-----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, P9YgW6fRyE5di4j58ipK7GisrM2/fITm6P2HjcytVvoc3YKjNOQkh0XQygvwYzZz CrHaQWvbyoX68igdXUMhGw== 0001145549-03-001492.txt : 20031120 0001145549-03-001492.hdr.sgml : 20031120 20031119200928 ACCESSION NUMBER: 0001145549-03-001492 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20031119 FILED AS OF DATE: 20031120 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: 031014116 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 u98787e6vk.txt KOREA ELECTRIC POWER CORPORATION 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 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 -----END PRIVACY-ENHANCED MESSAGE-----