction results in the acquisition of an asset or the incurrence of a
liability, the gain or loss in capital adjustment is added to or deducted from
the asset or the liability.
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 Peoples Republic of Korea (North
Korea), based on the percentage-of-completion method.
Income Tax Expense
The Company recognizes deferred income taxes arising from temporary differences
between pretax accounting income and taxable income. Accordingly, the provision
for income tax expense consists of the corporate income tax and resident tax
surcharges currently payable, and the changes in deferred income tax assets and
liabilities during the period. However, deferred income tax assets are
recognized only if the future tax benefits on accumulated temporary differences
are realizable. The deferred income tax assets and liabilities will be charged
or credited to income tax expense in the period each temporary difference
reverses in the future. Deferred income taxes will be recalculated based on the
actual tax rate in effect at each balance sheet date.
Ordinary Income Per Share and Earnings Per Share
Ordinary income per share and earnings per share are computed by dividing
ordinary income (after deduction for tax effect) and net income by the weighted
average number of common shares outstanding during the period. The number of
shares used in computing earnings and ordinary income per share is 629,305,456
shares and 639,055,699 shares for the three-month periods ended September 30,
2003 and 2002, respectively, and 630,659,327 shares and 639,011,053 shares for
the nine-month periods ended September 30, 2003 and 2002, respectively.
Comparative Presentation
The Company does not present cash flows for the three-month and nine-month
periods ended September 30, 2002 for comparative purposes in accordance with
transitional provision of SKAS No. 2 - "Interim Financial Statements".
-6-
3. PROPERTY, PLANT AND EQUIPMENT:
(1) Asset revaluation
The Company has 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). The gain from the asset revaluation was
KRW12,552,973 million.
(2) Publicly announced land prices
The published price of the Company's land as of September 30, 2003, as
announced by the Korean Government, is as follows (won in millions):
Area
Purpose (Square meters) Book value Land prices
--------------------------------------------- --------------- ------------ ------------
Transmission and distribution sites and other 16,867,795 KRW3,315,403 KRW3,274,495
(3) Utility plant
Utility plant as of September 30, 2003 and December 31, 2002 is as follows
(won in millions):
September 30, December 31,
2003 2002
------------- -------------
Land KRW 3,315,403 KRW 3,321,378
Buildings 2,204,589 2,135,878
Structures 23,429,658 22,415,717
Machinery 6,607,129 6,266,774
Vehicles 52,955 55,334
Ships 252 266
Others 251,879 236,689
------------- -------------
KRW35,861,865 KRW34,432,036
============= =============
(4) Changes in utility plant
Changes in cost of utility plant, accumulated depreciation and construction
grants for the nine-month period ended September 30, 2003 are shown below
(won in millions):
< Cost >
Increase Decrease
----------------------- -------------------------
December 31, Disposal/ September 30,
2002 Acquisition Other Reclassification Other 2003
------------- ------------ -------- ---------------- ------ -------------
Land KRW 3,321,378 KRW 25,870 KRW - KRW 31,845 KRW- KRW 3,315,403
Buildings 2,135,878 75,776 - 7,065 - 2,204,589
Structures 22,415,717 1,222,811 - 208,870 - 23,429,658
Machinery 6,266,774 397,176 - 56,821 - 6,607,129
Vehicles 55,334 1,713 - 4,092 - 52,955
Ships 266 - - 14 - 252
Others 236,689 18,005 - 2,815 - 251,879
Construction
in- progress 1,986,138 2,629,864 2,628 1,730,432 - 2,888,198
------------- ------------ -------- ------------ ---- -------------
KRW36,418,174 KRW4,371,215 KRW2,628 KRW2,041,954 KRW- KRW38,750,063
============= ============ ======== ============ ==== =============
< Accumulated depreciation >
Increase Decrease
December 31, ----------------------- ------------------ September 30,
2002 Depreciation Other Disposal Other 2003
------------ ------------ --------- --------- ----- -------------
Buildings KRW 344,790 KRW 80,948 KRW 8,770 KRW 1,602 KRW- KRW 432,906
Structures 2,984,483 536,457 20,302 27,340 - 3,513,902
Machinery 2,371,808 493,184 54,290 32,732 - 2,886,550
Vehicles 45,307 4,545 11 4,084 - 45,779
Ships 196 14 - 10 - 200
Others 193,040 18,441 279 2,734 - 209,026
------------ ------------ --------- --------- ---- ------------
KRW5,939,624 KRW1,133,589 KRW83,652 KRW68,502 KRW- KRW7,088,363
============ ============ ========= ========= ==== ============
-7-
< Construction grants >
Increase Decrease
-------------------- ------------------------------
Received Offset
December 31, from against Offset against September 30,
2002 customers Other depreciation removal cost 2003
------------ ---------- ----- ------------ -------------- -------------
Construction
grants KRW2,321,138 KRW397,884 KRW- KRW93,170 KRW30,516 KRW2,595,336
4. INTANGIBLES:
(1) Intangibles as of September 30, 2003 are shown below (won in millions):
Accumulated
Cost amortization Impairment Book value
---------- ------------ ---------- ----------
Development cost KRW 99,956 KRW 44,212 KRW- KRW55,744
Others 119,739 86,293 - 33,446
---------- ---------- ---- ---------
KRW219,695 KRW130,505 KRW- KRW89,190
========== ========== ==== =========
(2) Changes in intangibles for the nine-month period ended September 30, 2003
are shown below (won in millions):
Increase Decrease
December 31, -------------------- --------------------- September 30,
2002 Merger Other Amortization Other 2003
------------ ------ --------- ------------ ----- -------------
Development cost KRW63,659 KRW- KRW 6,688 KRW14,603 KRW - KRW55,744
Others 31,215 - 10,443 8,198 14 33,446
--------- ---- --------- --------- ----- ---------
KRW94,874 KRW- KRW17,131 KRW22,801 KRW14 KRW89,190
========= ==== ========= ========= ===== =========
(3) Ordinary development expenses for the three-month and nine-month periods
ended September 30, 2003 and 2002 are as follows (won in millions):
2003 2002
--------------------------- ---------------------------
Three-month Nine-month Three-month Nine-month
----------- ---------- ----------- ----------
Ordinary development expenses KRW36,469 KRW76,317 KRW31,931 KRW71,778
5. INSURED ASSETS:
Insured assets as of September 30, 2003 are as follows (won in millions):
Insured assets Insurance type Insured value Insurer
----------------------- ---------------------- ------------- ----------------------------------------------------
Buildings and machinery Fire insurance KRW386,458 Samsung Fire Insurance Co., Ltd. and others
Buildings and machinery Assemble insurance 365,312 LG Insurance Co., Ltd.
Buildings General insurance 149,354 Samsung Fire Insurance Co., Ltd. and others
Construction in progress Construction insurance 97,537 Hyundai Marine & Fire Insurance Co., Ltd. and others
In addition, the Company carries damage insurance for its light water nuclear
reactor construction in North Korea, general insurance for vehicles, loading
insurance for inventories, general insurance for movables, casualty insurance
for its employees and compensation liability insurance for its directors.
-8-
6. INVESTMENT SECURITIES:
(1) Investment securities as of September 30, 2003 and December 31, 2002 are as
follows (won in millions):
September 30, December 31,
2003 2002
------------- -------------
Other current assets
Held-to-maturity securities KRW 5 KRW -
------------- -------------
Investment securities
Available-for-sale-securities 88,901 86,492
Held-to-maturity securities 37 55
Securities subject to equity method 23,481,708 22,152,731
------------- -------------
23,570,646 22,239,278
------------- -------------
KRW23,570,651 KRW22,239,278
============= =============
Held-to-maturity securities are government and municipal bonds.
(2) Available-for-sale securities as of September 30, 2003 and December 31,
2002 are as follows (won in millions):
September 30, 2003 December 31, 2002
-------------------------------------- ----------------------
Ownership Acquisition Ownership
Company name (%) cost Book value (%) Book value
-------------------------------------------- --------- ----------- ---------- --------- ----------
Securities Market Stabilization Fund 7.64 KRW 7,763 KRW 7,763 7.57 KRW20,744
Energy Savings Investment Cooperative 40.6 5,000 5,000 40.6 5,000
Korea Power Exchange 50.0 62,606 62,606 50.0 49,855
Hwan Young Steel Co., Ltd. - 1,364 121 - 120
Investment securities in treasury stock fund - 22,244 13,411 - 10,773
--------- --------- ---------
KRW98,977 KRW88,901 KRW86,492
========= ========= =========
The Company entered into a treasury stock fund, composed of treasury stock
and other investment securities and recorded other investment securities in
available-for-sale securities. Losses on valuation of available for sale
securities in the treasury stock fund, which are recorded in capital
adjustment, amount to KRW8,833 million and KRW8,509 million as of September
30, 2003 and December 31, 2003, respectively.
Available-for-sales securities other than investment securities in treasury
stock fund are non-marketable equity securities and stated at cost due to
the lack of information to determine the fair value.
(3) Securities subject to the equity method as of September 30, 2003 and
December 31, 2002 are as follows (won in millions):
September 30, 2003 December 31, 2002
-------------------------------------------------------- -------------------------
Ownership Acquisition Net Asset Book Ownership
Company name (%) Cost Value Value (%) Book Value
------------------------------------- --------- ------------ ------------- ------------- --------- -------------
Korea Hydro & Nuclear Power Co., Ltd. 100.0 KRW9,364,799 KRW11,034,301 KRW11,034,301 100.0 KRW10,577,527
Korea South-East Power Co., Ltd. 100.0 1,232,004 1,918,093 1,918,093 100.0 1,679,117
Korea Midland Power Co., Ltd. 100.0 1,325,891 2,003,723 2,003,723 100.0 1,781,127
Korea Western Power Co., Ltd. 100.0 1,442,638 1,937,904 1,937,904 100.0 1,772,973
Korea Southern Power Co., Ltd. 100.0 1,797,378 2,060,232 2,060,232 100.0 1,953,743
Korea East-West Power Co., Ltd. 100.0 2,322,905 2,432,700 2,432,700 100.0 2,373,207
Korea Power Engineering Co., Ltd.(*) 97.9 4,991 185,300 61,723 97.9 51,991
Korea Plant Service & Engineering
Co., Ltd.(*) 100.0 6,000 264,632 264,632 100.0 238,947
-9-
September 30, 2003 December 31, 2002
-------------------------------------------------------- ---------------------------
Ownership Acquisition Net asset Book Ownership
Company name (%) Cost Value Value (%) Book Value
--------------------------------- --------- ----------- ------------- ------------- --------- --------------
KEPCO Nuclear Fuel Co., Ltd.(*) 96.4 89,757 155,455 141,094 96.4 KRW 134,538
Korea Electric Power Data Network
Co., Ltd.(*) 100.0 64,000 126,896 124,855 100.0 118,075
Korea Electric Power Industrial
Development, Ltd.(*) 49.0 7,987 20,974 20,974 100.0 40,730
Korea Gas Corporation 24.5 94,500 703,179 703,179 24.5 690,705
Korea District Heating Co.(*) 26.1 5,660 151,758 151,758 26.1 147,898
Powercomm Corporation 43.1 323,470 366,815 366,815 44.0 359,090
KEPCO International Hong Kong
Ltd. (*) 100.0 15,102 147,273 147,273 100.0 124,808
KEPCO International Philippines
Inc. (*) 100.0 103,610 112,452 112,452 100.0 108,255
------------- ------------- ------------- -------------
KRW18,200,692 KRW23,621,687 KRW23,481,708 KRW22,152,731
============= ============= ============= =============
(*) The Company used draft financial statements of Korea Power Engineering Co.,
Ltd., Korea Plant Service & Engineering Co., Ltd., KEPCO Nuclear Fuel Co.,
Ltd., Korea Electric Power Data Network Co., Ltd., Korea Electric Power
Industrial Development, Ltd., Korea District Heating Co., KEPCO
International Hong Kong Ltd. and KEPCO International Philippines Inc. for
equity method valuation.
If the difference between the cost of acquisition and the book value of the
subsidiary is a positive goodwill, the difference is amortized using the
straight-line method over five years from the year it was acquired, and if
it is a negative goodwill, the difference related to the depreciable assets
is amortized over the weighted average useful life of related assets from
the year it was acquired and the difference related to the non-depreciable
assets is amortized at the time assets are disposed of. As of September 30,
2003, there are no positive or negative goodwill.
The Company eliminates the unrealized gains arising from the transactions
with affiliates in equity method valuation. The eliminated gain arising
from the transaction with Korea Power Engineering Co., Ltd, KEPCO Nuclear
Fuel Co., Ltd. and Korea Electric Power Data Network Co., Ltd. amounted to
KRW 123,577 million, KRW14,361 million and KRW2,041 million, respectively,
as of September 30, 2003 and KRW119,475 million, KRW15,562 million and
KRW2,401 million, respectively, as of December 31, 2002.
In 2003, the Company has disposed some of its investments in Korea Electric
Power Industrial Development, Ltd., with the gain on disposal of investment
of KRW44,104 million.
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"), the Company applied the equity method for KEPCO International
Hong Kong Ltd. and KEPCO International Philippines Inc., reflecting the
changes in the net equity of KEPHILCO and KEILCO.
Details of valuation using the equity method for the nine-month period
ended September 30, 2003 are as follows (won in millions):
Gain on valuation
December 31, --------------------------------------------------- Other September 30,
Company name 2002 1st quarter 2nd quarter 3rd quarter Total changes(*) 2003
---------------------- ------------- ----------- ----------- ----------- ---------- ------------ -------------
Korea Hydro & Nuclear
Power Co., Ltd. KRW10,577,527 KRW273,472 KRW162,500 KRW235,797 KRW671,769 KRW(214,995) KRW11,034,301
Korea South-East Power
Co., Ltd. 1,679,117 101,342 68,472 102,432 272,246 (33,270) 1,918,093
Korea Midland Power
Co., Ltd. 1,781,127 104,872 92,632 70,977 268,481 (45,885) 2,003,723
Korea Western Power
Co., Ltd. 1,772,973 64,345 68,740 73,552 206,637 (41,706) 1,937,904
Korea Southern Power
Co., Ltd. 1,953,743 38,735 53,362 58,880 150,977 (44,488) 2,060,232
Korea East-West Power
Co., Ltd. 2,373,207 34,682 25,519 33,609 93,810 (34,317) 2,432,700
-10-
Gain on valuation
December 31, ------------------------------------------------- Other September 30,
Company name 2002 1st quarter 2nd quarter 3rd quarter Total changes(*) 2003
------------------------------------ ------------- ----------- ----------- ----------- ------------ ----------- -------------
Korea Power Engineering Co., Ltd. KRW 51,991 KRW 14,264 KRW 1,071 KRW 6,151 KRW 21,486 KRW (11,754) KRW 61,723
Korea Plant Service & Engineering
Co., Ltd. 238,947 7,977 19,864 6,844 34,685 (9,000) 264,632
KEPCO Nuclear Fuel Co., Ltd. 134,538 2,575 2,937 2,971 8,483 (1,927) 141,094
Korea Electric Power Data Network
Co., Ltd. 118,075 2,777 4,903 3,524 11,204 (4,424) 124,855
Korea Gas Corporation 690,705 50,560 5,418 (15,473) 40,505 (28,031) 703,179
Korea District Heating Co. 147,898 7,528 (358) (1,277) 5,893 (2,033) 151,758
Powercomm Corporation 359,090 (4,665) 8,627 8,960 12,922 (5,197) 366,815
Korea Electric Power Industrial
Development, Ltd. 40,730 616 151 1,229 1,996 (21,752) 20,974
KEPCO International Hong Kong Ltd. 124,808 5,242 22,860 12,317 40,419 (17,954) 147,273
KEPCO International Philippines Inc. 108,255 5,815 4,472 5,995 16,282 (12,085) 112,452
------------- ---------- ---------- ---------- ------------ ----------- -------------
KRW22,152,731 KRW710,137 KRW541,170 KRW606,488 KRW1,857,795 KRW(528,818) KRW23,481,708
============= ========== ========== ========== ============ =========== =============
(*) Other changes are composed of acquisition (disposal) amounts of investment
securities, dividends and the changes in investment securities in capital
adjustments.
(4) Gain on valuation of investment, which are recorded in capital adjustment
as of September 30, 2003 and December 31, 2002 are as follows (won in
millions):
September 30, December 31,
2003 2002
------------- ------------
Valuation using the equity method KRW29,802 KRW60,885
Valuation on available-for-sale securities (8,833) (8,509)
--------- ---------
KRW20,969 KRW52,376
========= =========
7. LOANS TO EMPLOYEES:
The Company has provided housing and tuition loans to employees as follows (won
in millions):
September 30, December 31,
2003 2002
------------- ------------
Short-term loans KRW 9,110 KRW 8,450
Long-term loans 144,455 128,656
---------- ----------
KRW153,565 KRW137,106
========== ==========
8. INVENTORIES:
Inventories as of September 30, 2003 and December 31, 2002 consist of the
following (won in millions):
September 30, December 31,
2003 2002
------------- ------------
Raw materials KRW 1,806 KRW 1,291
Supplies 61,599 57,169
Other 6,462 6,757
--------- ---------
KRW69,867 KRW65,217
========= =========
-11-
9. SHAREHOLDERS' EQUITY:
(1) Capital
The Company has 1,200,000,000 authorized shares of KRW5,000 par value
common stock, of which 640,100,876 shares are issued as of September 30,
2003.
(2) Capital Surplus
Capital surplus as of September 30, 2003 and December 31, 2002 is as
follows (won in millions):
September 30, December 31,
2003 2002
------------- -------------
Paid-in capital in excess of par value KRW 799,876 KRW 799,876
Reserves for asset revaluation 12,552,973 12,552,973
Other capital surplus 961,226 958,730
------------- -------------
KRW14,314,075 KRW14,311,579
============= =============
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.
(3) Retained earnings
Appropriated retained earnings as of September 30, 2003 and December 31,
2002 consist of the following (won in millions):
September 30, December 31,
2003 2002
------------- -------------
Legal reserve KRW 1,600,252 KRW 1,600,252
Reserve for business rationalization 31,900 31,900
Reserve for business expansion 10,925,339 8,556,873
Reserve for investment on social overhead capital 5,012,449 4,892,449
Reserve for research and human development 120,000 60,000
Voluntary reserve 210,000 210,000
------------- -------------
KRW17,899,940 KRW15,351,474
============= =============
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.
Prior to 1990, according to the KEPCO Act, at least 20 percent of net
income in each fiscal year was required to be established as a reserve for
business expansion until such reserve equals the common stock. Beginning in
1990, no percentage was specified in respect to this reserve.
The reserve for the investment on social overhead capital and research and
human development is 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.
-12-
(4) Capital adjustments
Capital adjustments as of September 30, 2003 and December 31, 2002 are as
follows (won in millions):
September 30, December 31,
2003 2002
------------- ------------
Treasury stock KRW(196,321) KRW(16,669)
Gain on valuation of equity method securities 29,802 60,885
Loss on valuation of available-for-sale securities (8,833) (8,509)
----------- ----------
KRW(175,352) KRW 35,707
=========== ==========
The Company has shares held as treasury stock amounting to KRW196,321
million (10,748,355 shares) and KRW 16,669 million (913,375 shares) as of
September 30, 2003 and December 31, 2002, respectively, for the purpose of
stock price stabilization.
10. BORROWINGS AND DEBENTURES:
(1) Long-term borrowings as of September 30, 2003 and December 31, 2002 are as
follows (won in millions):
Annual interest September 30, December 31,
Financial institution Type rate (%) 2003 2002
----------------------------------- ---------- --------------- ------------ ------------
Local currency
Industrial
Korea Development Bank facility 4.50~9.00 KRW2,968,293 KRW2,591,564
Kookmin Bank General 6.07~6.16 - 85,714
Others " 5.50~6.00 35 37
------------ ------------
2,968,328 2,677,315
------------ ------------
Foreign currency
Barclays International Financial
Services (Ireland) Ltd. Commercial 6M Libor-1.00 271,067 376,482
Kredit Anstalt Fur Wieder Aufbau Facility 6.00 - 180
Asian Development Bank " 6.00 1,027 1,415
------------ ------------
272,094 378,077
------------ ------------
3,240,422 3,055,392
Less: Current portion (878,764) (819,358)
------------ ------------
KRW2,361,658 KRW2,236,034
============ ============
(2) Debentures as of September 30, 2003 and December 31, 2002 are as follows
(won in millions):
Annual interest September 30, December 31,
rate (%) 2002 2002
--------------- ------------- -------------
Domestic debentures (Electricity bonds) 4.79~11.30 KRW 3,735,000 KRW 2,755,000
Foreign debentures 1.18~8.278 6,466,644 6,637,477
------------- -------------
10,201,644 9,392,477
Less: Current portion (3,977,835) (1,635,364)
Discount on debentures issued (15,050) (19,834)
------------- -------------
KRW 6,208,759 KRW 7,737,279
============= =============
-13-
(3) Foreign currency debts, by currency, as of September 30, 2003 and December
31, 2002 are as follows (won in millions):
September 30, 2003 December 31, 2002
------------------------------------- --------------------------------------
Foreign currencies Won equivalent Foreign currencies Won equivalent
------------------ -------------- ------------------ --------------
Long-term
borrowings US$ 225,893,057 KRW 272,094 US$ 301,179,115 KRW 377,897
EUR 143,104 180
------------ ------------
272,094 378,077
------------ ------------
Debentures US$ 3,979,875,632 4,585,068 US$ 3,980,542,219 4,785,584
JPY175,060,000,000 1,801,262 JPY175,060,000,000 1,773,130
EUR 25,183,000 33,525 EUR 25,183,000 31,664
GBP 24,467,000 46,789 GBP 24,467,000 47,099
------------ ------------
6,466,644 6,637,477
------------ ------------
KRW6,738,738 KRW7,015,554
============ ============
(4) Aggregate maturities of the Company's long-term debt as of September 30,
2003 are as follows (won in millions):
Year Local Foreign
ended currency currency Domestic Foreign
September 30 borrowings borrowings debentures debentures Total
------------ ------------ ---------- ------------ ------------ -------------
2004 KRW 697,026 KRW181,738 KRW1,810,000 KRW2,167,835 KRW 4,856,599
2005 769,797 90,356 550,000 1,271,995 2,682,148
2006 871,613 - 390,000 580,691 1,842,304
2007 421,561 - 235,000 154,206 810,767
2008 192,312 - 630,000 1,036,644 1,858,956
Thereafter 16,019 - 120,000 1,255,273 1,391,292
------------ ---------- ------------ ------------ -------------
KRW2,968,328 KRW272,094 KRW3,735,000 KRW6,466,644 KRW13,442,066
============ ========== ============ ============ =============
11. LEASES:
(1) The Company entered into a financial lease agreement with Korea Development
Leasing Corporation for certain computer systems, of which the acquisition
cost is KRW33,870 million as of September 30, 2003. Depreciation of the
leased assets amounted to KRW629 million for the nine-month period ended
September 30, 2003
(2) Annual payments under financial and operating lease agreements as of
September 30, 2003 are as follows (won in millions):
Amount
-------------------------------------
Year ended September 30 Financial lease Operating lease
----------------------- --------------- ---------------
2004 KRW 5,847 KRW2,513
2005 942 -
--------- --------
6,789 2,513
Less: Interest (245) -
Current portion (5,610) -
--------- --------
KRW 934 KRW2,513
========= ========
-14-
12. FOREIGN CURRENCIES DENOMINATED ASSETS AND LIABILITIES:
There are no significant liabilities denominated in foreign currencies other
than those mentioned in Note 10 and significant assets denominated in foreign
currencies as of September 30, 2003 and December 31, 2002 are as follows (won in
millions):
September 30, 2003 December 31, 2002
------------------------- ------------------------------
Foreign Equivalent Foreign Equivalent
Account Currencies Korean Won Currencies Korean Won
------------------------- ------------ ---------- ------------- ----------
Cash and cash equivalents US$9,818,708 KRW11,293 US$16,395,438 KRW19,681
Trade receivables US$3,396,137 3,906 US$ 3,497,537 4,198
Other account receivables US$ 580,060 667 US$ 644,263 773
Other non-current assets US$ 11,560 13 US$ 11,560 14
" JPY5,859,783 60 JPY 5,859,783 59
========= =========
KRW15,939 KRW24,725
========= =========
13. SWAP TRANSACTIONS:
The Company entered into the various swap contracts to hedge the fluctuation
risk of exchange rate and interest rate of foreign currency debts.
(1) Currency swap contracts as of September 30, 2003 are as follows (foreign
currency in millions):
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 JPY27,000 7.68 4.15
The Fuji Bank Ltd. 1995 2005 US$ 149 JPY14,500 Libor+0.155 3.40
Canadian Imperial Bank of
Commerce 1996 2006 US$ 97 JPY10,000 Libor+0.13 3.80
J.P. Morgan Chase Bank 1996 2006 US$ 200 JPY21,000 Libot+0.14 4.00
Deutsche Bank 1998 2004 JPY 1,705 US$ 55 6.41 7.11
(formerly Bankers Trust Co.) DEM 25
CHF 20
CAD 20
Deutsche Bank 1998 2004 JPY 2,945 US$ 95 6.36 7.05
(formerly Bankers Trust Co.) DEM 43
CHF 35
CAD 34
Union Bank of Switzerland 1998 2003 JPY12,150 US$ 100 4.00 6.375
J.P. Morgan Chase Bank & 2002 2007 JPY76,700 US$ 650 1.18 4.25
Deutsche Bank(*)
Barclays Bank PLC, London 2002 2007 JPY30,400 US$ 250 1.04 3M
Libor+0.75
(*) If the Republic of Korea declares a default on its debts, KEPCO is to
receive Korean government bonds instead of cash. Valuation for these embedded
derivatives is reflected in the valuation of the currency swap.
-15-
(2) Interest rate swap contracts as of September 30, 2003 are as follows
(foreign currency in millions):
Contract interest rate per annum
Notional amount ----------------------------------------
in millions Pay (%) Receive (%) Term
--------------- ------------------ ------------------ ---------
Lehman Brothers Special Financing Inc. US$ 150 Libor+0.25 6.375 1993-2003
Woori Bank (formerly Hanvit Bank) US$ 150 6.10 Libor+0.25 1996-2003
J.P. Morgan Securities Ltd. US$ 149 6.91 Libor+0.155 1995-2005
Korea Development Bank US$ 97 6.10 Libor+0.13 1997-2004
Barclays Bank PLC, London US$ 225 6M Libor-1 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.) JPY1,705 6.41
DEM 25 6.41
CHF 20 6.41
CAD 20 6.41
Deutsche Bank US$ 95 6.87 1998-2004
(formerly Bankers Trust Co.) JPY2,945 6.36
DEM 43 6.36
CHF 35 6.36
CAD 34 6.36
Deutsche Bank US$ 100 Max(6.074-Libor,0) Max(Libor-6.074,0) 1998-2007
(formerly Bankers Trust Co.)
Deutsche Bank US$ 100 Max(Libor-6.074,0) Max(6.074-Libor,0) 1998-2007
(formerly Bankers Trust Co.)
(3) The gains and losses on swap transactions for the three-month and
nine-month periods ended September 30, 2003 and 2002 are as follows (won in
millions):
2003 2002
--------------------------- --------------------------
Other income (expense) Three-month Nine-month Three-month Nine-month
----------------------- ----------- ---------- ----------- ----------
Currency swaps
Gains KRW 55,820 KRW 40,020 KRW 52,103 KRW89,859
Losses (86,042) (67,788) (29,917) (16,559)
Interest rate swaps
Gains 10,844 16,055 561 6,666
Losses (7,431) (9,966) (18,890) (25,774)
---------- ---------- ---------- ---------
KRW(26,809) KRW(21,679) KRW 3,857 KRW54,192
========== ========== ========== =========
14. POWER GENERATION, TRANSMISSION AND DISTRIBUTION EXPENSES:
Power generation, transmission and distribution expenses for the three-month and
nine-month periods ended September 30, 2003 and 2002 are as follows (won in
millions):
2003 2002
---------------------------- ----------------------------
Three-month Nine-month Three-month Nine-month
----------- ------------ ----------- ------------
Fuel KRW 3,683 KRW 9,070 KRW 2,811 KRW 7,155
Labor 138,170 385,314 164,013 386,356
Employee benefits 16,701 52,472 12,186 36,210
Taxes and dues 4,848 6,548 4,580 7,027
Rent 4,605 17,512 3,593 16,320
Depreciation and amortization 385,708 1,126,193 360,640 1,034,866
Maintenance 204,625 544,439 180,731 488,477
Commission and consultation fees 20,160 52,008 12,135 35,534
Compensation expense 13,418 30,178 16,661 40,982
Ordinary development expenses 32,464 65,995 34,498 63,392
Utility plant removal cost 53,960 144,850 42,921 128,667
Others 16,769 49,625 21,234 50,864
---------- ------------ ---------- ------------
KRW895,111 KRW2,484,204 KRW856,003 KRW2,295,850
========== ============ ========== ============
-16-
15. SELLING AND ADMINISTRATIVE EXPENSES:
Selling and administrative expenses for the three-month and nine-month periods
ended September 30, 2003 and 2002 are as follows (won in millions):
2003 2002
---------------------------- -----------------------------
Three-month Nine-month Three-month Nine-month
----------- ---------- ----------- ----------
Labor KRW87,970 KRW244,175 KRW107,275 KRW253,428
Employee benefits 11,530 36,364 8,587 27,042
Taxes and dues 2,841 4,652 2,736 4,365
Rent 2,838 11,120 4,148 13,398
Depreciation and amortization 10,109 30,197 11,650 34,222
Maintenance 3,910 9,369 3,557 8,664
Commission and consultation fees 16,430 55,729 21,799 54,077
Ordinary development expenses 4,005 10,294 4,062 8,386
Collection expense 82,645 203,146 69,124 179,706
Promotion 4,816 13,452 4,734 13,325
Bad debts 4,243 9,964 3,271 12,039
Communication 6,598 18,751 6,305 17,866
Insurance 1,662 6,124 1,022 5,396
Rewards 169 465 3,494 4,009
Others 11,939 35,591 12,328 33,652
---------- ---------- ---------- ----------
KRW251,705 KRW689,393 KRW264,092 KRW669,575
========== ========== ========== ==========
16. INCOME TAX EXPENSE:
(1) Income tax expense and effective tax rate for the three-month and
nine-month periods ended September 30, 2003 and 2002 are as follows (won in
millions):
2003 2002
----------------------------- -------------------------------
Three-month Nine-month Three-month Nine-month
----------- ---------- ----------- ------------
Income tax currently payable KRW359,510 KRW668,677 KRW298,326 KRW 812,722
Changes in deferred income taxes 133,262 295,414 87,744 278,448
---------- ---------- ---------- ------------
Income tax expense KRW492,772 KRW964,091 KRW386,070 KRW1,091,170
========== ========== ========== ============
Effective tax rate 32.8% 28.3% 29.6% 29.6%
(2) Deferred income tax liabilities as of September 30, 2003 and December 31,
2002 are as follows (won in millions).
September 30, December 31,
2003 2002
------------- -------------
Accumulated temporary differences KRW(5,507,273) KRW(4,559,354)
Tax rate (%) 29.7 29.7
------------- -------------
Deferred income tax liabilities KRW(1,635,660) KRW(1,354,128)
============= =============
Accumulated temporary differences and deferred income tax liabilities as of
December 31, 2002 were adjusted by KRW46,742 million and KRW13,882 million,
respectively, based on the 2002 income tax return.
-17-
17. RELATED PARTY TRANSACTIONS:
(1) Transactions with related parties for the three-month and nine-month
periods ended September 30, 2003 and 2002 are as follows (won in millions):
2003 2002
------------------------------ -----------------------------
Related party Transaction Three-month Nine-month Three-month Nine-month
--------------------------------------------- -------------------- ------------ ------------- ------------ ------------
Sales and other income:
Korea Hydro & Nuclear Power Co., Ltd. Sales of electricity KRW 30,957 KRW 81,802 KRW 47,841 KRW 91,984
and others
Korea South-East Power Co., Ltd. " 11,795 28,943 11,063 30,558
Korea Midland Power Co., Ltd. " 6,660 20,091 5,082 15,341
Korea Western Power Co., Ltd. " 8,481 25,749 797 20,131
Korea Southern Power Co., Ltd. " 5,784 14,372 4,278 13,457
Korea East-West Power Co., Ltd. " 10,388 29,678 6,518 29,415
Others " 23,456 62,939 29,213 54,246
------------ ------------- ------------ ------------
KRW 97,521 KRW 263,574 KRW 104,792 KRW 255,132
============ ============= ============ ============
Purchases and others:
Korea Hydro & Nuclear Power Co., Ltd. Purchase of KRW1,308,735 KRW 3,725,897 KRW1,180,118 KRW3,459,593
electricity and
others
Korea South-East Power Co., Ltd. " 331,404 1,066,912 322,531 1,050,386
Korea Midland Power Co., Ltd. " 373,132 1,341,935 426,127 1,084,478
Korea Western Power Co., Ltd. " 494,295 1,547,002 496,722 1,433,788
Korea Southern Power Co., Ltd. " 515,520 1,515,542 434,216 1,351,965
Korea East-West Power Co., Ltd. " 392,413 1,402,650 417,236 1,359,764
Korea Power Engineering Co., Inc. Designing of the 46,983 125,900 11,775 29,359
power plant
and others
Korea Plant Service & Engineering Co., Ltd. Utility plant 9,838 30,433 8,515 28,764
maintenance
Korea Electric Power Data Network Co., Ltd. Maintenance of 42,026 140,120 35,968 84,791
computer system
Commissions for
service and
Others others 31,119 117,606 32,438 106,036
------------ ------------- ------------ ------------
KRW3,545,465 KRW11,013,997 KRW3,365,646 KRW9,988,924
============ ============= ============ ============
(2) Receivables arising from related parties transactions as of September 30,
2003 and December 31, 2002 are as follows (won in millions):
December 31,
September 30, 2003 2002
------------------------------------- ------------
Other account
Trade receivables
Related party receivables and other Total Total
------------------------------------- ----------- ------------- --------- ------------
Korea Hydro & Nuclear Power Co., Ltd. KRW - KRW 270 KRW 270 KRW 8,020
Korea South-East Power Co., Ltd. 891 332 1,223 3,639
Korea Midland Power Co., Ltd. 1,261 556 1,817 382
Korea Western Power Co., Ltd. 2,699 165 2,864 3,145
Korea Southern Power Co., Ltd. 1,219 280 1,499 1,647
Korea East-West Power Co., Ltd. 3,043 232 3,275 4,518
Others - 3,158 3,158 10,603
-------- -------- --------- ---------
KRW9,113 KRW4,993 KRW14,106 KRW31,954
======== ======== ========= =========
-18-
(3) Payables arising from related parties transactions as of September 30, 2003
and December 31, 2002 are as follows (won in millions):
September 30, 2003
------------------------------------------- December 31,
Other account 2002
Trade payables ------------
Related party payables and other Total Total
------------------------------------------- ---------- ------------- ---------- ------------
Korea Hydro & Nuclear Power Co., Ltd. KRW341,593 KRW - KRW341,593 KRW 368,509
Korea South-East Power Co., Ltd. 92,415 111 92,526 124,031
Korea Midland Power Co., Ltd. 98,471 179 98,650 168,410
Korea Western Power Co., Ltd. 123,376 58 123,434 176,816
Korea Southern Power Co., Ltd. 142,118 57 142,175 130,181
Korea East-West Power Co., Ltd. 118,657 282 118,939 142,017
Korea Power Engineering Co., Inc. - 7,720 7,720 7,108
Korea Plant Service & Engineering Co., Ltd. - 5,779 5,779 6,845
Korea Electric Power Data Network Co., Ltd. - 24,561 24,561 25,502
Others 2 11,086 11,088 22,593
---------- --------- ---------- ------------
KRW916,632 KRW49,833 KRW966,465 KRW1,172,012
========== ========= ========== ============
18. ADDITIONAL PAYMENT OF INCOME TAX:
National Tax Service Seoul office has performed regular tax audit on the
Company's tax filings for 1998 and 1999 fiscal year from June 16, 2003 through
October 13, 2003. As a result, the Company is advised to pay 158,900 million won
as additional income tax. The Company accounts for this amount in other
expenses.
19. CONTINGENT LIABILITIES:
(1) The Company is engaged in 208 lawsuits as a defendant and 42 lawsuits as a
plaintiff. The total amount claimed from the Company is KRW83,061 million
and the total amount claimed by the Company is KRW107,394 million as of
September 30, 2003. The outcome of these lawsuits cannot presently be
determined. However, management believes that the ultimate disposition of
those litigations will not have a materially adverse effect on the
operations or financial position of the Company.
(2) The Company's liabilities of KRW17,646,157 million, including borrowings of
KRW13,825,884 million, were transferred to the power generation
subsidiaries at the time of spin-off. The Company has the collective
responsibility together with the subsidiaries to repay those debts, which
were transferred and outstanding, under the Commercial Code of the Republic
of Korea. The balance of borrowings subject to those collective
responsibilities as of September 30, 2003 is KRW4,843,700 million
(including the Company's borrowings of KRW1,151,655 million).
(3) The Company has provided debt repayment guarantees for its related parties
in connection with the related parties' borrowings as of September 30, 2003
as follows:
Loan type Guaranteed company Financial institutions Amount
--------------------- ---------------------------------- ---------------------- --------------
Foreign currency loan KEPCO International Hong Kong Ltd. Nippon Life Insurance US$ 82,006,000
" Norinchukin Bank 35,000,000
" Korea Development Bank 11,590,000
KEPCO Philippines Co. Korea Development Bank 54,522,000
--------------
US$183,118,000
==============
-19-
(4) KEPCO Ilijan Corporation, which is the subsidiary of KEPCO International
Philippines Inc., is engaged in the power generation business in the
Philippines and borrowed US$ 412,196,437 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 for performance of the power generation business of KEPCO Ilijan
Corporation as well as with the partial guarantees for the repayment of
those borrowings.
(5) Korea Development Bank has provided the repayment guarantees of
US$228,044,114 for the Company's commercial borrowings. In addition, Korea
Development Bank has also provided the repayment guarantee for some of
foreign currency debentures of the Company, which existed at the time of
spin-off but not redeemed as of September 30, 2003, instead of the
collective responsibilities of the power generation subsidiaries to
facilitate the Restructuring Plan. Guarantee amounts by currency are as
follows.
USD JPY EUR GBP
------------- -------------- ---------- ----------
Guaranteed amounts 2,258,120,252 44,432,400,000 26,634,989 32,785,780
(6) Five banks including the National Agricultural Cooperative Federation has
provided the Company a credit (overdraft) line amounting to KRW245,000
million as of September 30, 2003.
(7) The Company entered into a turnkey contract with the Korea Peninsula Energy
Development Organization (KEDO) on December 15, 1999, to construct two
1,000,000 KW-class pressurized light-water reactor units in North Korea.
The contract amount is US$ 4,182 million and subject to adjustment to cover
any changes in the price level.
(8) 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 those
companies amounted to KRW849,595 million for the nine-month period ended
September 30, 2003.
20. STATEMENT OF CASH FLOWS:
Cash flows from operating activities were presented using the indirect method.
Transactions not involving cash flows for the three-month and nine-month periods
ended September 30, 2003 are as follows (won in millions):
2003
-----------------------------
Three-month Nine-month
----------- ------------
Reclassification of long term loans to short-term loans KRW 3,042 KRW 6,995
Reclassification of construction in-progress to utility plant 593,835 1,730,432
Reclassification of debentures to current portion 938,988 2,415,420
Reclassification of long-term borrowings to current portion 193,136 634,228
-20-
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/ Myung-Whan Kim
--------------------------------
Name: Myung-Whan Kim
Title: General Manager
Date: November 19, 2003