-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EPU5g1uiys2r4R4RTceSfTA/TKPLS/7Mhkfe/P+h5m3MU+TGRKFh+zYHeozdK6m5 88IP/QX3Ch0cAi4oayerow== 0001145549-03-001123.txt : 20030902 0001145549-03-001123.hdr.sgml : 20030901 20030902114915 ACCESSION NUMBER: 0001145549-03-001123 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030901 FILED AS OF DATE: 20030902 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KOREA ELECTRIC POWER CORP CENTRAL INDEX KEY: 0000887225 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 133442428 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13372 FILM NUMBER: 03875582 BUSINESS ADDRESS: STREET 1: 167, SAMSONG-DONG STREET 2: KANGNAM-KU CITY: SEOUL 135-7911 KOREA STATE: NY ZIP: 10286 BUSINESS PHONE: 2018948855 MAIL ADDRESS: STREET 1: 167 SAMSEENG DONG GANGNAMGU CITY: SEOUL STATE: MO ZIP: 999999999 6-K 1 u98670e6vk.txt KEPCO FORM 6-K 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, 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 JUNE 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 June 30, 2003 and the related non-consolidated statements of income and cash flows for the three-month and six-month periods ended June 30, 2003, respectively, and the non-consolidated statements of income for the three-month and six-month periods ended June 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., investments which constituted 22.9 percent of the total non-consolidated assets as of June 30, 2003, and gain on equity method which constituted 34.5 percent of non-consolidated income before income tax for the six-month period then ended. Also, we were furnished with the report of other accountants on their review of the financial statements of Korea Hydro & Nuclear Power Co., Ltd. and 3 other power generating subsidiaries, investments which constituted 30.1 percent of the total non-consolidated assets as of June 30, 2002, and gain on equity method which constituted 35.5 percent of non-consolidated income before income tax for the six-month period then ended. We conducted our review in accordance with standards for review of interim financial statements in 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 Won166,053 million and Won7,468,532 million, respectively, for the six-month period ended June 30, 2003 and Won208,766 million and Won6,623,278 million, respectively, for the six-month period ended June 30, 2002. Related receivables and payables amounted to Won14,661 million and Won1,008,581 million, respectively, as of June 30, 2003 and Won31,954 million and Won1,172,012 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 Financial 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 interest costs, marketable 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 Won511,350 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. By: /s/ Anjin & Co. Anjin & Co. (An Associate Member Firm of Deloitte Touche Tohmatsu) Seoul, Korea August 1, 2003 KOREA ELECTRIC POWER CORPORATION NON-CONSOLIDATED BALANCE SHEETS AS OF JUNE 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 Won35,359,639 Won34,432,036 $29,636,778 $28,859,304 Less: accumulated depreciation (6,696,170) (5,939,624) (5,612,413) (4,978,312) construction grants (2,521,039) (2,321,138) (2,113,017) (1,945,468) ------------- ------------- ----------- ----------- 26,142,430 26,171,274 21,911,348 21,935,524 Construction in-progress 2,837,045 1,986,138 2,377,877 1,664,687 ------------- ------------- ----------- ----------- 28,979,475 28,157,412 24,289,225 23,600,211 ------------- ------------- ----------- ----------- Investments and others: Investment securities (Note 6) 22,996,074 22,239,278 19,274,221 18,639,911 Long-term loans (Note 7) 137,059 128,656 114,877 107,833 Long-term other account receivables 388,836 388,924 325,904 325,978 Currency and interest rate swaps (Note 13) 315,056 320,641 264,065 268,746 Intangibles (Note 4) 90,897 94,874 76,186 79,519 Other non-current assets (Note 12) 135,088 130,074 113,225 109,023 ------------- ------------- ----------- ----------- 24,063,010 23,302,447 20,168,478 19,531,010 ------------- ------------- ----------- ----------- Current assets: Cash and cash equivalents (Note 12) 358,236 610,056 300,257 511,320 Trade receivables, net of allowance for doubtful accounts of Won24,001 million in 2003 and Won21,588 million in 2002 (Notes 12 and 17) 1,313,364 1,400,411 1,100,799 1,173,758 Other account receivables, net of allowance for doubtful accounts of Won3,323 million in 2003 and Won3,007 million in 2002 (Notes 12 and 17) 210,121 228,101 176,113 191,183 Short-term financial instruments 79,000 79,000 66,214 66,214 Short-term loans (Note 7) 8,188 8,450 6,863 7,083 Inventories (Note 8) 68,031 65,217 57,021 54,661 Other current assets (Note 6) 112,029 94,519 93,897 79,221 ------------- ------------- ----------- ----------- 2,148,969 2,485,754 1,801,164 2,083,440 ------------- ------------- ----------- ----------- Total Assets Won55,191,454 Won53,945,613 $46,258,867 $45,214,661 ============= ============= =========== ===========
(continued) KOREA ELECTRIC POWER CORPORATION NON-CONSOLIDATED BALANCE SHEETS (CONTINUED) AS OF JUNE 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 Won 3,200,504 Won 3,200,504 $ 2,682,511 $ 2,682,511 Capital surplus 14,314,549 14,311,579 11,997,778 11,995,289 Retained earnings Appropriated 17,899,939 15,351,474 15,002,883 12,866,879 Unappropriated (Net income of 1,283,226 million for the six-month period ended June 30, 2003 and Won3,059,815 million for the year ended December 31, 2002) 1,283,226 3,059,815 1,075,540 2,564,593 Capital adjustments: (156,890) 35,707 (131,498) 29,928 ------------- ------------- ----------- ----------- Total Shareholders' Equity 36,541,328 35,959,079 30,627,214 30,139,200 ------------- ------------- ----------- ----------- Long-term liabilities: Long-term debt (Note 10) 9,546,644 9,973,313 8,001,546 8,359,160 Accrued severance indemnities, net (Note 2) 253,397 226,609 212,386 189,933 Reserve for self insurance 82,011 82,537 68,738 69,178 Currency and interest rate swaps (Note 13) 386,567 468,900 324,002 393,010 Financial lease liabilities (Note 11) 2,228 4,993 1,867 4,184 Deferred income tax liabilities (Note 16) 1,502,398 1,354,128 1,259,239 1,134,966 Other long-term liabilities 323,508 325,533 271,148 272,846 ------------- ------------- ----------- ----------- 12,096,753 12,436,013 10,138,926 10,423,277 ------------- ------------- ----------- ----------- Current liabilities: Trade payables (Note 17) 1,081,181 1,238,749 906,195 1,038,260 Other accounts payable (Note 17) 524,804 552,350 439,866 462,954 Current portion of long-term debt (Note 10) 3,954,999 2,454,722 3,314,893 2,057,432 Current portion of financial lease liabilities (Note 11) 6,532 8,538 5,475 7,156 Income tax payable 309,167 682,777 259,129 572,271 Accrued expenses 169,139 166,144 141,764 139,254 Dividends payable 1,751 2,153 1,467 1,805 Other current liabilities 505,800 445,088 423,938 373,052 ------------- ------------- ----------- ----------- 6,553,373 5,550,521 5,492,727 4,652,184 ------------- ------------- ----------- ----------- Total Liabilities 18,650,126 17,986,534 15,631,653 15,075,461 ------------- ------------- ----------- ----------- Total Shareholders' Equity and Liabilities Won55,191,454 Won53,945,613 $46,258,867 $45,214,661 ============= ============= =========== ===========
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, 2003 AND 2002 (See Independent Accountants' Review Report)
Korean Won ----------------------------------------------------------------- 2003 2002 ------------------------------- ------------------------------ Three-month Six-month Three-month Six-month ------------ ------------- ------------ ------------ (In millions, except per share amounts) OPERATING REVENUES (Note 17): Sale of electricity Won5,016,238 Won10,552,070 Won4,681,281 Won9,674,105 Other operating revenues 80,163 156,036 124,754 157,040 ------------ ------------- ------------ ------------ 5,096,401 10,708,106 4,806,035 9,831,145 ------------ ------------- ------------ ------------ OPERATING EXPENSES (Notes 14, 15, 17 and 18): Power generation, transmission, distribution 872,183 1,589,093 792,208 1,439,847 Purchased power 3,755,413 7,927,836 3,377,303 6,976,205 Other operating costs 80,201 155,405 123,536 154,408 Selling and administrative expenses 232,532 437,688 209,401 405,483 ------------ ------------- ------------ ------------ 4,940,329 10,110,022 4,502,448 8,975,943 ------------ ------------- ------------ ------------ OPERATING INCOME 156,072 598,084 303,587 855,202 OTHER INCOME (EXPENSES): Interest income 9,061 19,595 4,554 11,914 Interest expense (156,110) (304,176) (150,261) (303,637) Gain on foreign currency transactions and translation, net 335,241 50,865 425,895 453,032 Donations (5,819) (7,534) (5,816) (9,259) Rent 29,972 55,845 28,662 56,106 Gain on valuation using the equity method of accounting (Note 6) 541,170 1,251,307 596,403 1,238,853 Gain (loss) on disposal of investments, net (Note 6) 587 45,214 (155) (155) Loss on disposal of utility plant, net (1,589) (5,474) (4,539) (4,693) Valuation gain on currency and interest rate swaps, net (Note 13) 22,453 5,131 54,202 50,335 Other, net 31,865 45,688 30,017 47,812 ------------ ------------- ------------ ------------ 806,831 1,156,461 978,962 1,540,308 ------------ ------------- ------------ ------------ ORDINARY INCOME 962,903 1,754,545 1,282,549 2,395,510 INCOME TAX EXPENSE (Note 16) (233,720) (471,319) (374,551) (705,100) ------------ ------------- ------------ ------------ NET INCOME Won 729,183 Won 1,283,226 Won 907,998 Won1,690,410 ============ ============= ============ ============ ORDINARY INCOME PER SHARE (Note 2) Won 1,159 Won 2,032 Won 1,421 Won 2,645 ============ ============= ============ ============ EARNINGS PER SHARE (Note 2) Won 1,159 Won 2,032 Won 1,421 Won 2,645 ============ ============= ============ ============
(continued) KOREA ELECTRIC POWER CORPORATION NON-CONSOLIDATED STATEMENTS OF INCOME (CONTINUED) FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2003 AND 2002 (See Independent Accountants' Review Report)
Translation into U.S. Dollars (Note 2) -------------------------------------------------------------------- 2003 2002 ------------------------------ ------------------------------ Three-month Six-month Three-month Six-month ----------- ---------- ----------- ---------- (In thousands, except per share amounts) OPERATING REVENUES (Note 17): Sale of electricity $4,204,373 $8,844,246 $3,923,628 $8,108,377 Other operating revenues 67,189 130,782 104,563 131,624 ---------- ---------- ---------- ---------- 4,271,562 8,975,028 4,028,191 8,240,001 ---------- ---------- ---------- ---------- OPERATING EXPENSES (Notes 14, 15, 17 and 18): Power generation, transmission, distribution 731,022 1,331,902 663,992 1,206,812 Purchased power 3,147,609 6,644,737 2,830,695 5,847,125 Other operating costs 67,222 130,253 103,542 129,417 Selling and administrative expenses 194,897 366,850 175,510 339,857 ---------- ---------- ---------- ---------- 4,140,750 8,473,742 3,773,739 7,523,211 ---------- ---------- ---------- ---------- OPERATING INCOME 130,812 501,286 254,452 716,790 OTHER INCOME (EXPENSES): Interest income 7,594 16,424 3,817 9,986 Interest expense (130,844) (254,946) (125,942) (254,494) Gain on foreign currency transactions and translation, net 280,983 42,633 356,965 379,710 Donations (4,877) (6,315) (4,875) (7,761) Rent 25,121 46,806 24,023 47,025 Gain on valuation using the equity method of accounting (Note 6) 453,583 1,048,787 499,877 1,038,348 Gain (loss) on disposal of investments, net (Note 6) 492 37,896 (130) (130) Loss on disposal of utility plant, net (1,332) (4,588) (3,805) (3,934) Valuation gain on currency and interest rate swaps, net (Note 13) 18,819 4,300 45,429 42,189 Other, net 26,709 38,294 25,159 40,074 ---------- ---------- ---------- ---------- 676,248 969,291 820,518 1,291,013 ---------- ---------- ---------- ---------- ORDINARY INCOME 807,060 1,470,577 1,074,970 2,007,803 INCOME TAX EXPENSE (Note 16) (195,893) (395,037) (313,931) (590,982) ---------- ---------- ---------- ---------- NET INCOME $ 611,167 $1,075,540 $ 761,039 $1,416,821 ========== ========== ========== ========== ORDINARY INCOME PER SHARE (Note 2) $ 0.97 $ 1.70 $ 1.19 $ 2.22 ========== ========== ========== ========== EARNINGS PER SHARE (Note 2) $ 0.97 $ 1.70 $ 1.19 $ 2.22 ========== ========== ========== ==========
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, 2003 (See Independent Accountants' Review Report)
Translation into Korean Won U.S. Dollars (Note 2) ----------------------------- ----------------------------- Three-month Six-month Three-month Six-month ----------- ------------- ----------- ----------- (In millions) (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income Won 729,183 Won 1,283,226 $ 611,167 $ 1,075,540 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 384,535 760,587 322,299 637,488 Utility plant removal cost 49,689 90,890 41,648 76,180 Provision for severance and retirement benefits 23,528 30,407 19,720 25,486 Allowance for doubtful accounts 2,614 5,722 2,191 4,796 Interest income, net (3,130) (6,292) (2,623) (5,274) Gain on foreign currency translation, net (335,491) (55,778) (281,194) (46,750) Gain on valuation using the equity method of accounting (541,170) (1,251,307) (453,583) (1,048,787) Gain on disposal of investment, net (587) (45,214) (492) (37,896) Loss on disposal of utility plant, net 1,589 5,474 1,332 4,588 Valuation gain on currency and interest rate swaps (22,453) (5,131) (18,819) (4,300) Decrease in trade receivables 69,638 81,310 58,361 68,150 Decrease (increase) in other account receivables (2,840) 17,387 (2,381) 14,573 Decrease (increase) in inventories (159) 25,509 (134) 21,381 Increase in other current assets (15,087) (49,628) (12,646) (41,596) Decrease in trade payables (92,548) (157,568) (77,570) (132,066) Increase (decrease) in other accounts payable 110,310 (27,546) 92,456 (23,087) Decrease in income tax payable (132,642) (373,610) (111,174) (313,142) Increase (decrease) in accrued expenses (18,815) 2,995 (15,770) 2,510 Increase in other current liabilities 15,495 60,715 12,987 50,888 Increase (decrease) in deferred income tax liabilities (25,785) 148,270 (21,611) 124,273 Decrease in other long-term liabilities (1,013) (2,025) (849) (1,697) Payment of severance and retirement benefits (3,630) (4,374) (3,042) (3,666) Payment of self-insurance (191) (526) (160) (441) Others 4,414 6,258 3,708 5,244 ----------- ------------- --------- ----------- Net cash provided by operating activities 195,454 539,751 163,821 452,395 ----------- ------------- --------- -----------
(continued) KOREA ELECTRIC POWER CORPORATION NON-CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2003 (See Independent Accountants' Review Report)
Translation into Korean Won U.S. Dollars (Note 2) ----------------------------- ----------------------------- Three-month Six-month Three-month Six-month ------------- ------------- ----------- ----------- (In millions) (In thousands) CASH FLOWS FROM INVESTING ACTIVITIES: Disposal of utility plant Won 10,072 Won 28,501 $ 8,442 $ 23,888 Additions to utility plant (1,189,596) (1,975,701) (997,063) (1,655,939) Receipt of construction grants 156,222 279,460 130,938 234,230 Proceeds from disposal of investment securities 478,571 542,961 401,116 455,084 Acquisition of investment securities (4,750) (12,750) (3,981) (10,686) Decrease in long-term other account receivables 10,729 10,729 8,992 8,992 Collection of long-term loans 1,501 2,389 1,258 2,002 Increase of long-term loans (1,742) (14,745) (1,460) (12,358) Acquisition of intangibles (1,159) (3,685) (971) (3,089) Collection of short-term loans 2,105 4,215 1,764 3,533 Increase in other non-current assets (6,733) (5,015) (5,644) (4,203) ------------- ------------- --------- ----------- Net cash used in investing activities (544,780) (1,143,641) (456,609) (958,546) ------------- ------------- --------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt 1,143,692 1,573,390 958,588 1,318,741 Payment of long-term debt (309,215) (444,318) (259,170) (372,406) Acquisition of treasury stock - (180,120) - (150,968) Cash dividends (511,744) (511,753) (428,919) (428,927) Other, net (1,787) (85,129) (1,497) (71,352) ------------- ------------- --------- ----------- Net cash provided by financing activities 320,946 352,070 269,002 295,088 ------------- ------------- --------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (28,380) (251,820) (23,786) (211,063) CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 386,616 610,056 324,043 511,320 ------------- ------------- --------- ----------- CASH AND CASH EQUIVALENTS, END OF THE PERIOD Won 358,236 Won 358,236 $ 300,257 $ 300,257 ============= ============= ========= ===========
See accompanying notes to non-consolidated financial statements. KOREA ELECTRIC POWER CORPORATION. NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS JUNE 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 June 30, 2003, the Government of the Republic of Korea, Korea Development Bank and foreign investors hold 32.35 percent, 21.57 percent and 25.47 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 Financial 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 interest costs, marketable 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 Won511,350 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 Won1,193.10 to US $1.00 at June 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, as 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 six-month periods ended June 30, 2003 and 2002, the amounts of capitalized interest was Won45,897 million and Won30,029 million, respectively, and net foreign currency transactions and translation gains deducted from the capitalized interest amounted to Won26,250 million for the six-month period ended June 30, 2002. The impact on the Company's financial position as of and for the six month period ended June 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 Won2,837,045 Won55,191,454 Won 304,176 Won1,754,545 Expensed 2,791,148 55,145,557 350,073 1,708,648 ------------ ------------- ----------- ------------ Won 45,897 Won 45,897 Won(45,897) Won 45,897 ============ ============= =========== ============
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: o Grants from the government or public institutions o 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 Won279,460 million of construction grants, and offset Won61,285 million against depreciation expense, and Won18,274 million against utility plant removal cost for the six-month period ended June 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 marketable equity security, 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. 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 counts 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 Won253,492 million and Won226,708 million as of June 30, 2003 and December 31, 2002, respectively. Actual severance payments were Won4,374 million and Won3,387 million for the six-month periods ended June 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 Won95 million and Won99 million as of June 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. -5- 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 Won1,193.10 and Won1,200.40 to US$ 1.00 at June 30, 2003 and December 31, 2002, respectively. The translation gains or losses are reflected in current operations. 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 629,259,682 shares and 639,008,899 shares for the three-month periods ended June 30, 2003 and 2002, respectively, and 631,387,812 shares and 638,988,360 shares for the six-month periods ended June 30, 2003 and 2002, respectively. Comparative Presentation The Company does not present cash flows for the three-month and six-month periods ended June 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 Won12,552,973 million. (2) Publicly announced land prices The published price of the Company's land as of June 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 16,216,336 Won3,309,168 Won2,811,277
(3) Utility plant Utility plant as of June 30, 2003 and December 31, 2002 is as follows (won in millions):
March 31, December 31, 2003 2002 ------------- ------------- Land Won 3,309,168 Won 3,321,378 Buildings 2,170,378 2,135,878 Structures 23,090,240 22,415,717 Machinery 6,487,444 6,266,774 Vehicles 53,465 55,334 Ships 252 266 Others 248,692 236,689 ------------- ------------- Won35,359,639 Won34,432,036 ============= =============
(4) Changes of utility plant Changes of cost of utility plant, accumulated depreciation and construction grants for the six-month period ended June 30, 2003 are shown below (won in millions): < Cost >
Increase Decrease December 31, -------------------------- ------------------------- June 30, 2002 Acquisition Other Disposal Other 2003 ------------- ------------ ------------ ---------- ------------ ------------- Land Won 3,321,378 Won - Won 18,736 Won 30,946 Won - Won 3,309,168 Buildings 2,135,878 - 41,069 6,025 544 2,170,378 Structures 22,415,717 - 802,372 94,233 33,616 23,090,240 Machinery 6,266,774 - 259,093 32,751 5,672 6,487,444 Vehicles 55,334 - 1,713 3,582 - 53,465 Ships 266 - - 14 - 252 Others 236,689 - 13,614 1,611 - 248,692 Construction in- progress 1,986,138 1,975,701 892 - 1,125,686 2,837,045 ------------- ------------ ------------ ---------- ------------ ------------- Won36,418,174 Won1,975,701 Won1,137,489 Won169,162 Won1,165,518 Won38,196,684 ============= ============ ============ ========== ============ =============
< Accumulated depreciation >
Increase Decrease December 31, -------------------------- ------------------ June 30, 2002 Depreciation Other Disposal Other 2003 ------------ ------------ --------- --------- ----- ------------ Buildings Won 344,790 Won 53,077 Won 5,926 Won 1,495 Won- Won 402,298 Structures 2,984,483 354,686 19,728 22,227 - 3,336,670 Machinery 2,371,808 323,390 35,732 21,915 - 2,709,015 Vehicles 45,307 2,991 5 3,575 - 44,728 Ships 196 9 - 10 - 195 Others 193,040 11,725 42 1,543 - 203,264 ------------ ---------- --------- --------- ---- ------------ Won5,939,624 Won745,878 Won61,433 Won50,765 Won- Won6,696,170 --========== ========== ========= ========= ==== ============
-7- < Construction grants >
Increase Decrease -------------------- ----------------------------- Received Offset December 31, from against Offset against June 30, 2002 customers Other depreciation removal cost 2003 ------------ ---------- ----- ------------ -------------- ------------ Construction grants Won2,321,138 Won279,460 Won- Won61,285 Won18,274 Won2,521,039
4. INTANGIBLES: (1) Intangibles as of June 30, 2003 are shown below (won in millions):
Accumulated Cost amortization Impairment Book value ---------- ------------ ---------- ---------- Development cost Won 97,661 Won 39,215 Won- Won58,446 Others 115,635 83,184 - 32,451 ---------- ---------- ---- --------- Won213,296 Won122,399 Won- Won90,897 ========== ========== ==== =========
(2) Changes of intangibles for the six-month period ended June 30, 2003 are shown below (won in millions):
Increase Decrease December 31, -------------------- --------------------- June 30, 2002 Merger Other Amortization Other 2003 ------------ ------ --------- ------------ ------ --------- Development cost Won63,659 Won- Won 4,392 Won 9,605 Won - Won58,446 Others 31,215 - 6,463 5,104 123 32,451 --------- ---- --------- --------- ------ --------- Won94,874 Won- Won10,855 Won14,709 Won123 Won90,897 ========= ==== ========= ========= ====== =========
(3) Ordinary development expenses for the three-month and six-month periods ended June 30, 2003 and 2002 are as follows (won in millions):
2003 2002 --------------------------- ------------------------- Three-month Six-month Three-month Six-month ----------- --------- ----------- --------- Ordinary development expenses Won25,346 Won39,848 Won19,511 Won33,225
5. INSURED ASSETS: Insured assets as of June 30, 2003 are as follows (won in millions):
Insured assets Insurance type Insured value Insurer ------------------------- ---------------------- ------------- -------------------------------- Buildings and machinery Fire insurance Won325,670 LG insurance Co., Ltd. Buildings and machinery Assemble insurance 365,312 LG insurance Co., Ltd. Buildings General insurance 144,011 Samsung fire insurance Co., Ltd. and others Construction in progress Construction insurance 119,424 Samsung 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 June 30, 2003 and December 31, 2002 are as follows (won in millions):
December 31, June 30, 2003 2002 ------------- ------------- Other current assets Held-to-maturity securities Won 5 Won - Investment securities Available-for-sale-securities 102,690 86,492 Held-to-maturity securities 37 55 Securities subject to equity method 22,893,347 22,152,731 ------------- ------------- 22,996,074 22,239,278 ------------- ------------- Won22,996,079 Won22,239,278 ============= =============
Held-to-maturity securities are government and municipal bonds. (2) Available-for-sale securities as of June 30, 2003 and December 31, 2002 are as follows (won in millions):
June 30, 2003 December 31, 2002 ----------------------------------------- --------------------------- Ownership Acquisition Ownership Company name (%) cost Book value (%) Book value - -------------------------------------------- --------- ----------- ---------- --------- ---------- Securities market stabilization fund 7.57 Won 20,744 Won 20,744 7.57 Won20,744 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. - 1,364 120 - 120 Investment securities in treasury stock fund - 23,830 14,220 - 10,773 ---------- ---------- --------- Won113,544 Won102,690 Won86,492 ========== ========== =========
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 Won9,610 million and Won8,509 million as of June 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. -9- (3) Securities subject to the equity method as of June 30, 2003 and December 31, 2002 are as follows (won in millions):
June 30, 2003 December 31, 2002 ------------------------------------------------------------ ------------------------- Ownership Acquisition Net asset Book Ownership Book Company name (%) Cost Value Value (%) Value - ------------------------------------- --------- ------------- ------------- ------------- --------- ------------- Korea Hydro & Nuclear Power Co., Ltd. 100.0 Won 9,364,799 Won10,798,504 Won10,798,504 100.0 Won10,577,527 Korea South-East Power Co., Ltd. 100.0 1,232,004 1,815,661 1,815,661 100.0 1,679,117 Korea Midland Power Co., Ltd. 100.0 1,325,891 1,932,746 1,932,746 100.0 1,781,127 Korea Western Power Co., Ltd. 100.0 1,442,638 1,859,252 1,859,252 100.0 1,772,973 Korea Southern Power Co., Ltd. 100.0 1,797,378 1,999,885 1,999,885 100.0 1,953,743 Korea East-West Power Co., Ltd. 100.0 2,322,905 2,402,167 2,402,167 100.0 2,373,207 Korea Power Engineering Co., Ltd.(*) 97.9 4,991 177,695 55,573 97.9 51,991 Korea Plant Service & Engineering Co., Ltd.(*) 100.0 6,000 257,789 257,788 100.0 238,947 KEPCO Nuclear Fuel Co., Ltd.(*) 96.4 89,757 151,152 138,123 96.4 134,538 Korea Electric Power Data Network Co., Ltd.(*) 100.0 64,000 123,416 121,255 100.0 118,075 Korea Electric Power Industrial Development, Ltd.(*) 49.0 7,987 19,745 19,745 100.0 40,730 Korea Gas Corporation 24.5 94,500 717,478 717,478 24.5 690,705 Korea District Heating Co.(*) 26.1 5,660 153,286 153,286 26.1 147,898 Powercomm Corporation 43.1 323,470 357,856 357,856 44.0 359,090 KEPCO International Hong Kong Ltd.(*) 100.0 15,102 146,108 146,108 100.0 124,808 KEPCO International Philippines Inc.(*) 100.0 103,610 117,920 117,920 100.0 108,255 ------------- ------------- ------------- ------------- Won18,200,692 Won23,030,660 Won22,893,347 Won22,152,731 ============= ============= ============= =============
(*) 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 June 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 Won122,123 million, Won13,029 million and Won2,161 million, respectively, as of June 30, 2003 and Won119,475 million, Won15,562 million and Won2,401 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 Won44,104 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. -10- Details of valuation using the equity method for the six-month period ended June 30, 2003 are as follows (won in millions):
Gain on valuation December 31, ------------------------------------------ Other June 30, Company name 2002 1st quarter 2nd quarter Total changes(*) 2003 - ------------------------------------ ------------- ----------- ----------- ---------- ----------- ------------- Korea Hydro & Nuclear Power Co., Ltd. Won10,577,527 Won273,472 Won162,500 Won 435,972 Won(214,995) Won10,798,504 Korea South-East Power Co., Ltd. 1,679,117 101,342 68,472 169,814 (33,270) 1,815,661 Korea Midland Power Co., Ltd. 1,781,127 104,872 92,632 197,504 (45,885) 1,932,746 Korea Western Power Co., Ltd. 1,772,973 64,345 68,740 133,085 (46,806) 1,859,252 Korea Southern Power Co., Ltd. 1,953,743 38,735 53,362 92,097 (45,955) 1,999,885 Korea East-West Power Co., Ltd. 2,373,207 34,682 25,519 60,201 (31,241) 2,402,167 Korea Power Engineering Co., Ltd. 51,991 14,264 1,071 15,335 (11,753) 55,573 Korea Plant Service & Engineering Co., Ltd. 238,947 7,977 19,864 27,841 (9,000) 257,788 KEPCO Nuclear Fuel Co., Ltd. 134,538 2,575 2,937 5,512 (1,927) 38,123 Korea Electric Power Data Network Co., Ltd. 118,075 2,777 4,903 7,680 (4,500) 121,255 Korea Electric Power Industrial Development, Ltd. 40,730 616 151 767 (21,752) 19,745 Korea Gas Corporation 690,705 50,560 5,418 55,978 (29,205) 717,478 Korea District Heating Co. 147,898 7,528 (358) 7,170 (1,782) 153,286 Powercomm Corporation 359,090 (4,665) 8,627 3,962 (5,196) 357,856 KEPCO International Hong Kong Ltd. 124,808 5,242 22,860 28,102 (6,802) 146,108 KEPCO International Philippines Inc. 108,255 5,815 4,472 10,287 (622) 117,920 ------------- ---------- ---------- ------------ ----------- ------------- Won22,152,731 Won710,137 Won541,170 Won1,251,307 Won(510,691) Won22,893,347 ============= ========== ========== ============ =========== =============
(*) 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 June 30, 2003 and December 31, 2002 are as follows (won in millions):
December 31, June 30, 2003 2002 ------------- ------------ Valuation using the equity method Won47,929 Won60,885 Valuation on available for sale securities (9,610) (8,509) --------- --------- Won38,319 Won52,376 ========= =========
7. LOANS TO EMPLOYEES: The Company has provided housing and tuition loans to employees as follows (won in millions):
December 31, June 30, 2003 2002 ------------- ------------ Short-term loans Won 8,188 Won 8,450 Long-term loans 137,059 128,656 ---------- ---------- Won145,247 Won137,106 ========== ==========
8. INVENTORIES: Inventories as of June 30, 2003 and December 31, 2002 consist of the following (won in millions):
December 31, June 30, 2003 2002 ------------- ------------ Raw materials Won 1,770 Won 1,291 Supplies 60,421 57,169 Other 5,840 6,757 --------- --------- Won68,031 Won65,217 ========= =========
-11- 9. SHAREHOLDERS' EQUITY: (1) Capital The Company has 1,200,000,000 authorized shares of Won5,000 par value common stock, of which 640,100,876 shares are issued as of June 30, 2003. (2) Capital Surplus Capital surplus as of June 30, 2003 and December 31, 2002 is as follows (won in millions):
December 31, June 30, 2003 2002 ------------- ------------- Paid-in capital in excess of par value Won 799,876 Won 799,876 Reserves for asset revaluation 12,552,973 12,552,973 Other capital surplus 961,700 958,730 ------------- ------------- Won14,314,549 Won14,311,579 ============= =============
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 Won12,552,973 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 June 30, 2003 and December 31, 2002 consist of the following (won in millions):
December 31, June 30, 2003 2002 -------------- ------------- Legal reserve Won 1,600,252 Won 1,600,252 Reserve for business rationalization 31,900 31,900 Reserve for business expansion 10,925,338 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 ------------- ------------- Won17,899,939 Won15,351,474 ============= =============
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 June 30, 2003 and December 31, 2002 are as follows (won in millions):
December 31, June 30, 2003 2002 -------------- ------------ Treasury stock Won(195,209) Won(16,669) Gain on valuation of equity method securities 47,929 60,885 Loss on valuation of available for sale securities (9,610) (8,509) ----------- ---------- Won(156,890) Won 35,707 =========== ==========
The Company has shares held as treasury stock amounting to Won195,209 million (10,798,355 shares) and Won16,669 million (913,375 shares) as of June 30, 2003 and December 31, 2002, respectively, for the purpose of stock price stabilization. 10. BORROWINGS AND DEBENTURES: (1) Long-term borrowings as of June 30, 2003 and December 31, 2002 are as follows (won in millions):
Annual interest December 31, Financial institution Type rate (%) June 30, 2003 2002 -------------------------------- ------------------- --------------- ------------- ------------ Local currency Korea Development Bank Industrial facility 4.75~9.00 Won3,024,315 Won2,591,564 Kookmin Bank General 6.07~6.16 - 85,714 Others " 5.50~6.00 35 37 ------------ ------------ 3,024,350 2,677,315 ------------ ------------ Foreign currency Barclays International Financial Services (Ireland) Ltd. Commercial 6M Libor-1.00 280,720 376,482 Kredit Anstalt Fur Wieder Aufbau Facility 6.00 - 180 Asia Development Bank " 6.00 1,065 1,415 ------------ ------------ 281,785 378,077 ------------ ------------ 3,306,135 3,055,392 Less: Current portion (860,189) (819,358) ------------ ------------ Won2,445,946 Won2,236,034 ============ ============
(2) Debentures as of June 30, 2003 and December 31, 2002 are as follows (won in millions):
Annual interest December 31, rate (%) June 30, 2003 2002 --------------- ------------- ------------- Domestic debentures (Electricity bonds) 4.70~11.30 Won 3,630,000 Won 2,755,000 Foreign debentures 1.04~8.25 6,582,603 6,637,477 ------------ ------------- 10,212,603 9,392,477 Less: Current portion (3,094,810) (1,635,364) Discount on debentures issued (17,095) (19,834) ------------- ------------- Won 7,100,698 Won 7,737,279 ============= =============
-13- (3) Foreign currency debts, by currency, as of June 30, 2003 and December 31, 2002 are as follows (won in millions):
June 30, 2003 December 31, 2002 ------------------------------------- ------------------------------------- Foreign currencies Won equivalent Foreign currencies Won equivalent ------------------ --------------- ------------------ -------------- Long-term borrowings US$ 225,893,057 Won 281,785 US$ 301,179,115 Won 377,897 EUR 143,104 180 ------------ ------------ 281,785 378,077 ------------ ------------ Debentures US$ 3,979,875,632 4,755,805 US$ 3,980,542,219 4,785,584 JPY175,060,000,000 1,744,315 JPY175,060,000,000 1,773,130 EUR 25,183,000 34,308 EUR 25,183,000 31,664 GBP 24,467,000 48,175 GBP 24,467,000 47,099 ------------ ------------ 6,582,603 6,637,477 ------------ ------------ Won6,864,388 Won7,015,554 ============ ============
(4) Aggregate maturities of the Company's long-term debt as of June 30, 2003 are as follows (won in millions):
Year Local Foreign ended currency currency Electricity Foreign June 30 borrowings borrowings bonds debentures Total ---------- ------------ ---------- ------------ ------------ ------------- 2004 Won 671,977 Won188,212 Won1,080,000 Won2,014,810 Won 3,954,999 2005 728,175 93,573 1,290,000 1,459,633 3,571,381 2006 882,013 - 390,000 570,087 1,842,100 2007 500,707 - 150,000 49,736 700,443 2008 225,603 - 600,000 1,186,527 2,012,130 Thereafter 15,875 - 120,000 1,301,810 1,437,685 ------------ ---------- ------------ ------------ ------------- Won3,024,350 Won281,785 Won3,630,000 Won6,582,603 Won13,518,738 ============ ========== ============ ============ =============
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 Won33,870 million as of June 30, 2003. Depreciation of the leased assets amounted to Won436 million for the six-month period ended June 30, 2003 (2) Annual payments under financial and operating lease agreements as of June 30, 2003 are as follows (won in millions):
Amount ----------------------------------- Year ended June 30 Financial lease Operating lease --------------------- --------------- --------------- 2004 Won 6,892 Won3,300 2005 2,236 179 --------- -------- 9,128 3,479 Less: Interest (368) - Current portion (6,532) - --------- -------- Won 2,228 Won3,479 ========= ========
-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 June 30, 2003 and December 31, 2002 are as follows (won in millions):
June 30, 2003 December 31, 2002 ---------------------------- --------------------------- Foreign Equivalent Foreign Equivalent Account Currencies Korean Won Currencies Korean Won ------------------------- ------------ ---------- ------------- ---------- Cash and cash equivalents US$ 57,356 Won 68 US$16,395,438 Won19,681 Trade receivables US$3,383,742 4,037 US$ 3,497,537 4,198 Other account receivables US$ 583,785 697 US$ 644,263 773 Other non-current assets US$ 11,560 14 US$ 11,560 14 " JPY5,859,783 58 JPY 5,859,783 59 -------- --------- Won4,874 Won24,725 ======== =========
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 June 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 & Deutsche Bank (*) 2002 2007 JPY76,700 US$ 650 1.18 4.25 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 June 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- Max(Libor- 1998-2007 (formerly Bankers Trust Co.) Libor, 0) 6.074, 0) Deutsche Bank US$ 100 Max(Libor- Max(6.074- 1998-2007 (formerly Bankers Trust Co.) 6.074,0) Libor, 0)
(3) The gains and losses on swap transactions for the three-month and six-month periods ended June 30, 2003 and 2002 are as follows (won in millions):
2003 2002 --------------------------- -------------------------- Other income (expense) Three-month Six-month Three-month Six-month ---------------------- ----------- ---------- ----------- ---------- Currency swap Gains Won28,113 Won 29,801 Won 93,067 Won 84,157 Losses (9,562) (27,347) (35,149) (33,042) Interest rate swap Gains 9,250 11,205 7,451 7,928 Losses (5,348) (8,528) (11,167) (8,708) --------- ---------- ---------- ---------- Won22,453 Won 5,131 Won 54,202 Won 50,335 ========= ========== ========== ==========
-16- 14. POWER GENERATION, TRANSMISSION AND DISTRIBUTION EXPENSES: Power generation, transmission and distribution expenses for the three-month and six-month periods ended June 30, 2003 and 2002 are as follows (won in millions):
2003 2002 -------------------------- -------------------------- Three-month Six-month Three-month Six-month ----------- ------------ ----------- ------------ Fuel Won 2,686 Won 5,388 Won 2,305 Won 4,344 Labor 128,364 247,144 108,513 222,343 Employee benefits 21,979 35,772 14,423 24,024 Taxes and dues 599 1,700 1,993 2,448 Rent 3,593 12,907 3,963 12,727 Depreciation 374,206 740,485 350,372 674,226 Maintenance 224,738 339,814 204,000 307,746 Commission and consultation fees 17,267 31,848 13,856 23,399 Compensation expense 11,349 16,760 16,962 24,321 Ordinary development expenses 21,305 33,531 15,275 28,895 Utility plant removal cost 49,689 90,890 46,647 85,747 Others 16,408 32,854 13,899 29,627 ---------- ------------ ---------- ------------ Won872,183 Won1,589,093 Won792,208 Won1,439,847 ========== ============ ========== ============
15. SELLING AND ADMINISTRATIVE EXPENSES: Selling and administrative expenses for the three-month and six-month periods ended June 30, 2003 and 2002 are as follows (won in millions):
2003 2002 ------------------------- -------------------------- Three-month Six-month Three-month Six-month ----------- ---------- ----------- ---------- Labor Won 80,041 Won156,205 Won 71,378 Won146,153 Employee benefits 15,631 24,834 11,736 18,455 Taxes and dues 714 1,811 704 1,629 Rent 2,915 8,282 4,237 9,250 Depreciation 10,315 20,088 11,866 22,572 Maintenance 3,976 5,459 3,626 5,107 Commission and consultation fees 25,884 39,299 18,551 32,278 Ordinary development expenses 4,036 6,289 2,088 4,324 Collection expense 61,669 120,501 56,668 110,582 Promotion 4,875 8,636 4,997 8,591 Bad debts 2,614 5,722 4,029 8,768 Communication 6,056 12,153 6,021 11,562 Insurance 1,606 4,462 2,237 4,374 Rewards 157 296 452 515 Others 12,043 23,651 10,811 21,323 ---------- ---------- ---------- ---------- Won232,532 Won437,688 Won209,401 Won405,483 ========== ========== ========== ==========
-17- 16. INCOME TAX EXPENSE: (1) Income tax expense and effective tax rate for the three-month and six-month periods ended June 30, 2003 and 2002 are as follows (won in millions):
2003 2002 ------------------------- ------------------------- Three-month Six-month Three-month Six-month ----------- ---------- ----------- ---------- Income tax currently payable Won259,505 Won309,167 Won325,920 Won514,396 Changes in deferred income taxes (25,785) 162,152 48,631 190,704 ---------- ---------- ---------- ---------- Income tax expense Won233,720 Won471,319 Won374,551 Won705,100 ========== ========== ========== ========== Effective tax rate 24.3% 26.9% 29.2% 29.4%
(2) Deferred income tax liabilities as of June 30, 2003 and December 31, 2002 are as follows (won in millions).
December 31, June 30, 2003 2002 ------------- ------------- Accumulated temporary differences Won(5,058,580) Won(4,559,354) Tax rate (%) 29.7 29.7 ------------- ------------- Deferred income tax liabilities Won(1,502,398) Won(1,354,128) ============= =============
Accumulated temporary differences and deferred income tax liabilities as of December 31, 2002 were adjusted by Won46,741 million and Won13,882 million, respectively, due to the 2002 income tax return. 17. RELATED PARTY TRANSACTIONS: (1) Transactions with related parties for the three-month and six-month periods ended June 30, 2003 and 2002 are as follows (won in millions):
2003 2002 ----------------------------- ----------------------------- Related party Transaction Three-month Six-month Three-month Six-month - --------------------------------------- -------------------- ------------ ------------ ------------ ------------ Sales and other income: Korea Hydro & Nuclear Power Co., Ltd. Sales of electricity Won 30,626 Won 50,845 Won 25,846 Won 44,143 and others Korea South-East Power Co., Ltd. " 8,175 17,148 10,928 19,495 Korea Midland Power Co., Ltd. " 7,316 13,431 5,413 10,259 Korea Western Power Co., Ltd. " 14,561 17,268 8,684 19,334 Korea Southern Power Co., Ltd. " 4,338 8,588 4,713 9,179 Korea East-West Power Co., Ltd. " 9,004 19,290 13,501 22,897 Others " 16,510 39,483 14,126 83,459 ------------ ------------ ------------ ------------ Won 90,530 Won 166,053 Won 83,211 Won 208,766 ============ ============ ============ ============ Purchases and others: Korea Hydro & Nuclear Power Co., Ltd. Purchase of electricity Won1,129,354 Won2,417,162 Won1,152,183 Won2,279,475 and others Korea South-East Power Co., Ltd. " 316,352 735,508 353,941 727,855 Korea Midland Power Co., Ltd. " 438,601 968,803 339,490 658,351 Korea Western Power Co., Ltd. " 475,900 1,052,707 469,867 937,066 Korea Southern Power Co., Ltd. " 525,422 1,000,022 437,706 917,749 Korea East-West Power Co., Ltd. " 507,892 1,010,237 419,258 942,528 Korea Power Engineering Co., Inc. Designing of the power 68,809 78,917 8,752 17,584 plant and others Korea Plant Service & Engineering Co., Utility plant 11,667 20,595 11,323 20,249 Ltd. maintenance Korea Electric Power Data Network Co., Maintenance of 78,265 98,094 29,308 48,823 Ltd. computer system Others Commissions for 73,463 86,487 34,128 73,598 service and others ------------ ------------ ------------ ------------ Won3,625,725 Won7,468,532 Won3,255,956 Won6,623,278 ============ ============ ============ ============
-18- (2) Receivables arising from related parties transactions as of June 30, 2003 and December 31, 2002 are as follows (won in millions):
December 31, June 30, 2003 2002 ------------------------------------------- ------------ Other account Trade receivables Related party receivables and other Total Total - -------------------------------------- ----------- ------------- --------- ------------ Korea Hydro & Nuclear Power Co., Ltd. Won - Won 193 Won 193 Won 8,020 Korea South-East Power Co., Ltd. 1,883 236 2,119 3,639 Korea Midland Power Co., Ltd. 1,546 381 1,927 382 Korea Western Power Co., Ltd. 2,034 105 2,139 3,145 Korea Southern Power Co., Ltd. 1,208 315 1,523 1,647 Korea East-West Power Co., Ltd. 2,447 199 2,646 4,518 Others - 4,114 4,114 10,603 -------- -------- --------- --------- Won9,118 Won5,543 Won14,661 Won31,954 ======== ======== ========= =========
(3) Payables arising from related parties transactions as of June 30, 2003 and December 31, 2002 are as follows (won in millions):
December 31, June 30, 2003 2002 ------------------------------------------ ------------ Other accounts Trade payable Related party payables and other Total Total - ------------------------------------------- ---------- -------------- ------------ ------------ Korea Hydro & Nuclear Power Co., Ltd. Won316,396 Won 816 Won 317,212 Won 368,509 Korea South-East Power Co., Ltd. 95,743 110 95,853 124,031 Korea Midland Power Co., Ltd. 123,334 170 123,504 168,410 Korea Western Power Co., Ltd. 132,051 116 132,167 176,816 Korea Southern Power Co., Ltd. 142,262 58 142,320 130,181 Korea East-West Power Co., Ltd. 132,354 699 133,053 142,017 Korea Power Engineering Co., Inc. - 7,330 7,330 7,108 Korea Plant Service & Engineering Co., Ltd. - 7,384 7,384 6,845 Korea Electric Power Data Network Co., Ltd. - 29,647 29,647 25,502 Others 358 19,753 20,111 22,593 ---------- --------- ------------ ------------ Won942,498 Won66,083 Won1,008,581 Won1,172,012 ========== ========= ============ ============
18. CONTINGENT LIABILITIES: (1) The Company is engaged in 237 lawsuits as a defendant and 47 lawsuits as a plaintiff. The total amount claimed from the Company is Won88,811 million and the total amount claimed by the Company is Won110,263 million as of June 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 Won17,646,157 million, including borrowings of Won13,825,884 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 June 30, 2003 is Won5,109,031 million (including the Company's borrowings of Won1,151,422 million). -19- (3) The Company has provided debt repayment guarantees for its related parties in connection with the related parties' borrowings as of June 30, 2003 as follows:
Loan type Guaranteed company Financial institutions Amount ---------------- ---------------------------------- ---------------------- -------------- Foreign currency KEPCO International Hong Kong Ltd. Nippon Life Insurance US$ 82,006,000 loan " Norinchukin Bank 35,000,000 " Korea Development Bank 11,590,000 KEPCO Philippines Co. Korea Development Bank 54,522,000 -------------- US$183,118,000 ==============
(4) KEPCO Ilijan Corporation, which is the subsidiary of KEPCO International Philippines Inc., is engaged in the power generation business in the Philippines and borrowed US$ 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$228,044,114 for the Company's commercial borrowings. In addition, Korea Development Bank has also provided the repayment guarantee for some of foreign currency debentures of the Company, which existed at the time of spin-off, but not redeemed at June 30, 2003, instead of the collective responsibilities of the power generation subsidiaries to facilitate the Restructuring Plan. Guarantee amounts by currency are as follows.
USD JPY EUR GBP ------------- -------------- ---------- ---------- Guaranteed amounts 3,686,080,502 44,747,400,000 28,083,012 32,785,780 (including interest)
(6) Five banks including the National Agricultural Cooperative Federation has provided the Company a credit (overdraft) line amounting to Won245,000 million as of June 30, 2003. (7) The Company entered into a turnkey contract with the Korea Peninsula Energy Development Organization (KEDO) on December 15, 1999, to construct two 1,000,000 KW-class pressurized light-water reactor units in North Korea. The contract amount is US$ 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 Won570,707 million for the six-month period ended June 30, 2003. 19. 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 six-month periods ended June 30, 2003 are as follows (won in millions):
2003 -------------------------------- Three-month Six-month ----------- ------------ Reclassification of long term loans to short-term loans Won 1,642 Won 3,953 Reclassification of construction in-progress to utility plant 711,429 1,136,597 Reclassification of debenture to current portion 1,466,432 1,476,432 Reclassification of long-term borrowings to current portion 261,061 441,092
-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/ Hi-Taek Lee ----------------------------------- Name: Hi-Taek Lee Title: Chief Financial Officer Date : September 1, 2003 -----END PRIVACY-ENHANCED MESSAGE-----