Form 20-F

20-F 1 d853940d20f.htm FORM 20-F Form 20-F

As filed with the Securities and Exchange Commission on April 29, 2020

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F

(Mark One)

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☑	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from to

Commission File Number: 001-13372

KOREA ELECTRIC POWER CORPORATION

(Exact name of registrant as specified in its charter)


N/A		The Republic of Korea
*(Translation of registrant’s name into English)*		*(Jurisdiction of incorporation or organization)*

55 Jeollyeok-ro, Naju-si, Jeollanam-do, 58322, Korea

(Address of principal executive offices)

Sihyung Park, +82 61 345 4213, sihyung.park@kepco.co.kr, +82 61 345 4299

55 Jeollyeok-ro, Naju-si, Jeollanam-do, 58322, Korea

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbol(s):	Name of each exchange on which registered:
Common stock, par value Won 5,000 per share	KEP	New York Stock Exchange*
American depositary shares, each representing one-half of share of common stock	KEP	New York Stock Exchange

*	Not for trading, but only in connection with the listing of American depositary shares on the New York Stock Exchange, pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

One Hundred Year 7.95% Zero-to-Full Debentures, due April 1, 2096

6% Debentures due December 1, 2026

7% Debentures due February 1, 2027

6³⁄₄% Debentures due August 1, 2027

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period

covered by the annual report:

641,964,077 shares of common stock, par value of Won 5,000 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☑

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files): Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Emerging Growth Company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☐ International Financial Reporting Standards as issued by the International Accounting Standards Board ☑ Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

TABLE OF CONTENTS


			Page
PART I				2
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS			2
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE			2
ITEM 3.	KEY INFORMATION			2
	Item 3.A.	Selected Financial Data		2
	Item 3.B.	Capitalization and Indebtedness		4
	Item 3.C.	Reasons for the Offer and Use of Proceeds		4
	Item 3.D.	Risk Factors		4
ITEM 4.	INFORMATION ON THE COMPANY			29
	Item 4.A.	History and Development of the Company		29
	Item 4.B.	Business Overview		30
	Item 4.C.	Organizational Structure		79
	Item 4.D.	Property, Plant and Equipment		83
ITEM 4A.	UNRESOLVED STAFF COMMENTS			84
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS			84
	Item 5.A.	Operating Results		84
	Item 5.B.	Liquidity and Capital Resources		101
	Item 5.C.	Research and Development, Patents and Licenses, etc.		106
	Item 5.D.	Trend Information		107
	Item 5.E.	Off-Balance Sheet Arrangements		107
	Item 5.F.	Tabular Disclosure of Contractual Obligations		107
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES			117
	Item 6.A.	Directors and Senior Management		117
	Item 6.B.	Compensation		120
	Item 6.C.	Board Practices		120
	Item 6.D.	Employees		121
	Item 6.E.	Share Ownership		122
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS			122
	Item 7.A.	Major Shareholders		122
	Item 7.B.	Related Party Transactions		122
	Item 7.C.	Interests of Experts and Counsel		123
ITEM 8.	FINANCIAL INFORMATION			123
	Item 8.A.	Consolidated Statements and Other Financial Information		123
	Item 8.B.	Significant Changes		126
ITEM 9.	THE OFFER AND LISTING			126
	Item 9.A.	Offer and Listing Details		126
	Item 9.B.	Plan of Distribution		128
	Item 9.C.	Markets		128
	Item 9.D.	Selling Shareholders		131
	Item 9.E.	Dilution		131
	Item 9.F.	Expenses of the Issue		131
ITEM 10.	ADDITIONAL INFORMATION			132
	Item 10.A.	Share Capital		132
	Item 10.B.	Memorandum and Articles of Incorporation		132
	Item 10.C.	Material Contracts		139
	Item 10.D.	Exchange Controls		139
	Item 10.E.	Taxation		144
	Item 10.F.	Dividends and Paying Agents		155
	Item 10.G.	Statements by Experts		155


			Page
	Item 10.H.	Documents on Display		155
	Item 10.I.	Subsidiary Information		156
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			156
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES			161
	Item 12.A.	Debt Securities		161
	Item 12.B.	Warrants and Rights		161
	Item 12.C.	Other Securities		162
	Item 12.D.	American Depositary Shares		162
PART II				164
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES			164
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS			164
ITEM 15.	CONTROLS AND PROCEDURES			164
ITEM 16.	[RESERVED]			165
ITEM 16.A.	AUDIT COMMITTEE FINANCIAL EXPERT			165
ITEM 16.B.	CODE OF ETHICS			165
ITEM 16.C.	PRINCIPAL AUDITOR FEES AND SERVICES			165
ITEM 16.D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE			166
ITEM 16.E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS			166
ITEM 16.F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT			166
ITEM 16.G.	CORPORATE GOVERNANCE			167
ITEM 16.H.	MINE SAFETY DISCLOSURE			174
PART III				175
ITEM 17.	FINANCIAL STATEMENTS			175
ITEM 18.	FINANCIAL STATEMENTS			175
ITEM 19.	EXHIBITS			175

CERTAIN DEFINED TERMS AND CONVENTIONS

All references to “Korea” or the “Republic” in this annual report on Form 20-F, or this annual report, are references to the Republic of Korea. All references to the “Government” in this annual report are references to the government of the Republic. All references to “we,” “us,” “our,” “ours,” the “Company” or “KEPCO” in this annual report are references to Korea Electric Power Corporation and, as the context may require, its subsidiaries, and the possessive thereof, as applicable. All references to “the Ministry of Trade, Industry and Energy” and “the Ministry of Economy and Finance” include the respective predecessors thereof. All references to “tons” are to metric tons, equal to 1,000 kilograms, or 2,204.6 pounds. Any discrepancies in any table between totals and the sums of the amounts listed are due to rounding. All references to “IFRS” in this annual report are references to the International Financial Reporting Standards as issued by the International Accounting Standard Board. Unless otherwise stated, all of our financial information presented in this annual report has been prepared on a consolidated basis and in accordance with IFRS.

In addition, in this annual report, all references to:

•

“EWP” are to Korea East-West Power Co., Ltd.,

•

“KHNP” are to Korea Hydro & Nuclear Power Co., Ltd.,

•

“KOMIPO” are to Korea Midland Power Co., Ltd.,

•

“KOSEP” are to Korea South-East Power Co., Ltd.,

•

“KOSPO” are to Korea Southern Power Co., Ltd., and

•

“KOWEPO” are to Korea Western Power Co., Ltd.,

each of which is our wholly-owned generation subsidiary.

FORWARD-LOOKING STATEMENTS

This annual report includes “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934), including statements regarding our expectations and projections for future operating performance and business prospects. The words “believe,” “expect,” “anticipate,” “estimate,” “project” and similar words used in connection with any discussion of our future operation or financial performance identify forward-looking statements. In addition, all statements other than statements of historical facts included in this annual report are forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this annual report.

This annual report discloses, under the caption Item 3.D. “Risk Factors” and elsewhere, important factors that could cause actual results to differ materially from our expectations (“Cautionary Statements”). All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Cautionary Statements.

PART I

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.

KEY INFORMATION

Item 3.A. Selected Financial Data

The selected consolidated financial data set forth below as of and for the years ended December 31, 2015, 2016, 2017, 2018 and 2019 have been derived from our audited consolidated financial statements which have been prepared in accordance with IFRS.

You should read the following data with the more detailed information contained in Item 5. “Operating and Financial Review and Prospects” and our consolidated financial statements included in Item 18. “Financial Statements.” Historical results do not necessarily predict future results.

Consolidated Statement of Comprehensive Income (Loss) Data


	2015			2016			2017			2018			2019			2019
	(in billions of Won and millions of US$, except per share data)⁽¹⁾
Sales	￦	58,582		￦	59,763		￦	59,336		￦	60,033		￦	58,568		$	50,686
Cost of sales		45,458			45,550			52,099			58,208			57,780			50,004
Gross profit		13,124			14,213			7,237			1,825			788			682
Selling and administrative expenses		2,153			2,639			2,763			2,628			2,670			2,311
Other income, net		699			652			689			739			756			654
Other gains (losses), net		8,611			70			157			(621	)		(582	)		(503	)
Operating profit (loss)		20,281			12,296			5,320			(685	)		(1,708	)		(1,478	)
Finance expense, net		(1,832	)		(1,646	)		(1,596	)		(1,674	)		(1,772	)		(1,534	)
Income (loss) before income taxes		18,656			10,513			3,614			(2,001	)		(3,266	)		(2,826	)
Income tax (expense) benefit		(5,239	)		(3,365	)		(2,173	)		826			1,002			867
Profit (loss) for the period		13,416			7,148			1,441			(1,175	)		(2,264	)		(1,959	)
Other comprehensive income (loss)		34			(2	)		(95	)		(107	)		135			117
Total comprehensive income (loss)		13,450			7,146			1,346			(1,282	)		(2,128	)		(1,842	)
Profit (loss) attributable to:
Owners of the Company		13,289			7,048			1,299			(1,315	)		(2,346	)		(2,030	)
Non-controlling interests		127			100			142			140			82			71
Total comprehensive income (loss) attributable to:
Owners of the Company		13,308			7,042			1,230			(1,426	)		(2,239	)		(1,938	)
Non-controlling interests		142			104			116			144			111			96
Earnings (loss) per share
Basic⁽²⁾		20,701			10,980			2,023			(2,048	)		(3,654	)		(3.16	)
Earnings (loss) per ADS
Basic⁽²⁾		10,351			5,490			1,012			(1,024	)		(1,827	)		(1.58	)
Dividends per share		3,100			1,980			790			—			—			—

Consolidated Statements of Financial Position Data


	As of December 31,
	2015			2016			2017			2018			2019			2019
	(in billions of Won and millions of US$, except share and per share data)⁽¹⁾

Net working capital deficit⁽³⁾	￦	(686	)	￦	(5,031	)	￦	(4,283	)	￦	(2,096	)	￦	(4,749	)	$	(4,110)
Property, plant and equipment, net		141,361			145,743			150,882			152,743			164,702			142,537
Total assets		175,257			177,837			181,789			185,249			197,598			171,006
Total shareholders’ equity		67,942			73,051			72,965			71,093			68,889			59,618
Equity attributable to owners of the Company		66,634			71,724			71,682			69,744			67,496			58,412
Non-controlling interests		1,308			1,327			1,283			1,349			1,393			1,206
Share capital		3,210			3,210			3,210			3,210			3,210			2,778
Number of common shares as adjusted to reflect any changes in capital stock		641,964,077			641,964,077			641,964,077			641,964,077			641,964,077			641,964,077
Long-term debt (excluding current portion)⁽⁴⁾		50,907			44,700			45,624			53,073			59,019			51,077
Other long term liabilities⁽⁵⁾		33,697			35,347			39,776			39,242			45,457			39,340

Notes:

(1)	The financial information denominated in Won as of and for the year ended December 31, 2019 has been translated into U.S. dollars at the exchange rate of Won 1,155.5 to US$1.00, which was the Noon Buying Rate as of December 31, 2019.

(2)

Basic earnings (loss) per share are calculated by dividing net income available to holders of our common shares by the weighted average number of common shares issued and outstanding for the relevant period. Basic earnings (loss) per ADS have been computed as if all of our issued and outstanding common shares are represented by ADSs during each of the years presented. Each ADS represents one-half of our common share. Dilutive earnings (loss) per share were the same as basic earnings (loss) per share for the years ended December 31, 2015 through 2019 since there were no potential dilutive instruments.

(3)	Net working capital is defined as current assets minus current liabilities. For the periods indicated, current liabilities exceeded current assets, which resulted in working capital deficit for such periods.

(4)	Long-term debt, net consists of long-term borrowings and debt securities (excluding the current portions but including issue discounts and premiums) without taking into consideration of swap transactions.

(5)	Other long-term liabilities consist of total non-current liabilities of our consolidated financial statements included in this annual report minus long-term debt (excluding current portion) of this table.

Currency Translations and Exchange Rates

In this annual report, unless otherwise indicated, all references to “Won,” “KRW” or “￦” are to the currency of Korea, all references to “U.S. dollars,” “Dollars,” “USD”, “$” or “US$” are to the currency of the United States of America; all references to “Euro” or “€” are references to the currency of the European Union; all references to “Yen” or “¥” are references to the currency of Japan; all references to “A$” are to the currency of Australia; and all references to “RMB” are to the currency of the People’s Republic of China. Unless otherwise indicated, all translations from Won to U.S. dollars were made at Won 1,155.5 to US$1.00, which was the noon buying rate of the Federal Reserve Board (the “Noon Buying Rate”) in effect as of December 31, 2019, which rates are available on the H.10 statistical release of the Federal Reserve Board. On April 17, 2020, the Noon Buying Rate was Won 1,217.8 to US$1.00. The exchange rate between the U.S. dollar and Korean Won may be highly volatile from time to time and no representation is made that the Won or U.S. dollar amounts referred to in this annual report could have been or could be converted into U.S. dollars or Won, as the case may be, at any particular rate or at all.

The following table sets forth, for the periods and dates indicated, certain information concerning the Noon Buying Rate in Won per US$1.00.


Year Ended December 31,	At End of Period		Average⁽¹⁾		High		Low
	(Won per US$1.00)
2015		1,169.3		1,133.7		1,196.4		1,063.0
2016		1,203.7		1,160.5		1,242.6		1,090.0
2017		1,067.4		1,141.6		1,207.2		1,067.4
2018		1,112.9		1,099.3		1,141.7		1,054.6
2019		1,155.5		1,165.8		1,220.7		1,111.8
October		1,169.1		1,183.4		1,205.5		1,163.0
November		1,181.3		1,167.3		1,181.3		1,154.4
December		1,155.5		1,174.7		1,194.5		1,155.5
2020 (through April 17)		1,217.8		1,198.9		1,267.3		1,156.3
January		1,191.3		1,167.5		1,192.0		1,156.3
February		1,214.9		1,195.3		1,218.5		1,179.0
March		1,218.9		1,218.2		1,267.3		1,181.1
April (through April 17)		1,217.8		1,222.5		1,230.6		1,211.7

Source: Federal Reserve Board

Note:

(1)

The average rates for annual and interim periods were calculated by taking the simple average of the Noon Buying Rates on the last day of each month during the relevant period. The average rates for the monthly periods (or a portion thereof) were calculated by taking the simple average of the daily Noon Buying Rates during the relevant month (or a portion thereof).

Item 3.B. Capitalization and Indebtedness

Not Applicable

Item 3.C. Reasons for the Offer and Use of Proceeds

Not Applicable

Item 3.D. Risk Factors

Our business and operations are subject to various risks, many of which are beyond our control. If any of the risks described below actually occurs, our business, financial condition or results of operations could be seriously harmed.

Risks Relating to KEPCO

Increases in fuel prices will adversely affect our results of operations and profitability as we may not be able to pass on the increased cost to customers at a sufficient level or on a timely basis.

In 2019, fuel costs constituted 31.6% of our cost of sales, and the ratio of fuel costs to our sales was 31.2%. Our generation subsidiaries purchase substantially all of the fuel that they use (except for anthracite coal) from suppliers outside Korea at prices determined in part by prevailing market prices in currencies other than Won. For example, most of the bituminous coal requirements (which accounted for approximately 51.1% of our fuel requirements in 2019 in terms of electricity output) are imported principally from Indonesia, Australia, Russia and, to a lesser extent, South Africa and others, which accounted for approximately 29%, 37%, 15%, 5% and

14%, respectively, of the annual bituminous coal requirements of our generation subsidiaries in 2019. Approximately 81% of the bituminous coal requirements of our generation subsidiaries in 2019 were purchased under long-term contracts and the remaining 19% from the spot market. Pursuant to the terms of our long-term supply contracts, prices are adjusted periodically based on prevailing market conditions. In addition, our generation subsidiaries purchase a significant portion of their fuel requirements under contracts with limited duration. See Item 4.B. “Business Overview—Fuel.”

The prices of our main fuel types, namely, bituminous coal, oil and liquefied natural gas, or LNG, fluctuate, sometimes significantly, in tandem with their international market prices. For example, the average weekly spot price of “free on board” Newcastle coal 6000 GAR published by Bloomberg (Bloomberg Ticker: COASNE60) decreased from US$107.53 per ton in 2018 to US$77.49 per ton in 2019 and to US$69.48 per ton as of March 30, 2020. The prices of oil and LNG are substantially dependent on the price of crude oil, and according to Bloomberg (Bloomberg Ticker: PGCRDUBA), the average daily spot price of Dubai crude oil decreased from US$69.30 per barrel in 2018 to US$63.22 per barrel in 2019 and to US$22.51 per barrel as of March 30, 2020. Furthermore, because the prices of LNG are dependent on the price of crude oil, an increase in such fuel prices can result in an increase in the prices of LNG, which, in turn, affect the cost of purchasing electricity from independent power producers. We cannot assure you that fuel prices will remain stable or will not significantly increase in the remainder of 2020 or thereafter. In addition, effective from January 1, 2020, the International Maritime Organization regulation referred to as IMO 2020 mandated, among other requirements, a reduction in the fuel sulfur content cap from 3.5% to 0.5%. While the effects of new environmental regulations, such as IMO 2020, are difficult to predict, such regulations may significantly increase the operating cost of the shipping lines, in which the increased costs are expected to pass on these additional costs onto customers like us via higher freight rates. If fuel prices increase substantially in the future within a short span of time, our generation subsidiaries may be unable to secure adequate fuel supplies at prices commercially acceptable to them. In addition, any significant interruption or delay in the supply of fuel, bituminous coal in particular, from any of their suppliers may cause our generation subsidiaries to purchase fuel on the spot market at prices higher than the prices available under existing supply contracts, which would result in an increase in fuel costs.

Because the Government regulates the rates we charge for the electricity we sell to our customers (see Item 4.B. “Business Overview—Sales and Customers—Electricity Rates”), our ability to pass on fuel and other cost increases to our customers is limited. If fuel prices increase rapidly and substantially and the Government, out of concern for inflation or for other reasons, maintains the current level of electricity tariff or does not increase it to a level to sufficiently offset the impact of high fuel prices, the fuel price increases will negatively affect our profit margins or even cause us to suffer operating and/or net losses, and our business, financial condition, results of operations and cash flows would suffer.

The Government may also set or adjust electricity tariff rates that may not be necessarily responsive to fuel price movements. For example, effective on January 1, 2017, the Government made several adjustments to the existing rate structure in order to ease the burden of electricity tariff on residential consumers. The progressive rate structure applicable to the residential sector, which applies a gradient of increasing tariff rates for heavier electricity usage, was changed from a six-tiered structure with the highest rate being no more than 11.7 times the lowest rate (which gradient system has been in place since 2005) into a three-tiered structure with the highest rate being no more than three times the lowest rate, in order to reflect the changes in the pattern of electricity consumption and reduce the electricity charges payable by consumers. Additionally, a new tariff structure was implemented to encourage energy saving by offering rate discounts to residential consumers that voluntarily reduce electricity consumption while charging special high rates to residential consumers with heavy electricity consumption during peak usage periods in the summer and the winter. Further, during July and August 2018, the Government reduced residential electricity charges by temporarily relaxing the application of the current tariff structure and offering higher rate discounts to economically or otherwise disadvantaged customers to ease the burden on households that have significantly increased their use of air conditioners during a heatwave. Subsequently, a joint task force team, consisting of industry experts, scholars and government officials, was formed, which announced a proposal for amending the current tariff structure aimed to lower electricity

rates for households during the summer. As a result, in July 2019, the residential electricity tariff rate system was amended to expand the usage ceiling for the first two tiers of rates (from 200 kilowatts to 300 kilowatts for the first tier and from 400 kilowatts to 450 kilowatts for the second tier) applied during July and August each year. Although the rate discounts offered to residential consumers who voluntarily reduced electricity consumption and those offered to traditional wet markets were abolished the rate discount for electric vehicles will be gradually terminated in phases by June 2022, there can be no assurance that other potential future adjustments in electricity tariff rates and rate discount will not have an adverse impact on our business, results of operations, financial condition and profitability.

In addition, partly because the Government may have to undergo a lengthy deliberation process to approve an increase in electricity tariff, which represents a key component of the consumer price index, the electricity tariff may not be adjusted to a level sufficient to ensure a fair rate of return to us in a timely manner or at all, and we cannot assure that any future tariff increase by the Government will be sufficient to fully offset the adverse impact on our results of operations from current or potential rises in fuel costs. For example, the net losses between 2018 and first half of 2019, were largely due to sustained rises in fuel costs that were neither timely nor sufficiently offset by a corresponding rise in electricity tariff rates. If fuel costs increase and the Government maintains the current level of electricity tariff and does not increase it to a level to sufficiently offset the impact of rising fuel costs, our operating results, profit margins, business, financial condition and cash flows may be adversely affected. On the other hand, if fuel prices decrease, the public may demand a corresponding decrease in electricity tariff rates, and as a result the Government may decrease electricity tariff rates; however, we cannot assure you that the resulting tariff rate reduction will not be excessive and thus have a detrimental effect on our profit margins, results of operations or cash flows or that, if the fuel prices were to rise again subsequent to the tariff reduction, the tariff rates would be further adjusted upwards in a timely manner, in sufficient amounts or at all so as to fully offset the adverse impact from the increase in fuel prices.

We plan to prepare a proposition for a sustainable tariff system designed to mitigate the financial burden on us. Though the timeline is subject to change, we are tentatively aiming to prepare the proposition by the first half of 2020, which will include (1) a reasonable adjustment of the rate discount applicable to the residential customers with low electricity usage and (2) an introduction of the tariff system to the residential sector where the rates change depending on the demand in a given season or time (namely, the “time-of-use tariff”). However, it is difficult to predict when and whether the Government will increase tariff rates, and, if the adjustment occurs, by how much and which classes of customers will be affected, as various factors are considered in making such adjustments, including operating costs for supplying electricity, fuel prices, foreign exchange rates, the effect of electricity tariff on inflation, efficiency of national energy consumption and consumer welfare.

The Government may adopt policy measures to substantially restructure the Korean electric power industry or our operational structure, which may have a material adverse effect on our business, operations and profitability.

From time to time, the Government considers various policy initiatives to foster efficiency in the Korean electric power industry, and at times have adopted policy measures that have substantially modified our business and operations. For example, in January 1999, with the aim of introducing greater competition in the Korean electric power industry and thereby improving its efficiency, the Government announced a restructuring plan for the Korean electric power industry, or the Restructuring Plan. For a detailed description of the Restructuring Plan, see Item 4.B. “Business Overview—Restructuring of the Electric Power Industry in Korea.” As part of this initiative, in April 2001 the Government established the Korea Power Exchange to enable the sale and purchase of electricity through a competitive bidding process, established the Korea Electricity Commission to ensure fair competition in the Korean electric power industry, and, in order to promote competition in electricity generation, split off our electricity generation business to form one nuclear generation company and five non-nuclear generation companies, in each case, to be wholly owned by us. In 2002, the Government introduced a plan to privatize one of our five non-nuclear generation subsidiaries, but this plan was suspended indefinitely in 2004 due to prevailing market conditions and other policy considerations.

In August 2010, the Ministry of Trade, Industry and Energy announced the Proposal for the Improvement in the Structure of the Electric Power Industry, which was designed to promote responsible management by and improve operational efficiency of government-affiliated electricity companies by fostering competition among them. Pursuant to this proposal, while our six generation subsidiaries continued to be our wholly-owned subsidiaries, in January 2011 the six generation subsidiaries were officially designated as “market-oriented public enterprises” (same as us) under the Act on the Management of Public Institutions, whereupon the President of Korea appoints the president and the standing director who is to become a member of the audit committee of each such subsidiary; the selection of non-standing directors of each such subsidiary is subject to approval by the minister of the Ministry of Economy and Finance; the president of each such subsidiary is required to enter into a management contract directly with the minister of the Ministry of Trade, Industry and Energy; and the Public Agencies Operating Committee (which is comprised largely of Government officials and those recommended by Government officials) conducts performance evaluation of such subsidiaries. Previously, our president appointed the president and the statutory auditor of each such subsidiary; the selection of non-standing directors of each such subsidiary was subject to approval by our president; the president of each such subsidiary entered into a management contract with our president; and our evaluation committee conducted performance evaluation of such subsidiaries. As a result of these changes, our six generation subsidiaries took on additional operational responsibilities and management autonomy with respect to construction and management of generation units and procurement of fuel, while we as the parent company continued to oversee and coordinate, among others, finances, corporate governance, overseas businesses, including nuclear export technology and overseas resource development, that jointly affect us and our generation subsidiaries. See also Item 16G. “Corporate Governance—The Act on the Management of Public Institutions—Applications of the Act on Our Generation Subsidiaries,”

In June 2016, the Government announced the Proposal for Adjustment of Functions of Public Institutions (Energy Sector) for the purpose of streamlining the operations of government-affiliated energy companies by discouraging them from engaging in overlapping or similar businesses with each other, reducing non-core assets and activities and improving management and operational efficiency. The initiatives contemplated in this proposal that would affect us and our generation subsidiaries include the following: (i) the generation companies should take on greater responsibilities in overseas resource exploration and production projects as these involve procurement of fuels necessary for electricity generation while fostering cooperation among each other through closer coordination, (ii) KHNP should take a greater role in export of nuclear technology, and (iii) the current system of retail sale of electricity to end-users should be liberalized to encourage more competition. In accordance therewith, we transferred a substantial portion of our assets and liabilities in our overseas resource business to our generation subsidiaries as of December 31, 2016. In addition, pursuant to this Proposal, we considered a sale in the public market of a minority of our shares in our five non-nuclear generation subsidiaries, KEPCO KDN and KHNP. However, the planned sales have been put on hold, primarily due to prevailing market conditions. In any event, we plan to maintain a controlling stake in each of these subsidiaries.

Other than as set forth above, we are not aware of any specific plans by the Government to resume the implementation of the Restructuring Plan or otherwise change the current structure of the electric power industry or the operations of us or our generation subsidiaries materially in the near future. However, for reasons relating to changes in policy considerations, socio-political, economic and market conditions and/or other factors, the Government may resume the implementation of the Restructuring Plan or initiate other steps that may change the structure of the Korean electric power industry or the operations of us or our generation subsidiaries materially. Any such measures may have a negative effect on our business, results of operations and financial condition. In addition, the Government, which beneficially owns a majority of our shares and exercises significant control over our business and operations, may from time to time pursue policy initiatives that could directly or indirectly impact our business and operations, and such initiatives may vary from the interest and objectives of our other shareholders.

Our capacity expansion plans, which are principally based on projections on long-term supply and demand of electricity in Korea, may prove to be inadequate.

We and our generation subsidiaries make plans for expanding or upgrading our generation capacity and transmission infrastructure based on the Basic Plan Relating to the Long-Term Supply and Demand of Electricity, or the Basic Plan, which is generally revised and announced every two years by the Government. In December 2017, the Government announced the Eighth Basic Plan to revise the Seventh Basic Plan, for the former to be effective for the period from 2017 to 2031. The Eighth Basic Plan focuses on, among other things, (i) decreasing the reliance on nuclear and coal-based supply sources, (ii) increasing utilization of renewable energy sources and (iii) balancing the existing cost-based pool system of purchase of electricity with an environmentally-focused pool system. Furthermore, the Eighth Basic Plan includes the following implementing measures: (i) six new nuclear generation units in a planning stage would not be constructed, (ii) extension of life of 10 decrepit nuclear generation units would not be granted, (iii) Wolsong #1 unit is not counted as part of domestic energy generation capacity, (iv) seven decrepit coal-fired generation plants will be retired by 2022, (v) six other coal-fired generation plants shall be converted to LNG fuel use and (vi) domestic renewable energy generation capacity shall be expanded to 58.5 gigawatts by 2030. Currently, the Government is in the process of establishing the Ninth Basic Plan, which is expected to be released in 2020, to expand the electric power facilities based on the demand outlook from 2020 to 2034.

In June 2019, the Ministry of Trade, Industry and Energy adopted the Third Basic National Energy Plan following consultations with representatives from civic groups, the energy industry and academia. The Third Basic National Energy Plan, which is a comprehensive plan that covers the entire spectrum of energy industries in Korea, covers the period from 2019 to 2040. The Third Basic National Energy Plan is consistent with the First and the Second Basic National Energy Plans in terms of the general policy direction and aims to promote sustainable growth and improvement of people’s quality of life by converting to new and renewable energy. Specifically, it establishes the following five key tasks: (i) strengthening management of energy demand from various sectors, such as commerce and transportation, and promoting a rational electricity tariff system to improve the national energy consumption efficiency by 38% and reduce the energy demand by 18.6% by 2040; (ii) converting to clean and safe energy through gradual reduction of nuclear power generation and decisive reduction of coal power generation by prohibiting construction of new coal-fired power plants and increasing the portion of renewable energy sources to approximately 35% by 2040; (iii) expanding the power distribution in areas near those with demands for renewable energy and fuel cells and strengthening the roles and responsibilities of local governments; (iv) fostering the growth of the future energy industries (including renewable energy, hydrogen fuel and other efficient sources of energy limited to technology), promoting the value-add for traditional energy industries and maintaining a core energy ecosystem for nuclear power plants; and (v) improving the energy, gas and heat market systems to facilitate the national energy conversion and building platforms based on big data to foster creation of new energy industries.

We cannot assure that the Eighth Basic Plan, the Ninth Basic Plan, the Third Basic National Energy Plan, or their respective successor plans will successfully achieve their intended goals, the foremost of which is to ensure, through carefully calibrated capacity expansion and other means, balanced overall electricity supply and demand in Korea to end users while promoting efficiency and environmental friendliness in the consumption and production of electricity. If there is significant variance between the projected electricity supply and demand considered in planning our capacity expansions and the actual electricity supply and demand, or if these plans otherwise fail to meet their intended goals or have other unintended consequences, this may result in inefficient use of our working capital, and undue financing costs on the part of us and our generation subsidiaries, among others, which may have a material adverse effect on our results of operations, financial condition and cash flows.

From time to time, we may experience temporary power shortages or circumstances bordering on power shortages due to factors beyond our control, such as extreme weather conditions. Such circumstances may lead to increased end-user complaints and greater public scrutiny, which may in turn require us to modify our capacity expansion plans, and if we were to substantially modify our capacity plans, this might result in additional capital

expenditures and, as a result, have a material adverse effect on our results of operations, financial condition and cash flows.

Although the Government makes significant efforts to encourage conservation of electricity, including through public education campaigns, there is no assurance that such efforts will have the desired effect of substantially reducing the demand for electricity or improving efficient use thereof.

We are subject to various environmental regulations and related government initiatives, including in relation to climate change, which could cause significant compliance costs and operational liabilities.

We are subject to national, local and overseas environmental laws and regulations, including increasing pressure to reduce emission of carbon dioxide from our electricity generation activities as well as our natural resource development endeavors overseas. Our operations could expose us to the risk of substantial liability relating to environmental, health and safety issues, such as those resulting from the discharge of pollutants and carbon dioxide into the environment and the handling, storage and disposal of hazardous materials. We may be responsible for the investigation and remediation of environmental conditions at current or former operational sites. We may also be subject to related liabilities (including liabilities for environmental damage, third party property damage or personal injury) resulting from lawsuits brought by governments or private litigants. In the course of our operations, hazardous wastes may be generated, disposed of or treated at third party-owned or -operated sites. If those sites become contaminated, we could also be held responsible for the cost of investigation and remediation of such sites for any related liabilities, as well as for civil or criminal fines or penalties.

We intend to fully comply with our environmental obligations. However, our environmental measures, including the use of, or replacement with, environmentally friendly but more expensive parts and equipment and budgeting capital expenditures for the installation or modification of such facilities, may result in increased operating costs and liquidity requirement. The actual cost of installation, replacement, modification and/or operation of such equipment and related liquidity requirement may depend on a variety of factors that are beyond our control. There is no assurance that we will continue to be in material compliance with legal or regulatory requirements or satisfy social norms and expectations in the future in relation to the environment, including in respect of climate change.

In recent years, partly driven by growing public awareness and sensitivity toward climate change and other environmental issues as well as in an effort to capture the economic and social potential associated with renewable energy and “new energy”-related industries (such as smart grids, energy storage systems and electrical vehicles, among others), the Government has introduced and implemented a number of new measures designed to reduce greenhouse gas emission, minimize environmental damage and spur related business opportunities. Some key examples of such Government initiatives pertinent to our and our generation subsidiaries’ operations are as follows:

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Greenhouse Gas Emission Trading System, Related Emission Reduction Targets and the Greenhouse Gas Reduction Roadmap.

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implemented in three stages. During the first phase (2015 to 2017), the Government set up and conducted a test run of the trading system to ensure its smooth operation, allocating the greenhouse gas emission allowances free of charge. In July 2018, the Government released the allocation plan for the second phase (2018 to 2020), during which 97% of the greenhouse gas emission allowances may be allocated free of charge, with 3% allocated through an auction. During the third phase (2021 to 2025), the Government plans to expand the scale of the system with aggressive greenhouse gas emission reduction targets and allocating 10% of the greenhouse gas emission allowances through an auction.

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In December 2016, the Government announced the Climate Change Response Initiatives and the 2030 National Greenhouse Gas Reduction Roadmap, which set forth the greenhouse gas emission trading system as one of the primary means to reach the emission and greenhouse gas reduction targets of the policies. The Second Climate Change Response Initiative was adopted in October 2019, which sets forth a national target of greenhouse gas level as 536 million tons in the aggregate, representing a 37% reduction from the base case projection of greenhouse gas in 2030 and a 24.4% reduction as compared to the emission amount in 2017. In the electricity conversion sector, greenhouse gas reduction of 24 million tons (with a potential additional reduction of 34 million tons) from the base case projection of greenhouse gas level in 2030 is requested by 2030, and our business is classified as part of this sector. The additional potential reduction amount will be confirmed prior to the finalization of the Government’s 2020 Nationally Determined Contributions (NDCs). Adhering to such emission and greenhouse gas reduction requirement may result in significant additional compliance costs. For example, the daily market price of the KAUs traded through the Korea Exchange was Won 8,640 per ton in early 2015, and the price has increased continuously thereafter, reaching its peak price at Won 40,900 per ton on December 23, 2019. We cannot predict how the price of the KAUs will fluctuate over time, and such volatility may adversely affect our results of operation, financial condition and cash flows.

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Regulation of Coal-Fired Generation Units. As a measure to address the high level of particulate matter pollution, the Government temporarily suspended the operations of eight coal-fired generation units that are 30 years or older throughout the month of June 2017. Subsequently, in July 2017, two of these units were shut down completely and one unit switched fuel from coal to wood pallets. One of these units stopped its operation in January 2019 for switching fuel to wood pallets. As part of the Comprehensive Measures against Particulate Matter and the Eighth Basic Plan, announced by the Government in September 2017 and December 2017, respectively, the Government set forth the following policy directions relating to coal-fired generation units: (i) two coal-fired generation units scheduled for construction and four existing coal-fired generation units shall convert to LNG fuel use, (ii) in principle, construction of new coal-fired generation units shall not be planned, (iii) seven of the coal-fired generation units that are 30 years or older will be shut down on an accelerated schedule, (iv) beginning in 2018, coal-fired generation units that are 30 years or older shall temporarily cease operations from March through June of each year, (v) coal-fired generation units shall be put through comprehensive functional and environmental upgrades and (vi) coal-fired generation units shall be subject to emission standards that came into effect in January 2019 that are twice as more rigorous than the previous standards. In October 2018, the Government introduced a pilot regulation to lower the output of 35 coal-fired generation units to approximately 80% of their capacity that emit more than a certain amount of particulate matter. The regulation was formally implemented in January 2019, targeting 40 coal-fired power plants with high emissions of particulate matter. From March to June 2019, the scope expanded to cover 60 units in total. In addition, coal-fired generation units originally scheduled for preventive maintenance during the second half of 2019 were required to undertake such maintenance earlier in the spring of 2019. In November 2019, the Government pursued a reduction of coal-fired generation units in order to implement the Special Measures to Respond to the High Concentration Period (December to February) of Particulate Matter. During this period, 8 to 15 coal-fired generation units that require preventive maintenance or are otherwise older units were first shut down, with a maximum of 49 coal-fired generation units subject to a cap of 80% on the output within

the remaining reserve capacity range. As a result, the particulate matter emission was reduced by 2,503 tons, approximately 39% decrease compared to the same period during the previous year. We plan to continue to participate in the effort to reduce the particulate matter emissions from coal-fired generation units, not only during the winter but also during the spring. For example, in March 2020, we suspended the operations of between 21 and 28 coal power generation plants and imposed a cap of 80% on the output of up to 37 coal-fired generation units. Additionally, the Government adjusted the schedule to close down two decrepit coal-fired generation units (Boryeong #1 and #2), which will shut down around December 2020. Additionally, other coal-fired generation units, Samchunpo #1 and #2, will shut down around April 2020 and Honam #1 and #2 units by January 2021. While such measures may be subject to change, we expect to incur significant costs of complying with such measures, including in connection with more stringent particulate matter pollution regulations, retrofitting and overall replacement of environmental facilities.

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Coal and LNG Consumption Taxes. In January 2014, largely based on policy considerations of tax equity among different fuel types as well as environmental concerns, the Ministry of Economy and Finance announced that, effective July 1, 2014, consumption tax will apply to bituminous coal, which previously was not subject to consumption tax unlike other fuel types such as LNG or bunker oil. Pursuant to the amended Individual Consumption Tax Act effective as of April 1, 2019, which involved an increase of the unit tax rate for coal by Won 10 per kilogram across the board, the base tax rate (which is subject to certain adjustments) is Won 46 per kilogram for bituminous coal; however, due to concerns on the potential adverse effect on industrial activities, the applicable tax rate is applied differently based on the net heat generation amount. The currently applicable tax rate for bituminous coal is Won 43 per kilogram for net heat generation of less than 5,000 kilocalories, Won 46 per kilogram for net heat generation of 5,000 to 5,500 kilocalories and Won 49 per kilogram for net heat generation of 5,500 kilocalories or more. In contrast, the consumption tax and surcharge on importation of LNG decreased by Won 48 and Won 20.4 per kilogram, respectively, which came into effect in April 2019. The currently applicable consumption tax rate and surcharge on importation of LNG are Won 12 and Won 3.8 per kilogram, respectively. We expect an increase in our overall fuel costs, as bituminous coal currently represents the largest fuel type for our electricity generation, while the decrease in consumption tax and surcharge on importation of LNG will result in a decrease of our power purchase cost.

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Renewable Portfolio Standard. Under this program, each of our generation subsidiaries is required to generate a specified percentage of total electricity to be generated by such generation subsidiary in a given year in the form of renewable energy or, in case of a shortfall, purchase a corresponding amount of a Renewable Energy Certificate (a form of renewable energy credit) from other generation companies whose renewable energy generation surpass such percentage. The target percentage was 3.5% in 2016, 4.0% in 2017, 5.0% in 2018, 6.0% in 2019, 7.0% in 2020 and will incrementally increase to 10.0% by 2023. Fines are to be levied on any subsidiary that fails to do so in the prescribed timeline. In 2018, all six of our generation subsidiaries met the target through renewable energy generation and/or the purchase of a Renewable Energy Certificate. Compliance by our generation subsidiaries of the 2019 target is currently under evaluation, and if any generation subsidiary is found to have failed to meet the target for 2019 or for subsequent years, such generation subsidiary may become subject to fines. Additionally, as the target percentage is subject to change, changes to the target percentage may result in additional expenses for our generation subsidiaries.

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Renewable Energy 3020 Plan. In December 2017, the Ministry of Trade, Industry and Energy announced the Renewable Energy 3020 Plan, an initiative to increase the generation and use of renewable energy on a nationwide basis. The Government plans to increase the required percentage of total electricity to be generated from renewable energy sources from 7% in 2016 to 10.5% and 20% by 2022 and 2030, respectively. Moreover, the Government plans to increase the domestic renewable energy generation capacity to 63.8 gigawatts by 2030 through the expansion of solar and wind power generation capacities to 36.5 gigawatts and 17.7 gigawatts, respectively, by 2030.

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New Energy Industry Fund. In January 2016, the Ministry of Trade, Industry and Energy announced an initiative to promote the new energy industry by creating the New Energy Industry Fund, which is made up of funds sponsored by government-affiliated energy companies. We contributed Won 500 billion to the funds in 2016. The purpose of these funds is to invest in substantially all frontiers of the new energy industry, including renewable energy, energy storage systems, electric vehicles, small-sized self-sustaining electricity generation grids known as “micro-grids”, among others, as well as invest in start-up companies, ventures, small- to medium-sized enterprise and project businesses that engage in these businesses but have not previously attracted sufficient capital from the private sector.

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Environmental and safety considerations in electricity supply and demand planning. In March 2017, the Electric Utility Act was amended to the effect that starting in June 2017, future national planning for electricity supply and demand in Korea should consider the environmental and safety impacts of such planning. Accordingly, the costs related to environmental and safety impacts, such as the desulfurization costs, have been reflected in our variable cost of generating electricity since August 2019. In December 2019, the Regulation on the Operation of the Electricity Market was revised, under which the specific plans of the Cost Evaluation Committee (defined below) to reflect the cost of greenhouse gas emission allowances will be finalized within two years of such revision.

Complying with these Government initiatives and operating programs in furtherance thereof has involved and will likely continue to involve significant costs and resources on our part, which may adversely affect our results of operation, financial condition and cash flows. For example, we have spent approximately Won 710 billion for the greenhouse gas emission allowances in 2019, compared to Won 53 billion in 2018, and we anticipate that such cost will continue to increase in 2020 and thereafter. Further, as we are required to supply increasing amount of renewable energy, we expect that the environmental-related risks will continue to increase. We may not be able to pass on the increased cost to customers at a sufficient level or on a timely basis. Further, we and our generation subsidiaries could also become subject to substantial fines and other forms of penalties for non-compliance. There is no assurance that, particularly given the wide-ranging policy priorities for the Government, it will in fact raise the electricity tariff to a level sufficient to fully cover additional costs associated with implementing and operating these programs and otherwise complying with these programs, do so on a timely basis or at all. If the Government does not do so or provide us and our generation subsidiaries with other forms of assistance to offset the costs involved, our results of operation, financial condition and cash flows may be materially and adversely affected.

See Item 4.B. “Business Overview—Environmental Programs.”

We may require a substantial amount of additional indebtedness to refinance existing debt and for future capital expenditures.

We anticipate that a substantial amount of additional indebtedness will be required in the coming years in order to refinance existing debt, make capital expenditures for construction of generation plants and other facilities and/or make acquisitions, invest in renewable energy and the “new energy industry” projects and fund our overseas businesses. In 2017, 2018 and 2019, our capital expenditures in relation to the foregoing amounted to Won 13,711 billion, Won 13,695 billion and Won 15,795 billion, respectively, and our budgeted capital expenditures for 2020, 2021 and 2022 amount to Won 16,211 billion, Won 17,529 billion and Won 17,002 billion, respectively.

While we currently do not expect to face any material difficulties in procuring short-term borrowings to meet our liquidity and short-term capital requirements, there is no assurance that we will be able to do so. We expect that a portion of our long-term debt will need to be paid or refinanced through foreign currency-denominated borrowings and capital raising in international capital markets. Such financing may not be available on terms commercially acceptable to us or at all, especially if the global financial markets experience significant turbulence or a substantial reduction in liquidity or due to other factors beyond our control. If we are unable to

obtain financing on commercially acceptable terms on a timely basis, or at all, we may be unable to meet our funding requirements for capital expenditures or debt repayment obligations, which could have a material adverse impact on our business, results of operations and financial condition.

We and our generation subsidiaries have undertaken various programs to reduce debt and improve the overall financial health. For further information, see Item 4.B. “Business Overview—Debt Reduction Program and Related Activities.” Despite our best efforts, however, for reasons beyond our control, including macroeconomic environments, government regulations and market forces (such as international market prices for our fuels), we cannot assure whether we or our generation subsidiaries will be able to successfully reduce debt burdens or otherwise improve our financial health to a level that would be optimal for our capital structure. If we or our generation subsidiaries fail to do so or the measures taken by us or our generation subsidiaries to reduce debt levels or improve financial health have unintended adverse consequences, such developments may have an adverse effect on our business, results of operations and financial condition.

The movement of Won against the U.S. dollar and other currencies may have a material adverse effect on us.

The Won has fluctuated significantly against major currencies from time to time. Even slight depreciation of Won against U.S. dollar and other foreign currencies may result in a material increase in the cost of fuel and equipment purchased by us from overseas since the prices for substantially all of the fuel materials and a significant portion of the equipment we purchase are denominated in currencies other than Won, generally in U.S. dollars. Changes in foreign exchange rates may also impact the cost of servicing our foreign currency-denominated debt. As of December 31, 2019, 17.5% of our long-term debt (including the current portion but excluding issue discounts and premium) without taking into consideration of swap transactions, was denominated in foreign currencies, principally U.S. dollars. In addition, even if we make payments in Won for certain fuel materials and equipment, some of these fuel materials may originate from other countries and their prices may be affected accordingly by the exchange rates between the Won and foreign currencies, especially the U.S. dollar. Since the substantial majority of our revenues are denominated in Won, we must generally obtain foreign currencies through foreign currency-denominated financings or from foreign currency exchange markets to make such purchases or service such debt. As a result, any significant depreciation of Won against the U.S. dollar or other major foreign currencies will have a material adverse effect on our profitability and results of operations.

We may not be successful in implementing new business strategies.

As part of our overall business strategy, we plan to (i) expand clean energy and stabilize electricity supply and demand, (ii) enhance sales profitability and competitiveness, (iii) explore convergence-based new businesses and markets, (iv) secure future strategic technologies and establish infrastructure for digital transformation, and (v) strengthen management efficiency and embody social value.

Due to their inherent uncertainties, such new and expanded strategic initiatives expose us to a number of risks and challenges, including the following:

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new and expanded business activities may require unanticipated capital expenditures and involve additional compliance requirements;

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new and expanded business activities may result in less growth or profit than we currently anticipate, and there can be no assurance that such business activities will become profitable at the level we desire or at all;

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certain of our new and expanded businesses, particularly in the areas of renewable energy, require substantial government subsidies to become profitable, and such subsidies may be substantially reduced or entirely discontinued;

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we may fail to identify and enter into new business opportunities in a timely fashion, putting us at a disadvantage vis-à-vis competitors, particularly in overseas markets; and

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we may need to hire or retrain personnel to supervise and conduct the relevant business activities.

As part of our business strategy, we may also seek, evaluate or engage in potential acquisitions, joint ventures, strategic alliances, restructurings, combinations, rationalizations, divestments or other similar

opportunities. The prospects of these initiatives are uncertain, and there can be no assurance that we will be able to successfully implement or grow new ventures, and these ventures may prove more difficult or costly than what we originally anticipated. In addition, we regularly review the profitability and growth potential of our existing and new businesses. As a result of such review, we may decide to exit from or to reduce the resources that we allocate to new or existing ventures in the future. There is a risk that these ventures may not achieve profitability or operational efficiencies to the extent originally anticipated, and we may fail to recover investments or expenditures that we have already made. Any of the foregoing may have a material adverse effect on our reputation, business, results of operations, financial condition and cash flows.

We plan to pursue overseas expansion opportunities that may subject us to different or greater risks than those associated with our domestic operations.

While our operations have, to-date, been primarily based in Korea, we and our generation subsidiaries may expand, on a selective and opportunistic basis, overseas operations in the future. In particular, we and our generation subsidiaries may further expand our project portfolio to include the construction and operation of conventional thermal generation units, nuclear generation units and renewable energy power plants, transmission and distribution and (primarily through our generation subsidiaries) mining and development of fuel sources.

Overseas operations often involve risks that are different from those we face in our domestic operations, including the following:

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challenges of complying with multiple foreign laws and regulatory requirements, including tax laws and laws regulating our operations and investments;

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volatility of overseas economic conditions, including fluctuations in foreign currency exchange rates;

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difficulties in enforcing creditors’ rights in foreign jurisdictions;

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risk of expropriation and exercise of sovereign immunity where the counterparty is a foreign government;

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difficulties in establishing, staffing and managing foreign operations;

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differing labor regulations;

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political and economic instability, natural calamities, war and terrorism;

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lack of familiarity with local markets and competitive conditions;

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changes in applicable laws and regulations in Korea that affect foreign operations; and

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obstacles to the repatriation of earnings and cash.

Any failure by us to recognize or respond to these differences may adversely affect the success of our operations in those markets, which in turn could materially and adversely affect our business and results of operations.

Furthermore, while we seek to enter into overseas business opportunities in a prudent manner, some of our new international business ventures carry inherent risks that are different from our traditional business of electricity power generation, transmission and distribution. While the overseas businesses in the aggregate currently do not comprise a material portion of our overall business, as we are relatively inexperienced in these new types of overseas businesses, the actual revenues and profitability from, and investments and expenditures into, such ventures may be substantially different from what we plan or anticipate and may have a material adverse impact on our overall business, results of operations, financial condition and cash flows.

An increase in electricity generated by and/or sourced from independent power producers may erode our market position and hurt our business, growth prospects, revenues and profitability.

As of December 31, 2019, we and our generation subsidiaries owned approximately 66.8% of the total electricity generation capacity in Korea (excluding plants generating electricity for private or emergency use). New entrants to the electricity business will erode our market share and create significant competition, which could have a material adverse impact on our financial condition and results of operations.

In particular, we compete with independent power producers with respect to electricity generation. The independent power producers accounted for 27.3% of total power generation in 2019 and 33.2% of total generation capacity as of December 31, 2019. As of December 31, 2019, there were 20 independent power producers in Korea, excluding renewable energy producers. Private enterprises became permitted to own and operate coal-fired power plants in Korea only after the Ministry of Trade, Industry and Energy approved plans for independent power producers to construct coal-fired power plants under the Sixth Basic Plan announced in February 2013. Under the Eighth Basic Plan announced in December 2017, (i) six coal-fired units under construction with aggregate generation capacity of 6,260 megawatts are scheduled to be completed between 2021 and 2022, and (ii) two coal-fired units scheduled for construction shall be converted to LNG fuel use. Currently there are no additional plans for construction of coal-fired power plants by independent power producers beyond 2024, as the construction schedule of such generation units is being adjusted. While it remains to be seen whether construction of these generation units will be completed as scheduled, if these units were to be completed as scheduled and/or independent power producers are permitted to build additional generation capacity (whether coal-fired or not), our market share in Korea may decrease, which may have a material adverse effect on our results of operations and financial condition.

In addition, under the Community Energy System adopted by the Government in 2004, a minimal amount of electricity is supplied directly to consumers on a localized basis by independent power producers outside the cost-based pool system. Such system is used by our generation subsidiaries and most independent power producers to distribute electricity nationwide. The purpose of this system is to geographically decentralize electricity supply and thereby reduce transmission losses and improve the efficiency of energy use. These entities do not supply electricity on a national level but are licensed to supply electricity on a limited basis to their respective districts under the Community Energy System. As of March 31, 2020, the aggregate generation capacity of suppliers participating in the Community Energy System amounted to less than 1% of that of our generation subsidiaries in the aggregate. We currently do not expect the Community Energy System to be widely adopted, especially in light of the significant level of capital expenditure required for such direct supply. However, if the Community Energy System is widely adopted, it may erode our currently dominant market position in the generation and distribution of electricity in Korea and may have a material adverse effect on our business, results of operations and financial condition.

While we are currently the dominant market player in the electricity distribution in Korea, we cannot assure you that our market dominance will not face potential erosion in the future. For example, in June 2016, the Government announced the Proposal for Adjustment of Functions of Public Institutions (Energy Sector), which contemplated a gradual opening of the electricity trading market to the private sector. Although the proposal was withdrawn after a year of deliberation, a number of economists and civic groups are continuing to demand for the liberalization of the electricity trading market. It is difficult to predict whether and in what direction the liberalization of the electricity trading market will happen in the future, and such event may result in substantial reduction of our market share in electricity distribution in Korea, which would have a material adverse effect on our business, results of operation and cash flows.

See also Item 4.B. “Business Overview—Competition.”

Labor unrest or increases in labor cost may adversely affect our operations.

We and each of our generation subsidiaries have separate labor unions. As of December 31, 2019, approximately 72.9% of our and our generation subsidiaries’ employees in the aggregate were members of these labor unions. Since a six-week labor strike in 2002 by union members of our generation subsidiaries in response to a proposed privatization of one of our generation subsidiaries, there has been no material labor dispute. However, we cannot assure you that there will not be a major labor strike or other material disruptions of operations by the labor unions of us and our generation subsidiaries if the Government resumes privatization or other restructuring initiatives or for other reasons, which may adversely affect our business and results of operations.

Furthermore, the Government, as part of a response to low fertility amidst an aging population in Korea and to make the lives of workers more stable, has pledged to reduce the number of non-permanent workers and increase the employment of permanent workers, in part by transitioning from non-permanent to permanent positions in the public sector. In accordance with guidelines announced by the Government in July 2017, we have completed transitioning temporary workers to permanent positions as of December 31, 2018. In addition, we have finalized the measure with the subcontracted workers who provide meter-reading facility management and inbound call services to convert them to permanent employees by establishing subsidiaries and hiring the subcontracted workers through such subsidiaries, as of the end of 2019. Our generation subsidiaries have partially completed transitioning of non-permanent workers to permanent positions by hiring them for an indefinite period or establishing subsidiaries and hiring them through such subsidiaries. Our thermal generation subsidiaries plan to form a labor-management consultative body to transition the in-house subcontracted workers for the fuel and environmental facilities to permanent positions. Although the Government guidelines suggest that we transition the non-permanent workers to permanent positions within our existing budget for the related business, we cannot assure you that this will not result in increased costs for us or our generation subsidiaries and have an adverse impact on us or our generation subsidiaries’ financial condition and results of operations.

Additionally, domestic and international policy changes may affect our relationship with our employees, such as the Government’s potential ratification of four of the eight essential conventions of International Labor Organization and potential reformation of the public employee wage structure. We cannot assure you that such policy changes will not negatively affect our relationship with our employees, which may in turn adversely affect our business and results of operations.

Operation of nuclear power generation facilities inherently involves numerous hazards and risks, any of which could result in a material loss of revenues or increased expenses.

Through KHNP, we currently operate 24 nuclear-fuel generation units. Operation of nuclear power plants is subject to certain hazards, including environmental hazards such as leaks, ruptures and discharge of toxic and radioactive substances and materials. These hazards can cause personal injuries or loss of life, severe damage to or destruction of property and natural resources, pollution or other environmental damage, clean-up responsibilities, regulatory investigation and penalties and suspension of operations. Nuclear power has a stable and relatively inexpensive cost structure (which is least costly among the fuel types used by our generation subsidiaries) and is the second largest source of Korea’s electricity supply, accounting for 25.9% of electricity generated in Korea in 2019. Due to significantly lower unit fuel costs compared to those for thermal power plants, our nuclear power plants are generally operated at full capacity with only routine shutdowns for fuel replacement and maintenance, with limited exceptions.

From time to time, our nuclear generation units may experience unexpected shutdowns or maintenance-related stoppage. For example, following an earthquake in the vicinity in September 2016, four nuclear generation units at the Wolsong site were shut down for approximately three months as part of a preventive and safety assurance program although these units were not directly affected by the earthquake. Any prolonged or substantial breakdown, failure or suspension of operation of a nuclear unit could result in a material loss of revenues, an increase in fuel costs related to the use of alternative power sources, additional repair and maintenance costs, greater risk of litigation and increased social and political hostility to the use of nuclear power, any of which could have a material adverse impact on our financial condition and results of operations.

In addition, heightened concerns regarding the safety of operating nuclear generation units could impede with our ability to operating them for an extended period of time or at all. For example, the nuclear power plant at Wolsong #1 unit began operations in 1982 and ended its operations in 2012 pursuant to its 30-year operating license. In February 2015, the Nuclear Safety and Security Commission (“NSSC”) evaluated the safety of operating Wolsong #1 unit and approved its extended operation until November 2022. However, a civic group filed a lawsuit to annul such decision, and in February 2017, the Seoul Administrative Court ruled against the NSSC. The NSSC appealed this decision, and the civic group filed an injunction to suspend the operation of the Wolsong #1 unit. The civic group’s injunction was denied in July 2017. KHNP, which operated the unit pursuant to the NSSC’s initial decision, has joined this lawsuit. On June 15, 2018, the board of directors of KHNP decided to (i) retire Wolsong #1 unit earlier than planned due to its economic inefficiency and (ii) discontinue the construction of Chunji #1 and #2 as well

as Daejin #1 and #2 units. On December 24, 2019, the NSSC approved the permanent shutdown of Wolsong #1, and the Board of Audit and Inspection of Korea is currently carrying out an investigation into whether the board of directors of KHNP has made a reasonable assessment in making the decision to shut down Wolsong #1. As of December 31, 2019, impairment loss in connection with the property, plant and equipment of Wolsong #1 unit accrued to Won 572,216 million and reversal of impairment loss was Won 16,693 million. As of December 31, 2019, impairment loss in connection with the property, plant and equipment of Chunji #1 and #2 as well as Daejin #1 and #2 units amounted to Won 38,886 million. Although the board of directors did not make any decisions regarding Shin-Hanul #3 and #4 units, which are new nuclear plants under construction, we cannot assure you that the construction of these units will not be discontinued. As of December 31, 2019, impairment loss in connection with the property, plant and equipment of Shin-Hanul #3 and #4 units accrued to Won 134,736 million. The Government currently has preliminary plans to refund us for reasonable expenditures incurred in relation to the phase-out of nuclear power plants in accordance with the Government’s energy transition policy.

There are ten other nuclear generation units whose life under their initial operating license will expire in the next ten years, or by 2030, and we may find it more difficult to have the life of other nuclear units extended as well. The failure to extend the life of these units would result in a loss of revenues from such units and the increase in our overall fuel costs (as nuclear fuel is the cheapest compared to coal, LNG or oil), which could adversely affect our results of operation and financial condition. Furthermore, in September 2016, Greenpeace and 559 Korean nationals brought a lawsuit against the NSSC to revoke the permit the NSSC granted to KHNP in relation to the construction of Shin-Kori #5 and #6 nuclear generation units. The lower court ruled on this case in February 2019, both parties appealed, and the case is currently pending in the Seoul High Court. Additionally, in May 2019, a group of 729 Korean nationals brought a lawsuit against the NSSC, challenging its decision to suspend the operation of Shin-Kori #4. In July 2019, we have applied to participate in the lawsuit as a stakeholder. The case is currently pending in the Seoul High Court. We cannot assure you that there will not be new challenges to prohibit the construction of these new nuclear units in the future, whereby we may experience a loss of revenues and an increase in fuel costs (as nuclear fuel is the cheapest compared to coal, LNG or oil) as a result of such prohibition, which could adversely affect our results of operation and financial condition.

In order to prevent damages to the nuclear facilities such as a result of the tsunami and earthquake in March 2011 in Japan, KHNP prepared a comprehensive safety improvement plan including, but are not limited to, installing additional automatic shut-down systems for earthquakes, extending coastal barriers for seismic waves, procuring mobile power generators and storage batteries, installing passive hydrogen removers at nuclear facilities and improving the radiology emergency medical system. All follow-up measures will be finalized in December 2024 due to changes in the plan. KHNP also developed 10 additional supplementary safety measures by analysis of overseas plants and its current operations and implemented eight of such measures in 2017, with the two remaining measures to be implemented by 2022. However, there is no assurance that a similar or worse natural disaster may require the adoption and implementation of additional safety measures, which may be costly and have a material adverse impact on our financial condition and results of operations.

Subsequently, the Government unveiled its roadmap to shift in energy sources in October 2017 and announced the Eighth Basic Plan to implement such roadmap in December 2017. The Eighth Basic Plan focuses on, among other things, (i) decreasing the reliance on nuclear and coal-based supply sources, (ii) increasing utilization of renewable energy sources and (iii) balancing the existing cost-based pool system of purchase of electricity with an environmentally-focused pool system. Accordingly, six new nuclear generation units in a planning stage (Shin-Hanul #3 and #4, Chunji #1 and #2 and Daejin #1 and #2) would not be constructed, while new nuclear plants under construction, including Shin-Kori #5, #6, Shin-Hanul #1 and #2, shall begin operation by 2024 upon completion of the construction. Future extensions of life of decrepit nuclear generation units would not be granted and the proportion of renewable energy sources would be increased. We cannot assure you that these policies will not have an adverse impact on our or our generation subsidiaries’ financial condition and results of operations.

The construction and operation of our generation, transmission and distribution facilities involve difficulties, such as opposition from civic groups, which may have an adverse effect on us.

From time to time, we encounter social and political opposition against construction and operation of our generation facilities (particularly nuclear units) and, to a lesser extent, our transmission and distribution facilities.

For example, we recently faced intense opposition from local residents and civic groups to the construction of transmission lines in the Milyang area, which we resolved through various compensatory and other support programs. Such opposition delayed the schedule for completion of this project. Although we and the Government have undertaken various community programs to address concerns of residents in areas near our facilities, civic and community opposition could result in delayed construction or relocation of our planned facilities, which could have a material adverse impact on our business and results of operations.

Our risk management policies and procedures may not be fully effective at all times.

In the course of our operations, we must manage a number of risks, such as regulatory risks, market risks and operational risks. Although we devote significant resources to developing and improving our risk management policies and procedures and expect to continue to do so in the future, our risk management practices may not be fully effective at all times in eliminating or mitigating risk exposures in all market environments or against all types of risk, including risks that are unidentified or unanticipated, such as natural disasters or employee misconduct. For example, in May 2013, the NSSC discovered that certain parts used in several of our then-operating nuclear generation units had been supplied based on falsified certificates. This discovery led to full internal investigation and investigation by the Prosecutor’s Office, which in turn led to prosecutions and convictions of several current and former employees of KHNP on related and separate bribery charges, as well as termination of the then-president of KHNP as part of a broad disciplinary action. The incident also led to suspended operation of the related nuclear generation units for several months pending safety inspection. A similar incident involving falsified certificates and bribery occurred also in November 2012. We and KHNP have fully cooperated with the authorities in terms of investigations as well as remedial and preventive measures, including enhanced internal compliance policies and procedures. In November 2019, prosecutors indicted six of KHNP’s employees for, among others, failing to immediately shut down Hanbit #1 reactor when its thermal output exceeded the threshold specified by the nuclear safety technical operations manual and filing false reports to the NSSC. KHNP is also indicted for secondary liability from its employees’ alleged wrongdoings. The case stemmed from the NSSC’s investigations into the manual shutdown of Hanbit #1 reactor during a diagnostic test in May 2019. The case is currently pending, and we cannot assure you that the outcomes of the ongoing case will not have any material adverse effect on us, our reputation and our operating results. To prevent similar incidents from occurring again, KHNP is working to improve its risk monitoring and management system. For additional information, see Item 4.B. “Business Overview—Nuclear Safety.”

In April 2019, a forest fire broke out in Goseong in Gangwon Province, about 210 kilometers from Seoul, causing damages to nearby towns, covering approximately 700 hectares. The National Forensic Service has investigated the cause of the fire and has determined that the fire seems to have started by an electrical arc from our utility pole’s wire, which broke as a result of a strong wind. Based on this finding, the Police Department of Goseong conducted follow-up investigations and issued a recommendation to prosecute seven employees of KEPCO in connection with the fire. The prosecutors have taken over the case, and the investigations are still ongoing, the results of which may have a material adverse effect on us, our reputation and our operating results. In December 2019, we have agreed to pay 60% of the losses caused by the fire as determined by the Korea Claim Adjuster Association, a government organization, based on the fire victims’ official claims and verification thereof. However, the amount we need to pay may increase depending on the results of the ongoing investigations or any litigations relating to the fire. In addition, we are compensating the fire victims by providing a number of services, such as free supply of electricity, and implementing measures to prevent future fires that may result from an electrical arc, including a special maintenance program during the dry season between March and May. Despite our efforts, however, similar incidents such as the above may occur again, and we cannot assure you that such incidents will not have any material adverse effect on us, our reputation and our operating results.

Further, our operational activities like the generation of electricity involve inherent operating risks that may result in accidents involving serious injury or loss of life, environmental damage or property damage. In December 2018, an employee of KOWEPO’s subcontractor died in an accident at a Taean thermal power unit, leading to a public scrutiny and review by the Ministry of Employment and Labor. As a result, KOWEPO was required to halt the operations of three Taean thermal power units (Taean #9 and #10 units as well as Taean Integrated Gasification Combined Cycle (IGCC)) between December 2018 and May 2019. In response to the

accident, during the first half of 2019, we have mitigated 1,440 on-site risk factors by cooperating with the Government to conduct safety assessments.

We believe we and our subsidiaries are in compliance in all material respects with internal compliance policies and procedures and all other additional safety measures initiated internally or required by regulatory and governmental agencies. However, we cannot assure you that, despite all precautionary and preventative measures undertaken by us, these measures will prove to be fully effective at all times against all the risks we face or that an incident that could cause harm to our reputation and operation will not happen in the future, including due to factors beyond our control.

Our risk management procedures may not prevent losses in debt and foreign currency positions.

We manage interest rate exposure for our debt instruments by limiting our variable rate debt exposure as a percentage of our total debt and closely monitoring the movements in market interest rates. We also actively manage currency exchange rate exposure for our foreign currency-denominated liabilities by measuring the potential loss therefrom using risk analysis software and entering into derivative contracts to hedge such exposure when the possible loss reaches a certain risk limit. To the extent we have unhedged positions or our hedging and other risk management procedures do not work as planned, our results of operations and financial condition may be adversely affected.

The amount and scope of coverage of our insurance are limited.

Substantial liability may result from the operations of our nuclear generation units, the use and handling of nuclear fuel and possible radioactive emissions associated with such nuclear fuel. KHNP carries insurance for its generation units and nuclear fuel transportation, and we believe that the level of insurance is generally adequate and is in compliance with relevant laws and regulations. In addition, KHNP is the beneficiary of Government indemnity that covers damages which the insurance cannot cover. However, such insurance is limited in terms of amount and scope of coverage and does not cover all types or amounts of losses which could arise in connection with the ownership and operation of nuclear plants. Accordingly, material adverse financial consequences could result from a serious accident or a natural disaster to the extent it is neither insured nor covered by the government indemnity.

In addition, our non-nuclear generation subsidiaries carry insurance covering certain risks, including fire, in respect of their key assets, including buildings and equipment located at their respective power plants, construction-in-progress and imported fuel and procurement in transit. Such insurance and indemnity, however, cover only a portion of the assets that these generation subsidiaries own and operate and do not cover all types or amounts of loss that could arise in connection with the ownership and operation of these power plants. In addition, our generation subsidiaries are not permitted to self-insure, and accordingly have not self-insured, against risks of their uninsured assets or business. Accordingly, material adverse financial consequences could result from a serious accident to the extent it is uninsured.

In addition, because neither we nor our non-nuclear generation subsidiaries carry any insurance against terrorist attacks, an act of terrorism would result in significant financial losses. See Item 4.B. “Business Overview—Insurance.”

We may not be able to raise equity capital in the future without the participation of the Government.

Under applicable laws, the Government is required to directly or indirectly own at least 51% of our issued capital stock. As of December 31, 2019, the last day on which our shareholders’ registry was closed, the Government, directly and through Korea Development Bank (a statutory banking institution wholly owned by the Government), owned 51.1% of our issued capital stock. Accordingly, without changes in the existing Korean law, it may be difficult or impossible for us to undertake, without the participation of the Government, any equity financing in the future.

We may be exposed to potential claims made by current or previous employees for unpaid wages for the past three years under the expanded scope of ordinary wages and become subject to additional labor costs arising from the broader interpretation of ordinary wages under such decision.

Under the Labor Standards Act, an employee is legally entitled to “ordinary wages.” Under the guidelines previously issued by the Ministry of Employment and Labor, ordinary wages include base salary and certain fixed monthly allowances for work performed overtime during night shifts and holidays. Prior to the Supreme Court decision described below, many companies in Korea had typically interpreted these guidelines as excluding from the scope of ordinary wages fixed bonuses that are paid other than on a monthly basis, namely on a bi-monthly, quarterly or semi-annual basis, although such interpretation had been a subject of controversy and had been overruled in a few court cases.

In December 2013, the Supreme Court of Korea ruled that regular bonuses fall under the category of ordinary wages on the condition that those bonuses are paid regularly and uniformly, and that any agreement which excludes such regular bonuses from ordinary wage is invalid. One of the key rulings provides that bonuses that are given to employees (i) on a regular and continuous basis and (ii) calculated according to the actual number of days worked (iii) that are not incentive-based must be included in the calculation of “ordinary wages.” The Supreme Court further ruled that in spite of invalidity of such agreements, employees shall not retroactively claim additional wages incurred due to such court decision, in case that such claims bring to employees unexpected benefits which substantially exceeds the wage level agreed by employers and employees and cause an unpredicted increase in expenditures for their company, which would lead the company to material managerial difficulty or would be a threat to the existence of the company. In that case, the claim is not acceptable since it is unjust and is in breach of the principle of good faith.

As a result of such ruling by the Supreme Court of Korea, we and our subsidiaries became subject to a number of lawsuits filed by various industry-wide and company-specific labor unions based on claims that ordinary wage had been paid without including certain items that should have been included as ordinary wage. In July 2016, the court ruled against us, and in accordance with the court’s ruling, in August 2016 we paid Won 55.1 billion to the employees for three years of back pay plus interest. As of December 31, 2019, 25 lawsuits were pending against our subsidiaries for an aggregate claim amount of Won 61 billion, for which our subsidiaries set aside an aggregate amount of Won 29 billion to cover any potential future payments of additional ordinary wage in relation to the related lawsuits. We cannot presently assure you that the court will not rule against our subsidiaries in these lawsuits, or that the foregoing reserve amount will be sufficient to cover the amounts payable under the court rulings.

Additionally, since the issue of determining which labor costs should be additionally included as part of ordinary wages has not been fully resolved by the courts reviewing the lawsuits to which our subsidiaries are a party and other ordinary wage lawsuits filed against other companies, we cannot presently assure you that there will not be additional lawsuits in relation to ordinary wages and that we or our subsidiaries may not become liable for greater amount of damages as a result of these lawsuits. Furthermore, court decisions or labor legislations expanding the definition of ordinary wages may prospectively increase the labor costs of us and our subsidiaries. As a result, there can be no assurance that the above-described lawsuits and circumstances will not have a material adverse effect on our results of operations. See Item 8.A. Consolidated Statements and Other Financial Information – Legal Proceedings.

We are subject to cyber security risk.

Recently, our activities have been subject to an increasing risk of cyber-attacks and information leakages, the nature of which is continually evolving. For example, in December 2014, KHNP became subject to a cyber terror incident. Hackers hacked into the computer network of former KHNP employees and threatened to shut down certain of KHNP’s nuclear plants. The hacking incident did not jeopardize our nuclear operation in any material respect and none of the stolen information was material to our nuclear operation or the national nuclear

policy. In response to such incident, we and our subsidiaries have further bolstered anti-hacking and other preventive and remedial measures in relation to potential cyber terror. We are also continuing to strengthen our security management system by maintaining the international standard security standard, ISO2700, and the Korean standard, Personal Information Management System certification. In September 2019, the cyber security organization, physical protection, and technical information management organization were reorganized into an integrated security management organization for maximal effectiveness. Further, KHNP has established an organization dedicated to nuclear control security in accordance with the Government’s strengthened information security regulation. However, there is no assurance that a similar or more serious hacking or other forms of cyber terror will not happen with respect to us and our generation subsidiaries, which could have a material adverse impact on our business, financial condition and results of operations.

We previously engaged in limited activities relating to Iran and may become subject to sanctions under relevant laws and regulations of the United States and other jurisdictions as a result of such activities, which may adversely affect our business and reputation.

The U.S. Department of the Treasury’s Office of Foreign Assets Control, or OFAC, administers and enforces certain laws and regulations (which we refer to as the OFAC sanctions) that impose restrictions upon activities or transactions within U.S. jurisdiction with certain countries, governments, entities and individuals that are the subject of OFAC sanctions, including Iran. Even though non-U.S. persons generally are not directly bound by OFAC sanctions, in recent years OFAC has asserted that such non-U.S. persons can be held liable on various legal theories if they engage in transactions completed in part in the United States or by U.S. persons (such as, for example, wiring an international payment that clears through a bank branch in New York). The European Union also enforces certain laws and regulations that impose restrictions upon nationals and entities of, and business conducted in, member states with respect to activities or transactions with certain countries, governments, entities and individuals that are the subject of such laws and regulations, including Iran. The United Nations Security Council and other governmental entities also impose similar sanctions.

In addition to the OFAC sanctions described above, the United States also maintains indirect sanctions under authority of, among others, the Iran Sanctions Act, the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010, or CISADA, the National Defense Authorization Act for Fiscal Year 2012, or the NDAA, the Iran Threat Reduction and Syria Human Rights Act of 2012, or ITRA, various Executive Orders, the Iran Freedom and Counter-Proliferation Act of 2012, or IFCA, and the Countering America’s Adversaries Through Sanctions Act, or CAATSA. These indirect sanctions, which we refer to collectively as U.S. secondary sanctions, provide authority for the imposition of U.S. sanctions on foreign parties that provide services in support of certain Iran-related activities.

On July 14, 2015, the so-called “P5+1” powers (consisting of the United States, the United Kingdom, Germany, France, Russia, and China) and the European Union, or the EU, entered into an agreement with Iran known as the Joint Comprehensive Plan of Action Regarding the Islamic Republic of Iran’s Nuclear Program, or the JCPOA. The JCPOA was intended to significantly restrict Iran’s ability to develop and produce nuclear weapons. Upon implementation of the JCPOA on January 16, 2016 the United States, the EU, and the UN suspended certain nuclear-related sanctions against Iran following an announcement by the International Atomic Energy Agency that Iran had fulfilled its initial obligations under the JCPOA. Most U.S. secondary sanctions concerning Iran were suspended following January 16, 2016.

However, on May 8, 2018, the U.S. Government announced that it was ending its participation in the JCPOA and that it would take steps to re-impose secondary sanctions targeting Iran. Sanctions that had been lifted pursuant to the JCPOA were re-imposed after two wind down periods; one ending on August 6, 2018 and one ending on November 4, 2018. Since November 4, 2018, sanctions that have been lifted pursuant to the JCPOA have been re-imposed. Consequently, dealings with Iran may now subject foreign parties to U.S. secondary sanctions.

Violations of OFAC sanctions via transactions with a U.S. jurisdictional nexus can result in substantial civil or criminal penalties. A range of sanctions may be imposed on companies that engage in sanctionable activities within the scope of U.S. secondary sanctions, including, among other things, the blocking of any property subject to U.S. jurisdiction in which the sanctioned company has an interest, which could include a prohibition on transactions or dealings involving securities of the sanctioned company or the sanctioned company effectively losing access to the U.S. financial system.

We previously engaged in limited activities relating to Iran, but all of such activities have been terminated upon the withdrawal of the United States from the JCPOA.

Certain institutional investors, including state and municipal governments in the United States and universities, as well as financial institutions, have proposed or adopted initiatives regarding investments in companies that do business with countries that are the target of OFAC sanctions, including Iran. Accordingly, as a result of our historical activities related to Iran, certain investors may not wish to invest in our shares or ADSs or do business with us. In September 2016, the New Jersey Department of the Treasury’s Division of Investment notified of its preliminary determination of divestment pursuant to the New Jersey divestment laws. Such preliminary determination was reversed in February 2017 after we explained such determination was based on incorrect information about our business in Iran. As of October 2019, we were listed on the Texas Comptroller of Public Accounts’ list of Scrutinized Companies with ties to Iran. As of February 2020, we were listed on the Iowa Public Employees’ Retirement System’s (IPERS) Iran Prohibited Companies List. Such divestment initiatives and the decision not to invest in, or to divest from our shares or ADSs may have a material negative impact our reputation and the value of our shares or ADSs.

Violations of sanctions can result in penalties or other consequences adverse to us. Certain of our counterparties may be subjected to sanctions. If we violate sanctions, we may ourselves be subjected to sanctions or penalties. Our business and results of operations may be adversely affected or we may suffer reputational damage. In addition, such sanctions may prevent us from consummating or continuing any of the projects we are currently pursuing in Iran, which could adversely affect our results of operations. Also, at any time, certain investors may divest their interests in our shares if we are found to have violated or are suspected of violating applicable sanctions law arising from our operation in a sanctioned country such as Iran.

We purchase goods and services from Russia and those activities may be adversely impacted in a material manner by economic sanctions concerning Russia imposed by the United States and other jurisdictions.

The United States and the European Union have imposed economic sanctions concerning Russia. OFAC sanctions concerning Russia, inter alia, block the property of certain designated individuals and entities, target certain sectors of the Russian economy and prohibit certain transactions with certain targeted persons in targeted sectors of the Russian economy, and restrict investment in and trade with the Crimea region of Ukraine. Additionally, non-U.S. persons that engage in certain prohibited transactions concerning Russia or with certain sanctioned Russian persons or entities may be subject to secondary sanctions. In August 2017, the United States Congress passed CAATSA, which introduced a host of new U.S. secondary sanctions concerning Russia including, inter alia, for certain dealings with the Russian energy sector, support for Russia’s energy export pipelines and engaging in a “significant transaction” with a person that is part of, or operates for or on behalf of, Russia’s defense or intelligence sectors. Additionally, a non-U.S. person that knowingly facilitates a “significant transaction” or transactions for or on behalf of any person subject to sanctions imposed by the U.S. with respect to the Russian Federation or any child, spouse, parent, or sibling of such a sanctioned person may also be subject to secondary sanctions.

In 2019, we purchased 15.3% of our bituminous coal requirements from Russia. Additionally, we also purchase uranium and uranium separation services from a Russian supplier. In 2019, the total value of all goods and services purchased from Russia was approximately US$ 1.2 billion.

The extent to which the recent coronavirus (COVID-19) outbreak impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted.

The rapid and diffuse spread of the recent coronavirus (COVID-19) and global health concerns relating to this outbreak have had severe negative impact on, among other things, financial markets, liquidity, economic conditions and trade and could continue to do so or could worsen for an unknown period of time, which could in turn have a material adverse impact on our business, results of operations and financial condition. A number of governments and organizations have revised GDP growth forecasts for 2020 downward in response to the economic slowdown caused by the spread of COVID-19, and it is possible that the COVID-19 outbreak will cause a prolonged global economic crisis or recession. The extent to which the COVID-19 outbreak impacts our business, results of operations and financial condition will depend on future developments, including the timeliness and effectiveness of actions taken or not taken to contain and mitigate the effects of COVID-19 both in Korea and internationally by governments, central banks, healthcare providers, health system participants, other businesses and individuals, which are highly uncertain and cannot be predicted. In particular, the continued spread of the coronavirus could adversely impact our business by (i) disrupting our employees’ and contractors’ ability to provide ongoing services to us, (ii) reducing customer demand for electricity, (iii) reducing the supply of electricity, or (iv) prompting the Government to enact emergency measures such as electricity tariff adjustments to ease the burden on the economically disadvantaged customers, each of which could have an adverse impact on our financial condition, results of operations, and cash flows. For example, as part of the broader measures to alleviate the economic burden due to the COVID-19, the Government has recently decided to defer by three months the electricity tariff payments for the months of April to June. This relief is available to small businesses and economically disadvantaged customers already receiving rate discounts from us. Additionally, the Government plans to support the small businesses in Daegu and certain parts of the Gyeongbook region (designated as the special disaster zone impacted by the COVID-19) by deducting 50% of the electricity payments due for the months of April to September. The Government has prepared a supplementary budget for this measure, but there is no guarantee that the amount reserved for this measure will be used to its fullest according to such budget. Each of and any combination of these factors could have an adverse impact on our financial conditions, results of operations and cash flows.

Risks Relating to Korea and the Global Economy

Unfavorable financial and economic conditions in Korea and globally may have a material adverse impact on us.

We are incorporated in Korea, where most of our assets are located and most of our income is generated. As a result, we are subject to political, economic, legal and regulatory risks specific to Korea, and our business, results of operations and financial condition are substantially dependent on the Korean consumers’ demand for electricity, which are in turn largely dependent on developments relating to the Korean economy.

The Korean economy is closely integrated with, and is significantly affected by, developments in the global economy and financial markets. In recent years, adverse conditions and volatility in the worldwide financial markets, fluctuations in oil and commodity prices and the general weakness of the global economy have contributed to the uncertainty of global economic prospects in general and have adversely affected, and may continue to adversely affect, the Korean economy, which in turn could adversely affect our business, financial condition and results of operations. As the Korean economy is highly dependent on the health and direction of the global economy, the prices of our securities may be adversely affected by investors’ reactions to developments in other countries. In addition, due to the ongoing volatility in the global financial markets, the value of the Won relative to the U.S. dollar has also fluctuated significantly in recent years, which in turn also may adversely affect our financial condition and results of operations.

Factors that determine economic and business cycles in the Korean or global economy are for the most part beyond our control and inherently uncertain. In light of the high level of interdependence of the global economy, any of the foregoing developments could have a material adverse effect on the Korean economy and financial markets, and in turn on our business and profitability.

More specifically, factors that could have an adverse impact on Korea’s economy in the future include, among others:

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increases in inflation levels, volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (particularly against the U.S. dollar), interest rates, stock market prices and inflows and outflows of foreign capital, either directly, into the stock markets, through derivatives or otherwise, including as a result of increased uncertainty in the wake of the United Kingdom’s formal exit from the European Union on January 31, 2020, commonly known as “Brexit”;

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difficulties in the financial sectors in Europe, China and elsewhere and increased sovereign default risks in certain countries and the resulting adverse effects on the global financial markets;

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adverse developments in the economies of countries and regions to which Korea exports goods and services (such as the United States, Europe, China and Japan), or in emerging market economies in Asia or elsewhere that could result in a loss of confidence in the Korean economy, including potentially as a result of the Brexit;

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potential escalation of the ongoing trade war between the U.S. and China as each country introduces tariffs on goods traded with the other;

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social and labor unrest or declining consumer confidence or spending resulting from lay-offs, increasing unemployment and lower levels of income;

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uncertainty and volatility and further decreases in the market prices of Korean real estate;

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a decrease in tax revenues and a substantial increase in the Government’s expenditures for unemployment compensation and other social programs that together could lead to an increased Government budget deficit;

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political uncertainty, including as a result of increasing strife among or within political parties in Korea, and political gridlock within the government or in the legislature, which prevents or disrupts timely and effective policy making to the detriment of Korean economy, as well as the impeachment and indictment of the former president following a series of scandals and social unrest, which also involved the investigation of several leading Korean conglomerates and arrest of their leaders on charges of bribery and other possible misconduct;

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deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deterioration resulting from territorial or trade disputes or disagreements in foreign policy, including as a result of any potential renegotiation of free trade agreements, or the ongoing tension between Korean and China in relation to the decision to allow deployment by the United States of the Terminal High Altitude Defense system known as “THAAD” in Korea;

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increases in social expenditures to support the aging population in Korea or decreases in economic productivity due to the declining population size in Korea;

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any other development that has a material adverse effect in the global economy, such as an act of war, the spread of terrorism or a breakout of an epidemic such as SARS, avian flu, swine flu, Middle East Respiratory Syndrome, Ebola or Zika virus, novel coronavirus (COVID-19), or natural disasters, earthquakes and tsunamis and the related disruptions in the relevant economies with global repercussions;

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hostilities involving oil-producing countries in the Middle East and elsewhere and any material disruption in the supply of oil or a material increase in the price of oil resulting from such hostilities; and

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an increase in the level of tensions or an outbreak of hostilities in the Korean peninsula or between North Korea and the United States.

Any future deterioration of the Korean economy could have an adverse effect on our business, financial condition and results of operations.

Tensions with North Korea could have an adverse effect on us and the market value of our shares.

Relations between Korea and North Korea have been tense throughout Korea’s modern history. The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events. In particular, there continues to be uncertainty regarding the long-term stability of North Korea’s political leadership since the succession of Kim Jong-un to power following the death of his father in December 2011, which has raised concerns with respect to the political and economic future of the region. In February 2017, Kim Jong-un’s half-brother, Kim Jong-nam, was reported to have been assassinated in an international airport in Malaysia.

In addition, there continues to be heightened security tension in the region stemming from North Korea’s hostile military and diplomatic actions, including in respect of its nuclear weapons and long-range missile programs. Some examples from recent years include the following:

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In November 2017, North Korea conducted a test launch of another intercontinental ballistic missile, which, due to its improved size, power and range of distance, may potentially enable North Korea to target the United States mainland.

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Recently, on September 3, 2017, North Korea conducted its sixth nuclear test, claiming it had tested a hydrogen bomb that could be mounted on an intercontinental ballistic missile. In response, on September 12, 2017, the United Nations Security Council unanimously adopted a resolution imposing additional sanctions on North Korea including new limits on gas, petrol and oil imports, a ban on textile exports and measures to limit North Korean laborers from working abroad.

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On August 29, 2017, North Korea tested an intermediate-range ballistic missile which flew directly over northern Japan before landing in the Pacific Ocean. In response, the United Nations Security Council unanimously adopted a statement condemning such launch, reiterating demands that North Korea halt its ballistic missile and nuclear weapons programs.

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On July 4, 2017, North Korea tested its first intercontinental ballistic missile. In response, the U.S. government and the Government both issued statements condemning North Korea and conducted a joint military exercise on July 5, 2017. On July 28, 2017, North Korea tested a second intercontinental ballistic missile which landed in the Sea of Japan, inside Japan’s Economic Exclusion Zone. In response, on August 5, 2017, the United Nations Security Council unanimously adopted a resolution that strengthened sanctions on North Korea. The resolution includes a total ban on all exports of coal, iron, iron ore, lead, lead ore and seafood, which is expected to reduce North Korea’s export revenue by a third each year.

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In March 2017, North Korea launched four mid-range missiles, which landed off the east coast of the Korean peninsula.

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On September 9, 2016, North Korea conducted its fifth nuclear test, which has been the largest in scale among North Korea’s nuclear tests thus far. According to North Korean announcements, the test was successful in detonating a nuclear missile. The test created a sizable earthquake in South Korea. In response, in February 2017 the U.N. Security Council adopted Resolution 2321 (2016) against North Korea, the purpose of which is to strengthen its sanctions regime against North Korea and to condemn North Korea’s September 9, 2016 nuclear test in the strongest terms.

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On February 10, 2016, in retaliation of North Korea’s recent launch of a long-range rocket, South Korea announced that it would halt its operations of the Kaesong Industrial Complex to impede North Korea’s utilization of funds from the industrial complex to finance its nuclear and missile programs. In response, North Korea announced on February 11, 2016 that it would expel all South Korean employees from the industrial complex and freeze all South Korean assets there.

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On February 7, 2016, North Korea launched a rocket, claimed by them to be carrying a satellite intended for scientific observation. The launch was widely suspected by the international community to be a cover for testing a long-range missile capable of carrying a nuclear warhead. On February 18, 2016, the President of the United States signed into law mandatory sanctions on North Korea to punish it for its recent nuclear and missile tests, human rights violations and cybercrimes. The bill, which

marks the first measure by the United States to exclusively target North Korea, is intended to seize the assets of anyone engaging in business related to North Korea’s weapons program, and authorizes US$50 million over five years to transmit radio broadcasts into the country and support humanitarian assistance projects. On March 2, 2016, the United Nations Security Council voted unanimously to adopt a resolution to impose sanctions against North Korea, which include inspection of all cargo going to and from North Korea, a ban on all weapons trade and the expulsion of North Korean diplomats who engage in “illicit activities.” Also, on March 4, 2016, the European Union announced that it would expand its sanctions on North Korea, adding additional companies and individuals to its list of sanction targets. On April 1, 2016, North Korea fired a short-range surface-to-air missile in apparent protest of these sanctions adopted by the United States and the United Nations Security Council.

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On January 6, 2016, North Korea announced that it had successfully conducted its first hydrogen bomb test, hours after international monitors detected a 5.1 magnitude earthquake near a known nuclear testing site in the country. The claims have not been verified independently. The alleged test followed a statement made in the previous month by Kim Jong-un, who claimed that North Korea had developed a hydrogen bomb.

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In August 2015, two Korean soldiers were injured in a landmine explosion near the South Korean demilitarized zone. Claiming the landmines were set by North Koreans, the South Korean army re-initiated its propaganda program toward North Korea utilizing loudspeakers near the demilitarized zone. In retaliation, the North Korean army fired artillery rounds on the loudspeakers, resulting in the highest level of military readiness for both Koreas. High-ranking officials from North and South Korea subsequently met for discussions and entered into an agreement on August 25, 2015 intending to deflate military tensions.

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From time to time, North Korea has fired short- to medium-range missiles from the coast of the Korean peninsula into the sea. In March 2015, North Korea fired seven surface-to-air missiles into waters off its east coast in apparent protest of annual joint military exercises being held by Korea and the United States.

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North Korea renounced its obligations under the Nuclear Non-Proliferation Treaty in January 2003 and conducted three rounds of nuclear tests between October 2006 to February 2013, which increased tensions in the region and elicited strong objections worldwide. In response, the United Nations Security Council unanimously passed resolutions that condemned North Korea for the nuclear tests and expanded sanctions against North Korea.

North Korea’s economy also faces severe challenges, including severe inflation and food shortages, which may further aggravate social and political tensions within North Korea. In addition, reunification of Korea and North Korea could occur in the future, which would entail significant economic commitment and expenditure by Korea that may outweigh any resulting economic benefits of reunification. On April 27, 2018, May 26, 2018 and September 18, 2018, President Moon Jae-in met Kim Jong-un in a summit to discuss, among other matters, denuclearization of the Korean Peninsula. On June 12, 2018, President Donald Trump and Kim Jong-un in turn had an official summit in Singapore and on February 27, 2019, the parties held the second official summit in Hanoi, Vietnam. However, in March 2019, announcement was made that no agreement was reached in the second bilateral summit meeting between the United States and North Korea. On June 30 2019, for the first time, President Moon Jae-in, President Donald Trump and Kim Jong-un met in Panmunjom, a symbolic place of division in Korea, and the parties agreed to resume the United States and North Korea working-level negotiations, and on October 4, 2019, such working-level negotiations took place in Stockholm, Sweden. However, the negotiations did not result in any definitive agreement or any follow-up plans.

There can be no assurance that the level of tension on the Korean peninsula will not escalate in the future or that the political regime in North Korea may not suddenly collapse. Any further increase in tension or uncertainty relating to the military, political or economic stability in the Korean peninsula, including a breakdown of diplomatic negotiations over the North Korean nuclear program, occurrence of military hostilities, heightened concerns about the stability of North Korea’s political leadership or its actual collapse, a leadership crisis, a breakdown of high-level contacts or accelerated reunification could have a material adverse effect on our

business, financial condition and results of operations, as well as the price of our common shares and our American depositary shares.

We are generally subject to Korean corporate governance and disclosure standards, which differ in significant respects from those in other countries.

Companies in Korea, including us, are subject to corporate governance standards applicable to Korean public companies which differ in many respects from standards applicable in other countries, including the United States. As a reporting company registered with the Securities and Exchange Commission and listed on the New York Stock Exchange, we are, and will continue to be, subject to certain corporate governance standards as mandated by the Sarbanes-Oxley Act of 2002, as amended. However, foreign private issuers, including us, are exempt from certain corporate governance standards required under the Sarbanes-Oxley Act or the rules of the New York Stock Exchange. We and our generation subsidiaries are also subject to a number of special laws and regulations to Government-controlled entities, including the Act on the Management of Public Institutions. For a description of significant differences in corporate governance standards, see Item 16G. “Corporate Governance.” There may also be less publicly available information about Korean companies, such as us, than is regularly made available by public or non-public companies in other countries. Such differences in corporate governance standards and less public information could result in less than satisfactory corporate governance practices or disclosure to investors in certain countries.

You may not be able to enforce a judgment of a foreign court against us.

We are a corporation with limited liability organized under the laws of Korea. Substantially all of our directors and officers and other persons named in this annual report reside in Korea, and all or a significant portion of the assets of our directors and officers and other persons named in this annual report and substantially all of our assets are located in Korea. As a result, it may not be possible for holders of the American depository shares to affect service of process within the United States, or to enforce against them or us in the United States judgments obtained in United States courts based on the civil liability provisions of the federal securities laws of the United States. There is doubt as to the enforceability in Korea, either in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated on the United States federal securities laws.

Risks Relating to Our American Depositary Shares (ADSs)

There are restrictions on withdrawal and deposit of common shares under the depositary facility.

Under the deposit agreement, holders of shares of our common stock may deposit those shares with the depositary bank’s custodian in Korea and obtain American depositary shares, and holders of American depositary shares may surrender American depositary shares to the depositary bank and receive shares of our common stock. However, under current Korean laws and regulations, the depositary bank is required to obtain our prior consent for the number of shares to be deposited in any given proposed deposit which exceeds the difference between (i) the aggregate number of shares deposited by us for the issuance of American depositary shares (including deposits in connection with the initial and all subsequent offerings of American depositary shares and stock dividends or other distributions related to these American depositary shares) and (ii) the number of shares on deposit with the depositary bank at the time of such proposed deposit. We have consented to the deposit of outstanding shares of common stock as long as the number of American depositary shares outstanding at any time does not exceed 80,153,810 shares. As a result, if you surrender American depositary shares and withdraw shares of common stock, you may not be able to deposit the shares again to obtain American depositary shares.

Ownership of our shares is restricted under Korean law.

Under the Financial Investment Services and Capital Markets Act, with certain exceptions, a foreign investor may acquire shares of a Korean company without being subject to any single or aggregate foreign

investment ceiling. As one such exception, certain designated public corporations, such as us, are subject to a 40% ceiling on acquisitions of shares by foreigners in the aggregate. The Financial Services Commission may impose other restrictions as it deems necessary for the protection of investors and the stabilization of the Korean securities and derivatives market.

In addition to the aggregate foreign investment ceiling, the Financial Investment Services and Capital Markets Act and our Articles of Incorporation set a 3% ceiling on acquisition by a single investor (whether domestic or foreign) of the shares of our common stock. Any person (with certain exceptions) who holds our issued and outstanding shares in excess of such 3% ceiling cannot exercise voting rights with respect to our shares exceeding such limit.

The ceiling on aggregate investment by foreign investors applicable to us may be exceeded in certain limited circumstances, including as a result of acquisition of:

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shares by a depositary issuing depositary receipts representing such shares (whether newly issued shares or outstanding shares);

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shares by exercise of warrant, conversion right under convertible bonds, exchange right under exchangeable bonds or withdrawal right under depositary receipts issued outside of Korea;

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shares from the exercise of shareholders’ rights; or

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shares by gift, inheritance or bequest.

A foreign investor who has acquired our shares in excess of any ceiling described above may not exercise his voting rights with respect to our shares exceeding such limit and the Financial Services Commission may take necessary corrective action against him.

Holders of our ADSs will not have preemptive rights in certain circumstances.

The Korean Commercial Act and our Articles of Incorporation require us, with some exceptions, to offer shareholders the right to subscribe for new shares in proportion to their existing ownership percentage whenever new shares are issued. If we offer any rights to subscribe for additional shares of our common stock or any rights of any other nature, the depositary bank, after consultation with us, may make the rights available to you or use reasonable efforts to dispose of the rights on your behalf and make the net proceeds available to you. The depositary bank, however, is not required to make available to you any rights to purchase any additional shares unless it deems that doing so is lawful and feasible and:

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a registration statement filed by us under the U.S. Securities Act of 1933, as amended, is in effect with respect to those shares; or

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the offering and sale of those shares is exempt from or is not subject to the registration requirements of the U.S. Securities Act.

We are under no obligation to file any registration statement with the U.S. Securities and Exchange Commission in relation to the registration rights. If a registration statement is required for you to exercise preemptive rights but is not filed by us, you will not be able to exercise your preemptive rights for additional shares and you will suffer dilution of your equity interest in us.

The market value of your investment in our ADSs may fluctuate due to the volatility of the Korean securities market.

Our common stock is listed on the KRX KOSPI Division of the Korea Exchange, which has a smaller market capitalization and is more volatile than the securities markets in the United States and many European countries. The market value of ADSs may fluctuate in response to the fluctuation of the trading price of shares of

our common stock on the Stock Market Division of the Korea Exchange. The Stock Market Division of the Korea Exchange has experienced substantial fluctuations in the prices and volumes of sales of listed securities and the Stock Market Division of the Korea Exchange has prescribed a fixed range in which share prices are permitted to move on a daily basis. Like other securities markets, including those in developed markets, the Korean securities market has experienced problems including market manipulation, insider trading and settlement failures. The recurrence of these or similar problems could have a material adverse effect on the market price and liquidity of the securities of Korean companies, including our common stock and ADSs, in both the domestic and the international markets.

The Korean government has the ability to exert substantial influence over many aspects of the private sector business community, and in the past has exerted that influence from time to time. For example, the Korean government has promoted mergers to reduce what it considers excess capacity in a particular industry and has also encouraged private companies to publicly offer their securities. Similar actions in the future could have the effect of depressing or boosting the Korean securities market, whether or not intended to do so. Accordingly, actual or perceived actions or inactions by the Korean government may cause sudden movements in the market prices of the securities of Korean companies in the future, which may affect the market price and liquidity of our common stock and ADSs.

Your dividend payments and the amount you may realize in connection with a sale of your ADSs will be affected by fluctuations in the exchange rate between the U.S. dollar and the Won.

Investors who purchase the American depositary shares will be required to pay for them in U.S. dollars. Our outstanding shares are listed on the Korea Exchange and are quoted and traded in Won. Cash dividends, if any, in respect of the shares represented by the American depositary shares will be paid to the depositary bank in Won and then converted by the depositary bank into U.S. dollars, subject to certain conditions. Accordingly, fluctuations in the exchange rate between the Won and the U.S. dollar will affect, among other things, the amounts a registered holder or beneficial owner of the American depositary shares will receive from the depositary bank in respect of dividends, the U.S. dollar value of the proceeds which a holder or owner would receive upon sale in Korea of the shares obtained upon surrender of American depositary shares and the secondary market price of the American depositary shares.

If the Government deems that certain emergency circumstances are likely to occur, it may restrict the depositary bank from converting and remitting dividends in U.S. dollars.

If the Government deems that certain emergency circumstances are likely to occur, it may impose restrictions such as requiring foreign investors to obtain prior Government approval for the acquisition of Korean securities or for the repatriation of interest or dividends arising from Korean securities or sales proceeds from disposition of such securities. These emergency circumstances include any or all of the following:

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sudden fluctuations in interest rates or exchange rates;

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extreme difficulty in stabilizing the balance of payments; and

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a substantial disturbance in the Korean financial and capital markets.

The depositary bank may not be able to secure such prior approval from the Government for the payment of dividends to foreign investors when the Government deems that there are emergency circumstances in the Korean financial markets.

ITEM 4.

INFORMATION ON THE COMPANY

Item 4.A. History and Development of the Company

General Information

Our legal and corporate name is Korea Electric Power Corporation. We were established by the Government on December 31, 1981 as a statutory juridical corporation in Korea under the Korea Electric Power Corporation

(“KEPCO”) Act as the successor to Korea Electric Company. Our registered office is located at 55 Jeollyeok-ro, Naju-si, Jeollanam-do, 58322, Korea, and our telephone number is 82-61-345-4213. Our website address is www.kepco.co.kr.

Our agent in the United States is Korea Electric Power Corporation, North America Office, located at 7th Floor, Parker Plaza, 400 Kelby Street, Fort Lee, NJ 07024.

The Korean electric utility industry traces its origin to the establishment of the first electric utility company in Korea in 1898. On July 1, 1961, the industry was reorganized by the merger of Korea Electric Power Company, Seoul Electric Company and South Korea Electric Company, which resulted in the formation of Korea Electric Company. From 1976 to 1981, the Government acquired the private minority shareholdings in Korea Electric Company. After the Government acquired all the remaining shares of Korea Electric Company, Korea Electric Company was dissolved, and we were incorporated in 1981 and assumed the assets and liabilities of Korea Electric Company. We ceased to be wholly owned by the Government in 1989 when the Government sold 21% of our common stock. As of December 31, 2019, the last day on which our shareholders registry was closed, the Government maintained 51.1% ownership in aggregate of our common shares by direct holdings by the Government and indirect holdings through Korea Development Bank, a statutory banking institution wholly owned by the Government.

Under relevant laws of Korea, the Government is required to own, directly or indirectly, at least 51% of our capital. Direct or indirect ownership of more than 50% of our outstanding common stock enables the Government to control the approval of certain corporate matters relating to us that require a shareholders’ resolution, including approval of dividends. The rights of the Government and Korea Development Bank as holders of our common stock are exercised by the Ministry of Trade, Industry and Energy, based on the Government’s ownership of our common stock and a proxy received from Korea Development Bank, in consultation with the Ministry of Economy and Finance.

We operate under the general supervision of the Ministry of Trade, Industry and Energy. The Ministry of Trade, Industry and Energy, in consultation with the Ministry of Economy and Finance, is responsible for approving, subject to review by the Korea Electricity Commission, the electricity rates we charge our customers. See Item 4.B. “Business Overview—Sales and Customers—Electricity Rates.” We furnish reports to officials of the Ministry of Trade, Industry and Energy, the Ministry of Economy and Finance and other Government agencies and regularly consult with such officials on matters relating to our business and affairs. See Item 4.B. “Business Overview—Regulation.” Our non-standing directors, who comprise a majority of our board of directors, must be appointed by the Ministry of Economy and Finance following the review and resolution of the Public Agencies Operating Committee (which is established by law and chaired by the minister of the Ministry of Economy and Finance and whose members consist of Government officials and others appointed by the President of the Republic based on recommendation by the minister of the Ministry of Economy and Finance) from a pool of candidates recommended by the director nomination committee. Our president and standing directors who concurrently serve as members of our audit committee must be appointed by the President of the Republic upon the motion of the minister of the Ministry of Trade, Industry and Energy (in the case of our president) and the minister of the Ministry of Economy and Finance (in the case of our standing director who concurrently serves as a member of the audit committee) and following the nomination by our director nomination committee, the review and resolution of the Public Agencies Operating Committee and an approval at the general meeting of shareholders. See Item 6.A. “Directors and Senior Management—Board of Directors” and Item 16G. “Corporate Governance—The Act on the Management of Public Institutions”).

Item 4.B. Business Overview

Introduction

We are an integrated electric utility company engaged in the transmission and distribution of substantially all of the electricity in Korea. Through our six wholly-owned generation subsidiaries, we also generate the substantial majority of electricity produced in Korea. As of December 31, 2019, we and our generation

subsidiaries owned approximately 66.8% of the total electricity generation capacity in Korea (excluding plants generating electricity primarily for private or emergency use). In 2019, we sold to our customers 520,499 gigawatt-hours of electricity. We purchase electricity principally from our generation subsidiaries and, to a lesser extent, from independent power producers. Of the 529,075 gigawatt-hours of electricity we purchased in 2019, 27.0% was generated by KHNP, our wholly-owned nuclear and hydroelectric power generation subsidiary, 46.2% was generated by our wholly-owned five non-nuclear generation subsidiaries and 26.8% was generated by independent power producers that trade electricity to us through the cost-based pool system of power trading (excluding independent power producers that supply electricity under power purchase agreements with us). Our five non-nuclear generation subsidiaries are KOSEP, KOMIPO, KOWEPO, KOSPO and EWP, each of which is wholly owned by us and is incorporated in Korea. We derive substantially all of our revenues and profit from Korea, and substantially all of our assets are located in Korea.

In 2019, we had sales of Won 58,568 billion and net loss of Won 2,264 billion, compared to sales of Won 60,033 billion and net loss of Won 1,175 billion in 2018.

Our revenues are closely tied to demand for electricity in Korea. Demand for electricity in Korea increased at a compounded average growth rate of 1.8% per annum from 2015 to 2019, compared to the real gross domestic product, or GDP, which increased at a compounded average growth rate of 2.7% during the same period, according to the Bank of Korea. During 2019, the GDP growth rate was 2.0%, while the demand for electricity in Korea during the same year decreased by 1.1%.

Strategy

As our overall strategy, we seek to become a leading global energy enterprise by actively responding to the market’s demand for a stable supply of clean, safe, affordable and convenient source of energy. To this end, we plan to develop key competencies needed for digital transformation of our operations and energy transition. We also aim to strengthen competitiveness in our core operations and to develop new businesses and markets by focusing on low-carbon and renewable energy projects. We evaluate and renew our mid- to long-term strategy every three years, and in 2019 established the “Vision 2030 Mid- to Long-Term Strategy.” Under this vision, we will aim for sustainable growth of our operations through the supply of clean energy as well as a balanced new industry initiatives with growth potential.

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Expand clean energy and stabilize electricity supply and demand. We plan to contribute to the Government’s Nationally Determined Contributions (NDCs) by reducing greenhouse gas emissions from our generation subsidiaries and leading large-scale projects to promote the use of renewable energy. In addition, we will focus on ensuring smooth and stable connection for the renewable energy as part of our energy networks. We will also seek to enhance the efficiency of our electricity networks through the use of advanced technology.

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Enhance sales profitability and competitiveness. We will seek to become a market leader through the development of customized tariffs and new services. We will also maintain profitability through the cost-based tariff system and improve the demand-side efficiency to streamline energy use at the national level.

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Explore convergence-based new businesses and markets. We plan to selectively focus on and pursue profitable new businesses through in-depth market analysis (considering the market environment and our capabilities) to build a business ecosystem. In connection with our overseas business, we plan to explore opportunities to develop low-carbon, renewable energy to expand our market and to diversify our portfolio and provide suitable solutions meeting the different needs of various countries.

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We will focus on R&D and commercialization of technologies essential to achieving our strategy. We will also create a platform for developing new businesses and enhance the efficiency of our operations based on digital technology.

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In order to develop a management system suitable for sustainable growth, we will continue to develop sound corporate governance, financial structure and human resources. In addition, we will continue to

implement the environment, health and safety management system and focus on fostering shared social values and growth with local communities.

Government Ownership and Our Interactions with the Government

The KEPCO Act requires that the Government own at least 51% of our capital stock. Direct or indirect ownership of more than 50% of our outstanding common stock enables the Government to control the approval of certain corporate matters which require a shareholders’ resolution, including approval of dividends. The rights of the Government and Korea Development Bank as holders of our common stock are exercised by the Ministry of Trade, Industry and Energy in consultation with the Ministry of Economy and Finance. We are currently not aware of any plans of the Government to cease to own, directly or indirectly, at least 51% of our outstanding common stock.

We play an important role in the implementation of the Government’s national energy policy, which is established in consultation with us, among other parties. As an entity formed to serve public policy goals of the Government, we seek to maintain a fair level of profitability and strengthen our capital base in order to support the growth of our business in the long term.

The Government, through its various policy initiatives for the Korean energy industry as well as direct and indirect supervision of us and our industry, plays an important role in our business and operations. Most importantly, the electricity tariff rates we charge to our customers are regulated by the Government taking into account, among others, our needs to recover the costs of operations, make capital investments and recoup a fair return on capital invested by us, as well as the Government’s overall policy considerations, such as inflation. See Item 4.B. “Business Overview—Sales and Customers—Electricity Rates.”

In addition, pursuant to the Basic Plan determined by the Government, we and our generation subsidiaries have made, and plan to make, substantial expenditures for the construction of generation plants and other facilities to meet demand for electric power. See Item 5.B. “Liquidity and Capital Resources—Capital Requirements.”

Restructuring of the Electric Power Industry in Korea

On January 21, 1999, the Ministry of Trade, Industry and Energy published the Restructuring Plan. The overall objectives of the Restructuring Plan consisted of: (i) introducing competition and thereby increasing efficiency in the Korean electric power industry, (ii) ensuring a long-term, inexpensive and stable electricity supply, and (iii) promoting consumer convenience through the expansion of consumer choice.

The following provides further details relating to the Restructuring Plan.

Phase I

During Phase I, which served as a preparatory stage for Phase II and lasted from the announcement of the Restructuring Plan in January 1999 until April 2001, we undertook steps to split our generation business units off into one wholly-owned nuclear generation subsidiary (namely, KHNP) and five wholly-owned non-nuclear generation subsidiaries (namely, KOSEP, KOMIPO, KOWEPO, KOSPO and EWP), each with its own management structure, assets and liabilities. These steps were completed upon approval at our shareholders’ meeting in April 2001.

The Government’s principal objectives in the split-off of the generation units into separate subsidiaries were to: (i) introduce competition and thereby increase efficiency in the electricity generation industry in Korea, and (ii) ensure a stable supply of electricity in Korea.

Following the implementation of Phase I, we have substantial monopoly with respect to the transmission and distribution of electricity in Korea.

While our ownership percentage of our generation subsidiaries will depend on further adjustments to the Restructuring Plan to be adopted by the Government, we plan to retain 100% ownership of our transmission and distribution business.

Phase II

At the outset of Phase II in April 2001, the Government introduced a cost-based competitive bidding pool system under which we purchase power from our generation subsidiaries and other independent power producers for transmission and distribution to customers. For a further description of this system, see “—Purchase of Electricity—Cost-based Pool System” below.

Pursuant to the Electric Utility Act amended in December 2000, the Government established the Korea Power Exchange in April 2001. The primary function of the Korea Power Exchange is to deal with the sale of electricity and implement regulations governing the electricity market to allow for electricity distribution through a competitive bidding process. The Government also established the Korea Electricity Commission in April 2001 to regulate the Korean electric power industry and ensure fair competition among industry participants. To facilitate this goal, the Korea Power Exchange established the Electricity Market Rules relating to the operation of the bidding pool system. To amend the Electricity Market Rules, the Korea Power Exchange must have the proposed amendment reviewed by the Korea Electricity Commission and then obtain the approval of the Ministry of Trade, Industry and Energy.

The Korea Electricity Commission’s main functions include implementation of standards and measures necessary for electricity market operation and review of matters relating to licensing participants in the Korean electric power industry. The Korea Electricity Commission also acts as an arbitrator in tariff-related disputes among participants in the Korean electric power industry and investigates illegal or deceptive activities of the industry participants.

Privatization of Generation Subsidiaries

In April 2002, the Ministry of Trade, Industry and Energy released the basic privatization plan for five of our generation subsidiaries other than KHNP. Pursuant to this plan, we commenced the process of selling our equity interest in KOSEP in 2002. According to the original plan, this process was, in principle, to take the form of a sale of management control, potentially supplemented by an initial public offering as a way of broadening the investor base. In November 2003, KOSEP submitted its application to the Korea Exchange for a preliminary screening review, which was approved in December 2003. However, in June 2004, KOSEP made a request to the Korea Exchange to delay its stock listing due to unfavorable stock market conditions at that time.

In accordance with the Proposal for Adjustment of Functions of Public Institutions (Energy Sector) announced by the Government in June 2016, we considered a sale in the public market of a minority of our shares in our five non-nuclear generation subsidiaries, KEPCO KDN and KHNP gradually. However, the planned sales have been put on hold, primarily due to prevailing market conditions. In any event, we plan to maintain a controlling stake in each of these subsidiaries.

Suspension of the Plan to Form and Privatize Distribution Subsidiaries

In 2003, the Government established a Tripartite Commission consisting of representatives of the Government, leading businesses and labor unions in Korea to deliberate on ways to introduce competition in electricity distribution, such as by forming and privatizing new distribution subsidiaries. In 2004, the Tripartite Commission recommended not pursuing such privatization initiatives but instead creating independent business divisions within us to improve operational efficiency through internal competition. Following the adoption of such recommendation by the Government in 2004 and further studies by Korea Development Institute, in 2006 we created nine “strategic business units” (which, together with our other business units, were subsequently restructured into 14 such units in February 2012) that have a greater degree of autonomy with respect to management, financial accounting and performance evaluation while having a common focus on increasing profitability.

Initiatives to Improve the Structure of Electricity Generation

In August 2010, the Ministry of Trade, Industry and Energy announced the Proposal for Improvement in the Structure of the Electric Power Industry in order to resolve uncertainty related to restructuring plans for the electric power industry and maintain competitiveness of the electric power industry. Key initiatives of the proposal included the following: (i) maintain the current structure of having six generation subsidiaries and designate the six generation subsidiaries as market-oriented public enterprises under the Act on the Management of Public Institutions in order to foster competition among the generation subsidiaries and promote efficiency in their operations, (ii) clarify the scope of the business of us and the six generation subsidiaries (namely, that we shall manage the financial structure and governance of the six generation subsidiaries and nuclear power plant and overseas resources development projects, while the six generation subsidiaries will have greater autonomy with respect to construction and management of generation units and procurement of fuel), (iii) create a nuclear power export business unit to systematically enhance our capabilities to win projects involving the construction and operation of nuclear power plants overseas, (iv) further rationalize the electricity tariff by adopting a fuel-cost based tariff system in 2011 and a voltage-based tariff system in a subsequent year, and (v) create separate accounting systems for electricity generation, transmission, distribution and sales with the aim of introducing competition in electricity sales in the intermediate future.

In January 2011, the Ministry of Economy and Finance created a “joint cooperation unit” consisting of officers and employees selected from the five thermal power generation subsidiaries in order to reduce inefficiencies in areas such as fuel transportation, inventories, materials and equipment and construction, etc. and allow the thermal power generation subsidiaries to continue utilizing the benefits of economy of scale after split off of our generation business units into separate subsidiaries. The purpose of the joint cooperation unit was to give greater autonomy to the generation subsidiaries with regard to power plant construction and management and fuel procurements, and thereby enhance efficiency in operating power plants. The main functions of the joint cooperation unit are as follows: (i) maintain inventories of bituminous coal through volume exchanges and joint purchases, (ii) reduce shipping and demurrage expenses through joint operation and distribution of dedicated vessels, (iii) reduce costs by sharing information on generation material inventories and (iv) sharing human resources among the five thermal power generation subsidiaries for construction projects, among other things.

Furthermore, in January 2011 the six generation subsidiaries were officially designated as “market-oriented public enterprises,” whereupon the President of Korea appoints the president and the statutory auditor of each such subsidiary; the selection of non-standing directors of each such subsidiary is subject to approval by the minister of the Ministry of Economy and Finance; the president of each such subsidiary is required to enter into a management contract directly with the minister of the Ministry of Trade, Industry and Energy; and the Public Enterprise Management Evaluation Team which is established by the Public Agencies Operating Committee conducts performance evaluation of such subsidiaries. Previously, our president appointed the president and the statutory auditor of each such subsidiary; the selection of non-standing directors of each such subsidiary was subject to approval by our president; the president of each such subsidiary entered into a management contract with our president; and our evaluation committee conducted performance evaluation of such subsidiaries. For further details of the impact of the designation of our generation subsidiaries as “market-oriented public enterprises,” see Item 16G.—Corporate Governance—The Act on the Management of Public Institutions.

Proposal for Adjustment of Functions of Public Institutions (Energy Sector)

In June 2016, the Government announced the Proposal for Adjustment of Functions of Public Institutions (Energy Sector) for the purpose of streamlining the operations of government-affiliated energy companies by discouraging them from engaging in overlapping or similar businesses with each other, reducing non-core assets and activities and improving management and operational efficiency. The initiatives contemplated in this proposal that would affect us and our generation subsidiaries include the following: (i) the generation companies should take on greater responsibilities in overseas resource exploration and production projects as these involve procurement of fuels necessary for electricity generation while fostering cooperation among each other through closer coordination, (ii) KHNP should take a greater role in export of nuclear technology, and (iii) the current system of retail sale of electricity to end-users should be liberalized to encourage more competition. In accordance therewith, we transferred a substantial portion of our assets and liabilities in our overseas resource business to our generation subsidiaries as of December 31, 2016. In addition, this Proposal contemplated selling a minority stake in our generation subsidiaries and KEPCO KDN, but the planned sales have been put on hold, as discussed above in “—Privatization of Generation Subsidiaries.”

Purchase of Electricity

Cost-based Pool System

Since April 2001, the purchase and sale of electricity in Korea is required to be made through the Korea Power Exchange, which is a statutory not-for-profit organization established under the Electric Utility Act with responsibilities for setting the price of electricity, handling the trading and collecting relevant data for the electricity market in Korea. The suppliers of electricity in Korea consist of our six generation subsidiaries, which were split-off from us in April 2001, and independent power producers, which numbered 20 (excluding renewable energy producers) as of December 31, 2019. We distribute electricity purchased through the Korea Power Exchange to end users.

Our Relationship with the Korea Power Exchange

The key features of our relationships with the Korea Power Exchange include the following: (i) we and our six generation subsidiaries are member corporations of the Korea Power Exchange and collectively own 100% of its share capital, (ii) three of the 11 members of the board of directors of the Korea Power Exchange are currently our or our subsidiaries’ employees, and (iii) one of our employees is currently a member in three of the key committees of the Korea Power Exchange that are responsible for evaluating the costs of producing electricity, making rules for the Korea Power Exchange and gathering and disclosing information relating to the Korean electricity market.

Notwithstanding the foregoing relationships, however, we do not have control over the Korea Power Exchange or its policies since, among others, (i) the Korea Power Exchange, its personnel, policies, operations and finances are closely supervised and controlled by the Government, namely through the Ministry of Trade, Industry and Energy, and are subject to a host of laws and regulations, including, among others, the Electric Utility Act and the Act on the Management of Public Institutions, as well as the Articles of Incorporation of the Korea Power Exchange, (ii) we are entitled to elect no more than one-third of the Korea Power Exchange directors and our representatives represent only a minority of its board of directors and committees (with the other members being comprised of representatives of the Ministry of Trade, Industry and Energy, employees of the Korea Power Exchange, businesspersons and/or scholars), and (iii) the role of our representatives in the policy making process for the Korea Power Exchange is primarily advisory based on their technical expertise derived from their employment at us or our generation subsidiaries. Consistent with this view, the Finance Supervisory Service issued a ruling in 2005 that stated that we are not deemed to have significant influence or control over the decision-making process of the Korea Power Exchange relating to its business or financial affairs.

Pricing Factors

The price of electricity in the Korean electricity market is determined principally based on the cost of generating electricity using a system known as the “cost-based pool” system. Under the cost-based pool system, the price of electricity has two principal components, namely the marginal price (representing the variable cost of generating electricity) and the capacity price (representing the fixed cost of generating electricity).

Under the merit order system, the electricity purchase allocation, the system marginal price (as described below) and the final allocation adjustment are automatically determined based on an objective formula. The variable cost (including the adjusted coefficient as described below) and the capacity price are determined in advance of trading by the Cost Evaluation Committee, which is comprised of representatives from the Ministry of Trade, Industry and Energy, the Korea Power Exchange, us, generation companies, scholars and researchers (the “Cost Evaluation Committee”). Accordingly, a supplier of electricity cannot exercise control over the merit order system or its operations to such supplier’s strategic advantage.

Marginal Price

The primary purpose of the marginal price is to compensate the generation companies for fuel costs, which represents the principal component of the variable costs of generating electricity. We currently refer such marginal price as the “system marginal price.”

The system marginal price represents, in effect, the marginal price of electricity at a given hour at which the projected demand for electricity and the projected supply of electricity for such hour intersect, as determined by the merit order system, which is a system used by the Korea Power Exchange to allocate which generation units will supply electricity for which hour and at what price. To elaborate, the projected demand for electricity for a given hour is determined by the Korea Power Exchange based on a forecast made one day prior to trading, and such forecast takes into account, among others, historical statistics relating to demand for electricity nationwide by day and by hour, seasonality and on-peak-hour versus off-peak hour demand analysis. The projected supply of electricity at a given hour is determined as the aggregate of the available capacity of all generation units that have submitted bids to supply electricity for such hour. These bids are submitted to the Korea Power Exchange one day prior to trading.

Under the merit order system, the generation unit with the lowest variable cost of producing electricity among all the generation units that have submitted a bid for a given hour is first awarded a purchase order for electricity up to the available capacity of such unit as indicated in its bid. The generation unit with the next lowest variable cost is then awarded a purchase order up to its available capacity in its bid, and so forth, until the projected demand for electricity for such hour is met. We refer to the variable cost of the generation unit that is the last to receive the purchase order for such hour as the system marginal price, which also represents the highest price at which electricity can be supplied at a given hour based on the demand and supply for such hour. Generation units whose variable costs exceed the system marginal price for a given hour do not receive purchase orders to supply electricity for such hour. The variable cost of each generation unit is determined by the Cost Evaluation Committee on a monthly basis and reflected in the following month based on the fuel costs two months prior to such determination. The purpose of the merit order system is to encourage generation units to reduce its electricity generation costs by making its generation process more efficient, sourcing fuels from most cost-effective sources or adopting other cost savings programs.

The final allocation of electricity supply is further adjusted on the basis of other factors, including the proximity of a generation unit to the geographical area to which power is being supplied, network and fuel constraints and the amount of power loss. This adjustment mechanism is designed to adjust for transmission losses in order to improve overall cost-efficiency in the transmission of electricity to end-users.

The price of electricity at which our generation subsidiaries sell electricity to us is determined using the following formula:

Variable cost + [System marginal price – Variable cost] * Adjusted coefficient

An adjusted coefficient applies in principle to all generation units operated by our generation subsidiaries and the coal-fired generation units operated by independent power producers. The adjusted coefficient applicable to the generation units operated by our generation subsidiaries is determined based on considerations of, among others, electricity tariff rates, the differential generation costs for different fuel types and the relative fair returns on investment in respect of us compared to our generation subsidiaries. The purpose of the adjusted coefficient here is to prevent electricity trading from resulting in undue imbalances as to the relative financial results among generation subsidiaries as well as between us (as the purchaser of electricity) and our generation subsidiaries (as sellers of electricity). Such imbalances may arise from excessive profit taking by base load generators (on account of their inherently cheaper fuel cost structure compared to non-base load generators) as well as from fluctuations in fuel prices (it being the case that during times of rapid and substantial rises in fuel costs which are not offset by corresponding rises in electricity tariff rates charged by us to end-users, on a non-consolidated basis our profitability will decline compared to that our generation subsidiaries since our generation subsidiaries are entitled to sell electricity to us at cost plus a guaranteed margin). In comparison, the adjusted coefficient applicable to the coal-fired generation units operated by independent power producers is determined to enable such independent power producers to recover the total costs of building and operating such units.

The adjusted coefficient applicable to our generation subsidiaries is currently set at the highest level for the marginal price of electricity generated using nuclear fuel, followed by coal and (depending the prevailing relative market prices) oil and/or LNG. The differentiated adjusted coefficients reflect the Government’s prevailing energy policy objectives and have the effect of setting priorities in the fuel types to be used in electricity generation.

The adjusted coefficient is determined by the Cost Evaluation Committee in principle on an annual basis, although in exceptional cases driven by external or structural factors such as rapid and substantial changes in fuel costs, adjustments to electricity tariff rates or changes in the electricity pricing structure, the adjusted coefficient may be adjusted on a quarterly basis.

Previously, it was contemplated that the vesting contract system, as described below, would gradually replace the application of the adjusted coefficient. However, since the implementation of the vesting contract system has been suspended indefinitely, it is unlikely to impact the application of the adjusted coefficient in the foreseeable future.

Capacity Price

In addition to payment in respect of the variable cost of generating electricity, generation units receive payment in the form of capacity price, the purpose of which is to compensate them for the fixed costs of constructing generation facilities, provide incentives for construction of new generation units and maintain reliability of the nationwide electricity transmission network.

The capacity price is determined by the Cost Evaluation Committee as a function of the following factors: (i) reference capacity price, (ii) reserve capacity factor, (iii) time-of-the-day capacity coefficient and (iv) since October 2016, fuel switching factor. The time-of-the-day capacity coefficient are determined annually before the end of December for the subsequent 12-months period. The reference capacity price, reserve capacity factor and the fuel switching factor are determined annually before the end of June for the subsequent 12-months period.

The reference capacity price refers to the Won amount per kilowatt-hour payable annually for annualized available capacity indicated in the bids submitted the day before trading (provided that such capacity is actually available on the relevant day of trading), and is determined based on the construction costs and maintenance costs of a standard generation unit and related transmission access facilities, and a base rate for loading electricity. Prior to October 2016, the same reference capacity price applied uniformly to all generation units. Since October 2016, the reference capacity price applies differentially to each generation unit depending on the start year of its commercial operation. Accordingly, the reference capacity price currently ranges from Won 9.46 to 10.68 per kilowatt hour.

The reserve capacity factor relates to the requirement to maintain a standard capacity reserve margin in the range of 13% in order to prevent excessive capacity build-up as well as induce optimal capacity investment at the regional level. The capacity reserve margin is the ratio of peak demand to the total available capacity. Under this system, generation units in a region where available capacity is insufficient to meet demand for electricity as evidenced by failing to meet the standard capacity reserve margin receive increased capacity price. Conversely, generation units in a region where available capacity exceeds demand for electricity as evidenced by exceeding the standard capacity reserve margin receive reduced capacity price. Since October 2016, the reserve capacity factor also factors in the transmission loss per generation unit in order to favor transmission of electricity from a nearby generation unit.

The time-of-the-day capacity coefficient allows hourly and seasonal adjustments in order to incentivize our generation subsidiaries to operate their generation facilities at full capacity during periods of highest demand. For example, the capacity price paid differs depending on whether the relevant hour is an “on-peak” hour, a “mid-peak” hour or an “off-peak” hour (the capacity price being highest for the on-peak hours and lowest for the off-peak hours) and the capacity price paid is highest during the months of January, July and August when electricity usage is highest due to weather conditions.

The fuel switching factor, which was introduced in October 2016 to promote environmental sensitivities to climate change, seeks to encourage reduced greenhouse gas emission by penalizing generation units (mostly coal-fired units) for excessive greenhouse gas emission.

Other than subject to the aforementioned variations, the same capacity pricing mechanism applies to all generation units regardless of fuel types used.

Vesting Contract System

In May 2014, the Electric Utility Act was amended to introduce a “vesting contract” system in determining the price and quantity of electricity to be sold and purchased between the purchaser of electricity (namely, us) and the sellers of electricity (namely, our generation subsidiaries and independent power producers). Under the vesting contract system, electricity generators using base load fuels (such as nuclear, coal, hydro and by-product gas) at a particular generation unit were to be required to enter into a contract with the purchaser of electricity (namely, us), which specifies, among other things, the quantity of electricity to be generated and sold at a particular generation unit and the price at which such electricity is sold, subject to certain adjustments.

The vesting contract system was introduced principally to prevent excessive profit-taking by low-cost producers of electricity using base load fuels (such as nuclear, coal, hydro and by-product gas) by replacing the adjusted coefficient as the basis for determining the guaranteed return to generation companies, as well as to enhance the stability of electricity supply by requiring long-term contractual arrangements for the purchase and sale of electricity and promote cost savings, productivity enhancements and operational efficiency by providing incentives and penalties depending on the degree to which the generation companies could supply electricity at costs below the contracted electricity prices.

In order to minimize undue shock to the electricity trading market in Korea, the vesting contract system was to be implemented in phases starting with by-product gas-based electricity in 2015, which accounted for 1.8% of electricity purchased by us during such year. The rollout of the vesting contract system was further studied by a task force consisting of representatives from the Government, the Korea Power Exchange and generation companies.

Following such study, the Government announced in June 2016 that, due to changes in the electricity business environment (including an increase in generation capacity relative to peak usage, reduced fuel costs following a decline in oil prices and greater environmental concerns related to coal-fired electricity generation), it will indefinitely suspend any further rollout of the vesting contract system beyond by-product gas-based electricity, and revert to the adjusted coefficient-based electricity pricing adjustment mechanism.

Power Trading Results

The results of power trading, as effected through the Korea Power Exchange, for our generation subsidiaries and independent power producers in 2019 are as follows:


	Items	Volume (Gigawatt hours)		Percentage of Total Volume (%)		Sales to KEPCO⁽²⁾ (in billions of Won)		Percentage of Total Sales (%)		Unit Price (Won/kWh)
Generation Companies	KHNP		142,949		27.0		8,608		18.1		60.22
	KOSEP		60,361		11.4		5,354		11.2		88.70
	KOMIPO		43,342		8.2		4,435		9.3		102.33
	KOWEPO		44,178		8.3		4,354		9.1		98.56
	KOSPO		48,933		9.2		4,987		10.5		101.91
	EWP		48,144		9.1		4,658		9.8		96.75
	Others⁽¹⁾		141,168		26.8		15,290		32.1		108.31

	Total		529,075		100.0		47,686		100.0		90.13

Energy Sources	Nuclear		138,607		26.2		8,094		17.0		58.39
	Bituminous coal		215,012		40.6		18,808		39.4		87.47
	Anthracite coal		2,331		0.4		240		0.5		102.85
	Oil		5,105		1.0		1,149		2.4		225.12
	LNG/Combined-cycle		138,655		26.2		16,519		34.6		119.13
	Renewables		23,220		4.4		2,176		4.6		93.72
	Hydro		2,193		0.4		236		0.5		107.83
	Pumped storage		3,444		0.7		419		0.9		121.62
	Others		508		0.1		45		0.1		88.79

	Total		529,075		100.0		47,686		100.0		90.13

Load	Base load		355,950		67.3		27,141		56.9		76.25
	Non-base load		173,125		32.7		20,545		43.1		118.67

	Total		529,075		100.0		47,686		100.0		90.13

Notes:

(1)	Others represent independent power producers that trade electricity through the cost-based pool system of power trading (excluding independent power producers that supply electricity under power purchase agreements with us).

(2)	Based on the payment made by us through Korea Power Exchange

Power Purchased from Independent Power Producers Under Power Purchase Agreements

In 2019, we purchased an aggregate of 17,446 gigawatt hours of electricity generated by independent power producers under existing power purchase agreements. These independent power producers had an aggregate generation capacity of 9,274 megawatts as of December 31, 2019.

Power Generation

As of December 31, 2019, we and our generation subsidiaries had a total of 671 generation units, including nuclear, thermal, hydroelectric and internal combustion units, representing total installed generation capacity of 83,672 megawatts. Our thermal units produce electricity using steam turbine generators fired by coal and oil. Our internal combustion units use oil or diesel-fired gas turbines and our combined-cycle units are primarily LNG-fired. We also purchase power from several generation plants not owned by our generation subsidiaries.

The table below sets forth as of and for the year ended December 31, 2019 the number of units, installed capacity and the average capacity factor for each type of generating facilities owned by our generation subsidiaries.


	Number of Units		Installed Capacity⁽¹⁾		Average Capacity Factor⁽²⁾
			(Megawatts)		(Percent)
Nuclear		24		23,250		70.6
Thermal:
Coal		59		34,311		70.5
Oil		7		2,600		8.1
Total thermal		66		36,911		66.1

Internal combustion		217		341		19.4
Combined-cycle⁽³⁾		114		16,485		27.0
Integrated gasification combined cycle⁽⁴⁾		1		346		34.0
Hydro		57		5,352		11.0
Wind		14		139		20.2
Solar		152		170		12.7
Fuel cell		19		165		55.5
Bio		6		505		65.4
Others⁽⁵⁾		1		10		34.1

Total		671		83,672		55.8

Notes:

(1)	Installed capacity represents the level of output that may be sustained continuously without significant risk of damage to plant and equipment.

(2)	Average capacity factor represents the total number of kilowatt hours of electricity generated in the indicated period divided by the total number of kilowatt hours that would have been generated if the generation units were continuously operated at installed capacity, expressed as a percentage.

(3)	Involves generation through gas and oil.

(4)	Involves generation through coal and gasified coal.

(5)	Includes waste-to-energy.

The expected useful life of a unit, assuming no substantial renovation, is approximately as follows: nuclear, over 40 years; thermal, over 30 years; internal combustion, over 25 years; and hydroelectric, over 55 years. Substantial renovation can extend the useful life of thermal units by up to 20 years.

We seek to achieve efficient use of fuels and diversification of generation capacity by fuel type. In the past, we relied principally upon oil-fired thermal generation units for electricity generation. Since the oil shock in 1974, however, Korea’s power development plans have emphasized the construction of nuclear generation units. While nuclear units are more expensive to construct than thermal generation units of comparable capacity, nuclear fuel is less expensive than fossil fuels in terms of electricity output per unit cost. However, efficient operation of nuclear units requires that such plants be run continuously at relatively constant energy output levels. As it is impractical to store large quantities of electrical energy, we seek to maintain nuclear power production capacity at approximately the level at which demand for electricity is continuously stable. During those times when actual demand exceeds the usual level of electricity supply from nuclear power, we rely on units fired by fossil fuels and hydroelectric units, which can be started and shut down more quickly and efficiently than nuclear units, to meet the excess demand. Bituminous coal is currently the least expensive thermal fuel per kilowatt-hour of electricity produced, and therefore we seek to maximize the use of bituminous coal for generation needs in excess of the stable demand level, except for meeting short-term surges in demand which require rapid start-up and shutdown. Thermal units fired by LNG, hydroelectric units and internal

combustion units are the most efficient types of units for rapid start-ups and shutdowns, and therefore we use such units principally to meet short-term surges in demand. Anthracite coal is a less efficient fuel source than bituminous coal in terms of electricity output per unit cost.

Our generation subsidiaries have constructed and operated thermal and internal combustion units in order to help meet power demand. Subject to market conditions, our generation subsidiaries plan to continue to add additional thermal and internal combustion units. These units generally take less time to complete construction than nuclear units.

The high average age of our oil-fired thermal units is attributable to our reliance on oil-fired thermal units as the primary means of electricity generation until mid-1970s. Since then, we have diversified our fuel sources and constructed relatively few oil-fired thermal units compared to units of other fuel types.

The table below sets forth, for the periods indicated, the amount of electricity generated by facilities linked to our grid system and the amount of power used or lost in connection with transmission and distribution.


	2015		2016		2017		2018		2019		% of 2019 Gross Generation⁽¹⁾
	(in gigawatt hours, except percentages)
Electricity generated by us and our generation subsidiaries:
Nuclear		164,762		161,995		148,426		133,505		145,910		25.9
Coal		207,533		207,912		227,186		222,818		211,785		37.6
Oil		8,822		13,055		5,242		5,845		1,842		0.3
LNG		222		369		220		—		—		—
Internal combustion		633		573		496		528		579		0.1
Combined-cycle		45,923		46,477		36,957		46,780		39,049		6.9
Hydro		4,424		4,835		5,263		5,187		4,477		0.8
Wind		181		186		209		195		192		0.03
Solar, fuel cells and others		420		908		2,485		3,469		5,236		0.9

Total generation by us and our generation subsidiaries		432,920		436,310		426,484		418,327		409,070		72.7

Electricity generated by IPPs:
Thermal		72,316		83,789		103,745		125,830		133,523		23.7
Hydro and other renewable		17,106		20,342		23,238		26,490		20,343		3.6

Total generation by IPPs		89,422		104,131		126,983		152,320		153,866		27.3

Gross generation		522,343		540,441		553,467		570,647		562,936		100
Auxiliary use⁽²⁾		21,293		21,605		22,279		22,309		21,587		3.8
Pumped-storage⁽³⁾		4,824		4,716		5,477		5,106		4,588		0.8

Total net generation⁽⁴⁾		496,226		514,120		525,711		543,232		536,761		95.4

Transmission and distribution losses⁽⁵⁾		18,063		18,475		18,790		19,359		19,000		3.54

IPPs = Independent power producers

Notes:

(1)	Unless otherwise indicated, percentages are based on gross generation.

(2)	Auxiliary use represents electricity consumed by generation units in the course of generation.

(3)	Pumped storage represents electricity consumed during low demand periods in order to store water which is utilized to generate hydroelectric power during peak demand periods.

(4)	Total net generation represents gross generation minus auxiliary and pumped-storage use.

(5)	Transmission and distribution losses represents total transmission and distribution losses divided by total net generation.

The table below sets forth our total capacity at the end of, and peak and average loads during, the indicated periods.


	2015		2016		2017		2018		2019
	(Megawatts)
Total capacity		94,102		100,180		116,657		117,205		125,338
Peak load		78,790		85,183		85,133		92,478		90,314
Average load		60,284		61,694		63,188		65,142		64,262

Korea Hydro & Nuclear Power Co., Ltd

We commenced nuclear power generation activities in 1978 when our first nuclear generation unit, Kori #1, began commercial operation. On April 2, 2001, all of our nuclear and hydroelectric power generation assets and liabilities were transferred to KHNP.

KHNP owns and operates 24 nuclear generation units at four power plant complexes in Korea, located in Kori, Wolsong, Yonggwang (Hanbit) and Ulchin (Hanul), 52 hydroelectric generation units including 16 pumped storage hydro generation units as well as ten solar generation units and one wind generation unit as of December 31, 2019.

The table below sets forth the number of units and installed capacity as of December 31, 2019 and the average capacity factor by types of generation units in 2019.


	Number of Units		Installed Capacity⁽¹⁾		Average Capacity Factor⁽²⁾
			(Megawatts)		(Percent)
Nuclear		24		23,250		70.6
Hydroelectric		52		5,307		9.32
Solar		15		26		13.2
Wind		1		1		6.1

Total		92		28,584

Notes:

(1)	Installed capacity represents the level of output that may be sustained continuously without significant risk of damage to plant and equipment.

(2)	Average capacity factor represents the total number of kilowatt hours of electricity generated in the indicated period divided by the total number of kilowatt hours that would have been generated if the generation units were continuously operated at installed capacity, expressed as a percentage.

KHNP commenced commercial operation of Shin-Kori #3, with a 1,400 megawatt capacity, in December 2016, and Shin-Kori #4 began commercial operations on August 2019. KHNP is currently building four additional nuclear generation units, two at the Shin-Kori and two at Shin-Hanul sites, each with a 1,400 megawatt capacity. KHNP expects to complete these units between 2020 and 2024. In June 2018, the board of directors of KHNP decided to retire Wolsong #1 unit earlier than planned due to the unit’s economic inefficiency. The initial phase of the decommissioning of Kori #1, which primarily involves safety inspections and the removal of spent fuels, has begun after its permanent shutdown in June 2017.

Nuclear

The table below sets forth certain information with respect to the nuclear generation units of KHNP as of December 31, 2019.


Unit⁽⁵⁾	Reactor Type ⁽¹⁾		Reactor Design⁽²⁾	Turbine and Generation⁽³⁾	Commencement of Operations		Installed Capacity		Average Capacity Factor⁽⁴⁾ (%)
							(Megawatts)
Kori-2		PWR	W	GEC		1983		650		100.0
Kori-3		PWR	W	GEC, Hitachi		1985		950		68.0
Kori-4		PWR	W	GEC, Hitachi		1986		950		51.1
Shin-Kori-1		PWR	D, KEPCO E&C, W	D, GE		2011		1,000		74.9
Shin-Kori-2		PWR	D, KEPCO E&C, W	D, GE		2012		1,000		79.4
Shin-Kori-3		PWR	D, KEPCO E&C, W	D, GE		2016		1,400		88.4
Shin-Kori-4		PWR	D, KEPCO E&C, W	D, GE		2019		1,400		102.7
Wolsong-2		PHWR	AECL, H, K	H, GE		1997		700		91.6
Wolsong-3		PHWR	AECL, H	H, GE		1998		700		59.6
Wolsong-4		PHWR	AECL, H	H, GE		1999		700		83.4
Shin-Wolsong-1		PWR	D, KEPCO E&C, W	D, GE		2012		1,000		85.0
Shin-Wolsong-2		PWR	D, KEPCO E&C, W	D, GE		2015		1,000		75.2
Hanbit-1		PWR	W	W, D		1986		950		16.6
Hanbit-2		PWR	W	W, D		1987		950		86.7
Hanbit-3		PWR	H, CE, K	H, GE		1995		1,000		0.0
Hanbit-4		PWR	H, CE, K	H, GE		1996		1,000		0.0
Hanbit-5		PWR	D, CE, W, KEPCO E&C	D, GE		2002		1,000		99.5
Hanbit-6		PWR	D, CE, W, KEPCO E&C	D, GE		2002		1,000		73.5
Hanul-1		PWR	F	A		1988		950		83.7
Hanul-2		PWR	F	A		1989		950		78.3
Hanul-3		PWR	H, CE, K	H, GE		1998		1,000		76.0
Hanul-4		PWR	H, CE, K	H, GE		1999		1,000		95.5
Hanul-5		PWR	D, KEPCO E&C, W	D, GE		2004		1,000		74.3
Hanul-6		PWR	D, KEPCO E&C, W	D, GE		2005		1,000		77.4

Total nuclear								23,250		70.6

Notes:

(1)	“PWR” means pressurized light water reactor; “PHWR” means pressurized heavy water reactor.

(2)

“W” means Westinghouse Electric Company (U.S.A.); “AECL” means Atomic Energy Canada Limited (Canada); “F” means Framatome (France); “H” means Hanjung; “CE” means Combustion Engineering (U.S.A.); “D” means Doosan Heavy Industries; “K” means Korea Atomic Energy Research Institute; “KEPCO E&C” means KEPCO Engineering & Construction.

(3)	“GEC” means General Electric Company (U.K.); “P” means Parsons (Canada and U.K.); “W” means Westinghouse Electric Company (U.S.A.); “A” means Alstom (France); “H” means Hanjung; “GE” means General Electric (U.S.A.); “D” means Doosan Heavy Industries; “Hitachi” means Hitachi Ltd. (Japan).

(4)	The average fuel cost per kilowatt in 2019 for the entire generation units was Won 7.89 per kilowatt.

(5)	Kori-1 was permanently shut down on June 18, 2017. Shin-Kori-4 commenced operations on August 29, 2019. On December 24, 2019, the NSSC approved the permanent shutdown of Wolsong #1.

Under extended-cycle operations, nuclear units can be run continuously for periods longer than the conventional 12-month period between scheduled shutdowns for refueling and maintenance. Since 1987, we have adopted the mode of extended-cycle operations for all of our pressurized light water reactor units and plan to use it for our newly constructed units. The duration of shutdown for fuel replacement, maintenance and the evaluation period for approval to start after maintenance was 2,434.7 days in the aggregate in 2019. In addition, KHNP’s nuclear units experienced an average of 0.08 unplanned shutdowns per unit in 2019. In the ordinary course of operations, KHNP’s nuclear units routinely experience damage and wear and tear, which are repaired

during routine shutdown periods or during unplanned temporary suspensions of operations. No significant damage has occurred in any of KHNP’s nuclear reactors, and no significant nuclear exposure or release incidents have occurred at any of KHNP’s nuclear facilities since the first nuclear plant commenced operation in 1978.

Hydroelectric

The table below sets forth certain information relating to KHNP’s pumped-storage and hydroelectric business units, including the installed capacity as of December 31, 2019 and the average capacity factor in 2019.


Location of Unit	Number of Units		Classification	Year Built		Installed Capacity		Average Capacity Factor
						(Megawatts)		(%)
Hwacheon		4	Dam waterway		1944		108.0		12.53
Chuncheon		2	Dam		1965		62.3		13.48
Euiam		2	Dam		1967		48.0		23.12
Cheongpyung		4	Dam		1943		140.1		15.88
Paldang		4	Dam		1973		120.0		26.85
Chilbo (Seomjingang)		3	Basin deviation		1945		35.4		24.44
Boseonggang		2	Basin deviation		1937		4.5		37.58
Kwoesan		2	Dam		1957		2.8		27.14
Anheung(GangLim)		3	Dam waterway		1978		0.4		15.03
Kangreung		2	Basin deviation		1991		82.0		0
Topyeong		1	Dam		2011		0.04		7.58
Muju		1	Dam		2003		0.4		14.65
Sancheong		2	Dam		2001		1.0		29.46
Yangyang		2	Dam		2005		1.4		38.91
Yecheon		1	Dam		2011		0.9		8.88
Yecheon (Mini)		1	Dam		2018		0.025		91.04
Cheongpeoung		2	Pumped Storage		1980		400.0		8.16
Samrangjin		2	Pumped Storage		1985		600.0		0
Muju		2	Pumped Storage		1995		600.0		9.84
Sancheong		2	Pumped Storage		2001		700.0		9.45
Yangyang		4	Pumped Storage		2006		1,000.0		9.58
Cheongsong		2	Pumped Storage		2006		600.0		10.76
Yecheon		2	Pumped Storage		2011		800.0		9.55

Total		52					5,307.3		9.32

Solar/Wind

The table below sets forth certain information, including the installed capacity as of December 31, 2019 and the average capacity factor in 2019, of the solar and wind power units of KHNP.


Location of Unit	Classification	Year Built		Installed Capacity		Average Capacity Factor
				(Megawatts)		(Percent)
Yonggwang	Solar		2008		13.95		15.8
Yecheon	Solar		2012		2.01		15.4
Kori	Wind		2008		0.75		3.6
Kori	Solar		2017		5.15		16.9
Gapyeong	Solar		2017		0.07		15.2
Hydro Technical Training Center	Solar		2017		0.09		12.9
Cheongpyung	Solar		2018		0.09		14.4
Cheongsong	Solar		2018		0.05		12.5
Kwoesan	Solar		2018		0.25		15.7
Boseonggang	Solar		2018		1.99		14.6
Samrangjin	Solar		2019		2.77		15.4

Total					27.17

Korea Water Resources Corporation, which is a Government-owned entity, assumes full control of multi-purpose dams, while KHNP maintains the dams used for power generation. Existing hydroelectric power units have exploited most of the water resources in Korea available for commercially viable hydroelectric power generation. Consequently, we expect that no new major hydroelectric power plants will be built in the foreseeable future. Due to the ease of its start-up and shut-down mechanism, hydroelectric power generation is reserved for peak demand periods.

Korea South-East Power Co., Ltd.

The table below sets forth, by fuel type, the weighted average age and installed capacity as of December 31, 2019 and the average capacity factor and average fuel cost per kilowatt in 2019 based upon the net amount of electricity generated, of KOSEP.


	Weighted Average Age of Units		Installed Capacity		Average Capacity Factor		Average Fuel Cost per kWh
	(Years)		(Megawatts)		(Percent)		(Won)
Bituminous:
Samcheonpo #1, 2, 3, 4, 5, 6		28.4		3,240		69.0		81.18
Yeongheung #1, 2, 3, 4, 5, 6		10.8		5,080		81.8		78.88
Yeosu # 2		6.0		669		75.0		115.30
Anthracite:
Yeongdong #1, 2		40.4		200		0.0		—
Combined cycle and internal Combustion:
Bundang gas turbine #1,2,3,4,5,6,7,8; steam turbine #1, 2		26.2		922		28.6		173.88
Hydro, Solar and other renewable energy		—		265		—		231.80

Total		21.3		10,376		70.4		90.70

Korea Midland Power Co., Ltd.


	Weighted Average Age of Units		Installed Capacity		Average Capacity Factor		Average Fuel Cost per kWh
	(Years)		(Megawatts)		(Percent)		(Won)
Bituminous:
Boryeong #1, 2, 3, 4, 5, 6, 7, 8		24.91		4,000		65.30		59.16
Shin Boryeong #1, 2		1.462		2,038		75.51		52.69
Anthracite:
Seocheon #1, 2⁽¹⁾		—		—		—		—
Oil-fired:
Jeju #2, 3		19.46		150		60.97		170.19
LNG-fired:
Seoul #5⁽¹⁾		—		—		—		—
Combined-cycle and internal combustion:
Boryeong gas turbine #1, 2, 3, 4, 5, 6 ; steam turbine #1, 2, 3,		20.82		1,350.00		6.26		128.19
Incheon gas turbine #1, 2, 3, 4,5,6 ; steam turbine #1, 2,3		10.88		1,462.45		24.10		116.81
Seoul gas turbine #1, 2 ; steam turbine #1, 2		0.38		738.35		38.41		95.67
Jeju gas turbine #1, 2 ; steam turbine #1, 2		1.51		208.09		40.17		234.19
Sejong gas turbine #1,2 ; steam turbine #1		6.17		530.44		51.19		112.34
Jeju Gas Turbine #3		25.58		55.00		1.55		634.05
Jeju Internal Combustion Engine#1,2		12.58		80.00		38.03		134.41
Wind:
Yangyang #1, 2		13.58		3.00		12.61		7.70
Sejong Maebongsan Wind		13.47		8.80		4.74		0.002
Jeju Sangmyung Wind		3.5		21.00		18.71		2.69
Combined heat and power:
Wonju#1		4.67		10.00		73.92		12.90
Hydroelectric:
Boryeong		10.86		7.50		23.67		0.25
Shin Boryeong		3.25		5.00		37.85		0.01
Photovoltaic (“PV”) power and fuel cell generation:
Boryeong (PV) site		3.19		3.11		13.14		3.11
Shin Boryeong (PV) site		3.58		2.90		14.79		0.01
Seocheon (PV) site		12.00		1.23		13.97		0.001
Jeju (PV) site		6.94		2.34		12.08		0.54
Seoul (PV) site		8.42		1.30		14.89		2.56
Sejong (PV) site		2.08		0.33		15.17		0.002
Yeosu (PV) site		7.83		2.22		15.48		0.001
Incheon (PV) site		2.18		1.58		14.75		0.001
Boryeong (fuel cell) site		11.33		0		4.67		718.49
Shin Boryeong (fuel cell) site		2.17		7.48		90.40		135.89

Total		14.90		10,690		51.37		71.15

Note:

(1)	Seocheon #1 and Seocheon #2 were shut down in July 2017 and Seoul #5 was shut down in April 2017.

Korea Western Power Co., Ltd.


	Weighted Average Age of Units		Installed Capacity		Average Capacity Factor		Average Fuel Cost per kWh
	(Years)		(Megawatts)		(Percent)		(Won)
Bituminous:
Taean #1, 2, 3, 4, 5, 6, 7, 8, 9, 10		13.7		6,100		65.8		57.06
Oil-fired:
Pyeongtaek #1, 2, 3, 4		38.1		1,400		4.9		147.74
Combined cycle:
Pyeongtaek #2		5.2		868.5		65.7		94.74
Gunsan		9.6		718.4		35.5		107.49
West Incheon		27.1		1,800		13.9		108.88
Hydroelectric:
Taean		12.3		2.2		17.2		—
Solar:
Taean		2.4		17.3		14.0		—
Pyeongtaek		2.5		3.9		14.2		—
West Incheon		2.5		1.2		14.3		—
Gunsan		4.2		1.0		13.2		—
Samryangjin		12.1		3.0		13.4		—
Sejong City		7.5		5.0		14.3		—
Gyeonggi-do		7.0		2.5		14.4		—
Yeongam		6.8		13.3		15.5		—
Fuel Cell:
West Incheon 1		4.8		16.2		53.6		—
West Incheon 2		0.9		18.0		69.5		—
Cheonan Cheongsu		0.0		5.3		30.3		—
Wind Power:								—
Hwasun		4.0		16		17.9		—
Integrated gasification combined cycle:								—
Taean		3.4		346.3		56.1		65.08

Total		17.5		11,338		46.8		67.73

Korea Southern Power Co., Ltd.


	Weighted Average Age of Units		Installed Capacity		Average Capacity Factor		Average Fuel Cost per kWh
	(Years)		(Megawatts)		(Percent)		(Won)
Bituminous:
Hadong #1, 2, 3, 4, 5, 6, 7, 8		18.3		4,000		77.2		56.5
Samcheok #1		2.8		2,044		63.6		55.8
Oil-fired:
Nam Jeju #3, 4		13.0		200		59.7		164.4
Combined cycle:
Shin Incheon #1, 2, 3, 4		23.2		1,800		17.9		105.3
Busan #1, 2, 3, 4		16.2		1,800		38.1		101.5
Yeongwol #1		9.2		848		4.3		133.5
Hallim		23.5		105		33.8		195.0
Andong #1		5.8		362		59.2		95.6
Wind power:
Hankyung		13.2		21		19.0		1.38
Seongsan		10.2		20		25.8		1.06
Solar		3.5		22		14.5		0.11
Small Hydropower		2.4		3		55.1		—
Fuel Cell		1.2		59		82.8		127.7

Total		14.7		11,284		52.0		69.8

Korea East-West Power Co., Ltd.


	Weighted Average Age of Units		Installed Capacity		Average Capacity Factor		Average Fuel Cost per kWh
	(Years)		(Megawatts)		(Percent)		(Won)
Bituminous:
Dangjin #1, 2, 3, 4, 5, 6, 7, 8, 9, 10		12.0		6,040		67.1		83.65
Honam #1, 2		46.7		500		77.2		104.89
Anthracite:
Donghae #1, 2		20.8		400		74.0		115.97
Oil-fired:
Ulsan #4, 5, 6		39.4		1,200		11.9		253.94
Combined cycle:
Ulsan gas turbine #1, 2, 3, 4, 5, 6, 7, 8; steam turbine #1, 2, 3, 4		16.1		2,072		36.2		129.49
Ilsan gas turbine #1, 2, 3, 4, 5, 6; steam turbine #1, 2		25.8		900		16.0		208.99
Mini hydro, Photovoltaic, Fuel Cell, Wind-Power, Biomass:		—		81		49.2		290.73

Total		18.7		11,193		54.6		101.36

Power Plant Remodeling and Recommissioning

Our generation subsidiaries supplement power generation capacity through remodeling or recommissioning of thermal units. Recommissioning includes installation of anti-pollution devices, modification of control systems and overall rehabilitation of existing equipment. The following table shows recent remodeling and recommissioning initiatives by our generation subsidiaries.


Power Plant	Capacity	Completed (Year)	Extension	Company
Taean #1 - 10	6,100 MW (500 MW×8, 1,050 MW×2)	EP⁽¹⁾ upgrade (#2, 2016) EP upgrade (#1, 3, 2017) EP upgrade (#2, 4, 2018) SCR⁽²⁾ upgrade (#2, 4, 7, 2016) SCR upgrade (#1, 3, 8, 9, 10, 2017) SCR upgrade (#5, 6, 10, 2018) FGD⁽⁵⁾ upgrade (#1, 3, 2017) FGD upgrade (#2, 4, 2018)	Anti-pollution	KOWEPO
Pyeongtaek #1- 4	1,400 MW (350 MW×4)	Steam turbine upgrade (#2, 3, 2014)	10-year performance-improvement	KOWEPO
Boryeong #1, 2	1,000 MW (500 MW×2)	FGD upgrade (#1, 2, 2014)	Performance-improvement	KOMIPO
Boryeong #3 - 6	2,000 MW (500 MW×8)	Retrofit (#3, 2019) Retrofit (#5, 6, 2021) Retrofit (#4, 2023) FGD, EP, SCR upgrade (#3, 2019) FGD, EP, SCR upgrade (#5, 6, 2021) FGD, EP, SCR upgrade (#4, 2023)	Lifetime extension & Performance-improvement Performance-improvement	KOMIPO
Boryeong #7, 8	1,000 MW (500 MW×2)	FGD,EP upgrade (#7, 2025) FGD,EP upgrade (#8, 2026)	Performance-improvement	KOMIPO
Seocheon #1, 2	400 MW (200 MW×2)	SCR⁽²⁾ (2012)	Anti-pollution	KOMIPO
Yeosu #1, 2	668.6MW (#1:340, #2:328.6MW)	Boiler Type Change (CFBC⁽³⁾:#1:2016, #2:2011)	30 years	KOSEP
Samcheonpo #1, 2	1,120 MW (560 MW ×2)	Boiler, EP, Draft System Upgrade (#1, 2: 2012)	10 years Refurbishing-modernization	KOSEP
Samcheonpo #5, 6	1,000 MW (500 MW ×2)	EP Upgrade (2016 ~ 2017), FGD, SCR, WESP installation (2019 ~ 2020)	Anti-pollution	KOSEP
Yeongdong #1	125 MW (125 MW ×1)	Boiler, Hybrid SCR & EP, Draft System Retrofit (Biomass⁽⁴⁾ #1: 2017)	Renewable energy	KOSEP
Yeongdong #2	200 MW (200 MW ×1)	Boiler, Hybrid SCR & EP, Draft System Retrofit (Biomass #1: 2020)	Renewable energy	KOSEP
Dangjin #1 - 4	2,000MW (500MW×4)	FGD, EP, SCR upgrade(2022)	Performance-improvement	EWP
Dangjin #5 - 8	2,000MW (500MW×4)	FGD, EP, SCR upgrade(2024)	Performance-improvement	EWP
Dangjin #9 - 10	2,040MW (1,020MW×2)	FGD, EP, SCR upgrade(2026)	Performance-improvement	EWP
Donghae #1, 2	400 MW (200 MW×2)	FGD(2022)	Anti-pollution & modification of control systems	EWP

Power Plant

Capacity

Completed (Year)

Extension

Company

Hadong #1-8

4,000 MW

(500 MW×8)

SCR Upgrade (#5. 2016)

SCR Upgrade (#2,3,5. 2017)

SCR Upgrade (#1,4,6,7. 2018)

SCR Upgrade (#8. 2019)

FGD Upgrade (#6, 2018)

FGD Upgrade (#2, 3, 2019)

FGD Upgrade (#4 2020)

FGD Upgrade (#5 2021)

Anti-pollution

KOSPO

Notes:

(1)	“EP” means an electrostatic precipitation system.

(2)	“SCR” means a selective catalytic reduction system.

(3)	“CFBC” means a circulating fluidized bed combustion system.

(4)	“Biomass” means wood pallet powered plant.

(5)	“FGD” means flue-gas desulfurization designed to remove sulfur oxides.

Transmission and Distribution

We currently transmit and distribute substantially all of the electricity in Korea.

As of December 31, 2019, our transmission system consisted of 34,440 circuit kilometers of lines of 765 kilovolts and others including high-voltage direct current lines, and we had 864 substations with aggregate installed transformer capacity of 326,329 megavolt-amperes

As of December 31, 2019, our distribution system consisted of 125,067 megavolt-amperes of transformer capacity and 9,641,891 units of support with a total line length of 504,402 circuit kilometers.

We make substantial investments in our transmission and distribution systems to minimize power interruptions and improve efficiency. Our current projects principally focus on increasing capabilities of the existing power networks and reducing our transmission and distribution loss, which was 3.54% of our gross generation in 2019. To cope with increasing damages to large-scale transmission and distribution facilities, we plan to reinforce stability of our transmission and distribution facilities through stricter design and material specifications. In addition, we also plan to expand underground transmission and distribution facilities to meet customer demand for more environment-friendly facilities. In order to reduce the interruption time in power distribution, which is an indicator of the quality of electricity transmission, we are also continuing to invest in automation of electricity transmission and development of new transmission technologies, among others.

Some of the facilities we own and use in our distribution system use rights of way and other concessions granted by municipal and local authorities in areas where our facilities are located. These concessions are generally renewed upon expiration.

New Energy Industry Projects

Certain of our new energy industry projects are described below.

Advanced Metering Infrastructure

In July 2012, the Government implemented a master plan to build out a smart grid, which includes the Advanced Metering Infrastructure (“AMI”) roadmap, and revised the plan to focus on building electricity market ecosystem in August 2018. In accordance with such plan, we are in the process of installing “smart meters” and related communication networks and operating systems as part of the “smart grid” initiative in an effort to

enhance efficiency in the power electricity industry and alleviate growing energy shortage concerns. Our goal is to complete such installation for all of the households in Korea. Smart meters refer to digital meters that record, on a real-time basis, electricity consumption within a household so that consumers will have a price-based incentive to enhance efficiency in their electricity usage. As of December 31, 2019, we have installed 8.5 million smart meter units, and plan to install an additional 13.5 million units step by step. The AMI project is expected to cost approximately Won 1.6 trillion in total. Currently, there is no set timetable for the future completion of the installation.

Smart Grids

Smart grids refer to next-generation networks for electricity distribution that integrate information technology into existing power grids with the aim of enabling two-way real time exchange of information between electricity suppliers and consumers for optimal efficiency in electricity use. As part of our overall business strategy, we are currently developing and implementing smart grids based on advanced information technology, in order to promote more efficient allocation and use of electricity by consumers. We expect that such technology will improve efficiency and reduce electricity loss over the course of electricity transmission and distribution. We also expect that the smart grid initiative will significantly increase efficient energy consumption by providing real-time data to customers, which would in turn help to reduce greenhouse gas emission and decrease Korea’s reliance on foreign energy sources.

Leveraging our experience gained through high-tech intelligent power transmission and distribution network, or “smart grid” test beds in Jeju Island from 2009 to 2013, we plan to expand our smart grid project. We successfully implemented the KEPCO-Building Energy Management System(K-BEMS) at our Guri-Namyangju branch and the Smart Grid Deployment Project in 2014. In recognition of our achievement, we were awarded a special prize from the International Smart Grid Action Network in 2018. By the end of 2019, we implemented smart grid technology in 120 of our branches and 76 public sites (11 buildings, 8 campuses, 33 factories and 24 dispersed generation). Based on this experience, we plan to expand implementation of smart grid technology to residential and industrial buildings.

Energy Storage Systems

In October 2013, as part of an endeavor to create new markets for energy demand management applications using information and communication technology, we established a business plan to roll out energy storage systems for frequency regulation nationwide. These systems involve the establishment and operation of batteries and transformers with large-sized charge and discharge capabilities adjacent to substations to transmit electricity stably with regulated frequencies and optimize the efficiency of the substation operation. This system allows full conversion of reserve capacity for frequency regulation at existing low-cost generators into electricity storage and, if operated in sizable scale, offers opportunities for substantial cost savings in purchase of electricity.

In December 2014, we conducted a pilot project for this initiative by installing a 52 megawatts energy storage system at the Seo-Anseong substation and the Shin-Yongin substation. In July 2015, these substations began to commercially operate energy storage systems, and we expanded the energy storage capacity nationwide by an additional 184 megawatts in 2016, an additional 140 megawatts in 2017, with a total capacity of 376 megawatts as of December 31, 2019. In addition, we completed construction of the largest indoor energy storage systems for frequency regulation in Gimje substation with a 48 megawatts capacity.

Electric Vehicle Charging Infrastructure

In order to promote the use of environment-friendly electric vehicles, we began constructing infrastructures for electric vehicles in 2009. Since 2016, we have installed electric vehicle charging stations throughout public space and residential building complexes. In 2017, we created a platform for businesses in the electric vehicle charging industry by charging for the service and making the infrastructures available to the market. We plan to expand such infrastructures and to install 3,000 high speed electric vehicle charging stations by 2022.

In January 2016, the Ministry of Trade, Industry and Energy announced an initiative to promote the new energy industry by creating the New Energy Industry Fund. For further details, see “—Capital Investment Program.”

Fuel Sources and Requirements

Nuclear

Uranium, the principal fuel source for nuclear power, accounted for 34.8%, 31.9% and 35.7% of the fuel requirements for electricity generation by us and our generation subsidiaries in 2017, 2018 and 2019, respectively.

All uranium ore concentrates used by KHNP are imported from, and conversion and enrichment of such concentrates are provided by, sources outside Korea and are paid for with currencies other than Won, primarily U.S. dollars.

In order to ensure a stable supply, KHNP enters into long-term and medium-term contracts with various suppliers and supplements such supplies with purchases in spot markets. In 2019, KHNP purchased approximately 5,000 tons of its uranium concentrate requirement under both long-term and spot supply contracts with suppliers in Canada, France, the United States, the United Kingdom, Switzerland, Niger, Australia, Germany, Japan and Russia. Under the long-term supply contracts, the purchase prices of uranium concentrates are adjusted annually based on base prices and spot market prices prevailing at the time of actual delivery. The conversion and enrichment services of uranium concentrates are provided by suppliers in Canada, France, Germany, Japan, China, Russia, the United Kingdom and Switzerland. A Korean supplier typically provides fabrication of fuel assemblies. Except for certain fixed contract prices, contract prices for processing of uranium are adjusted annually in accordance with the general rate of inflation. KHNP intends to obtain its uranium requirements in the future, in part, through purchases under medium- to long-term contracts and, in part, through spot market purchases.

Coal

Bituminous coal accounted for 52.2%, 52.6% and 51.1% of the fuel requirements for electricity generation by us and our generation subsidiaries in 2017, 2018 and 2019, respectively, and anthracite coal accounted for 1.0%, 0.6% and 0.6% of our fuel requirements for electricity generation in 2017, 2018 and 2019, respectively.

In 2019, our generation subsidiaries purchased approximately 84 million tons of bituminous coal, of which approximately 29%, 37%, 15%, 5% and 14% were imported from Indonesia, Australia, Russia, South Africa and others, respectively. Approximately 81% of the bituminous coal requirements of our generation subsidiaries in 2019 were purchased under long-term contracts with the remaining 19% purchased in the spot market. Some of our long-term contracts relate to specific generating plants and extend through the end of the projected useful lives of such plants, subject in some cases to periodic renewal. Pursuant to the terms of our long-term supply contracts, prices are adjusted periodically based on market conditions. The average cost of bituminous coal per ton purchased under such contracts amounted to Won 98,891, Won 107,233 and Won 101,624 in 2017, 2018 and 2019, respectively.

In 2019, our generation subsidiaries purchased approximately 1 million tons of anthracite coal. The prices for anthracite coal under such contracts are set by the Government. The average cost of anthracite coal per ton purchased under such contracts was Won 124,036, Won 129,976 and Won 136,526 in 2017, 2018 and 2019, respectively.

Oil

Oil accounted for 1.2%, 1.4% and 0.5% of the fuel requirements for electricity generation by us and our generation subsidiaries in 2017, 2018 and 2019, respectively.

In 2019, our generation subsidiaries purchased approximately 6 million barrels of fuel oil, substantial portion of which was purchased from domestic refiners through competitive open bidding. Purchase prices are based on the spot market price in Singapore. The average cost per barrel was Won 77,188, Won 85,116 and Won 100,827 in 2017, 2018 and 2019, respectively.

LNG

LNG accounted for 8.7%, 11.2% and 9.5% of the fuel requirements for electricity generation by us and our generation subsidiaries in 2017, 2018 and 2019, respectively. In 2019, for use in electricity generation we purchased approximately 5 million tons of LNG from Korea Gas Corporation, a Government-controlled entity in which we currently own a 21.57% equity interest (excluding treasury shares). In 2019, we purchased a substantial portion of our LNG requirements for use in power generation from Korea Gas Corporation. Under the terms of the LNG contract with Korea Gas Corporation, all of our five non-nuclear generation subsidiaries jointly and severally agreed to purchase a total of 4.9 million tons of LNG in 2019, subject to an automatic price adjustment annually based on a pre-determined formula if the actual purchased amount exceeds or falls short of the contracted amount. We believe the quantities of LNG provided under such contract will be adequate to meet the needs of our generation subsidiaries for LNG for the next several years. The LNG supply contracts between our generation subsidiaries and Korea Gas Corporation generally have a term of 20 years and provide for minimum purchase requirements for our generation subsidiaries, the specific terms of which are subject to negotiation between Korea Gas Corporation and our generation subsidiaries and approval by the Government. The average cost per ton of LNG was Won 655,127, Won 763,460 and Won 727,083, in 2017, 2018 and 2019, respectively. In January 2020, Korea Gas Corporation announced that it will implement a new individual tariffs formula, whereby the domestic power plants can negotiate lower prices directly with Korea Gas Corporation. The new formula will apply to domestic power plants whose current contracts with Korea Gas Corporation will expire after January 2022 and also to new power plants commencing operations from January 2022.

Hydroelectric

Hydroelectric power generation accounted for 1.2%, 1.2% and 1.1%, of the fuel requirements for electricity generation by us and our generation subsidiaries in 2017, 2018 and 2019, respectively. The availability of water for hydroelectric power depends on rainfall and competing uses for available water supplies, including residential, commercial, industrial and agricultural consumption. Pumped storage enables us to increase the available supply of water for use during periods of peak electricity demand.

Sales and Customers

Our sales depend principally on the level of demand for electricity in Korea and the rates we charge for the electricity we sell to the end-users.

Demand for electricity in Korea grew at a compounded average rate of 1.8% per annum for the five years ended December 31, 2019. According to the Bank of Korea, the compounded growth rate for GDP was approximately 2.7% for the same period. The GDP growth rate was approximately 3.1%, 2.7% and 2.0% during 2017, 2018 and 2019, respectively.

The table below sets forth, for the periods indicated, the annual rate of growth in Korea’s GDP and the annual rate of growth in electricity demand (measured by total annual electricity consumption) on a year-on-year basis.


	2015			2016			2017			2018			2019
Growth in GDP		2.8	%		2.9	%		3.1	%		2.7	%		2.0	%
Growth in electricity consumption		1.3	%		2.8	%		2.2	%		3.6	%		(1.1	%)

Electricity demand in Korea varies within each year for a variety of reasons other than the general growth in GDP demand. Electricity demand tends to be higher during daylight hours due to heightened commercial and

industrial activities and electronic appliance use. Due to the use of air conditioning during the summer and heating during the winter, electricity demand is higher during these two seasons than the spring or the fall. Variation in weather conditions may also cause significant variation in electricity demand.

We do not use any marketing channels, including any special sales methods, to sell electricity to our customers, other than to install electricity meters on-site and take monthly readings of such meters, based upon which invoices are sent to our customers.

Demand by the Type of Usage

The table below sets forth consumption of electric power, and growth of such consumption on a year-on-year basis, by the type of usage (in gigawatt hours) for the periods indicated.


	2015 (GWh)		YoY growth (%)			2016 (GWh)		YoY growth (%)			2017 (GWh)		YoY growth (%)			2018 (GWh)		YoY growth (%)			2019 (GWh)		YoY growth (%)			% of Total 2019
Residential		65,619		1.8			68,057		3.7			68,544		0.7			72,895		6.3			72,639		(0.4	)		14.0
Commercial		103,679		2.9			108,617		4.8			111,298		2.5			116,934		5.1			116,227		(0.6	)		22.4
Educational		7,691		3.4			8,079		5.1			8,316		2.9			8,678		4.3			8,561		(1.4	)		1.6
Industrial		273,548		0.4			278,828		1.9			285,969		2.6			292,999		2.5			289,240		(1.3	)		55.6
Agricultural		15,702		8.3			16,580		5.6			17,251		4.0			18,504		7.3			18,882		2.0			3.6
Street lighting		3,341		3.7			3,462		3.6			3,557		2.7			3,582		0.7			3,571		(0.3	)		0.7
Overnight Power		14,075		(4.0	)		13,416		(4.7	)		12,811		(4.5	)		12,557		(2.0	)		11,379		(9.4	)		2.2

Total		483,655		1.3			497,039		2.8			507,746		2.2			526,149		3.6			520,499		(1.1	)		100.0

The industrial sector represents the largest segment of electricity consumption in Korea. Demand for electricity from the industrial sector was 289,240 gigawatt hours in 2019, representing a 1.3% decrease from 2018, largely due to the changes in the business environment resulting from the U.S.-China trade disputes and the Japanese export restrictions against Korea during 2019. Demand for electricity from the commercial sector depends largely on the level and scope of commercial activities in Korea. Demand for electricity from the commercial sector decreased to 116,227 gigawatt hours in 2019, representing a 0.6% decrease from 2018 largely due to the decrease in the commercial electricity usage for air conditioning and heating as a result of a more temperate weather. Demand for electricity from the residential sector is largely dependent on population growth and use of heaters, air conditioners and other electronic appliances. Demand for electricity from the residential sector decreased to 72,639 gigawatt hours in 2019, representing a 0.4% decrease compared to 2018, largely due to a decrease in household electricity usage for air conditioning and heating as a result of a more temperate weather.

Demand Management

Our ability to provide adequate supply of electricity is principally measured by the facility reserve margin and the supply reserve margin. The facility reserve margin represents the difference between the peak usage during a year and the installed capacity at the time of such peak usage, expressed as a percentage of such installed capacity. The supply reserve margin represents the difference between the peak usage in a year and the average available capacity at the time of such peak usage, expressed as a percentage of such peak usage. The following table sets forth our facility reserve margin and supply reserve margin for the periods indicated.


	2015			2016			2017			2018			2019
Facility reserve margin		19.4	%		17.6	%		37.0	%		26.7	%		36.2	%
Supply reserve margin		11.6	%		8.5	%		12.9	%		7.7	%		6.7	%

While we seek to meet the growing demand for electricity in Korea primarily by continuing to expand our generation capacity, we have also implemented several measures to curtail electricity consumption, especially

during peak periods. We apply time-of-use and seasonality tariff, which are structured so that higher tariffs are charged at the time and months of peak demand to select types of customers, and we also apply a progressive rate structure for the residential use of electricity. We have several demand management programs to control demand and induce power conservation during peak hours and peak seasons such as providing incentives for reducing power consumption during peak hours.

Electricity Rates

The Electric Utility Act and the Price Stabilization Act of 1975, each as amended from time to time, prescribe the procedures for the approval and establishment of rates charged for the electricity we sell. We submit our proposals for revisions of rates or changes in the rate structure to the Ministry of Trade, Industry and Energy. The Ministry of Trade, Industry and Energy then reviews these proposals and, following consultation with the Ministry of Economy and Finance and review by the Korea Electricity Commission, makes the final decision.

Under the Electric Utility Act and the Price Stabilization Act, electricity rates are established at levels that would enable us to recover our operating costs attributable to our basic electricity generation, transmission and distribution operations as well as receive a fair investment return on capital used in those operations.

For the purposes of rate approval, operating costs are defined as the sum of our operating expenses (which principally consists of cost of sales and selling and administrative expenses) and our adjusted income taxes.

Fair investment return represents an amount equal to the rate base multiplied by the rate of return.

The rate base is currently equal to the sum of:

•

net utility plant in service (which is equal to utility plant minus accumulated depreciation minus revaluation reserve);

•

the portion of working capital which is equal to the appropriate level of operating costs minus depreciation and other non-cash charges while taking into account the actual time of cost recovery; and

•

the portion of construction-in-progress which is charged from our retained earnings.

The amounts used for the variables in the rates are those projected by us for the periods to be covered by the rate approval.

For the purpose of determining the fair rate of return, the rate base is divided into two components in proportion to our total shareholders’ equity and our total debt. The rate of return permitted in relation to the debt component of the rate base is set at a level designed to approximate the weighted average interest cost on all types of borrowing for the periods covered by the rate approval. The rate of return permitted in relation to the equity component of the rate base is set by applying the capital asset pricing model which takes account of the risk-free rate, the return on the Korea Stock Price Index, KOSPI, and the correlation of the stock price of our company with KOSPI. In 2018, the approved rate of return on the debt component of the rate base was 0.82% while the approved rate of return on the equity component of the rate base was 3.03%. As a result of such approved rates of returns, the fair rate of return in 2018 was determined to be 3.85%. The fair rates of return for 2019 have not yet been determined.

The Electric Utility Act and the Price Stabilization Act do not specify a basis for determining the reasonableness of our operating expenses or any other items (other than the level of the fair investment return) for the purposes of the rate calculation. However, the Government exercises substantial control over our budgeting and other financial and operating decisions.

In addition to the calculations described above, a variety of other factors are considered in setting overall tariff levels. These other factors include consumer welfare, our projected capital requirements, the effect of electricity tariff on inflation in Korea and the effect of tariff on demand for electricity.

From time to time, our actual rate of return on invested capital may differ significantly from the fair rate of return on invested capital assumed for the purposes of electricity tariff approvals, for reasons, among others, related to movements in fuel prices, exchange rates and demand for electricity that differ from what is assumed for determining our fair rate of return. For example, between 1987 and 1990, the actual rate of return was above the fair rate of return due to declining fuel costs and rising demand for electricity at a rate not anticipated for purposes of determining our fair rate of return. Similarly, depreciation of the Won against the U.S. dollar accounted for our actual rates of return being lower than the fair rate of return for the period from 1996 to 2000. For the period between 2006 and 2013, our actual rates of return were lower than the fair rate of return largely due to a general increase in fuel costs and additional facility investment costs incurred, the effects of which were not offset by timely increases in our tariff rates. Between 2014 and 2016, however, largely due to a decrease in fuel costs reflective of the drop in oil prices, our actual rate of return has surpassed the fair rate of return; however, substantially all of the resulting excess has been used to fund capital expenditure and repair and maintenance, as well as to offer tariff discounts to economically or otherwise disadvantaged customers, and make investments in renewable energy and other environmental programs.

Partly in response to the variance between our actual rates of return and the fair rates of return, the Government from time to time increases the electricity tariff rates, but there typically is a significant time lag for the tariff increases as such increases requires a series of deliberation processes and administrative procedures and the Government also has to consider other policy considerations, such as the inflationary effect of overall tariff increases and the efficiency of energy use from sector-specific tariff increases.

Prior to November 2013, the Government from time to time effected tariff increases that typically covered all sectors, namely, residential, commercial and industrial, mainly in response to sustained increases in fuel prices. No cross-sector tariff increase has been implemented since November 2013 largely due to a general decline in fuel prices and relatively stable exchange rates. However, effective on January 1, 2017, the Government made several adjustments to the existing rate structure in order to ease the burden of electricity tariff on residential consumers. The progressive rate structure applicable to the residential sector, which applies a gradient of increasing tariff rates for heavier electricity usage, was changed from a six-tiered structure with the highest rate being no more than 11.7 times the lowest rate (which gradient system has been in place since 2005) into a three-tiered structure with the highest rate being no more than three times the lowest rate in order to reflect the changes in the pattern of electricity consumption and reduce the electricity charges payable by consumers. Additionally, a new tariff structure was implemented to encourage energy saving by offering rate discounts to residential consumers that voluntarily reduce electricity consumption while charging special high rates to residential consumers with heavy electricity consumption during peak usage periods in the summer and the winter. Additionally, during July and August 2018, the Government reduced residential electricity charges by temporarily relaxing the application of the current tariff structure and offering higher rate discounts to economically or otherwise disadvantaged customers to ease the burden on households that have significantly increased their use of air conditioners during a heatwave. Subsequently, a joint task force team, consisting of industry experts, scholars and government officials, was formed, which announced a proposal for amending the current tariff structure aimed to lower electricity rates for households during the summer. As a result, in July 2019, the Government amended the residential electricity tariff rate system to expand the usage ceiling for the first two tiers of rates (from 200 kilowatts to 300 kilowatts for the first tier and from 400 kilowatts to 450 kilowatts for the second tier) applied during July and August each year. Although the rate discounts offered to residential consumers who voluntarily reduced electricity consumption and those offered to traditional wet markets were abolished in December 2019 and the rate discount for electric vehicles will be gradually terminated in phases by June 2022, there can be no assurance that other current or potential future adjustments in electricity tariff rates and rate discounts will not have an adverse impact on our business, results of operations, financial condition and profitability.

We plan to prepare a proposition for a sustainable tariff system designed to mitigate the financial burden on us. Though the timeline is subject to change, we are tentatively aiming to prepare the proposition by the first half of 2020, which will include (1) a reasonable adjustment of the rate discount applicable to the residential customers with low electricity usage and (2) an introduction of the tariff system to the residential sector where the rates change depending on the demand in a given season or time (namely, the “time-of-use tariff”). Despite the efforts, however, the downward tariff rate adjustments may change our revenues from the sale of electricity and accordingly have a material adverse effect on our results of operation and cash flows.

The tariff rates we charge for electricity vary among the different classes of consumers, which principally consist of industrial, commercial, residential, educational and agricultural consumers. The tariff also varies depending upon the voltage used, the season, the time of usage, the rate option selected by the user and, in the residential sector, the amount of electricity used per household, as well as other factors. For example, we adjust for seasonal tariff variations by applying higher rates when demand tends to rise such as during the months of June, July and August (when the demand tends to rise due to increased use of air conditioning) and November, December, January and February (when demand tends to rise due to increased use of heating), which reflects the policy of the Korean government to cope with the rise in electricity demand during peak seasons by encouraging a more efficient use of electricity by customers. In addition, we provide discounts on tariff rates to certain users such as low income households.

Our current tariff schedule reflecting the adjustments outlined above, is summarized below by the type of usage:

•

Industrial. The monthly basic charge varies from Won 5,550 per kilowatt to Won 9,810 per kilowatt depending on the type of contract, the voltage used and the rate option. The energy usage charge varies from Won 52.8 per kilowatt-hour to Won 196.6 per kilowatt-hour depending on the type of contract, the voltage used, the season, the time of day and the rate option.

•

Commercial. The monthly basic charge varies from Won 6,160 per kilowatt to Won 9,810 per kilowatt depending on the type of contract, the voltage used and the rate option. The energy usage charge varies from Won 53.7 per kilowatt-hour to Won 196.6 per kilowatt-hour depending on the type of contract, the voltage used, the season, the time of day and the rate option.

•

Residential. The monthly basic charge varies from Won 910 for electricity usage of less than 200 kilowatt hours to Won 7,300 for electricity usage in excess of 400 kilowatt hours. During the months of July and August each year, the usage ceiling for the first two tiers of rates is increased from 200 kilowatts to 300 kilowatts for the first tier and from 400 kilowatts to 450 kilowatts for the second tier. Residential tariff also includes an energy usage charge ranging from Won 93.3 to Won 280.6 per kilowatt-hour for electricity usage depending on the amount of usage and voltage. During the peak usage periods during the summer and the winter, namely the months of July and August and December to February, a higher energy usage charge of Won 709.5 per kilowatt-hour applies to residential consumers whose monthly electricity consumption exceeds 1,000 kilowatts hour.

•

Educational. The monthly basic charge varies from Won 5,230 per kilowatt to Won 6,980 per kilowatt depending on the voltage used and the rate option. The energy usage charge varies from Won 43.8 per kilowatt-hour to Won 160.4 per kilowatt-hour depending on the voltage used, the season and the rate option.

•

Agricultural. The monthly basic charge varies from Won 360 per kilowatt to Won 1,210 per kilowatt depending on the type of usage. The energy usage charge varies from Won 21.6 per kilowatt-hour to Won 41.9 per kilowatt-hour depending on the type of contract, the voltage used and the season.

•

Street-lighting. The monthly basic charge is Won 6,290 per kilowatt and the energy usage charge is Won 85.9 per kilowatt-hour. For electricity capacity of less than 1 kilowatt or for places where the installation of the electricity meter is difficult, a fixed rate of Won 37.5 per watt applies, with the minimum monthly charge of Won 1,220.

In 2001, as part of implementing the Restructuring Plan, the Ministry of Trade, Industry and Energy established the Electric Power Industry Basis Fund to enable the Government to take over certain public services previously performed by us. In 2019, 3.7% of the tariff we collected from our customers was transferred to this fund prior to recognizing our sales revenue.

Power Development Strategy

We and our generation subsidiaries make plans for expanding or upgrading our generation capacity based on the Basic Plan, which is generally revised and announced every two years by the Government. In July 2015, the Government announced the Seventh Basic Plan relating to the future supply and demand of electricity, focusing on stable supply of electricity and increasing the portion of low carbon electricity supply sources, among others. To revise the Seventh Basic Plan, in December 2017, the Government announced the Eighth Basic Plan which are more environmentally focused than the Seventh Basic Plan and to be effective for the period from 2017 to 2031. The Eighth Basic Plan focuses on, among other things, (i) decreasing the reliance on nuclear and coal-based supply sources, (ii) increasing utilization of renewable energy sources and (iii) balancing the existing cost-based pool system of purchase of electricity with an environmentally-focused pool system. Furthermore, the Eighth Basic Plan includes the following implementing measures: (i) six new nuclear generation units in a planning stage would not be constructed, (ii) extension of life of 10 decrepit nuclear generation units would not be granted, (iii) Wolsong #1 unit is not counted as part of domestic energy generation capacity, (iv) seven decrepit coal-fired generation plants will be retired by 2022, (v) six other coal-fired generation plants shall be converted to LNG fuel use and (vi) domestic renewable energy generation capacity shall be expanded to 58.5 gigawatts by 2030. Currently, the Government is in the process of establishing the Ninth Basic Plan, which is expected to be released in 2020, to expand the electric power facilities based on the demand outlook from 2020 to 2034.

In June 2019, the Ministry of Trade, Industry and Energy adopted the Third Basic National Energy Plan following consultations with representatives from civic groups, the energy industry and academia. The Third Basic National Energy Plan, which is a comprehensive plan that covers the entire spectrum of energy industries in Korea, covers the period from 2019 to 2040. The Third Basic National Energy Plan is consistent with the First and the Second Basic National Energy Plans in terms of the general policy direction and aims to promote sustainable growth and improvement of people’s quality of life by converting to new and renewable energy. Specifically, it establishes the following five key tasks: (i) strengthening management of energy demand from various sectors, such as commerce and transportation, and promoting a rational electricity tariff system to improve the national energy consumption efficiency by 38% and reduce the energy demand by 18.6% by 2040; (ii) converting to clean and safe energy through gradual but decisive reduction of nuclear power generation and coal power generation by prohibiting construction of new coal-fired power plants and increasing the proportion of renewable energy sources to approximately 35% by 2040; (iii) expanding the power distribution in areas near those with demands for renewable energy and fuel cells and strengthening the roles and responsibilities of local governments; (iv) fostering the growth of the future energy industries (including renewable energy, hydrogen fuel and other efficient sources of energy linked to technology), promoting the value-add for traditional energy industries and maintaining a core energy ecosystem for nuclear power plants; and (v) improving the energy, gas and heat market systems to facilitate the national energy conversion and building platforms based on big data to foster creation of new energy industries.

We cannot assure that the Eighth Basic Plan, the Ninth Basic Plan, the Third Basic National Energy Plan or the respective plans to be subsequently adopted will successfully achieve their intended goals, the foremost of which is to ensure, through carefully calibrated capacity expansion and other means, balanced overall electricity supply and demand in Korea at to end users while promoting efficiency and environmental friendliness in the consumption and production of electricity. If there is significant variance between the projected electricity supply and demand considered in planning our capacity expansions and the actual electricity supply and demand or if these plans otherwise fail to meet their intended goals or have other unintended consequences, this may result in inefficient use of our working capital, mispricing of electricity and undue financing costs on the part of us and

our generation subsidiaries, among others, which may have a material adverse effect on our results of operations, financial condition and cash flows.

Capital Investment Program

The table below sets forth, for each of the years ended December 31, 2017, 2018 and 2019, the amounts of capital expenditures for the construction of generation, transmission and distribution facilities.


2017	2018		2019
(In billions of Won)
￦13,711	￦	13,695	￦	15,795

The table below sets forth the currently estimated installed capacity for new or expanded generation units to be completed by our generation subsidiaries in each year from 2020 to 2022 based on the Eighth Basic Plan, as amended.


Year	Number of Units	Type of Units	Total Installed Capacity
			(Megawatts)
2020	1	Nuclear power		1,400
	1	LNG-combined		150
	25	Renewables		143
2021	1	Nuclear power		1,400
	1	Coal-fired		1,000
	25	Renewables		385
2022	1	LNG-combined		495
	25	Renewables		451

For the period from 2023 to 2024, our generation subsidiaries currently plan to complete two additional nuclear units with an aggregate installed capacity of 2,800 megawatts.

As part of our capital investment program, we also intend to add new transmission lines and substations, continue to replace overhead lines with underground cables and improve the existing transmission and distribution systems.

The actual number and capacity of generation units and transmission and distribution facilities we construct and the timing of such construction are subject to change depending upon a variety of factors, including, among others, changes in the Basic Plan, demand growth projections, availability and cost of financing, changes in fuel prices and availability of fuel, ability to acquire necessary plant sites, environmental considerations and community opposition.

The table below sets forth, for the period from 2020 to 2022, the budgeted amounts of capital expenditures pursuant to our capital investment program, which primarily consist of budgets for the construction of generation, transmission and distribution facilities and, to a lesser extent, renewable energy generation and new energy industry projects. The budgeted amounts may vary from the actual amounts of capital expenditures for a variety of reasons, including, among others, the implementation of the Eighth Basic Plan currently in place and the Ninth Basic Plan, which is expected to be announced in 2020, changes in the number of units to be constructed, the actual timing of such construction, changes in rates of exchange between the Won and foreign currencies and changes in interest rates.


	2020		2021		2022		Total
	(in billions of Won)
Generation⁽¹⁾:
Nuclear	￦	3,774	￦	3,268	￦	3,342	￦	10,384
Thermal		2,865		3,289		3,443		9,804
Renewables and others		847		1,521		884		3,316

Sub-total		7,486		8,078		7,669		23,504

Transmission and Distribution:
Transmission		2,992		3,870		4,011		10,873
Distribution		3,449		3,366		3,403		10,218

Sub-total		6,441		7,236		7,414		21,091

Others⁽²⁾		2,284		2,215		1,919		6,000

Total	￦	16,211	￦	17,529	￦	17,002	￦	50,595

Notes:

(1)	The budgeted amounts for our generation facilities are based on the Eighth Basic Plan, as amended.

(2)	Principally consists of investments in telecommunications and new energy industry projects, among others.

In January 2016, the Ministry of Trade, Industry and Energy announced an initiative to promote the new energy industry by creating the New Energy Industry Fund, which is made up of funds sponsored by government-affiliated energy companies. We contributed Won 500 billion to the funds in 2016. The purpose of these funds is to invest in substantially all frontiers of the new energy industry, including renewable energy, energy storage systems, electric vehicles, small-sized self-sustaining electricity generation grids known as “micro-grids”, among others, as well as invest in start-up companies, ventures, small- to medium-sized enterprise and project businesses that engage in these businesses but have not previously attracted sufficient capital from the private sector.

Furthermore, as part of the Comprehensive Measures against Particulate Matter and the Eighth Basic Plan, announced by the Government in September 2017 and December 2017, respectively, the Government set forth the following policy directions relating to coal-fired generation units: (i) two coal-fired generation units scheduled for construction and four existing coal-fired generation units shall convert to LNG fuel use, (ii) in principle, construction of new coal-fired generation units shall not be planned, (iii) seven of the coal-fired generation units that are 30 years or older will be shut down on an accelerated schedule, (iv) beginning in 2018, coal-fired generation units that are 30 years or older shall temporarily cease operations from March through June of each year, (v) coal-fired generation units shall be put through comprehensive functional and environmental upgrades and (vi) coal-fired generation units shall be subject to emission standards that came into effect in January 2019 that are twice as more rigorous than the previous standards. In October 2018, the Government introduced a pilot regulation to lower the output of 35 coal-fired power plants to approximately 80% of their capacity that emit more than a certain amount of particulate matter. The regulation was formally implemented in January 2019, targeting 40 coal-fired power plants with high emissions of particulate matter. From March to June 2019, the scope expanded to cover 60 units in total. In addition, coal-fired generation units scheduled for

preventive maintenance during the second half of 2019 was required to undertake such maintenance earlier in the spring of 2019. In November 2019, the Government pursued a reduction of coal power generation in order to implement the Special Measures to Respond to the High Concentration Period (December to March) of Particulate Matter. During this period, 8 to 15 coal generators (requiring preventive maintenance or are otherwise older) were first shut down, with a maximum of 49 generators subject to a cap of 80% on the output within the remaining reserve capacity range. As a result, the particulate matter emission was reduced by 2,503 tons, a 39% decrease compared to the same period during the previous year. We plan to continue to participate in the effort to reduce the particulate matter emissions from coal power generation plants, not only during the winter but also the spring season. For example, in March 2020, we suspended the operations of between 21 and 28 coal power generation plants and imposed a cap of 80% on the output of up to 37 coal power generation plants. Additionally, the Government adjusted the schedule to close down two decrepit coal generators (Boryeong #1 and #2). While such measures may be subject to change, we expect to incur significant costs of complying with such measures, including in connection with more stringent particulate matter pollution regulations, retrofitting and overall replacement of environmental facilities.

We have financed, and plan to finance in the future, our capital investment programs primarily through net cash provided by our operating activities and financing in the form of debt securities and loans from domestic financial institutions, and to a lesser extent, borrowings from overseas financial institutions. In addition, in order to prepare for potential liquidity shortage, we and our generation subsidiaries maintain several credit facilities with financial institutions in the aggregate amounts of Won 4,406 billion and US$2,493 million, the full amount of which was available as of December 31, 2019. We, KHNP, KOMIPO and KOWEPO also maintain global medium-term note programs in the aggregate amount of US$13 billion, of which approximately US$8 billion remains currently available for future drawdown. KOSEP also maintains an A$2 billion Australian dollar medium-term note program, of which approximately A$1.7 billion remains current available for future drawdown. See also Item 5.B. “Liquidity and Capital Resources—Capital Resources.”

Environmental Programs

The Environmental Policy Basic Act, the Air Quality Preservation Act, the Water Quality Preservation Act, the Marine Pollution Prevention Act and the Waste Management Act, collectively referred in this annual report as the Environmental Acts, are the major laws of Korea that regulate atmospheric emissions, waste water, noise and other emissions from our facilities, including power generators and transmission and distribution units. Our existing facilities are currently in material compliance with the requirements of these environmental laws and international agreements, such as the United Nations Framework Convention on Climate Change, the Montreal Protocol on Substances that Deplete the Ozone Layer, the Stockholm Convention on Persistent Organic Pollutants and the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal. In order to foster coordination among us and our generation subsidiaries in respect of climate change, we and 11 of our electricity-related subsidiaries formed the CEO Coordination Committee in June 2016. Additionally, we are endeavoring to develop and implement greenhouse gas reduction strategy in line with the new climate regime set forth by the Paris Climate Agreement.

We continuously endeavor to contribute to sustainable growth (whether as an economy, a society or an ecosystem) by actively taking actions that befit our social responsibility as a corporate citizen in the energy industry. For example, in 2005, we became the first public company in Korea to join the United Nations Global Compact, an international voluntary initiative designed to hold a forum for corporations, United Nations agencies, labor and civic groups to promote reforms in economic, environmental and social policies. As part of our involvement with such initiative, we issue an annual report named the “Sustainability Report” to disclose our activities from the perspectives of economy, environment and society, in accordance with the reporting guidelines of the Global Reporting Initiative, the official collaborating center of the United Nations Environment Program that works in cooperation with United Nations Secretary General. In recognition of our efforts and achievements to reduce greenhouse gas emissions in response to global climate change, in May 2013, we obtained the Carbon Trust Standard certification issued by Carbon Trust, a British nonprofit organization with

the goal of establishing a sustainable, low carbon economy. In 2015, we obtained recertification from Carbon Trust by satisfying even more rigorous evaluation criteria. We are also a participant of the Carbon Disclosure Project, an international organization that promotes transparency in informational disclosure of carbon management process, and in 2017, 2018 and 2019 we were recognized by the Carbon Disclosure Project and received honors in energy and utility sector. In 2017, 2018 and 2019, pursuant to the Dow Jones Sustainability Indices, which measures management performance in terms of contribution to sustainability, we were selected as one of the notable companies in the Asia Pacific in the global electricity utility sector. We recognize the interest in ESG within the investors’ community and are continuously pursuing safe and clean energy supply and distribution by reducing greenhouse gas emissions and enhancing our ability to respond to climate change, the details of such efforts provided through periodic sustainability reports.

The table below sets forth the number of emission control equipment installed at thermal power plants by our generation subsidiaries as of December 31, 2019.


	KOSEP		KOMIPO		KOWEPO		KOSPO		EWP
Flue Gas Desulphurization System		14		10		14		10		15
Selective Non-catalytic Reduction System		2		—		—		—		7
Selective Catalytic Reduction System		16		12		17		16		29
Electrostatic Precipitation System		16		12		14		14		17
Low NO2 Combustion System		20		340		25		26		28

Total		68		374		70		66		96

In accordance with the Act on Allocation and Trading of Greenhouse Gas Emission Allowances, enacted in March 2013, the Government is currently in the process of implementing a greenhouse gas emission trading system under which the Government will allocate the amount of permitted greenhouse gas emission to companies by industry and a company whose business emits more carbon than the permitted amount may purchase the right to emit more carbon through the greenhouse gas emission trading exchange. This system is expected to be implemented in three stages. During the first phase (2015 to 2017), the Government set up and made a test run of the trading system to ensure its smooth operation; during this phase, the greenhouse gas emission allowances were allocated without charge. In July 2018, the Government released the allocation plan for the second phase (2018 to 2020). During the second phase, 97% of the greenhouse gas emission allowances may be allocated free of charge, with 3% allocated through an auction. During the third phase (2021 to 2025), the Government plans to run the system on an expanded scale with aggressive greenhouse gas emission reduction targets, with 10% of the greenhouse gas emission allowances allocated through an auction. In December 2016, the Government announced the Climate Change Response Initiatives and the 2030 National Greenhouse Gas Reduction Roadmap, which set forth the greenhouse gas emission trading system as one of the primary means to reach the emission and greenhouse gas reduction targets of the policies. The Second Climate Change Response Initiative was adopted in October 2019, which sets a national target of greenhouse gas level of 536 million tons in the aggregate, representing a 37% reduction from the base case projection of greenhouse gas in 2030 and a 24.4% reduction as compared to the emission amount in 2017.

Electricity conversion sector, in which we operate our business, is requested to reduce the greenhouse gas emission by 58 million tons by year 2030 according to the Government’s 2020 Nationally Determined Contributions (NDCs). In line with the policy, our target reduction of the greenhouse gas emission is 47 million tons by year 2030. Adhering to such emission and greenhouse gas reduction requirement is expected to result in our incurring significant compliance costs. For example, the daily market price of the KAUs traded through the Korea Exchange was at Won 8,640 per ton in early 2015, but the price has continued to rise, recording Won 40,900 per ton at its peak in December 23, 2019.

The table below sets forth the amount of annual emission from all generating facilities of our generation subsidiaries for the periods indicated. The amount of CO₂ emissions may increase in the near future due to the

construction of additional coal thermal power plants but is expected to decrease in the long-term, principally due to an increased use of LNG and renewable energy and the implementation of the greenhouse gas emission trading system.


Year ⁽¹⁾	SOx (g/MWh)		NOx (g/MWh)		TSP ⁽²⁾ (g/MWh)		CO₂ (kg/MWh)
2015		165		266		8		464
2016		156		246		7		477
2017		138		177		7		506
2018		120		146		7		516

Notes:

(1)	The amounts of annual emission for 2019 are expected to be determined in June 2020.

(2)	“TSP” means Total Suspended Particles.

While the Third Basic National Energy Plan prohibits construction of new coal-fired power plants, the additional coal-fired power plants under construction by KEPCO are pursuant to the Sixth Basic Plan released in 2013. In constructing the new power plants, we are applying the “Ultra Super Critical” technology designed to minimize emission of pollutants and maximize the efficiency by reducing the coal consumption. We are also committed to lowering our exposure to coal-generated energy in the long-term. For additional information, see Item 3.D. “Risk Factors— We are subject to various environmental regulations and related government initiatives, including in relation to climate change, which could cause significant compliance costs and operational liabilities.”

In order to comply with the current and expected environmental standards and address related legal and social concerns, we intend to continue to install additional equipment, make related capital expenditures and undertake several environment-friendly measures to foster community goodwill. For example, under the Persistent Organic Pollutants Management Act enacted in 2007, we are required to remove polychlorinated biphenyl, or PCB, a toxin, from the insulating oil of our transformers by 2025. In addition, when constructing certain large new transmission and distribution facilities, we assess and disclose their environmental impact at the planning stage of such construction, and we consult with local residents, environmental groups and technical experts to generate community support for such projects. We exercise additional caution in cases where such facilities are constructed near ecologically sensitive areas such as wetlands or preservation areas. We also make reasonable efforts to minimize any negative environmental impact, for example, by using more environment-friendly technology and hardware. In addition, we also undertake measures to minimize losses during the transmission and distribution process by making our power distribution network more energy-efficient in terms of loss of power, as well as to lower consumption of energy, water and other natural resources. In addition, we and our subsidiaries acquired the ISO 14001 certification, an environmental management system widely adopted internationally, in 2007 and have made it a high priority to make our electricity generation and distribution more environmentally friendly. In addition to the ISO 14001 certification, we further reinforced our environmental management system by acquiring in 2013 a domestic “GMS (Green Management System), KS I 7001/7002” certification, which relates to the management of resources, energy, green house effects and social responsibilities. In 2014, we were awarded the presidential award for environmental contributions as a corporate citizen, after scoring the highest among 102 corporations that competed for the award. In order to encourage the implementation of environment-friendly measures by other corporations and enhance environmental awareness at a social level, we have been disclosing our environment-related activities and achievements to the public through the Environment Information System managed by the Ministry of Environment since 2012.

Our environmental measures, including the use of environment-friendly but more expensive parts and equipment and allocation of capital expenditures for the installation of such facilities, may result in increased operating costs and liquidity requirement. The actual cost of installation and operation of such equipment and related liquidity requirement will depend on a variety of factors which may be beyond our control. There is no

assurance that we will continue to be in material compliance with legal or social standards or requirements in the future in relation to the environment.

As part of our long-term strategic initiatives, we plan to take other measures designed to promote the generation and use of environmentally friendly, or green, energy. See Item 4.B. “Business Overview—Strategy.” In line with such strategic initiatives, we are, among others:

•

investing in and researching technologies that capture and utilize carbon dioxide;

•

planning to develop capacity of 41.2 gigawatts of renewable energy by 2030 with our generation subsidiaries according to our “Renewable Energy 2030” initiative;

•

implementing a mid- to long-term goal of “energy shift through expanding renewable energy”, reviewed and approved by our board in October 2019;

•

pursuing overseas energy projects according to the “Overseas Generation Business Agreement”, signed by us and our generation subsidiaries at the end of 2019, which stipulates stringent internal guidelines in connection with investments in greenfield coal power plant projects; and

•

refining our disclosure of greenhouse gas emission and relevant data to global investors to meet the recommendations set forth by the Task-force on Climate-Related Financial Disclosures (TCFD) set up by the Financial Stability Board (FSB) in 2015.

Specifically, our internal guideline stipulates the following five factors to be considered and fulfilled before we and our generation subsidiaries pursue a greenfield coal power plant project overseas:

a coal-fired plant is a realistic option as part of the target country’s energy policy;

the project applies the latest low carbon technology, such as the “Ultra Super Critical” technology, and complies with the international environment standards;

export financing is available based on the OECD guidelines;

the project involves a joint business development with Korean companies and financial service industry; and

the project gains local acceptance via socially responsible investments to protect environment.

Some of our generation facilities are powered by renewable energy sources, such as solar energy, wind power and hydraulic power. While such facilities are currently insignificant as a proportion of our total generation capacity or generation volume of our generation subsidiaries, we expect that the portion will increase in the future, especially since we are required to comply with the Renewable Portfolio Standard program as described below.

The following table sets forth the generation capacity and generation volume in 2019 of our generation facilities that are powered by renewable energy sources.


	Generation Capacity (megawatts)			Generation Volume (gigawatt-hours)
Hydraulic Power⁽¹⁾		652			1,018
Wind Power		139			192
Solar Energy, Fuel Cells, Biogas and others		1,196			5,236

Subtotal		1,986			6,446
As percentage of total⁽²⁾		2.4	%		1.6	%

Notes:

(1)	Excluding generation capacity and volume of pumped storage, which is generally not classified as renewable energy.

(2)	As a percentage of the total generation capacity or total generation volume, as applicable, of us and our generation subsidiaries.

In order to deal with shortage of fuel and other resources and also to comply with various environmental standards, in 2012 the Government adopted the Renewable Portfolio Standard program, which replaced the Renewable Portfolio Agreement which had been in effect from 2006 to 2011. Under this program, each of our generation subsidiaries is required to generate a specified percentage of total electricity to be generated by such generation subsidiary in a given year in the form of renewable energy or, in case of a shortfall, purchase a corresponding amount of a Renewable Energy Certificate (a form of renewable energy credit) from other generation companies whose renewable energy generation surpass such percentage. The target percentage was 5.0% in 2018, 6.0% in 2019 and 7.0% in 2020 and will incrementally increase to 10.0% by 2023. Fines are to be levied on any subsidiary that fails to do so in the prescribed timeline. In 2018, all six of our generation subsidiaries met the target through renewable energy generation and/or the purchase of a Renewable Energy Certificate. Compliance by our generation subsidiaries of the 2019 target is currently under evaluation, and if any generation subsidiary is found to have failed to meet the target for 2019 or for subsequent years, such generation subsidiary may become subject to fines.

As to how we plan to finance our capital expenditures related to our environmental programs, see “—Capital Investment Program.”

In March 2017, the Electric Utility Act was amended to the effect that starting in June 2017, future national planning for electricity supply and demand in Korea should consider the environmental and safety impacts of such planning, such as desulfurization costs. Accordingly, the costs related to environmental and safety impacts such as the desulfurization costs, have been reflected in our variable cost of generating electricity since August 2019. In December 2019, the Regulation on the Operation of the Electricity Market was revised, under which our specific plans to reflect the cost of greenhouse gas emission allowances will be finalized within two years of such revision.

Furthermore, under the new electricity rate structure effected by the Government effective January 1, 2017, a temporary rate discount will apply in the case of investments in environmentally friendly facilities such as energy storage systems, renewable energy and electric cars. While the initial temporary rate discount had applied between 2017 and 2019, it was extended until 2020. In order to mitigate any potential burden on the consumers and shock to the electric car market, the temporary rate discount will be incrementally phased out by June 2022.

Community Programs

Building goodwill with local communities is important to us in light of concerns among the local residents and civic groups in Korea regarding construction and operation of generation units, particularly nuclear generation units. The Act for Supporting the Communities Surrounding Power Plants and the Act on the Compensation and Support for Areas Adjacent to Transmission and Substation Facilities require that the generation companies and the affected local governments carry out various activities up to a certain amount annually to address neighboring community concerns. Pursuant to these Acts, we and our generation subsidiaries, in conjunction with the affected local and municipal governments, undertake various programs, including scholarships and financial assistance to low-income residents.

Under the Act for Supporting the Communities Surrounding Power Plants, activities required to be undertaken under the Act are funded partly by the Electric Power Industry Basis Fund (see “—Sales and Customers—Electricity Rates”) and partly by KHNP as part of its budget. KHNP is required to make annual contributions to the affected local communities in an amount equal to Won 0.25 per kilowatt-hour of electricity generated by its nuclear generation units during the one-year period before the immediately preceding fiscal year, Won 5 million per thousand kilowatts of hydroelectric generation capacity and Won 0.5 million per thousand kilowatts of pumped-storage generation capacity. In addition, under Korean tax law, KHNP is required to pay

local tax levied on its nuclear generation units in an amount equal to Won 1 (effective January 1, 2015, which reflects an increase from the previous Won 0.5 per kilowatt-hour of their generation volume in the affected areas) and Won 2 per 10 cubic meters of water used for hydroelectric generation.

The Act on the Compensation and Support for Areas Adjacent to Transmission and Substation Facilities, enacted in January 2014 with effect from July 2014, prescribes measures to be taken by power generation or transmission companies with respect to the communities adjacent to transmission and substation facilities. Under this Act, those who own land or houses in the vicinity of transmission lines and substation may claim compensation for damages or compel purchase of such properties by the power generation or transmission companies which are legally obligated in principle to pay for such damages or purchase such properties. In addition, under this Act, residents of communities adjacent to transmission and substation facilities are entitled to subsidies on electricity tariff as well as support for a variety of welfare projects and collective business ventures.

Prior to the construction of a generation unit, our generation subsidiaries perform an environmental impact assessment which is designed to evaluate public hazards, damage to the environment and concerns of local residents. A report reflecting this evaluation and proposing measures to address the problems identified must be submitted to and approved by the Ministry of Trade, Industry and Energy following agreement with related administrative bodies, including the Ministry of Environment prior to the construction of the unit. Our generation subsidiaries are then required to implement the measures reflected in the approved report. Despite these activities, civic community groups may still oppose the construction and operation of generation units (including nuclear units), and such opposition could adversely impact our construction plans for generation units (including nuclear units) and have a material adverse effect on our business, results of operations and cash flow.

Upon relocation of our corporate headquarters in November 2014, we developed and established Bitgaram Energy Valley as a smart energy hub city in Gwangju and Jeollanamdo, to attract and facilitate the growth of start-ups and research institutions related to new energy industries while contributing to the local economy, balanced regional development and job creation. To achieve this goal, we provide funding, business networks and research and development assistance to companies which entered into investment contracts with us. As of December 31, 2019, we had signed agreements with 430 companies relating to investments in the Bitgaram Energy Valley, and we currently aim to increase the total number of companies investing in the Bitgaram Energy Valley to 500 companies by the end of 2020.

Nuclear Safety

KHNP takes nuclear safety as its top priority and continues to focus on ensuring the safe and reliable operation of nuclear power plants. KHNP also focuses on enhancing corporate ethics and transparency in the operation of its plants.

KHNP has a corporate code of ethics and is firmly committed to enhancing nuclear safety, developing new technologies and improving transparency. KHNP has also established the “Statement of Safety Policy for Nuclear Power Plants” to ensure the highest level of nuclear safety. Furthermore, KHNP invests approximately 5% of its total annual sales into research and development for the enhancement of nuclear safety and operational performance.

KHNP implements comprehensive programs to monitor, ensure and improve safety of nuclear power plants. In order to enhance nuclear safety through risk-informed assessment, KHNP conducts probabilistic safety assessments, including for low power-shutdown states, for all its nuclear power plants. In order to systematically verify nuclear safety and identify the potential areas for safety improvements, KHNP performs periodic safety reviews on a 10-year frequency basis for all its operating units. These reviews have been completed for Kori #1, #2, #3, #4; Hanbit #1, #2, #3, #4, #5, #6; Wolsong #1, #2, #3 and #4; and Hanul #1, #2, #3, #4, #5, #6 once or more. Reviews for Wolsong #3, #4 and Hanul #1, #2, #3, #4 are in progress. In order to enhance nuclear safety and plant performance, KHNP has established a maintenance effectiveness monitoring program based on the

maintenance rules issued by the United States Nuclear Regulatory Commission, which covers all of KHNP’s nuclear power plants in commercial operation.

KHNP has developed the Risk Monitoring System for operating nuclear power plants, which it implements in all of its nuclear power plants. The Risk Monitoring System is intended to help ensure nuclear plant safety. In addition, KHNP has developed and implemented the Severe Accident Management Guidelines and is developing the Severe Accident Management Guidelines for Low Power-Shutdown States in order to manage severe accidents for all of its nuclear power plants.

KHNP conducts various activities to enhance nuclear safety such as quality assurance audits and reviews by the KHNP Nuclear Review. KHNP maintains a close relationship with international nuclear organizations in order to enhance nuclear safety. KHNP invites international safety review teams such as the World Association of Nuclear Operators (“WANO”) Peer Review Team to its nuclear plants for purposes of meeting international standards for independent review of its facilities. KHNP actively exchanges relevant operational information and technical expertise with its peers in other countries. For example, KHNP conducted seven WANO Peer Reviews for Kori #2, #3 and #4 units and Hanbit #1, #2, #3 and #4 units and Wolsong #5 and #6 units as well as Hanul #1, #2, #3 and #4 units in 2019. The recommendations and findings from this event were shared with KHNP’s other nuclear plants to implement improvements at such plants. In addition, KHNP has applied for the Operational Safety Review Team at the International Atomic Energy Agency to conduct a mission at Shin-Kori #3 and #4 units in the second half year of 2020. The purpose of such application was to ensure that KHNP nuclear generation units reflect the global safety standards.

The average level of radiation dose per unit amounted to a relatively low level of 0.28 man-Sv in 2019, which was substantially lower than the global average of 0.60 man-Sv/year in 2019 as reported in the WANO performance indicator report.

In response to the damage to the nuclear facilities in Japan as a result of the tsunami and earthquake in March 2011, the Government conducted additional safety inspections on nuclear power plants by a group of experts from governmental authorities, civic groups and academia. As a result of such inspections, the Government required KHNP to perform 46 comprehensive safety improvement measures. As of December 31, 2019, KHNP has completed implementation of 43 measures and will implement the three remaining measures by 2020. The Government also established the Nuclear Safety & Security Commission in October 2011 for neutral and independent safety appraisals. KHNP developed ten additional measures through benchmarking of overseas cases and internal analysis of current operations. As of December 31, 2019, KHNP has completed implementation of eight measures and will implement the two remaining measures by 2022.

From time to time, our nuclear generation units may experience unexpected shutdowns. For example, on September 12, 2016, multiple earthquakes including a magnitude 5.8 earthquake hit the city of Gyeongju, a home to KHNP’s headquarters and Wolsong Nuclear Power Plant. Although there was no material safety issues, KHNP had manually stopped the operations of Wolsong Nuclear Power Plant units #1, 2, 3, and 4 according to the safety guidelines. All units have resumed their operations on December 5, 2016, with the approval by the Nuclear Power Safety Commission. KHNP continues to implement measures to improve the safety by reinforcing seismic capability of its core facilities and performing stress tests across all its nuclear power plants. In 2018, KHNP finished the implementation of such measures for 24 units and enhanced seismic design of the core facilities to withstand a magnitude 7.0 earthquake (6.5 before implementation). As for the units under construction (Shin-Kori#5 and #6), the core facilities will be able to withstand a magnitude 7.4 earthquake.

Low and intermediate level waste, or LILW, and spent fuels are stored in temporary storage facilities at each nuclear site of KHNP. The temporary LILW storage facilities at the nuclear sites had been sufficient to accommodate all LILWs produced up to 2015. Korea Radioactive Waste Agency (“KORAD”) completed the construction of a LILW disposal facility in the city of Gyeongju, and government approval for its operations was obtained in December 2014.

In order to increase the storage capacity of temporary storage facilities for spent fuels, KHNP has been pursuing various projects, such as installing high-density racks in spent fuel pools and building dry storage facilities. Through these activities, we expect that the storage capacity for spent fuels in all nuclear sites will be sufficient to accommodate all the spent fuels produced by 2020. The policy for spent fuel management options is currently under development.

In 2009, the Radioactive Waste Management Act (“RWMA”) was enacted in order to centralize management of the disposal of spent fuel and LILW and enhance the security and efficiency of related management processes. The RWMA designates KORAD to manage the disposal of spent fuels and LILW. Pursuant to the RWMA, the Government has established the Radioactive Waste Management Fund. The management expense for LILW is paid when LILW is transferred to KORAD, and the charge for spent fuel is paid based on the quantity generated every quarter. LILW-related management costs and charges for spent fuel are reviewed by the Ministry of Trade, Industry and Energy every two years. In December 2019, after the review by the committee composed of Government officials, KHNP, Korea Radioactive Waste Management Corporation and experts in finance and accounting, LILW-related management costs were increased while charges for spent-fuel remained the same. The change in LILW-related management costs caused an increase in KHNP’s expenses relating to radioactive waste.

All of KHNP’s nuclear plants are currently in compliance with Korean law and regulations and the safety standards of the IAEA in all material respects. For a description of certain past incidents relating to quality assurance in respect of KHNP, see Item 3.D. “Risk Factors— Our risk management policies and procedures may not be fully effective at all times.”

Decommissioning

Decommissioning of a nuclear power unit is the process whereby the unit is shut down at the end of its life, the fuel is removed and the unit is eventually dismantled. KHNP implements a dismantling policy under which dismantling would take place five to ten years after the unit’s closure. KHNP renewed the operating license of Kori #1, the first nuclear power plant constructed in Korea, which commenced operation in 1978, for an additional ten years in 2007. At the recommendation of the Ministry of Trade, Industry and Energy, KHNP has decided not to renew the operating license of Kori #1 and the initial phase of decommissioning (namely, safety inspection and removal of spent fuels) of Kori #1 has begun after its permanent shutdown in June 2017. In February 2015, KHNP also renewed the operation license of Wolsong #1 (which originally expired in November 2012) for an additional ten years until 2022. In June 2015, reactivation of Wolsong #1 was approved by the NSSC after periodic inspection. However, a civic group has since then brought a lawsuit to reverse such approval, and in February 2017, a lower court ruled to annul the NSSC’s approval, which ruling has since been appealed. On June 15, 2018, the board of directors of KHNP decided to (i) retire Wolsong #1 unit earlier than planned due to its economic inefficiency and (ii) discontinue the construction of Chunji #1 and #2 as well as Daejin #1 and #2 units. As of December 31, 2019, impairment loss in connection with the property, plant and equipment of Wolsong #1 unit accrued to Won 572,216 million and reversal of impairment loss was Won 16,693 million. As of December 31, 2019, impairment loss in connection with the property, plant and equipment of Chunji #1 and #2 as well as Daejin #1 and #2 units amounted to Won 38,886 million. Although the board of directors did not make any decisions regarding Shin-Hanul #3 and #4 units, which are new nuclear plants under construction, we cannot assure you that the construction of these units will not be discontinued. As of December 31, 2019, impairment loss in connection with the property, plant and equipment of Shin-Hanul #3 and #4 units accrued to Won 134,736 million. KHNP retains full financial and operational responsibility for decommissioning its units.

KHNP has accumulated decommissioning costs as a liability since 1983. The decommissioning costs of nuclear facilities are defined by the Radioactive-Waste Management Act, which requires KHNP to credit annual appropriations separately. These costs are estimated based on studies conducted by the relevant committees, and are reviewed by the Ministry of Trade, Industry and Energy every two years. In 2019, the actual discount rates

decreased and the decommissioning cost per unit increased. As of December 31, 2019, KHNP was required to accrue Won 19,097 billion for the costs of dismantling and decontaminating existing nuclear power plants, which consisted of dismantling costs of nuclear plants of Won 15,994 billion and dismantling costs of spent fuel and radioactive waste of Won 3,103 billion. For accounting treatment of decommissioning costs, see Item 5.A. “Operating Results—Critical Accounting Policies—Decommissioning Costs.”

Overseas Activities

We are engaged in a number of overseas activities. We believe that such activities help us diversify our revenue streams by leveraging the operational experience of us and our subsidiaries gathered from providing a full range of services, such as power plant construction and specialized engineering and maintenance services in Korea, as well as establishing strategic relationships with countries that are or may become providers of fuels.

Throughout the years, we have sought to expand our project portfolio to include the construction and operation of conventional thermal generation units, nuclear generation units and renewable energy power plants, transmission and distribution and mining and development of fuel sources. While strategically important, we believe that our overseas activities, as currently being conducted, are not in the aggregate significant in terms of scope or amount compared to our domestic activities. In addition, a number of the overseas contracts currently being pursued are based on non-binding memoranda of understanding and the details of such projects may significantly change during the course of negotiating the definitive agreements.

Below is a description of our major overseas projects.

Generation projects

Nuclear Generation Project

In December 2009, following an international open bidding process, we entered into a prime contract for the original contract amount of US$18.6 billion with the Emirates Nuclear Energy Corporation (“ENEC”), a state-owned nuclear energy provider of the United Arab Emirates (“UAE”), to design and construct four civil nuclear power generation units to be located in Barakah, a region approximately 270 kilometers from Abu Dhabi, for the UAE’s peaceful nuclear energy program. Under the contract, we and our subcontractors, some of which are our subsidiaries, are to perform various duties including, among others, designing and constructing four nuclear power generation units each with a capacity of 1,400 megawatts, supplying nuclear fuel for three fuel cycles including initial loading, with each cycle currently projected to last for approximately 18 months, and providing technical support, training and education related to plant operation. In connection with the parties’ execution of an amendment to the prime contract, the target completion dates for the four units were amended to be by December 2020. The contract amount of US$18.6 billion was increased to US$19.1 billion, and the amendment was signed in November 2017.

On October 20, 2016, in order to foster a long-term strategic partnership and stable management of the units post-construction we entered into an investment agreement with ENEC to jointly establish Barakah One PJSC, a special purpose company which will oversee the operation and management of the nuclear power plant currently being constructed in Barakah, United Arab Emirates. Barakah One PJSC is capitalized with loans in the amount of US$19.6 billion and equity of US$4.7 billion. We have a 18% equity interest in Barakah One PJSC, and also have a 18% equity interest in Nawah Energy Company, a subsidiary of ENEC, which will also be responsible for the operation and maintenance of the Barakah nuclear power plant. On December 20, 2018, the board of directors of KEPCO resolved to invest additional US$380 million in Barakah One PJSC. With the additional investment, KEPCO’s total capital investment amount in Barakah One PJSC is expected to be US$1.28 billion. KEPCO’s equity interest in the project is 18%, which remains unchanged. The total project cost of the construction and operation of the Barakah nuclear power plant is expected to be approximately US$29.5 billion, and the operational period is expected to be 60 years after the project commercial operation date in 2025. Actual capital contribution is currently scheduled to be made in September 2025.

Non-nuclear Generation Projects

We are currently engaged in three major power projects in the Philippines: (i) a “build, operate and transfer” of a 1,200-megawatt combined-cycle power plant project in Ilijan, construction of which began in November 1997 and was completed in June 2002 and which is being operated by us until 2022 (the project cost of the Ilijan project was US$721 million, for which project finance on a limited recourse basis was provided), (ii) ownership of a 39.6% equity interest in SPC Power Corporation, an independent power producer, and a 39.6% equity interest in two distribution companies in the Philippines, and (iii) a “build, operate and own” of a 200-megawatt CFBC coal power plant in Cebu for which construction began in February 2008 and was completed in May 2011, followed by operation thereof until 2036. The project cost of the Cebu project was US$451 million, for which project financing on a limited recourse basis was provided.

In April 2007, we formed a limited partnership with Shanxi International Electricity Group and Deutsche Bank in China to develop and operate power projects and coal mines in Shanxi province, China, which was approved by the Chinese government. The total capital investment in these projects amounted to US$1.33 billion, of which our capital investment was US$450 million. We are expected to participate in the operation of the project for a period of 50 years ending 2057. The total installed capacity of these projects is 6,992 megawatts and capacity under construction was 2,566 megawatts, and our equity interest in the partnership was 34%.

In July 2008, a consortium consisting of us and Xenel of Saudi Arabia won the bid to “build, own and operate” a gas-fired power plant with installed capacity of 373 megawatts in Al Qatrana, near Amman, and we entered into definitive agreements in October 2009. Construction of this project was completed in December 2011, and the plant is currently in operation and will be operated until 2035. The total project cost was US$461 million, of which the consortium made an equity contribution of US$143 million and the remainder was funded with debt financing. We and Xenel own 80:20 equity interests in the project, respectively.

In December 2008, we formed a consortium with ACWA Power International of Saudi Arabia and submitted a bid for the 1,204 megawatt oil-fired power project in Rabigh, Saudi Arabia. In March 2009, we were selected as the preferred bidder, and in July 2009, we entered into a power purchase agreement with Saudi Electricity Company. Construction of the project was completed in April 2013, and we will participate in the operation of the plant for 20 years. The total project cost was approximately US$2.5 billion. We currently hold a 40.0% equity interest in the joint venture entity, Rabigh Electricity Company, which operates the project.

In August 2010, a consortium led by us was selected as the preferred bidder in an international auction for the construction and operation of the Norte II gas-fueled combined-cycle electricity generation facility in Chihuahua, Mexico, as ordered by the Commission Federal de Electricidad (“CFE”) of Mexico. The consortium established a special purpose vehicle, KST Electric Power Company (“KST”), to act as the operating entity, and in September 2010, KST entered into a power purchase agreement with CFE in relation to the construction and operation of a 433-megawatt combined-cycle power plant at Chihuahua in Mexico. In October 2010, KST was licensed by the Mexican government as an independent power producer, which allows it to produce and sell electricity to CFE during the specified contract period. The project will be undertaken on a “build, own and operate” basis. The total cost of the project is approximately US$427 million. We hold a 56% equity interest in the consortium, with the remaining equity interests held by Samsung Asset Management (34% equity interest) and Techint, a company based in Mexico (10% equity interest). Approximately 6% (equating to 24% before refinancing) of the total project costs is being financed through equity investments by the consortium and the remaining 94% (equating to 77.5% before refinancing) through the project bond issuance guaranteed by Export-Import Bank of Korea. Commercial operation of this project commenced in December 2013, and the operation period will run for 25 years until 2038. Our wholly-owned subsidiary, KEPCO Energy Service Company, currently manages the operation of the project.

In October 2010, a consortium including us was selected by Abu Dhabi Water & Electricity Authority (“ADWEA”), a state-run utilities provider in the UAE, as the preferred bidder in an international bidding for the

construction and operation of the combined-cycle natural gas-fired electricity generation facilities in Shuweihat, UAE with aggregate capacity of 1,600 megawatts. Construction was completed in July 2014 and we will participate in the operation of the plant until 2039. The total project cost was approximately US$1.4 billion, of which 20% was financed through equity investments by the consortium members and the remaining 80% through debt financing. Equity interests in the consortium are owned by ADWEA (60.0%), Sumitomo (20.4%) and us (19.6%). The total amount of our equity investment in the project is approximately US$56 million.

In January 2012, a consortium consisting of us, Mitsubishi Corporation and Wartsila Development & Financial Services of Finland was selected by National Electric Power Corporation, a state-run electricity provider in Jordan, to construct and operate a diesel engine power project in Almanakher with an expected total generation capacity of 573 megawatts. Construction of this project was completed in October 2014 and the plant is currently in operation and will be operated until 2039. The total project cost was approximately US$760 million, of which the consortium made an equity contribution of approximately US$190 million and the remainder was funded with debt financing. We, Mitsubishi Corporation and Wartsila Development & Financial Services own 60:35:5 equity interests in the project, respectively. Our equity investment in this project is US$104 million.

In March 2013, a consortium consisting of us and Marubeni, a Japanese corporation, was selected by the Ministry of Industry and Trade of Vietnam for the construction and operation of a 1,200 megawatt coal-fired power plant in Thanh Hoa province, Vietnam. We started construction in July 2018 and to complete completion by July 2022, followed by operation for 25 years. The total project cost is expected to be US$2.5 billion, of which 24% will be funded by equity contribution and the remaining 76% by debt financing. The share capital of the special purpose entity in charge of this project is US$568 million, and we and Marubeni each hold 50% equity interest in such entity.

On October 6, 2016, a consortium comprised of us, Marubeni Corporation and four local entities, with equity interest in the consortium of 24.5%, 24.5% and 51.0%, respectively, was notified that it has been selected by the Republic of South Africa Department of Energy as the preferred bidder for the construction and operation project of a coal-fired power plant in the Republic of South Africa. Once negotiations and financing arrangements are completed, the construction of the coal-fired power plant is expected to commence. The plant is expected to have an aggregate capacity of 630 megawatts, and construction is expected to take 52 months to complete. The consortium plans to participate in the operation of the plant for a period of 30 years from the commercial operation date. The total cost of the project is estimated to be around US$2.14 billion, of which our total capital investment is expected to be approximately US$133 million. In connection with the project, we plan to establish a holding company and a project company in the Republic of South Africa.

On September 28, 2017, we entered into a joint development agreement with Tadmax Resources Bhd, a Malaysian corporation, in relation to a gas-fired power plant with capacity of 1,200 megawatts in Pulau Indah, Malaysia. We obtained approval for this project from Malaysia Energy Commission, the host entity of the project. We will hold a 25% equity interest in this project, and Worldwide Holdings Berhad will hold a 35%, and Tadmax Resources Bhd will hold a 40% equity interest in it. The total project cost is expected to be approximately US$800 million, and we expect to invest approximately US$40 million for the equity interest. Upon closing of the financing, the construction for this project will begin in January 2021, following the approval of the applicable tariff rates by the Malaysian Energy Commission, which occurred in the first quarter of 2020. This project marks our first entry into the Malaysian power generation market. We expect to enter into a power purchase agreement with Tenaga Nasional Berhad for a term of 21 years, with a goal of generating a stable revenue stream from this project.

On November 5, 2019, we entered into an Energy Conversion Agreement comprising of a power purchase agreement with the Guam Power Authority for a term of 25 years to construct and operate Ukudu gas-fired power plants in Guam, United States, including 198 megawatts gas fired power plant, 65 megawatts back-up diesel generator and 25 megawatts energy storage facility. KEPCO and Korea East-West Power Co., Ltd., hold

60% and 40% shares in the project, respectively. The total project cost is expected to be approximately US$700 million, and we expect to invest US$84 million for the equity interest. The construction of the project is expected to commence in 2021 upon approval of the environmental impact assessment and the issuance of relevant permits. The power station is expected to commence commercial operation in 2023. The completed power plants are expected to be operated as base load generators, replacing the existing old heavy fuel power plants in Guam.

Exploration and Production Projects

In order to secure a more reliable supply of fuel for power generation and hedge against fluctuations in fuel price, from 2007 to 2016, we pursued overseas exploration and production projects, including five bituminous coal projects and five uranium projects involving investments of approximately Won 1.4 trillion. However, pursuant to the Government’s Proposal for Adjustment of Functions of Public Institutions (Energy Sector) announced in June 2016, as of December 31, 2016, except for the Bylong project described below, we transferred all our assets and liabilities for our overseas resource business to our six generation subsidiaries, which are the end-consumers of fuels and are therefore expected to more responsively manage these projects. The amount of net assets that we transferred to our generation subsidiaries as of December 31, 2016 was Won 622 billion.

Some of the assets transferred include our equity interest in PT Adaro Energy TBK, which is one of the largest coal producers in Indonesia, as well as our 20% equity interest in PT. Bayan Resources Tbk pursuant to which we were entitled to an off-take of 7 million tons per year beginning in 2015.

One exception to the transfers on such date was our 90% equity interest in KEPCO Bylong Pty Ltd (“KEPCO Bylong”). We transferred 10% of our equity interest in the KEPCO Bylong to our five non-nuclear generation subsidiaries as of December 31, 2016, and we plan to gradually transfer the remainder of our interest to them subject to the progress of the regulatory approval process and resource production phase of the project. In July 2015, KEPCO Bylong lodged a development application to the State Government of New South Wales (the “NSW”) of Australia. In September 2019, Independent Planning Commission of the NSW, which is the governmental authority with the approval power, refused to grant KEPCO Bylong’s development application. As of December 31, 2019, we have invested approximately Won 810 billion in the Bylong project, and, as of December 31, 2019, impairment loss in connection with the Bylong project was approximately Won 540 billion. While we remain committed to the Bylong project, we are currently assessing next steps by analyzing the implications of the refusal.

Our nuclear generation subsidiary, KHNP, is also pursuing development projects for procurements of uranium in countries including Canada, France and Niger.

Renewable Energy Projects

Our overseas renewable energy projects include the generation of electricity through renewable energy sources.

Since 2005, joint ventures between us and China Datang Corporation of the People’s Republic of China have built and operated a number of wind farms in Inner Mongolia, Liaoning and Gansu provinces. We own 40% of these joint ventures, whose equity in the aggregate amount is approximately US$450 million. The projects are funded one-third by equity contributions and two-thirds by debt financing. As of December 31, 2019, the joint venture operated 22 wind farms with a total capacity of 1,017 megawatts and a 7-megawatt photovoltaic power station.

In December 2015, we entered into an agreement with the Ministry of Energy and Mineral Resources of Jordan to build, own and operate a wind farm with installed capacity of 89.1 megawatts in Fujeij, Ma’an, Jordan. Commercial operations commenced on July 14, 2019. Total project cost is approximately US$181 million, of

which 40% is financed through equity investments by us and the remaining 60% through debt financing. We believe that this project will help us to further diversify our business portfolio in the Middle East from the existing focus on nuclear and thermal power plants to expand to renewable energy facilities.

In June 2015, we entered into a memorandum of understanding with Energy Product, a Japanese local developer, to build, own and operate photovoltaic power station with a capacity of 28 megawatts, together with a 13.7 megawatts-hour energy storage system, in Chitose, Hokkaido prefecture in Japan. The parties subsequently signed the joint development agreement and other definitive agreements. The power station, in which we own 80.1% interest, started commercial operation in July 2017. Total project cost is approximately JPY 11.3 billion, of which 20% was financed through 80:20 equity investments by us and EP. The remaining 80% is funded through debt financing.

In August 2016, we entered into a Purchase and Sale Agreement with Cogentrix Solar Holdings to operate a photovoltaic power station in Colorado, United States, with a capacity of 30 megawatts for 25 years. Total project cost is approximately US$85 million, of which 50.1% was financed through 50.1:49.9 equity investments by us and a private equity fund formed by us and National Pension Service. It was our first foray into the North American power market.

In June 2017, a consortium between us and LG CNS Co., Ltd. won a project to build, own and operate a photovoltaic power station in Guam, United States, with a capacity of 60 megawatts for 25 years, including 32 megawatts-hour energy storage system. The total project cost is approximately US$200 million, of which 25% will be financed through equity investment by us and LG CNS Co., Ltd., each holding 70% and 30% of equity interests, respectively, and the remaining 75% will be funded through debt financing. The debt to equity ratio will be fixed upon financial closing. The consortium has entered into a power purchase agreement with Guam Power Authority in August 2018.

In September 2017, we entered into an agreement with Recurrent Energy to operate 3 solar photovoltaic project in southern California, United States, with a capacity of 235MW for 34 years. KEPCO partnered with the Corporate Partnership Fund, a Korean private equity fund. We invested USD 38 million in the project, and the transaction marks our largest investment in the U.S. solar market.

In October 2018, we entered into a Share Purchase Agreement and Share Subscription Agreement to operate a photovoltaic power station with a capacity of 50 megawatts in Calatagan in Philippines. The parties, KEPCO and Solar Philippines Power Project Holdings, Inc., subsequently signed the Shareholders’ Agreement in December 2018, in which KEPCO owns 38% interest. We financed PHP 2.25 billion (approximately USD 42.8 million) for the Calatagan Project, of which 80% was financed through equity investments and the remaining 20% was funded through debt financing.

In October 2019, KEPCO and Sprott Korea as a consortium entered into a Share Purchase Agreement and Shareholders Agreement with Candian Solar INC to develop and operate a photovoltaic power station with a capacity of 294 megawatts in Mexico, including the State of Sonora, for 35 years. We invested USD 41 million in the project, and the transaction marks KEPCO’s first investment in the solar market in Mexico.

Although renewable energy projects are currently insignificant as a proportion of our total overseas activities and our generation activities, we expect the portion of renewable energy projects to increase in the future as we seek to penetrate the overseas renewable energy market, diversify our businesses and actively address climate change. We expect to further diversify our business in the renewable energy sector to also include smart transmission and distribution facilities, smart grids and utilization of new energy related technologies.

North Korea

Kaesong Complex

Since 2005, we have provided electricity to the industrial complex located in Kaesong, North Korea, which was established pursuant to an agreement made during the summit meeting of the two Koreas in June 2000. The Kaesong complex is the largest economic project between the two Koreas and is designed to combine the Republic’s capital and entrepreneurial expertise with the availability of land and labor of North Korea. In March 2005, we built a 22.9 kilovolt distribution line from Munsan substation in Paju, Gyeonggi Province to the Kaesong complex and became the first to supply electricity to pilot zones such as ShinWon Ebenezer. In April 2006, we started to construct a 154 kilovolt, 16 kilometer transmission line connecting Munsan substation to the Kaesong complex as well as Pyunghwa substation in the complex and began operations in May 2007.

At the end of 2015, we supplied electricity to 254 units, including administrative agencies, support facilities and resident corporations, using a tariff structure identical to that of South Korea. However, we suspended power transmission to the Kaesong Industrial Complex since February 11, 2016 following the Government’s decision to halt operations of the industrial complex to impede North Korea’s utilization of funds from the industrial complex to finance its nuclear and missile programs. As of December 31, 2019, the book value of our facility located at the complex was Won 16.6 billion. For the year ended December 31, 2019, the amount of trade receivables from the companies residing in Kaesong complex was Won 2.9 billion. It is currently uncertain if we can exercise the property rights for our facility in the Kaesong complex. No assurance can be given that we will not experience any material losses as a result of the suspension of this project or failure of the project as a result of a breakdown or escalation of hostilities in the relationship between the Republic and North Korea. See Item 3.D. “Risk Factors—Risks Relating to Korea and the Global Economy—Tensions with North Korea could have an adverse effect on us and the market value of our shares.”

Insurance

We and our generation subsidiaries carry insurance covering against certain risks, including fire, in respect of key assets, including buildings, equipment, machinery, construction-in-progress and procurement in transit, as well as, in the case of us, directors’ and officers’ liability insurance. We and our generation subsidiaries maintain casualty and liability insurance against risks related to our business to the extent we consider appropriate. Other than KHNP, neither we nor our generation subsidiaries separately insure against terrorist attacks. These insurance and indemnity policies, however, cover only a portion of the assets that we own and operate and do not cover all types or amounts of loss that could arise in connection with the ownership and operation of these assets.

Substantial liability may result from the operations of our nuclear generation units, the use and handling of nuclear fuel and possible radioactive emissions associated with such nuclear fuel. KHNP maintains property and liability insurance against risks of its business to the extent required by the related law and regulations or considered as appropriate and otherwise self-insures against such risks. KHNP carries insurance for its generation units against certain risks, including property damage, nuclear fuel transportation and liability insurance for personal injury and property damage. KHNP carries property damage insurance covering up to US$1 billion per accident for all properties within its plant complexes, which includes property insurance coverage for acts of terrorism up to US$300 million and for breakdown of machinery up to US$300 million. In addition to the insurance on operating nuclear power generation units, KHNP has construction insurance for Shin-Kori #4, #5 and #6 and Shin-Hanul #1 and #2. KHNP maintains nuclear liability insurance for personal injury and third-party property damage for coverage of up to 300 million Special Drawing Rights, or SDRs, which amounts to approximately US$409.7 million, at the rate of 1 SDR = US$1.365690 as posted on the Internet homepage of the International Monetary Fund on March 27, 2020 per plant complex, for a total coverage of 1.5 billion SDRs. KHNP is also the beneficiary of a Government indemnity with respect to such risks for damage claims of up to Won 300 million SDRs per nuclear plant complex, for a total coverage of 1.5 billion SDRs. Under the Nuclear Damage Compensation Act of 1969, as amended, KHNP is liable only up to 300 million SDRs, per single accident per plant complex; provided that such limitation will not apply where

KHNP intentionally causes harm or knowingly fails to prevent the harm from occurring. KHNP will receive the Government’s support, subject to the approval of the National Assembly, if (i) the damages exceed the insurance coverage amount of 300 million SDRs and (ii) the Government deems such support to be necessary for the purposes of protecting damaged persons and supporting the development of nuclear energy business. KHNP carries insurance for its generation units and nuclear fuel transportation, and we believe that the level of insurance is generally adequate and is in compliance with relevant laws and regulations. In addition, KHNP is the beneficiary of Government indemnity which covers a portion of liability in excess of the insurance. However, such insurance is limited in terms of amount and scope of coverage and does not cover all types or amounts of losses which could arise in connection with the ownership and operation of nuclear plants. Accordingly, material adverse financial consequences could result from a serious accident or a natural disaster to the extent it is neither insured nor covered by the government indemnity. See Item 3.D. “Risk Factors—Risks Relating to KEPCO—The amount and scope of coverage of our insurance are limited.”

Competition

In particular, we compete with independent power producers with respect to electricity generation. The independent power producers accounted for 27.3% of total power generation in 2019 and 33.2% of total generation capacity as of December 31, 2019. As of December 31, 2019, there were 20 independent power producers in Korea, excluding renewable energy producers. Private enterprises became permitted to own and operate coal-fired power plants in Korea only after the Ministry of Trade, Industry and Energy approved plans for independent power producers to construct coal-fired power plants under the Sixth Basic Plan announced in February 2013. Under the Eighth Basic Plan announced in December 2017, six coal-fired units under construction with aggregate generation capacity of 6,260 megawatts are scheduled to be completed between 2021 and 2022. While it remains to be seen whether construction of these generation units will be completed as scheduled, if these units were to be completed as scheduled and/or independent power producers are permitted to build additional generation capacity (whether coal-fired or not), our market share in Korea may decrease, which may have a material adverse effect on our results of operations and financial condition.

Our market dominance in the electricity distribution in Korea also may face potential erosion in light of the recent Proposal for Adjustment of Functions of Public Institutions (Energy Sector) announced by the Government in June 2016. This proposal contemplates a gradual opening of the electricity trading market to the private sector although no detailed roadmap has been provided for such opening. It is currently premature to predict to what extent, or in what direction, the liberalization of the electricity trading market will happen.

Nonetheless, any significant liberalization of the electricity trading market may result in substantial reduction of our market share in electricity distribution in Korea, which would have a material adverse effect on our business, results of operation and cash flows.

The electric power industry, which began its liberalization process with the establishment of our power generation subsidiaries in April 2001, may become further liberalized in accordance with the Restructuring Plan. See Item 4.B. “Business Overview—Restructuring of the Electric Power Industry in Korea.”

In the residential sector, consumers may use natural gas, oil and coal for space and water heating and cooking. However, currently there is no practical substitute for electricity for lighting and other household appliances, which is available on commercially affordable terms.

In the commercial sector, electricity is the dominant energy source for lighting, office equipment and air conditioning. For its other uses, such as space and water heating, natural gas and, to a lesser extent, oil, provide competitive alternatives to electricity.

In the industrial sector, electricity is the dominant energy source for a number of industrial applications, including lighting and power for many types of industrial machinery and processes that are available on commercially affordable terms. For other uses, such as heating, electricity competes with oil and natural gas and potentially with gas-fired combined heating and power plants.

Regulation

We are a statutory juridical corporation established under the KEPCO Act for the purpose of ensuring a stable supply of electric power and further contributing toward the sound development of the national economy through facilitating development of electric power resources and carrying out proper and effective operation of the electricity business. The KEPCO Act (including the amendment thereto) prescribes that we engage in the following activities:

development of electric power resources;

generation, transmission, transformation and distribution of electricity and other related business activities;

research and development of technology related to the businesses mentioned in items 1 and 2;

overseas businesses related to the businesses mentioned in items 1 through 3;

investments or contributions related to the businesses mentioned in items 1 through 4;

businesses incidental to items 1 through 5;

Development and operation of certain real estate held by us to the extent that:

it is necessary to develop certain real estate held by us due to external factors, such as relocation, consolidation, conversion to indoor or underground facilities or deterioration of our substation or office; or

it is necessary to develop certain real estate held by us to accommodate development of relevant real estate due to such real estate being incorporated into or being adjacent to an area under planned urban development; and

other activities entrusted by the Government.

The KEPCO Act currently requires that our profits be applied in the following order of priority:

•

first, to make up any accumulated deficit;

•

second, to set aside 20.0% or more of profits as a legal reserve until the accumulated reserve reaches one-half of our capital;

•

third, to pay dividends to shareholders;

•

fourth, to set aside a reserve for expansion of our business;

•

fifth, to set aside a voluntary reserve for the equalization of dividends; and

•

sixth, to carry forward surplus profit.

As of December 31, 2019, the legal reserve was Won 1,605 billion and the voluntary reserve was Won 34,785 billion, which consisted of reserve for business expansion of Won 28,968 billion, reserve for investment in social overhead capital of Won 5,277 billion, reserve for research and human development of Won 330 billion and reserve for equalizing dividends of Won 210 billion.

We are under the supervision of the Ministry of Trade, Industry and Energy, which has principal supervisory responsibility (in consultation with other Government agencies, such as the Ministry of Economy and Finance, as applicable) over us with respect to the appointments of our directors and our other senior management as well as approval of electricity tariff rate adjustments, among others.

Because the Government owns part of our capital stock, the Government’s Board of Audit and Inspection may audit our books.

The Electric Utility Act requires that licenses be obtained in relation to generation, transmission, distribution and sales of electricity, with limited exceptions. We hold the license to generate, transmit, distribute and sell electricity. Each of our six generation subsidiaries holds an electricity generation license. The Electric Utility Act governs the formulation and approval of electricity rates in Korea. See “—Sales and Customers—Electricity Rates” above.

Our operations are subject to various laws and regulations relating to environmental protection and safety.

Debt Reduction Program and Related Activities

In light of the general policy guideline of the Government for public institutions (including us and our generation subsidiaries) to reduce their respective overall debt levels, we and our generation subsidiaries have, in consultation with the Ministry of Trade, Industry and Energy and as approved by the Public Agencies Operating Committee, previously set target debt-to-equity levels every year from 2014 to 2017 and undertook various programs to reduce debt and improve the overall financial health, including through rationalizing and applying stricter review to (from a profitability and efficiency perspective) various aspects of our operations (both domestic and overseas), inviting private sector investments, disposing of non-core assets (such as non-core or loss-generating overseas operations and real property unrelated to operations), reducing costs, exploring alternative ways to generate additional revenue and developing contingency plans for further cost savings. Such debt-reduction initiatives ended at the end of 2017 as initially planned. However, we plan to continue carry out similar initiatives to manage our level of debt.

Despite our best efforts, however, for reasons beyond our control, including macroeconomic environments, government regulations and market forces (such as international market prices for our fuels), we cannot assure whether we or our generation subsidiaries will be able to successfully reduce debt burdens or otherwise improve our financial health or to a level that would be optimal for our capital structure. If we or our generation subsidiaries fail to do so or the measures taken by us or our generation subsidiaries to reduce debt levels or improve financial health have unintended adverse consequences, such developments may have an adverse effect on our business, results of operations and financial condition.

Establishment of an University

In light of the Government’s policy for Korea’s southwestern Honam region and in an effort to cultivate talents and establish a research platform for new market expansions, we plan to establish an university in South Jeolla Province. The university is planned to focus on energy studies and is expected to have 100 professors and more than 1,000 students. On April 17, 2020, the Ministry of Education gave us the permission to form a legal entity for the university, and by 2021 the entity will apply for an approval from the Ministry of Education to establish the university. The opening date is tentatively scheduled for 2022. The estimated cost of such project is Won 995 billion until 2025. Although the source of the funding has not yet been finalized, we are endeavoring to secure funds from both the central government and the municipality government. For example, for ten years after the commencement of the university, we anticipate receiving funding (to be used for expenses in operating the school) from the municipality government in the amount of Won 200 billion. We are also currently discussing with the government-wide University Establishment and Support Committee regarding a potential funding from the central government. On August 8, 2019, our Board of Directors resolved to make an initial contribution of Won 60 billion for the promotion, initial operation and the design of the university campus. After taking into account fundings from the municipality and central governments, we anticipate our contribution to the university until 2025 to be approximately Won 480 billion, subject to change depending on the amount of contribution from the central government. We cannot assure you that the magnitude of our expected contribution to the university will not have material adverse effects on our profit margins, results of operations or cash flows.

Proposed Sale of Certain Power Plants and Equity Interests

The following table summarizes our current plans for sale of certain of our assets. These sales will be made pursuant to the Government’s plans to reduce debt levels and improve management efficiency of public enterprises. The consummation of these plans, however, is subject to, among others, related Government policies and market conditions.

Equity Holdings

Primary Business

Fair Value ⁽¹⁾
as of December 31,
2019

Ownership
Percentage as of
December 31, 2019

Ownership
Percentage
to be Sold

(in billions of
Won)

KEPCO Engineering & Construction Co., Inc.

Architectural engineering for utility plants

504

65.77

14.77

Korea Electric Power Industrial Development Co., Ltd.

Electricity metering

29.00

Note:

(1)	Fair value has been computed as the product of the closing share price on December 31, 2019 multiplied by the number of shares owned by KEPCO.

KEPCO Engineering & Construction Co., Inc.

Pursuant to the Third Phase of the Public Institution Reform Plan announced by the Government in August 2008, we conducted the initial public offering of Korea Engineering and Construction Co., Inc., or KEPCO E&C formerly known as Korea Power Engineering Co., Ltd., in December 2009 for gross proceeds to us of Won 165 billion, following which we owned 77.9% of KEPCO E&C’s shares. In furtherance of the Public Institution Reform Plan and to improve our financial profile, we sold our equity interests representing 3.1%, 4.0%, 4.5% and 0.54% of KEPCO E&C shares in November 2011, December 2013, December 2014 and December 2016, respectively, in each case to third party investors. We currently hold a 65.77% equity interest in KEPCO E&C.

Korea Electric Power Industrial Development Co., Ltd.

In 2003, we privatized Korea Electric Power Industrial Development, or KEPID, formerly our wholly-owned subsidiary, by selling 51.0% of its equity interest to Korea Freedom Federation. Pursuant to the Fifth

Phase of the Public Institution Reform Plan announced by the Government in 2009, we sold 20% of the KEPID shares through additional listing. We currently plan to sell the remaining 29.0% of KEPID’s equity interest based on, among others, considerations of economic and market conditions.

Item 4.C. Organizational Structure

As of December 31, 2019, we had 119 subsidiaries, 66 associates and 64 joint ventures (not including any special purpose entities).

Subsidiaries

Our wholly-owned six generation subsidiaries are KHNP, KOSEP, KOMIPO, KOWEPO, KOSPO and EWP. Our non-generation subsidiaries include KEPCO E&C, KEPCO KPS, KEPCO NF, and KEPCO KDN. For a full list of our subsidiaries, including foreign subsidiaries, and their respective jurisdiction of incorporation, please see Exhibit 8.1 attached to this annual report.

Associates and Joint Ventures

An associate is an entity over which we have significant influence and that is neither a subsidiary nor a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but does not have control or joint control over those policies. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint ventures) have rights to the net assets of the arrangement.

The table below sets forth each of our associates and joint ventures as of December 31, 2019 by name, the percentage of our shareholdings and their principal activities.


	Ownership (Percent)		Principal Activities
Associates:
Korea Gas Corporation⁽¹⁾		20	Importing and wholesaling LNG
Korea Electric Power Industrial Development Co., Ltd.		29	Electricity metering and others
YTN Co., Ltd.		21	Broadcasting
Cheongna Energy Co., Ltd.		44	Generating and distributing vapor and hot/cold water
Gangwon Wind Power Co., Ltd.⁽²⁾		15	Power generation
Hyundai Green Power Co., Ltd.		29	Power generation
Korea Power Exchange⁽⁵⁾		100	Management of power market and others
Hyundai Energy Co., Ltd.⁽⁸⁾		31	Power generation
Ecollite Co., Ltd.		36	Artificial light-weight aggregate
Taebaek Wind Power Co., Ltd.		25	Power generation
Taeback Guinemi Wind Power Co., Ltd.		25	Power generation
Pyeongchang Wind Power Co., Ltd.		25	Power generation
Daeryun Power Co., Ltd.⁽³⁾		9	Power generation
Changjuk Wind Power Co., Ltd.		30	Power generation
KNH Solar Co., Ltd.		27	Power generation
SPC Power Corporation		38	Power generation
Gemeng International Energy Co., Ltd.		34	Power generation
PT. Cirebon Electric Power		28	Power generation
KNOC Nigerian East Oil Co., Ltd.⁽⁴⁾		15	Resources development
KNOC Nigerian West Oil Co., Ltd.⁽⁴⁾		15	Resources development
PT Wampu Electric Power		46	Power generation
PT. Bayan Resources TBK		20	Resources development


	Ownership (Percent)		Principal Activities
S-Power Co., Ltd.		49	Power generation
Pioneer Gas Power Limited⁽⁷⁾		39	Power generation
Eurasia Energy Holdings		40	Power generation and resources development
Xe-Pian Xe-Namnoy Power Co., Ltd.		25	Power generation
Hadong Mineral Fiber Co., Ltd.⁽³⁾		8	Recycling fly ashes
Green Biomass Co., Ltd.⁽¹⁰⁾		8	Power generation
PT. Mutiara Jawa		29	Manufacturing and operating floating coal terminal
Samcheok Eco Materials Co., Ltd.⁽⁹⁾		2	Recycling fly ashes
Noeul Green Energy Co., Ltd.		29	Power generation
Naepo Green Energy Co., Ltd.		42	Power generation
Goseong Green Energy Co., Ltd.⁽²⁾		1	Power generation
Gangneung Eco Power Co., Ltd.⁽²⁾		2	Power generation
Shin Pyeongtaek Power Co., Ltd.		40	Power generation
Heang Bok Do Si Photovoltaic Power Co., Ltd.		28	Power generation
Dongducheon Dream Power Co., Ltd.⁽¹⁴⁾		34	Power generation
Jinbhuvish Power Generation Pvt. Ltd.⁽²⁾		5	Power generation
Daejung Offshore Wind Power Co., Ltd.		50	Power generation
GS Donghae Electric Power Co., Ltd.		34	Power generation
Daegu Photovoltaic Co., Ltd.		29	Power generation
Busan Green Energy Co., Ltd.		29	Power generation
Gunsan Bio Energy Co., Ltd.⁽²⁾		19	Power generation
Korea Electric Vehicle Charging Service		28	Electric vehicle charge service
Korea Nuclear Partners Co., Ltd.		29	Electric material agency
Korea Electric Power Corporation Fund⁽¹¹⁾		98	Developing electric enterprises
Energy Infra Asset Management Co., Ltd.⁽³⁾		10	Asset management
Daegu clean Energy Co., Ltd.		28	Renewable power generation
YaksuESS Co., Ltd		29	Installing ESS related equipment
Nepal Water & Energy Development Company Private Limited⁽¹³⁾		58	Construction and operation of utility plant
Gwangyang Green Energy Co., Ltd.		20	Power generation
PND solar., Ltd		29	Power generation
Hyundai Eco Energy Co., Ltd.⁽²⁾		19	Power generation
YeongGwang Yaksu Wind Electric. Co., Ltd⁽²⁾		10	Power generation
Green Energy Electricity Generation Co., Ltd.		29	Power generation
Korea Energy Solutions Co., Ltd.		20	R & D
ITR Co., Ltd.		20	R & D
Structure test network Co., Ltd.		20	Technical testing and consulting
Namjeongsusang Solar Power Operation Co., Ltd.⁽¹⁸⁾		15	Power generation
Indeck Niles Development, LLC⁽²³⁾		50	Power generation
Indeck Niles Asset Management, LLC		33	Power generation
Hanwha Corporation-linked Sunlight Power Special Private Equity Investment Trust No. 1		49	Holding company
Suwon New Power Co., Ltd.		40	Power generation
KPGE Inc.		29	Power generation materials business
Gwangbaek Solar Power Investment Co., Ltd.⁽²¹⁾		19	Power generation
Goduk Clean Energy Co., Ltd.⁽²⁰⁾		61	Fuel cell generation


	Ownership (Percent)		Principal Activities

Joint Ventures:
KEPCO-Uhde Inc.⁽⁶⁾		53	Power generation
Shuweihat Asia Power Investment B.V.		49	Holding company
Shuweihat Asia Operation & Maintenance Company⁽⁶⁾		55	Maintenance of utility plant
Waterbury Lake Uranium L.P.		33	Resources development
ASM-BG Investicii AD		50	Power generation
RES Technology AD		50	Power generation
KV Holdings, Inc.		40	Power generation
KEPCO SPC Power Corporation⁽⁶⁾		75	Construction and operation of utility plant
Gansu Datang Yumen Wind Power Co., Ltd.		40	Power generation
Datang Chifeng Renewable Power Co., Ltd.		40	Power generation
Datang KEPCO Chaoyang Renewable Power Co., Ltd.		40	Power generation
Rabigh Electricity Company		40	Power generation
Rabigh Operation & Maintenance Company Limited		40	Maintenance of utility plant
Jamaica Public Service Company Limited		40	Power generation
KW Nuclear Components Co., Ltd.		45	Manufacturing
Busan Shinho Solar Power Co., Ltd.		25	Power generation
Global Trade Of Power System Co., Ltd.		29	Exporting products and technology of small or medium business by proxy
Expressway Solar-light Power Generation Co., Ltd.		29	Power generation
Amman Asia Electric Power Company⁽⁶⁾		60	Power generation
KAPES, Inc.⁽⁶⁾		51	R&D
Honam Wind Power Co., Ltd.		29	Power generation
Jeongam Wind Power Co., Ltd.		40	Power generation
Korea Power Engineering Service Co., Ltd.		29	Construction and service
Chun-cheon Energy Co., Ltd.		30	Power generation
Yeonggwangbaeksu Wind Power Co., Ltd.⁽³⁾		15	Power generation
Nghi Son 2 Power LLC		50	Power generation
Kelar S.A⁽⁶⁾		65	Power generation
PT. Tanjung Power Indonesia		35	Power generation
Incheon New Power Co., Ltd.		29	Power generation
Seokmun Energy Co., Ltd.		29	Power generation
Daehan Wind Power PSC		50	Power generation
Barakah One Company⁽¹²⁾		18	Power generation
Nawah Energy Company⁽¹²⁾		18	Operation of utility plant
MOMENTUM		33	International thermonuclear experimental reactor construction management
Daegu Green Power Co., Ltd		29	Power generation
Yeonggwang Wind Power Co., Ltd.		46	Power generation
Chester Solar IV SpA		45	Power generation
Chester Solar V SpA		45	Power generation
Diego de Almagro Solar SpA		45	Power generation
South Jamaica Power Company Limited		20	Power generation
Daesan Green Energy Co., Ltd.		35	Power generation
RE Holiday Holdings LLC		50	Power generation
RE Pioneer Holdings LLC		50	Power generation


	Ownership (Percent)		Principal Activities
RE Barren Ridge 1 Holdings LLC		50	Power generation
RE Astoria 2 LandCo LLC		50	Power generation
RE Barren Ridge LandCo LLC		50	Power generation
Laurel SpA		45	Power generation
KIAMCO KOWEPO Bannerton Hold Co Pty Ltd⁽³⁾		12	Power generation
Chile Solar JV SpA		50	Power generation
Taebaek Gadeoksan Wind Power Co., Ltd.		38	Power generation
Cheong-Song Noraesan Wind Power Co., Ltd.		29	Power generation
Chester Solar I SpA		45	Power generation
Solar Philippines Calatagan Corporation		38	Power generation
Saemangeum Solar Power Co., Ltd.⁽²²⁾		81	Power generation
Chungsongmeon BongSan wind power Co., Ltd.		29	Power generation
Jaeun Resident Wind Power Plant Co., Ltd.		29	Power generation
DE Energia SpA		49	Power generation
Dangjin Eco Power Co., Ltd. (newly)⁽¹⁵⁾		34	Power generation
Haemodum Solar Co., Ltd.		49	Power generation
Yangyang Wind Power Co., Ltd.⁽¹⁷⁾		100	Power generation
HORUS SOLAR, S.A. DE C.V.⁽¹⁹⁾		15	Renewable power generation
RECURSOS SOLARES PV DE MEXICO II, S.A. DE C.V.⁽¹⁹⁾		15	Renewable power generation
SUNMEX RENOVABLES, S.A. DE C.V.⁽¹⁹⁾		15	Renewable power generation
Stavro Holding II AB		20	Holding company

Notes:

(1)	The effective percentage of ownership (excluding the treasury stocks) is 21.57%.

(2)

Our effective percentage of ownership is less than 20%, but we can exercise significant influence by virtue of our contractual right to appoint directors to the board of directors of this entity and, through such directors, we can influence the financial and operating policy of the board of directors.

(3)	Our effective percentage of ownership is less than 20%, but we can exercise significant influence by virtue of our contractual right to appoint a director to the board of directors of this entity.

(4)

Our effective percentage of ownership is less than 20%, but we can exercise significant influence by virtue of our contractual right to appoint one out of four members of the steering committee of this entity. Moreover, we have significant financial transactions with this entity to the effect that we can exercise significant influence on this entity.

(5)

The Government regulates our ability to make operating and financial decisions over this entity, as the Government requires maintaining arms-length transactions between the Korea Power Exchange and our other subsidiaries. We can exercise significant influence by virtue of our right to nominate directors to the board of directors of this entity.

(6)	Our effective percentage of ownership is more than 50%. However, according to the shareholders’ agreement, all critical financial and operating decisions must be agreed to by all shareholders. For this reason, these entities are classified as joint ventures.

(7)	The reporting period of all associates and joint ventures ends on December 31, except for Pioneer Gas Power Limited, whose reporting period ends on March 31.

(8)

As of December 31, 2018, 15.64% of ownership of Hyundai Energy Co., Ltd. is held by NH Power II Co., Ltd. and NH Bank. According to the shareholders’ agreement reached on March 2011, we have a call option to acquire the investment in Hyundai Energy Co., Ltd. from NH Power II Co., Ltd. and NH Bank upon a certain rate of return, and NH Power II Co., Ltd. and NH Bank also have put options to dispose of their investment to us. In connection with this agreement, we applied the equity method on our 46.30% equity investment in Hyundai Energy Co., Ltd.

(9)	Our effective percentage of ownership (excluding the redeemable convertible preferred stock) is 25.54%.

(10)	Our effective percentage of ownership is less than 20%, but we can exercise significant influence by virtue of our contractual right to appoint a director to the board of directors of this entity and the fact that a dominant portion of the investee’s sales transactions is generated from us.

(11)	Our effective percentage of ownership is more than 50% but we do not hold control over relevant business while we exercise significant influence by participating in the Investment Decision Committee. For this reason, this entity is classified as an associate.

(12)	Our effective percentage of ownership is less than 20%, but we have joint control over this entity as decisions on the major activities require the unanimous consent of the parties that collectively control this entity.

(13)	Our effective percentage of ownership is more than 50%, but we do not control this entity according to the shareholders’ agreement. For this reason, this entity is classified as an associate.

(14)	Our effective percentage of ownership is 34.01% considering redeemable convertible preferred stock.

(15)	Eumseong Natural Gas Power Co., Ltd. and Dangjin Eco Solar Power Co., Ltd. were established by spin-off from Dangjin Eco Power Co., Ltd. After the spin-off, Eumseong Natural Gas Power Co., Ltd. was merged and absorbed by us during December 2019.

(16)	Daejung Offshore Wind Power Co., Ltd. and GS Donghae Electric Power Co., Ltd. are reclassfied from joint ventures to associates, and Jeongam Wind Power Co., Ltd. and Korea Power Engineering Service Co., Ltd. are reclassified from associates to joint ventures during the year ended December 31, 2019.

(17)	The temporary percentage of ownership is more than 50% due to differences in the timing of the payment. We are expected to exert significant influence after payment is completed in the first quarter of 2020.

(18)

The effective percentage of ownership is less than 20%. However, we consider the major decision-making body to be the general decision of the board of directors, and the general decision of the board of directors can be passed only by two directors. For this reason, the entities are classified as an associate.

(19)	The effective percentage of ownership is less than 20%. However, according to the shareholders’ agreement, decisions on the major activities must be agreed to by all ownership parties. For this reason, the entities are classified as joint ventures

(20)

The effective percentage of ownership is 61%. However, it seems we don’t have power on the Goduk Clean Energy Co., Ltd. due to its proportion to make decisions, which is less than 50%. We can exercise significant influence on the entity by participating in the board of directors and others. Therefore the entity is classified as an associate.

(21)	The effective percentage of ownership is less than 20%. However, we can exercise significant influence by virtue of its contractual right to appoint a director to the board of directors of the entity.

(22)	The effective percentage of ownership is more than 50%. However, according to the shareholders’ agreement, all operation related decisions must be agreed by all ownership parties. For this reason, the entity is classified as a joint venture.

(23)	Although the investment amount is not paid as of December 31, 2019, we have an investment agreement on 50% of the interests. We can exercise significant influence by virtue of its contractual right to appoint a director to the board of directors of the entity.

Item 4.D. Property, Plant and Equipment

Our property consists mainly of power generation, transmission and distribution equipment and facilities in Korea. See Item 4.B. “Business Overview—Power Generation,” “—Transmission and Distribution” and “—Capital Investment Program.” In addition, we own our corporate headquarters building complex at 55 Jeollyeok-ro, Naju-si, Jeollanam-do, 58322, Korea. As of December 31, 2019, the net book value of our property, plant and equipment was Won 164,702 billion. As of December 31, 2019, investment property, which is accounted for separately from our property, plant and equipment, amounted to Won 159 billion. No significant amount of our properties is leased. There are no material encumbrances on our properties, including power generation, transmission and distribution equipment and facilities.

Pursuant to a Government plan announced in 2005, which mandated relocation of the headquarters of select government-invested enterprises from the Seoul metropolitan area to other provinces in Korea as part of an initiative to foster balanced economic growth in the provinces, we, our generation subsidiaries and our certain subsidiaries relocated our respective headquarters to the designated locations during 2014 and 2015. Our headquarters are currently located in Naju in Jeollanam-do Province while the headquarters of our six generation subsidiaries and other subsidiaries are various cities outside of Seoul across Korea.

In connection with the relocation of our headquarters, in September 2014 we entered into an agreement to sell the property housing our prior headquarters to a consortium consisting of members of the Hyundai Motor group for Won 10,550 billion through an open bidding. The sale was completed in September 2015.

During 2019, we completed the sales of 270 properties (including residential properties, storage spaces, and substation lots that are located in Korea) which are not directly related to our operations for an aggregate sale price of approximately Won 55 billion. The book value of such properties amounted to Won 32 billion, representing 0.3% of our total real properties as of December 31, 2019. The foregoing sales reflect our ongoing efforts to improve our financial soundness through debt reduction and enhance our management efficiency, selling noncore properties that have no direct relations to electricity facilities.

ITEM 4A.

UNRESOLVED STAFF COMMENTS

We do not have any unresolved comments from the SEC staff regarding our periodic reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion on our operating and financial review and prospects together with our consolidated financial statements and the related notes which appear elsewhere in this annual report. Our results of operations, financial condition and cash flows may materially change from time to time, for reasons including various policy initiatives (including changes to the Restructuring Plan) by the Government in relation to the Korean electric power industry, and accordingly our historical performance may not be indicative of our future performance. See Item 4.B. “Business Overview—Restructuring of the Electric Power Industry in Korea” and Item 3D. “Risk Factors—The Government may adopt policy measures to substantially restructure the Korean electric power industry or our operational structure, which may have a material adverse effect on our business, operations and profitability.”

Item 5.A. Operating Results

Overview

We are a predominant market participant in the Korean electric power industry, and our business is heavily regulated by the Government, including with respect to the rates we charge to customers for the electricity we sell. In addition, our business requires a high level of capital expenditures for the construction of electricity generation, transmission and distribution facilities and is subject to a number of variable factors, including demand for electricity in Korea and fluctuations in fuel costs, which are in turn impacted by the movements in the exchange rates between the Won and other currencies.

Under the Electric Utility Act and the Price Stabilization Act, the Government generally establishes electricity rates at levels that are expected to permit us to recover our operating costs attributable to our basic electricity generation, transmission and distribution operations in addition to receiving a fair investment return on capital used in those operations. For a detailed description of the fair investment return, see Item 4.B. “Business Overview—Sales and Customers—Electricity Rates.”

If fuel prices were to rise substantially and rapidly in the future, such rise may have a material adverse effect on our results of operations and profitability. For example, the net losses between 2018 and first half of 2019, were largely due to sustained rises in fuel costs that were neither timely nor sufficiently offset by a corresponding rise in electricity tariff rates. In part to address these concerns, the Government from time to time increases the electricity tariff rates. However, such increases may be insufficient to fully offset the adverse impact from the rise in fuel costs, and since such increases typically require lengthy public deliberations in order to be implemented, the tariff increases often occur with a significant time lag and as a result our results of operations and cash flows may suffer. On the other hand, if fuel prices decrease, substantial political pressure may lead the Government to lower the level of electricity tariff in a relatively shorter period of time due to the lack of public opposition, which could negatively affect our profit margins and in turn our financial condition and results of operations.

In addition, we expect complying with the Government environmental-related initiatives and regulations to continue to involve significant costs and resources on our part, which may adversely affect our results of operation, financial condition and cash flows. For example, we have spent approximately Won 710 billion for the greenhouse gas emission allowances in 2019, compared to Won 53 billion in 2018, and we anticipate that such cost will continue to increase in 2020 and thereafter. Further, as we are required to supply increasing amount of renewable energy, we expect that the environmental-related risks will continue to increase.

The results of our operations are largely affected by the following factors:

•

demand for electricity;

•

electricity rates we charge to our customers;

•

fuel costs;

•

costs of complying with the environmental-related policies and regulations; and

•

the exchange rates of Won against other foreign currencies, in particular the U.S. dollar.

Demand for Electricity

Our sales are largely dependent on the level of demand for electricity in Korea and the rates we charge for the electricity we sell.


	2015			2016			2017			2018			2019
Growth in GDP		2.8	%		2.9	%		3.1	%		2.7	%		2.0	%
Growth in electricity consumption		1.3	%		2.8	%		2.2	%		3.6	%		(1.1	%)

Demand for electricity may be categorized either by the type of its usage or by the type of customers. The following describes the demand for electricity by the type of its usage, namely, industrial, commercial and residential:

•

Demand for electricity from the commercial sector depends largely on the level and scope of commercial activities in Korea. Demand for electricity from the commercial sector decreased to 116,227 gigawatt hours in 2019, representing a 0.6% decrease from 2018 largely due to the decrease in the commercial electricity usage for air conditioning and heating as a result of a more temperate weather.

•

Demand for electricity from the residential sector is largely dependent on population growth and use of heaters, air conditioners and other electronic appliances. Demand for electricity from the residential sector increased to 72,639 gigawatt hours in 2019, representing a 0.4% decrease compared to 2018, largely due to a decrease in household electricity usage for air conditioning and heating as a result of a more temperate weather. For a discussion on demand by the type of customers, see Item 4.B. “Business Overview—Sales and Customers—Demand by the Type of Usage.” Since our inception, we have had the predominant market share in terms of electricity generated in Korea.

Since our inception, we have had the predominant market share in terms of electricity generated in Korea. As for electricity we purchase from the market for transmission and distribution to our end-users, our generation subsidiaries accounted for 77.8%, 74.0% and 73.2% in 2017, 2018 and 2019, respectively, while the remainder was accounted for by independent power producers. As for transmission and distribution of electricity, we have historically handled, expect to continue to handle, substantially all of such activities in Korea.

We expect that we will continue to have a dominant market share in the generation, transmission and distribution of electricity in Korea for the foreseeable future, absent any substantial changes to the Restructuring Plan or other policy initiatives by the Government in relation to the Korean electric power industry, or an unexpected level of market penetration by independent power producers or localized electricity suppliers under the Community Energy System. However, our market dominance in the electricity distribution in Korea may face potential erosion in light of the recent Proposal for Adjustment of Functions of Public Institutions (Energy Sector) announced by the Government in June 2016. This proposal contemplates a gradual opening of the electricity trading market to the private sector although no detailed roadmap has been provided for such opening. It is currently premature to predict to what extent, or in what direction, the liberalization of the electricity trading market will happen. Nonetheless, any significant liberalization of the electricity trading market may result in substantial reduction of our market share in electricity distribution in Korea, which would have a material adverse effect on our business, results of operation and cash flows. See Item 4.B. “Business Overview—Competition.”

Electricity Rates

Under the Electric Utility Act and the Price Stabilization Act, electricity rates are established at levels that will permit us to recover our operating costs attributable to our basic electricity generation, transmission and distribution operations in addition to receiving a fair investment return on capital used in those operations. For further discussion of fair investment return, see Item 4.B. “Business Overview—Sales and Customers—Electricity Rates.”

From time to time, our actual rate of return on invested capital may differ significantly from the fair rate of return on invested capital assumed for the purposes of electricity tariff approvals, for reasons, among others, related to movements in fuel prices, exchange rates and demand for electricity that differs from what is assumed for determining our fair rate of return. For example, between 1987 and 1990, the actual rate of return was above the fair rate of return due to declining fuel costs and rising demand for electricity at a rate not anticipated for purposes of determining our fair rate of return. Similarly, depreciation of the Won against the U.S. dollar accounted for our actual rates of return being lower than the fair rate of return for the period from 1996 to 2000. For the period between 2006 and 2013, our actual rates of return were lower than the fair rate of return largely due to a general increase in fuel costs and additional facility investment costs incurred, the effects of which were not offset by timely increases in our tariff rates. Between 2014 and 2016, however, largely due to the decrease in

fuel costs reflective of the drop in oil prices, our actual rate of return has surpassed the fair rate of return; however, substantially all of the resulting excess has been used to fund capital expenditure and repair and maintenance, as well as to offer tariff discounts to economically or otherwise disadvantaged customers, and investments in renewable energy and other environmental programs.

In the past, the Government effected tariff increases that typically covered all sectors, namely, residential, commercial and industrial. No cross-sector tariff increase has been implemented since November 2013, largely due to the downward trend in fuel costs. However, effective January 1, 2017, the Government made several adjustments to the existing rate structure in order to ease the burden of electricity tariff on residential consumers. First, the progressive rate structure applicable to the residential sector, which applies a gradient of increasing tariff rates for heavier electricity usage, was changed from a six-tiered structure with the highest rate being no more than 11.7 times the lowest rate (which gradient system has been in place since 2005) into a three-tiered structure with the highest rate being no more than three times the lowest rate in order to reflect the changes in the pattern of electricity consumption and reduce the electricity charges payable by consumers. Second, a new tariff structure was implemented to encourage energy saving by offering rate discounts to residential consumers that voluntarily reduce electricity consumption while charging special high rates to residential consumers with heavy electricity consumption during peak usage periods in the summer and the winter. Additionally, during July and August 2018, the Government reduced residential electricity charges by temporarily relaxing the application of the current tariff structure and offering higher rate discounts to economically or otherwise disadvantaged customers to ease the burden on households that have significantly increased their use of air conditioners during a heatwave. Subsequently, a joint task force team, consisting of industry experts, scholars and government officials, was formed, which announced three proposals for amending the current tariff structure aimed to lower electricity rates for households during the summer. As a result, in July 2019, the residential electricity tariff rate system was amended to expand the usage ceiling for the first two tiers of rates (from 200 kilowatts to 300 kilowatts for the first tier and from 400 kilowatts to 450 kilowatts for the second tier) applied during July and August each year. Further, in December 2019, the rate discounts offered to residential consumers who voluntarily reduced electricity consumption and those offered to traditional wet markets were abolished, with a temporary relief granted to the traditional wet markets committed to energy efficiency. The rate discount for electric vehicles will be gradually terminated in phases by June 2022. The effects of such adjustments on us are uncertain, and there can be no assurance that it will not have an adverse impact on our business, results of operations, financial condition and profitability. We plan to prepare a proposition for a sustainable tariff system designed to mitigate the financial burden on us. Though the timeline is subject to change, we are tentatively aiming to prepare the proposition by the first half of 2020, which will include (1) a reasonable adjustment of the rate discount applicable to the residential customers with low electricity usage and (2) an introduction of the tariff system to the residential sector where the rates change depending on the demand in a given season or time (namely, the “time-of-use tariff”). Despite the efforts, however, the downward tariff rate adjustments may change our revenues from the sale of electricity and accordingly have a material adverse effect on our results of operation and cash flows..

Fuel Costs

Our results of operations are also significantly affected by the cost of producing electricity, which is subject to a variety of factors, including, in particular, the cost of fuel.

Cost of fuel in any given year is a function of the volume of fuels consumed and the unit fuel cost for the various types of fuel used for generation of electricity which affects the cost structure for both our generation

subsidiaries and independent power producers from whom we purchase electric power. A significant change in the unit fuel costs materially impacts the costs of electricity generated by our generation subsidiaries, which mainly comprise our fuel costs under the cost of sales, as well as, to our knowledge, the costs of electricity generated by the independent power producers that sell their electricity to us (see Item 4.A. “Purchase of Electricity—Cost-based Pool System”), which mainly comprise our purchased power costs under the cost of sales. We are however unable to provide a comparative analysis since the unit fuel cost information for independent power producers and their cost structures are proprietary information.

Fuel costs constituted 31.7%, 34.5% and 31.6% of our cost of sales, and the ratio of fuel costs to our sales was 27.8%, 33.5% and 31.2% in 2017, 2018 and 2019, respectively. Substantially all of the fuel (except for anthracite coal) used by our generation subsidiaries is imported from outside of Korea at prices determined in part by prevailing market prices in currencies other than Won. In addition, our generation subsidiaries purchase a significant portion of their fuel requirements under contracts with limited quantity and duration. Pursuant to the terms of our long-term supply contracts, prices are adjusted from time to time subject to prevailing market conditions. See Item 4.B. “Business Overview—Fuel.”

Uranium accounted for 34.8%, 31.9% and 35.7% of our fuel requirements in 2017, 2018 and 2019, respectively. Coal accounted for 53.3%, 53.2% and 51.8% of our fuel requirements in 2017, 2018 and 2019, respectively. LNG accounted for 8.7%, 11.2% and 9.5% of our fuel requirements in 2017, 2018 and 2019, respectively. Oil accounted for 1.2%, 1.4% and 0.5% of our fuel requirements in 2017, 2018 and 2019, respectively. In each case, the fuel requirements are measured by the amount of electricity generated by us and our generation subsidiaries and do not include electricity purchased from independent power producers. In order to ensure stable supplies of fuel materials, our generation subsidiaries enter into long-term and medium-term contracts with various suppliers and supplement such supplies with fuel materials purchased on spot markets.

The price of bituminous coal, which represents our largest fuel requirement, fluctuates significantly from time to time. In 2019, approximately 81% of the bituminous coal requirements of our generation subsidiaries were purchased under long-term contracts and the remaining 19% purchased on the spot market. The average weekly spot price of “free on board” Newcastle coal 6000 GAR published by Bloomberg (Bloomberg Ticker: COASNE60) decreased from US$107.53 per ton in 2018 to US$77.49 per ton in 2019 and to US$69.48 per ton as of March 30, 2020. If the price of bituminous coal were to sharply rise, our generation subsidiaries may not be able to secure their respective bituminous coal supplies at prices commercially acceptable to them. In addition, any significant interruption or delay in the supply of fuel, bituminous coal in particular, from any of their suppliers could cause our generation subsidiaries to purchase fuel on the spot market at prices higher than contracted, resulting in an increase in fuel cost.

From 2017 to 2019, the prices of oil and LNG fluctuated significantly. The prices of oil and LNG are substantially dependent on the price of crude oil, and according to Bloomberg (Bloomberg Ticker: PGCRDUBA), the average daily spot price of Dubai crude oil increased from US$53.1 per barrel in 2017 to US$69.3 per barrel in 2018, and decreased to US$63.22 per barrel in 2019 and to US$22.51 per barrel as of March 30, 2020. While there was a significant decrease in the price of crude oil recently, there is no guarantee that this trend will continue.

Nuclear power has a stable and relatively low-cost structure and forms a significant portion of electricity supplied in Korea. Due to significantly lower unit fuel costs compared to those for thermal power plants, our nuclear power plants are generally operated at full capacity with only routine shutdowns for fuel replacement and maintenance, with limited exceptions. In case of shortage in electricity generation resulting from stoppages of the nuclear power plants, we seek to make up for such shortage with power generated by our thermal power plants.

Because the Government heavily regulates the rates we charge for the electricity we sell (see Item 4.B. “Business Overview—Sales and Customers—Electricity Rates”), our ability to pass on such cost increases to our customers is limited. For example, from 2008 to 2012 we had consecutive net losses and, from time to time,

operating losses, largely due to sustained rises in fuel costs that were neither timely nor sufficiently offset by a corresponding rise in electricity tariff rates. If fuel prices substantially increase and the Government, out of concern for inflation or for other reasons, maintains the current level of electricity tariff and does not increase it to a level to sufficiently offset the impact of rising fuel prices, the price increases will negatively affect our profit margins or even cause us to suffer operating and/or net losses, and our business, financial condition, results of operations and cash flows would suffer.

Movements of the Won against the U.S. Dollar and Other Foreign Currencies

Korean Won has fluctuated significantly against major currencies from time to time. For fluctuations in exchange rates, see Item 3.A. “Selected Financial Data—Currency Translations and Exchange Rates.” In particular, Korean Won underwent substantial fluctuations during the recent global financial crisis, and remains subject to significant volatility. The Noon Buying Rate per one U.S. dollar increased from Won 1,067.4 on December 31, 2017 to 1,112.9 on December 31, 2018 and increased again to Won 1,155.5 on December 31, 2019 and to Won 1,217.8 as of April 17, 2020. In 2018 and 2019, the Won generally depreciated against U.S. dollar and other foreign currencies, and such depreciation may result in a significant increase in the cost of fuel materials and equipment purchased from overseas as well as the cost of servicing our foreign currency debt. As of December 31, 2019, 17.5% of our long-term debt (including the current portion but excluding issue discounts and premium) without taking into consideration of swap transactions was denominated in foreign currencies, principally U.S. dollars. The prices for substantially all of the fuel materials and a significant portion of the equipment we purchase are stated in currencies other than Won, generally in U.S. dollars. Since a substantial portion of our revenues is denominated in Won, we must generally obtain foreign currencies through foreign currency-denominated financings or from foreign currency exchange markets to make such purchases or service such debt, fulfill our obligations under existing overseas investments and make new overseas investments. As a result, any significant depreciation of Won against U.S. dollar or other foreign currencies will have a material adverse effect on our profitability and results of operations. See Item 3.D. “Risk Factors—Risks Relating to KEPCO—The movement of Won against the U.S. dollar and other currencies may have a material adverse effect on us.”

Recent Accounting Changes

New Amendments Adopted

New amendments to IFRS and other accounting standards are set forth below.

IFRS 16 ‘Leases’

IFRS 16 replaces existing leases guidance, including IAS 17 ‘Lease’, IFRIC 4 ‘Determining whether an Arrangement contains a Lease’, SIC-15 ‘Operating Leases – Incentives’ and SIC-27 ‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on-balance sheet model.

Lessor accounting under IFRS 16 is substantially unchanged from IAS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in IAS 17.

We have adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of January 1, 2019. Under this method, the standard is applied retrospectively with the

cumulative effect of initially applying the standard recognized at the date of initial application. We have elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option (‘short-term leases’), and lease contracts for which the underlying asset is of low value (‘leases of low-value assets’).

The impacts on our consolidated statements of financial position on the date of initial application (January 1, 2019) are as follows:


In millions of Won	Original carrying amount under IAS 17		Adjustment			New carrying amount under IFRS 16
Assets
Current assets
Cash and cash equivalents	￦	1,358,345		—			1,358,345
Current financial assets, net		2,359,895		—			2,359,895
Trade and other receivables, net		7,793,592		—			7,793,592
Inventories, net		7,188,253		—			7,188,253
Income tax refund receivables		143,214		—			143,214
Current non-financial assets		878,888		(3,021	)		875,867
Assets held-for-sale		22,881		—			22,881

Total current assets		19,745,068		(3,021	)		19,742,047

Non-current assets
Non-current financial assets, net		2,113,613		—			2,113,613
Non-current trade and other receivables, net		1,819,845		(10	)		1,819,835
Property, plant and equipment, net		152,743,194		4,947,947			157,691,141
Investment properties, net		159,559		—			159,559
Goodwill		2,582		—			2,582
Intangible assets other than goodwill, net		1,225,942		—			1,225,942
Investments in associates		4,064,820		—			4,064,820
Investments in joint ventures		1,813,525		—			1,813,525
Deferred tax assets		1,233,761		—			1,233,761
Non-current non-financial assets		327,152		(1,332	)		325,820

Total non-current assets		165,503,993		4,946,605			170,450,598

Total Assets	￦	185,249,061		4,943,584			190,192,645


In millions of Won	Original carrying amount under IAS 17		Adjustment		New carrying amount under IFRS 16
Liabilities
Current liabilities
Trade and other payables, net	￦	6,405,395		510,304		6,915,699
Current financial liabilities, net		7,981,879		—		7,981,879
Income tax payables		285,420		—		285,420
Current non-financial liabilities		5,574,041		—		5,574,041
Current provisions		1,594,798		—		1,594,798

Total current liabilities		21,841,533		510,304		22,351,837

Non-current liabilities
Non-current trade and other payables, net		2,941,696		4,433,280		7,374,976
Non-current financial liabilities, net		53,364,911		—		53,364,911
Non-current non-financial liabilities		8,160,033		—		8,160,033
Employee benefits liabilities, net		1,645,069		—		1,645,069
Deferred tax liabilities		9,617,309		—		9,617,309
Non-current provisions		16,585,748		—		16,585,748

Total non-current liabilities		92,314,766		4,433,280		96,748,046

*Total Liabilities()**	￦	114,156,299		4,943,584		119,099,883


Equity
Contributed capital	￦	4,053,578		—		4,053,578
Retained earnings		51,519,119		—		51,519,119
Other components of equity		14,171,228		—		14,171,228

Equity attributable to owners of the controlling company		69,743,925		—		69,743,925
Non-controlling interests		1,348,837		—		1,348,837

Total Equity	￦	71,092,762		—		71,092,762

Total Liabilities and Equity	￦	185,249,061		4,943,584		190,192,645

(*)

The adjustment from the total liabilities amounting to Won 4,943,584 is a present value of operating lease payment as of December 31, 2018, discounted by weighted average interest rate of lessee’s incremental borrowing rate as of January 1, 2019, and deducted by the present value of short-term leases and low-value asset leases payments.

We have lease contracts for various items such as consecutive voyage charter contracts, power purchase agreements (PPA), real estate lease contracts including buildings, switchyard, and land for electric substation, vehicles, and other equipment.

Before adoption of IFRS 16, we, as a lessee, classified a lease contract as a finance lease if it transferred substantially all of the risks and rewards incidental to ownership of the leased asset to us; otherwise as an operating lease. Upon adoption of IFRS 16, we applied a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The standard provides specific transition requirements and practical expedients, which has been applied by us.

The significant accounting policies applied by us in preparation of its consolidated financial statements are described in Note 3.(8) to our consolidated financial statements included in this annual report.

Critical Accounting Policies

The following discussion and analysis are based on our consolidated financial statements included in this annual report. The fundamental objective of financial reporting is to provide useful information that allows a reader to comprehend our business activities. To aid in that understanding, our management has identified “critical accounting policies.”

We make a number of estimates and judgments in preparing our consolidated financial statements. These estimates may differ from actual results and have a significant impact on our recorded assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We consider an estimate to be a critical accounting estimate if it requires a high level of subjectivity or judgment, and a significant change in the estimate would have a material impact on our financial condition or results of operations. Further discussion of these critical accounting estimates and policies is included in the notes to our consolidated financial statements included in this annual report.

The accounting policies set out below have been applied consistently by us and our subsidiaries to all periods presented in the consolidated annual financial statements, unless otherwise indicated.

Sale and Purchase of Electricity

We sell electricity to customers and accounts for the generation, transmission and distribution of electricity together as a single performance obligation. We recognize sale of electricity at a point in time when electricity has been distributed to the customer. Our transaction price includes variable considerations due to the progressive electricity billing system, discounts on electricity bills for government policy purposes and penalties as well as a result of customer usage patterns, customer mix, meter reading schedules, weather and other factors. Variable consideration is estimated by using the expected value method, which predicts the amount of consideration to which we will be entitled. We recognize variable consideration only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved, which is when the customer is billed.

Construction Contracts

We provide services for power plant construction and engineering, procurement and construction (“EPC”), where each contract has a single performance obligation and is recognized over time on the estimated progress to completion of the construction using the cost-based input method. We believe using the cost-based input method represents a faithful depiction of the transfer of services to the customer. Costs incurred towards contract completion include costs associated with direct materials, labor, and other indirect costs related to contract performance. Judgment is required in estimating the costs expected to incur in completing the construction projects, which in turn involves estimating future materials, labor, contingencies and other related costs. Revenue is estimated based on the contractual amount; however, it can also be affected by uncertainties resulting from unexpected future events.

We recognize revenue in advance of billing the customer, which results in the recording of a contract asset. Once we meet the billing criteria and our rights to consideration become unconditional, the contract asset is then transferred to trade receivable. Billing requirements are generally structured around the completion of certain construction milestones. On some instances, contract liability is recognized when we receive consideration before being able to recognize revenue. Once revenue recognition conditions are met, the contract liability is subsequently released to revenue.

Derivative Instruments

We recognize rights and obligations arising from derivative instruments as assets and liabilities, which are stated at fair value. The gains and losses that result from the change in the fair value of derivative instruments are

reported in current earnings. However, for derivative instruments designated as hedging the exposure of variable cash flows, the effective portions of the gains or losses on the hedging instruments are recorded as accumulated other comprehensive income (loss) and credited or charged to operations at the time the hedged transactions affect earnings, and the ineffective portions of the gains or losses are credited or charged immediately to operations.

Significant management judgment is involved in determining the fair value of estimated derivative instruments. The estimates and assumptions used by our management to determine fair value can be impacted by many factors, such as the estimated discount factor derived from observable market data, credit risk of the counterparty and the estimated cash flow based on settlement period, interest convention, and other contract information of the derivative instruments.

As of December 31, 2017, we had Won 395 billion of net amounts as liabilities. As of December 31, 2018, we had Won 210 billion of net amounts as liabilities. As of December 31, 2019, we had Won 141 billion of net amounts as assets. Changes in the estimated discount factor or cash flow, or changes in the assumptions and judgments by management underlying these estimates, may cause material revisions to the estimated total gain or loss effect of derivative instruments, which could have a material effect on the recorded asset or liability.

Our derivative financial instruments are entered into with major financial institutions, thereby minimizing the risk of credit loss from each counter party.

Decommissioning Costs

We recognize the fair value of estimated decommissioning costs as a liability in the period in which we incur a legal obligation associated with retirement of long-lived assets that result from acquisition, construction, development and/or normal use of the assets. We also recognize a corresponding asset that is depreciated over the life of the asset. Accretion expense consists of period-to-period changes in the liability for decommissioning costs resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows. Depreciation and accretion expenses are included in the cost of electric power in the accompanying consolidated statements of comprehensive income.

Significant management judgment is involved in determining the fair value of estimated decommissioning costs. The estimates and assumptions used by our management to determine fair value can be impacted by many factors, such as the estimated decommissioning costs based on engineering studies commissioned and approved by the Korean government, and changes in assumed dates of decommissioning, inflation rate, discount rate, decommissioning technology, regulation and the general economy.

As of December 31, 2017, 2018 and 2019, we had a liability for decommissioning costs in the amounts of Won 15,985 billion, Won 16,364 billion and Won 19,237 billion, respectively. Changes in the estimated costs or timing of decommissioning, or changes in the assumptions and judgments by management underlying these estimates, may cause material revisions to the estimated total cost to decommission these facilities, which could have a material effect on the recorded liability. We used discount rates of 2.94%, 2.94% and 2.43% and inflation rates of 1.21%, 1.21% and 1.10% when calculating the decommissioning cost liability of nuclear plants recorded as of December 31, 2017, 2018 and 2019, respectively. In addition, the following is a sensitivity analysis of the potential impact on decommissioning costs from a 0.1% increase or decrease in each of the inflation rate and the discount rate, assuming that all other aforementioned assumptions remain constant:

Sensitivity to inflation rate

Sensitivity to discount rate

+0.10%

-0.10%

+0.10%

-0.10%

(in billions of Won)

Increase (decrease) of liability for decommissioning costs

￦

400

￦

(389

)

￦

(368

)

￦

379

See Notes 26 and 45 of the notes to our consolidated financial statements included in this annual report for further related information.

Provision for Decontamination of Transformer

Under the Persistent Organic Pollutants Management Act which was enacted in 2007, we are required to remove PCB from our transformers’ insulating oil by 2025. We are also required to inspect the PCB levels in our transformers and dispose of any PCBs in excess of established safety standards.

As of December 31, 2017, 2018 and 2019, we had liabilities of Won 180 billion, Won 148 billion and Won 153 billion, respectively, for inspection and disposal costs related to the decontamination of existing transformers.

The estimates and assumptions used by our management to determine fair value can be affected by many factors, such as the estimated costs of inspection and disposal, inflation rate, discount rate, regulations and the general economy.

Changes in the estimated costs or changes in the assumptions and judgments underlying these estimates may cause material revisions to the estimated total costs, which could have a material effect on our recorded liability. When calculating the provision for the decontamination of our transformers, we used a discount rate of 2.55% and an inflation rate of 1.23% as of December 31, 2017, a discount rate of 2.18% and an inflation rate of 1.27 % as of December 31, 2018 and a discount rate of 1.97% and an inflation rate of 1.09% as of December 31, 2019.

Deferred Tax Assets

In assessing the realizability of the deferred tax assets, our management considers whether it is probable that a portion or all of the deferred tax assets will not be realized. The ultimate realization of our deferred tax assets is dependent on whether we are able to generate future taxable income in specific tax jurisdictions during the periods in which temporary differences become deductible. Our management has scheduled the expected future reversals of the temporary differences and projected future taxable income in making this assessment. Based on these factors, our management believes that it is probable that we will realize the benefits of these temporary differences as of December 31, 2019. However, the amount of deferred tax assets that is realized may be different if we do not realize estimated future taxable income during the carry forward periods as originally expected.

In relation to the deferred tax assets recognized for tax loss, future taxable income is estimated considering the following: (i) five-year mid-to long-term financial forecasts of earnings before tax approved by management and submitted to the Ministry of Economy and Finance, and (ii) average amount of tax adjustments for the recent three years.

For tax credits carried forward, similar to deferred tax assets recognized for tax loss, our management estimates the probability timing of future taxable profits in determining the probability of utilization of tax credits carried forward. In addition, our management considers the possible carry forward period and available tax credit or deductible temporary differences within the tax laws of each country in which the tax credits originated.

Similarly, our management also estimates the probability of utilization of temporary differences considering the probability of generating future taxable profits in the periods that the deductible temporary differences reverse. We do not recognize deferred tax assets for certain temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures considering future dividends or disposals.

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities at each separate taxpaying entity. Under IFRS, a

deferred tax asset is recognized for temporary differences that will result in deductible amounts in future years and for carry forwards. If, based on the weight of available evidence, it is more likely that some or the entire portion of the deferred tax asset will not be realized, that portion is deducted directly from the deferred tax asset.

We believe that the accounting estimate related to the realizability of deferred tax asset is a “critical accounting estimate” because: (i) it requires management to make assessments about the timing of future events, including the probability of expected future taxable income and available tax planning opportunities, and (ii) the difference between these assessments and the actual performance could have a material impact on the realization of tax benefits as reported in our results of operations. Management’s assumptions require significant judgment because actual performance has fluctuated in the past and may continue to do so.

Useful Lives of Property, Plant and Equipment

Property, plant and equipment are initially measured at cost and after initial recognition, are carried at cost less accumulated depreciation and accumulated impairment losses. The cost of property, plant and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Economic useful life is the duration of time the asset is expected to be productively employed by us, which may be less than its physical life. Management’s assumptions on the following factors, among others, affect the determination of estimated economic useful life: wear and tear, obsolescence, technical standards, changes in market demand and technological changes.

The estimated useful lives of our property, plant and equipment are as follows:


		Useful lives (years)
Buildings		8 ~ 40
Structures		8 ~ 50
Machinery		2 ~ 32
Vehicles		3 ~ 8
Loaded heavy water		30
Asset retirement costs		18, 30, 40, 60
Right-of-use assets		1 ~ 32
Ships		9
Others		4~15

A component that is significant compared to the total cost of property, plant and equipment is depreciated over its separate useful life. Depreciation methods, residual values and useful lives of property, plant and equipment are reviewed at the end of each reporting period and if change is deemed appropriate, it is treated as a change in accounting estimate.

Impairment of Long-lived Assets

At the end of each reporting period, we review the carrying amounts of tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, we estimate the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable

amount is the higher of fair value less costs to sell or value in use. In assessing value in use, the estimated future cash flows are discounted to their present values using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss. The recoverability of a cash-generating unit is assessed by comparing the carrying amount of the cash-generating unit with its value-in-use (“VIU”) amount measured using the discounted cash flow model.

In the event that an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, ensuring that such carrying amount increase does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or the cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

The assessment of impairment is a critical accounting estimate, because significant management judgment is required to determine: (i) whether an indicator of impairment has occurred, (ii) how assets should be grouped, and (iii) the recoverable amount (including the preparation of the VIU estimate) of the asset or asset group in the case of impairment. If management’s assumptions about these assets change as a result of events or circumstances, and management believes the assets may have declined in value, we may record impairment charges, resulting in lower profits. Our management uses its best estimate in making these evaluations and considers various factors, including the future sales volume, unit sales price, cost of power purchase and discount rate. However, actual market prices and operating costs could vary from those used in the impairment evaluations, and the impact of such variations could be material. For the year ended December 31, 2017, we performed impairment tests on individual assets of KOMIPO and KOWEPO, both of which are wholly owned subsidiaries, due to potential indicators of impairment. For the year ended December 31, 2018, we performed impairment tests on individual assets of KHNP and KOWEPO due to potential indication of impairment. For the year ended December 31, 2019, we performed impairment tests on land and others of KEPCO Bylong Australia Pty., Ltd. due to potential indication of impairment. Accordingly, we recognized the amount by which the carrying amount exceeds its recoverable amount as impairment loss on our consolidated statements of comprehensive income. See Note 18 of the notes to our consolidated financial statements included in this annual report for further information.

Accrual for Loss Contingencies for Legal Claims

We are involved in legal proceedings regarding matters arising in the ordinary course of business. In relation to these matters, as of December 31, 2019, we and our subsidiaries were engaged in 586 lawsuits as a defendant and 199 lawsuits as a plaintiff. The total amount claimed against us and our subsidiaries was Won 698 billion and the total amount claimed by us was Won 707 billion as of December 31, 2019. As of December 31, 2019, our provisions for these legal claims amounted to Won 88 billion. These provisions are adjusted when events or circumstances cause these judgments or estimates to change.

Actual amounts of our liabilities as determined upon settlement of legal claims or by final decisions of the courts in relation thereto may be substantially different from the amounts of provisions recognized or contingent liabilities disclosed. If the actual amounts are higher than the amounts of related provisions, the resulting additional liabilities would adversely impact our results of operations, financial condition and cash flows.

Consolidated Results of Operations

2019 Compared to 2018

In 2019, our consolidated sales, which is principally derived from the sale of electric power, decreased by 2.4% to Won 58,568 billion in 2019 from Won 60,033 billion in 2018, primarily reflecting a decrease in sales of electric power. Our sale of electric power decreased by 1.7% to Won 56,895 billion for 2019 from Won 57,898 billion for 2018, primarily due to a decrease in the volume of electricity sold and a decline in the average unit sales price. The volume of electricity sold decreased by 1.1% to 520,499 gigawatt hours in 2019 from 526,149 gigawatt hours in 2018, primarily due to a 1.3% decrease in the volume of electricity sold to the industrial sector, which represents the largest segment of electricity consumption in Korea, to 289,240 gigawatt hours in 2019 from 292,999 gigawatt hours in 2018; a 0.6% decrease in the volume of electricity sold to the commercial sector, which represents the second largest segment of electricity consumption in Korea, to 116,227 gigawatt hours in 2019 from 116,934 gigawatt hours in 2018; and a 0.4% decrease in the volume of electricity sold to the residential sector to 72,639 gigawatt hours in 2019 from 72,895 gigawatt hours in 2018. The decrease in the volume of electricity sold to the industrial sector was primarily due to the changes in the business environment resulting from the U.S.-China trade disputes and the Japanese export restrictions against Korea during 2019. The decrease in the volume of electricity sold to the commercial sector was primarily due to the decrease in the commercial electricity usage for air conditioning and heating as a result of a more temperate weather. The decrease in the volume of electricity sold to the residential sector was primarily due to a decrease in household electricity usage for air conditioning and heating as a result of a more temperate weather. Average unit sales price decreased by 0.08% to Won 108.66 per kilowatt-hour in 2019 from Won 108.75 per kilowatt-hour in 2018, primarily due to a decrease in the average tariff resulting from a rate discount applicable to households during the summer of 2019. Our sales of construction services decreased by 27.4% to Won 1,265 billion in 2019 from Won 1,742 billion in 2018, primarily due to a decrease in sales amount recorded from the ongoing construction of our nuclear complex construction projects in the United Arab Emirates as the construction projects progress over time. In addition to the above factors, our operating results were partly affected by sustained rises in fuel costs that were neither timely nor sufficiently offset by a corresponding rise in electricity tariff rates during the first half of 2019.

Our consolidated cost of sales, which is principally derived from the purchase of power from independent power producers and to a lesser extent, from raw materials used and depreciation, decreased by 0.7%, to Won 57,780 billion in 2019 from Won 58,208 billion in 2018, primarily due to a 0.2% decrease in power purchase and a 12.6% decrease in raw material used, which was partially offset by a 10.8% increase in depreciation and a 20.4% increase in other cost of sales, primarily due to an increase in the price of the greenhouse gas emission allowances and related costs.

Power purchase, which accounted for 31.6% and 31.5% of our cost of sales in 2019 and 2018, respectively, decreased by 0.2% to Won 18,270 billion in 2019 from Won 18,307 billion in 2018, primarily due to a 2.7% decrease in the LNG consumption tax, resulting in a decrease in the cost of purchasing LNG.

Raw materials used, which accounted for 29.6% and 33.6% of our cost of sales in 2019 and 2018, respectively, decreased by 12.6% to Won 17,084 billion in 2019 from Won 19,538 billion in 2018, largely due to an increased utilization rate of nuclear generation units, resulting in less raw materials used.

Depreciation expense, excluding amortization of nuclear fuel charged to fuel costs in the amounts of Won 1,050 billion and Won 923 billion in 2019 and 2018, respectively, increased by 10.5% to Won 9,684 billion in 2019 from Won 8,760 billion in 2018 primarily due to additional property, plant and equipment acquired in relation to the construction of new generation facilities pursuant to our capital investment program.

Other cost of sales increased by 20.4% to Won 2,613 billion in 2019 from Won 2,170 billion in 2018 primarily due to an increase in the price of the greenhouse gas emission allowances and related costs, as such allowances previously allocated free of charge diminish over time. For example, we have spent approximately

Won 710 billion for the greenhouse gas emission allowances in 2019, compared to Won 53 billion in 2018. For further information, please see Item 4.B. “Business Overview—Environmental Programs.”

As a cumulative result of the foregoing factors, our consolidated gross profit decreased by 56.8% to Won 788 billion in 2019 from Won 1,825 billion in 2018, and our consolidated gross profit margin decreased to 1.3% in 2019 from 3.0% in 2018. The decreases in our consolidated gross profit and consolidated gross profit margin were largely attributable to a 2.4% decrease in our consolidated sales (which was mainly due to 1.1% decrease in the volume of electricity sold and a 27.4% decrease in the sales of construction services), which were partially offset by a 0.7% decrease in cost of sales (which was primarily due to 0.2% decrease in power purchase, a 12.6% decrease in raw materials used and a 4.5% decrease in welfare and benefit expenses, which were in turn partially offset by the 10.8% increase in depreciation and a 20.4% increase in other cost of sales).

Our consolidated selling and administrative expenses increased by 1.6% to Won 2,670 billion in 2019 from Won 2,628 billion in 2018, largely due to an increase in the retirement benefit expenses and other labor-related costs.

Our consolidated other income, net of expenses, increased by 2.3% to Won 756 billion in 2019 from Won 739 billion in 2018, mainly as a result of an increase in reversal of provisions and compensation and reparations revenue.

Our consolidated net other losses decreased to Won 582 billion in 2019 from net other losses of Won 621 billion in 2018, primarily due to the fact that impairment losses of Won 703 billion related to Wolsong #1 and Shin-Hanul #3 and #4 were recognized in 2018, compared to Won 3,819 million in 2019, the effect of which was partially offset by the impairment loss of Won 514 billion related to the mining rights of KEPCO Australia Pty., Ltd. and KEPCO Bylong Australia Pty., Ltd. in 2019.

As a cumulative result of the foregoing factors, our consolidated operating profit (loss) decreased by 149.3% to an operating loss of Won 1,708 billion in 2019 from an operating loss of Won 685 billion in 2018, and our consolidated operating income margin decreased to (2.9)% in 2019 from (1.1)% in 2018. These decreases were mainly due to a decrease in sales resulting from a weakened domestic economy, a general decline in electricity sales due to a decreased demand for air conditioning and heating, an increase in depreciation expense and an increase in the cost of greenhouse gas emission allowances.

Our consolidated finance expenses, net, increased by 5.9% to Won 1,772 billion in 2019 from Won 1,674 billion in 2018, primarily as a result of an increase in the interest expenses due to increased borrowings and bond issuances.

Our consolidated profit of associates or joint ventures using equity method decreased by 40.2% to Won 214 billion in 2019 from Won 358 billion in 2018, primarily due to a decline in sales and revenue of certain of our associates and joint ventures abroad and losses from Korea Gas Corporation’s overseas equity investments.

As a cumulative result of the foregoing factors, our consolidated profit (loss) before income taxes decreased by 63.2% to a loss of Won 3,266 billion in 2019 from a loss of Won 2,001 billion in 2018.

Our income tax benefit increased significantly to Won 1,002 billion in 2019 from Won 826 billion in 2018, largely as a result of the decrease in our profit before income taxes. Our effective tax rate, which represents tax expense as a percentage of profit before income taxes, was not calculated for income tax benefit caused by net operating losses in 2019 and 2018 and was 60.1% in 2017. See Note 41 to our financial statements included in this annual report.

As a cumulative result of the above factors, our consolidated loss increased by 92.7% to a loss of Won 2,264 billion in 2019 from a loss of Won 1,175 billion in 2018. Our consolidated net profit margin also decreased to (3.9)% in 2019 from (2.0)% in 2018. Our loss attributable to the owners of the company was a loss of Won 2,346 billion in 2019 compared to a loss of Won 1,315 billion in 2018.

We reported consolidated other comprehensive income of Won 135 billion in 2019 compared to consolidated other comprehensive loss of Won 107 billion in 2018, largely due to an increase in the remeasurement of defined benefit liability, net of tax, and foreign currency translation gain of foreign operations, net of tax.

As a cumulative result of the above factors, our consolidated total comprehensive loss increased by 66.1% to a loss of Won 2,128 billion in 2019 from a loss of Won 1,282 billion in 2018.

2018 Compared to 2017

In 2018, our consolidated sales, which is principally derived from the sale of electric power, slightly increased by 1.2% to Won 60,033 billion in 2018 from 59,336 billion in 2017, primarily reflecting an increase in sales of electric power. Our sale of electric power increased by 3.8% to Won 57,898 billion for 2018 from Won 55,773 billion for 2017, primarily due to an increase in the volume of electricity sold, which was partially offset by a decline in the average unit sales price. The volume of electricity sold increased by 3.6% to 526,149 gigawatt hours in 2018 from 507,746 gigawatt hours in 2017, primarily due to a 2.5% increase in the volume of electricity sold to the industrial sector, which represents the largest segment of electricity consumption in Korea, to 292,999 gigawatt hours in 2018 from 285,969 gigawatt hours in 2017, a 5.1% increase in the volume of electricity sold to the commercial sector, which represents the second largest segment of electricity consumption in Korea, to 116,934 gigawatt hours in 2018 from 111,298 gigawatt hours in 2017, and a 6.3% increase in the volume of electricity sold to the residential sector to 72,895 gigawatt hours in 2018 from 68,544 gigawatt hours in 2017. The increase in the volume of electricity sold to the industrial sector was primarily due to the increased volume of semiconductor and other exports. The increase in the volume of electricity sold to the commercial sector was primarily due to extreme weather conditions that have led to increased demand for heating and air conditioning. The increase in the volume of electricity sold to the residential sector was primarily due to an increase in household electricity usage for air conditioning and heating as a result of extreme weather conditions. Average unit sales price decreased by 0.7% to Won 108.75 per kilowatt-hour in 2018 from Won 109.53 per kilowatt-hour in 2017, primarily due to a decrease in the average tariff resulting from a rate discount applicable to households during the summer of 2018. Our sales of construction services decreased by 45.8% to Won 1,742 billion in 2018 from Won 3,212 billion in 2017, primarily due to a decrease in sales amount recorded from the ongoing construction of our nuclear complex construction projects in the United Arab Emirates as the projects progress over time.

Our consolidated cost of sales, which is principally derived from the purchase of power from independent power producers and to a lesser extent, from raw materials used and depreciation, increased by 11.7%, to Won 58,208 billion in 2018 from Won 52,099 billion in 2017, primarily due to a 28.3% increase in power purchase, a 22.7% increase in raw material used and a 2.3% increase in depreciation, which were offset by a 45.5% decrease in other cost of sales.

Power purchase, which accounted for 31.5% and 27.4% of our cost of sales in 2018 and 2017, respectively, increased by 28.3% to Won 18,307 billion in 2018 from Won 14,264 billion in 2017, primarily due to a 9.0% increase in the unit cost of power purchased from Won 104.3 per kilowatt-hour in 2017 to Won 113.7 per kilowatt-hour in 2018, largely resulting from a general increase in international market prices for the main fuel types, which led to an increase in the price of electricity generated by independent power producers, from whom we are purchasing an increasing amount of electricity.

Raw materials used, which accounted for 33.6% and 30.6% of our cost of sales in 2018 and 2017, respectively, increased by 22.7% to Won 19,538 billion in 2018 from Won 15,925 billion in 2017, largely due to a general increase in international market prices.

Depreciation expense, excluding amortization of nuclear fuel charged to fuel costs in the amounts of Won 923 billion and Won 1,069 billion in 2018 and 2017, respectively, increased by 4.4% to Won 8,760 billion in

2018 from Won 8,393 billion in 2017 primarily due to additional property, plant and equipment acquired in relation to the construction of new generation facilities pursuant to our capital investment program.

Other cost of sales decreased by 45.5% to Won 2,170 billion in 2018 from Won 3,980 billion in 2017 primarily due to a decrease of other cost of overseas sales in relation to our nuclear complex construction projects in the United Arab Emirates.

As a cumulative result of the foregoing factors, our consolidated gross profit decreased by 74.8% to Won 1,825 billion in 2018 from Won 7,237 billion in 2017, and our consolidated gross profit margin decreased to 3.0% in 2018 from 12.2% in 2017. The decreases in our consolidated gross profit and consolidated gross profit margin were largely attributable to a 11.7% increase in our consolidated cost of sales (which was mainly due to a 28.3% increase in power purchase, a 22.7% increase in raw materials used and the 2.3% increase in depreciation, which were offset by a 45.5% decrease in other cost of sales and a 14.6% decrease in welfare and benefit expense), which substantially outpaced the 1.2% increase in our consolidated sales (which was primarily due to the 3.6% increase in the volume of electricity sold, which was offset by a 45.8% decrease in the sales of construction services).

Our consolidated selling and administrative expenses decreased by 4.9% to Won 2,628 billion in 2018 from Won 2,763 billion in 2017, largely due to a 68.6% decrease in bad debt expense to Won 40 billion in 2018 from Won 127 billion in 2017, which mainly related to an allowance in 2017 for KOSEP’s accounts receivables with low possibility of collection from Hyundai Energy Co., Ltd., which was not applicable in 2018, and a 73.0% decrease in advertising expenses to Won 31 billion in 2018 from Won 115 billion in 2017, which mainly related to our sponsorships for the PyeongChang 2018 Winter Olympics incurred in 2017, which was not applicable in 2018.

Our consolidated other income, net of expenses, increased by 7.3% to Won 739 billion in 2018 from Won 689 billion in 2017, mainly as a result of an increase in gains on assets contributed, gains on liabilities exempted and income related to transfer of assets from customers, which include items of property, equipment, or cash that we receive from customers in relation to supplying electricity.

Our consolidated net other losses increased significantly to Won 621 billion in 2018 from net other gains of Won 157 billion in 2017, primarily due to an increase in impairment loss on property, plant and equipment, largely resulting from the early retirement of Wolsong#1 unit and a recognition of impairment loss related to Shin-Hanul #3 and #4 units.

As a cumulative result of the foregoing factors, our consolidated operating profit decreased by 112.9% to an operating loss of Won 685 billion in 2018 from an operating profit of Won 5,320 billion in 2017, and our consolidated operating income margin decreased to (1.1)% in 2018 from 9.0% in 2017. These decreases were mainly due to an increase in our cost of sales primarily as a result of an increase in raw materials and power purchases due to increases in the fuel costs and the volume of electricity sold.

Our consolidated finance expenses, net, increased by 4.8% to Won 1,674 billion in 2018 from Won 1,597 billion in 2017, primarily as a result of a decrease in net gains on foreign currency translation and transaction, which was partially offset by an increase in net gains on valuation of derivatives.

We recorded consolidated profit of associates or joint ventures using equity method of Won 358 billion in 2018 compared to a loss of Won 108 billion in 2017, primarily as a result of an increase in profit of Korea Gas Corporation.

As a cumulative result of the foregoing factors, our consolidated income (loss) before income taxes decreased by 155.4% to a loss of Won 2,001 billion in 2018 from an income of Won 3,614 billion in 2017.

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Our income tax benefit increased significantly to Won 826 billion in 2018 from an income tax expense of Won 2,173 billion in 2017, largely as a result of the decrease in our profit before income taxes. Our effective tax expense rate, which represents tax expense as a percentage of profit before income taxes, was not calculated for income tax benefit in 2018 and was 60.1% in 2017. Our recognition of deferred tax liabilities was mainly due to temporary differences with respect to property, plant and equipment and investments in subsidiaries and associates. The applicable statutory tax rate was 27.5% in 2018 and 2017. See Note 41 to our financial statements included in this annual report.

As a cumulative result of the above factors, our consolidated profit (loss) decreased by 181.5% to a loss of Won 1,175 billion in 2018 from a profit of Won 1,441 billion in 2017. Our consolidated net profit margin also decreased to (2.0)% in 2018 from 2.4% in 2017. Our profit (loss) attributable to the owners of the company was a loss of Won 1,315 billion in 2018 compared to a profit of Won 1,299 billion attributable to the owners of the company in 2017.

We reported consolidated other comprehensive loss of Won 107 billion in 2018 compared to consolidated other comprehensive loss of Won 95 billion in 2017, largely due to our recognition of loss from remeasurements of defined benefit liability whereas we recognized income from such remeasurements in 2017.

As a cumulative result of the above factors, our consolidated total comprehensive income (loss) decreased by 195.2% to a loss of Won 1,282 billion in 2018 from an income of Won 1,346 billion in 2017.

Inflation

The effects of inflation in Korea on our financial condition and results of operations are reflected primarily in construction costs as well as in labor expenses. Inflation in Korea has not had a significant impact on our results of operations in recent years. It is possible that inflation in the future may have an adverse effect on our financial condition or results of operations.

Segment Results

We operate the following business segments: transmission and distribution, nuclear power generation and thermal power generation and all others. The transmission and distribution segment, which is operated by us, the parent company, consists of operations related to the transmission, distribution and sale to end-users of electricity purchased from our generation subsidiaries as well as from independent power producers. The power generation segment, which is operated by our one nuclear generation subsidiary and five non-nuclear generation subsidiaries, consists of operations related to the generation of electricity sold to us through the Korea Power Exchange. The transmission and distribution segment and the power generation segment together represent our electricity business. The remainder of our operation is categorized as “all others.” The all other segment consists primarily of operations related to the plant maintenance and engineering service, information services, and sales of nuclear fuel, communication line leasing, overseas businesses and others. In 2017, 2018 and 2019, the unaffiliated revenues of the power generation segment (representing the six generation subsidiaries) and all our other revenues in the aggregate amounted to only 3.2%, 2.9% and 2.7% of our consolidated revenues, respectively, and the results of operations for our business segments substantially mirror our consolidated results of operations. For further information, see Note 4 of the notes to our consolidated financial statements included in this annual report.

Item 5.B.

Liquidity and Capital Resources

We expect that our capital requirements, capital resources and liquidity position may change in the course of implementing the Restructuring Plan. See Item 4.B. “ —Business Overview—Restructuring of the Electric Power Industry in Korea” and Item 3D. “Risk Factors—Risks Relating to KEPCO— The Government may adopt policy measures to substantially restructure the Korean electric power industry or our operational structure, which may have a material adverse effect on our business, operations and profitability.”

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Capital Requirements

We anticipate that the following represent the major sources of our capital requirements in the short-term to intermediate future:

•

capital expenditures pursuant to our capital investment program;

•

working capital requirements, the largest component of which is fuel purchases;

•

payment of principal and interest on our existing debt; and

•

overseas investments.

In addition, if there were to occur unanticipated material changes to the Restructuring Plan, the Basic Plan or other major policy initiatives of the Government relating to the electric power industry, or natural disasters, such developments may require a significant amount of additional capital requirements.

Capital Expenditures

We anticipate that capital expenditures will be the most significant use of our funds for the next several years. Our capital expenditures relate primarily to the construction of new generation units, maintenance of existing generation units and expansion of our transmission and distribution systems. Our capital expenditures generally follow budgets established under the Basic Plan, which contains projections relating to the supply and demand of electricity of Korea based on which we plan the construction of additional generation units and transmission systems.

Our total capital expenditures for the construction of generation, transmission and distribution facilities were Won 13,711 billion, Won 13,695 billion and Won 15,795 billion in 2017, 2018 and 2019, respectively, and under our current budgets, are estimated to be approximately Won 16,211 billion, Won 17,529 billion and Won 17,002 billion, in 2020, 2021 and 2022, respectively. We plan to finance our capital expenditures primarily through issuance of securities in the capital markets, borrowings from financial institutions and construction grants.

Furthermore, as part of the Comprehensive Measures against Particulate Matter and the Eighth Basic Plan, announced by the Government in September 2017 and December 2017, respectively, the Government set forth the following policy directions relating to coal-fired generation units: (i) two coal-fired generation units scheduled for construction and four existing coal-fired generation units shall convert to LNG fuel use, (ii) in principle, construction of new coal-fired generation units shall not be planned, (iii) seven of the coal-fired generation units that are 30 years or older will be shut down on an accelerated schedule, (iv) beginning in 2018, coal-fired generation units that are 30 years or older shall temporarily cease operations from March through June of each year, (v) coal-fired generation units shall be put through comprehensive functional and environmental upgrades and (vi) coal-fired generation units shall be subject to emission standards that came into effect in January 2019 that are twice as more rigorous than the previous standards. Compliance with such measures is expected to result in our incurring significant costs.

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Fuel Purchases

We require significant funds to finance our operations, principally in relation to the purchase of fuels by our generation subsidiaries for generation of electricity. In 2017, 2018 and 2019, fuel costs constituted 31.7%, 34.5% and 31.6% of our cost of sales and the ratio of fuel costs to our sales was 27.8%, 33.5% and 31.2%, respectively. We plan to fund our fuel purchases primarily with net operating cash, although in cases of rapid increases in fuel prices as is the case from time to time, we may also rely on borrowings from financial institutions and issuance of debt securities in the capital markets.

Repayment of Existing Debt

Payments of principal and interest on indebtedness will require considerable resources. The table below sets forth the scheduled maturities of the outstanding interest-paying debt (excluding issue discounts and premium) without taking into consideration of swap transactions of us and our six wholly-owned generation subsidiaries as of December 31, 2019 for each year from 2020 to 2024 and thereafter. As of December 31, 2019, such debt represented 95.7% of our outstanding debt on a consolidated basis.


Year ended December 31	Local Currency Borrowings		Foreign Currency Borrowings		Domestic Debentures		Foreign Debentures		Total
	(in billions of Won)
2020		938		—		6,360		1,190		8,488
2021		204		9		7,391		1,390		8,994
2022		204		1		6,400		2,142		8,747
2023		553		—		5,790		1,621		7,964
2024		203		—		5,380		1,300		6,883
Thereafter		32		—		21,710		2,268		24,010
Total		2,134		10		53,031		9,911		65,086

We and our six wholly-owned generation subsidiaries incurred interest charges (including capitalized interest) in relation to our interest-paying debt of Won 2,287 billion, Won 2,362 billion and Won 2,536 billion in 2017, 2018 and 2019, respectively. We anticipate that interest charges will increase in future years because of, among other factors, anticipated increases in our long-term debt. See “—Capital Resources” below. The weighted average rates of interest on our and our six wholly-owned generation subsidiaries’ debt were 3.20%, 3.23% and 2.75% in 2017, 2018 and 2019, respectively.

Overseas Investments

As part of our revenue diversification and fuel procurement strategy, we plan to continue to make overseas investments on a selective basis, which will be funded primarily through foreign currency-denominated borrowings and debt securities issuances as well as net operating cash from such projects.

Capital Resources

We have traditionally met our working capital and other capital requirements primarily from net cash provided by operating activities, issuance of debt securities and borrowings from financial institutions. Net cash provided by operating activities is primarily a function of electricity sales and fuel purchases and is also affected by increases and decreases in trade receivables, trade payables and inventory related to electricity sales and fuel purchases. Net cash provided by operating activities was Won 11,250 billion, Won 6,680 billion and Won 8,213 billion in 2017, 2018 and 2019, respectively.

As of December 31, 2017, 2018 and 2019, our long-term debt (excluding the current portion but including issue discounts and premium), without taking into consideration of swap transactions, amounted to Won

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45,624 billion and Won 53,073 billion and Won 59,019 billion, respectively, representing 62.5%, 74.7% and 85.7% of shareholders’ equity, respectively, as of such dates. As of December 31, 2017, 2018 and 2019, the current portions of our long-term debt were Won 8,085 billion, Won 7,101 billion and Won 7,759 billion, respectively. As of December 31, 2017, 2018 and 2019, our short-term borrowings amounted to Won 1,038 billion, Won 861 billion and Won 1,099 billion, respectively. See Note 23 of the notes to our consolidated financial statements included in this annual report. Total long-term debt (including the current portion but excluding issue discounts and premium), without taking into consideration of swap transactions, as of December 31, 2019 was Won 66,890 billion, of which Won 55,196 billion was denominated in Won and an equivalent of Won 11,694 billion was denominated in foreign currencies, primarily U.S. dollars. We, KHNP, KOMIPO and KOWEPO also maintain global medium-term note programs in the aggregate amount of US$13 billion, of which approximately US$8 billion remains currently available for future drawdown. KOSEP also maintains an A$2 billion Australian dollar medium-term note program, of which approximately A$1.7 billion remains current available for future drawdown.

Subject to the implementation of our capital expenditure plan and the sale of our interests in our generation subsidiaries and other subsidiaries, our long-term debt may increase or decrease in future years. Until recently, a significant portion of our long-term debt was raised through foreign currency-denominated borrowings. Our foreign currency-denominated long-term debt (including the current portion but excluding issue discounts and premium), without taking into consideration of swap transactions, amounted to Won 10,671 billion and Won 11,694 billion as of December 31, 2018 and 2019, respectively.

Our ability to incur long-term debt in the future is subject to a variety of factors, many of which are beyond our control, including, the amount of capital that other Korean entities may seek to raise in capital markets. Economic, political and other conditions in Korea may also affect investor demand for our securities and those of other Korean entities. In addition, our ability to incur debt will also be affected by the Government’s policies relating to foreign currency borrowings, the liquidity of the Korean capital markets and our operating results and financial condition. In case of adverse developments in Korea, the price at which such financing may be available may not be acceptable to us.

We incur our short-term borrowings primarily through commercial papers sold to domestic financial institutions. We have not had, and we do not expect to have, any material difficulties in obtaining short-term borrowings. In addition, in order to prepare for potential liquidity shortage, we maintain several credit facilities with financial institutions, with Won-denominated facilities amounting to Won 4,406 billion in aggregate and foreign currency-denominated facilities amounting to US$2,493 million in aggregate. The full amount of these facilities was available as of December 31, 2019.

We may raise capital from time to time through the issuance of equity securities. However, there are certain restrictions on our ability to issue equity instrument, including limitations on shareholdings by foreigners. In addition, without changes in the existing KEPCO Act which requires that the Government, directly or pursuant to the Korea Development Bank Act, through Korea Development Bank, own at least 51% of our capital stock, it may be difficult or impossible for us to undertake any equity financing other than sales of treasury stock without the participation of the Government. Even if we are able to conduct equity financing with the participation of the Government, prevailing market conditions may be such that we may not be able conduct equity financing on terms that are commercially acceptable to us. See Item 3D. “Risk Factors—Risks Relating to Korea and the Global Economy.”

Our total shareholders’ equity decreased by 3.1% from Won 71,093 billion as of December 31, 2018 to Won 68,890 billion as of December 31, 2019, mainly as a result of a decrease in total comprehensive income.

Liquidity

Our liquidity is substantially affected by our acquisition of property, plant and equipment, fuel purchases and schedule of repayment of debt. Our property, plant and equipment increased by 7.8% from Won

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152,743 billion as of December 31, 2018 to Won 164,702 billion as of December 31, 2019. While the fuel costs decreased by 9.1% from Won 20,093 billion in 2018 to Won 18,261 billion in 2019, our current trade and other payables increased from Won 6,405 billion as of December 31, 2018 to Won 6,649 billion as of December 31, 2019. Our current financial liabilities increased by 11.9% from Won 7,982 billion as of December 31, 2018 to Won 8,931 billion as of December 31, 2019 according to our debt repayment schedule.

Our cash flows are also impacted by other factors. Our net cash provided by operating activities increased by 22.9% from Won 6,680 billion in 2018 to Won 8,213 billion in 2019. Although there was an increase in losses of Won 1,089 billion during 2019 compared to 2018, this was offset by the increase in depreciation by Won 1,066 billion and increase in increase to provisions by Won 1,244 billion.

Our cash flows from investing activities are mainly affected by the acquisition of property, plant and equipment and financial assets, which was Won 16,166 billion in 2019, as well as the proceeds from disposals of financial assets, which was Won 2,783 billion in 2019. Our net cash used in investing activities increased by 3.7% from Won 13,014 billion in 2018 to Won 13,499 billion in 2019, mainly due to an increase in acquisition of property, plant and equipment of Won 1,733 billion offset by the increase in proceeds from disposals of financial assets of Won 364 billion and decreases in acquisition of financial assets of Won 676 billion.

Our cash flows from financing activities are mainly affected by the proceeds and repayment of long-term borrowings and debt securities, which was Won 6,153 billion in 2019, as well as the payment of lease liabilities, which was Won 573 billion in 2019. Our net cash from financing activities was Won 5,302 billion in 2018 and Won 5,775 billion in 2019, respectively, largely due to an increase of Won 373 billion in proceeds from short-term borrowings, net.

Due to the capital-intensive nature of our business as well as significant volatility in fuel prices, from time to time we operate with working capital deficits, and we may have substantial working capital deficits in the future. As of December 31, 2017, 2018 and 2019, we had a working capital deficit of Won 4,283 billion, Won 2,096 billion and Won 4,749 billion, respectively. We have traditionally met our working capital and other capital requirements primarily with net cash provided by operating activities, issuance of debt securities, borrowings from financial institutions and construction grants. We also incur short-term borrowings primarily through commercial papers sold to domestic financial institutions. We have not had, and we do not expect to have, any material difficulties in obtaining short-term borrowings. See “—Capital Resources.”

We may face liquidity concerns in the case of sudden and sharp depreciation of the Won against major foreign currencies or depreciation over a sustained period of time. While substantially all of our revenues and our cash and cash equivalents are denominated in Won, we pay for substantially all of our fuel purchases in foreign currencies and a substantial portion of our long-term debt is denominated in foreign currencies, and payment of principal and interest thereon is made in foreign currencies. In the past, we have incurred foreign currency debt principally due to the limited availability and the high cost of Won-denominated financing in Korea. However, in light of the increasing sophistication of the Korean capital markets and the recent increase in Won liquidity in the Korean financial markets, we plan to reduce the portion of our debt which is denominated in foreign currencies although we intend to continue to raise certain amounts of capital through long-term foreign currency debt for purposes of maintaining diversity in our funding sources as well as paying for overseas investments and fuel procurements in foreign currencies. As of December 31, 2019, 17.5% of our long-term debt (including the current portion but excluding issue discounts and premium) without taking into consideration of swap transactions was denominated principally in U.S. dollars.

We enter into currency swaps and other hedging arrangements with respect to our debt denominated in foreign currencies only to a limited extent due primarily to the limited size of the Korean market for such derivative arrangements. Such instruments include combined currency and interest rate swap agreements, interest rate swaps and foreign exchange agreements. We do not enter into derivative financial instruments in order to

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hedge market risk resulting from fluctuations in fuel costs. Our policy is to hold or issue derivative financial instruments for hedging purposes only. See Note 12 of the notes to our consolidated financial statements.

We paid dividends of Won 790 per share in respect of fiscal year 2017. We did not pay any dividends in respect of fiscal year 2018 and 2019.

Other

Our operations are materially affected by the policies and actions of the Government. See Item 4.B. “Business Overview—Regulation.”

Item 5.C.

Research and Development, Patents and Licenses, etc.

Research and Development

Our research and development program is focused on developing advanced electric power, renewable energy, smart grid and customer-friendly electricity service technologies that will enable us to become a global leader in the energy industry. In order to achieve our corporate vision of becoming a “A Smart Energy Creator” in 2014, we adopted the KEPCO Technology Strategy, which emphasizes enhanced technological convergence and customer service. As part of such strategy, we are continuously investing in technology development to preemptively respond to changes in the energy paradigm and to improve the quality of the electricity. As a result, we secured 24 core strategic technologies and 78 first-in-class technologies in the related fields such as power network upgrading, 4th industrial revolution and renewable energy. In 2020, consistent with the Government guidelines, we plan to invest approximately 5.2% of our annual estimated net sales in the research and development. We also actively cope with changes in the external environment represented by 3Ds (Digitalization, Decarbonization and Decentralization) and established medium and long-term technology development strategies for core strategies to create sustainable new growth engines. We plan to invest in the following: (i) a system platform that combines technologies such as big data, artificial intelligence and cloud computing; (ii) digitalization technology of electric power facility; (iii) power energy storage technology; (iv) advanced renewable energy technology; (v) energy consumption optimization demand management technology; (vi) advanced power generation technology; (vii) international power grid connection technology and (viii) active distribution system technology to secure 103 core technologies that can contribute to national development and quality of life of our customers.

Our high-priority “creative smart energy” projects currently include the following:

•

acquiring integrated gasified process technology;

•

establishing smart energy cities for high efficient grid;

•

developing highly efficient absorbents for carbon capture;

•

commercializing offshore wind power plants; and

•

obtaining high-voltage direct currents technology suitable for domestic operation.

Our research and development activities also focus on the following:

•

in the thermal power generation sector, reducing the greenhouse effect, enhancing efficiency and reducing cost in power plant construction and operation as well as in our plant maintenance, including through improvements in damage analysis and environment-friendly inspections;

•

in the renewable energy sector, enhancing efficiency, lowering costs of power generation, identifying new energy sources and exploring new business opportunities;

•

in the electric power system sector, enhancing the stability and reliability in the operation of our electric power grid as well as enhancing efficiency in electricity distribution, including through

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build-out of large-sized electricity storage facilities and superconducting transmission cable grids, introducing preventive maintenance measures for substations and developing technologies related to system automation, power utilization and power line communication;

•

in the customer service sector, developing technologies enabling a greater range of business opportunities and heightened customer service in anticipation of the upcoming rollout of the smart grid system; and

•

in the technological convergence sector, identifying new business opportunities through convergence among technologies and businesses and maximizing synergy from such convergence in tandem with the promotion of creative economy in Korea as well as globally.

In addition, we cooperate closely with several other electric utility companies and research institutes, both foreign and domestic, on various projects to diversify the scope and scale of our research and development activities.

We and our six generation subsidiaries invested Won 975 billion, Won 929 billion and Won 976 billion in 2017, 2018 and 2019, respectively, and currently plan to invest Won 1,050 billion in 2020, on research and development. Our current focus in research and development is primarily in the development area of ICT-based smart energy technology. We had 1,355 employees engaged in research and development activities as of December 31, 2019. As a result of our research, we have 7,056 registered patents and 9,917 patent applications outstanding in Korea and abroad as of December 31, 2019.

Item 5.D.

Trend Information

Trends, uncertainties and events which could have a material impact on our sales, liquidity and capital resources are discussed above in Item 5.A. “Operating Results” and Item 5.B. “Liquidity and Capital Resources.”

Item 5.E.

Off-Balance Sheet Arrangements

We had no significant off-balance sheet arrangements as of December 31, 2019.

Item 5.F.

Tabular Disclosure of Contractual Obligations

The following summarizes the Company’s known contractual obligations on a consolidated basis as of December 31, 2019 and the effect such obligations are expected to have on liquidity and cash flow in future periods.


	Payments Due by Period
Contractual Obligations⁽¹⁾	Total		Less than 1 year		1–3 years		3–5 years		After 5 years
	(in billions of Won)
Long-term debt⁽²⁾	￦	66,890	￦	7,762	￦	23,603	￦	10,063	￦	25,462
Short-term borrowings		1,099		1,099		—		—		—
Interest payments⁽³⁾		12,410		1,800		3,180		2,033		5,397
Lease liabilities		5,757		686		1,190		1,145		2,736

Total	￦	86,156	￦	11,347	￦	27,973	￦	13,241	￦	33,595

Notes:

(1)

Other than as set forth in this table, we have several other contractual obligations, including fuel purchase agreements. As for fuel purchase agreements, we have entered into several contracts under which we are committed to purchasing minimum quantities of fuel, including approximately 80 to 90 million tons of bituminous coal annually. As for all uranium ore concentrates, in order to ensure stable supply, we enter into

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long-term and medium-term contracts with various suppliers and supplements such supplies with purchases in spot markets. We negotiate annually with Korea Gas Corporation and other suppliers to purchase LNG. The fuel purchase price is typically negotiated near or at time of purchase subject to prevailing market conditions. In 2019, we purchased fuel in the amount of Won 18.3 trillion.

(2)	Long-term debt represents long-term borrowings and debt securities including the current portion excluding interest.

(3)	Our long-term debt and short-term borrowings have fixed or variable rate of interest. For the variable rate of interest, we used the rate in effect as of December 31, 2019 in calculating the interest payments on debt for the periods indicated.

We entered into a power purchase agreement with GS EPS Co., Ltd. and two other non-renewable energy independent power producers that are not part of the Community Energy System, under which we are required to purchase all electricity generated by these companies to the extent such electricity is traded through the Korea Power Exchange. The purchase prices for such electricity are predetermined under the power purchase agreements, subject to annual adjustments. We purchased power from these companies in the amounts of Won 941 billion, Won 966 billion and Won 500 billion in 2017, 2018 and 2019, respectively.

We meet our coal requirements primarily through purchases of bituminous coal and anthracite coal under long-term supply contracts with domestic and foreign suppliers to purchase. Under these long-term supply contracts, purchase prices are adjusted periodically based on prevailing market conditions. We also purchase a substantial portion of our LNG requirements from Korea Gas Corporation, a related party. We have also entered into long-term transportation contracts with Pan Ocean Co., Ltd. and others.

We import all uranium ore concentrates from sources outside Korea (including the United Kingdom, Kazakhstan, France, Germany, Niger, Canada and Japan) through medium- to long-term contracts and pay for such concentrates with currencies other than Won, primarily U.S. dollars. Contract prices for processing of uranium are generally based on market prices. See Note 49 of the notes to our consolidated financial statements for further details of these contracts.

Under the Long-term Transmission and Substation Plan approved by the Ministry of Trade, Industry and Energy, we are liable for the construction of all of our power transmission facilities and the maintenance and repair expenses for such facilities.

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Payment guarantee and short-term credit facilities from financial institutions as of December 31, 2019 were as follows:

Payment guarantee


Description	Financial Institutions	Credit Lines
		(In millions of Won or thousands of USD, JPY, INR, CAD, SAR, NPR, ZAR and EUR)
Payment of import letter of credits	Shinhan Bank		KRW	7,749
	Shinhan Bank and others		USD	1,051,334
	Societe Generale		MYR	2,500
Inclusive credits	Shinhan Bank		INR	92,348
	Hana Bank		KRW	8,000
	Hana Bank and others		USD	30,975
Performance guarantees on Contract	Seoul Guarantee Insurance and others		KRW	84,011
	First Abu Dhabi Bank and others		USD	596,862
	Korea Development Bank and others		JPY	637,495
	Hana Bank and others		EUR	4,158
	Hana Bank and others		INR	191,883
	Hana Bank		CAD	464
	Shinhan Bank		ZAR	55,730
Guarantees for bid	Hana Bank		USD	10,000
Warranty bond and others	Seoul Guarantee Insurance		KRW	44,047
	Export-Import Bank of Korea and others		USD	714,654
	Hana Bank		SAR	86,508
	SMBC Bank		QAR	15,000
Payment on payable from foreign country	Nonghyup Bank		USD	4,680
Trade finance	BNP Paribas and others		USD	700,000
Other guarantees	Nonghyup Bank and others		KRW	537,064
	Export-Import Bank of Korea and others		USD	1,562,194
	Shinhan Bank		JPY	381,210
	Standard Chartered		AED	50

Overdraft and Others


Description	Financial Institutions	Credit Lines
		(In millions of Won, thousands of USD or thousands of PHP)
Overdraft	Nonghyup Bank and others		KRW	2,105,500
Commercial paper	Hana Bank and others		KRW	1,250,000
Limit amount available for card	Hana Bank and others		KRW	51,904
	Banco de Oro		PHP	5,000
Loan limit	Kookmin Bank and others		KRW	1,050,503
	DBS Bank and others		USD	2,492,700

We have outstanding borrowings with a limit of USD 275,600 thousand from its creditors such as International Finance Corporation. Regarding the borrowing contract, we have guaranteed capital contribution of USD 69,808 thousand and additional contribution up to USD 19,000 thousand for contingencies, if any. Moreover, for one of the electricity purchasers, Central Power Purchasing Agency Guarantee Ltd., we have

109

provided payment guarantee up to USD 2,777 thousand, in case of construction delay or insufficient contract volume after commencement of the construction.

We have provided PT. Perusahaan Listrik Negara performance guarantee up to USD 2,293 thousand and investment guarantee up to USD 43,500 thousand to Mizuho bank and others in proportion to its ownership in the electricity purchase contract with PT. Cirebon Energi Prasarana in relation to the second electric power generation business in Cirebon, Indonesia.

We have provided MUFG Bank, Ltd. (MUFG) (formerly, the Bank of Tokyo Mitsubishi UFJ. Ltd. (BTMU)) borrowing guarantee up to USD 41,258 thousand proportion to its ownership in the equity bridge loan guarantee with PT. Cirebon Energi Prasarana in relation to the second electric power generation business in Cirebon, Indonesia.

We have provided the Export-Import Bank of Korea, BNP Paribas and ING Bank guarantee of mutual investment of USD 2,192 thousand, which is equivalent to the ownership interest of PT BS Energy and PT Nusantara Hydro Alam, in order to guarantee the expenses related to hydroelectric power business of Tanggamus, Indonesia.

We have provided the Export-Import Bank of Korea and SMBC guarantee of mutual investment of USD 401 thousand, which is equivalent to the ownership interest of PT Mega Power Mandiri, in order to guarantee the expenses related to hydroelectric power business of PT. Wampu Electric Power, our associate.

We have provided the DekaBank with an investment guarantee of EUR 13,800 thousand to Stavro Vind AB, to enter into a loan contract for the Sweden Wind Power (Stavro) construction operation project.

We are obligated to complete the construction of the waste oil refining for power generation business of Next energy Co., Ltd. (the contract amount of Won 14,700 million). We must compensate financial institution agents for the liquidated damages if the construction is not completed. Also, we have entered into a performance guarantee agreement with Next energy Co., Ltd. under which we are obligated to provide a supplemental funding if the amount of power generated or the operation time of the power plant does not reach the level agreed upon by the parties. We expect that an outflow of resources is probable due to guarantee of completing the construction hence have recognized revenue over time after deducting Won 5,244 million as the variable consideration for the contract amount of the project.

Existing guarantees provided by us to our associates and joint ventures as of December 31, 2019 are as follows.

Primary Guarantor

(Providing Company)

Principal Obligator

(Provided Company)

Type of

Guarantees

Currency

Credit Limit

Guarantee (Final
Provided Company)

(In millions of Won or thousands of USD and SAR)

KEPCO

Shuweihat Asia Operation & Maintenance Company

Performance guarantees

USD

11,000

SAPCO

KEPCO

Rabigh Operation & Maintenance Company Limited

Performance guarantees and others

USD

1,387

RABEC

KEPCO

Nghi Son 2 Power LLC

Performance guarantees

USD

70,000

SMBC Ho Chi Minh and others

KEPCO

Barakah One Company

Debt guarantees

USD

900,000

Export-Import Bank of Korea and others

Performance guarantees and others

USD

4,430,240

110

Primary Guarantor

(Providing Company)

Principal Obligator

(Provided Company)

Type of

Guarantees

Currency

Credit Limit

Guarantee (Final
Provided Company)

(In millions of Won or thousands of USD and SAR)

KEPCO

RE Holiday Holdings LLC

Performance guarantees

USD

223,000

EPS Renewables Holdings, LLC, Santander Bank and others

KEPCO

RE Pioneer Holdings LLC

Performance guarantees

USD

170,000

EPS Renewables Holdings, LLC, Santander Bank and others

KEPCO

RE Barren Ridge 1 Holdings LLC

Performance guarantees

USD

149,000

EPS Renewables Holdings, LLC, Santander Bank and others

KEPCO

Rabigh Electricity Company

Performance guarantees

SAR

6,508

Hana Bank

Debt guarantees

SAR

80,000

KEPCO

Shuweihat Asia Power Investment B.V.

Performance guarantees

USD

100,000

ING Bank

KEPCO

Amman Asia Electric Power Company

KOWEPO

Cheongna Energy Co., Ltd.

Collateralized money invested

KRW

1,411

Hana Bank and others

Guarantees for supplemental funding and others⁽*¹⁾

—

KOWEPO

Xe-Pian Xe-Namnoy Power Co., Ltd.

Payment guarantees for business reserve

USD

2,500

Krung Thai Bank

Collateralized money invested

KRW

72,935

Impounding bonus guarantees

USD

5,000

SK E&C

KOWEPO

Rabigh Operation & Maintenance Company Limited

Performance guarantees and others

SAR

5,600

Saudi Arabia British Bank

KOWEPO

Daegu Photovoltaic Co., Ltd.

Collateralized money invested

KRW

2,060

Korea Development Bank

KOWEPO

Dongducheon Dream Power Co., Ltd.

Collateralized money invested^(*7)

KRW

41,531

Kookmin Bank and others

Debt guarantees

KRW

20,300

BNK Securities and others

KOWEPO

PT. Mutiara Jawa

Collateralized money invested

KRW

1,438

Woori Bank

KOWEPO

Haeng Bok Do Si Photovoltaic Power Co., Ltd.

Collateralized money invested

KRW

215

Nonghyup Bank

KOWEPO

Shin Pyeongtaek Power Co., Ltd.

Collateralized money invested

KRW

66,956

Kookmin Bank

Guarantees for supplemental funding^(*1)

—

Kookmin Bank and others

111

Primary Guarantor

(Providing Company)

Principal Obligator

(Provided Company)

Type of

Guarantees

Currency

Credit Limit

Guarantee (Final
Provided Company)

(In millions of Won or thousands of USD and SAR)

EWP

Busan Shinho Solar Power Co., Ltd.

Collateralized money invested

KRW

5,045

Korea Development Bank and others

EWP

Seokmun Energy Co., Ltd.

Collateralized money invested

KRW

17,342

Kookmin Bank and others

Guarantees for supplemental funding^(*1)

—

EWP

Chun-cheon Energy Co., Ltd.

Collateralized money invested

KRW

34,872

Kookmin Bank and others

Guarantees for supplemental funding^(*1)

KRW

20,000

EWP

Honam Wind Power Co., Ltd.

Collateralized money invested

KRW

4,375

Shinhan Bank and others

Guarantees for supplemental funding^(*1)

—

EWP

GS Donghae Electric Power Co., Ltd.

Collateralized money invested

KRW

255,983

Korea Development Bank and others

Guarantees for supplemental funding^(*1)

—

EWP

Yeonggwangbaeksu Wind Power Co., Ltd.

Collateralized money invested

KRW

3,040

Kookmin Bank and others

EWP

Yeonggwang Wind Power Co., Ltd.

Collateralized money invested

KRW

17,627

KDB Capital Corporation and others

Guarantees for supplemental funding^(*1)

—

EWP

Daesan Green Energy Co., Ltd.

Collateralized money invested

KRW

17,182

IBK

Guarantees for supplemental funding^(*1)

KRW

18,989

IBK

EWP

Taebaek Gadeoksan Wind Power Co., Ltd.

Collateralized money invested

KRW

7,846

Samsung Fire & Marine Insurance Co., Ltd. and others

EWP

PT. Tanjung Power Indonesia

Debt guarantees

USD

24,544

Sumitomo mitsui banking

Other guarantees

USD

3,150

PT Adaro Indonesia

Guarantees for supplemental funding^(*1)

—

Sumitomo mitsui banking and others

Collateralized money invested

KRW

34,327

MUFG and others

EWP

South Jamaica Power Company Limited

Performance guarantees

USD

14,400

Societe Generale

Collateralized money invested

KRW

13,863

JCSD Trustee Services Limited and others

112

Primary Guarantor

(Providing Company)

Principal Obligator

(Provided Company)

Type of

Guarantees

Currency

Credit Limit

Guarantee (Final
Provided Company)

(In millions of Won or thousands of USD and SAR)

EWP Barbados 1 SRL

South Jamaica Power Company Limited

Guarantees for supplemental funding^(*1, 3)

—

JCSD Trustee Services Limited and others

EWP

DE Energia SpA

Collateralized money invested

KRW

8,665

Mirae Asset Daewoo Co., Ltd. and others

EWP

Debt guarantees

KRW

6,632

KOSPO

KNH Solar Co., Ltd.

Collateralized money invested

KRW

2,382

Shinhan Bank and Kyobo Life Insurance Co., Ltd.

Performance guarantees and guarantees for supplemental funding^(*1)

—

KOSPO

Daeryun Power Co., Ltd.

Collateralized money invested

KRW

26,247

Korea Development Bank and others

Guarantees for supplemental funding and others ^(*1)

KRW

8,000

KOSPO

Daegu Green Power Co., Ltd.

Collateralized money invested

KRW

22,824

Shinhan Bank and others

Performance guarantees

—

KOSPO

Kelar S.A

Performance guarantees

USD

61,692

Hana Bank, MUFG

KOSPO

Daehan Wind Power PSC

Debt guarantees^(*9)

USD

16,000

Shinhan Bank

Performance guarantees

USD

3,600

Debt guarantees^(*9)

USD

240

Performance Debt guarantees^(*9)

USD

1,898

Hana Bank

KOSPO

Pyeongchang Wind Power Co., Ltd.

Collateralized money invested

KRW

5,877

Woori Bank and Shinhan Bank and others

Performance guarantees

—

KOSPO

Taebaek Guinemi Wind Power Co., Ltd.

Collateralized money invested

KRW

2,553

IBK

Guarantees for supplemental funding^(*1)

—

KOSPO

Jeongam Wind Power Co., Ltd.

Guarantees for supplemental funding^(*1) and performance guarantees

—

SK Securities Co., LTD., KDB Capital Corporation, and others

Collateralized money invested

KRW

4,437

KOSPO

Taebaek Wind Power Co., Ltd.

Guarantees for supplemental funding^(*1)

—

Shinhan Bank and others

113

Primary Guarantor

(Providing Company)

Principal Obligator

(Provided Company)

Type of

Guarantees

Currency

Credit Limit

Guarantee (Final
Provided Company)

(In millions of Won or thousands of USD and SAR)

KOSPO

Samcheok Eco Materials Co., Ltd.

Payment guarantees^(*47)

—

SEM Investment Co., Ltd.

Kospo Chile SpA

Kelar S.A.

Collateralized money invested

KRW

70,462

Export-Import Bank of Korea and others

Chester Solar ISpA

Collateralized money invested

KRW

1,157

IBK

Chester Solar IV SpA

Collateralized money invested

KRW

672

Chester Solar V SpA

Collateralized money invested

KRW

146

Diego de Almagro Solar Spa

Collateralized money invested

KRW

1,035

Laurel SpA

Collateralized money invested

KRW

595

KOMIPO

YeongGwang Yaksu Wind Electric. Co., Ltd.

Collateralized money invested

KRW

386

IBK and others

KOMIPO

Hyundai Green Power Co., Ltd.

Collateralized money invested

KRW

124,253

Korea Development Bank and others

KOMIPO

PT. Cirebon Electric Power

Debt guarantees

USD

11,248

Mizuho Bank

KOMIPO

PT. Wampu Electric Power

Debt guarantees

USD

4,854

SMBC

KOMIPO

Green Energy Electricity Generation Co., Ltd.

Collateralized money invested

KRW

163

IBK

Guarantees for supplemental funding and others^(*1)

—

IBK and others

KOMIPO

YaksuESS Co., Ltd.

Collateralized money invested

KRW

516

IBK

KOMIPO

Namjeongsusang Solar Power Operation Co., Ltd.

Collateralized money invested

KRW

812

IBK

KOMIPO

Gwangbaek Solar Power Investment Co., Ltd.

Collateralized money invested

KRW

2,054

IBK

KOSEP

Hyundai Energy Co., Ltd.

Collateralized money invested^(*5)

—

IBK

Guarantees for supplemental funding and others^(*1,6)

KRW

76,800

NH investment & securities Co., Ltd. and others

KOSEP

S-Power Co., Ltd.

Collateralized money invested

KRW

115,784

Korea Development Bank and others

114

Primary Guarantor

(Providing Company)

Principal Obligator

(Provided Company)

Type of

Guarantees

Currency

Credit Limit

Guarantee (Final
Provided Company)

(In millions of Won or thousands of USD and SAR)

KOSEP

RES Technology AD

Collateralized money invested

KRW

16,248

UniCredit Bulbank and others

KOSEP

ASM-BG Investicii AD

Collateralized money invested

KRW

19,376

UniCredit Bulbank and others

KOSEP

Expressway Solar-light Power Generation Co., Ltd.

Guarantees for supplemental funding^(*1,2)

KRW

2,500

Woori Bank

KOSEP

Goseong Green Energy Co., Ltd.

Collateralized money invested

KRW

2,340

Kyobo Life Insurance Co., Ltd. and others

KOSEP

Gangneung Eco Power Co., Ltd.

Collateralized money invested

KRW

2,430

Kyobo Life Insurance Co., Ltd. and others

KOSEP

PND solar., Ltd.

Collateralized money invested

KRW

1,144

IBK

KOSEP

Hyundai Eco Energy Co., Ltd.

Collateralized money invested

KRW

3,781

Samsung Life Insurance and others

KOSEP

Jaeun Resident Wind Power Plant Co., Ltd.

Collateralized money invested

KRW

2,198

IBK

KOSEP

Cheongsong Myeonbongsan Wind Power Plant Co., Ltd.

Collateralized money invested

KRW

2,764

Kyobo Life Insurance Co., Ltd. and others

KHNP

Noeul Green Energy Co., Ltd.

Collateralized money invested

KRW

6,611

Hana Bank and others

Guarantees for supplemental funding^(*1)

—

KHNP

Busan Green Energy Co., Ltd.

Collateralized money invested

KRW

10,636

Shinhan Bank and others

KHNP

Cheong-Song Noraesan Wind Power Co., Ltd.

Collateralized money invested

KRW

3,044

Woori Bank and others

Guarantees for supplemental funding^(*1)

—

KHNP

Incheon New Power Co., Ltd.

Collateralized money invested^(*8)

—

Shinhan Bank

Guarantees for supplemental funding^(*1)

—

Notes:

(1)	We guarantee to provide supplemental funding for business with respect to excessive business expenses or insufficient repayment of borrowings.

(2)

We have granted the right to Hana Financial Investment Co., Ltd., as an agent for the creditors to Expressway Solar-light Power Generation Co., Ltd. (“ESPG”), to the effect that in the event of acceleration of ESPG’s payment obligations under certain borrowings to such creditors, Hana Financial may demand us to dispose of shares in ESPG held by us and apply the resulting proceeds to repayment of ESPG’s obligations.

115

(3)	This includes a guarantee for the shareholder’s capital payment in connection with the business of 190MW gas complex thermal power plant in Jamaica. EWP Barbados 1 SRL’s capital contribution amount is USD 18,400,000 and there is no residual guarantee amount among total collateral limit.

(4)

Controlling and non-controlling common shareholders of Samcheok Eco Materials Co., Ltd. have pre-emption rights, if preferred shareholders sell their shares before December 23, 2020. And promised yield of the preferred stock is guaranteed through the transaction. As of December 31, 2019, we have recognized derivative liabilities of Won 6,205 million related to the the guarantee. Additionally, we are party to an agreement with Samcheok Eco Materials Co., Ltd. whereby compensation for the expected amount of damage must be settled if damage is incurred in relation to the fulfillment obligations for the coal ash supply.

(5)	We recognized an impairment loss on all of the equity securities of Hyundai Energy Co., Ltd. in prior years, and the acquisition cost of the securities provided as collateral is Won 47,067 million.

(6)	Pursuant to the guarantee agreement, we recognized other provisions of Won 28,717 million as the possibility of economic benefit outflow to fulfill the obligation was deemed probable and the amount could be reasonably estimated.

(7)	The common stocks of Dongducheon Dream Power Co., Ltd. held by us were pledged as collateral.

(8)	We recognized an impairment loss on all of the equity securities of Incheon New Power Co., Ltd. during the year ended December 31, 2019, and the acquisition cost of the securities provided as collateral is Won 461 million.

(9)	We provided a payment guarantee to Daehan Wind Power PSC for reimbursement of Equity Bridge Loan (EBL), a letter of credit for Debt Service Reserve Account (DSRA) and a guarantee for the swap termination costs and others.

Other than as described in this annual report and also in Notes 47 and 50 of the notes to our consolidated financial statements included in this annual report, we did not have any other material credit lines and guarantee commitments provided to any third parties as of December 31, 2019.

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ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Item 6.A. Directors and Senior Management

Board of Directors

Under the KEPCO Act, the Act on the Management of Public Institutions and our Articles of Incorporation, our board of directors, which is required to consist of not more than 15 directors, including the president, is vested with the authority over our management.

Pursuant to our Articles of Incorporation and the Act on the Management of Public Institutions, we have two types of directors: standing directors (sangim-isa in Korean) and non-standing directors (bisangim-isa in Korean). The standing directors refer to our directors who serve their directorship positions in full-time capacity. The non-standing directors refer to our directors who do not serve their directorship positions in full-time capacity. The non-standing directors currently do not hold any executive positions with us or our subsidiaries.

Under our Articles of Incorporation, there may not be more than seven standing directors, including our president, and more than eight non-standing directors. The number of non-standing directors must exceed the number of standing directors, including our president. A senior non-standing director appointed by the Ministry of Economy and Finance becomes our chairman of the board following the review and resolution of the Public Agencies Operating Committee.

Our president serves as our chief executive officer and represents us and administers our day-to-day business in all matters and bears the responsibility for the management’s performance. Our president is appointed by the President of the Republic upon the motion of the Ministry of Trade, Industry and Energy following the nomination by our director nomination committee, the review and resolution of the Public Agencies Operating Committee pursuant to the Act on the Management of Public Institutions and an approval at the general meeting of our shareholders.

Our standing director who concurrently serve as members of the audit committee are appointed through the same appointment process applicable to our president, except that the motion for appointment is made by the Ministry of Economy and Finance instead of the Ministry of Trade, Industry and Energy. Standing directors other than our president or those who concurrently serve as members of the audit committee are appointed by our president with the approval at the general meeting of our shareholders.

Our non-standing directors must be appointed by the minister of the Ministry of Economy and Finance following the review and resolution of the Public Agencies Operating Committee from a pool of candidates recommended by the director nomination committee and must have ample knowledge and experience in business management. Appointment of non-standing directors to become part of the audit committee is subject to approval at the general meeting of our shareholders. Government officials that are not part of the teaching staff in national and public schools are ineligible to become our non-standing directors.

The term of our president is three years, while that of our directors (standing or non-standing, but not the president) is two years. According to the Act on the Management of Public Institutions, our president’s term cannot be terminated unless done so by the President of the Republic pursuant to the Act on the Management of Public Institutions or upon an event as specified in our Articles of Incorporation.

Attendance by a majority of the board members constitutes a voting quorum for our board meetings, and resolutions can be passed by a majority of the board members. In the event the president acts in violation of law or the Articles of Incorporation, is negligent in his duties, or otherwise is deemed to be significantly impeded in performing his official duties as president, the board of directors may by resolution request the minister of the Ministry of Trade, Industry and Energy to dismiss or recommend the dismissal of the president.

Our non-standing directors may request any information necessary to fulfill their duties from our president, and except in special circumstances, our president must comply with such request.

117

The names, titles and outside occupations, if any, of the directors as of April 17, 2020 and the respective years in which they took office are set forth below.


Name (Gender)	Age	Title	Outside Occupation	Position Held Since
JongKap, KIM (Male)	68	President, Chief Executive Officer and Standing Director	None	April 13, 2018
Kim, Hoe-Chun (Male)	59	Senior Executive Vice President for Business Management, Standing Director	None	July 16, 2018
Kim, Dong-Sub (Male)	60	Senior Executive Vice President for Business Operations, Standing Director	None	July 16, 2018
Park, Hyung-Duck (Male)	59	Senior Executive Vice President for Strategy & Finance, Chief Financial Officer, Standing Director	None	July 16, 2018
Lim, Hyun-Seung (Male)	59	Senior Executive Vice President for Nuclear Power Generations, Standing Director	None	July 16, 2018
Kim, Sung-Arm (Male)	60	Senior Executive Vice President for Power Grid, Standing Director	None	March 4, 2019
Kim, Jwa-Kwan (Male)	60	Non-Standing Director and Chairman of the Board of Directors	Professor of Environmental Engineering ,Catholic University of Pusan	April 4, 2018
Kim, Chang-Joon (Male)	75	Non-Standing Director	Head of Gwangju Sports Council	March 19, 2018
Yang, Bong-Ryull (Male)	68	Non-Standing Director	None	April 4, 2018
Jung, Yeon-Gil (Male)	53	Non-Standing Director and Member of the Audit Committee	Professor of New Materials Engineering, Changwon University, Energy Policy Consultant of the Ministry of Trade, Industry and Energy	April 4, 2018
Noh, Geum-Sun (Female)	58	Non-Standing Director and Member of the Audit Committee	None	June 12, 2018
Choi, Seung-Kook (Male)	54	Non-Standing Director	Director of Solar and Wind Energy Cooperative Association	June 12, 2018
Park, Cheol-Su (Male)	51	Non-Standing Director	Head of Self-Support Center in Naju Director of the Naju Social Economy Network	June 12, 2018
Park, Jong-Bae (Male)	56	Non-Standing Director	Professor of Electrical and Electronics Engineering, Konkuk University	January 31, 2020

JongKap KIM has been our President and CEO since April 13, 2018. Prior to his current position, he served as the Chief Executive Officer of Siemens Korea, the Chief Executive Officer of SK Hynix, a Commissioner of Korean Intellectual Property Office, and a Vice Minister of Ministry of Trade, Industry and Energy. Mr. Kim received a Ph. D. in public administration from Sungkyunkwan University, M.A. in economics from Indiana University and M.B.A. from New York University.

118

Kim, Hoe-Chun has been our Standing Director since July 16, 2018. Mr. Kim also currently serves as our Senior Vice President for Business Management and previously served as the Executive Vice President & Chief HR Officer and the Vice President of Corporate Planning Department. Mr. Kim received a Korean Executive M.B.A. from Helsinki School of Economics.

Kim, Dong-Sub has been our Standing Director since July 16, 2018. Mr. Kim also currently serves as our Senior Executive Vice President for Business Operations and previously served as the Executive Vice President & Chief Technology Officer and the Vice President of KEPCO Research Institute. Mr. Kim received a Ph.D. of engineering in technology policy from Yonsei University.

Park, Hyung-Duck has been our Standing Director since July 16, 2018. Mr. Park also currently serves as our Senior Executive Vice President for Strategy and Finance and Chief Financial Officer. Mr. Park previously served as the Vice President at Regional Headquarters KEPCO Gyeonggi and the Vice President of Sales and Marketing Department. Mr. Park received an Executive M.B.A. in utilities management from Helsinki School of Economics.

Lim, Hyun-Seung has been our Standing Director since July 16, 2018. Mr. Lim also currently serves as our Senior Executive Vice President for Nuclear Power Generations and previously served as the Vice President of UAE Nuclear Project Department in KEPCO and the Vice President of Global Nuclear Project Department. Mr. Lim received a B.ME from Sungkyunkwan University.

Kim, Sung-Arm has been our Standing Director since March 4, 2019. Mr. Kim also currently serves as our Senior Executive Vice President for Power Grid and previously served as the Vice President at Regional Headquarters KEPCO Namseoul and the Vice President of Transmission and Substation Construction Department. Mr. Kim received a B.S. in electrical engineering from Hongik University.

Kim, Jwa-Kwan has been our Non-Standing Director since April 4, 2018. Mr. Kim is currently the professor of Environmental Engineering at Catholic University of Pusan. Mr. Kim previously served as a visiting professor at the Seoul National University Graduate School of Environmental Studies. Mr. Kim received a B.S. in environmental engineering from Pukyong National University and a Ph.D. in public administration from Seoul National University.

Kim, Chang-Joon has been our Non-Standing Director since March 19, 2018. Mr. Kim is currently Head of Gwangju Sports Council. Mr. Kim previously served as a member of the Electricity Regulatory Commission (KOREC). Mr. Kim received a B.S. in veterinary science at Chonnam National University.

Yang, Bong-Ryull has been our Non-Standing Director since April 4, 2018. Mr. Yang previously served as the Ambassador of the Republic of Korea to Malaysia and the Vice President of Public Affairs in Gwangju Institute of Science and Technology. Mr. Yang received a B.A. in politics at Seoul National University and a Ph.D. in business administration from Gwangju University.

Jung, Yeon-Gil has been our Non-Standing Director since April 4, 2018. Mr. Jung is currently Professor of New Materials Engineering at Changwon University and the Energy Policy Consultant of the Ministry of Trade, Industry and Energy. Mr. Jung previously served as vice-chairman of the Korean Ceramic Society. Mr. Jung received a B.S. and a Ph.D in material engineering from Hanyang University.

Noh, Geum-Sun has been our Non-Standing Director since June 12, 2018. Ms. Noh is a certified public accountant and previously served as the President of EOS Partners, the Executive Auditor of National Pension Service and co-representative of Mirae Accounting Firm. Ms. Noh received a B.S. in nursing from Seoul National University.

Choi, Seung-Kook has been our Non-Standing Director since June 12, 2018. Mr. Choi currently serves as the Director of Solar and Wind Energy Cooperative Association. Mr. Choi previously served as a co-representative

119

of Korea NGO’s Energy Network. Mr. Choi received a B.A. in sociology from Hanyang University and a M.A. in urban administration from the University of Seoul.

Park, Cheol-Su has been our Non-Standing Director since June 12, 2018. Mr. Park currently serves as the head of Self-Support Center in Naju and the director of Naju Social Economy Network. Mr. Park received a B.A. in English literature from Gwangju University and a M.A. in public administration from Chonnam National University.

Park, Jong-Bae has been our Non-Standing Director since January 31, 2020. Mr. Park is currently the professor of Electrical and Electronics Engineering at Konkuk University. Mr. Park previously served as a Head of the Office of Career Development and Placement at Konkuk University. Mr. Park received a B.S. and a Ph.D in Electrical and Electronics Engineering from Seoul National University.

The business address of our directors is 55 Jeollyeok-ro, Naju-si, Jeollanam-do, 58322, Korea.

Audit Committee

Under the Act on the Management of Public Institutions, which took effect as of April 1, 2007, we are designated as a “market-oriented public enterprise” and, as such, are required to establish an audit committee in lieu of the pre-existing board of auditors upon expiration of the term of the last remaining member of the board of auditors. In September 2007, we amended our Articles of Incorporation to establish, in lieu of the pre-existing board of auditors, an audit committee meeting the requirements under the Sarbanes-Oxley Act. Under the Act on the Management of Public Institutions, the Korean Commercial Act and the amended Articles of Incorporation, we are required to maintain an audit committee consisting of three members, of which not less than two members are required to be non-standing directors. The roles and responsibilities of our audit committee members are to perform the functions of an audit committee meeting the requirements under the Sarbanes-Oxley Act. Our audit committee was established on December 8, 2008.

Noh, Geum-Sun and Jung, Yeon-Gil, both non-standing directors, are currently members of our audit committee. Lee, Jung-Hee voluntarily resigned as a standing director and as a member of the audit committee on December 13, 2019. Under Korean law, Lee, Jung-Hee retains the rights and is subject to obligations as a member of the audit committee and a standing director, to the extent such rights and obligations are connected to performance of his duties as a member of the audit committee, until his successor to take his place at our audit committee is approved and appointed at a general meeting of the shareholders. All such members of the audit committee are independent within the meaning of the Korea Stock Exchange listing standards, the regulations promulgated under the Korean Commercial Act and the New York Stock Exchange listing standards.

Item 6.B. Compensation

The aggregate amount of remuneration paid to our standing and non-standing directors in the aggregate consist of (i) salaries and wages paid to standing and non-standing directors, which amounted to Won 1,543 million in aggregate in 2019, and (ii) accrued retirement and severance benefits for standing directors, which amounted to Won 31 million in 2019. Under the Act on the Management of Public Institution, our executive officers consist of the president and the standing and non-standing directors. Standing directors, except the standing director who concurrently serves as a member of our audit committee, take executive positions with our company while the other directors, including non-standing directors, do not. We do not have any other officer who is in charge of a principal business unit, division or function, any other officer who performs a policy making function or any other person who performs similar policy making functions for us.

Item 6.C. Board Practices

Under the Act on the Management of Public Institutions and our Articles of Incorporation, for appoints made after April 1, 2007, the term of office for our president is three years and the term of our office for our

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directors (whether standing or non-standing but not the president) is two years. Our president and directors may be reappointed for one or more additional terms of one year. In order to be reappointed, the president must be evaluated on the basis of his management performance; a standing director, on the basis of the performance of the duties for which he was elected to perform, or if the standing director has executed an incentive bonus contract, on the basis of his performance under the contract; and a non-standing director, on the basis of his performance of the duties for which he was elected to perform.

Our board currently does not maintain a compensation committee. See Item 16G. “Corporate Governance.” However, we currently maintain an audit committee meeting the requirements of the Sarbanes-Oxley Act to perform the roles and responsibilities of the compensation committee. Prior to the establishment of the audit committee on December 8, 2008 pursuant to the Act on the Management of Public Institutions, we maintained a board of auditors, which performed the roles and responsibilities required of an audit committee under the Sarbanes-Oxley Act, including the supervision of the financial and accounting audit by the independent registered public accountants.

Our president’s management contract includes benefits upon termination of his employment. The amount for termination benefits payable equals the average value of compensation for one month times the number of years the president is employed by us, provided that the president is only eligible for termination benefits after more than one year of continuous service.

The termination benefits for our standing directors are determined in accordance with our internal regulations for executive compensation. Standing directors are eligible for benefits only upon termination of employment or death following one year of continuous service.

See also Item 16G. “Corporate Governance” for a further description of our board practices.

Item 6.D. Employees

As of December 31, 2019, we and our generation subsidiaries had a total of 47,452 regular employees, almost all of whom are employed within Korea. Approximately 10.5% of our regular employees (including employees of our generation subsidiaries) are located at our head office.

The following table sets forth the number of and other information relating to our regular employees, not including directors or senior management, as of December 31, 2019.


	KEPCO		KHNP		KOSEP		KOMIPO		KOWEPO		KOSPO		EWP		Total
Regular Employees
Administrative		5,094		997		304		373		270		299		396		7,733
Engineers		12,220		9,683		1,991		2,192		1,983		1,751		2,059		31,879
Others		5,659		1,154		190		200		244		388		5		7,840

Total		22,973		11,834		2,485		2,765		2,497		2,438		2,460		47,452

Head Office Employees		1,741		1,292		412		378		393		402		370		4,988
% of total		7.6%		10.9%		16.6%		13.7%		15.7%		16.5%		15.0%		10.5%
Members of Labor Union		17,463		8,304		1,827		1,656		1,734		1,651		1,948		34,583
% of total		76.0%		70.2%		73.5%		59.9%		69.4%		67.7%		79.2%		72.9%

We and each of our generation subsidiaries have separate labor unions. Approximately 72.9% of our and our generation subsidiaries’ employees in the aggregate are members of these labor unions, each of which negotiates a collective bargaining agreement for its members each year. Under applicable Korean law, an employee-employer cooperation committee comprised of an equal number of representatives of management and labor (which shall be no less than three and no more than ten representatives from each of management and labor) is

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required to be established. Accordingly, an employee-employer cooperation committee composed of eight representatives of management and eight representatives of labor has been established at us and at each of our generation subsidiaries. The committee meets periodically to discuss various labor issues.

Since our formation in 1981, our businesses had not been interrupted by any work stoppages or strikes except in early 2002, when employees belonging to our five non-nuclear generation subsidiaries went on strike for six weeks to protest the Government’s decision to privatize such non-nuclear generation subsidiaries according to the Restructuring Plan, which privatization plan has since been suspended indefinitely. See Item 3.D. “Risk Factors—Risks Relating to KEPCO—The Government may adopt policy measures to substantially restructure the Korean electric power industry or our operational structure, which may have a material adverse effect on our business, operations and profitability.”

We believe our relations with our employees are generally good.

Item 6.E. Share Ownership

As of December 31, 2019, none of our directors and members of our administrative, supervisory or management bodies own more than 0.1% of our common stock individually and in aggregate.

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Item 7.A. Major Shareholders

The following table sets forth certain information relating to certain owners of our capital stock as of December 31, 2019, the date we last closed our shareholders’ registry:


Title of Class	Identity of Person or Group	Shares Owned		Percentage of Class⁽¹⁾ (%)
Common stock	Government		116,841,794		18.2
	Korea Development Bank⁽²⁾		211,235,264		32.9

	Subtotal		328,077,058		51.1
	National Pension Service		50,592,477		7.9
	Employee Stock Ownership Association		917,698		0.1
	Directors as a group		750		0.0
	Public (non-Koreans)		154,843,683		24.1
	Common shares		127,250,445		19.8
	American depositary shares		27,593,238		4.3
	Public (Koreans)		107,532,411		16.8

	Total		641,964,077		100.0

Notes:

(1)	Percentages are based on issued shares of common stock.

(2)	Korea Development Bank is a Government-controlled entity.

All of our shareholders have equal voting rights. See Item 10.B. “Memorandum and Articles of Incorporation—Description of Capital Stock—Voting Rights.”

Item 7.B. Related Party Transactions

We are engaged in a variety of transactions with our affiliates. We have related party transactions with Government-controlled entities such as Korea Gas Corporation, our consolidated subsidiaries and our equity investees. In addition, we engage in related party transactions with Korea Development Bank, one of our major shareholders. See Note 47 of the Notes to our consolidated financial statements included in this annual report for a description of transaction and balances with our related parties.

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In the past three years, our related party transactions principally consisted of purchases of LNG from Korea Gas Corporation and long-term borrowings from Korea Development Bank. In 2017, 2018 and 2019, we and our generation subsidiaries purchased LNG from Korea Gas Corporation in the aggregate amount of Won 3,246 billion, Won 5,191 billion and Won 4,049 billion, respectively. As of December 31, 2019, we had borrowings from Korea Development Bank in the aggregate amount of Won 259 billion, which had an interest rate range of 0.50% to 4.60% as well as 1 year KoFC bond rate +0.95 for certain operating funds.

We also engage in extensive transactions with our consolidated generation subsidiaries, including the purchase of electricity from them through Korea Power Exchange, sales of electricity to them, payment and receipt of commissions for services and receivables and payables transactions. These are eliminated in the consolidation process. We also provide guarantees for certain of our affiliates. See Item 5.F. “Tabular Disclosure of Contractual Obligations—Overdraft and Others.” We also have certain relationships with the Korea Power Exchange. See Item 4.B. “Business Overview—Purchase of Electricity—Cost-based Pool System.”

For a further description of our transactions with our affiliates, see Note 47 of the Notes to our consolidated financial statements included in this annual report.

Item 7.C. Interests of Experts and Counsel

Not Applicable

ITEM 8.

FINANCIAL INFORMATION

Item 8.A. Consolidated Statements and Other Financial Information

We prepare our consolidated financial statements in compliance with requirements under Item 18. “Financial Statements.”

Legal Proceedings

As of December 31, 2019, we and our subsidiaries were engaged in 586 lawsuits as a defendant and 199 lawsuits as a plaintiff. As of the same date, the total amount of damages claimed against us and our subsidiaries was Won 698 billion, for which we have made a provision of Won 88 billion as of December 31, 2019, and the total amount claimed by us and our subsidiaries was Won 707 billion as of December 31, 2019. While the outcome of any of these lawsuits cannot presently be determined with certainty, our management currently believes that the final results from these lawsuits will not have a material adverse effect on our liquidity, financial position or results of operations.

The following are potentially significant claims pertaining to us and our subsidiaries.

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should have been included as ordinary wage. In July 2016, the court ruled against us, and in accordance with the court’s ruling, in August 2016 we paid Won 55.1 billion to the employees for three years of back pay plus interest. As of December 31, 2019, however, 25 lawsuits were pending against our subsidiaries for an aggregate claim amount of Won 61 billion, for which our subsidiaries set aside an aggregate amount of Won 29 billion to cover any potential future payments of additional ordinary wage in relation to the related lawsuits. All cases are currently on-going at various stages of proceedings. We cannot presently assure you that the courts will not ultimately rule against our subsidiaries in these lawsuits, or that the amount of our reserves against these lawsuits will be sufficient to cover the amounts actually payable under court rulings. Any of these developments would adversely affect our results of operations.

During the period from 2014 to 2019, certain residential customers filed class action lawsuits against us based on the claim that electricity tariffs, determined under the progressive rate structure, were excessive. As of December 31, 2019, we were subject to 14 such lawsuits brought by approximately 10,000 plaintiffs with an aggregate claim amount of Won 5.8 billion. Of these 14 lawsuits, seven cases are currently pending in the third round of proceedings (for which we won all of the first and second rounds of proceedings, except for one case) and three cases are currently pending in the second round of proceedings (for which we won all of the first rounds of proceedings). Four cases are currently pending in the first round of proceedings.

In November 2019, prosecutors indicted six of KHNP’s employees for, among others, failing to immediately shut down Hanbit #1 reactor when its thermal output exceeded the threshold specified by the nuclear safety technical operations manual and filing false reports to the NSSC. KHNP is also indicted for secondary liability from its employees’ alleged wrongdoings. The case stemmed from the NSSC’s investigations into the manual shutdown of Hanbit #1 reactor during a diagnostic test in May 2019. The case is currently pending, and we cannot assure you that the outcomes of the ongoing case will not have any material adverse effect on us, our reputation and our operating results.

In addition, our generation subsidiaries, currently and from time to time, are involved in lawsuits incidental to the conduct of their business. A significant number of such lawsuits are based on the claim that the construction and operation of the electricity generation units owned by our generation subsidiaries have impaired neighboring fish farms. For example, in May 2012, a group of merchants and fishermen in the Jeolla region have sued KHNP for damages from pollutants released by a generation unit. The case is still pending. Our generation subsidiaries normally pay compensation to the members of fishery associations near our power plant complex for expected losses and damages arising from the construction and operation of their power plants in advance. Despite such compensation paid by us, a claim may still be filed against our generation subsidiaries challenging the compensation paid by us.

The nuclear power plant at Wolsong #1 unit began operations in 1982 and ended its operations in 2012 pursuant to its 30-year operating license. In February 2015, the NSSC evaluated the safety of operating Wolsong #1 unit and approved its extended operation until November 2022. However, a civic group filed a lawsuit to annul such decision, and in February 2017, the Seoul Administrative Court ruled against the NSSC. The NSSC appealed this decision, and the civic group has filed an injunction to suspend the operation of the Wolsong #1 unit. The civic group’s injunction was denied in July 2017. KHNP, which operated the unit pursuant to the NSSC’s initial decision, has joined this lawsuit. On June 15, 2018, the board of directors of KHNP decided to (i) retire Wolsong #1 unit earlier than planned due to its economic inefficiency and (ii) discontinue the construction of Chunji #1 and #2 as well as Daejin #1 and #2 units. As of December 31, 2019, impairment loss in connection with the property, plant and equipment of Wolsong #1 unit accrued to Won 572,216 million and reversal of impairment loss was Won 16,693 million. As of December 31, 2019, impairment loss in connection with the property, plant and equipment of Chunji #1 and #2 as well as Daejin #1 and #2 units amounted to Won 38,886 million. Although the board of directors did not make any decisions regarding Shin-Hanul #3 and #4 units, which are new nuclear plants under construction, we cannot assure you that the construction of these units will not be discontinued. As of December 31, 2019, impairment loss in connection with the property, plant and equipment of Shin-Hanul #3 and #4 units accrued to Won 134,736 million. There are ten other nuclear

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generation units whose life under their initial operating license will expire in the next ten years, or by 2030. We may find it more difficult to have the life of other nuclear units extended as well. Furthermore, in June 2016, Greenpeace and 559 Korean nationals brought a lawsuit against the NSSC to revoke the permit the NSSC granted to KHNP in relation to the construction of Shin-Kori #5 and #6 nuclear generation units. The lower court ruled on this case in February 2019, both parties appealed, and the case is currently pending in the Seoul High Court. Additionally, in May 2019, a group of 729 Korean nationals brought a lawsuit against the NSSC, challenging its decision to suspend the operation of Shin-Kori #4. In July 2019, we have applied to participate in the lawsuit as a stakeholder. The case is currently pending in the Seoul High Court. We cannot assure you that there will not be new challenges to prohibit the construction of new nuclear units in the future, whereby we may experience a loss of revenues and an increase in our overall fuel costs (as nuclear fuel is the cheapest compared to coal, LNG or oil) as a result of such prohibition, which could adversely affect our results of operation and financial condition.

We and our subsidiaries are also involved in the following arbitrations, among others.

•

SAP Korea Ltd brought a breach of contract claim against us and KEPCO KDN Co., Ltd., one of our subsidiaries, in relation to the enterprise resource planning software serviced by SAP Korea. In that connection, arbitration was filed in the International Chamber of Commerce International Court of Arbitration. We have not recognized any provision because the probability of economic benefit outflow is remote and the related amount cannot be reliably estimated.

•

Hyundai E&C, GS Engineering & Construction Corp. and Hansol SeenTec Co., Ltd. filed an arbitration case against us at the Korea Commercial Arbitration Board to request payment for additional construction costs. As of December 31, 2018, we have recognized the litigation provisions of Won 204,787 million in relation to this arbitration case and made the payment according to the results of this arbitration.

•

Halla Corporation filed an arbitration case against us at the Korea Commercial Arbitration Board to request payment for additional construction costs, and we filed an arbitration case against Halla Corporation to request penalty payment for the delayed construction work. As of December 31, 2019, we have recognized Won 19,754 million of provision estimated to be required to fulfill our obligations in relation to this arbitration. In January 2020, according to the results of this arbitration, we have made a reversal of the provision of Won 19,754 million.

•

Enzen, one of our subcontractors, filed an arbitration case against us over a contractual dispute in connection with the electric power IT modernization project in Kerala, India. We have not recognized any losses because the probability of economic benefit outflow is remote and the related amount cannot be reasonably determined.

•

In September 2019, we filed for arbitration against IL KWANG E&C Co., Ltd. at the Korea Commercial Arbitration Board, in relation to damage claims received as of December 31, 2019. We have not recognized any estimated provision because the related amount cannot be reasonably determined as of December 31, 2019.

From 2017 to 2018, the Korea Customs Service (“KCS”) conducted an investigation on a group of individuals and companies suspected of illegally importing North Korean coal. KOSEP was subject to a written investigation in 2018, as it had procured coal from a direct supplier that, in turn, purchased the coal from one of the traders who was suspected of such illegal activity. The transaction between KOSEP and the direct supplier was denominated in U.S. dollars. Neither KOSEP nor its direct supplier were found to have committed any wrongdoing. KCS concluded the investigation in August 2018 and ultimately accused three individuals and three companies (none of which included KOSEP or its direct supplier) of document forgery and violation of applicable customs and compliance law. Prosecutors indicted these individuals and companies as well as additional parties, and in October 2019, the Daegu District Court sentenced the defendants to imprisonment and/or fines. Neither KOSEP nor its direct supplier were implicated, and no legal action has been taken, or is currently pending, against KOSEP or any of its directors or officers. However, we cannot assure you that this

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investigation, the result of the trial and/or related events will not have any material adverse effect on us, our reputation, our common shares or our American depositary shares.

On November 9, 2018, certain of our former executive and employees were convicted in a district court on charges for receiving bribes. In May 2019, the appellate court confirmed the charges.

As part of our efforts to prevent recurrence of similar cases, we have implemented the following measures:

•

Implementing web training program on integrity for all employees,

•

Strengthening integrity and anti-corruption evaluation systems for high-ranking officers and reflecting such results in performance evaluations, and

•

Increasing the punishment and penalties for employee corruption.

We do not believe such claims or proceedings, individually or in the aggregate, have had or will have a material adverse effect on us and our generation subsidiaries. However, we cannot assure you that this will be the case in the future, given the possibility that we may become subject to more legal and arbitral proceedings arising from changes in the environmental laws and regulations as they become applicable to us and our generation subsidiaries, and the related growth in demand for more compensation by actual and potential affected parties. Further, we cannot assure you that the above convictions and/or related events will not have an adverse effect on our reputation as well as the price of our common shares and our American depositary shares.

Dividend Policy

For our dividend policy, see Item 10.B. “Memorandum and Articles of Incorporation—Description of Capital Stock—Dividend Rights.” For a description of the tax consequences of dividends paid to our shareholders, see Item 10.E. “Taxation—Korean Taxes—Shares or ADSs—Dividends on the Shares of Common Stock or ADSs” and Item 10.E. “Taxation—U.S. Federal Income Tax Consideration for U.S. Persons—Tax Consequences with Respect to Common Stock and ADSs—Distributions on Common Stock or ADSs.”

Item 8.B. Significant Changes

Not Applicable

ITEM 9.

THE OFFER AND LISTING

Item 9.A. Offer and Listing Details

Notes

We have issued the following registered notes and debentures, which are traded principally in the over-the-counter market:

•

7.95% Zero-To-Full Debentures, due April 1, 2096 (the “7.95% Debentures”);

•

6% Debentures due December 1, 2026, (the “6% Debentures”);

•

7% Debentures due February 1, 2027 (the “7% Debentures”); and

•

6-3/4% Debentures due August 1, 2027 (the “6-3/4% Debentures,” and together with the 7.95% Debentures, the 6% Debentures and the 7% Debentures, the “Registered Debt Securities”).

Sales prices for the Registered Debt Securities are not regularly reported on any United States securities exchange or other United States securities quotation service.

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Share Capital

The principal trading market for our common stock is the Korea Exchange. Our common stock is also listed on the New York Stock Exchange in the form of ADSs. The ADSs have been issued by Citibank, N.A. as depositary and are listed on the New York Stock Exchange under the symbol “KEP.” One ADS represents one-half of one share of our common stock. As of December 31, 2019, the date we last closed our shareholders’ registry, 55,186,476 ADSs representing 4.3 % shares of our common stock were outstanding.

Common Stock

Shares of our common stock are listed on the KRX KOSPI Market of the Korea Exchange. The table below shows the high and low closing prices on the KRX KOSPI Market of the Korea Exchange for our common stock since 2015.


	Price
Period	High		Low
	(In Won)
2015
First Quarter		46,000		39,150
Second Quarter		48,500		42,450
Third Quarter		52,200		46,300
Fourth Quarter		53,300		47,500
2016
First Quarter		60,600		49,800
Second Quarter		63,000		57,400
Third Quarter		62,900		54,000
Fourth Quarter		54,500		43,200
2017
First Quarter		48,750		40,350
Second Quarter		46,700		40,800
Third Quarter		45,500		38,200
Fourth Quarter		41,100		37,350
2018
First Quarter		37,750		30,850
Second Quarter		37,750		32,000
Third Quarter		33,300		28,700
Fourth Quarter		34,350		23,850
October		29,350		23,850
November		30,800		26,600
December		34,350		29,750
2019
First Quarter		35,800		29,900
Second Quarter		30,350		24,700
Third Quarter		27,950		24,700
Fourth Quarter		29,250		25,100
October		26,300		25,100
November		28,150		25,250
December		29,250		27,450
2020
First Quarter		28,500		16,250
January		28,500		25,550
February		26,100		21,300
March		22,800		16,250
April (through April 17)		21,200		19,000

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ADSs

The table below shows the high and low closing prices on the New York Stock Exchange for the outstanding ADSs since 2015. Each ADS represents one-half of one share of our common stock.


	Closing Price per ADS
Period	High		Low
	(In US$)
2015
First Quarter		21.01		18.26
Second Quarter		22.53		19.29
Third Quarter		22.13		19.45
Fourth Quarter		23.31		20.28
2016
First Quarter		21.01		18.26
Second Quarter		26.90		24.67
Third Quarter		28.31		24.38
Fourth Quarter		24.34		18.48
2017
First Quarter		21.35		17.53
Second Quarter		20.80		17.82
Third Quarter		20.38		16.73
Fourth Quarter		18.22		16.60
2018
First Quarter		17.83		14.28
Second Quarter		17.43		14.34
Third Quarter		14.70		12.62
Fourth Quarter		14.96		10.52
2019
First Quarter		15.75		13.01
Second Quarter		13.20		10.42
Third Quarter		11.79		10.24
Fourth Quarter		12.22		10.52
October		11.19		10.52
November		12.22		10.97
December		12.16		11.69
2020
First Quarter		12.23		6.34
January		12.23		10.57
February		11.03		8.79
March		9.23		6.34
April (through April 17)		8.76		7.53

Item 9.B. Plan of Distribution

Not Applicable

Item 9.C. Markets

The Korea Exchange

The Korea Exchange began its operations in 1956, originally under the name of the Korea Stock Exchange. On January 27, 2005, pursuant to the Korea Securities and Futures Exchange Act, the Korea Exchange was

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officially created through the consolidation of the Korea Stock Exchange, the Korea Futures Exchange, the KOSDAQ Stock Market, Inc., or KOSDAQ, and the KOSDAQ Committee within the Korea Securities Dealers Association, which was in charge of the management of the KOSDAQ. The KRX KOSPI Market of the Korea Exchange, formerly the Korea Stock Exchange, has a single trading floor located in Seoul. The Korea Exchange is a limited liability company, the shares of which are held by (i) securities companies and futures companies that were the members of the Korea Stock Exchange or the Korea Futures Exchange and (ii) the shareholders of the KOSDAQ.

As of March 31, 2020, the aggregate market value of equity securities listed on the KOSPI of the Korea Exchange was approximately Won 1,179,728 billion. The average daily trading volume of equity securities for the first quarter of 2020 was approximately 712 million shares with an average transaction value of Won 8,104 billion.

The Korea Exchange has the power in some circumstances to suspend trading of shares of a given company or to de-list a security. The Korea Exchange also restricts share price movements. All listed companies are required to file accounting reports annually, semi-annually and quarterly and to release immediately all information that may affect trading in a security.

The Government has in the past exerted, and continues to exert, substantial influence over many aspects of the private sector business community which can have the intention or effect of depressing or boosting the market. In the past, the Government has informally both encouraged and restricted the declaration and payment of dividends, induced mergers to reduce what it considers excess capacity in a particular industry and induced private companies to publicly offer their securities.

The Korea Exchange publishes the Korea Composite Stock Price Index, or KOSPI, every ten seconds, which is an index of all equity securities listed on the KRX KOSPI Market of the Korea Exchange. On January 1, 1983, the method of computing KOSPI was changed from the Dow Jones method to the aggregate value method. In the new method, the market capitalizations of all listed companies are aggregated, subject to certain adjustments, and this aggregate is expressed as a percentage of the aggregate market capitalization of all listed companies as of the base date, January 4, 1980.

Movements in KOSPI in the past five years are set out in the following table:


	Opening		High		Low		Closing
2015		1,926.4		2,173.4		1,829.8		1,961.3
2016		1,918.8		2,068.7		1,835.3		2,026.5
2017		2,026.2		2,558.0		2,026.2		2,467.5
2018		2,479.7		2,598.2		1,996.1		2,041.0
2019		2,010.0		2,248.6		1,909.7		2,197.7
2020 (through April 17)		2,175.2		2,267.3		1,457.6		1,914.5

Source: The Korea Exchange

Shares are quoted “ex-dividend” on the first trading day of the relevant company’s accounting period; since the calendar year is the accounting period for the majority of listed companies, this may account for the drop in KOSPI between its closing level at the end of one calendar year and its opening level at the beginning of the following calendar year.

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With certain exceptions, principally to take account of a share being quoted “ex-dividend” and “ex-rights,” upward and downward movements in share prices of any category of shares on any day are limited under the rules of the Korea Exchange to 30% of the previous day’s closing price of the shares, rounded down as set out below:


Previous Day’s Closing Price (Won)	Rounded Down to (Won)
less than 5,000	￦	5
5,000 to less than 10,000		10
10,000 to less than 50,000		50
50,000 to less than 100,000		100
100,000 to less than 500,000		500
500,000 or more		1,000

As a consequence, if a particular closing price is the same as the price set by the fluctuation limit, the closing price may not reflect the price at which persons would have been prepared, or would be prepared to continue, if so permitted, to buy and sell shares. Orders are executed on an auction system with priority rules to deal with competing bids and offers.

Due to deregulation of restrictions on brokerage commission rates, the brokerage commission rate on equity securities transactions may be determined by the parties, subject to commission schedules being filed with the Korea Exchange by the securities companies. In addition, a securities transaction tax will generally be imposed on the transfer of shares or certain securities representing rights to subscribe for shares. A special agricultural and fishery tax of 0.15% of the sales prices will also be imposed on transfer of these shares and securities on the Korea Exchange. See Item 10.E. “Taxation—Korean Taxes.”

The number of companies listed on the KRX KOSPI Market of the Korea Exchange since 2015, the corresponding total market capitalization at the end of the periods indicated and the average daily trading volume for those periods are set forth in the following table:


Year	Number of Listed Companies		Total Market Capitalization on the Last Day for Each Period				Average Daily Trading Volume, Value
Year	Number of Listed Companies		(Millions of Won)		(Thousands of U.S. dollars)⁽¹⁾		(Thousands of Shares)		(Millions of Won)		(Thousands of U.S. dollars)⁽¹⁾
2015		770		1,242,832,089		1,060,436,936		455,256		5,351,734		4,566,326
2016		779		1,308,440,373		1,082,697,868		376,772		4,523,043		3,742,692
2017		774		1,605,820,912		1,498,806,153		340,463		5,335,418		4,979,856
2018		788		1,343,971,857		1,202,014,003		397,972		6,548,622		5,856,920
2019		799		1,475,909,365		1,274,753,295		470,722		4,989,806		4,309,731
2020 (through April 17)		797		1,287,911,931		1,112,378,590		764,850		8,587,660		7,417,223

Source: The Korea Exchange

Note:

(1)	Converted at the market average exchange rate as announced by Seoul Money Brokerage Services, Ltd. in Seoul at the end of the periods indicated.

The Korean securities markets are principally regulated by the Financial Services Commission and the Financial Investment Services and Capital Markets Act. The law imposes restrictions on insider trading and price manipulation, requires specified information to be made available by listed companies to investors and establishes rules regarding margin trading, proxy solicitation, takeover bids, acquisition of treasury shares and reporting requirements for shareholders holding substantial interests.

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Protection of Customer’s Interest in Case of Insolvency of Financial Investment Companies with a Brokerage License

Under Korean law, the relationship between a customer and a financial investment company with a brokerage license in connection with a securities sell or buy order is deemed to be consignment, and the securities acquired by a consignment agent (i.e., the financial investment company with a brokerage license) through such sell or buy order are regarded as belonging to the customer insofar as the customer and the consignment agent’s creditors are concerned. Therefore, in the event of bankruptcy or reorganization procedures involving a financial investment company with a brokerage license, the customer of such financial investment company is entitled to the proceeds of the securities sold by such financial investment company.

When a customer places a sell order with a financial investment company with a brokerage license which is not a member of the Korea Exchange and this financial investment company places a sell order with another financial investment company with a brokerage license which is a member of the Korea Exchange, the customer is still entitled to the proceeds of the securities sold received by the non-member company from the member company regardless of the bankruptcy or reorganization of the non-member company.

Likewise, when a customer places a buy order with a non-member company and the non-member company places a buy order with a member company, the customer has the legal right to the securities received by the non-member company from the member company because the purchased securities are regarded as belonging to the customer insofar as the customer and the non-member company’s creditors are concerned.

Under the Financial Investment Services and Capital Markets Act, the Korea Exchange is obliged to indemnify any loss or damage incurred by a counterparty as a result of a breach by its members. If a financial investment company with a brokerage license which is a member of the Korea Exchange breaches its obligation in connection with a buy order, the Korea Exchange is obliged to pay the purchase price on behalf of the breaching member.

As the cash deposited with a financial investment company with a brokerage license is regarded as belonging to such financial investment company, which is liable to return the same at the request of its customer, the customer cannot take back deposited cash from the financial investment company with a brokerage license if a bankruptcy or reorganization procedure is instituted against such financial investment company and, therefore, can suffer from loss or damage as a result. However, the Depositor Protection Act provides that Korean Deposit Insurance Corporation will, upon the request of the investors, pay investors up to Won 50 million per depositor per financial institution in case of the such financial investment company’s bankruptcy, liquidation, cancellation of securities business license or other insolvency events (collectively, the “Insolvency Events”). Pursuant to the Financial Investment Services and Capital Markets Act, subject to certain exceptions, financial investment companies with a brokerage license are required to deposit the cash received from their customers with the Korea Securities Finance Corporation, a special entity established pursuant to the Financial Investment Services and Capital Markets Act. Set-off or attachment of cash deposits by financial investment companies with a brokerage license is prohibited. The premiums related to this insurance under the Depositor Protection Act are paid by financial investment companies with a brokerage license.

Item 9.D. Selling Shareholders

Not Applicable

Item 9.E. Dilution

Not Applicable

Item 9.F. Expenses of the Issue

Not Applicable

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ITEM 10.

ADDITIONAL INFORMATION

Item 10.A. Share Capital

Not Applicable

Item 10.B. Memorandum and Articles of Incorporation

Set forth below is information relating to our capital stock, including brief summaries of material provisions of our Articles of Incorporation, the KEPCO Act, the Financial Investment Services and Capital Markets Act, the Korean Commercial Act and certain related laws of Korea, all currently in effect. The following summaries are qualified in their entirety by reference to our Articles of Incorporation and the applicable provisions of the KEPCO Act, Financial Investment Services and Capital Markets Act, the Korean Commercial Act, the Act on the Management of Public Institutions and certain related laws of Korea. On April 14, 2020, we amended our Articles of Incorporation to incorporate the requirements relating to the electronic registration of stocks, bond, etc. in accordance with the Act on Electronic Registration of Stocks, Bonds, Etc. (“Electronic Registration Act”) and relevant amendments to the Act on the Management of Public Institutions.

Objects and Purposes

We are a statutory juridical corporation established under the KEPCO Act for the purpose of ensuring “stabilization of the supply and demand of electric power, and further contributing toward the sound development of the national economy through expediting development of electric power resources and carrying out proper and effective operation of the electricity business.” The KEPCO Act and our Articles of Incorporation (Article 2) contemplate that we engage in the following activities:

development of electric power resources;

generation, transmission, transformation and distribution of electricity and other related business activities;

research and development of technology related to the businesses mentioned in items 1 and 2;

overseas businesses related to the businesses mentioned in items 1 through 3;

investments or contributions related to the businesses mentioned in items 1 through 4;

businesses incidental to items 1 through 5;

Development and operation of certain real estate held by us to the extent that:

other activities entrusted by the Government.

Our registered name is “Hankook Chollryuk Kongsa” in Korean and “Korea Electric Power Corporation” in English. Our registration number in the commercial registry office is 114671-0001456.

Directors

Under the KEPCO Act and our Articles of Incorporation, our board of directors consists of our president, standing directors and non-standing directors. A majority of the board members constitutes a voting quorum, and resolutions will be passed by a majority of the board members. Directors who have an interest in certain agenda proposed to the board may not vote on such issues.

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The standards of remuneration for our officers, including directors, shall be determined by a resolution of the board of directors, provided that the maximum amount of remuneration to be paid to our officers shall be determined by shareholder resolution and provided that the remuneration standards for the president and standing directors shall be determined by board resolution in accordance with the guideline thereon established by the minister of the Ministry of Economy and Finance through review and resolution of our management committee. Directors who have an interest may not participate in the meeting of the board of directors for determining the remuneration for officers.

Neither the KEPCO Act nor our Articles of Incorporation have provisions relating to (i) borrowing powers exercisable by the directors and how such borrowing powers can be varied, (ii) retirement or non-retirement of directors under an age limit requirement, or (iii) the number of shares required for a director’s qualification.

Share Capital

Currently, our authorized share capital is 1,200,000,000 shares, which consists of shares of common stock and shares of non-voting preferred stock, par value Won 5,000 per share. Under our Articles of Incorporation, we are authorized to issue up to 150,000,000 non-voting preferred shares. As of December 31, 2019, the last day on which our shareholders’ registry was closed for purposes of identifying shareholders of record, 641,964,077 common shares were issued and no non-voting preferred shares have been issued. All of the issued and outstanding common shares are fully-paid and non-assessable and are in registered form. Our shares are electronically registered with our account management institution in lieu of issuing share certificates.

Description of Capital Stock

Dividend Rights

Under the KEPCO Act, we are authorized to pay preferential dividends on our shares held by public shareholders as opposed to those held by the Government. Dividends to public shareholders are distributed in proportion to the number of shares of the relevant class of capital stock owned by each public shareholder following approval by the shareholders at a general meeting of shareholders. Korea Development Bank may receive dividends in proportion to the numbers of our shares held by them. Under the Korean Commercial Act and our Articles of Incorporation, we will pay full annual dividends on newly issued shares.

Under our Articles of Incorporation, holders of non-voting preferred shares (of which there are currently none) are entitled to receive an amount not less than 8% of their par value as determined by a resolution of the board of directors at the time of their issuance. However, stock dividends shall be paid based on par value and may not exceed the amount equivalent to a half of the total amount of profit available for dividend payment.

We declare our dividend annually at the annual general meeting of shareholders which is held within three months after the end of the fiscal year. The annual dividend is paid to the shareholders on record as of the end of the fiscal year preceding the annual shareholders’ meeting. Annual dividends may be distributed either in cash or in our shares. However, a dividend of shares must be distributed at par value, and dividends in shares may not exceed one-half of the annual dividend.

Under the Korean Commercial Act and our Articles of Incorporation, we do not have an obligation to pay any annual dividend unclaimed for five years from the payment date.

The KEPCO Act provides that we shall not pay an annual dividend unless we have made up any accumulated deficit and set aside as a legal reserve an amount equal to 20.0% or more of our net profit until our accumulated reserve reaches one-half of our stated capital.

Distribution of Free Shares

In addition to dividends in the form of shares to be paid out of retained or current earnings, the Korean Commercial Act permits us to distribute to our shareholders an amount transferred from our capital surplus or legal reserve to stated capital in the form of free shares.

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Voting Rights

Holders of our common shares are entitled to one vote for each common share, except that voting rights with respect to any common shares held by us or by a corporate shareholder, more than one-tenth of whose outstanding capital stock is directly or indirectly owned by us, may not be exercised. Any person (with certain exceptions) who holds more than 3% of our issued and outstanding shares cannot exercise voting rights with respect to the shares in excess of this 3% limit. See “—Limitation on Shareholdings.” Pursuant to the Korean Commercial Act, cumulative voting is permissible in relation to the appointment of directors. Under the Korean Commercial Act, a cumulative vote can be requested by the shareholders of a corporation representing at least 1% of the total voting shares of such corporation if the relevant shareholders’ meeting is intended to elect more than two seats of the board of directors and the request for cumulative voting is made to the management of the corporation in writing at least six weeks in advance of the shareholders’ meeting. Under this new voting method, each shareholder will have multiple voting rights corresponding to the number of directors to be appointed in such voting and may exercise all such voting rights to elect one director. Shareholders are entitled to vote cumulatively unless the Articles of Incorporation expressly prohibit cumulative voting. Our current Articles of Incorporation do not prohibit cumulative voting. Except as otherwise provided by law or our Articles of Incorporation, a resolution can be adopted at a general meeting of shareholders by affirmative majority vote of the voting shares of the shareholders present or represented at a meeting, which must also represent at least one-fourth of the voting shares then issued and outstanding. The holders of our non-voting preferred shares (other than enfranchised preferred shares (as described below)) are not entitled to vote on any resolution or to receive notice of any general meeting of shareholders unless the agenda of the meeting includes consideration of a resolution on which such holders are entitled to vote. If we are unable to pay any dividend to holders of non-voting preferred shares as provided in our Articles of Incorporation, the holders of non-voting preferred shares will become enfranchised and will be entitled to exercise voting rights until such dividends are paid. The holders of these “enfranchised preferred shares” have the same rights as holders of our common shares to request, receive notice of, attend and vote at a general meeting of shareholders. Pursuant to the KEPCO Act and our Articles of Incorporation, the appointment of standing directors, the president and standing statutory auditor are subject to shareholder approval.

Under the Korean Commercial Act, for the purpose of electing our statutory auditor, a shareholder (together with certain related persons) holding more than 3% of the total shares having voting rights may not exercise voting rights with respect to shares in excess of such 3% limit.

The Korean Commercial Act provides that the approval by holders of at least two-thirds of those shares having voting rights present or represented at a meeting, where such shares also represent at least one-third of the total issued and outstanding shares having voting rights, is required in order to, among other things:

•

amend our Articles of Incorporation;

•

remove a director or statutory auditor;

•

effect any dissolution, merger, consolidation or spin-off of us;

•

transfer the whole or any significant part of our business;

•

effect the acquisition by us of all of the business of any other company;

•

effect the acquisition by us of the business of another company that may have a material effect on our business;

•

reduce capital; or

•

issue any new shares at a price lower than their par value.

Under our Articles of Incorporation, an approval by the Ministry of Trade, Industry and Energy is required in order to amend the Articles of Incorporation. Any change to our authorized share capital requires an amendment to our Articles of Incorporation.

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In addition, in the case of amendments to our Articles of Incorporation or any merger or consolidation of us or in certain other cases which affect the rights or interests of the non-voting preferred shares a resolution must be adopted by a meeting of the holders of non-voting preferred shares approving such event. This resolution may be adopted if approval is obtained from holders of at least two-thirds of those non-voting preferred shares present or represented at such meeting and such non-voting preferred shares also represent at least one-third of our total issued and outstanding non-voting preferred shares.

A shareholder may exercise his voting rights by proxy. The proxy shall present the power of attorney prior to the start of the general meeting of shareholders. Under the Financial Investment Services and Capital Markets Act and our Articles of Incorporation, no one other than us may solicit a proxy from shareholders.

Subject to the provisions of the deposit agreement, holders of our American Depositary Shares (“ADSs”) are entitled to instruct the depositary, whose agent is the record holder of the underlying common shares, how to exercise voting rights relating to those underlying common shares.

Preemptive Rights and Issuance of Additional Shares

Authorized but unissued shares may be issued at such times and, unless otherwise provided in the Korean Commercial Act, upon such terms as our board of directors may determine. The new shares must be offered on uniform terms to all our shareholders who have preemptive rights and who are listed on the shareholders’ register as of the record date. Subject to the limitations described under “—Limitation on Shareholdings” below and with certain other exceptions, all our shareholders are entitled to subscribe for any newly issued shares in proportion to their existing shareholdings. Under the Korean Commercial Act, we may vary, without shareholder approval, the terms of such preemptive rights for different classes of shares. Public notice of the preemptive rights to new shares and their transferability must be given not less than two weeks (excluding the period during which the shareholders’ register is closed) prior to the record date. Our board of directors may determine how to distribute shares for which preemptive rights have not been exercised or where fractions of shares occur.

Our Articles of Incorporation provide that new shares that are (1) publicly offered pursuant to the Financial Investment Services and Capital Markets Act, (2) issued to members of our employee stock ownership association, (3) represented by depositary receipts, (4) issued through offering to public investors, or (5) issued to investors in kind under the State Property Act may be issued pursuant to a resolution of the board of directors to persons other than existing shareholders, who in such circumstances will not have preemptive rights.

Under our Articles of Incorporation, we may issue convertible bonds or bonds with warrants each up to an aggregate principal amount of Won 2,000 billion and Won 1,000 billion, respectively, to persons other than existing shareholders. However, the aggregate principal amount of convertible bonds and bonds with warrants so issued to persons other than existing shareholders may not exceed Won 2,000 billion.

Under the Financial Investment Services and Capital Markets Act and our Articles of Incorporation, members of our employee stock ownership association, whether or not they are our shareholders, have a preemptive right, subject to certain exceptions, to subscribe for up to 20.0% of any shares publicly offered pursuant to the Financial Investment Services and Capital Markets Act. This right is exercisable only to the extent that the total number of shares so acquired and held by members of our employee stock ownership association does not exceed 20.0% of the total number of shares then outstanding.

Liquidation Rights

In the event of our liquidation, the assets remaining after payment of all debts, liquidation expenses and taxes will be distributed among shareholders in proportion to the number of shares held. Holders of our non-voting preferred shares have no preference in liquidation.

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Rights of Dissenting Shareholders

In certain limited circumstances (including, without limitation, the transfer of the whole or any significant part of our business or the merger, or consolidation upon a split-off of us with another company), dissenting holders of shares have the right to require us to purchase their shares. To exercise such right, shareholders must submit a written notice of their intention to dissent to us prior to the general meeting of shareholders or the class meeting of holders of non-voting preferred shares, as the case may be. Within 20 days after the date on which the relevant resolution is passed at such meeting, such dissenting shareholders must request us in writing to purchase their shares. We are obligated to purchase the shares of dissenting shareholders within one month after the expiration of such 20-day period. The purchase price for such shares must be determined through negotiation between the dissenting shareholders and us. Under the Financial Investment Services and Capital Markets Act, if we cannot agree on a price through negotiation, the purchase price will be the average of (1) the weighted average of the daily share price on the Korea Exchange for a two-month period before the date of adoption of the relevant board resolution, (2) the weighted average of the daily share price on the Korea Exchange for the one month period before such date and (3) the weighted average of the daily share price on the Korea Exchange for the one week period before such date. However, if we or dissenting shareholders who requested us to purchase their shares oppose such purchase price, the determination of a purchase price may be filed with a court. Holders of ADSs will not be able to exercise dissenter’s rights unless they have withdrawn the underlying Common Stock and become our direct shareholders.

Transfer of Shares

Under the Electronic Registration Act, the transfer of shares is effected by the electronic registration of such transfers on an electronic register pursuant to the Electronic Registration Act, under which the electronic registration of stocks, bonds and transfers thereof will be required. To assert shareholders’ right against us, the transferee must have his name and address registered on our electronic register of shareholders. For this purpose, a shareholder is required to apply for electronic registration of transfers between accounts.

These requirements do not apply to the holders of ADSs. Under current Korean regulations, the Korea Securities Depository, foreign exchange banks (including domestic branches of foreign banks), financial investment companies with a dealing, brokerage or collective investment license and internationally recognized foreign custodians are authorized to act as agents and provide related services for foreign shareholders. Our transfer agent is Kookmin Bank, located at 26, Gukjegeumyung-ro 8-gil, Yeongdeungpo-gu, Seoul, Korea. Certain foreign exchange controls and securities regulations apply to the transfer of our shares by non-residents of Korea or non-Koreans. See Item 9. “The Offer and Listing.”

Acquisition of Our Own Shares

Under the Korean Commercial Act, we may acquire our own shares through (1) purchases on a stock exchange or (2) purchase of the shares in proportion to the number of shares held by each shareholder on equal terms and conditions, by a resolution at a Shareholders’ meeting. The aggregate amount of the acquisition price shall not exceed the excess of our net assets, on a non-consolidated basis, over the sum of (1) our stated capital, (2) the total amount of our capital surplus reserve and earned surplus reserve which have accumulated up to the end of the previous fiscal year, (3) our earned surplus required to be accumulated for the then current fiscal year and (4) our net assets stated in the balance sheet as being increased as a result of the evaluation of the assets and liabilities in accordance with our accounting principles without being set off against any unrealized losses. In addition, under the Korean Commercial Act, we may not acquire our own shares if our net assets may fall short of the aggregate amount of the item (1) to (4) above, on a non-consolidated basis, as of the conclusion of the relevant business year of us. In general, our subsidiaries 50% or more of whose shares are owned by us may not acquire our shares.

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General Meeting of Shareholders

The ordinary general meeting of our shareholders is held within three months after the end of each fiscal year, and subject to board resolution or court approval, an extraordinary general meeting of our shareholders may be held as necessary or at the request of shareholders holding an aggregate of 1.5% or more of our outstanding common shares for at least six consecutive months. Under the Korean Commercial Act, an extraordinary general meeting of shareholders may be convened at the request of our audit committee, subject to a board resolution or court approval. Holders of non-voting preferred shares may only request a general meeting of shareholders once the non-voting preferred shares have become enfranchised as described under “—Description of Capital Stock—Voting Rights” above. Written notices setting forth the date, place and agenda of the meeting must be given to shareholders at least two weeks prior to the date of the general meeting of shareholders. However, pursuant to the Korean Commercial Act and our Articles of Incorporation, with respect to holders of less than 1% of the total number of our issued and outstanding shares which are entitled to vote, notice may be given by placing at least two public notices at least two weeks in advance of the meeting in at least two daily newspapers published in Seoul or by placing a public notice in the electrical disclosure system of the Financial Supervisory Service or the Korea Exchange, at least two weeks in advance of the meeting. Currently, for giving such notice, we use an electronic disclosure system available for access at a website maintained by the Financial Supervisory Service (known as the Data Analysis, Retrieval and Transfer System, or DART). Shareholders not on the shareholders’ register as of the record date are not entitled to receive notice of the general meeting of shareholders or attend or vote at such meeting. Holders of the enfranchised preferred shares on the shareholders’ register as of the record date are entitled to receive notice of, and to attend and vote at, the general meetings. Otherwise, holders of non-voting preferred shares are not entitled to receive notice of general meetings of shareholders or vote at such meetings but may attend such meetings.

The general meeting of shareholders is held in Naju, Jeollanam-do.

Register of Shareholders and Record Dates

Our transfer agent, Kookmin Bank, maintains the register of our shareholders at its office in Seoul, Korea. It registers transfers of our shares on the register of shareholders upon presentation of the share certificates.

The record date for annual dividends is December 31. For the purpose of determining the holders of shares entitled to annual dividends, the register of shareholders may be closed from January 1 to January 31 of each year. Further, the Korean Commercial Act and our Articles of Incorporation permit us at least two weeks’ public notice to set a record date and/or close the register of shareholders for not more than three months for the purpose of determining the shareholders entitled to certain rights pertaining to our shares. The trading of our shares and the delivery of certificates in respect of them may continue while the register of shareholders is closed.

Annual Report

At least one week prior to the annual general meeting of shareholders, our annual report and audited consolidated financial statements must be made available for inspection at our principal office and at all branch offices. Copies of annual reports, the audited non-consolidated financial statements and any resolutions adopted at the general meeting of shareholders will be available to our shareholders.

Under the Financial Investment Services and Capital Markets Act, we must file with the Financial Services Commission and the Korea Exchange an annual report within 90 days after the end of our fiscal year, a half-year report within 45 days after the end of the first six months of our fiscal year and quarterly reports within 45 days after the end of the first three months and nine months of our fiscal year. Following our adoption of IFRS starting in January 1, 2011 pursuant to regulatory requirements for listed companies in Korea, we are required to file half-year and quarterly reports containing interim financial statements and notes thereto on a consolidated basis as well as on a separate basis.

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Limitation on Shareholdings

No person other than the Government, our employee stock ownership association and persons who obtain an approval from the Financial Services Commission may hold for its account more than 3% of our total issued and outstanding shares. In calculating shareholdings for this purpose, shares held by your spouse and your certain relatives or by your certain affiliates (such spouses, relatives and affiliates are together referred to as “Affiliated Holders”) are deemed to be held by you. If you hold our shares in violation of this 3% limit, you are not entitled to exercise the voting rights or preemptive rights of our shares in excess of such 3% limit and the Financial Services Commission may order you to take necessary corrective action. In addition, the KEPCO Act currently requires that the Government, directly or through Korea Development Bank, own not less than 51% of our capital. For other restrictions on shareholdings, see Item 9. “The Offer and Listing.”

Change of Control

The KEPCO Act requires that the Government, directly or pursuant to the Korea Development Bank Act, through Korea Development Bank, own not less than 51% of our capital.

Disclosure of Share Ownership

Under the Financial Investment Services and Capital Markets Act, any person whose direct or beneficial ownership of a listed company’s shares with voting rights, equity-related debt securities including convertible bonds, bonds with warrants, exchangeable bonds, certificates representing the rights to subscribe for common shares, derivatives-linked securities and depository receipts of the aforementioned securities (collectively referred to as “Equity Securities”), together with the Equity Securities directly or beneficially owned by certain related persons or by any person acting in concert with the person, accounts for 5% or more of our total outstanding Equity Securities is required to report the status and purpose (in terms of whether the purpose of shareholding is to participate in the management of the issuer) of the holdings and the material contents of the agreements relating to the Equity Securities and other matters prescribed by the Presidential Decree under the Financial Investment Services and Capital Markets Act to the Financial Services Commission of Korea and the Korea Exchange within five business days after reaching the 5% ownership interest threshold.

In addition, any change (i) in the purpose of the shareholding or in the ownership, (ii) the major terms and conditions of agreements relating to Equity Securities owned (such as trust agreements and collateral agreements) to the extent the number of relevant Equity Securities is 1% or more of the total outstanding Equity Securities, or (iii) the type of ownership (direct ownership or holding) to the extent the number of relevant Equity Securities is 1% or more of the total outstanding Equity Securities, must be reported to the Financial Services Commission of Korea and the Korea Exchange within five business days from the date of such change (or by the tenth day of the month following the month in which the change occurs, in the case of a person with no intent to seek management control). Notwithstanding the foregoing, certain professional investors designated by the Financial Services Commission may report such matters to the Financial Services Commission and the Korea Exchange by the tenth day of the month immediately following the end of the quarter in which such 5.0% ownership interest is reached or the change occurs.

When filing a report to the Financial Services Commission and the Korea Exchange in accordance with the reporting requirements described above, a copy of such report must be sent to the relevant listed company. Violation of these reporting requirements may subject a person to sanctions such as prohibition on the exercise of voting rights with respect to the Equity Securities for which the reporting requirement was violated or fines or imprisonment. Furthermore, the Financial Services Commission may order the disposal of the Equity Securities for which the reporting requirement was violated or may impose administrative fine.

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acquiring additional Equity Securities of the listed company and exercising voting rights during the period commencing from the date on which the event triggering the reporting requirements occurs to the fifth day from the date on which the report is made.

Item 10.C. Material Contracts

None.

Item 10.D. Exchange Controls

General

The Foreign Exchange Transaction Act and the Presidential Decree and regulations under that Act and Decree, or collectively the Foreign Exchange Transaction Laws, regulate investment in Korean securities by non-residents and issuance of securities outside Korea by Korean companies. Non-residents may invest in Korean securities pursuant to the Foreign Exchange Transaction Laws. The Financial Services Commission has also adopted, pursuant to its authority under the Financial Investment Services and Capital Markets Act, regulations that regulate investment by foreigners in Korean securities and issuance of securities outside Korea by Korean companies.

Subject to certain limitations, the Ministry of Economy and Finance has the authority to take the following actions under the Foreign Exchange Transaction Laws: (i) if the Government deems it necessary on account of war, armed conflict, natural disaster or grave, sudden and significant changes in domestic or foreign economic circumstances or similar events or circumstances, the Ministry of Economy and Finance may temporarily suspend performance under any or all foreign exchange transactions, in whole or in part, to which the Foreign Exchange Transaction Laws apply (including suspension of payment and receipt of foreign exchange) or impose an obligation to deposit, safe-keep or sell any instruments of payment to the Bank of Korea or certain other governmental agencies or financial institutions, or effective from July 18, 2017, impose an obligation on resident creditors to collect and recover debts owed by non-resident debtors,, and (ii) if the Government concludes that the international balance of payments and international financial markets are experiencing or are likely to experience significant disruption or that the movement of capital between Korea and other countries are likely to adversely affect the Korean Won, exchange rates or other macroeconomic policies, the Ministry of Economy and Finance may take action to require any person who intends to effect or effects a capital transaction to deposit all or a portion of the instruments of payment acquired in such transactions with the Bank of Korea or certain other governmental agencies or financial institutions.

Government Review of Issuances of Debt Securities and ADSs and Report for Payments

In order for us to issue debt securities of any series outside of the Republic, we are required to file a report with our designated foreign exchange bank or the Ministry of Economy and Finance on the issuance of such debt securities, depending on the issuance amount. The Ministry of Economy and Finance may at its discretion direct us to take measures as necessary to avoid undue exchange rate fluctuations before it accepts such report. Furthermore, in order for us to make payments of principal of or interest on the debt securities of any series and other amounts as provided in an indenture and such debt securities, we are required to present relevant documents to the designated foreign exchange bank at the time of each actual payment. The purpose of such presentation is to ensure that the actual remittance is consistent with the terms of the transaction reported to our designated foreign exchange bank or the Ministry of Economy and Finance.

In order for us to offer for purchase shares of our common stock held in treasury in the form of ADSs or issue shares of our common stock represented by the ADSs, we are required to file a prior report of such offer or issuance with our designated foreign exchange bank or the Ministry of Economy and Finance, depending on the offering amount. The Ministry of Economy and Finance may at its discretion direct us to take measures as necessary to avoid undue exchange rate fluctuations before it accepts such report. No further Governmental approval is necessary for the initial offering and issuance of the ADSs.

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In order for a depositary to acquire any existing shares of our common stock from holders of these shares of common stock (other than from us) for the purpose of issuance of depositary receipts representing these shares of common stock, the depositary would be required to obtain our consent for the number of shares to be deposited in any given proposed deposit which exceeds the difference between (1) the aggregate number of shares deposited by us or with our consent for the issuance of ADSs (including deposits in connection with the initial and all subsequent offerings of ADSs and stock dividends or other distributions related to these ADSs) and (2) the number of shares on deposit with the depositary at the time of such proposed deposit. We may not grant this consent for the deposit of shares of our common stock in the future, if our consent is required. Therefore, a holder of ADSs who surrenders ADSs and withdraws shares of our common stock may not be permitted subsequently to deposit such shares and obtain ADSs.

In addition, we are also required to notify the Ministry of Economy and Finance upon receipt of the full proceeds from the offering of ADSs. No additional Governmental approval is necessary for the offering and issuance of ADSs.

Reporting Requirements for Holders of Substantial Interests

Under the Financial Investment Services and Capital Markets Act, any person whose direct beneficial ownership of a listed company’s Equity Securities, together with the Equity Securities beneficially owned by certain related persons or by any person acting in concert with such person, accounts for 5% or more of our total outstanding Equity Securities is required to report the status and purpose (namely, whether the purposes of the share ownership is to participate in the management of the issuer) of the holdings and the material contents of the agreements relating to the Equity Securities and other matters prescribed by the Presidential Decree under the Financial Investment Services and Capital Markets Act to the Financial Services Commission and the Korea Exchange within five business days after reaching the 5% ownership interest and any change in ownership interest subsequent to the report which equals or exceeds 1.0% of the total outstanding Equity Securities is required to be reported to the Financial Services Commission and the Korea Exchange within five business days from the date of the change.

A person reporting to the Financial Services Commission and the Korea Exchange that his purpose of holding the Equity Securities is to participate in the management of the listed company is prohibited from acquiring additional Equity Securities of the listed company and exercising voting rights during the period commencing from the date on which the event triggering the reporting requirements occurs to the fifth day from the date on which the report is made.

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In addition to the reporting requirements described above, any person whose direct or beneficial ownership of our voting stock and/or depository receipts for our voting stock accounts for 10.0% or more of the total issued and outstanding voting stock, whom we refer to as a major shareholder, must file a report to the Securities and Futures Commission and to the Korea Exchange within five business days after the date on which the person reached such shareholding limit. In addition, such person must file a report to the Securities and Futures Commission and to the Korea Exchange regarding any subsequent change in his/her shareholding. Such report on subsequent change in shareholding must be filed within five business days of the occurrence of any such change. Violation of these reporting requirements may subject a person to criminal sanctions such as fines and imprisonment.

Restrictions Applicable to ADSs

No Governmental approval is necessary for the sale and purchase of ADSs in the secondary market outside Korea or for the withdrawal of shares of our common stock underlying ADSs and the delivery inside Korea of the withdrawn shares. However, a foreigner who intends to acquire shares must obtain an Investment Registration Card from the Financial Supervisory Service as described below. The acquisition of shares by a foreigner must be reported by the foreigner or his standing proxy in Korea immediately to the Governor of the Financial Supervisory Service.

Special Reporting Requirement for Companies Whose Securities Are Listed on Foreign Exchanges

Under the regulations of the Financial Services Commission and the Korea Exchange, (i) if a company listed on the Korea Exchange has submitted a public disclosure of material matters to a foreign financial investment supervisory authority pursuant to the laws of the foreign jurisdiction, then it must submit a copy of the public disclosure and a Korean translation thereof to the Financial Services Commission of Korea and the Korea Exchange, and (ii) if a company listed on the Korea Exchange is approved for listing on a foreign stock market or determined to be de-listed from the foreign stock market or actually listed on, or de-listed from, a foreign stock market, then it must submit a copy of any document, which it submitted to or received from the relevant foreign government, foreign financial investment supervisory authority or the foreign stock market, and a Korean translation thereof to the Financial Services Commission of Korea and the Korea Exchange.

Persons who have acquired shares of our common stock as a result of the withdrawal of shares of common stock underlying ADSs may exercise their preemptive rights for new shares, participate in free distributions and receive dividends on shares of our common stock without any further governmental approval.

Restrictions Applicable to Common Stock

Under the Foreign Exchange Transaction Laws and the Regulations on Financial Investment Business (together, the “Investment Rules”), foreigners are permitted to invest, subject to certain exceptions and procedural requirements, in all shares of Korean companies unless prohibited by specific laws. Foreign investors may trade shares listed on the Korea Exchange only through the Korea Exchange except for certain limited circumstances. These circumstances include, among others, (1) odd-lot trading of shares, (2) acquisition of shares by a foreign company as a result of a merger, (3) acquisition or disposal of shares in connection with a tender offer, (4) acquisition of shares by exercise of warrant, conversion right under convertible bonds, exchange right under exchangeable bonds or withdrawal right under depositary receipts issued outside of Korea by a Korean company, such shares being “Converted Shares,” (5) acquisition of shares through exercise of rights under securities issued outside of Korea, (6) acquisition of shares as a result of inheritance, donation, bequest or exercise of shareholders’ rights (including preemptive rights or rights to participate in free distributions and receive dividends), (7) over-the-counter transactions between foreigners of a class of shares for which a ceiling on aggregate acquisition by foreigners (as explained below) exists and has been reached or exceeded, (8) acquisition of shares by direct investment under the Foreign Investment Promotion Law, (9) acquisition and disposal of shares on an overseas stock exchange market, if such shares are simultaneously listed on the KRX

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KOSPI Market or the KRX KOSDAQ Market of the Korea Exchange and such overseas stock exchange, and (10) arm’s length transactions between foreigners in the event all such foreigners belong to an investment group managed by the same person. For over-the-counter transactions of shares listed on the Korea Exchange outside the Korea Exchange between foreigners of a class of shares for which a ceiling on aggregate acquisition by foreigners exists and has been reached or exceeded, a financial investment company with a brokerage license in Korea must act as an intermediary. Odd-lot trading of shares listed on the Korea Exchange outside the Korea Exchange must involve a financial investment company with a dealing license in Korea as the other party. Foreign investors are prohibited from engaging in margin transactions with respect to shares subject to a ceiling on acquisition by foreigners.

The Investment Rules require a foreign investor who wishes to invest in or dispose of shares on the Korea Exchange (including Converted Shares) to register his/her identity with the Financial Supervisory Service prior to making any such investment or disposal unless he/she had previously registered. However, such registration requirement does not apply to foreign investors who acquire Converted Shares with the intention of selling them within three months from the date they were acquired. Upon registration, the Financial Supervisory Service will issue to the foreign investor an Investment Registration Card which must be presented each time the foreign investor opens a brokerage account with a financial investment company or financial institution in Korea. Foreigners eligible to obtain an Investment Registration Card include any foreign nationals who are individuals (with residence abroad for six months or more), foreign governments, foreign municipal authorities, foreign public institutions, international financial institutions or similar international organizations, corporations incorporated under foreign laws and any person in any additional category designated by the Decree of the Financial Services and Capital Markets Act. All Korean branches of a foreign corporation as a group are treated as a separate foreigner from the head office of the foreign corporation. However, a foreign branch of a Korean securities company, a foreign corporation or a depositary issuing depositary receipts may obtain one or more Investment Registration Cards in its name in certain circumstances as described in the relevant regulations.

Upon a foreign investor’s purchase of shares through the Korea Exchange, no separate report by the investor is required because the Investment Registration Card system is designed to control and oversee foreign investment through a computer system. However, a foreign investor’s acquisition or sale of shares outside the Korea Exchange (as discussed above) must be reported by the foreign investor or his standing proxy to the Governor of the Financial Supervisory Service at the time of each acquisition or sale. However, a foreign investor must ensure that any acquisition or sale by it of shares outside the Korea Exchange in the case of trades in connection with a tender offer, odd-lot trading of shares or trades of a class of shares for which the aggregate foreign ownership limit has been reached or exceeded, is reported to the Governor of the Financial Supervisory Service by the Korea Securities Depository, financial investment companies with a dealing or brokerage license or securities finance companies engaged to facilitate such transactions. In the event a foreign investor desires to acquire or sell shares outside the Korea Exchange and the circumstances in connection with such sale or acquisition do not fall within the exceptions made for certain limited circumstances described above, then the foreign investor must obtain the prior approval of the Governor. In addition, in the event a foreign investor acquires or sells shares outside the Korea Exchange, a prior report to the Governor of the Financial Supervisory Service may also be required in certain circumstances. A foreign investor may appoint one or more standing proxies from among the Korea Securities Depository, foreign exchange banks (including domestic branches of foreign banks), financial investment companies with a dealing, brokerage or collective investment license and certain eligible foreign custodians which will exercise shareholders’ rights or perform any matters related to the foregoing activities if the foreign investor does not perform these activities himself. However, a foreign investor may be exempted from complying with these standing proxy rules with the approval of the Governor of the Financial Supervisory Service in cases deemed inevitable by reason of conflict between the laws of Korea and those of the home country of the foreign investor.

Certificates evidencing shares of Korean companies must be kept in custody with an eligible custodian in Korea, the Korea Securities Depository, foreign exchange banks (including domestic branches of foreign banks), financial investment companies with a dealing, brokerage or collective investment license and certain eligible

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foreign custodians are eligible to be a custodian of shares for a non-resident or foreign investor. A foreign investor must ensure that his custodian deposits his shares with the Korea Securities Depository. Generally, a foreign investor may not permit any person, other than his/her standing proxy, to exercise rights relating to his shares or perform any tasks related thereto on his behalf. However, a foreign investor may be exempted from complying with this deposit requirement with the approval of the Governor of the Financial Supervisory Service in circumstances where compliance is made impracticable, including cases where such compliance would contravene the laws of the home country of the foreign investor.

Under the Investment Rules, with certain exceptions, a foreign investor may acquire shares of a Korean company without being subject to any single or aggregate foreign investment ceiling. However, certain designated public corporations are subject to a 40.0% ceiling on acquisitions of shares by foreigners in the aggregate and a ceiling on acquisitions of shares by a single foreign investor provided in the Articles of Incorporation of such corporations. Of the Korean companies listed on the Korea Exchange, we are so designated. The Financial Services Commission may impose other restrictions as it deems necessary for the protection of investors and the stabilization of the Korean securities and derivatives market. Generally, the ownership of Converted Shares constitutes foreign ownership for purposes of such aggregate foreign ownership limit. However, the acquisition of Converted Shares is one of the exceptions under which foreign investors may acquire shares of designated corporations in excess of the 40.0% ceiling.

In addition to the aggregate foreign investment ceiling set by the Financial Services Commission under authority of the Financial Investment Services and Capital Markets Act, our Articles of Incorporation set a 3% ceiling on acquisition by a single investor (whether domestic or foreign) of the shares of our common stock. Any person (with certain exceptions) who holds more than 3% of our issued and outstanding shares cannot exercise voting rights with respect to our shares in excess of this 3% limit.

The ceiling on aggregate investment by foreigners applicable to us may be exceeded in certain limited circumstances, including as a result of acquisition of:

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shares by a depositary issuing depositary receipts representing such shares (whether newly issued shares or outstanding shares);

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Converted Shares;

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shares from the exercise of shareholders’ rights; or

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shares by gift, inheritance or bequest.

A foreigner who has acquired shares in excess of any ceiling described above may not exercise his voting rights with respect to the shares exceeding such limit and the Financial Services Commission may take necessary corrective action against him.

Under the Foreign Exchange Transaction Laws, a foreign investor who intends to acquire shares must designate a foreign exchange bank at which he must open a foreign currency account and a Won account exclusively for stock investments. No approval is required for remittance into Korea and deposit of foreign currency funds in the foreign currency account. Foreign currency funds may be transferred from the foreign currency account at the time required to place a deposit for, or settle the purchase price of, a stock purchase transaction to a Won account opened at a securities company. Funds in the foreign currency account may be remitted abroad without any governmental approval.

Dividends on shares of our common stock are paid in Won. No governmental approval is required for foreign investors to receive dividends on, or the Won proceeds of the sale of, any shares to be paid, received and retained in Korea. Dividends paid on, and the Won proceeds of the sale of, any shares held by a non-resident of Korea must be deposited either in a Won account with the investor’s securities company or the investor’s Won account. Funds in the investor’s Won account may be transferred to his foreign currency account or withdrawn

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for local living expenses, provided that any withdrawal of local living expenses in excess of a certain amount should be reported to the Governor of the Financial Supervisory Service. Funds in the investor’s Won account may also be used for future investment in shares or for payment of the subscription price of new shares obtained through the exercise of preemptive rights.

Financial investment companies with a securities dealing, brokerage or collective investment license are allowed to open foreign currency accounts with foreign exchange banks exclusively for accommodating foreign investors’ stock investments in Korea. Through these accounts, these securities companies and asset management companies may enter into foreign exchange transactions on a limited basis, such as conversion of foreign currency funds and Won funds, either as a counterparty to or on behalf of foreign investors without the foreign investors having to open their own accounts with foreign exchange banks.

Item 10.E.

Taxation

Korean Taxes

The following summary describes the material Korean tax consequences of ownership of the Registered Debt Securities and ADSs. Persons considering the purchase of the Registered Debt Securities or ADSs should consult their own tax advisors with regard to the application of the Korean income tax laws to their particular situations as well as any tax consequences arising under the laws of any other taxing jurisdiction. Reference is also made to a tax treaty between the Republic and the United States entitled “Convention Between the United States of America and the Republic of Korea for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and the Encouragement of International Trade and Investment,” signed on June 4, 1976 and entered into force on October 20, 1979.

The following summary of Korean tax considerations applies to you so long as you are not:

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a resident of Korea;

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a corporation having its head office, principal place of business or place of effective management in Korea; or

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engaged in a trade or business in Korea through a permanent establishment or a fixed base to which the relevant income is attributable or with which the relevant income is effectively connected.

Registered Debt Securities

Taxation of Interest

Pursuant to the Special Tax Treatment Control Law (“STTCL”), when we make payments of interest to you on the Registered Debt Securities, no amount will be withheld from such payments for, or on account of, any income taxes of any kind imposed, levied, withheld or assessed by Korea or any political subdivision or taxing authority thereof or therein, provided that Registered Debt Securities are deemed to be foreign currency-denominated bonds issued outside of Korea for the purpose of the STTCL.

If the tax exemption under the STTCL referred to above were to cease to be in effect, the rate of income tax or corporation tax applicable to the interest on the Registered Debt Securities would be 14% of income for a non-resident without a permanent establishment in Korea. In addition, local income tax would be imposed at the rate of 10.0% of the income tax or corporation tax (which would increase the total tax rate to 15.4%), unless reduction is available under an applicable income tax treaty. If you are a qualified resident in a country that has entered into a tax treaty with Korea, you may qualify for an exemption or a reduced rate of Korean withholding tax. See the discussion under “—Shares or ADSs—Tax Treaties” below for an additional explanation on treaty benefits.

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In order to obtain the benefits of an exemption or a reduced withholding tax rate under a tax treaty, you must submit to us, prior to the interest payment date, such evidence of tax residence as may be required by the Korean tax authorities in order to establish your entitlement to the benefits of the applicable tax treaty.

Furthermore, Korean tax laws require the beneficial owner to submit an application for entitlement to a preferential tax rate together with evidence of tax residence (including a certificate of tax residence of the beneficial owner issued by a competent authority of the country of tax residence of the beneficial owner) to a withholding obligor paying Korean source income in order to benefit from the available reduced tax rate pursuant to the relevant tax treaty. Under Korean tax laws and subject to certain exceptions, an overseas investment vehicle (which is defined as an organization established in a foreign jurisdiction that manages funds collected through investment solicitation by acquiring, disposing or otherwise investing in proprietary targets and then distributes the proceeds thereof to investors) (the “Overseas Investment Vehicle”) must obtain an application for a preferential tax rate from the beneficial owner and forward it to the withholding obligor along with an overseas investment vehicle report (prepared by the Overseas Investment Vehicle) which includes a detailed statement on the beneficial owner.

Due to recent amendment to the Korean tax laws, which applies for fiscal years beginning on or after January 1, 2020, Overseas Investment Vehicles may be regarded as beneficial owners of Korean sourced income in certain situations. Pursuant to such amendment, Overseas Investment Vehicles may be treated as beneficial owners of Korean source income if one of the following conditions are met: (i) the Overseas Investment Vehicle is subject to taxation in the jurisdiction in which it resides and there is no intentional tax avoidance purpose to establishing the Overseas Investment Vehicle in the jurisdiction; (ii) the Overseas Investment Vehicle is deemed as the beneficial owner under a tax treaty; or (iii) the Overseas Investment Vehicle is unable to confirm its list of beneficial owners investing in the Overseas Investment Vehicle (if only a portion of the beneficial owners are confirmed, applies with respect to the remaining unconfirmed list of beneficial owners). Overseas Investment Vehicles that are not regarded as foreign “corporations” for purposes of the Korean tax law may be recognized as beneficial owners if one of the above conditions (ii) or (iii) are met. Further, Overseas Investment Vehicles that meet condition (iii) would be subject to the default statutory withholding tax rate under the Korean tax laws and the treaty withholding rates under relevant tax treaties would not apply even though the Overseas Investment Vehicles are deemed to be beneficial owners of Korean source income.

Taxation of Capital Gains

Korean tax laws currently exclude from Korean taxation gains made by a non-resident without a permanent establishment in Korea from the sale of a Registered Debt Security to another non-resident (except where a non-resident sells Registered Debt Securities to another non-resident who has a permanent establishment in Korea, if any). In addition, capital gains realized from the transfer of Registered Debt Securities outside Korea by non-residents with or without permanent establishments in Korea are currently exempt from taxation by virtue of the STTCL, provided that the issuance of such Registered Debt Securities is deemed to be an overseas issuance of foreign currency-denominated bonds under the STTCL. If you sell or otherwise dispose of a Registered Debt Security through other ways than those mentioned above, any gain realized on the transaction will be taxable at ordinary Korean withholding tax rates (which is the lesser of 22.0% (including local income tax) of the net gain or 11.0% (including local income tax) of the gross sale proceeds, subject to the production of satisfactory evidence of the acquisition cost of such Registered Debt Securities and certain direct transaction costs attributable to the disposal of such Registered Debt Securities), unless an exemption is available under an applicable income tax treaty. See the discussion under “—Shares or ADSs—Tax Treaties” below for an additional explanation on treaty benefits.

Inheritance Tax and Gift Tax

If you die while you are the holder of Registered Debt Securities, the subsequent transfer of the Registered Debt Securities by way of succession will be subject to Korean inheritance tax. Similarly, if you transfer

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Registered Debt Securities as a gift, the donee will be subject to Korean gift tax and you may be required to pay the gift tax if the donee fails to do so.

At present, Korea has not entered into any tax treaty relating to inheritance or gift taxes.

Shares or ADSs

Dividends on the Shares of Common Stock or ADSs

We will deduct Korean withholding tax from dividends (whether in cash or in shares) paid to you at a rate of 22% (inclusive of local income tax). If you are a qualified resident in a country that has entered into a tax treaty with Korea, you may qualify for a reduced rate of Korean withholding tax. See the discussion under “—Tax Treaties” below for an additional explanation on treaty benefits.

In order to obtain the benefits of a reduced withholding tax rate under a tax treaty, you must submit to the Korea Securities Depository, prior to the dividend payment date, such evidence of tax residence as may be required by the Korean tax authorities in order to establish your entitlement to the benefits of the applicable tax treaty. Evidence of tax residence may be submitted to the Korea Securities Depository through the withholding tax agent. If we distribute to you free shares representing a transfer of certain capital reserves or asset revaluation reserves into paid-in capital, such distribution may be subject to Korean withholding tax.

Furthermore, Korean tax laws require the beneficial owner to submit an application for entitlement to a preferential tax rate together with evidence of tax residence (including a certificate of tax residence of the beneficial owner issued by a competent authority of the country of tax residence of the beneficial owner) to a withholding obligor paying Korean source income in order to benefit from the available reduced tax rate pursuant to the relevant tax treaty. Under Korean tax laws and subject to certain exceptions, the Overseas Investment Vehicle must obtain an application for entitlement to a preferential tax rate from the beneficial owner and forward it to the withholding obligor along with an overseas investment vehicle report (prepared by the Overseas Investment Vehicle) which includes a detailed statement on the beneficial owner.

If you hold common shares or ADSs and receive the dividend through an account at the Korea Securities Depository held by a foreign depositary settlement institute, you are not required to submit the application for entitlement to a preferential tax rate. However, evidence of tax residence may need to be submitted to us through such foreign depositary settlement institute.

Taxation of Capital Gains

As a general rule, capital gains earned by non-residents upon the transfer of the common shares or ADSs would be subject to Korean income tax at a rate equal to the lesser of (i) 11.0% (including local income tax) of the gross proceeds realized or (ii) 22.0% (including local income tax) of the net realized gain (subject to the production of satisfactory evidence of the acquisition costs and certain direct transaction costs arising out of the transfer of such common shares or ADSs), unless such non-resident is exempt from Korean income taxation under an applicable Korean tax treaty into which Korea has entered with the non-resident’s country of tax residence. Please see the discussion under “—Tax Treaties” below for an additional explanation on treaty benefits. Even if you do not qualify for any exemption under a tax treaty, you will not be subject to the foregoing income tax on capital gains if you qualify for the relevant Korean domestic tax law exemptions discussed in the following paragraphs.

You will not be subject to Korean income taxation on capital gains realized upon the transfer of our common stocks or ADSs through the Korea Exchange if you (i) have no permanent establishment in Korea and (ii) did not own or have not owned (together with any shares owned by any entity which you have a certain special relationship with and possibly including the shares represented by the ADSs) 25.0% or more of our total issued and outstanding shares at any time during the calendar year in which the sale occurs and during the five calendar years prior to the calendar year in which the sale occurs.

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It should be noted that (i) capital gains earned by you (regardless of whether you have a permanent establishment in Korea) from the transfer of ADSs outside Korea will be exempted from Korean income taxation provided that ADSs are deemed to have been issued overseas under the STTCL, but (ii) if and when an owner of the underlying shares of stock transfers ADSs after conversion of the underlying shares into ADSs, the exemption described in (i) is not applicable.

If you are subject to tax on capital gains with respect to the sale of ADSs, or of shares of common stock which you acquired as a result of a withdrawal, the purchaser or, in the case of the sale of shares of common stock on the Korea Exchange or through an investment dealer or investment broker under the Financial Investment Services and Capital Markets Act, an investment dealer or investment broker is required to withhold Korean tax from the sales price in an amount equal to 11.0% (including local income tax) of the gross realization proceeds and to make payment of these amounts to the Korean tax authority, unless you establish your entitlement to an exemption under an applicable tax treaty or domestic tax law or produce satisfactory evidence of your acquisition cost and transaction costs for the shares of common stock or the ADSs.

However, if you transfer the ADSs following an exchange of the underlying shares of stock owned by you for ADSs to a purchaser who is a non-resident or a foreign company without a permanent establishment in Korea, you are obligated to file an income tax return and pay tax on gain realized from such transfer unless exempt under an applicable tax treaty or domestic law. Further, if you transfer the shares of common stock outside of Korea (excluding a transfer on a foreign exchange) to non-residents or foreign companies without permanent establishments in Korea, you are obligated to file an income tax return and pay income tax on capital gain realized from such transfer unless exempt under an applicable tax treaty or domestic law. If a purchaser or an investment dealer or investment broker, as the case may be, withholds and remits the tax on capital gains derived from transfer of shares of common stock or ADSs, your obligation to file an income tax return and pay income tax will not apply.

In order to obtain the benefit of an exemption from tax pursuant to a tax treaty, you must submit to the purchaser or the investment dealer or the investment broker, or through the ADS depositary, as the case may be, prior to or at the time of payment, such evidence of your tax residence as the Korean tax authorities may require in support of your claim for treaty benefits. Please see the discussion under “—Tax Treaties” below for an additional explanation on claiming treaty benefits. Furthermore, Korean tax laws require the beneficial owner to submit an application for tax exemption together with evidence of tax residence (including a certificate of tax residence of the beneficial owner issued by a competent authority of the country of tax residence of the beneficial owner) to a withholding obligor paying Korean source income in order to benefit from the available exemption pursuant to the relevant tax treaty. Under Korean tax laws and subject to certain exceptions, the Overseas Investment Vehicle must obtain an application for tax exemption from the beneficial owner and forward it to the withholding obligor along with an overseas investment vehicle report (prepared by the Overseas Investment Vehicle) which includes a detailed statement on the beneficial owner.

Tax Treaties

Korea has entered into a number of income tax treaties with other countries (including the United States), which would reduce or exempt Korean withholding tax on dividends on, and capital gains on transfer of, shares of our common stock or ADSs. For example, under the Korea-United States income tax treaty, reduced rates of Korean withholding tax of 16.5% or 11.0% (respectively, including local income tax, depending on your status and shareholding ratio) on dividends and an exemption from Korean withholding tax on capital gains are available to residents of the United States that are beneficial owners of the relevant dividend income or capital gains. However, under Article 17 (Investment of Holding Companies) of the Korea-United States income tax treaty, such reduced rates and exemption do not apply if (i) you are a United States corporation, (ii) by reason of any special measures, the tax imposed on you by the United States with respect to such dividends or capital gains is substantially less than the tax generally imposed by the United States on corporate profits, and (iii) 25.0% or more of your capital is held of record or is otherwise determined, after consultation between competent

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authorities of the United States and Korea, to be owned directly or indirectly by one or more persons who are not individual residents of the United States. Also, under Article 16 (Capital Gains) of the Korea-United States income tax treaty, the exemption on capital gains does not apply if you are an individual, and (a) you maintain a fixed base in Korea for a period or periods aggregating 183 days or more during the taxable year and your ADSs or shares of common stock giving rise to capital gains are effectively connected with such fixed base or (b) you are present in Korea for a period or periods of 183 days or more during the taxable year.

You should inquire for yourself whether you are entitled to the benefit of an income tax treaty with Korea. It is the responsibility of the party claiming the benefits of an income tax treaty in respect of dividend payments or capital gains to submit to us, the purchaser or the investment dealer or the investment broker, as applicable, a certificate as to his tax residence. In the absence of sufficient proof, we, the purchaser or the investment dealer or the investment broker, as applicable, must withhold tax at the normal rates. Further, in order for you to obtain the benefit of a tax exemption on certain Korean source income (e.g., interest, dividends and capital gains) under an applicable tax treaty, Korean tax laws require you (or your agent) to submit an application for tax exemption (if there is no change in the content of such application, it is not required to submit such application again within a period of three years thereafter) along with a certificate of your tax residence issued by a competent authority of your country of tax residence. Under Korean tax laws and subject to certain exceptions, the Overseas Investment Vehicle must obtain an application for tax exemption from the beneficial owner and forward it to the withholding obligor along with an overseas investment vehicle report (prepared by the Overseas Investment Vehicle) which includes a detailed statement on the beneficial owner. The withholding obligor must submit the application and the report to the relevant tax office by the ninth day of the month following the date of the first payment of such income.

Furthermore, the Korean tax laws require the beneficial owner to submit an application for entitlement to a preferential tax rate (if there is no change in the content of such application, it is not required to submit such application again within a period of three years thereafter) together with evidence of tax residence (including a certificate of tax residence of the beneficial owner issued by a competent authority of the country of tax residence of the beneficial owner) to a withholding obligor paying Korean source income in order to benefit from the available reduced tax rate pursuant to the relevant tax treaty. If you hold the shares of common stock or ADSs and receive the dividend through an account at the Korea Securities Depository held by a foreign depositary settlement institute, you are not required to submit the application for entitlement to a preferential tax rate. However, evidence of tax residence may need to be submitted to us through such foreign depositary settlement institute.

Under Korean tax laws and subject to certain exceptions, the Overseas Investment Vehicle must obtain an application for a preferential tax rate from the beneficial owner and forward it to the withholding obligor along with an overseas investment vehicle report (prepared by the Overseas Investment Vehicle) which includes a detailed statement on the beneficial owner.

Inheritance Tax and Gift Tax

If you die while holding an ADS or donate an ADS, it is unclear whether, for Korean inheritance and gift tax purposes, you will be treated as the owner of the shares of common stock underlying the ADSs. If the tax authority interprets depositary receipts as the underlying share certificates, you may be treated as the owner of the shares of common stock and your heir or the donee (or in certain circumstances, you as the donor) will be subject to Korean inheritance or gift tax presently at the rate of 10.0% to 50.0%, depending on the value of the ADSs or shares of common stock.

If you die while holding a share of common stock or donate a share of common stock, your heir or donee (or in certain circumstances, you as the donor) will be subject to Korean inheritance or gift tax at the same rate as indicated above.

At present, Korea has not entered into any tax treaty relating to inheritance or gift taxes.

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Securities Transaction Tax

If you transfer shares of common stock on the Stock Market of the Korea Exchange, you will be subject to securities transaction tax at the rate of 0.10% and an agriculture and fishery special surtax at the rate of 0.15% of the sale price of the shares of common stock. If your transfer of the shares of common stock is not made on the Stock Market of the Korea Exchange, subject to certain exceptions you will be subject to securities transaction tax at the rate of 0.5% for transfers prior to April 1, 2020 and 0.45% for transfers on or after April 1, 2020 and will not be subject to an agriculture and fishery special surtax.

Under the Securities Transaction Tax Law, depositary receipts (such as ADSs) constitute share certificates subject to the securities transaction tax. However, a transfer of depositary receipts listed on the New York Stock Exchange, NASDAQ National Market or other qualified foreign exchanges will be exempt from the securities transaction tax although depositary receipts, including ADSs, constitute share certificates subject to the securities transaction tax.

In principle, the securities transaction tax, if applicable, must be paid by the transferor of the shares or rights. When the transfer is effected through the Korea Securities Depository, the Korea Securities Depository is generally required to withhold and pay the tax to the tax authorities. When such transfer is made through an investment dealer or investment broker under the Financial Investment Services and Capital Markets Act only, such investment dealer or investment broker is required to withhold and pay the tax. Where the transfer is effected by a non-resident without a permanent establishment in Korea, other than through the Korea Securities Depository or an investment dealer or investment broker, the transferee is required to withhold the securities transaction tax for payment to the Korean tax authority.

U.S. Federal Income Tax Considerations for U.S. Persons

The following is a summary of certain U.S. federal income tax consequences for beneficial owners of the Registered Debt Securities, common stock and ADSs that are “U.S. Persons” (as defined below). For purposes of this summary, you are a “U.S. Person” if you are any of the following for U.S. federal income tax purposes:

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an individual citizen or resident of the United States;

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a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

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a trust if (1) it is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.

This summary is based on current law, which is subject to change (perhaps retroactively), is for general purposes only and should not be considered tax advice. This summary does not represent a detailed description of the U.S. federal income tax consequences and does not address the effects of the Medicare contribution tax on net investment income or foreign, state, local or other tax considerations that may be relevant to you in light of your particular circumstances. The discussion set forth below is applicable to you if (i) you are a resident of the United States for purposes of the current income tax treaty between the United States and Korea (the “Treaty”), (ii) your Registered Debt Securities, common stock or ADSs are not, for purposes of the Treaty, effectively connected with a permanent establishment in Korea and (iii) you otherwise qualify for the full benefits of the Treaty. Except where noted, this summary deals only with Registered Debt Securities, common stock or ADSs held as capital assets, and it does not represent a detailed description of the U.S. federal income tax consequences applicable to you if you are subject to special treatment under the U.S. federal income tax laws (including if you are a dealer in securities or currencies, a financial institution, a regulated investment company, a real estate

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investment trust, an insurance company, a tax-exempt organization, a person holding the Registered Debt Securities, common stock or ADSs as part of a hedging, integrated or conversion transaction, constructive sale or straddle, a person owning 10.0% or more of our stock (by vote or value), a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings, a person liable for the alternative minimum tax, a person required to accelerate the recognition of any item of gross income with respect to the Registered Debt Securities, common stock or ADSs as a result of such income being recognized on an applicable financial statement, a partnership or other pass-through entity (or an investor therein), or a U.S. Person whose “functional currency” is not the U.S. dollar). We cannot assure you that a change in law will not alter significantly the tax considerations that we describe in this summary.

If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds the Registered Debt Securities, common stock or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our Registered Debt Securities, common stock, or ADSs, you should consult your tax advisor.

Because of the 100-year maturity of the One Hundred Year 7.95% Zero-to-Full Debentures, due April 1, 2096 (the “ZTF Debentures”), it is not certain whether the ZTF Debentures will be treated as debt for U.S. federal income tax purposes. The discussion below assumes that the ZTF Debentures (as well as the other Registered Debt Securities) will be treated as debt, except that a summary of the consequences to you if the ZTF Debentures were not treated as debt is provided under “Tax Consequences with Respect to Registered Debt Securities Generally—ZTF Debentures Treated as Equity” below.

The discussion of the tax consequences of ownership of common stock and ADSs below, is based, in part, upon representations made by the depositary to us and assumes that the deposit agreement, and all other related agreements, will be performed in accordance with their terms.

You should consult your own tax advisor concerning the particular U.S. federal income tax consequences to you of the ownership of the Registered Debt Securities, common stock and ADSs, as well as the consequences to you arising under the laws of any other taxing jurisdiction.

Tax Consequences with Respect to Registered Debt Securities Generally

Payments

Except as provided below with regard to original issue discount (as defined below) on the ZTF Debentures, interest on a Registered Debt Security will generally be taxable to you as ordinary income at the time it is paid or accrued in accordance with your method of accounting for tax purposes. Principal payments on an amortizing Registered Debt Security generally will constitute a tax-free return of capital to you.

Although interest payments to you are currently exempt from Korean taxation provided that Registered Debt Securities are deemed to be foreign currency-denominated bonds issued outside of Korea for the purpose of the STTCL (see—“Korean Taxes—Registered Debt Securities—Taxation of Interest,” above), if the Korean law providing for the exemption is repealed, then, in addition to interest payments on the Registered Debt Securities and original issue discount on the ZTF Debentures, you will be required to include in income any additional amounts paid and any Korean tax withheld from interest payments notwithstanding that you in fact did not receive such withheld tax. You may be entitled to deduct or credit such Korean tax (up to the Treaty rate), subject to applicable limitations in the Internal Revenue Code of 1986, as amended (the “Code”). Your election to deduct or credit foreign taxes will apply to all of your foreign taxes for a particular taxable year. Interest income on a Registered Debt Security (including additional amounts and any Korean taxes withheld in respect thereof) and original issue discount on a ZTF Debenture generally will constitute foreign source income and generally will be considered passive category income for purposes of computing the foreign tax credit. You will generally be denied a foreign tax credit for Korean taxes imposed with respect to the Registered Debt Securities where you do

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not meet a minimum holding period requirement during which you are not protected from risk of loss. The rules governing the foreign tax credit are complex. Investors are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

Original Issue Discount

The ZTF Debentures were issued with original issue discount (“OID”) for U.S. federal income tax purposes equal to the difference between (i) the sum of all scheduled amounts payable on the ZTF Debentures (including the interest payable on such ZTF Debentures) and (ii) the “issue price” of the ZTF Debentures. The “issue price” of each ZTF Debenture is the first price at which a substantial amount of the ZTF Debentures was sold to the public (other than to an underwriter, broker, placement agent or wholesaler). If you hold ZTF Debentures, then (subject to the discussion in “—Bond Premium” below) you generally must include OID in gross income (as ordinary income) in advance of the receipt of cash attributable to that income, regardless of your method of accounting. However, you generally will not be required to include separately in income cash payments received on the ZTF Debentures, even if denominated as interest.

The amount of OID includible in income by the holder of a ZTF Debenture is the sum of the “daily portions” of OID with respect to the ZTF Debenture for each day during the taxable year or portion of the taxable year in which such holder held such ZTF Debenture, or “accrued OID” (for a discussion relevant to subsequent purchasers, see “—Market Discount” and “—Bond Premium,” below). The daily portion is determined by allocating to each day in any “accrual period” a pro rata portion of the OID allocable to that accrual period. The “accrual period” for a ZTF Debenture may be of any length and may vary in length over the term of the ZTF Debenture, provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs on the first day or the final day of an accrual period. The amount of OID allocable to any accrual period other than the final accrual period is an amount equal to the product of the ZTF Debenture’s adjusted issue price at the beginning of such accrual period and its yield to maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period). OID allocable to a final accrual period is the difference between the amount payable at maturity and the adjusted issue price at the beginning of the final accrual period. The “adjusted issue price” of a ZTF Debenture at the beginning of any accrual period is equal to its issue price increased by the accrued OID for each prior accrual period (for subsequent purchasers, determined without regard to the amortization of any acquisition or bond premium, as described below) and reduced by any payments previously made on such ZTF Debenture. Under these rules, you will have to include in income increasingly greater amounts of OID in successive accrual periods. We are required to provide information returns stating the amount of OID accrued on ZTF Debentures held of record by persons other than corporations and other exempt holders.

As discussed above, although interest payments to you are currently exempt from Korean taxation provided that Registered Debt Securities are deemed to be foreign currency-denominated bonds issued outside of Korea for the purpose of the STTCL (see—“Korean Taxes—Registered Debt Securities—Taxation of Interest,” above), if the Korean law providing for the exemption is repealed, then Korean withholding tax may be imposed at times that differ from the times at which you are required to include interest or OID in income for U.S. federal income tax purposes and this disparity may limit the amount of foreign tax credit available.

Market Discount

If you purchased a Registered Debt Security other than a ZTF Debenture for an amount that is less than its stated redemption price at maturity, or, in the case of a ZTF Debenture, its adjusted issue price, the amount of the difference will be treated as “market discount” for U.S. federal income tax purposes, unless that difference is less than a specified de minimis amount. Under the market discount rules, you will be required to treat any payment, other than qualified stated interest (as defined in the Code), on, or any gain on the sale, exchange, retirement or other disposition of, a Registered Debt Security as ordinary income to the extent of the market discount that you have not previously included in income and are treated as having accrued on the Registered Debt Security at the

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time of its payment or disposition. In addition, you may be required to defer, until the maturity of the Registered Debt Security or its earlier disposition in a taxable transaction, the deduction of all or a portion of the interest expense on any indebtedness attributable to the Registered Debt Security.

Any market discount will be considered to accrue ratably during the period from the date of acquisition to the maturity date of the Registered Debt Security, unless you elect to accrue on a constant interest method. Your election to accrue market discount on a constant interest method is to be made for the taxable year in which you acquired the Registered Debt Security, applies only to that Registered Debt Security and cannot be revoked. You may elect to include market discount in income currently as it accrues, on either a ratable or constant interest method, in which case the rule described above regarding deferral of interest deductions will not apply. Your election to include market discount in income currently, once made, applies to all market discount obligations acquired by you on or after the first taxable year to which your election applies and may not be revoked without the consent of the Internal Revenue Service (the “IRS”). You should consult your own tax advisor before making this election.

Bond Premium

If you purchased a ZTF Debenture for an amount that is greater than its adjusted issue price but equal to or less than the sum of all amounts payable on the ZTF Debenture after the purchase date, you will be considered to have purchased that ZTF Debenture at an “acquisition premium.” Under the acquisition premium rules, the amount of OID that you must include in gross income with respect to a ZTF Debenture for any taxable year will be reduced by the portion of the acquisition premium properly allocable to that year.

If you purchased a Registered Debt Security for an amount in excess of the sum of all amounts payable on the Registered Debt Security after the purchase date other than qualified stated interest, you will be considered to have purchased the Registered Debt Security at a “premium” and, if such Registered Debt Security is a ZTF Debenture, you will not be required to include any OID in income. You generally may elect to amortize the premium over the remaining term of the Registered Debt Security on a constant yield method as an offset to interest when includible in income under your regular accounting method. In the case of instruments that provide for alternative payment schedules, bond premium is calculated by assuming that (a) you will exercise or not exercise options in a manner that maximizes your yield, and (b) we will exercise or not exercise options in a manner that minimizes your yield (except that we will be assumed to exercise call options in a manner that maximizes your yield). If you do not elect to amortize bond premium, that premium will decrease the gain or increase the loss you would otherwise recognize on disposition of a Registered Debt Security. Your election to amortize premium on a constant yield method will also apply to all debt obligations held or subsequently acquired by you on or after the first day of the first taxable year to which the election applies. You may not revoke the election without the consent of the IRS. You should consult your own tax advisor before making this election.

Sale, Exchange and Retirement of Registered Debt Securities

When you sell, exchange or retire a Registered Debt Security, you will recognize gain or loss equal to the difference between the amount you receive (not including an amount equal to any accrued qualified stated interest, which will be taxable as ordinary income to the extent not previously included in income) and your adjusted tax basis in the Registered Debt Security. Your tax basis in a Registered Debt Security other than a ZTF Debenture will generally be your cost of obtaining the Registered Debt Security increased by any market discount included in income and reduced by payments of principal you receive and any bond premium that you elect to amortize. Your adjusted tax basis in a ZTF Debenture will, in general, be your cost therefor, increased by any market discount and OID previously included in income and reduced by any cash payments on the ZTF Debenture and any bond premium that you elect to amortize. Your gain or loss realized on selling, exchanging or retiring a Registered Debt Security will generally be treated as United States source income. Consequently, you may not be able to use the foreign tax credit arising from any Korean tax imposed on the disposition of

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Registered Debt Securities unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources. Except as described above with respect to market discount, your gain or loss will be capital gain or loss and will generally be long-term capital gain or loss if, at the time of the sale, exchange or retirement of a Registered Debt Security, you have held the Registered Debt Security for more than one year. If you are an individual and the Registered Debt Security being sold, exchanged or retired is a capital asset that you held for more than one year, you may be eligible for reduced rates of taxation on any capital gain recognized. Your ability to deduct capital losses is subject to limitations.

ZTF Debentures Treated as Equity

If the ZTF Debentures were treated as equity for U.S. federal income tax purposes, amounts actually or deemed paid with respect to the ZTF Debentures would be deemed dividends for U.S. federal income tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes).

You would include the amounts actually or deemed paid by us on the ZTF Debentures (before reduction for Korean withholding tax, if any) as dividend income when actually or constructively paid by us. Section 305 of the Code, which would apply to the ZTF Debentures if they were treated as equity for U.S. federal income tax purposes, requires current accrual of dividends under principles similar to the accrual of OID. Amounts treated as dividends will not be eligible for the dividends received deduction generally allowed to U.S. corporations.

Tax Consequences with Respect to Common Stock and ADSs

In general, for U.S. federal income tax purposes, holders of ADSs will be treated as the owners of the underlying common stock that is represented by such ADSs. Accordingly, deposits or withdrawals of common stock by holders of ADSs will not be subject to U.S. federal income tax.

Distributions on Common Stock or ADSs

The gross amount of distributions (other than certain distributions of common stock or rights to subscribe for common stock) to holders of common stock or ADSs (including amounts withheld in respect of Korean withholding taxes) will be taxable dividends to such holders, to the extent paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Such income (including withheld taxes) will be includable in the gross income of a holder as ordinary income on the day actually or constructively received by the holder, in the case of common stock, or by the depositary, in the case of ADSs. Such dividends will not be eligible for the dividends received deduction allowed to corporations under the Code.

With respect to non-corporate U.S. Persons, certain dividends paid by a qualified foreign corporation and received by such holders may be subject to reduced rates of taxation. A qualified foreign corporation includes a foreign corporation that is eligible for the benefits of an income tax treaty with the United States, if such treaty contains an exchange of information provision and the United States Treasury Department had determined that the treaty is satisfactory for purposes of the legislation. The United States Treasury Department has determined that the Treaty, which contains an exchange of information provision, is (in the absence of additional guidance) satisfactory for these purposes. In addition, we believe we are eligible for the benefits of the Treaty. However, a foreign corporation is also treated as a qualified foreign corporation with respect to dividends paid by that corporation on shares (or ADSs backed by such shares) that are readily tradable on an established securities market in the United States. Shares of our common stock will generally not be considered readily tradable for these purposes. However, United States Treasury Department guidance indicates that our ADSs, which are listed on the New York Stock Exchange, are readily tradable on an established securities market in the United States. There can be no assurance that our ADSs will be considered readily tradable on an established securities market in later years. Non-corporate U.S. Persons that do not meet a minimum holding period requirement during which they are not protected from a risk of loss or that elect to treat the dividend income as “investment income”

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pursuant to Section 163(d)(4) of the Code will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. Holders should consult their own tax advisors regarding the application of the foregoing rules to their particular circumstances.

The amount of any dividend paid in Won will equal the United States dollar value of the Won received calculated by reference to the exchange rate in effect on the date the dividend is received by the holder, in the case of common stock, or by the depositary, in the case of ADSs, regardless of whether the Won are converted into U.S. dollars. If the Won received as a dividend are not converted into U.S. dollars on the date of receipt, a holder will have a basis in the Won equal to their U.S. dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other disposition of the Won will be treated as United States source ordinary income or loss. The amount of any distribution of property other than cash will be the fair market value of such property on the date of distribution.

The maximum rate of withholding tax on dividends paid to you pursuant to the Treaty is 16.5%. You will be required to properly demonstrate your entitlement to the reduced rate of withholding under the Treaty (see “—Korean Taxes—Shares or ADSs —Tax Treaties”). Subject to certain conditions and limitations, Korean withholding taxes (up to the Treaty rate) will be treated as foreign taxes eligible for credit against your U.S. federal income tax liability. For purposes of calculating the foreign tax credit, dividends paid on the common stock or ADSs will be treated as foreign source income and will generally constitute passive category income. Further, in certain circumstances, if you have held common stock or ADSs for less than a specified minimum period during which you are not protected from risk of loss, or are obligated to make payments related to the dividends, you will not be allowed a foreign tax credit for foreign taxes imposed on dividends paid on common stock or ADSs. The rules governing the foreign tax credit are complex. Investors are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances including the possible adverse impact on creditability to the extent you are entitled to a refund of any Korean tax withheld or a reduced rate of withholding.

To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits for a taxable year, as determined under U.S. federal income tax principles, the distribution will first be treated as a tax- free return of capital, causing a reduction in the adjusted basis of the common stock or ADSs (thereby increasing the amount of gain, or decreasing the amount of loss, to be recognized by the investor on a subsequent disposition of the common stock or ADSs), and the balance in excess of adjusted basis will be taxed as capital gain recognized on a sale or exchange of property. Consequently, such distributions in excess of our current and accumulated earnings and profits would not give rise to foreign source income and you generally would not be able to use the foreign tax credit arising from any Korean withholding tax imposed on such distributions unless such credit can be applied (subject to applicable limitations) against U.S. tax due on other foreign source income in the appropriate category for foreign tax credit purposes. However, we do not expect to keep earnings and profits in accordance with U.S. federal income tax principles. Therefore, you should expect that a distribution will generally be treated as a dividend (as discussed above).

Distributions of common stock or rights to subscribe for common stock that are received as part of a pro rata distribution to all of our shareholders generally will not be subject to U.S. federal income tax. Consequently such distributions will not give rise to foreign source income and you generally will not be able to use the foreign tax credit arising from any Korean withholding tax unless such credit can be applied (subject to applicable limitations) against U.S. tax due on other income derived from foreign sources. The basis of the new common stock or rights so received will be determined by allocating your basis in the old common stock between the old common stock and the new common stock or rights received, based on their relative fair market value on the date of distribution. However, the basis of the rights will be zero if (i) the fair market value of the rights is less than 15% of the fair market value of the old common stock at the time of distribution, unless the taxpayer timely elects to determine the basis of the old common stock and of the rights by allocating between the old common stock and the rights the adjusted basis of the old common stock or (ii) the rights are not exercised and thus expire.

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Sale, Exchange or Other Disposition of ADSs or Common Stock

Upon the sale, exchange or other disposition of ADSs or common stock, you generally will recognize capital gain or loss equal to the difference between the amount realized upon the sale, exchange or other disposition and your adjusted tax basis in the ADSs or common stock. The capital gain or loss will be long-term capital gain or loss if at the time of sale, exchange or other disposition, the ADSs or common stock have been held by you for more than one year. Under current law, long-term capital gains of individuals are, under certain circumstances, taxed at lower rates than items of ordinary income. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by you will generally be treated as U.S. source gain or loss. Consequently, you may not be able to use the foreign tax credit arising from any Korean tax imposed on the disposition of ADSs or common stock unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources.

You should note that any Korean securities transaction tax will not be treated as a creditable foreign tax for U.S. federal income tax purposes, although you may be entitled to deduct such taxes, subject to applicable limitations under the Code.

Passive Foreign Investment Company Rules

Based upon the past and projected composition of our income and assets and the valuation of our assets, we do not believe that we were a passive foreign investment company (a “PFIC”) for 2019, and we do not expect to be a PFIC in 2020 or to become one in the foreseeable future, although there can be no assurance in this regard. If, however, we become a PFIC, such characterization could result in adverse U.S. tax consequences to you if you are a U.S. investor. For example, if we become a PFIC, our U.S. investors may become subject to increased tax liabilities under U.S. tax laws and regulations and will become subject to burdensome reporting requirements. Our PFIC status is determined on an annual basis and depends on the composition of our income and assets. Specifically, we will be classified as a PFIC for U.S. tax purposes if either: (i) 75% or more of our gross income in a taxable year is passive income, or (ii) the average percentage of our assets by value in a taxable year which produce or are held for the production of passive income (which generally includes cash) is at least 50%. We cannot assure you that we will not be a PFIC for 2020 or any future taxable year.

Information Reporting and Backup Withholding

In general, information reporting requirements will apply to principal, interest, OID and premium payments on Registered Debt Securities and dividend payments in respect of the common stock or ADSs or the proceeds received on the sale, exchange or redemption of the Registered Debt Securities, common stock or ADSs paid within the United States (and in certain cases, outside of the United States) to holders other than certain exempt recipients, and a backup withholding tax may apply to such amounts if you fail to provide an accurate taxpayer identification number or certification of exempt status or fail to report interest and dividends required to be shown on your U.S. federal income tax returns. The amount of any backup withholding from a payment to you will be allowed as a refund or a credit against your U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Item 10.F.

Dividends and Paying Agents

Not Applicable

Item 10.G.

Statements by Experts

Not Applicable

Item 10.H.

Documents on Display

We are subject to the information requirements of the Exchange Act, and, in accordance therewith, are required to file reports, including annual reports on Form 20-F, and other information with the U.S. Securities

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and Exchange Commission. You may inspect and copy these materials, including this annual report and the exhibits thereto, at SEC’s Public Reference Room 100 Fifth Street, N.E., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the public reference rooms. As a foreign private issuer, we are also required to make filings with the Commission by electronic means. Any filings we make electronically will be available to the public over the Internet at the Commission’s web site at http://www.sec.gov.

Item 10.I.

Subsidiary Information

Not Applicable

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk exposures are to fluctuations in exchange rates, interest rates and fuel prices. We are exposed to foreign exchange risk related to foreign currency-denominated liabilities. As of December 31, 2019, 17.5% of our long-term debt (including the current portion but excluding issue discounts and premium), without taking into consideration of swap transactions, was denominated in foreign currencies, principally U.S. dollars. However, a substantial portion of our revenues is denominated in Won. As a result, changes in exchange rates, particularly between the Won and the U.S. dollar, significantly affect us due to our significant amounts of foreign currency-denominated debt and the effect of such changes on the amount of funds required by us to make interest and principal payments on such debt. In order to reduce the impact of foreign exchange rate fluctuations on our results of operations, we have recently been reducing and plan to continue to reduce the proportion of our debt which is denominated in foreign currencies.

We are also exposed to foreign exchange risk related to our purchases of fuel since we obtain substantially all of our fuel materials (other than anthracite coal) directly or indirectly from sources outside Korea. Prices for such fuel materials are quoted based on prices stated in, and in many cases are paid for in, currencies other than Won. In 2019, fuel costs represented 31.2% of our sales.

We are exposed to interest rate risk due to significant amounts of debt. Upward fluctuations in interest rates increase the cost of additional debt and the interest cost of outstanding floating rate borrowings. We are also exposed to fluctuations in prices of fuel materials. In 2019, for electricity generation, uranium accounted for 35.7% of our fuel requirements, coal accounted for 51.8%, LNG accounted for 9.5%, oil accounted for 0.5%, and others accounted for 2.4%, measured in each case by the amount of electricity we generated. In 2018, for electricity generation, uranium accounted for 31.9% of our fuel requirements, coal accounted for 53.2%, LNG accounted for 11.2%, oil accounted for 1.4%, and others accounted for 2.3%, measured in each case by the amount of electricity we generated.

For additional discussions of our market risks, see Item 3.D. “Risk Factors” and Item 5.B. “Liquidity and Capital Resources—Liquidity.”

We have entered into various swap contracts to hedge exchange rate risks arising from foreign currency-denominated debts. Details of currency swap contracts outstanding as of December 31, 2019 are as follows:


	Counterparty	Contract Year		Settlement Year		Contract amounts				Contract interest rate		Contract Exchange Rate
Type	Counterparty	Contract Year		Settlement Year		Pay		Receive		Pay	Receive	Contract Exchange Rate
						(KRW in millions, USD, CHF, HKD, AUD, EUR, SEK and other foreign currencies in thousands)
Trading	Standard Chartered		2014		2029		KRW 102,470		USD 100,000	3.14%	3.57%		1,024.70
	Societe Generale		2014		2024		KRW 105,017		USD 100,000	4.92%	5.13%		1,050.17
	Hana Bank		2015		2024		KRW 107,970		USD 100,000	4.75%	5.13%		1,079.70
	Credit Agricole		2015		2024		KRW 94,219		USD 86,920	4.85%	5.13%		1,083.97
	Woori Bank		2019		2027		KRW 21,708		USD 19,417	5.04%	6.75%		1,118.00
	Woori Bank		2019		2024		KRW 296,000		USD 250,000	1.21%	2.50%		1,184.00
	Korea Development Bank		2019		2024		KRW 177,600		USD 150,000	1.24%	2.50%		1,184.00

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	Counterparty	Contract Year		Settlement Year		Contract amounts				Contract interest rate		Contract Exchange Rate
Type	Counterparty	Contract Year		Settlement Year		Pay		Receive		Pay	Receive	Contract Exchange Rate
						(KRW in millions, USD, CHF, HKD, AUD, EUR, SEK and other foreign currencies in thousands)
	Hana Bank		2019		2024		KRW 118,400		USD 100,000	1.24%	2.50%		1,184.00
	Citibank		2012		2022		KRW 112,930		USD 100,000	2.79%	3.00%		1,129.30
	JP Morgan		2012		2022		KRW 112,930		USD 100,000	2.79%	3.00%		1,129.30
	Bank of America		2012		2022		KRW 112,930		USD 100,000	2.79%	3.00%		1,129.30
	Shinhan Bank		2016		2022		KRW 112,930		USD 100,000	2.79%	3.00%		1,129.30
	HSBC		2012		2022		KRW 111,770		USD 100,000	2.89%	3.00%		1,117.70
	Hana Bank		2012		2022		KRW 111,770		USD 100,000	2.87%	3.00%		1,117.70
	Standard Chartered		2012		2022		KRW 111,770		USD 100,000	2.89%	3.00%		1,117.70
	Deutsche Bank		2012		2022		KRW 55,885		USD 50,000	2.79%	3.00%		1,117.70
	Nomura		2015		2025		KRW 111,190		USD 100,000	2.60%	3.25%		1,111.90
	Korea Development Bank		2015		2025		KRW 111,190		USD 100,000	2.62%	3.25%		1,111.90
	Woori Bank		2015		2025		KRW 55,595		USD 50,000	2.62%	3.25%		1,111.90
	Hana Bank		2015		2025		KRW 55,595		USD 50,000	2.62%	3.25%		1,111.90
	Woori Bank		2017		2027		KRW 111,610		USD 100,000	2.25%	3.13%		1,116.10
	Korea Development Bank		2017		2027		KRW 111,610		USD 100,000	2.31%	3.13%		1,116.10
	Hana Bank		2017		2027		KRW 111,610		USD 100,000	2.31%	3.13%		1,116.10
	Korea Development Bank		2018		2028		KRW 108,600		HKD 800,000	2.69%	3.35%		135.75
	Shinhan Bank		2018		2028		KRW 115,388		HKD 850,000	2.66%	3.35%		135.75
	Korea Development Bank		2018		2023		KRW 170,280		USD 150,000	2.15%	3.75%		1,135.20
	Woori Bank		2018		2023		KRW 170,280		USD 150,000	2.18%	3.75%		1,135.20
	Hana Bank		2018		2023		KRW 113,520		USD 100,000	2.17%	3.75%		1,135.20
	Shinhan Bank		2018		2023		KRW 227,040		USD 200,000	2.17%	3.75%		1,135.20
	Citibank		2019		2024		KRW 239,956		CHF 200,000	1.44%	0.00%		1,199.78
	Korea Development Bank		2019		2027		KRW 119,978		CHF 100,000	1.43%	0.05%		1,199.78
	HSBC		2019		2024		USD 205,500		AUD 300,000	3M Libor+ 0.78%	3M BBSW+ 0.97%		0.69
Cash flow hedge	HSBC		2014		2020		KRW 99,901		AUD 100,000	3.52%	5.75%		999.01
	HSBC		2014		2020		KRW 100,482		AUD 100,000	3.48%	5.75%		1,004.82
	Standard Chartered		2013		2020		USD 117,250		AUD 125,000	3M Libor + 1.25%	5.75%		0.94
	Standard Chartered		2014		2020		KRW 126,032		USD 117,250	3.55%	3M Libor + 1.25%		1,074.90
	Korea Development Bank		2017		2020		KRW 114,580		USD 100,000	1.75%	2.38%		1,145.80
	Hana Bank		2017		2020		KRW 114,580		USD 100,000	1.75%	2.38%		1,145.80
	Export-import bank of Korea		2017		2020		KRW 114,580		USD 100,000	1.75%	2.38%		1,145.80
	Korea Development Bank		2016		2021		KRW 121,000		USD 100,000	2.15%	2.50%		1,210.00
	Morgan Stanley		2016		2021		KRW 121,000		USD 100,000	3M Libor + 2.10%	2.50%		1,210.00
	BNP Paribas		2016		2021		KRW 121,000		USD 100,000	3M Libor + 2.10%	2.50%		1,210.00
	Nomura		2017		2037		KRW 52,457		EUR 40,000	2.60%	1.70%		1,311.42
	Nomura		2017		2037		KRW 59,423		SEK 450,000	2.62%	2.36%		132.05
	Korea Development Bank		2019		2022		KRW 112,650		USD 100,000	1.80%	3.38%		1,126.50
	Kookmin Bank		2019		2022		KRW 112,650		USD 100,000	1.80%	3.38%		1,126.50
	Woori Bank		2019		2022		KRW 112,650		USD 100,000	1.80%	3.38%		1,126.50
	Korea Development Bank		2018		2023		KRW 320,880		USD 300,000	2.03%	3.75%		1,069.60
	BNP Paribas		2019		2024		KRW 111,841		CHF 100,000	1.78%	0.13%		1,118.41
	Kookmin Bank		2019		2024		KRW 111,841		CHF 100,000	1.78%	0.13%		1,118.41
	Korea Development Bank		2019		2022		KRW 117,340		USD 100,000	1.06%	2.38%		1,173.40
	Hana Bank		2019		2022		KRW 117,340		USD 100,000	1.06%	2.38%		1,173.40
	Kookmin Bank		2019		2022		KRW 117,340		USD 100,000	1.06%	2.38%		1,173.40
	Hana Bank		2018		2021		KRW 212,960		USD 200,000	2.10%	3.00%		1,064.80
	Korea Development Bank		2018		2021		KRW 212,960		USD 200,000	2.10%	3.00%		1,064.80
	Credit Agricole		2014		2020		KRW 110,680		USD 100,000	2.29%	2.50%		1,106.80
	Societe Generale		2014		2020		KRW 55,340		USD 50,000	2.16%	2.50%		1,106.80

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	Counterparty	Contract Year		Settlement Year		Contract amounts				Contract interest rate		Contract Exchange Rate
Type	Counterparty	Contract Year		Settlement Year		Pay		Receive		Pay	Receive	Contract Exchange Rate
						(KRW in millions, USD, CHF, HKD, AUD, EUR, SEK and other foreign currencies in thousands)
	Hana Bank		2014		2020		KRW 55,340		USD 50,000	2.16%	2.50%		1,106.80
	Hana Bank		2014		2020		KRW 55,340		USD 50,000	2.21%	2.50%		1,106.80
	Standard Chartered		2014		2020		KRW 55,340		USD 50,000	2.21%	2.50%		1,106.80
	HSBC		2014		2020		KRW 55,340		USD 50,000	2.21%	2.50%		1,106.80
	Nomura		2014		2020		KRW 55,340		USD 50,000	2.21%	2.50%		1,106.80
	BNP Paribas		2014		2020		KRW 55,340		USD 50,000	2.21%	2.50%		1,106.80
	HSBC		2014		2020		KRW 55,340		USD 50,000	2.21%	2.50%		1,106.80
	Hana Bank		2017		2022		KRW 226,600		USD 200,000	1.94%	2.63%		1,133.00
	Korea Development Bank		2017		2022		KRW 113,300		USD 100,000	1.94%	2.63%		1,133.00
	Nomura		2017		2022		KRW 113,300		USD 100,000	1.95%	2.63%		1,133.00
	Woori Bank		2017		2022		KRW 56,650		USD 50,000	1.95%	2.63%		1,133.00
	Kookmin Bank		2017		2022		KRW 56,650		USD 50,000	1.95%	2.63%		1,133.00
	Korea Development Bank		2018		2023		KRW 169,335		USD 150,000	2.26%	3.88%		1,128.90
	Woori Bank		2018		2023		KRW 169,335		USD 150,000	2.26%	3.88%		1,128.90
	Credit Agricole		2018		2023		KRW 112,890		USD 100,000	2.26%	3.88%		1,128.90
	Hana Bank		2018		2023		KRW 56,445		USD 50,000	2.26%	3.88%		1,128.90
	Kookmin Bank		2018		2023		KRW 56,445		USD 50,000	2.26%	3.88%		1,128.90

Under these currency swap contracts, we recognized net valuation gain of Won 311 billion in 2019.

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Details of interest rate contracts outstanding as of December 31, 2019 are as follows:


	Counterparty	Contract Year		Settlement Year				Contract Interest Rate Per Annum
Type	Counterparty	Contract Year		Settlement Year		Contract Amount		Pay	Receive
						(KRW in millions, USD in thousands)
Trading	Hana Bank		2017		2022		KRW 100,000	2.01%	3M CD + 0.24%
	Hana Bank		2017		2022		KRW 100,000	2.06%	3M CD + 0.27%
	Nomura⁽¹⁾		2017		2037		KRW 30,000	2.05%	3.08%
	Hana Bank		2017		2021		KRW 200,000	2.45%	3M CD + 0.32%
	Nomura⁽²⁾		2018		2038		KRW 30,000	2.56%	3.75%
	Hana Bank		2018		2023		KRW 200,000	2.15%	3M CD + 0.19%
	Hana Bank		2018		2023		KRW 200,000	2.17%	3M CD + 0.19%
	Hana Bank		2018		2023		KRW 150,000	2.03%	3M CD + 0.21%
	Hana Bank		2019		2024		KRW 200,000	1.87%	3M CD + 0.13%
	Societe Generale		2017		2022		KRW 200,000	3M Libor + 3.44%	3.77%
	Nomura		2017		2027		KRW 52,457	3M Libor + 2.25%	2.60%
	Nomura		2017		2027		KRW 59,423	3M Libor + 2.27%	2.62%
	Export-import bank of Korea		2015		2031		USD 15,893	2.67%	6M USD Libor
	ING Bank		2015		2031		USD 7,861	2.67%	6M USD Libor
	BNP Paribas		2015		2031		USD 7,861	0.0267	6M USD Libor
Cash flow hedge	BNP Paribas		2009		2027		USD 92,120	4.16%	6M USD Libor
	KFW		2009		2027		USD 92,120	4.16%	6M USD Libor
	Export-import bank of Korea		2016		2036		USD 80,514	3.00%	6M USD Libor

Notes:

(1)	2.05% of the contract interest rate for paying is applied for five years from the date of issuance, and 3M CD + 0.10% is applied thereafter. Depending on exercise of counterparty’s right, it can be reimbursed before the due date on the same day of every year starting from September 18, 2022.

(2)	2.56% of the contract interest rate for paying is applied for five years from the date of issuance, and 3M CD + 0.10% is applied thereafter. Depending on exercise of counterparty’s right, it can be reimbursed before the due date on the same day of every year starting from June 15, 2023.

Under these interest rate swap contracts, we recognized net valuation loss of Won 16,231 million in 2019.

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We engage in transactions denominated in foreign currencies and consequently become exposed to fluctuations in exchange rates. The carrying amounts of our foreign currency-denominated monetary assets and monetary liabilities as of December 31, 2018 and 2019 were as follows:


	Assets				Liabilities
Type	2018		2019		2018		2019
	(In thousands of USD, EUR, GBP and other foreign currencies)
AED		10,513		57,403		5,890		40,061
AUD		143		143		717,712		1,036,785
BDT		71,575		85,547		1,175		635
BWP		1,214		1,437		—		—
CAD		96		86		4		3,112
CHF		—		—		400,000		500,753
CNY		—		—		26,140		26,140
CZK		—		—		—		243
EUR		337		208		105,673		111,199
GBP		—		—		1		191
GHS		25,794		—		—		—
HKD		—		—		1,650,000		1,648,815
IDR		60,568		376,136		206,935		219,801
INR		1,228,795		1,244,170		183,963		210,232
JOD		2,764		1,516		5		147
JPY		35,935		109,970		390,921		314,402
KZT		319		319		—		—
MGA		3,318,447		3,858,201		170,641		133,403
MMK		25,208		29,651		—		—
PHP		709,285		175,210		66,985		130,073
PKR		305,542		354,361		3,588		4,366
SAR		2,024		2,653		—		480
SEK		—		—		450,000		449,072
USD		1,422,510		1,227,054		8,103,602		9,963,928
UYU		39,898		58,781		4,253		8,213
VND		—		418,998		—		1,375
ZAR		170		450		4		6

The following analysis sets forth the sensitivity of our consolidated net income before income taxes (our “pre-tax income”) to changes in exchange rates, interest rates, electricity rates and fuel costs. For purposes of this section, we and our related parties are deemed one entity. The range of changes in such risk categories represents our view of the changes that are reasonably possible over a one-year period, although it is difficult to predict such changes as a result of adverse economic developments in Korea. See Item 3.D. “Risk Factors—Risks Relating to Korea and the Global Economy—Unfavorable financial and economic conditions in Korea and globally may have a material adverse impact on us.” The following discussion only addresses material market risks faced by us and does not discuss other risks which we face in the normal course of business, including country risk, credit risk and legal risk. Unless otherwise specified, all calculations are made under IFRS.

If Won depreciates against U.S. dollar and all other foreign currencies held by us by 10% and all other variables are held constant from their levels as of December 31, 2019, we estimate that our unrealized foreign exchange translation losses will increase by Won 1,198 billion in 2020. Such sensitivity analysis is conducted for monetary assets and liabilities denominated in foreign currencies other than functional currency as of December 31, 2018 and 2019, without taking into consideration of swap transactions. To manage our foreign currency risk related to foreign currency-denominated receivables and payables, we have a policy of entering into currency forward agreements. In addition, to manage our foreign currency risk related to foreign currency-

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denominated expected sales transactions and purchase transactions, we enter into cross-currency swap agreements.

We are exposed to interest rate risk due to our borrowings with floating interest rates. If interest rates increase by 1%p on all of our borrowings and debentures bearing variable interest and all other variables are held constant as of December 31, 2019, we estimate that our profit before income taxes will decrease by Won 25 billion (not reflecting the fact that a portion of such interest may be capitalized under IFRS) in 2020. Such sensitivity analysis does not take into consideration interest rate swap transactions. To manage our interest rate risks, we, in addition to maintaining an appropriate mix of fixed and floating rate loans, have entered into certain interest rate swap agreements.

We are exposed to electricity rates risk due to the rate regulation by the Government, which considers the effect of electricity rate changes on the national economy. If the electricity rate rises by 1% and all other variables are held constant as of December 31, 2019, we estimate that our profit before income taxes will increase by Won 559 billion in 2020.

We are exposed to fuel price risks due to the heavy influence of fuel costs on our sales and cost of sales. If the fuel prices of anthracite and bituminous coal, oil, LNG and others used for generation by us and our generation subsidiaries rise by 1% and all other variables are held constant as of December 31, 2019, we estimate that our profit before income taxes will decrease by Won 178 billion in 2020.

The above discussion and the estimated amounts generated from the sensitivity analyzes referred to above include “forward-looking statements,” which assume for analytical purposes that certain market conditions may occur. Accordingly, such forward-looking statements should not be considered projections by us of future events or losses.

See Note 45 of the notes to our consolidated financial statements included in this annual report for further related information.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Item 12.A.

Debt Securities

Of the four debt securities issued by us that are registered under the Exchange Act as set forth in the cover page of this annual report, the One Hundred Year 7.95% Zero-to-Full Debentures due April 1, 2096, were guaranteed by Korea Development Bank. However, such guarantee expired on April 1, 2016 by reason of the expiration of a put option period applicable to such debentures in accordance with the terms of such debentures.

Korea Development Bank, a statutory bank for the Korean government, is 100% beneficially owned by the Korean government. The voting rights in our equity interest held by Korea Development Bank are effectively exercised by the Korean government.

The guarantee by Korea Development Bank of our above-mentioned registered debt securities was itself a security registered under the Securities Act. Korea Development Bank is a Schedule B issuer and periodically files registration statements with the Commission. These registration statements typically include financial statements prepared in accordance with the applicable generally accepted accounting principles, currently the Korean International Financial Reporting Standards, and audited in accordance with generally accepted auditing standards in the Republic of Korea.

Item 12.B.

Warrants and Rights

Not applicable.

161

Item 12.C.

Other Securities

Not applicable.

Item 12.D.

American Depositary Shares

Under the terms of the Deposit Agreement in respect of our ADSs, the holder and beneficiary owners of ADSs, any party depositing or withdrawing or surrendering ADSs or ADRs, whichever applicable, may be required to pay the following fees and charges to Citibank, N.A. acting as depositary for our ADSs:


Item	Services	Fees

1	Taxes and other governmental charges	As applicable

2	Registration of transfer of common shares generally on our shareholders’ register, any institution authorized under the applicable law to effect book-entry transfers of securities (including Korea Securities Depositary), or any entity that presently carries out the duties of registrar for the common shares, and applicable to transfers of common shares to the name of the Depositary or its nominee on the making of deposits or withdrawals	A fee of US$1.50 or less per ADS

3	Cable, telex and facsimile transmission expenses	As applicable

4	Expenses incurred by the Depositary in the conversion of foreign currency	As applicable

5	Execution and delivery of ADRs and the surrender of ADRs	Fee of US$0.05 or less per ADS

6	Cash distribution made by the Depositary or its agent	Fee of US$0.02 or less per ADS

7	Fee for the distribution of proceeds of sales of securities or rights for distribution other than cash, common shares or rights to subscribe for shares, distribution in shares or distribution in rights to subscribe for shares	Lesser of (i) the fee for the execution and delivery of ADRs referred to above which would have been charged as a result of the deposit by the holders of securities or common shares received in exercise of rights distributed to them, but which securities or rights are instead sold by the Depositary and the net proceeds distributed and (ii) the amount of such proceeds

8	Depositary services performed in administering the ADRs (which fee shall be assessed against holders of ADSs as of the record date or dates and shall be payable at the sole discretion of the Depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions)	Fee of US$0.02 or less per ADS per calendar year

Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary by the brokers (on behalf of their clients) receiving the newly-issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs to the depositary for cancellation. The brokers in turn charge these transaction fees to their clients.

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Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary to the holders of record of ADSs as of the applicable ADS record date. The depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions other than cash (i.e., stock dividends, rights offerings), the depositary charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or un-certificated in direct registration), the depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts via the central clearing and settlement system, the Depository Trust Company (“DTC”), the depositary generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the depositary.

In the event of refusal to pay the depositary fees, the depositary may, under the terms of the Deposit Agreement, refuse the requested service until payment is received or may set-off the amount of the depositary fees from any distribution to be made to the ADS holder.

The fees and charges the ADS holders may be required to pay may vary over time and may be changed by us and by the depositary. The ADS holders will receive prior notice of such changes.

Depositary Payments for the Fiscal Year 2019

The following table sets forth our expenses incurred in 2019, which were reimbursed by Citibank, N.A. in the aggregate:


	(In thousands of U.S. dollars)
Reimbursement of legal fees	US$	122
Reimbursement of accounting fees		156
Contributions towards our investor relations and other financing efforts (including investor conferences, non-deal roadshows and market information services)		660
Other		188

Total	US$	1,125

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PART II

ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15.

CONTROLS AND PROCEDURES

Disclosure Control

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2019. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives. Based upon our evaluation, our chief executive officer and chief financial officer concluded that the design and operation of our disclosure controls and procedures as of December 31, 2019 were effective to provide reasonable assurance that information required to be disclosed by us in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decision regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for our company. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we have evaluated the effectiveness of our internal control over financial reporting as of December 31, 2019 based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with generally accepted accounting principles and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a company’s assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of a company’s management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to consolidated financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

164

Following the overhaul in May 2013 by the Committee of Sponsoring Organization of the Treadway (“COSO”) of the COSO Framework relating to internal controls and adoption of the 2013 Integrated Framework of the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework (2013)”), we have, effective January 1, 2014, adopted the COSO Framework (2013) and incorporated it into our internal control system for us and our subsidiaries in order to comply with the Sarbanes Oxley Act and to standardize our internal control system. As required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules as promulgated by the Securities and Exchange Commission, management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019 using criteria established by the COSO Framework (2013). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2019 based on the criteria established by the COSO Framework (2013).

Audit Report of the Independent Registered Public Accounting Firm

Ernst & Young Han Young has issued an audit report on the effectiveness of our internal control over financial reporting as of December 31, 2019, which is included elsewhere in this annual report.

Changes in Internal Controls

There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our adoption of the COSO Framework (2013) did not have, and is not reasonably likely to have, any material effect on our internal control over financial reporting.

We operate an integrated ERP system for a transparent and efficient management of the core ERP components, including personnel, accounting, procurement, construction and facilities maintenance. In addition, we also operate a strategic enterprise management system that includes business warehouse, management information and business planning and simulation systems. We continue to upgrade and improve the ERP system, which is being used as our core information infrastructure.

ITEM 16.

[RESERVED]

ITEM 16.A.

AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that we have at least one “audit committee financial expert” as such term is defined by the regulations of the Securities and Exchange Commission issued pursuant to Section 407 of the Sarbanes-Oxley Act of 2002. Our audit committee financial expert is Noh, Geum-Sun. Such member is independent within the meaning of the Korea Stock Exchange listing standards, the regulations promulgated under the Enforcement Decree of the Korean Commercial Act and the New York Stock Exchange listing standards.

ITEM 16.B.

CODE OF ETHICS

We have adopted a code of ethics for our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions as required under Section 406 of the Sarbanes-Oxley Act of 2002, together with an insider reporting system in compliance with Section 301 of the Sarbanes-Oxley Act. The code of ethics is available on our website www.kepco.co.kr. We have not granted any waiver, including an implicit waiver, from a provision of the code of ethics to any of the above-mentioned officers during our most recently completed fiscal year.

ITEM 16.C.

PRINCIPAL AUDITOR FEES AND SERVICES

The following table sets forth the aggregate fees billed for each of the years ended December 31, 2018 and 2019 for professional services rendered by our principal auditors for such year, for various types of services and

165

a brief description of the nature of such services. KPMG Samjong Accounting Corp., a Korean independent registered public accounting firm, was our principal auditors for the year ended December 31, 2018. Ernst & Young Han Young, a Korean independent registered public accounting firm, was our principal auditors for the year ended December 31, 2019 and we currently expect Ernst & Young Han Young to serve as our principal auditors for the year ended December 31, 2020.


	Aggregate Fees Billed During
Type of Services	2018		2019		Nature of Services
	(In millions of Won)
Audit Fees	￦	3,884	￦	7,440	Audit service including interim review service for KEPCO and its subsidiaries.
Audit-Related Fees		315		558	Comfort letter services.
Tax Fees		105		113	Tax return and consulting advisory service.
All Other Fees		—		—	All other services which do not meet the three categories above.

Total	￦	4,304	￦	8,111

The U.S. law and regulations in effect since May 6, 2003 generally require all service of the principal auditors to be pre-approved by an independent audit committee or, if no such committee exists with respect to an issuer, by the entire board of directors. We have adopted the following policies and procedures for consideration and approval of requests to engage our principal auditors to perform audit and non-audit services. If the request relates to services that would impair the independence of our principal auditors, the request must be rejected. If the service request relates to audit and permitted non-audit services for us and our subsidiaries, it must be forwarded to our audit committee and receive pre-approval.

In addition, the U.S. law and regulations permit the pre-approval requirement to be waived with respect to engagements for non-audit services aggregating no more than five percent of the total amount of revenues we paid to our principal auditors, if such engagements were not recognized by us at the time of engagement and were promptly brought to the attention of our audit committee or a designated member thereof and approved prior to the completion of the audit.

ITEM 16.D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE

Not applicable.

ITEM 16.E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Neither we nor any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Exchange Act, purchased any of our equity securities during the period covered by this annual report.

ITEM 16.F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Our independent accountant has recently changed from KPMG Samjong Accounting Corp. (“KPMG”) to Ernst & Young Han Young (“E&Y”) due to the expiration of the term of the appointment of KPMG. Under the rules of the Board of Audit and Inspection, a Government agency, relating to audits of Government-owned entities, a public accounting firm may not audit a Government-owned entity (including us) for a term exceeding six consecutive years. The fiscal year 2018 marked the sixth year of audit by KPMG of us, thus we were required to appoint a new independent registered public accounting firm. As a result, we appointed E&Y, whose appointment was approved at our audit committee meeting on November 16, 2018. E&Y has begun serving as our new independent registered public accounting firm for the years ended December 31, 2019, 2020 and 2021.

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KPMG’s engagement as our independent registered public accounting firm expired upon the completion of the audit of our consolidated financial statements as of and for the year ended December 31, 2018 and the effectiveness of internal control over financial reporting as of December 31, 2018 and the issuance of their reports thereon April 30, 2019. The audit report of KPMG on our consolidated financial statements as of and for the years ended December 31, 2017 and 2018 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. Furthermore, in connection with the audit of our consolidated financial statements as of and for the years ended December 31, 2017 and 2018 there were no disagreements (as described in Item 16F(a)(1)(iv) of Form 20-F) with KPMG on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG, would have caused KPMG to make reference to the subject matter of the disagreement in connection with their reports. In addition, we confirm that during the years ended December 31, 2017 and 2018 and prior to the expiration of KPMG’s engagement as our independent registered public accounting firm, there were no “reportable events” requiring disclosure pursuant to Item 16F(a)(1)(v) of Form 20-F.

During our fiscal years ended December 31, 2017 and 2018 and prior to the commencement of E&Y’s term as our independent registered public accounting firm, neither we nor anyone on our behalf consulted with E&Y with respect to either (1) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements, and neither a written report nor oral advice was provided to us that E&Y concluded was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue or (2) any matter that was either the subject of a disagreement, as defined in Item 16F(a)(1)(iv) of Form 20-F and the related instructions to Item 16F, or a reportable event, as described in Item 16F(a)(1)(v) of Form 20-F.

We provided a copy of the disclosure in this Item to KPMG and requested that KPMG furnish us with a letter addressed to the Commission stating whether it agrees with such disclosure, and if it does not agree, stating the respects in which it does not agree. A copy of KPMG’s letter dated April 29, 2020 is filed as Exhibit 15.5 to this Form 20-F.

ITEM 16.G. CORPORATE GOVERNANCE

We are committed to high standards of corporate governance. We are in compliance with the corporate governance provisions of the KEPCO Act, the Act on the Management of Public Institutions, the Korean Commercial Act, the Financial Investment Services and Capital Markets Act of Korea and the Listing Rules of the Korea Exchange. We, like all other companies in Korea, must comply with the corporate governance provisions under the Korean Commercial Act, except to the extent the KEPCO Act and the Act on the Management of Public Institutions otherwise require. Our corporate governance is also affected by various regulatory guidelines, including those promulgated by the Ministry of Economy and Finance. In addition, as a company listed on the Korea Exchange, we are subject to the Financial Investment Services and Capital Markets Act of Korea, unless the Financial Investment Services and Capital Markets Act of Korea otherwise provides.

The Act on the Management of Public Institutions

General Provisions

On April 1, 2007, the Act on the Management of Public Institutions took effect by abolishing and replacing the Government-invested Enterprise Management Basic Act, which was enacted in 1984. Unless stated otherwise therein, the Act on the Management of Public Institutions takes precedence over any other laws and regulations in the event of inconsistency. On April 2, 2007, pursuant to this Act the minister of the Ministry of Economy and Finance designated us as a “market-oriented public enterprise” as defined under this Act, and we became subject to this Act accordingly. We incorporated the applicable provisions of this Act into our Articles of Incorporation by amendment thereto in September 2007.

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The Act on the Management of Public Institutions sets out the rules for corporate governance for entities that are subject to this Act, including the appointment of their respective president and directors. Under this Act as it applies to us as a “market-oriented public enterprise”, (i) a senior non-standing director as appointed by the minister of the Ministry of Economy and Finance becomes the chairman of our board of directors following the review and resolution of the Public Agencies Operating Committee; (ii) our president and our standing directors who concurrently serve as members of our audit committee are appointed by the President of the Republic upon the motion of the Ministry of Trade, Industry and Energy (in the case of our president) or of the Ministry of Economy and Finance (in the case of standing directors who concurrently serve as members of our audit committee), following the nomination by such enterprise’s director nomination committee, the review and resolution of the Public Agencies Operating Committee pursuant to the Act on the Management of Public Institutions and an approval at the general meeting of our shareholders; (iii) our standing directors other than the president and those who also serve as audit committee members must be appointed by our president with the approval at the general meeting of our shareholders from a pool of candidates recommended by our director nomination committee; and (iv) our non-standing directors must be appointed by the minister of the Ministry of Economy and Finance following the review and resolution of the Public Agencies Operating Committee from a pool of candidates recommended by the director nomination committee, and must have ample knowledge and experience in business management.

The Public Agencies Operating Committee is established pursuant to the Act on the Management of Public Institutions and is comprised of one chairperson who is the Minister of the Ministry of Economy and Finance and the following members: (i) one Vice Minister-level public official from the Office for Government Policy Coordination as nominated by the minister of the Office for Government Policy Coordination; (ii) one Vice Minister, Deputy Administrator or an equivalent public official of the related administrative agency as prescribed by Presidential Decree; (iii) one Vice Minister, Deputy Administrator, or an equivalent public official of the competent agency who does not fall under subclause (ii); and (iv) 11 or fewer persons commissioned by the President based on the recommendation of the Minister of the Ministry of Economy and Finance from among persons in various fields including law, economy, press, academia, labor, who have good knowledge and experience in the operation and business administration of public institutions as well as good reputation for impartiality.

Our director nomination committee, which is also known as the Committee for Recommendation of Executive Officers, is comprised of non-standing directors and members appointed by the board of directors. The number of members ranges from five to 15 persons and must be decided by a resolution of the board of directors; provided that, the number of members appointed by the board of directors must be less than half of the total number of members of our director nomination committee.

Under the Act on the Management of Public Institutions and our Articles of Incorporation, the term of office is three years for our president and two years for our directors (standing and non-standing) other than our president. Our directors (including the president) may be reappointed for one or more additional terms of one year. In order to be reappointed, the president must be evaluated on the basis of his management performance; a standing director, on the basis of the performance of the duties for which he was elected to perform, or if the standing director has executed an incentive bonus contract, on the basis of his performance under the contract; and a non-standing director, on the basis of his performance of the duties for which he was elected to perform.

Under the Act on the Management of Public Institutions and our Articles of Incorporation, a recommendation from the director nomination committee is required for the appointment of our executive officers, except in the case of reappointments. The director nomination committee consists of five to fifteen members, including private-sector members appointed by the board of directors. Non-standing directors must comprise at least a majority of the director nomination committee. One of the private-sector members must be able to represent our opinion and must not be currently employed by us. As required under the Act on the Management of Public Institutions, we established an audit committee. At least two-thirds of the audit committee members must be non-standing directors, and at least one committee member must be an expert in finance or

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accounting. According to the Act on the Management of Public Institutions, our president’s term cannot be terminated unless done so by the President of the Republic pursuant to the Act on the Management of Public Institutions or upon an event as specified in our Articles of Incorporation.

As required under Act on the Management of Public Institutions, we submit to the Government by October 31 every year a report on our medium- to long-term management goals. Under the Act on the Management of Public Institutions, we are also required to give separate public notice of important management matters, such as our budget and financial statements, status of directors and annual reports. In addition, for purposes of providing a comparison of the management performances of government agencies, we are required to post on a designated website a notice on a standard form detailing our management performance. Following consultation with the minister of the Ministry of Trade, Industry and Energy and the review and resolution of the operating committee, the Ministry of Economy and Finance must examine the adequacy and competency of government agencies and establish plans on merger, abolishment, restructuring and privatization of public agencies. In such case, the minister of the Ministry of Trade, Industry and Energy must execute these plans and submit a performance report to the Ministry of Economy and Finance.

Under certain amendments to the Act on the Management of Public Institutions that became effective as of July 1, 2019, our president is required to establish a plan to appoint directors and senior management based on the gender equality, endeavor to follow such plan, and submit an annual report on our gender equality plan regarding appointment of directors and senior management to the Ministry of Economy and Finance.

Application of the Act to Our Generation Subsidiaries

On January 24, 2011, the Ministry of Economy and Finance changed the designation of our six generation subsidiaries from “other public institutions” to “market-oriented public enterprises”, each as defined in the Act on the Management of Public Institutions, and all of our generation subsidiaries accordingly amended their respective articles of incorporation in 2011 to be in compliance with this Act. As “other public institutions”, our generation subsidiaries previously were not subject to the same regulations under the Act on the Management of Public Institutions applicable to us with regards to corporate governance matters such as the appointment and dismissal of directors and the composition of the boards of directors. However, as “market-oriented public enterprises”, our generation subsidiaries are currently subject to the same such regulations that are applicable to us.

Specifically, prior to such designation, (i) our president appointed the presidents and the statutory auditors of our generation subsidiaries; (ii) the selection of non-standing directors of each such subsidiary was subject to approval by our president; (iii) the president of each such subsidiary entered into a management contract with our president; and (iv) our evaluation committee conducted performance evaluation of such subsidiaries. However, following such designation, akin to the appointment process applicable to us, (i) the President of the Republic appoints the presidents and standing directors of our generation subsidiaries that concurrently serve as members of the audit committees; (ii) the selection of non-standing directors of these subsidiaries is subject to approval by the minister of the Ministry of Economy and Finance; (iii) the president of each such generation subsidiary is required to enter into a management contract directly with the minister of the Ministry of Trade, Industry and Energy; and the Public Agencies Operating Committee conducts performance evaluation of such subsidiaries.

Our Control over the Generation Subsidiaries

Designation of our generation subsidiaries as “market-oriented public enterprises” was intended to promote responsible management by and improve operational efficiency of government-affiliated electricity companies by fostering competition among them so as to provide improved service to the general public. Such designation also has had the effect of the Government exercising greater direct control over the appointment of the governing body of our generation subsidiaries (in ways that are similar how the Government exercises such control over us as our majority shareholder as well as our regulator).

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In addition, the Government has imposed a number of regulations that further affect the respective operational boundaries between us and our generation subsidiaries, including as follows:

•

In August 2010, in furtherance of the Act on the Management of Public Institutions, the Ministry of Economy and Finance announced the Proposal for the Improvement in the Structure of the Electric Power Industry, which was designed to promote responsible management by and improve operational efficiency of government-affiliated electricity companies by fostering competition among them. Key initiatives of the proposal included the following: (i) maintain the current structure of having six generation subsidiaries and designate the six generation subsidiaries as market-oriented public enterprises under the Act on the Management of Public Institutions in order to foster competition among the generation subsidiaries and promote efficiency in their operations, and (ii) clarify the scope of the business of us and the six generation subsidiaries (namely, that we shall manage the financial structure and governance of the six generation subsidiaries and nuclear power plant and overseas resources development projects, while the six generation subsidiaries will have greater autonomy with respect to construction and management of generation units and procurement of fuel, among others).

•

However, notwithstanding these developments, we, also a government-controlled entity, remain as the sole shareholder of our generation subsidiaries and continue to exercise significant control over them in such capacity as the sole shareholder well as through other practical means as further described below.

First, as the sole shareholder, we continue to have the right, under the Act on the Management of Public Institutions, to approve or disapprove the appointment of key members of the governing body of our generation subsidiaries (namely, the president and the standing directors) by way of a vote at the general shareholders meeting before such appointments are ultimately approved and made by the President of the Republic (in the case of the presidents and standing directors concurrently serving as audit committee members of the generation subsidiaries) or by the president of each generation subsidiary (in the case of other standing directors of such generation subsidiary). Our right to exercise such voting right as a shareholder is also protected by the Commercial Act of Korea.

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Second, in practice we retain significant control over our generation subsidiaries through the following means:

•

We are the sole purchaser of electricity produced by the generation subsidiaries and continue to have near monopoly in terms of transmitting and distributing electricity in Korea. Accordingly, we continue to have significant influence over our generation subsidiaries in the electricity industry.

•

Our president holds regular meetings (known as “CEO Meetings”) with the presidents of our generation subsidiaries for which our president determines whether and when to convene such meetings, sets the agenda for such meetings and chairs such meetings. Since significant issues that jointly affect us and our generation subsidiaries are often discussed and decided at these meetings, the leadership role exercised by our president in such meetings is significant in setting the policies and direction for us and our generation subsidiaries as a whole.

•

We maintain and operate the Affiliated Company Management Team within the parent company organizational structure. The purpose of this team is to support and coordinate the management of the generation subsidiaries. Activities of the Affiliated Company Management Team include preparation of the CEO meetings, deliberation on major issues to be discussed at CEO Meetings, convening a general meeting of shareholders of the generation subsidiaries and coordination on the decision-making process for the general meeting of shareholders of the generation subsidiaries.

Ultimately, our control over our generation subsidiaries is derived from the fact that the Government owns the majority of our shares and effectively controls us as the supervisor and regulator in a heavily regulated industry, and in effect also exercises the same degree of control over our generation subsidiaries through our sole share ownership over our generation subsidiaries as well as its statutory power of direct appointment of the governing bodies of our generation subsidiaries. In effect, we are acting as an intermediate holding company in a vertical control structure involving the Government, us and our generation subsidiaries, where the Government holds the ultimate control over both us and our generation subsidiaries and exercises its control over our generation subsidiaries in part through us acting as the sole shareholder and the parent company.

Differences in Korean/New York Stock Exchange Corporate Governance Practices

We are a “foreign private issuer” (as such term is defined in Rule 3b-4 under the Exchange Act), and our ADSs are listed on the New York Stock Exchange, or NYSE. Under Section 303A of the NYSE Listed Company Manual, NYSE-listed companies that are foreign private issuers are permitted to follow home country practice in lieu of the corporate governance provisions specified by the NYSE with limited exceptions. Under the NYSE Listed Company Manual, we as a foreign private issuer are required to disclose significant differences between NYSE’s corporate governance standards and those we follow under Korean law. The following summarizes some significant ways in which our corporate governance practices differ from those followed by U.S. companies listed on the NYSE under the listing rules of the NYSE.

Majority of Independent Directors on the Board

Under the NYSE listing rules, U.S. companies listed on the NYSE must have a board, the majority of which is comprised of independent directors satisfying the requirements of “independence” as set forth in Rule 10A-3 under the Exchange Act. No director qualifies as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with us). The NYSE rules include detailed tests for determining director independence. As a foreign private issuer, we are exempt from this requirement. Under the Act on the Management of Public Institutions, more than one-half of our directors must be non-standing directors. For a discussion on qualifications of non-standing directors, see Item 6.A. “Directors and Senior Management—Board of Directors.” Under the Act on the Management of Public Institutions, a non-standing director is appointed by the Ministry of Economy and Finance following the review and resolution of the Public

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Agencies Operating Committee from a pool of candidates recommended by the director nomination committee, and must have ample knowledge and experience in business management. Government officials that are not part of the teaching staff in national and public schools are ineligible to become our non-standing directors.

Executive Session

Under the NYSE listing rules, non-management directors of U.S. companies listed on the NYSE are required to meet on a regular basis without management present and independent directors must meet separately at least once per year. While no such requirement currently exists under applicable Korean law, listing standards or our Articles of Incorporation, executive sessions were held from time to time in 2018 in order to promote the exchange of diverse opinions by non-standing directors.

Audit Committee

Under the NYSE listing rules, listed companies must have an audit committee that has a minimum of three members, and all audit committee members must satisfy the requirements of independence set forth in Section 303A.02 of the NYSE Listed Company Manual and Rule 10A-3 under the Exchange Act. Our audit committee members meet the requirements of independence set forth in Section 303A.02 of the NYSE Listed Company Manual and Rule 10A-3 under the Exchange Act. The audit committee must be directly responsible for the appointment, compensation, retention and oversight of the work of the independent registered public accountants. Our audit committee performs the roles and responsibilities required of an audit committee under the Sarbanes-Oxley Act, including the supervision of the audit by the independent registered public accountants. Under the Korea Exchange listing rules and the Korean Commercial Act, a large listed company must also establish an audit committee of which at least two-thirds of its members must be non-standing directors and whose chairman must be a non-standing director. Under the Act on the Management of Public Institutions, the Korean Commercial Act, the amended Articles of Incorporation and the Korea Exchange listing rules, we are required to maintain an audit committee consisting of three members, of which not less than two members are required to be non-standing directors. Our audit committee is in compliance with the foregoing requirements under the Act on the Management of Public Institutions, the Korean Commercial Act, the amended Articles of Incorporation and the Korea Exchange listing rules.

Nomination/Corporate Governance Committee

Under the NYSE listing rules, U.S. companies listed on the NYSE must have a nomination/corporate governance committee composed entirely of independent directors. In addition to identifying individuals qualified to become board members, this committee must develop and recommend to the board a set of corporate governance principles. Under the Act on the Management of Public Institutions, we are required to have a director nomination committee which consists of non-standing directors and ad hoc members appointed by our Board of Directors. Our standing directors and executives as well as governmental officials that are not part of the teaching staff in national and public schools are ineligible to become a member of our director nomination committee. There is no requirement to establish a corporate governance committee under applicable Korean law.

Pursuant to the NYSE listing standards, non-management directors must meet on a regular basis without management present and independent directors must meet separately at least once per year. No such requirement currently exists under applicable Korean law.

Compensation Committee

Under the NYSE listing rules, U.S. companies listed on the NYSE are required to have a compensation committee which is composed entirely of independent directors. In January 2013, the SEC approved amendments to the listing rules of NYSE and NASDAQ regarding the independence of compensation committee members and the appointment, payment and oversight of compensation consultants. The listing rules were adopted as required

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by Section 952 of the Dodd-Frank Act and rule 10C-1 of the Exchange Act, which direct the national securities exchanges to prohibit the listing of any equity security of a company that is not in compliance with the rule’s compensation committee director and advisor independence requirements. Certain elements of the listing rules became effective on July 1, 2013 and companies listed on the NYSE must comply with such listing rules by the earlier of the company’s first annual meeting after January 15 or October 31, 2014.

No such requirement currently exists under applicable Korean law or listing standards, and we currently do not have a compensation committee.

Corporate Governance Guidelines and Code of Business Conduct and Ethics

Under the NYSE listing rules, U.S. companies listed on the NYSE are required to establish corporate governance guidelines and to adopt a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. As a foreign private issuer, we are exempt from this requirement. Pursuant to the requirements of the Sarbanes-Oxley Act, we have adopted a code of ethics applicable to our President & Chief Executive Officer and all other directors and executive officers including the Chief Financial Officer and the Chief Accounting Officer, as well as all financial, accounting and other officers that are involved in the preparation and disclosure of our consolidated financial statements and internal control of financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We have also adopted an insider reporting system in compliance with Section 301 of the Sarbanes-Oxley Act. The code of ethics applicable to our executive officers and financial officers are available on www.kepco.co.kr.

Shareholder Approval of Equity Compensation Plans

Under the NYSE listing rules, shareholders of U.S. companies listed on the NYSE are required to approve all equity compensation plans. Under Korean law and regulations, stock options can be granted to employees to the extent expressly permitted by the articles of incorporation. We currently do not have any equity compensation plans.

Annual Certification of Compliance

Under the NYSE listing rules, a chief executive officer of a U.S. company listed on the NYSE must annually certify that he or she is not aware of any violation by the company of NYSE corporate governance standards. As a foreign private issuer, we are not subject to this requirement. However, in accordance with rules applicable to both U.S. companies and foreign private issuers, we are required to promptly notify the NYSE in writing if any executive officer becomes aware of any material noncompliance with the NYSE corporate governance standards applicable to us. In addition, foreign private issuers, including us, are required to submit to the NYSE an annual written affirmation relating to compliance with Sections 303A.06 and 303A.11 of the NYSE listed company manual, which are the NYSE corporate governance standards applicable to foreign private issuers. All written affirmations must be executed in the form provided by the NYSE, without modification. An annual written affirmation is required to be submitted to the NYSE within 30 days of filing with the SEC our annual report on Form 20-F. We have been in compliance with this requirement in all material respects and plan to submit such affirmation within the prescribed time line.

Whistle Blower Protection

On May 25, 2011, the SEC adopted final rules to implement whistleblower provisions of the Dodd-Frank Act, which are applicable to foreign private issuers with securities registered under the U.S. securities laws. The final rules provide that any eligible whistleblower who voluntarily provides the SEC with original information that leads to the successful enforcement of an action brought by the SEC under U.S. securities laws must receive an award of between 10 and 30 percent of the total monetary sanctions collected if the sanctions exceed US$1,000,000. An eligible whistleblower is defined as someone who provides information about a possible

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violation of the securities laws that he or she reasonably believes has occurred, is ongoing, or is about to occur. The possible violation does not need to be material, probably or even likely, but the information must have a “facially plausible relationship to some securities law violation”; frivolous submissions would not qualify. The final rules also prohibit retaliation against the whistleblower. While the final rules do not require employees to first report allegations of wrongdoing through a company’s corporate compliance system, they do seek to incentivize whistleblowers to utilize internal corporate compliance first by, among other things, (i) giving employees who first report information internally the benefit of the internal reporting date for purposes of the SEC program so long as the whistleblower submits the same information to the SEC within 120 days of the initial disclosure; (ii) clarifying that the SEC will consider, as part of the criteria for determining the amount of a whistleblower’s award, whether the whistleblower effectively utilized the company’s corporate compliance program or hindered the function of the program; and (iii) crediting a whistleblower who reports internally first and whose company passes the information along to the SEC, which would mean the whistleblower could receive a potentially higher award for information gathered in an internal investigation initiated as a result of the whistleblower’s internal report.

In addition, the final rules address concerns that the whistleblower rules incentivize officers, directors and those with legal, audit, compliance or similar responsibilities to abuse these positions by making whistleblower complaints to the SEC with respect to information they obtained in these roles by generally providing that information obtained through a communication subject to attorney-client privilege or as a result of legal representation would not be eligible for a whistleblower award unless disclosure would be permitted by attorney conduct rules. Accordingly, officers and directors, auditors and compliance personnel and other persons in similar roles would not be eligible to receive awards for information received in these positions unless (x) they have a reasonable basis to believe that (1) disclosure of the information is necessary to prevent the entity from engaging in conduct that is likely to cause substantial injury to the financial interests of the entity or investors; or (2) the entity is engaging in conduct that will impede an investigation of the misconduct, for example, destroying documents or improperly influencing witnesses; or (y) 120 days have passed since the whistleblower provided the information to senior responsible persons at the entity or 120 days have passed since the whistleblower received the information at a time when these people were already aware of the information.

In Korea, under the Financial Investment Services and Capital Markets Act, anyone may provide or furnish the Financial Services Commission or the Securities and Futures Commission with information on unfair trading or any other violation of the Financial Investment Services and Capital Markets Act. The Financial Services Commission shall keep the identity of the whistleblower confidential, and any institution, organization or company to which the whistleblower belongs may not treat the whistleblower unfavorably, directly or indirectly. In addition, the Financial Services Commission may also reward the whistleblower within the limit of the budget of the Financial Services Commission.

ITEM 16.H.

MINE SAFETY DISCLOSURE

Not applicable.

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PART III

ITEM 17.

FINANCIAL STATEMENTS

Not applicable.

ITEM 18.

FINANCIAL STATEMENTS

Reference is made to Item 19. “Exhibits” for a list of all financial statements filed as part of this annual report.

ITEM 19.

EXHIBITS

(a) Financial Statements filed as part of this Annual Report

See Index to Financial Statements on page F-1 of this annual report.

(b) Exhibits filed as part of this Annual Report

See Index of Exhibits beginning on page E-1 of this annual report.

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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.


KOREA ELECTRIC POWER CORPORATION
By:		/s/ JongKap KIM
Name:		JongKap KIM
Title:		President and Chief Executive Officer
Date:		April 29, 2020

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INDEX OF EXHIBITS



1.1		Articles of Incorporation, as last amended on April 14, 2020 (in English)

2.1		Form of Deposit Agreement**

8.1		List of Subsidiaries

12.1		Certifications of our Chief Executive Officer required by Rule 13a-14(a) of the Exchange Act (Certifications under Section 302 of the Sarbanes-Oxley Act of 2002)

12.2		Certifications of our Chief Financial Officer required by Rule 13a-14(a) of the Exchange Act (Certifications under Section 302 of the Sarbanes-Oxley Act of 2002)

13.1		Certifications of our Chief Executive Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of the United States Code (18 U.S.C. 1350) (Certifications under Section 906 of the Sarbanes-Oxley Act of 2002)

13.2		Certifications of our Chief Financial Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of the United States Code (18 U.S.C. 1350) (Certifications under Section 906 of the Sarbanes-Oxley Act of 2002)

15.1		The Korea Electric Power Corporation Act, as amended on March 21, 2017 (in English)***

15.2		Enforcement Decree of the Korea Electric Power Corporation Act, as amended on August 31, 2016 (in English)*

15.3		The Act on the Management of Public Institutions, as amended on December 31, 2018 (in English)

15.4		Enforcement Decree of the Act on the Management of Public Institutions, as amended on June 18, 2019 (in English)

15.5		Letter from KPMG

101.1		Interactive Data Files (XBRL-Related Documents)

*	Incorporated by reference to the Registrant’s annual report on Form 20-F (No. 001-13372) previously filed on April 28, 2017.

**	Incorporated by reference to the Registrant’s Registration Statement on Form F-6 with respect to the ADSs, registered under Registration No. 333-196703.

***	Incorporated by reference to the Registrant’s annual report on Form 20-F (No. 001-13372) previously filed on April 30, 2019.

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INDEX TO FINANCIAL STATEMENTS


	Page

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements (as of December 31, 2019 and for the year then ended)		F-2

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements (as of December 31, 2018, and for each of the two years in the period then ended)		F-4

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting		F-5

Consolidated Statements of Financial Position as of December 31, 2018 and 2019		F-7

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2017, 2018 and 2019		F-9

Consolidated Statements of Changes in Equity for the Years Ended December 31, 2017, 2018 and 2019		F-11

Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2018 and 2019		F-14

Notes to the Consolidated Financial Statements		F-16

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

ON CONSOLIDATED FINANCIAL STATEMENTS

To the Shareholders and Board of Directors of

Korea Electric Power Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statement of financial position of Korea Electric Power Corporation and subsidiaries (the “Company”) as of December 31, 2019, the related consolidated statements of comprehensive loss, changes in equity and cash flows for the year then ended, and the related notes (collectively the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and cash flows for the year then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated April 29, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

F-2


		*Impairment of property, plant and equipment in electricity transmission and distribution business*

Description of the Matter		As more fully described in note 18 to the consolidated financial statements, the aggregate carrying amount of property, plant and equipment (“PP&E”) recorded by the Company was KRW 164,701,827 million and no impairment charges were recognized during the year ended December 31, 2019. As the Company generated operating losses during the year, the Company evaluated its cash-generating unit (“CGU”) in its electricity transmission and distribution business for recoverability by comparing the carrying amount of the CGU with its value-in-use (“VIU”) amount measured using the discounted cash flow model and concluded that the CGU was fully recoverable as of December 31, 2019. Auditing the Company’s impairment assessment involved subjective judgment and required the involvement of specialists because, in preparing the VIU estimate, management uses estimates in the discounted cash flow model that include, among others, assumptions about future sales volume, unit sales prices, cost of power purchases, and discount rate, that are inherently uncertain. Further, the carrying amount of PP&E to the consolidated financial statements is material and as such these assumptions have a significant effect on the outcome of the impairment assessment.

How We Addressed the Matter in Our Audit		We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s processes for determining the VIU of the CGU. This included controls over management’s review of the significant assumptions (i.e., future sales volume, unit sales prices, cost of power purchases, and discount rate) used to develop the discounted cash flow forecasts. Our testing of the Company’s impairment calculation included, among other procedures, evaluating the discounted cash flow model by involving our valuation specialists to assist in testing the significant assumptions used to develop the cash flow forecasts and testing the completeness and accuracy of the underlying data. We assessed the accuracy of the Company’s historical projections by comparing them with actual operating results, evaluated management’s methodology for determining the discount rate used to calculate the present value of the forecasted cash flows by comparing it against our own calculated rate using both market and entity-specific information, searched for and evaluated information that corroborates or contradicts the Company’s assumptions, and performed sensitivity analyses of significant assumptions to evaluate the changes in the VIU estimate that could result from changes in the assumptions. Furthermore, we considered the Company’s business plan and external market data for major unobservable inputs such as future sales volumes, unit sales price and cost of power purchases, that were used in estimating the VIU. For example, we compared these significant assumptions to current industry practice, market and economic trends, historical results of the Company’s business and other relevant factors.

/s/ Ernst & Young Han Young

We have served as the Company’s auditor since 2018.

Seoul, the Republic of Korea

April 29, 2020

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

Korea Electric Power Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statement of financial position of Korea Electric Power Corporation and subsidiaries (the “Company”) as of December 31, 2018, the related consolidated statements of comprehensive income (loss), changes in equity and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2018, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

/s/ KPMG Samjong Accounting Corp.

We served as the Company’s auditor from 2013 to 2018.

Seoul, Korea

April 30, 2019

F-4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON

INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Shareholders and Board of Directors of

Korea Electric Power Corporation:

Opinion on Internal Control Over Financial Reporting

We have audited Korea Electric Power Corporation and subsidiaries (the “Company”)’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of financial position of the Company as of December 31, 2019, the related consolidated statements of comprehensive loss, changes in equity and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”), and our report dated April 29, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

F-5

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young Han Young

Seoul, the Republic of Korea

April 29, 2020

F-6

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Position

As of December 31, 2018 and 2019


	Note			2018		2019
				In millions of won
Assets
Current assets
Cash and cash equivalents		5,6,7,45	￦		1,358,345		1,810,129
Current financial assets, net		5,6,9,11,12,13,45			2,359,895		1,586,509
Trade and other receivables, net		5,8,20,24,45,46,47			7,793,592		7,701,452
Inventories, net		14			7,188,253		7,050,700
Income tax receivables		41			143,214		99,718
Current non-financial assets		15			878,888		1,206,377
Assets held-for-sale		42			22,881		28,116

Total current assets					19,745,068		19,483,001

Non-current assets
Non-current financial assets, net		5,6,9,10,11,12,13,45			2,113,613		2,563,498
Non-current trade and other receivables, net		5,8,20,45,46,47			1,819,845		2,002,297
Property, plant and equipment, net		18,24,27,49			152,743,194		164,701,827
Investment properties, net		19,27			159,559		158,580
Goodwill		16,51			2,582		97,977
Intangible assets other than goodwill, net		21,27,46			1,225,942		1,069,976
Investments in associates		4,17			4,064,820		4,251,802
Investments in joint ventures		4,17			1,813,525		1,663,029
Defined benefit assets, net		25			—		1,047
Deferred tax assets		41			1,233,761		1,437,829
Non-current non-financial assets		15			327,152		166,929

Total non-current assets					165,503,993		178,114,791

Total Assets		4	￦		185,249,061		197,597,792

(Continued)

F-7

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Position, Continued

As of December 31, 2018 and 2019


	Note			2018			2019
				In millions of won
Liabilities
Current liabilities
Trade and other payables		5,22,24,45,47	￦		6,405,395			6,649,402
Current financial liabilities, net		5,12,23,45,47			7,981,879			8,930,903
Income tax payables		41			285,420			358,277
Current non-financial liabilities		20,28,29			5,574,041			5,688,353
Current provisions		26,45			1,594,798			2,604,721

Total current liabilities					21,841,533			24,231,656

Non-current liabilities
Non-current trade and other payables		5,22,24,45,47			2,941,696			6,965,760
Non-current financial liabilities, net		5,12,23,45,47			53,364,911			59,115,598
Non-current non-financial liabilities		28,29			8,160,033			8,834,452
Employee benefits liabilities, net		25,45			1,645,069			1,929,854
Deferred tax liabilities		41			9,617,309			8,564,775
Non-current provisions		26,45			16,585,748			19,066,048

Total non-current liabilities					92,314,766			104,476,487

Total Liabilities		4	￦		114,156,299			128,708,143

Equity
Contributed capital		1,30,45
Share capital			￦		3,209,820			3,209,820
Share premium					843,758			843,758

					4,053,578			4,053,578

Retained earnings		31
Legal reserves					1,604,910			1,604,910
Voluntary reserves					35,906,267			34,785,425
Unappropriated retained earnings					14,007,942			12,811,798

					51,519,119			49,202,133

Other components of equity		34
Other capital surplus					1,234,825			1,226,364
Accumulated other comprehensive loss					(358,570	)		(280,730	)
Other equity					13,294,973			13,294,973

					14,171,228			14,240,607

Equity attributable to owners of the controlling company					69,743,925			67,496,318
Non-controlling interests		16, 33			1,348,837			1,393,331

Total Equity			￦		71,092,762			68,889,649

Total Liabilities and Equity			￦		185,249,061			197,597,792

See accompanying notes to the consolidated financial statements.

F-8

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

For the years ended December 31, 2017, 2018 and 2019


	Note			2017			2018			2019
				In millions of won, except per share information
Sales		4,35,45,47
Sales of goods			￦		55,772,548			57,897,804			56,894,876
Sales of construction services		20			3,212,184			1,742,391			1,264,916
Sales of services					351,157			392,867			408,290

					59,335,889			60,033,062			58,568,082

Cost of sales		14,25,43,47
Cost of sales of goods					(48,454,036	)		(55,976,628	)		(55,750,468	)
Cost of sales of construction services					(3,047,396	)		(1,638,869	)		(998,766	)
Cost of sales of services					(597,423	)		(592,224	)		(1,030,601	)

					(52,098,855	)		(58,207,721	)		(57,779,835	)

Gross profit					7,237,034			1,825,341			788,247
Selling and administrative expenses		25,36,43,47			(2,762,855	)		(2,627,890	)		(2,669,576	)
Other income		37			869,118			969,894			997,973
Other expenses		37			(180,055	)		(231,330	)		(241,913	)
Other gains (losses), net		38			156,627			(621,124	)		(582,258	)

Operating profit (loss)		4			5,319,869			(685,109	)		(1,707,527	)
Finance income		5,12,39			1,530,618			796,870			1,009,706
Finance expenses		5,12,40			(3,127,952	)		(2,470,743	)		(2,782,156	)
Profit (loss) related to associates, joint ventures and subsidiaries		4,16,17
Share in profit of associates and joint ventures					241,537			473,269			257,673
Gain on disposal of investments in associates and joint ventures					609			5,079			70,094
Gain on disposal of investments in subsidiaries					—			73			—
Share in loss of associates and joint ventures					(323,225	)		(110,168	)		(90,853	)
Loss on disposal of investments in associates and joint ventures					—			(2,183	)		(2	)
Impairment loss on investments in associates and joint ventures					(27,238	)		(7,907	)		(22,517	)
Loss on disposal of investments in subsidiaries					—			—			(256	)

					(108,317	)		358,163			214,139

Profit (loss) before income tax					3,614,218			(2,000,819	)		(3,265,838	)
Income tax benefit (expense)		41			(2,172,824	)		826,321			1,002,303

Profit (loss) for the period			￦		1,441,394			(1,174,498	)		(2,263,535	)

(Continued)

F-9

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss), Continued

For the years ended December 31, 2017, 2018 and 2019


	Note			2017			2018			2019
				In millions of won, except per share information
Other comprehensive income (loss)		5,12,25,31,34
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit liability, net of tax		25,31	￦		170,337			(108,169	)		42,315
Share in other comprehensive income (loss) of associates and joint ventures, net of tax		31			10,067			(1,153	)		(6,789	)
Net change in fair value of financial assets at fair value through other comprehensive income		34			—			(34,185	)		(11,732	)
Items that are or may be reclassified subsequently to profit or loss:
Net change in the unrealized fair value of available-for-sale financial assets, net of tax					(7,098	)		—			—
Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax		5,12,34			20,868			211			19,242
Foreign currency translation of foreign operations, net of tax		34			(134,196	)		(20,717	)		72,816
Share in other comprehensive income (loss) of associates and joint ventures, net of tax		34			(154,694	)		57,088			19,344

Other comprehensive income (loss), net of tax					(94,716	)		(106,925	)		135,196

Total comprehensive income (loss) for the period			￦		1,346,678			(1,281,423	)		(2,128,339	)

Profit (loss) attributable to:
Owners of the controlling company		44	￦		1,298,720			(1,314,567	)		(2,345,517	)
Non-controlling interests					142,674			140,069			81,982

			￦		1,441,394			(1,174,498	)		(2,263,535	)

Total comprehensive income (loss) attributable to:
Owners of the controlling company			￦		1,230,194			(1,426,477	)		(2,239,147	)
Non-controlling interests					116,484			145,054			110,808

			￦		1,346,678			(1,281,423	)		(2,128,339	)

Earnings (loss) per share (in won)		44
Basic and diluted earnings (loss) per share			￦		2,023			(2,048	)		(3,654	)

See accompanying notes to the consolidated financial statements.

F-10

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2017, 2018 and 2019


		Equity attributable to owners of the controlling company											Non- controlling interests			Total equity
		Contributed capital		Retained earnings			Other components of equity			Subtotal			Non- controlling interests			Total equity
		In millions of won
Balance at January 1, 2017	￦		4,053,578		53,173,871			14,496,244			71,723,693			1,326,852			73,050,545

Total comprehensive income (loss) for the period
Profit for the period			—		1,298,720			—			1,298,720			142,674			1,441,394
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit liability, net of tax			—		158,991			—			158,991			11,346			170,337
Share in other comprehensive income of associates and joint ventures, net of tax			—		10,065			—			10,065			2			10,067
Items that are or may be reclassified subsequently to profit or loss:
Net change in the unrealized fair value of available-for-sale financial assets, net of tax			—		—			(7,102	)		(7,102	)		4			(7,098	)
Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax			—		—			19,614			19,614			1,254			20,868
Foreign currency translation of foreign operations, net of tax			—		—			(95,103	)		(95,103	)		(39,093	)		(134,196	)
Share in other comprehensive income (loss) of associates and joint ventures, net of tax			—		—			(154,991	)		(154,991	)		297			(154,694	)
Transactions with owners of the Company, recognized directly in equity
Dividends paid			—		(1,271,089	)		—			(1,271,089	)		(70,252	)		(1,341,341	)
Issuance of shares of capital by subsidiaries and others			—		—			(1,378	)		(1,378	)		18,381			17,003
Changes in consolidation scope			—		—			—			—			7,337			7,337
Dividends paid (hybrid bond)			—		—			—			—			(15,856	)		(15,856	)
Repayment of hybrid bond			—		—			—			—			(99,750	)		(99,750	)
Others			—		—			25			25			—			25

Balance at December 31, 2017	￦		4,053,578		53,370,558			14,257,309			71,681,445			1,283,196			72,964,641

(Continued)

F-11

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Equity, Continued

For the years ended December 31, 2017, 2018 and 2019


		Equity attributable to owners of the controlling company											Non- controlling interests			Total equity
		Contributed capital		Retained earnings			Other components of equity			Subtotal			Non- controlling interests			Total equity
		In millions of won
Balance at January 1, 2018	￦		4,053,578		53,370,558			14,257,309			71,681,445			1,283,196			72,964,641
Effect of change in accounting policy			—		71,928			(76,851	)		(4,923	)		—			(4,923	)

Restated balance at January 1, 2018			4,053,578		53,442,486			14,180,458			71,676,522			1,283,196			72,959,718
Total comprehensive income (loss) for the period
Profit (loss) for the period			—		(1,314,567	)		—			(1,314,567	)		140,069			(1,174,498	)
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit liability, net of tax			—		(100,495	)		—			(100,495	)		(7,674	)		(108,169	)
Share in other comprehensive income (loss) of associates and joint ventures, net of tax			—		(1,153	)		—			(1,153	)		—			(1,153	)
Net change in fair value of financial assets at fair value through other comprehensive income			—		—			(34,125	)		(34,125	)		(60	)		(34,185	)
Items that are or may be reclassified subsequently to profit or loss:
Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax			—		—			(1,140	)		(1,140	)		1,351			211
Foreign currency translation of foreign operations, net of tax			—		—			(32,086	)		(32,086	)		11,369			(20,717	)
Share in other comprehensive income (loss) of associates and joint ventures, net of tax			—		—			57,089			57,089			(1	)		57,088
Transactions with owners of the Company, recognized directly in equity
Dividends paid			—		(507,152	)		—			(507,152	)		(92,741	)		(599,893	)
Issuance of shares of capital by subsidiaries and others			—		—			1,032			1,032			17,183			18,215
Changes in consolidation scope			—		—			—			—			9,530			9,530
Dividends paid (hybrid bond)			—		—			—			—			(13,385	)		(13,385	)

Balance at December 31, 2018	￦		4,053,578		51,519,119			14,171,228			69,743,925			1,348,837			71,092,762

(Continued)

F-12

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Equity, Continued

For the years ended December 31, 2017, 2018 and 2019


		Equity attributable to owners of the controlling company											Non- controlling interests			Total equity
		Contributed capital		Retained earnings			Other components of equity			Subtotal			Non- controlling interests			Total equity
		In millions of won
Balance at January 1, 2019	￦		4,053,578		51,519,119			14,171,228			69,743,925			1,348,837			71,092,762
Total comprehensive income (loss) for the period
Profit (loss) for the period			—		(2,345,517	)		—			(2,345,517	)		81,982			(2,263,535	)
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit liability, net of tax			—		36,160			—			36,160			6,155			42,315
Share in other comprehensive loss of associates and joint ventures, net of tax			—		(6,789	)		—			(6,789	)		—			(6,789	)
Net change in fair value of financial assets at fair value through other comprehensive income			—		—			(11,732	)		(11,732	)		—			(11,732	)
Items that are or may be reclassified subsequently to profit or loss:
Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax			—		—			14,041			14,041			5,201			19,242
Foreign currency translation of foreign operations, net of tax			—		—			55,347			55,347			17,469			72,816
Share in other comprehensive income of associates and joint ventures, net of tax			—		—			19,343			19,343			1			19,344
Transactions with owners of the Company, recognized directly in equity
Dividends paid			—		—			—			—			(99,255	)		(99,255	)
Issuance of shares of capital by subsidiaries and others			—		—			—			—			21,071			21,071
Equity transactions between consolidated entities			—		—			(8,460	)		(8,460	)		323			(8,137	)
Changes in consolidation scope			—		—			—			—			24,932			24,932
Dividends paid (hybrid bond)			—		—			—			—			(13,385	)		(13,385	)
Others			—		(840	)		840			—			—			—

Balance at December 31, 2019	￦		4,053,578		49,202,133			14,240,607			67,496,318			1,393,331			68,889,649

See accompanying notes to the consolidated financial statements.

F-13

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2017, 2018 and 2019


		2017			2018			2019
		In millions of won
Cash flows from operating activities
Profit (loss) for the period	￦		1,441,394			(1,174,498	)		(2,263,535	)

Adjustments for:
Income tax expense (benefit)			2,172,824			(826,321	)		(1,002,303	)
Depreciation			9,660,039			9,905,856			10,971,825
Amortization			113,672			118,938			156,915
Employee benefit expense			391,360			360,575			725,120
Bad debt expense			126,326			57,468			16,629
Interest expense			1,789,552			1,868,458			2,046,811
Loss on sale of financial assets			2,343			1			2,106
Loss on disposal of property, plant and equipment			70,514			60,704			72,508
Loss on abandonment of property, plant, and equipment			424,091			481,176			364,233
Impairment loss on property, plant and equipment			51,067			710,162			50,034
Impairment loss on intangible assets			20			8,112			513,609
Loss on disposal of intangible assets			183			43			827
Increase to provisions			1,690,120			1,056,994			2,301,215
Loss (gain) on foreign currency translation, net			(902,878	)		243,378			370,309
Gain on valuation of financial assets at fair value through profit or loss			—			(8,495	)		(5,575	)
Loss on valuation of financial assets at fair value through profit or loss			—			6,616			4,513
Valuation and transaction loss (gain) on derivative instruments, net			1,043,628			(300,500	)		(403,765	)
Share in loss (profit) of associates and joint ventures, net			81,688			(363,101	)		(166,820	)
Gain on disposal of financial assets			(1,130	)		(1,838	)		(3,866	)
Gain on disposal of property, plant and equipment			(48,316	)		(98,077	)		(43,784	)
Gain on disposal of intangible assets			(564	)		(12	)		(206	)
Gain on disposal of investments in associates and joint ventures			(609	)		(5,079	)		(70,094	)
Loss on disposal of investments in associates and joint ventures			—			2,183			2
Impairment loss on investments in associates and joint ventures			27,238			7,907			22,517
Gain on disposal of investments in subsidiaries			—			(72	)		—
Loss on disposal of investments in subsidiaries			—			—			256
Interest income			(206,143	)		(223,767	)		(268,118	)
Dividend income			(11,477	)		(12,777	)		(13,838	)
Impairment loss on available-for-sale financial assets			2,713			—			—
Others, net			16,679			81,317			128,237

			16,492,940			13,129,849			15,769,297

Changes in:
Trade receivables			(218,328	)		246,755			95,345
Non-trade receivables			(31,807	)		154,580			64,027
Accrued income			577,838			(484,718	)		83,589
Other receivables			(1,271	)		(61,961	)		(116,583	)
Other current assets			37,576			(148,509	)		(271,986	)
Inventories			(1,373,438	)		(1,771,550	)		(980,216	)
Other non-current assets			(46,079	)		(54,148	)		(611,066	)
Trade payables			342,126			478,744			(546,159	)
Non-trade payables			(214,704	)		(292,912	)		192,506
Accrued expenses			(715,305	)		(361,204	)		(454,501	)
Other payables			292			—			—
Other current liabilities			(126,323	)		250,112			373,403
Other non-current liabilities			763,958			287,488			650,468
Investments in associates and joint ventures (dividends received)			106,983			175,175			215,612
Provisions			(1,390,606	)		(1,132,969	)		(1,473,461	)
Payments of employee benefit obligations			(69,489	)		(89,253	)		(65,242	)
Plan assets			(325,080	)		(330,064	)		(348,386	)

	￦		(2,683,657	)		(3,134,434	)		(3,192,650	)

(Continued)

F-14

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2017, 2018 and 2019


		2017			2018			2019
		In millions of won
Cash generated from operating activities	￦		15,250,677			8,820,917			10,313,112
Dividends received (financial assets at fair value through other comprehensive income)			10,590			11,182			24,255
Interest paid			(1,886,303	)		(1,895,898	)		(2,027,850	)
Interest received			173,226			194,221			186,122
Income taxes paid			(2,298,296	)		(450,290	)		(282,211	)

Net cash provided by (used in) operating activities			11,249,894			6,680,132			8,213,428

Cash flows from investing activities
Proceeds from disposals of investments in associates and joint ventures			10,542			1,617			—
Acquisition of investments in associates and joint ventures			(206,753	)		(319,425	)		(107,821	)
Proceeds from disposals of property, plant and equipment			85,801			234,138			522,742
Acquisition of property, plant and equipment			(12,535,958	)		(12,266,870	)		(14,000,359	)
Proceeds from disposals of intangible assets			1,072			13			7,702
Acquisition of intangible assets			(143,887	)		(110,587	)		(229,426	)
Proceeds from disposals of financial assets			5,296,680			2,419,259			2,783,474
Acquisition of financial assets			(4,786,717	)		(2,841,651	)		(2,165,342	)
Increase in loans			(218,698	)		(188,675	)		(335,773	)
Collection of loans			120,967			100,010			292,745
Increase in deposits			(397,078	)		(299,564	)		(280,637	)
Decrease in deposits			110,383			259,930			275,314
Proceeds from disposals of assets held-for-sale			—			18,716			30,662
Receipt of government grants			55,533			30,416			21,705
Cash outflow from merger			—			—			(154,311	)
Net cash inflow (outflow) from changes in consolidation scope			—			2,141			(2,917	)
Other cash inflow (outflow) from investing activities, net			1,414			(53,769	)		(157,116	)

Net cash provided by (used in) investing activities			(12,606,699	)		(13,014,301	)		(13,499,358	)

Cash flows from financing activities
Proceeds from (repayment of) short-term borrowings, net			370,328			(183,660	)		188,957
Proceeds from long-term borrowings and debt securities			10,098,067			14,251,586			13,221,407
Repayment of long-term borrowings and debt securities			(8,198,882	)		(8,095,590	)		(7,068,290	)
Payment of lease liabilities			(122,919	)		(134,454	)		(573,437	)
Settlement of derivative instruments, net			33,434			60,907			102,146
Change in non-controlling interests			23,582			20,113			17,365
Repayment of hybrid bond			(99,750	)		—			—
Dividends paid (hybrid bond)			(15,856	)		(17,658	)		(13,385	)
Dividends paid			(1,340,387	)		(599,391	)		(99,356	)
Other cash outflow from financing activities, net			(2,023	)		(175	)		—

Net cash provided by (used in) financing activities			745,594			5,301,678			5,775,407

Net increase (decrease) in cash and cash equivalents before effect of exchange rate fluctuations			(611,211	)		(1,032,491	)		489,477
Effect of exchange rate fluctuations on cash held			(70,403	)		21,097			(37,693	)

Net increase (decrease) in cash and cash equivalents			(681,614	)		(1,011,394	)		451,784
Cash and cash equivalents at January 1			3,051,353			2,369,739			1,358,345

Cash and cash equivalents at December 31	￦		2,369,739			1,358,345			1,810,129

See accompanying notes to the consolidated financial statements.

F-15

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 31, 2019

1.	Reporting Entity (Description of the controlling company)

Korea Electric Power Corporation (“KEPCO”) was incorporated on January 1, 1982 in accordance with the Korea Electric Power Corporation Act (the “KEPCO Act”) to engage in the generation, transmission and distribution of electricity and development of electric power resources in the Republic of Korea. KEPCO also provides power plant construction services. KEPCO’s stock was first listed on the Korea Stock Exchange on August 10, 1989 and subsequently on the New York Stock Exchange on October 27, 1994 through its depository receipts. KEPCO’s headquarters is located in Naju, Jeollanam-do.

As of December 31, 2019, KEPCO’s share capital amounts to ￦3,209,820 million and KEPCO’s shareholders are as follows:


	Number of shares		Percentage of ownership
The Government of the Republic of Korea		116,841,794		18.20	%
Korea Development Bank		211,235,264		32.90	%
Foreign investors		154,843,683		24.12	%
Other		159,043,336		24.77	%

		641,964,077		100.00	%

In accordance with the Restructuring Plan enacted on January 21, 1999 by the Ministry of Trade, Industry and Energy, KEPCO spun off its power generation divisions on April 2, 2001, resulting in the establishment of six power generation subsidiaries.

2.	Basis of Preparation

The consolidated financial statements of KEPCO and its subsidiaries (the “Company”) were approved by the Board of Directors on February 28, 2020 and authorized on April 10, 2020 for the purpose of Form 20-F filing with the Securities and Exchange Commission.

(1)

Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

(2)

Basis of measurement

These consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the consolidated statements of financial position:

•

financial assets at fair value through profit or loss

•

financial assets at fair value through other comprehensive income

•

derivative financial instruments are measured at fair value

•

liabilities for defined benefit plans are recognized at the net of the total present value of defined benefit obligations less the fair value of plan assets

(3)

Functional and presentation currency

These consolidated financial statements are presented in Korean won (“won”), as won is the main currency used in KEPCO and most of the significant operating subsidiaries.

F-16

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

2.	Basis of Preparation, Continued

(4)

Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

The followings are the key assumptions and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

(i)

Useful lives of property, plant and equipment, and estimations on provision for decommissioning costs

The Company reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period. Management’s assumptions could affect the determination of estimated economic useful lives.

The Company records the fair value of estimated decommissioning costs as a liability in the period in which the Company incurs a legal obligation associated with the retirement of long-lived assets that result from acquisition, construction, development and/or normal use of the assets. The Company is required to record a liability for the dismantling (demolition) of nuclear power plants and disposal of spent fuel and low and intermediate radioactive wastes. The measurement of such liability is subject to change based on change in estimated cash flow, inflation rate, discount rate, and expected timing of decommissioning.

(ii)

Deferred tax

The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities of each consolidated taxpaying entity. However, the amount of deferred tax assets may be impaired if the Company determines the estimated future taxable income is not sufficient to realize the deferred tax assets recognized.

(iii)

Valuations of financial instruments at fair values

The Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has established control framework with respect to the measurement of fair values. The valuation team regularly reviews significant unobservable inputs and valuation adjustments.

If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS including the level in the fair value hierarchy in which such valuation techniques should be classified.

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the

F-17

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

2.	Basis of Preparation, Continued

(4)

Use of estimates and judgments, continued

same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

(iv)

Defined employee benefit liabilities

The Company offers its employees defined benefit plans. The cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting period. For actuarial valuations, certain inputs such as discount rates and future salary increases are estimated. Defined benefit plans contain significant uncertainties in estimations due to its long-term nature (refer to Note 25).

(v)

Unbilled revenue

Electricity delivered but neither metered nor billed is estimated at the reporting date based on the progressive electricity billing system, discounts on electricity bills for government policy purposes and penalties as well as a result of customer usage patterns, customer mix, meter reading schedules, weather, and etc. Unbilled revenue recognized as of December 31, 2018 and 2019 are ￦1,671,117 million and ￦1,580,804 million, respectively.

(vi)

Construction contracts

The Company recognizes revenue over time using the cost-based input method which represents a faithful depiction of the Company’s progress towards complete satisfaction of providing the power plant construction, which has been identified as a single performance obligation. In applying the cost-based input method, it is necessary to use estimates and assumptions related to the Company’s efforts or inputs expected to be incurred. Cost incurred towards contract completion include costs associated with direct materials, labor, and other indirect costs related to contract performance. Judgment is required in estimating the costs expected to incur in completing the construction projects which involves estimating future materials, labor, contingencies and other related costs. Revenue is estimated based on the contractual amount however, it can also be affected by uncertainties resulting from unexpected future events.

(vii)

Early shutdown of Wolsong unit 1 nuclear power plant and changes in new nuclear power plants construction

The 30-year designed life of Wolsong unit 1 nuclear power plant of the Company had expired on November 20, 2012. On February 27, 2015, however, approval from the Nuclear Safety and Security Commission (NSSC) was received to continue its operation until November 20, 2022.

According to the Eighth Basic Plan for Electricity Supply and Demand announced by the Ministry of Trade, Industry and Energy in 2017, Wolsong unit 1 nuclear power plant was expected to go through a comprehensive evaluation for the feasibility of continuous operation including economic efficiency and acceptability of household and community in 2018 in order to decide whether to shut down early. On June 15, 2018, the board of directors of Korea Hydro & Nuclear Power Co., Ltd. (“KHNP”), a subsidiary of KEPCO, has decided to shut down the Wolsong unit 1 on the grounds that its deficit was increasing, and its economic efficiency was low due to the unoptimistic utilization rate. On December 24, 2019, NSSC approved the permanent shutdown of unit 1.

F-18

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

2.	Basis of Preparation, Continued

(4)

Use of estimates and judgments, continued

In addition, KHNP has also decided to discontinue the construction of Cheonji unit 1 and 2 and Daejin unit 1 and 2 pursuant to the government policy. For this reason, the Company recognized impairment loss, reversal of impairment loss and other expenses during the year 2018 and 2019, as described in Note 18 and Note 50.

Among the new nuclear power plants under construction, Shin-Hanul unit 3 and 4, for which approval for power generation business was previously obtained, are not included in the decision to suspend construction of the board of directors of KHNP. However, considering the decision to shut down Wolsong unit 1 and suspended construction of Cheonji unit 1 and 2 and Daejin unit 1 and 2, it is highly likely that the construction of Shin-Hanul unit 3 and 4 will be suspended according to the government’s policy. For this reason, the Company recognized impairment loss as described in Note 18 and Note 50, as the Company believes that there was a significant change in its operating environment during the year ended December 31, 2018.

The Korean government plans to refund to the Company for reasonable expenditures incurred in relation to the phase-out of nuclear power plants in accordance with the energy transformation policy established by the Korean government. In doing so, after discussions with relevant government agencies and upon approval by the Congress, the Korean government is considering to use available resource including utilizing relevant fund to make the refund. Also, the Korean government has stated that it plans to establish relevant legal basis of providing refund including utilizing available resource, if necessary.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in the following notes:

•

Note 17 – Investments in Associates and Joint Ventures

•

Note 18 – Property, Plant and Equipment

•

Note 20 – Construction Contracts

•

Note 45 – Risk Management

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is included in the following notes:

•

Note 25 – Employment Benefits

•

Note 41 – Income Taxes

(5)

Changes in accounting policies

(i)

IFRS 16 ‘Leases’

IFRS 16 replaces existing leases guidance, including IAS 17 ‘Lease’, IFRIC 4 ‘Determining whether an Arrangement contains a Lease’, SIC-15 ‘Operating Leases—Incentives’ and SIC-27 ‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on-balance sheet model.

Lessor accounting under IFRS 16 is substantially unchanged from IAS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in IAS 17.

F-19

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

2.	Basis of Preparation, Continued

(5)

Changes in accounting policies, continued

The Company adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of January 1, 2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. The Company elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option (‘short-term leases’), and lease contracts for which the underlying asset is of low value (‘leases of low-value assets’).

The impacts on the Company’s consolidated statements of financial position on the date of initial application (January 1, 2019) of IFRS 16 are as follows:


		Carrying amount under IAS 17		Adjustment			Carrying amount under IFRS 16
		In millions of won
Assets
Current assets
Cash and cash equivalents	￦		1,358,345		—			1,358,345
Current financial assets, net			2,359,895		—			2,359,895
Trade and other receivables, net			7,793,592		—			7,793,592
Inventories, net			7,188,253		—			7,188,253
Income tax refund receivables			143,214		—			143,214
Current non-financial assets			878,888		(3,021	)		875,867
Assets held-for-sale			22,881		—			22,881

Total current assets			19,745,068		(3,021	)		19,742,047

Non-current assets
Non-current financial assets, net			2,113,613		—			2,113,613
Non-current trade and other receivables, net			1,819,845		(10	)		1,819,835
Property, plant and equipment, net			152,743,194		4,947,947			157,691,141
Investment properties, net			159,559		—			159,559
Goodwill			2,582		—			2,582
Intangible assets other than goodwill, net			1,225,942		—			1,225,942
Investments in associates			4,064,820		—			4,064,820
Investments in joint ventures			1,813,525		—			1,813,525
Deferred tax assets			1,233,761		—			1,233,761
Non-current non-financial assets			327,152		(1,332	)		325,820

Total non-current assets			165,503,993		4,946,605			170,450,598

Total Assets	￦		185,249,061		4,943,584			190,192,645

F-20

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

2.	Basis of Preparation, Continued

(5)

Changes in accounting policies, continued


		Carrying amount under IAS 17		Adjustment		Carrying amount under IFRS 16
		In millions of won
Liabilities
Current liabilities
Trade and other payables, net	￦		6,405,395		510,304		6,915,699
Current financial liabilities, net			7,981,879		—		7,981,879
Income tax payables			285,420		—		285,420
Current non-financial liabilities			5,574,041		—		5,574,041
Current provisions			1,594,798		—		1,594,798

Total current liabilities			21,841,533		510,304		22,351,837

Non-current liabilities
Non-current trade and other payables, net			2,941,696		4,433,280		7,374,976
Non-current financial liabilities, net			53,364,911		—		53,364,911
Non-current non-financial liabilities			8,160,033		—		8,160,033
Employee benefits liabilities, net			1,645,069		—		1,645,069
Deferred tax liabilities			9,617,309		—		9,617,309
Non-current provisions			16,585,748		—		16,585,748

Total non-current liabilities			92,314,766		4,433,280		96,748,046

*Total Liabilities()**	￦		114,156,299		4,943,584		119,099,883

Equity
Contributed capital	￦		4,053,578		—		4,053,578
Retained earnings			51,519,119		—		51,519,119
Other components of equity			14,171,228		—		14,171,228

Equity attributable to owners of the controlling company			69,743,925		—		69,743,925
Non-controlling interests			1,348,837		—		1,348,837

Total Equity	￦		71,092,762		—		71,092,762

Total Liabilities and Equity	￦		185,249,061		4,943,584		190,192,645

(*) The adjustment from the total liabilities amounting to ￦4,943,584 is a present value of operating lease payment as of December 31, 2018, discounted by the weighted average interest rate of the lessee’s incremental borrowing rates as of January 1, 2019, and deducted by the present value of short-term leases and low-value asset leases payments.

The Company has lease contracts for various items such as consecutive voyage charter contracts, power purchase agreements (PPA), real estate lease contracts including buildings, switchyard, and land for electric substations, vehicles, and other equipment.

Before adoption of IFRS 16, the Company, as a lessee, classified a lease contract as a finance lease if it transferred substantially all of the risks and rewards incidental to ownership of the leased asset to the Company; otherwise as an operating lease. Upon adoption of IFRS 16, the Company applied a single

F-21

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

2.	Basis of Preparation, Continued

(5)

Changes in accounting policies, continued

recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The standard provides specific transition requirements and practical expedients, which have been applied by the Company.

The significant accounting policies applied by the Company in preparation of its consolidated financial statements are described in Note 3.(9).

3.	Significant Accounting Policies

The significant accounting policies applied by the Company in preparation of its consolidated financial statements are included below. Except as described in Note 2.(5), the Company applied the following significant accounting policies consistently throughout the all periods presented.

(1)

Basis of consolidation

The consolidated financial statements are the financial statements of the Company in which the assets, liabilities, equity, income, expenses and cash flows of KEPCO and its subsidiaries are presented as those of a single economic entity. Subsidiaries are those entities controlled by the Company. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

Income and expense of a subsidiary acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those of the Company.

Transactions within the Company are eliminated during the consolidation.

Changes in the Company’s ownership interests in a subsidiary that do not result in the Company losing control over the subsidiary are accounted for as equity transactions. The carrying amounts of the Company’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.

When the Company loses control of a subsidiary, any gain or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognized in other comprehensive income and accumulated in equity, the amounts previously recognized in other comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the relevant assets (i.e., reclassified to profit or loss or transferred directly to retained earnings). The fair value of any investment retained in the former subsidiary at the date when control is lost is recognized as the fair value on initial recognition for subsequent accounting under IFRS 9 ‘Financial Instruments’ or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

F-22

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(2)

Business combinations

A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control.

The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Company, liabilities incurred by the Company to the former owners of the acquiree and the equity interests issued by the Company in exchange for control of the acquiree. Acquisition-related costs are generally recognized in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired, and the liabilities assumed are recognized at their fair value at the acquisition date, except that:

•

deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognized and measured in accordance with IAS 12 ‘Income Taxes’ and IAS 19 ‘Employee Benefits’ respectively;

•

assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 ‘Non-current Assets Held for Sale’ are measured in accordance with that standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.

Non-controlling interest that is present on acquisition day and entitles the holder to a proportionate share of the entity’s net assets in an event of liquidation, may be initially measured either at fair value or at the non-controlling interest’s proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The choice of measurement can be elected on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in other IFRSs. When the consideration transferred by the Company in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not re-measured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is re-measured at subsequent reporting dates in accordance with IFRS 9 ‘Financial Instruments’, or with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ as appropriate, with the corresponding gain or loss being recognized in profit or loss.

When a business combination is achieved in stages, the Company’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date (i.e., the date when the Company obtains

F-23

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(2)

Business combinations, continued

control) and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.

The assets and liabilities acquired under business combinations under common control are recognized at the carrying amounts recognized previously in the consolidated financial statements of the ultimate parent. The difference between consideration transferred and carrying amounts of net assets acquired is recognized as part of share premium.

(3)

Investments in associates

An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but does not control or joint control over those policies. If the Company holds 20% ~ 50% of the voting power of the investee, it is presumed that the Company has significant influence.

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. If the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 ‘Non-current Assets Held for Sale’, any retained portion of an investment in associates that has not been classified as held for sale shall be accounted for using the equity method until disposal of the portion that is classified as held for sale takes place. After the disposal takes place, the Company shall account for any retained interest in associates in accordance with IFRS 9 ‘Financial Instruments’ unless the retained interest continues to be an associate, in which case the entity uses the equity method.

Under the equity method, an investment in an associate is initially recognized in the consolidated statement of financial position at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the associate. When the Company’s share of losses of an associate exceeds the Company’s interest in that associate (which includes any long-term interests that, in substance, form part of the Company’s net investment in the associate), the Company discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment. Any excess of the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

F-24

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(3)

Investments in associates, continued

Upon disposal of an associate that results in the Company losing significant influence over that associate, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset in accordance with IFRS 9. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate.

In addition, the Company accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by that associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Company reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when it loses significant influence over that associate.

The requirements of IAS 28 ‘Investments in Associates and Joint Ventures’ are applied to determine whether it is necessary to recognize any impairment loss with respect to the Company’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 ‘Impairment of Assets’ as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

When the Company transacts with its associate, incomes and losses resulting from the transactions with the associate are recognized in the Company’s consolidated financial statements only to the extent of interests in the associate that are not related to the Company.

(4)

Joint arrangements

A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Joint arrangements are classified into two types—joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e., joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e., joint ventures) have rights to the net assets of the arrangement.

If the Company is a joint operator, the Company is to recognize and measure the assets and liabilities (and recognize the related revenues and expenses) in relation to its interest in the arrangement in accordance with relevant IFRSs applicable to the particular assets, liabilities, revenues and expenses. If the joint arrangement is a joint venture, the Company is to account for that investment using the equity method accounting in accordance with IAS 28 ‘Investment in Associates and Joint Ventures’ (refer to Note 3.(3), except when the Company is applicable to the IFRS 5 ‘Non-current Assets Held for Sale’.

(5)

Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is

F-25

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(5)

Non-current assets held for sale, continued

available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the Company is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Company will retain a non-controlling interest in its former subsidiary after the sale.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

(6)

Goodwill

The Company measures goodwill which acquired in a business combination at the amount recognized at the date on which it obtains control of the acquiree (acquisition date) less any accumulated impairment losses. Goodwill acquired in a business combination is allocated to each cash-generating unit (CGU) that is expected to benefit from the synergies arising from the business acquired.

The Company assesses at the end of each reporting period and whenever there is an indication that the asset may be impaired. An impairment loss is recognized if the carrying amount of an asset or a CGU exceeds its recoverable amount. Impairment losses are recognized in profit or loss.

Any impairment identified at the CGU level will first reduce the carrying value of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Except for impairment losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

On disposal of the relevant CGU, the amount of goodwill is included in the determination of the gain or loss on disposal.

(7)

Revenue from Contracts with Customers

The Company recognizes revenue by applying the five-step approach (Step 1: Identify the contract(s) with a customer, Step 2: Identify the performance obligations in the contract, Step 3: Determine the transaction price, Step 4: Allocate the transaction price to the performance obligations in the contract, Step 5: Recognize revenue when the entity satisfied a performance obligation). The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, excluding amounts collected on behalf of third parties. Also, the Company recognizes revenue when the Company satisfies a performance obligation by transferring a promised good or service to a customer.

(i)

Sale of goods

The Company sells electricity to customers and accounts for the transmission and distribution of electricity as a single performance obligation. The sale of electricity is recognized at a point in time when electricity has been distributed to the customer. The transaction price includes variable consideration due to the progressive electricity billing system, discounts on electricity bills for

F-26

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(7)

Revenue from Contracts with Customers, continued

government policy purposes and penalties as well as a result of customer usage patterns, customer mix, meter reading schedules, weather, etc. Variable consideration is estimated by using the expected value method which predicts the amount of consideration to which the Company will be entitled and is only recognized only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved which is when the customer is billed.

(ii)

Sale of construction services

The Company also provides services for power plant construction and engineering, procurement and construction (“EPC”) where each contract has a single performance obligation and is recognized over time on the estimated progress to completion of the construction using the cost-based input method. The Company believes using the cost-based input method represents a faithful depiction of the transfer of services to the customer. Cost incurred towards contract completion include costs associated with direct materials, labor, and other indirect costs related to contract performance. Judgment is required in estimating the costs expected to incur in completing the construction projects which involves estimating future materials, labor, contingencies and other related costs. Revenue is estimated based on the contractual amount. However, it may be affected by uncertainties resulting from unexpected future events.

Revenue may be recognized in advance of billing the customer which results in the recording of a contract asset. Once the Company meets the billing criteria and its rights to consideration become unconditional, the contract asset is then transferred to trade receivable. Billing requirements are generally structured around the completion of certain construction milestones. On some instances, contract liability is recognized when the Company receives consideration before being able to recognize revenue. Once revenue recognition conditions are met, the contract liability is subsequently released to revenue.

(iii)

Sale of services

The Company develops electric power resources including the provision of power generation byproducts and O&M services which are accounted for as a separate performance obligation under each contract. The Company recognizes revenue over time when customers consume the benefits provided by the Company under the terms of the service agreement.

(8)

Deferred Revenue

The Company receives consideration in the form of an item of property, equipment or cash for constructing or acquiring an item of property or equipment in exchange for supplying electricity to its customers. The transaction price is based on the fair value of the consideration received and is initially recorded in deferred revenue included in current and non-current non-financial liabilities of the Company’s consolidated financial position. The Company determines the supply of electricity to be a single performance obligation. Deferred revenue is released to other income over time on a straight-line basis throughout the estimated service period which does not exceed the transferred asset’s useful life.

F-27

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(9)

Leases

The lessee and the lessor account for each lease component separately from non-lease component, in the lease contracts or contracts that contain lease. However, the Company applied a practical expedient to each type of underlying asset in accounting as a lessee, and instead of separating the non-lease component from the lease component, it applied a method of accounting for each lease component and the related non-lease component as a single lease contract. The lessor’s accounting has not changed significantly. Therefore, a lease that transfers most of the risks and rewards of ownership of the underlying asset is classified as a finance lease, and a lease that does not transfer most of the risks and rewards of ownership of the underlying asset is classified as an operating lease.

(i)

The Company as a lessor

In the case of finance leases, the Company recognizes the same amount of the net investment in the lease as finance lease receivables and recognizes interest income using the effective interest method. Income from operating leases is recognized using the straight-line basis over the lease term, and lease opening direct costs incurred during the negotiation and contract phase of the operating lease contract are added to the carrying amount of the lease asset and recognized as expenses over the lease term on a straight-line basis.

(ii)

The Company as a lessee

(a)

Leases previously classified as finance leases

The Company did not change the initial carrying amounts of recognized assets and liabilities at the date of initial application for leases previously classified as finance leases (i.e., the right-of-use assets and lease liabilities equal the lease assets and liabilities recognized under IAS 17). The requirements of IFRS 16 was applied to these leases from 1 January 2019.

(b)

Leases previously accounted for as operating leases

The Company recognized right-of-use assets and lease liabilities for those leases previously classified as operating leases, except for short-term leases and leases of low-value assets. The right-of-use assets were recognized based on the amount equal to the lease liabilities, adjusted for any related prepaid and accrued lease payments previously recognized. Lease liabilities were recognized based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application.

•

Lease liabilities

At the commencement date of the lease, the Company recognized lease liabilities measured at the present value of lease payments to be made over the lease term. The incremental borrowing rate as a lessee at the date of initial application is 1.81% ~ 4.79%, and the effect of initial adoption are described in Note 2.(5).

The Company applied the practical expedient to post-judgment of the possibility of exercising the option of extension or termination when estimating the remaining lease duration. The Company also applied a single discount rate to a portfolio of leases with similar characteristics.

F-28

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(9)

Leases, continued

•

Right-of-use assets

The Company recognized a right-of-use asset at the date of initial adoption for a lease previously classified as an operating lease under IAS 17. The Company recognized the lease liabilities as the same amount with right-of-use assets and adjusted the amount of the prepaid lease payment recognized in the statement financial position before the date of initial application.

Contracts recognized as leases before the date of initial application are accounted for leases regardless of whether they meet the new lease definition or not. After the date of initial application, the Company evaluates whether new lease contracts meet definition of the lease under IFRS 16.

The Company also applied the available practical expedients wherein it:

•

Applied the short-term leases exemptions to leases with lease term that ends within 12 months at the date of initial application

•

Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application

•

Used hindsight in determining the lease term where the contract contains options to extend or terminate the lease

•

Applied the low-value leases to leases of office equipment that are considered to be low value.

(iii)

Summary of new accounting policies

Set out below are the new accounting policies of the Company upon adoption of IFRS 16, which have been applied from the date of initial application:

•

Right-of-use assets

The Company recognizes right-of-use assets at the commencement date of the lease. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

•

Lease liabilities

At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognized as expenses in the period on which the event or condition that triggers the payment occurs.

F-29

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(9)

Leases, continued

In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment of an option to purchase the underlying asset.

•

Short-term leases and leases of low-value assets

The Company applies the short-term leases recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the leases of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease term.

Book value and changes in book value of right-of-use assets and lease liabilities during the period are described in Note 24.

(10)

Foreign currencies

Transactions in foreign currencies are translated to the respective functional currencies of the Company entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency using the reporting date’s exchange rate. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

Exchange differences are recognized in profit or loss in the period in which they arise except for:

•

Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;

•

Exchange differences on transactions entered into in order to hedge certain foreign currency risks (refer to note 3.(24) Derivative financial instruments, including hedge accounting); and

•

Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the net investment.

For the purpose of presenting financial statements, the assets and liabilities of the Company’s foreign operations are expressed in Korean won using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity.

F-30

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(10)

Foreign currencies, continued

When a foreign operation is disposed of, the relevant amount in the translation is transferred to profit or loss as part of the gain or loss on disposal.

(11)

Borrowing costs

The Company capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Other borrowing costs are recognized in expense as incurred. A qualifying asset is an asset that requires a substantial period of time to get ready for its intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

(12)

Government grants

Government grants are not recognized unless there is reasonable assurance that the Company will comply with the grant’s conditions and that the grant will be received.

Benefit from a government loan at a below-market interest rate is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

(i)

If the Company received grants related to assets

Government grants whose primary condition is that the Company purchase, construct or otherwise acquire long-term assets are deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduced depreciation expense.

(ii)

If the Company received grants related to income

Government grants which are intended to compensate the Company for expenses incurred are recognized as other income (government grants) in profit or loss over the periods in which the Company recognizes the related costs as expenses.

(13)

Employee benefits

When an employee has rendered service to the Company during a period, the Company recognizes the contribution payable to a defined contribution plan in exchange for that service as a liability (accrued expense).

For defined benefit pension plans and other post-employment benefits, the net periodic pension expense is actuarially determined by “Pension Actuarial System” developed by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability. However, if there is not a deep market, market yields on government bonds are used.

F-31

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(13)

Employee benefits, continued

Net defined benefit liability’s measurement is composed of actuarial gains and losses, return on plan assets excluding net interest on net defined benefit liability, and any change in the effect of the asset ceiling, excluding net interest, which are immediately recognized in other comprehensive income. The actuarial gains or losses recognized in other comprehensive income which will not be reclassified into net profit or loss for later periods are immediately recognized in retained earnings. Past service cost will be recognized as expenses upon the earlier of the date of change or reduction to the plan, or the date of recognizing termination benefits.

The retirement benefit obligation recognized in the statement of financial position represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses and unrecognized past service cost, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to unrecognized actuarial losses and past service cost, plus the present value of available refunds and reductions in future contributions to the plan.

(14)

Income taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

(i)

Current tax

Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period and any adjustment to tax payable in respect of previous years. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.

Current tax assets and liabilities are offset only if, the Company:

(a)

has a legally enforceable right to set off the recognized amounts; and

(b)

intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

(ii)

Deferred tax

Deferred tax is recognized, using the asset-liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. A deferred tax liability is recognized for all taxable temporary differences. A deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which they can be utilized. However, deferred tax is not recognized for the following temporary differences: taxable temporary differences arising on the initial recognition of goodwill, or the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting profit or loss nor taxable income.

In certain circumstances such as when accounting for leases or decommissioning costs of nuclear power plants, the carrying amount of the asset recorded is equal to the liability recognized at initial recognition. When recording its deferred tax balances, the Company considers these assets and

F-32

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(14)

Income taxes, continued

liabilities separately on a gross basis. Accordingly, the taxable temporary difference relating to the asset and the deductible temporary difference relating to the liability are separately recognized and presented on a net basis in the financial statements.

The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets or deferred tax liabilities on investment properties measured at fair value, unless any contrary evidence exists, are measured using the assumption that the carrying amount of the property will be recovered entirely through sale.

The Company recognizes a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Company recognizes a deferred tax asset for all deductible temporary differences arising from investments in subsidiaries and associates, to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset only if there is a legally enforceable right to offset the related current tax liabilities and assets, and they relate to income taxes levied by the same tax authority and they intend to settle current tax liabilities and assets on a net basis.

(iii)

Current and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

(15)

Property, plant and equipment

F-33

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(15)

Property, plant and equipment, continued

operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Subsequent costs are recognized in the carrying amount of property, plant and equipment at cost or, if appropriate, as separate items if it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.

Property, plant and equipment, except for land, are depreciated on a straight-line basis over estimated useful lives that appropriately reflect the pattern in which the asset’s future economic benefits are expected to be consumed. For loaded nuclear fuel related to long-term raw materials and spent nuclear fuels related to asset retirement costs, the Company uses the unit-of-production method to measure and recognize depreciation expenses.

The estimated useful lives of the Company’s property, plant and equipment are as follows:


		Useful lives (years)
Buildings		8 ~ 40
Structures		8 ~ 50
Machinery		2 ~ 32
Vehicles		3 ~ 8
Loaded heavy water		30
Asset retirement costs		18, 30, 40, 60
Right-of-use assets		1 ~ 32
Ships		9
Others		4 ~ 15

A component that is significant compared to the total cost of property, plant and equipment is depreciated over its separate useful life.

Depreciation methods, residual values and useful lives of property, plant and equipment are reviewed at the end of each reporting period and if change is deemed appropriate, it is treated as a change in accounting estimate.

Property, plant and equipment are derecognized on disposal, or when no future economic benefits are expected from its use or disposal. Gains or losses arising from derecognition of a property, plant and equipment, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.

(16)

Investment property

Property held for the purpose of earning rentals or benefiting from capital appreciation is classified as investment property. Investment property is initially measured at its cost. Transaction costs are included in the initial measurement. Subsequently, investment property is carried at depreciated cost less any accumulated impairment losses.

Subsequent costs are recognized in the carrying amount of investment property at cost or, if appropriate, as separate items if it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.

F-34

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(16)

Investment property, continued

Investment property except for land, are depreciated on a straight-line basis over 8 ~ 40 years as estimated useful lives.

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognized.

(17)

Intangible assets

(i)

Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.

(ii)

Research and development

Expenditure on research activities is recognized as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, all of the following have been demonstrated:

•

The technical feasibility of completing the intangible asset so that it will be available for use or sale;

•

The intention to complete the intangible asset and use or sell it;

•

The ability to use or sell the intangible asset;

•

How the intangible asset will generate probable future economic benefits;

•

The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

•

The ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. When the development expenditure does not meet the criteria listed above, an internally-generated intangible asset cannot be recognized and the expenditure is recognized in profit or loss in the period in which it is incurred.

Internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses.

F-35

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(17)

Intangible assets, continued

The estimated useful lives and amortization methods of the Company’s intangible assets are as follows:


	Useful lives (years)	Amortization methods
Usage rights for donated assets	10 ~ 30	Straight line
Software	4, 5	Straight line
Industrial rights	5 ~ 10	Straight line
Development expenses	5	Straight line
Leasehold rights	10	Straight line
Others	3 ~ 50 or indefinite	Straight line
Mining right	—	Unit of production

(iii)

Intangible assets acquired in a business combination

Intangible assets that are acquired in a business combination are recognized separately from goodwill are initially recognized at their fair value at the acquisition date.

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

(iv)

Derecognition of intangible assets

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from its use or disposal. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognized in gain or loss when the asset is derecognized.

(18)

Greenhouse gas emissions rights (allowances) and obligations

In connection with Enforcement of Allocation and Trading of Greenhouse Gas Emissions Allowances, the Company applies the following accounting policies for greenhouse gas emissions rights and obligations.

(i)

Greenhouse gas emissions rights

Greenhouse gas emissions rights consist of the allowances received free of charge from the government and the ones purchased. The cost of the greenhouse gas emissions rights includes expenditures arising directly from the acquisition and any other costs incurred during normal course of the acquisition.

Greenhouse gas emissions rights are held by the Company to fulfill the legal obligation and recorded as intangible assets. To the extent that the portion to be submitted to the government within one year from the end of reporting period, the greenhouse gas emissions rights are classified as current assets. Greenhouse gas emissions rights recorded as intangible assets are initially measured at cost and substantially remeasured at cost less accumulated impairment losses.

Greenhouse gas emissions rights are derecognized on submission to the government or when no future economic benefits are expected from its use or disposal.

(ii)

Greenhouse gas emissions obligations

Greenhouse gas emissions obligations are the Company’s present legal obligation to submit the greenhouse gas emissions allowances to the government and recognized when an outflow of resources

F-36

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(18)

Greenhouse gas emissions rights (allowances) and obligations, continued

is probable and a reliable estimate can be made of the amount of the obligation. Greenhouse gas emissions obligations are measured as the sum of the carrying amount of the allocated rights that will be submitted to the government and the best estimate of expenditure required to settle the obligation at the end of the reporting period for any excess emission.

(19)

Impairment of non-financial assets other than goodwill

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets with definite useful lives to determine whether there is any indication that those assets may have been impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, to the extent the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

(20)

Inventories

Inventories are measured at the lower of cost and net realizable value. Cost of inventories for inventories in transit are measured by using specific identification method. Cost of inventories, except for those in transit, are measured under the weighted average method and consists of the purchase price, cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, are recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs.

F-37

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(21)

Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. Where the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows.

Where some or all of the expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement shall be recognized when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimates. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

(i)

Provision for employment benefits

The Company determines the provision for employment benefits as the incentive payments based on the results of the individual performance evaluation or management assessment.

(ii)

Provision for decommissioning costs of nuclear power plants

The Company records the fair value of estimated decommissioning costs as a liability in the period in which the Company incurs a legal obligation associated with retirement of long-lived assets that result from acquisition, construction, development and/or normal use of the assets. Accretion expense consists of period-to-period changes in the liability for decommissioning costs resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows.

(iii)

Provision for disposal of spent nuclear fuel

Under the Radioactive Waste Management Act, the Company is levied to pay the spent nuclear fuel fund for the management of spent nuclear fuel. The Company recognizes the provision of present value of the payments.

(iv)

Provision for low and intermediate radioactive wastes

Under the Radioactive Waste Management Act, the Company recognizes the provision for the disposal of low and intermediate radioactive wastes in best estimate of the expenditure required to settle the present obligation.

(v)

Provision for Polychlorinated Biphenyls (“PCBs”)

Under the regulation of Persistent Organic Pollutants Management Act, enacted in 2007, the Company is required to remove PCBs, a toxin, from the insulating oil of its transformers by 2025. As a result of the enactments, the Company is required to inspect the PCBs contents of transformers and dispose of PCBs in excess of safety standards under the legally settled procedures. The Company’s estimates and assumptions used to determine fair value can be affected by many factors, such as the estimated costs of inspection and disposal, inflation rate, discount rate, regulations and the general economy.

F-38

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(21)

Provisions, continued

(vi)

Provisions for power plant regional support program

Power plant regional support programs consist of scholarship programs to local students, local economy support programs, local culture support programs, environment development programs, and local welfare programs. The Company recognizes the provision in relation to power plant regional support program.

(vii)

Provisions for transmission and transformation facilities-neighboring areas support program

The Company has present obligation to conduct transmission and transformation facilities-neighboring areas support program under Act on assistance to transmission and transformation facilities-neighboring areas. The Company recognizes the provision of estimated amount to fulfill the obligation.

(viii)

Renewable Portfolio Standard (“RPS”) provisions

RPS program is required to generate a specified percentage of total electricity to be generated in the form of renewable energy and provisions are recognized for the governmental regulations to require the production of energies from renewable energy sources such as solar, wind and biomass.

(22)

Financial instruments

The Company recognizes financial assets and financial liabilities in the statement of financial position when the Company becomes a party to the contractual provisions of the instrument. Upon initial recognition, financial assets and financial liabilities are measured at their fair value plus, in the case of a financial asset or financial liabilities not at fair value through profit or loss, transaction costs that are directly attributable to the asset’s acquisition or issuance.

(i)

Classification and measurement of financial assets

The Company classifies financial assets into three principal categories; measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL) based on the business model in which assets are managed and their cash flow characteristics. The company assesses the hybrid financial instrument in which derivatives embedded as whole for classification.


	Cash flow characteristics
Business model	Solely payments of principal and interest (SPPI)	Other than SPPI
To collect contractual cash flows	Amortized cost
Both collecting contractual cash flows and selling financial assets	FVOCI^(*1)	FVTPL^(*2)
To sell financial assets	FVTPL

(*1)

To eliminate or reduce an accounting mismatch, the Company may elect to recognize the amount of change in fair value in profit or loss.

(*2)

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI.

F-39

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(22)

Financial instruments, continued

① A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL: 1) it is held within a business model whose objective is to hold assets to collect contractual cash flows; and 2) its contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

② A financial asset is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: 1) it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and 2) its contractual terms of the financial asset give rise on specified dates to cash flow that are solely payments of principal and interest on the principal amount outstanding.

③ All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. On initial recognition of equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in fair value in OCI, and will not reclassify (recycle) those items in OCI to profit or loss subsequently.

(ii)

Classification and measurement of financial liabilities

Financial liabilities are classified as FVTPL or other financial liabilities.

① A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss.

② A non-derivative financial liability that is not classified as at FVTPL is classified as other financial liabilities. Other financial liabilities are measured initially at its fair value minus transaction costs that are directly attributable to the acquisition or issue. Other financial liabilities are subsequently measured at amortized cost using the effective interest method.

(iii)

Impairment: Financial assets and contract assets

The Company applies a forward-looking ‘expected credit loss’ (ECL) model for debt instruments, lease receivables, contractual assets, loan commitments and financial guarantee contracts.

The Company recognizes loss allowances measured on either of the 12-month or lifetime ECL based on the extent of increase in credit risk since inception as shown in the below table.


Classification		Loss allowances
Stage 1	Credit risk has not increased significantly since the initial recognition	12-month ECL:	ECLs that resulted from possible default events within the 12 months after the reporting date

Stage 2	Credit risk has increased significantly since the initial recognition	Lifetime ECL:	ECL that resulted from all possible default events over the expected life of a financial instrument

Stage 3	Credit-impaired

Under IFRS 9, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses for trade receivables or contract assets that result from transactions that are

F-40

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(22)

Financial instruments, continued

within the scope of IFRS 15 and that do not contain a significant financing component in accordance with IFRS 15 and if the trade receivables or contract assets include a significant financing component, the Company may choose as its accounting policy to measure the loss allowance at an amount equal to lifetime expected credit losses.

The Company has chosen to measure the loss allowance at an amount equal to lifetime expected credit losses for the trade receivables, contract assets and lease receivables that contain a significant financing component.

(iv)

Derecognition

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. The Company enters into transactions whereby it transfers assets recognized in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

(23)

Service Concession Arrangements

The Company recognizes revenues from construction services and operating services related to service concession arrangements in accordance with IFRS 15 ‘Revenue from Contracts with Customers’.

The Company recognizes a financial asset to the extent that it has an unconditional contractual right to receive cash or another financial asset for the construction services and an intangible asset to the extent that it receives a right (license) to charge users of the public service. Borrowing costs attributable to the arrangement are recognized as an expense in the period in which they are incurred unless the Company has a contractual right to receive an intangible asset (a right to charge users of the public service). In this case, borrowing costs attributable to the arrangement are capitalized during the construction phase of the arrangement.

(24)

Derivative financial instruments, including hedge accounting

The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including foreign exchange forward contracts, interest rate swaps and cross currency swaps and others.

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value.

The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in such case the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

F-41

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(24)

Derivative financial instruments, including hedge accounting, continued

A derivative with a positive fair value is recognized as a financial asset; a derivative with a negative fair value is recognized as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realized or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

(i)

Separable embedded derivatives

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and when the host contracts are not measured at FVTPL.

An embedded derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the hybrid instrument to which the embedded derivative is part of, is more than 12 months and it is not expected to be realized or settled within 12 months. All other embedded derivatives are presented as current assets or current liabilities.

(ii)

Hedge accounting

The Company designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, as either fair value hedges or cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item.

(iii)

Fair value hedges

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The changes in the fair value of the hedging instrument and the change in the hedged item attributable to the hedged risk relating to the hedged items are recognized in the consolidated statements of comprehensive income.

Hedge accounting is discontinued when the Company revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. The fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortized and recognized as profit or loss from that date.

(iv)

Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss, and is included in the ‘finance income and expense’.

Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item is recognized in profit or loss, in the

F-42

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

3.	Significant Accounting Policies, Continued

(24)

Derivative financial instruments, including hedge accounting, continued

same line of the consolidated statement of comprehensive income as the recognized hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains or losses previously accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability.

Hedge accounting is discontinued when the Company revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or it no longer qualifies for hedge accounting. Any gain or loss accumulated in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss.

4.	Segment, Geographic and Other Information

(1)

Segment determination and explanation of the measurements

The Company’s operating segments are its business components that generate discrete financial information that is reported to and regularly reviewed by the Company’s the chief operating decision maker, the Chief Executive Officer, for the purpose of resource allocation and assessment of segment performance. The Company’s reportable segments are ‘Transmission and distribution’, ‘Electric power generation (Nuclear)’, ‘Electric power generation (Non-nuclear)’, ‘Plant maintenance & engineering service’ and ‘Others’; others mainly represent the business unit that manages the Company’s foreign operations.

Segment operating profit (loss) is determined the same way that consolidated operating profit is determined under IFRS without any adjustment for corporate allocations. The accounting policies used by each segment are consistent with the accounting policies used in the preparation of the consolidated financial statements. Segment assets and liabilities are determined based on separate financial statements of the entities instead of on a consolidated basis. There are various transactions between the reportable segments, including sales of property, plant and equipment and so on, that are conducted on an arm’s-length basis at market prices that would be applicable to an independent third party. For subsidiaries which are in a different segment from that of its immediate parent company, their carrying amount in separate financial statements is eliminated in the consolidating adjustments in the tables below. In addition, consolidation adjustments in the table below include adjustments of the amount of investment in associates and joint ventures from the cost basis amount reflected in segment assets to that determined using equity method in the consolidated financial statements.

F-43

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

4.	Segment, Geographic and Other Information, Continued

(2)

Financial information of the segments for the years ended December 31, 2017, 2018 and 2019, respectively, are as follows:


		2017
Segment		Total segment revenue			Intersegment revenue			Revenue from external customers		Depreciation and amortization			Interest income			Interest expense			Profit (loss) related to associates and joint ventures			Employee benefit expense			Loss on abandonment of property, plant, and equipment		Increase in provisions, net				Operating profit (loss)
		In millions of won
Transmission and distribution	￦		59,486,766			2,044,160			57,442,606		3,466,410			49,987			737,971			(105,166	)		158,738			384,595		885,195				1,902,634
Electric power generation (Nuclear)			9,415,752			9,359,468			56,284		3,267,510			21,034			487,503			3,637			80,809			—		801,800				1,347,794
Electric power generation (Non-nuclear)			22,795,816			21,885,251			910,565		2,954,375			18,860			486,176			(6,718	)		94,075			39,335		171,457				1,523,497
Plant maintenance & engineering service			2,621,440			2,211,716			409,724		109,001			10,801			2,967			(70	)		87,344			161		219,382				265,593
Others			655,062			138,352			516,710		36,001			130,003			103,782			—			861			—		(967	)			113,296
Consolidation adjustments			(35,638,947	)		(35,638,947	)		—		(59,586	)		(24,542	)		(28,847	)		—			(30,467	)		—		(386,747	)			167,055

	￦		59,335,889			—			59,335,889		9,773,711			206,143			1,789,552			(108,317	)		391,360			424,091		1,690,120				5,319,869

Finance income																																1,530,618

Finance expense																																(3,127,952	)

Loss related to associates and joint ventures																																(108,317	)

Profit before income tax																														￦		3,614,218

F-44

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

4.	Segment, Geographic and Other Information, Continued

(2)

Financial information of the segments for the years ended December 31, 2017, 2018 and 2019, respectively, are as follows, continued:


		2018
Segment		Total segment revenue			Intersegment revenue			Revenue from external customers		Depreciation and amortization			Interest income			Interest expense			Profitrelated to associates and joint ventures		Employee benefit expense			Loss on abandonment of property, plant, and equipment		Increase in provisions, net				Operating profit (loss)
		In millions of won
Transmission and distribution	￦		59,676,952			1,393,120			58,283,832		3,555,158			77,925			708,329			287,268		144,180			424,774		580,931				(1,814,363	)
Electric power generation (Nuclear)			8,858,717			8,833,787			24,930		3,088,019			30,422			503,161			9,946		76,467			38,886		520,167				357,401
Electric power generation (Non-nuclear)			25,204,085			24,389,816			814,269		3,269,023			29,313			577,441			58,993		91,140			17,516		(227,234	)			482,418
Plant maintenance & engineering service			2,526,126			2,170,959			355,167		114,030			12,505			4,126			1,956		77,526			—		174,785				314,755
Others			996,300			441,436			554,864		55,513			117,878			119,037			—		1,742			—		356				102,421
Consolidation adjustments			(37,229,118	)		(37,229,118	)		—		(56,949	)		(44,276	)		(43,636	)		—		(30,480	)		—		7,989				(127,741	)

	￦		60,033,062			—			60,033,062		10,024,794			223,767			1,868,458			358,163		360,575			481,176		1,056,994				(685,109	)

Finance income																															796,870

Finance expense																															(2,470,743	)

Gain related to associates and joint ventures																															358,163

Loss before income tax																													￦		(2,000,819	)

F-45

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

4.	Segment, Geographic and Other Information, Continued

(2)

Financial information of the segments for the years ended December 31, 2017, 2018 and 2019, respectively, are as follows, continued:


		2019
Segment		Total segment revenue			Intersegment revenue			Revenue from external customers		Depreciation and amortization			Interest income			Interest expense			Profit/(loss) related to associates and joint ventures			Employee benefit expense			Loss on abandonment of property, plant, and equipment		Increase in provisions, net				Operating profit (loss)
		In millions of won
Transmission and distribution	￦		58,328,372			1,336,725			56,991,647		3,814,428			73,478			777,120			140,757			298,144			350,865		987,828				(2,568,529	)
Electric power generation (Nuclear)			8,937,026			8,908,803			28,223		3,227,695			37,277			511,864			(5,497	)		132,283			—		672,134				782,511
Electric power generation (Non-nuclear)			24,254,957			23,472,153			782,804		3,955,333			35,626			655,466			77,641			163,626			13,364		766,407				551,287
Plant maintenance & engineering service			2,627,539			2,254,841			372,698		125,546			14,214			2,861			1,237			124,745			—		124,242				312,341
Others			1,049,324			656,614			392,710		127,364			141,262			134,248			—			18,409			4		2,408				(489,585	)
Consolidation adjustments			(36,629,136	)		(36,629,136	)		—		(121,626	)		(33,739	)		(34,748	)		—			(12,087	)		—		(251,804	)			(295,552	)

	￦		58,568,082			—			58,568,082		11,128,740			268,118			2,046,811			214,138			725,120			364,233		2,301,215				(1,707,527	)

Finance income																																1,009,706

Finance expense																																(2,782,156	)

Gain related to associates and joint ventures																																214,139

Loss before income tax																														￦		(3,265,838	)

F-46

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

4.	Segment, Geographic and Other Information, Continued

(3)

Information related to segment assets and segment liabilities as of and for the years ended December 31, 2018 and 2019 are as follows:


		2018
Segment		Segment assets			Investments in associates and joint ventures		Acquisition of non-current assets			Segment liabilities
		In millions of won
Transmission and distribution	￦		107,486,379			3,671,897		6,323,504			53,404,610
Electric power generation (Nuclear)			55,792,704			43,038		2,187,077			30,484,104
Electric power generation (Non-nuclear)			49,296,392			2,114,203		3,435,222			27,558,156
Plant maintenance & engineering service			3,431,068			49,207		111,393			1,200,390
Others			7,816,885			—		382,978			3,165,286

Segment totals			223,823,428			5,878,345		12,440,174			115,812,546

Consolidation adjustments:
Elimination of inter-segment amounts			(41,026,970	)		—		(62,717	)		(5,055,737	)
Equity method adjustment			964,234			—		—			—
Deferred taxes			2,131			—		—			(621	)
Others			1,486,238			—		—			3,400,111

			(38,574,367	)		—		(62,717	)		(1,656,247	)

Consolidated totals	￦		185,249,061			5,878,345		12,377,457			114,156,299


		2019
Segment		Segment assets			Investments in associates and joint ventures		Acquisition of non-current assets			Segment liabilities
		In millions of won
Transmission and distribution	￦		109,809,254			3,716,931		6,340,593			58,350,681
Electric power generation (Nuclear)			59,562,190			59,081		2,574,358			33,909,152
Electric power generation (Non-nuclear)			54,758,933			2,088,581		4,955,784			33,117,193
Plant maintenance & engineering service			3,528,879			50,238		95,810			1,124,855
Others			7,833,516			—		344,795			3,531,496

Segment totals			235,492,772			5,914,831		14,311,340			130,033,377

Consolidation adjustments:
Elimination of inter-segment amounts			(39,207,636	)		—		(81,555	)		(6,654,717	)
Equity method adjustment			1,791,844			—		—			—
Deferred taxes			2,048			—		—			5,329,158
Others			(481,236	)		—		—			325

			(37,894,980	)		—		(81,555	)		(1,325,234	)

Consolidated totals	￦		197,597,792			5,914,831		14,229,785			128,708,143

F-47

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

4.	Segment, Geographic and Other Information, Continued

(4)

Geographic information

Electric sales, the main operations of the Company, are conducted in the Republic of Korea. The following information on revenue from external customers and non-current assets is determined by the location of the customers and of the assets:


Geographical unit		Revenue from external customers						*Non-current assets(2)**
Geographical unit		2017		2018		2019		2017		2018		2019
		In millions of won
Domestic	￦		55,652,807		57,799,991		56,942,128		153,436,810		157,037,428		169,366,365
Overseas(*1)			3,683,082		2,233,071		1,625,954		4,497,535		3,299,346		2,743,755

	￦		59,335,889		60,033,062		58,568,082		157,934,345		160,336,774		172,110,120

(*1)

Middle East and other Asian countries make up the majority of overseas revenue and non-current assets. Since the overseas revenue or non-current assets attributable to particular countries are not material, they are not disclosed individually.

(*2)

Amount excludes financial assets and deferred tax assets.

(5)

Information on significant customers

There is no single customer comprising more than 10% of the Company’s revenue for the years ended December 31, 2017, 2018 and 2019.

F-48

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

5.	Classification of Financial Instruments

(1)

Classification of financial assets as of December 31, 2018 and 2019 are as follows:


		2018
		Financial assets at fair value through profit or loss		Financial assets at fair value through other comprehensive income		Financial assets at amortized cost		Derivative assets (applying hedge accounting)		Total
		In millions of won
Current assets
Cash and cash equivalents	￦		—		—		1,358,345		—		1,358,345
Current financial assets
Current financial assets at fair value through profit or loss			313,893		—		—		—		313,893
Current financial assets at amortized costs			—		—		11,956		—		11,956
Current derivative assets			13,936		—		—		28,171		42,107
Other financial assets			—		—		1,991,939		—		1,991,939
Trade and other receivables			—		—		7,793,592		—		7,793,592

			327,829		—		11,155,832		28,171		11,511,832

Non-current assets
Non-current financial assets
Non-current financial assets at fair value through profit or loss			607,042		—		—		—		607,042
Non-current financial assets at fair value through other comprehensive income			—		399,495		—		—		399,495
Non-current financial assets at amortized costs			—		—		2,086		—		2,086
Non-current derivative assets			23,695		—		—		36,533		60,228
Other financial assets			—		—		1,044,762		—		1,044,762
Trade and other receivables			—		—		1,819,845		—		1,819,845

			630,737		399,495		2,866,693		36,533		3,933,458

	￦		958,566		399,495		14,022,525		64,704		15,445,290

F-49

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

5.	Classification of Financial Instruments, Continued

(1)

Classification of financial assets as of December 31, 2018 and 2019 are as follows, continued:


		2019
		Financial assets at fair value through profit or loss		Financial assets at fair value through other comprehensive income		Financial assets at amortized cost		Derivative assets (applying hedge accounting)		Total
		In millions of won
Current assets
Cash and cash equivalents	￦		—		—		1,810,129		—		1,810,129
Current financial assets
Current financial assets at fair value through profit or loss			131,385		—		—		—		131,385
Current financial assets at amortized costs			—		—		12,302		—		12,302
Current derivative assets			21		—		—		27,597		27,618
Other financial assets			—		—		1,415,204		—		1,415,204
Trade and other receivables			—		—		7,701,452		—		7,701,452

			131,406		—		10,939,087		27,597		11,098,090

Non-current assets
Non-current financial assets
Non-current financial assets at fair value through profit or loss			615,876		—		—		—		615,876
Non-current financial assets at fair value through other comprehensive income			—		379,170		—		—		379,170
Non-current financial assets at amortized costs			—		—		1,307		—		1,307
Non-current derivative assets			165,183		—		—		118,232		283,415
Other financial assets			—		—		1,283,730		—		1,283,730
Trade and other receivables			—		—		2,002,297		—		2,002,297

			781,059		379,170		3,287,334		118,232		4,565,795

	￦		912,465		379,170		14,226,421		145,829		15,663,885

F-50

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

5.	Classification of Financial Instruments, Continued

(2)

Classification of financial liabilities as of December 31, 2018 and 2019 are as follows:


		2018
		Financial liabilities at fair value through profit or loss		Financial liabilities recognized at amortized cost		Derivative liabilities (applying hedge accounting)		Total
		In millions of won
Current liabilities
Borrowings	￦		—		1,172,624		—		1,172,624
Debt securities			—		6,788,824		—		6,788,824
Derivative liabilities			13,706		—		6,725		20,431
Trade and other payables			—		6,405,395		—		6,405,395

			13,706		14,366,843		6,725		14,387,274

Non-current liabilities
Borrowings			—		3,258,015		—		3,258,015
Debt securities			—		49,815,164		—		49,815,164
Derivative liabilities			85,304		—		206,428		291,732
Trade and other payables			—		2,941,696		—		2,941,696

			85,304		56,014,875		206,428		56,306,607

	￦		99,010		70,381,718		213,153		70,693,881


		2019
		Financial liabilities at fair value through profit or loss		Financial liabilities recognized at amortized cost		Derivative liabilities (applying hedge accounting)		Total
		In millions of won
Current liabilities
Borrowings	￦		—		1,315,134		—		1,315,134
Debt securities			—		7,542,705		—		7,542,705
Derivative liabilities			13,286		—		59,778		73,064
Trade and other payables			—		6,649,402		—		6,649,402

			13,286		15,507,241		59,778		15,580,305

Non-current liabilities
Borrowings			—		3,389,743		—		3,389,743
Debt securities			—		55,628,959		—		55,628,959
Derivative liabilities			39,861		—		57,035		96,896
Trade and other payables			—		6,965,760		—		6,965,760

			39,861		65,984,462		57,035		66,081,358

	￦		53,147		81,491,703		116,813		81,661,663

F-51

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

5.	Classification of Financial Instruments, Continued

(3)

Classification of comprehensive income (loss) from financial instruments for the years ended December 31, 2017, 2018 and 2019 are as follows:


			2017			2018			2019
			In millions of won
Cash and cash equivalents	Interest income	￦		35,474			40,704			42,861
Financial assets at fair value through profit or loss	Interest income			—			21,713			29,411
	Gain on valuation of derivatives			—			34,117			151,604
	Gain on transaction of derivatives			—			39,114			63,329
	Gain on valuation of financial assets			—			1,879			1,062
	Gain on disposal of financial assets			—			1,837			1,760
Financial assets at fair value through profit or loss	Interest income			290			—			—
	Gain (loss) on valuation of derivatives			(214,100	)		—			—
	Loss on transaction of derivatives			(37,266	)		—			—
	Gain on valuation of financial assets			12			—			—
Financial assets at fair value through other comprehensive income	Dividends income			—			12,777			13,838
Available-for-sale financial assets	Dividends income			11,477			—			—
	Impairment loss on available-for-sale financial assets			(2,713	)		—			—
	Gain (loss) on disposal of available-for-sale financial assets			(1,213	)		—			—
Financial assets at amortized cost	Interest income			—			89			539
Held-to-maturity investments	Interest income			82			—			—
Loans and receivables	Interest income			30,014			21,925			63,448
Trade and other receivables	Interest income			102,727			90,390			69,941
Short-term financial instruments	Interest income			29,412			41,025			49,070
Long-term financial instruments	Interest income			8,144			7,920			12,794
Other financial assets	Interest income			—			1			54
Derivative assets (applying hedge accounting)	Gain (loss) on valuation of derivatives (profit or loss)			(41,129	)		69,799			123,730
	Gain on valuation of derivatives (equity, before tax)			2,453			8,600			38,305
	Gain (loss) on transaction of derivatives			(58,299	)		34,152			65,651
Financial liabilities at fair value through profit or loss	Loss on valuation of derivatives			—			(4,650	)		27,686
	Gain on transaction of derivatives			—			36,046			(493	)
Financial liabilities at fair value through profit or loss	Gain (loss) on valuation of derivatives			(179,879	)		—			—
	Gain (loss) on transaction of derivatives			(27,175	)		—			—
Financial liabilities carried at amortized cost	Interest expense of borrowings and debt securities			(1,240,727	)		(1,320,516	)		(1,394,328	)
	Loss on retirement of financial liabilities			(5	)		—			—
	Interest expense of trade and other payables			(57,160	)		(42,830	)		(94,019	)
	Interest expense of others			(491,665	)		(505,112	)		(558,464	)
	Gain (loss) on foreign currency transactions and translations			1,075,215			(356,159	)		(406,175	)
Derivative liabilities (applying hedge accounting)	Gain (loss) on valuation of derivatives (profit or loss)			(439,559	)		53,937			14,330
	Gain (loss) on valuation of derivatives (equity, before tax)			29,431			(15,029	)		(2,578	)
	Gain (loss) on transaction of derivatives			(46,221	)		37,985			(42,072	)

F-52

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

6.	Restricted Deposits

Restricted deposits as of December 31, 2018 and 2019 are as follows:


			2018		2019
			In millions of won
Cash and cash equivalents	Deposits for government project	￦		12,747		9,287
	Collateral provided for borrowings			100,998		63,198
	Collateral provided for lawsuit			3		3
	Deposits for transmission regional support program			4,337		3,002
	Decommissioning costs of nuclear power plants			604		—
Short-term financial instruments	Restriction on withdrawal related to ‘win-win growth program’ for small and medium enterprises			34,000		93,000
Current financial assets at fair value through profit or loss	Decommissioning costs of nuclear power plants			29,451		—
Non-current financial assets at fair value through profit or loss	Decommissioning costs of nuclear power plants			498,555		541,969
Long-term financial instruments	Escrow accounts			69		74
	Guarantee deposits for banking accounts at oversea branches			315		326
	Collateral provided for borrowings			—		11,745
	Decommissioning costs of nuclear power plants			245,896		250,464
	Funds for developing small and medium enterprises(*)			200,000		200,000

		￦		1,126,975		1,173,068

(*)

Deposits for small and medium enterprises at the Industrial Bank of Korea (IBK) and others for construction of Bitgaram Energy Valley businesses as of December 31, 2018 and 2019.

7.	Cash and Cash Equivalents

Cash and cash equivalents as of December 31, 2018 and 2019 are as follows:


		2018		2019
		In millions of won
Cash	￦		138		266
Other demand deposits			927,650		1,117,499
Short-term deposits classified as cash equivalents			211,424		527,235
Short-term investments classified as cash equivalents			219,133		165,129

	￦		1,358,345		1,810,129

F-53

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

8.	Trade and Other Receivables

(1)

Trade and other receivables as of December 31, 2018 and 2019 are as follows:


		2018
		Gross amount		Allowance for doubtful accounts			Present value discount			Book value
		In millions of won
Current assets
Trade receivables	￦		7,303,065		(215,775	)		—			7,087,290
Other receivables			728,560		(20,231	)		(2,027	)		706,302

			8,031,625		(236,006	)		(2,027	)		7,793,592

Non-current assets
Trade receivables			415,318		(93	)		(448	)		414,777
Other receivables			1,496,464		(84,495	)		(6,901	)		1,405,068

			1,911,782		(84,588	)		(7,349	)		1,819,845

	￦		9,943,407		(320,594	)		(9,376	)		9,613,437


		2019
		Gross amount		Allowance for doubtful accounts			Present value discount			Book value
		In millions of won
Current assets
Trade receivables	￦		7,147,683		(208,505	)		—			6,939,178
Other receivables			792,147		(27,579	)		(2,294	)		762,274

			7,939,830		(236,084	)		(2,294	)		7,701,452

Non-current assets
Trade receivables			338,261		(4,254	)		(382	)		333,625
Other receivables			1,759,930		(86,576	)		(4,682	)		1,668,672

			2,098,191		(90,830	)		(5,064	)		2,002,297

	￦		10,038,021		(326,914	)		(7,358	)		9,703,749

F-54

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

8.	Trade and Other Receivables, Continued

(2)

Other receivables as of December 31, 2018 and 2019 are as follows:


		2018
		Gross amount		Allowance for doubtful accounts			Present value discount			Book value
		In millions of won
Current assets
Non-trade receivables	￦		298,587		(19,940	)		—			278,647
Accrued income			102,023		—			—			102,023
Deposits			228,466		—			(2,027	)		226,439
Finance lease receivables			84,688		(291	)		—			84,397
Others			14,796		—			—			14,796

			728,560		(20,231	)		(2,027	)		706,302

Non-current assets
Non-trade receivables			136,432		(77,475	)		—			58,957
Deposits			376,211		—			(6,901	)		369,310
Finance lease receivables			898,658		(842	)		—			897,816
Others			85,163		(6,178	)		—			78,985

			1,496,464		(84,495	)		(6,901	)		1,405,068

	￦		2,225,024		(104,726	)		(8,928	)		2,111,370


		2019
		Gross amount		Allowance for doubtful accounts			Present value discount			Book value
		In millions of won
Current assets
Non-trade receivables	￦		376,438		(27,201	)		—			349,237
Accrued income			68,921		—			—			68,921
Deposits			273,887		—			(2,294	)		271,593
Finance lease receivables			60,304		(378	)		—			59,926
Others			12,597		—			—			12,597

			792,147		(27,579	)		(2,294	)		762,274

Non-current assets
Non-trade receivables			196,821		(78,654	)		—			118,167
Accrued income			2,222		—			—			2,222
Deposits			338,989		—			(4,682	)		334,307
Finance lease receivables			1,118,537		(484	)		—			1,118,053
Others			103,361		(7,438	)		—			95,923

			1,759,930		(86,576	)		(4,682	)		1,668,672

	￦		2,552,077		(114,155	)		(6,976	)		2,430,946

F-55

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

8.	Trade and Other Receivables, Continued

(3)

Trade and other receivables measured at amortized cost

No interest is accrued for trade receivables related to electricity for the duration between the billing date and the payment due dates. However, once trade receivables are overdue, the Company imposes a monthly interest rate of 1.5% on the overdue trade receivables. The Company holds deposits of three months’ expected electricity usage for customers requesting temporary usage and customers with delinquent payments.

(4)

Aging analysis of trade receivables as of December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Trade receivables: (not overdue)	￦		7,419,648			7,338,757

Trade receivables: (overdue, not impaired)			—			—

Less than 60 days			—			—

Trade receivables: (impairment reviewed)			298,735			147,187

Less than 60 days			2,525			6,555
60 ~ 90 days			37,266			1,899
90 ~ 120 days			16,033			2,106
120 days ~ 1 year			46,204			37,357
Over 1 year			196,707			99,270

			7,718,383			7,485,944
Less: allowance for doubtful accounts			(215,868	)		(212,759	)
Less: present value discount			(448	)		(382	)

	￦		7,502,067			7,272,803

At the end of each reporting period, the Company assesses whether the credit to trade receivables is impaired. The Company recognizes loss allowances for trade receivables individually when there is any objective evidence that trade receivables are impaired and significant and classifies the trade receivables that are not individually assessed as the trade receivables subject to be assessed on a collective basis. Also, from January 1, 2018, the Company recognizes loss allowances based on an ‘expected credit loss’ (ECL) model.

F-56

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

8.	Trade and Other Receivables, Continued

(5)

Aging analysis of other receivables as of December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Other receivables: (not overdue)	￦		2,075,601			2,327,640

Other receivables: (overdue, not impaired)			—			—

Less than 60 days			—			—

Other receivables: (impairment reviewed)			149,423			224,437

Less than 60 days			24,782			98,220
60 ~ 90 days			1,007			2,034
90 ~ 120 days			10,997			14,135
120 days ~ 1 year			23,991			26,212
Over 1 year			88,646			83,836

			2,225,024			2,552,077
Less: allowance for doubtful accounts			(104,726	)		(114,155	)
Less: present value discount			(8,928	)		(6,976	)

	￦		2,111,370			2,430,946

At the end of each reporting period, the Company assesses whether the credit to other receivables is impaired. The Company recognizes loss allowances for other receivables individually when there is any objective evidence that trade receivables are impaired and significant, and classifies the other receivables that are not individually assessed as the other receivables subject to be assessed on a collective basis. Also, from January 1, 2018, the Company recognizes loss allowances based on an ‘expected credit loss’ (ECL) model.

(6)

Changes in the allowance for doubtful accounts for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017						2018						2019
		Trade receivables			Other receivables			Trade receivables			Other receivables			Trade receivables			Other receivables
		In millions of won
Beginning balance	￦		71,985			87,661			173,583			78,008			215,868			104,726
Effect of change in accounting policy			—			—			6,641			128			—			—
Loss allowance as at January 1 under IFRS 9			—			—			180,224			78,136			215,868			104,726
Bad debt expense			126,714			1,778			41,498			17,817			29,221			19,206
Write-off			(32,995	)		(3,129	)		(7,696	)		(244	)		(10,106	)		(1,146	)
Reversal			—			(2,166	)		(1,726	)		(143	)		(41,940	)		—
Others			7,879			(6,136	)		3,568			9,160			19,716			(8,631	)

Ending balance	￦		173,583			78,008			215,868			104,726			212,759			114,155

F-57

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

9.	Financial Assets at Fair Value through Profit or Loss

(1)

Financial assets at fair value through profit or loss as of December 31, 2018 and 2019 are as follows:


		2018				2019
		Current		Non-current		Current		Non-current
		In millions of won
Financial assets at fair value through profit or loss
Beneficiary certificate	￦		100		320,148		894		160,952
Cooperative			—		5,052		—		5,155
Other			313,793		83,586		130,491		244,857

			313,893		408,786		131,385		410,964

Financial assets designated as at fair value through profit or loss
Debt with embedded derivatives			—		187,483		—		150,916
Other			—		10,773		—		53,996

			—		198,256		—		204,912

	￦		313,893		607,042		131,385		615,876

(2)

Details of gain (loss) from financial assets at fair value through profit or loss for the years ended December 31, 2019 and 2018 are as follows:


		2018		2019
		In millions of won
Beneficiary certificate	￦		6,892		12,458
Cooperative			626		76
Debt with embedded derivatives			4,804		2,697
Other			13,108		17,002

	￦		25,430		32,233

F-58

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

10.

Financial Assets at Fair Value through Other Comprehensive Income

(1)

Changes in financial assets at fair value through other comprehensive income for the years ended December 31, 2018 and 2019 are as follows:


		2018
		Beginning balance		Effect of change in accounting policy		Acquisition		Disposal			Valuation			Impairment		Others			Ending balance
		In millions of won
Listed	￦		—		274,453		—		(1	)		(63,007	)		—		(1,389	)		210,056
Unlisted			—		197,450		—		—			(12,070	)		—		4,059			189,439

	￦		—		471,903		—		(1	)		(75,077	)		—		2,670			399,495

Current financial assets at fair value through other comprehensive income	￦		—		—		—		—			—			—		—			—
Non-current financial assets at fair value through other comprehensive income			—		471,903		—		(1	)		(75,077	)		—		2,670			399,495


		2019
		Beginning balance		Acquisition		Disposal			Valuation			Impairment		Others		Ending balance
		In millions of won
Listed	￦		210,055		—		—			(11,734	)		—		2,880		201,201
Unlisted			189,439		1,876		(19,315	)		3,715			—		2,254		177,969

	￦		399,494		1,876		(19,315	)		(8,019	)		—		5,134		379,170

Current financial assets at fair value through other comprehensive income	￦		—		—		—			—			—		—		—
Non-current financial assets at fair value through other comprehensive income			399,494		1,876		(19,315	)		(8,019	)		—		5,134		379,170

F-59

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

10.

Financial Assets at Fair Value through Other Comprehensive Income, Continued

(2)

Financial assets at fair value through other comprehensive income as of December 31, 2018 and 2019 are as follows:


	2018
	Shares		Ownership				Acquisition cost		Book value		Fair value
							In millions of won
Listed
Korea District Heating Corp.		2,264,068		19.55	%	￦		173,201		129,051		129,051
Ssangyong Motor Co., Ltd.		38,568		0.03	%			428		153		153
SM Korea Line Corp.		18		0.00	%			1		—		—
Namkwang Engineering & Construction Co., Ltd.		121		0.00	%			15		1		1
Bumyang Construction Co., Ltd.		35		0.00	%			2		—		—
ELCOMTEC Co., Ltd.		32,875		0.04	%			217		61		61
PAN ocean Co., Ltd.		1,492		0.00	%			14		7		7
Dongbu Corp.		955		0.02	%			12		7		7
KSP Co., Ltd.		22,539		0.08	%			24		32		32
STX Heavy Industries Co., Ltd.		5,057		0.13	%			191		29		29
Codes Combine Co., Ltd.		291		0.00	%			1		1		1
PT Adaro Energy Tbk		480,000,000		1.50	%			71,554		44,790		44,790
Energy Fuels Inc.		1,711,814		1.91	%			16,819		5,435		5,435
Bunji Corporation Limited (formerly, Baralaba Coal Company Limited)		99,763		0.07	%			18,445		—		—
Denison Mines Corp.		58,284,000		10.42	%			84,134		30,122		30,122
Fission 3.0(*6)		75,000		0.14	%			—		13		13
Fission Uranium Corp.		800,000		0.16	%			785		354		354

								365,843		210,056		210,056

Unlisted(*1)
Intellectual Discovery Co., Ltd.		1,000,000		8.81	%	￦		5,000		954		954
Hwan Young Steel Co., Ltd.		10,916		0.14	%			1,092		97		97
SAMBO AUTO. Co., Ltd.		15,066		0.02	%			38		38		38
Mobo Co., Ltd.		504		0.00	%			14		14		14
Dae Kwang Semiconductor Co., Ltd.		589		0.07	%			6		6		6
Sanbon Department Store		828		0.01	%			124		3		3
Miju Steel Mfg. Co., Ltd.		1,097		0.23	%			50		50		50
Sungwon Co., Ltd.(*7)		117		0.07	%			15		15		15
Hana Civil Engineering Co., Ltd.		23		0.00	%			1		1		1
KC Development Co., Ltd.		839		0.02	%			6		6		6
IMHWA Corp.		329		0.11	%			5		5		5
DALIM Special Vehicle Co., Ltd.		58		0.08	%			10		10		10
ASA JEONJU Co., Ltd.		34,846		1.34	%			697		69		69
Moonkyung Silica Co., Ltd.		42		0.56	%			—		—		—
Sungkwang Timber Co., Ltd.		9		0.34	%			4		4		4
Yongbo Co., Ltd.		61		0.20	%			3		3		3
HJ Steel Co., Ltd.		218		0.07	%			2		2		2
KS Remicon Co., Ltd.		12		0.04	%			3		3		3
Joongang Platec Co., Ltd.		3,591		0.75	%			72		35		35
Pyungsan SI Ltd.		434		0.01	%			9		9		9
Samgong Development Co., Ltd.		12		0.01	%			7		7		7
Joongang Development Co., Ltd.		540		0.12	%			8		8		8

F-60

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

10.

Financial Assets at Fair Value through Other Comprehensive Income, Continued

(2)

Financial assets at fair value through other comprehensive income as of December 31, 2018 and 2019 are as follows, continued:


	2018
	Shares		Ownership				Acquisition cost		Book value		Fair value
							In millions of won
AJS Co., Ltd.		12,906		0.23	%	￦		32		32		32
SHIN-E B&P Co., Ltd.		119		0.13	%			10		—		—
MSE Co., Ltd.		429		0.13	%			9		9		9
Ilrim Nano Tec Co., Ltd.		1,520		0.07	%			15		15		15
Youngjin Hi-Tech Co., Ltd.		2,512		0.25	%			126		21		21
Buyoung Co., Ltd.		270		0.00	%			3		3		3
Ilsuk Co., Ltd.		152		0.17	%			10		10		10
Dongyang Telecom Co., Ltd.		1,760		0.01	%			11		11		11
Jongwon Remicon Co., Ltd.		31		0.18	%			13		13		13
Zyle Daewoo Motor Sales Co., Ltd.		22		0.00	%			—		—		—
Daewoo Development Co., Ltd.		8		0.00	%			—		—		—
Seyang Inc.		537		0.05	%			27		27		27
Seungri Enterprise Co., Ltd.		93		0.05	%			3		3		3
Onggane Food Co., Ltd		5		0.07	%			1		1		1
Shin-E P&C Co., Ltd.		1,569		0.64	%			111		3		3
Ejung Ad Co., Ltd.		132		0.09	%			3		3		3
Solvus Co., Ltd.		1,056		0.04	%			3		3		3
Myung Co., Ltd.		89		0.05	%			2		2		2
Shinil Engineering Co., Ltd.		887		0.06	%			3		3		3
Biwang Industry Co., Ltd		406		0.04	%			2		2		2
Huimun Co., Ltd.		263		0.26	%			4		4		4
Young Sung Co., Ltd.		89		0.40	%			26		26		26
Yuil Industrial Electronics Co., Ltd.		804		0.32	%			15		15		15
DN TEK Inc.		12,401		0.29	%			61		5		5
Kwang Jin Structure Co., Ltd.		3,072		0.60	%			31		31		31
Woojin Industry Corporation		3		0.00	%			16		16		16
Kwang Sung Industry Co., Ltd.		325		0.35	%			7		7		7
Futech Mold Co., Ltd.		274		0.27	%			14		14		14
Woojoo Environment Ind. Co., Ltd.		101		0.11	%			13		13		13
Hyungji Esquire Co., Ltd.		61		0.02	%			22		22		22
Kolmar Pharma Co., Ltd.		1,426		0.01	%			52		3		3
Morado Co., Ltd.		209		0.04	%			2		2		2
Myung Sung Tex Co., Ltd.		20		0.00	%			2		2		2
Kwang Sung Co., Ltd.		610		0.53	%			31		31		31
Seen Business and Technology co., Ltd. (formerly, EverTechno. Co.,Ltd.)		29,424		0.73	%			148		7		7
Autowel Co.,Ltd.		260		0.38	%			14		14		14
Woobang Construction Co., Ltd.		8		0.00	%			8		8		8
Shin Pyung Co., Ltd.		6		0.03	%			3		3		3
JMC Heavy Industries Co., Ltd.		2,724		0.10	%			27		2		2
Najin Steel Co., Ltd.		37		0.06	%			5		5		5
Sinkwang Industry Co., Ltd.		1,091		1.68	%			5		5		5
Crystal Co., Ltd.		22		0.07	%			2		2		2

F-61

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

10.

Financial Assets at Fair Value through Other Comprehensive Income, Continued

(2)

Financial assets at fair value through other comprehensive income as of December 31, 2018 and 2019 are as follows, continued:


	2018
	Shares		Ownership				Acquisition cost		Book value		Fair value
							In millions of won
Elephant & Friends Co., Ltd.		563		0.61	%	￦		3		3		3
Mireco Co., Ltd.		109		0.25	%			11		11		11
L&K Industry Co., Ltd.		1,615		0.60	%			24		24		24
JO Tech Co., Ltd.		1,263		0.62	%			25		25		25
Kendae Printing Co., Ltd.		422		0.60	%			21		21		21
Dauning Co., Ltd.		231		0.41	%			6		6		6
Korea Trecision Co., Ltd.		22		0.45	%			5		5		5
Ace Track Co., Ltd.		3,130		1.08	%			219		59		59
Yoo-A Construction Co., Ltd.		105		0.20	%			11		11		11
Dung Hwan Co., Ltd.		531		0.02	%			5		5		5
Hurim Biocell Co., Ltd.		1,021		0.00	%			5		5		5
Smart Power Co.,Ltd.		133,333		4.35	%			200		200		200
Sunjin Power Tech Co., Ltd.		4,941		0.92	%			247		32		32
Haseung Industries Co.,Ltd.		55		0.62	%			28		28		28
Beer Yeast Korea Inc.		1,388		0.43	%			7		7		7
Korea Bio Red Ginseng Co.,Ltd.		194		0.09	%			10		10		10
B CON Co.,Ltd.		96		1.16	%			6		6		6
SsangMa Machine Co., Ltd.		4		0.05	%			1		1		1
Ace Integration Co., Ltd		105		0.09	%			24		24		24
AceInti Agricultural Co., Ltd.		16		0.02	%			5		5		5
KyungDong Co., Ltd.		130		0.01	%			1		1		1
ChunWon Development Co., Ltd.		193		0.19	%			39		39		39
WonIl Co., Ltd.		999		0.15	%			50		50		50
SungLim Industrial Co., Ltd.		29		0.03	%			1		1		1
Korea Minerals Co., Ltd.		191		0.05	%			134		1		1
HyoDong Development Co., Ltd.		119		0.15	%			24		24		24
Haspe Tech Co., Ltd.		652		0.55	%			20		20		20
JoHyun Co., Ltd.		350		1.56	%			18		18		18
KC Co., Ltd.		5,107		0.17	%			26		26		26
SeongJi Industrial Co.,Ltd.		41		0.05	%			1		1		1
Dong Yang Metal Co., Ltd.		2,951		1.97	%			161		147		147
Seyang Precision Ind.Co., Ltd.		829		0.23	%			41		41		41
Dooriwon Food System Co., Ltd.		13		0.27	%			1		1		1
ShinShin Co., Ltd		339		1.12	%			17		17		17
Kitorang Co., Ltd.		165		0.24	%			49		49		49
Sung Kwang Co., Ltd.		23		0.37	%			6		6		6
Shinheung petrol. Co. Ltd.		699		0.14	%			35		35		35
Force TEC Co., Ltd.		3,501		0.02	%			18		18		18
Samsung Tech Co., Ltd.		486		1.28	%			97		36		36
Tae Hyung Co., Ltd.		28		0.43	%			20		20		20
Samyangplant Co., Ltd.		323		0.60	%			16		16		16
Younil Metal Co., Ltd.		41		0.21	%			21		21		21
Myungjin Tech Co., Ltd.		20		0.54	%			4		4		4

F-62

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

10.

Financial Assets at Fair Value through Other Comprehensive Income, Continued

(2)

Financial assets at fair value through other comprehensive income as of December 31, 2018 and 2019 are as follows, continued:


	2018
	Shares		Ownership				Acquisition cost		Book value		Fair value
							In millions of won
Hankook Precision Ind Co., Ltd.		110		0.06	%	￦		11		11		11
Borneo International Furniture Co., Ltd.(*4)		4,000		0.16	%			97		13		13
CJ Paradise Co.,Ltd		24		0.02	%			12		12		12
Han Young Technology Company Co.,Ltd.		35		0.00	%			—		—		—
STX Offshore & Shipbuilding Co., Ltd		8,622		0.25	%			1,078		1,078		1,078
Ptotronics Co., Ltd.		843		0.42	%			84		6		6
NFT Co., Ltd.		136		0.40	%			8		8		8
Echoroba Co.,Ltd.		157		0.02	%			3		3		3
Hyundaitech Co.,Ltd.		1,363		0.87	%			27		27		27
Dasan Material Co.Ltd.		29		0.04	%			22		22		22
Fish World Co.,Ltd.		47		0.21	%			2		2		2
SG Shinsung Engineering and Construction Co., Ltd.		10		0.00	%			6		6		6
Samdo Industry Electric Co.,Ltd.		48		0.02	%			1		1		1
Taejung Industries Co.,Ltd.		9,268		0.30	%			5		5		5
Shinsei Trading Co., Ltd.		64		0.72	%			6		6		6
Dynamic Co., Ltd.		111		0.19	%			3		3		3
Green Alchemy Co.,Ltd.		38,202		1.48	%			191		17		17
Youone TBM Engineering & Construction Co., Ltd.		615		0.27	%			31		31		31
KM Leatech Co., Ltd.		1,648		0.98	%			8		8		8
Wonil T&I Co., Ltd.		229		0.17	%			23		23		23
Semist Co.,Ltd.		555		0.80	%			3		3		3
DS POWER Co., Ltd.		580,000		2.34	%			2,900		916		916
Sewon Bus Co.,Ltd		12		0.00	%			—		—		—
Enertec Co., Ltd.		7,937		0.19	%			44		44		44
Sangji Co., Ltd.		20		0.26	%			4		4		4
Bellie Doughnuts Co., Ltd.		64		0.07	%			4		4		4
Possbell Engineering Co., Ltd.		36		0.64	%			1		1		1
AIRTECH Information communication Co., Ltd		2,379		0.60	%			12		12		12
CST co.,ltd.		4,998		0.28	%			100		100		100
TN Inc.		1,416		2.00	%			71		71		71
Shin kwang Industrial Co., Ltd.		884		0.35	%			55		55		55
Kiscom Co., Ltd.		1,493		0.04	%			1		1		1
Seil Electronics Co.,Ltd.		2,285		0.41	%			286		286		286
Wonil laser Co., Ltd		157		0.37	%			16		16		16
Pyung Hwa Industrial Co.,Ltd.		3,388		3.00	%			85		85		85
Navanakorn Electric Co., Ltd.(*2)		4,442,800		26.93	%			17,216		17,126		17,126
PT. Kedap Saayq		671		10.00	%			18,540		—		—
Set Holding(*3)		1,100,220		2.50	%			229,255		161,983		161,983
PT. Cirebon Energi Prasarana		22,420		10.00	%			2,612		2,507		2,507
KODE NOVUS 1 LLC(*5)		—		10.00	%			—		—		—
Choheung packing Co.,Ltd.		61		0.13	%			12		12		12

F-63

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

10.

Financial Assets at Fair Value through Other Comprehensive Income, Continued

(2)

Financial assets at fair value through other comprehensive income as of December 31, 2018 and 2019 are as follows, continued:


	2018
	Shares		Ownership				Acquisition cost		Book value		Fair value
							In millions of won
Jaewoo Co., Ltd.		359		0.24	%	￦		11		11		11
Wooyang HC Co., Ltd(*8)		1,375		0.01	%			159		159		159
Sungsan Parts Co., Ltd.		629		0.80	%			63		63		63
KMT Co., Ltd.		1,411		0.93	%			21		21		21
TheYeonriji Co., Ltd.		116		0.10	%			6		6		6
Flusys Co., Ltd.		9		0.08	%			2		2		2
DaeSung Frontier Co., Ltd.		2,203		1.11	%			221		221		221
DongSeo Electronics Co., Ltd.		323		0.07	%			16		16		16
Daewoo Display Co., Ltd.		177		0.03	%			5		5		5
Yeong-gwang Remicon Co., Ltd.		15		0.12	%			2		2		2
NTS Co., Ltd.		143		0.22	%			36		36		36
AID CO.,LTD.		1,212		0.57	%			36		36		36
Changwon Eco-friendly farming Corp.		3		0.01	%			—		—		—
Kumo Hitech Co., Ltd.		6,697		0.53	%			100		100		100
Kyung Pyo Industry Co., Ltd.		186		0.76	%			19		19		19
Daedong Industry Co., Ltd.		617		0.55	%			46		46		46
Doosung Heavy Industries Co., Ltd.		53		0.06	%			5		5		5
Jangback Testiles Co., Ltd.		494		5.05	%			49		49		49
Samjoo Hightech Co., Ltd.		522		0.08	%			3		3		3
Samkwang Chemical Co., Ltd.		204		1.27	%			51		51		51
Taekwang Industry Co., Ltd.		1,327		0.48	%			93		93		93
Taekwang Precision Co., Ltd.		54		0.47	%			54		54		54
SG Corp.		213		0.54	%			21		21		21
Shinseung Chemical Industy Co., Ltd.		5		0.01	%			60		60		60
KJ Alloy Co., Ltd.		368		0.20	%			7		7		7
SM Hi-tech Co., Ltd.		22		0.39	%			22		22		22
Keum Mun Industry Co., Ltd.		1,320		0.97	%			330		330		330
Puruen Environment Co., Ltd.		967		1.34	%			19		19		19
Miretech Co., Ltd.		9,111		0.27	%			18		18		18
SIE Co., Ltd.		12		0.02	%			1		1		1
Soongwon Ind. Co., Ltd.		150		0.40	%			53		53		53
Sejin Hightech Co., Ltd.		17,980		0.16	%			18		18		18
Namcheong Corp.		7,096		0.28	%			284		284		284
Eun Sung Enterprise Co.		1,131		0.72	%			17		17		17
Dongdo Basalt Industry Co., Ltd.		182		1.50	%			73		73		73
Shinyoung Textiles Co., Ltd.		523		1.01	%			52		52		52
Bugook Cast Iron Co.		135		0.71	%			14		14		14
Ilwoo Steel Co., Ltd.		41		0.28	%			17		17		17
Dong-un Tech Co., Ltd.		1,159		6.28	%			81		81		81
Wongwang Door Corp.		575		1.00	%			29		29		29

								284,670		189,439		189,439

		—				￦		650,513		399,495		399,495

(*1)

The Company used initial cost as their fair value because there was not enough information to determine fair value, and the range of the estimated fair value is wide.

F-64

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

10.

Financial Assets at Fair Value through Other Comprehensive Income, Continued

(2)

Financial assets at fair value through other comprehensive income as of December 31, 2018 and 2019 are as follows, continued:

(*2)

Although the Company holds more than 20% of the equity shares of these investments, the Company is unable to exercise significant influence.

(*3)

The Company has estimated the fair value of Set Holding by using the discounted cash flow method and has recognized the difference between its fair value and book value as gain or loss on valuation of available-for-sale financial assets in other comprehensive income or loss during the year ended December 31, 2018.

(*4)

The number of shares owned has changed due to capital reduction without refund (3:1), consolidation of stocks (10,000:1), and split of stock (1:2,000) during the year ended December 31, 2018.

(*5)

As described in note 20, this is reclassified to financial assets at fair value through other comprehensive income due to loss of significant influence of the Company.

(*6)

The number of shares owned has changed due to the stock merge (4:1) during the year ended December 31, 2018.

(*7)

The number of shares owned has changed due to the stock merge (5:1) during the year ended December 31, 2018.

(*8)

The number of shares owned has changed due to the stock merge (10:1) during the year ended December 31, 2018.


	2019
	Shares		Ownership				Acquisition cost		Book value		Fair value
							In millions of won
Listed
Korea District Heating Corp.		2,264,068		19.55	%	￦		173,201		107,090		107,090
Ssangyong Motor Co., Ltd.		38,568		0.03	%			428		80		80
SM Korea Line Corp.		18		0.00	%			1		—		—
Namkwang Engineering & Construction Co., Ltd.		121		0.00	%			15		1		1
Bumyang Construction Co., Ltd.		35		0.00	%			2		—		—
ELCOMTEC Co., Ltd.		32,875		0.04	%			217		52		52
PAN Ocean Co., Ltd.		1,492		0.00	%			14		7		7
Dongbu Corp.		955		0.00	%			12		8		8
KSP Co., Ltd.		22,539		0.06	%			24		40		40
STX Heavy Industries Co., Ltd.		8,639		0.03	%			213		26		26
Codes Combine Co., Ltd.		291		0.00	%			1		1		1
PT Adaro Energy Tbk		480,000,000		1.50	%			65,028		62,026		62,026
Energy Fuels Inc.		1,711,814		1.91	%			16,819		3,764		3,764
Bunji Corporation Limited (formerly, Baralaba Coal Company Limited)		99,763		0.07	%			18,445		—		—
Denison Mines Corp.		58,284,000		10.42	%			84,134		27,903		27,903
Fission 3.0		75,000		0.14	%			—		5		5
Fission Uranium Corp.		800,000		0.16	%			785		199		199

								359,339		201,202		201,202

F-65

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

10.

Financial Assets at Fair Value through Other Comprehensive Income, Continued

(2)

Financial assets at fair value through other comprehensive income as of December 31, 2018 and 2019 are as follows, continued:


	2019
	Shares		Ownership				Acquisition cost		Book value		Fair value
							In millions of won
Unlisted(*1)
Intellectual Discovery Co., Ltd.		1,000,000		6.00	%	￦		5,000		954		954
Hwan Young Steel Co., Ltd.		10,916		0.14	%			1,092		97		97
SAMBO AUTO. Co., Ltd.		15,066		0.02	%			38		38		38
Mobo Co., Ltd.		504		0.00	%			14		14		14
Dae Kwang Semiconductor Co., Ltd.		589		0.07	%			6		6		6
Sanbon Department Store		828		0.01	%			124		3		3
Miju Steel Mfg. Co., Ltd.		1,097		0.23	%			50		50		50
Sungwon Co., Ltd.		117		0.07	%			15		15		15
Hana Civil Engineering Co., Ltd.		23		0.00	%			1		1		1
KC Development Co., Ltd.		839		0.02	%			6		6		6
IMHWA Corp.		329		0.11	%			5		5		5
DALIM Special Vehicle Co., Ltd.		58		0.08	%			10		10		10
ASA JEONJU Co., Ltd.		34,846		1.34	%			697		69		69
Moonkyung Silica Co., Ltd.		42		0.56	%			—		—		—
Sungkwang Timber Co., Ltd.		3		0.08	%			5		5		5
Yongbo Co., Ltd.		61		0.20	%			3		3		3
HJ Steel Co., Ltd.		218		0.07	%			2		2		2
KS Remicon Co., Ltd.		12		0.04	%			3		3		3
Joongang Platec Co., Ltd.		3,591		0.75	%			72		35		35
Pyungsan SI Co., Ltd.		434		0.01	%			9		9		9
Samgong Development Co., Ltd.		12		0.01	%			7		7		7
Joongang Development Co., Ltd.		540		0.12	%			8		8		8
AJS Co., Ltd.		12,906		0.23	%			32		32		32
MSE Co., Ltd.		429		0.13	%			9		9		9
Ilrim Nano Tec Co., Ltd.		1,520		0.07	%			15		15		15
Youngjin Hi-Tech Co., Ltd.		2,512		0.25	%			126		21		21
Buyoung Co., Ltd.		270		0.00	%			3		3		3
Ilsuk Co., Ltd.		152		0.17	%			10		10		10
Dongyang Telecom Co., Ltd.		1,760		0.01	%			11		11		11
Jongwon Remicon Co., Ltd.		31		0.18	%			13		13		13
Zyle Daewoo Motor Sales Co., Ltd.		22		0.00	%			—		—		—
Daewoo Development Co., Ltd.		8		0.00	%			—		—		—
Seyang Inc.		537		0.05	%			27		27		27
Seungri Enterprise Co., Ltd.		93		0.05	%			3		3		3
Onggane Food Co., Ltd		5		0.07	%			1		1		1
Shin-E P&C Co., Ltd.		1,569		0.64	%			111		3		3
Ejung Ad Co., Ltd.		132		0.09	%			3		3		3
Solvus Co., Ltd.		1,056		0.04	%			3		3		3
Myung Co., Ltd.		89		0.05	%			2		2		2
Shinil Engineering Co., Ltd.		887		0.06	%			3		3		3
Biwang Industry Co., Ltd		406		0.04	%			2		2		2
Young Sung Co., Ltd.		89		0.40	%			27		27		27

F-66

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

10.

Financial Assets at Fair Value through Other Comprehensive Income, Continued

(2)

Financial assets at fair value through other comprehensive income as of December 31, 2018 and 2019 are as follows, continued:


	2019
	Shares		Ownership				Acquisition cost		Book value		Fair value
							In millions of won
Yuil Industrial Electronics Co., Ltd.		804		0.32	%	￦		16		16		16
DN TEK Inc.		12,401		0.29	%			62		6		6
Woojin Industry Corporation		3		0.00	%			16		16		16
Kwang Sung Industry Co., Ltd.		325		0.35	%			7		7		7
Futech Mold Co., Ltd.		274		0.27	%			14		14		14
Woojoo Environment Ind. Co., Ltd.		101		0.11	%			13		13		13
Hyungji Esquire Co., Ltd.		61		0.02	%			22		22		22
Kolmar Pharma Co., Ltd.		1,426		0.01	%			52		3		3
Morado Co., Ltd.		209		0.04	%			2		2		2
Myung Sung Tex Co., Ltd.		20		0.00	%			2		2		2
Kwang Sung Co., Ltd.		610		0.53	%			31		31		31
Seen Business and Technology co., Ltd.		29,424		0.73	%			147		7		7
Woobang Construction Co., Ltd.		8		0.00	%			8		8		8
Shin Pyung Co., Ltd.		6		0.03	%			3		3		3
JMC Heavy Industries Co., Ltd.		2,724		0.10	%			27		2		2
Najin Steel Co., Ltd.		37		0.06	%			5		5		5
Sinkwang Industry Co., Ltd.		1,091		1.68	%			5		5		5
Elephant & Friends Co., Ltd.		563		0.61	%			3		3		3
Mireco Co., Ltd.		109		0.25	%			11		11		11
L&K Industry Co., Ltd.		1,615		0.60	%			24		24		24
JO Tech Co., Ltd.		1,263		0.62	%			25		25		25
Kendae Printing Co., Ltd.		422		0.60	%			21		21		21
Dauning Co., Ltd.		231		0.41	%			6		6		6
Korea Trecision Co., Ltd.		22		0.45	%			5		5		5
Ace Track Co., Ltd.		3,130		1.08	%			219		59		59
Yoo-A Construction Co., Ltd.		105		0.20	%			11		11		11
Dung Hwan Co., Ltd.		531		0.02	%			5		5		5
Hurim Biocell Co., Ltd.		1,021		0.00	%			5		5		5
Smart Power Co.,Ltd.		133,333		4.14	%			200		200		200
Sunjin Power Tech Co., Ltd.		4,941		0.92	%			247		32		32
Haseung Industries Co.,Ltd.		55		0.62	%			28		28		28
Beer Yeast Korea Inc.		1,388		0.43	%			7		7		7
B CON Co.,Ltd.		96		1.16	%			6		6		6
Ace Integration Co., Ltd		105		0.09	%			23		23		23
AceInti Agricultural Co., Ltd.		16		0.02	%			5		5		5
KyungDong Co., Ltd.		130		0.01	%			1		1		1
ChunWon Development Co., Ltd.		193		0.19	%			39		39		39
SungLim Industrial Co., Ltd.		29		0.03	%			1		1		1
Korea Minerals Co., Ltd.		191		0.05	%			135		1		1
HyoDong Development Co., Ltd.		128		0.15	%			25		25		25
Haspe Tech Co., Ltd.		652		0.55	%			20		20		20
JoHyun Co., Ltd.		350		1.56	%			18		18		18
KC Co., Ltd.		5,107		0.17	%			26		26		26

F-67

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

10.

Financial Assets at Fair Value through Other Comprehensive Income, Continued

(2)

Financial assets at fair value through other comprehensive income as of December 31, 2018 and 2019 are as follows, continued:


	2019
	Shares		Ownership				Acquisition cost		Book value		Fair value
							In millions of won
SeongJi Industrial Co.,Ltd.		41		0.05	%	￦		1		1		1
Dong Yang Metal Co., Ltd.		2,951		1.97	%			161		148		148
Seyang Precision Ind.Co., Ltd.		829		0.23	%			41		41		41
Dooriwon Food System Co., Ltd.		13		0.27	%			1		1		1
ShinShin Co., Ltd		339		1.12	%			17		17		17
Sung Kwang Co., Ltd.		23		0.37	%			6		6		6
Shinheung petrol. Co., Ltd.		699		0.14	%			35		35		35
Force TEC Co., Ltd.		3,501		0.02	%			18		18		18
Samsung Tech Co., Ltd.		486		1.28	%			97		36		36
Tae Hyung Co., Ltd.		28		0.43	%			20		20		20
Younil Metal Co., Ltd.		41		0.21	%			21		21		21
Hankook Precision Ind Co., Ltd.		110		0.06	%			11		3		3
Borneo International Furniture Co., Ltd.		4,000		0.16	%			97		13		13
CJ Paradise Co.,Ltd		24		0.02	%			12		12		12
Han Young Technology Company Co.,Ltd.		35		0.00	%			—		—		—
STX Offshore & Shipbuilding Co., Ltd		8,622		0.25	%			1,078		1,078		1,078
Ptotronics Co., Ltd.		843		0.42	%			84		6		6
NFT Co., Ltd.		136		0.40	%			8		8		8
Echoroba Co.,Ltd.		157		0.02	%			3		3		3
Hyundaitech Co.,Ltd.		1,363		0.87	%			27		27		27
Dasan Material Co., Ltd.		29		0.04	%			22		22		22
Fish World Co.,Ltd.		47		0.21	%			2		2		2
SG Shinsung Engineering and Construction Co., Ltd.		10		0.00	%			6		6		6
Samdo Industry Electric Co.,Ltd.		48		0.02	%			1		1		1
Taejung Industries Co.,Ltd.		9,268		0.30	%			5		5		5
Shinsei Trading Co., Ltd.		64		0.72	%			6		6		6
Dynamic Co., Ltd.		111		0.19	%			3		3		3
Green Alchemy Co.,Ltd.		38,202		1.48	%			191		17		17
Youone TBM Engineering & Construction Co., Ltd.		615		0.27	%			31		31		31
KM Leatech Co., Ltd.		1,648		0.98	%			8		8		8
Semist Co.,Ltd.		555		0.80	%			3		3		3
Sewon Bus Co.,Ltd		12		0.00	%			—		—		—
Enertec Co., Ltd.		7,937		0.19	%			44		44		44
Sangji Co., Ltd.		20		0.26	%			4		4		4
Bellie Doughnuts Co., Ltd.		64		0.07	%			4		4		4
Possbell Engineering Co., Ltd.		36		0.64	%			1		1		1
AIRTECH Information communication Co., Ltd		2,379		0.60	%			12		12		12
Shin kwang Industrial Co., Ltd.		884		0.35	%			55		55		55
Kiscom Co., Ltd.		1,493		0.04	%			1		1		1
Wonil laser Co., Ltd		157		0.37	%			16		16		16

F-68

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

10.

Financial Assets at Fair Value through Other Comprehensive Income, Continued

(2)

Financial assets at fair value through other comprehensive income as of December 31, 2018 and 2019 are as follows, continued:


	2019
	Shares		Ownership				Acquisition cost		Book value		Fair value
							In millions of won
Pyung Hwa Industrial Co.,Ltd.		3,388		3.00	%	￦		85		85		85
PT. Kedap Saayq		671		10.00	%			18,540		—		—
Set Holding(*2)		1,100,220		2.50	%			229,255		166,863		166,863
PT. Cirebon Energi Prasarana		22,420		10.00	%			2,612		2,596		2,596
Choheung Packing Co., Ltd.		61		0.13	%			12		12		12
Jaewoo Co., Ltd.		359		0.24	%			11		11		11
Wooyang HC Co., Ltd		1,375		0.01	%			159		159		159
Sungsan Parts Co., Ltd.		629		0.80	%			63		63		63
KMT Co., Ltd.		1,411		0.93	%			21		21		21
TheYeonriji Co., Ltd.		116		0.10	%			6		6		6
Flusys Co., Ltd.		9		0.08	%			2		2		2
DongSeo Electronics Co., Ltd.		323		0.07	%			16		16		16
Daewoo Display Co., Ltd.		177		0.03	%			5		5		5
Yeong-gwang Remicon Co., Ltd.		15		0.12	%			2		2		2
NTS Co., Ltd.		143		0.22	%			36		36		36
AID Co., Ltd.		1,212		0.57	%			36		36		36
Changwon Eco-friendly farming Corp.		3		0.01	%			—		—		—
Kumo Hitech Co., Ltd.		6,697		0.53	%			100		100		100
Kyung Pyo Industry Co., Ltd.		186		0.76	%			19		19		19
Daedong Industry Co., Ltd.		617		0.55	%			46		46		46
Doosung Heavy Industries Co., Ltd.		53		0.06	%			5		5		5
Samjoo Hightech Co., Ltd.		522		0.08	%			3		3		3
Samkwang Chemical Co., Ltd.		204		1.27	%			51		51		51
SG Corp.		213		0.54	%			21		21		21
Shinseung Chemical Industy Co., Ltd.		5		0.01	%			60		60		60
KJ Alloy Co., Ltd.		368		0.20	%			7		7		7
SM Hi-tech Co., Ltd.		22		0.39	%			22		22		22
Keum Mun Industry Co., Ltd.		1,320		0.97	%			330		56		56
Puruen Environment Co., Ltd.		967		1.34	%			19		19		19
Miretech Co., Ltd.		9,111		0.27	%			18		18		18
SIE Co., Ltd.		12		0.02	%			1		1		1
Sejin Hightech Co., Ltd.		17,980		0.16	%			18		18		18
Namcheong Corp.		7,096		0.28	%			284		11		11
Eun Sung Enterprise Co.		1,131		0.72	%			17		17		17
Dongdo Basalt Industry Co., Ltd.		182		1.50	%			73		73		73
Shinyoung Textiles Co., Ltd.		523		1.01	%			52		23		23
Bugook Cast Iron Co.		135		0.71	%			14		14		14
Ilwoo Steel Co., Ltd.		41		0.28	%			17		17		17
Dong-un Tech Co., Ltd.		1,159		6.28	%			81		81		81
Wongwang Door Corp.		575		1.00	%			29		29		29
Seobu Highway Solar Co., Ltd.		19,460		10.00	%			192		192		192
Dongbu Highway Solar Co., Ltd.		19,020		4.99	%			192		192		192
Muan sunshine solar power plant		298,300		19.00	%			1,492		1,492		1,492

F-69

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

10.

Financial Assets at Fair Value through Other Comprehensive Income, Continued

(2)

Financial assets at fair value through other comprehensive income as of December 31, 2018 and 2019 are as follows, continued:


	2019
	Shares		Ownership				Acquisition cost		Book value		Fair value
							In millions of won
Mansu Co.,Ltd.		344		0.25	%	￦		15		15		15
Eanskorea Co., Ltd.		39		0.05	%			2		2		2
Youngdongseafood Co., Ltd.		165		0.33	%			8		8		8
Hyunwoo Winstar Co., Ltd.		1		0.00	%			—		—		—
Sehwa Diecasting Co., Ltd.		299		1.66	%			44		44		44
Sungchang Tech Co., Ltd.		159		0.31	%			10		10		10
Yuchang Industry Co., Ltd.		90		0.11	%			5		5		5
Jeongpum Co., Ltd.		322		0.35	%			16		16		16
Korea Steel Power Co., Ltd.		2,761		1.88	%			55		55		55
DMC Co., Ltd.		5,831		0.02	%			38		38		38
Amanex Co., Ltd.		10		0.02	%			9		9		9
Dae-A Leisure Co., Ltd.		23		0.00	%			4		4		4
Caffe Bene Co.,Ltd.		1,908		0.03	%			2		2		2
Daechang HRSG Co.,Ltd.		618		0.12	%			62		62		62
Shinjin International Corp.		4		0.01	%			1		1		1
Daewoon Shell Tech Co., Ltd.		666		2.81	%			33		33		33
Jinhung Packaging Co.,Ltd		4,329		3.02	%			9		22		22
Donglim Eng Co., Ltd.		26		0.11	%			3		3		3
SIP Co., Ltd.		274		0.55	%			7		7		7
Clizen Co., Ltd.		615		0.34	%			31		31		31
DAEDONGMILLENNIUM Co., Ltd.		159		0.42	%			32		32		32
Daeji Product Co., Ltd.		15		0.05	%			1		—		—
Cheong Hae Myeong Ga Co.,Ltd		1,867		0.11	%			5		5		5
Shinhan Sangi Co., Ltd.		29		0.20	%			4		4		4
Jaein Circuit Co., Ltd.		498		1.12	%			65		65		65
SSET Co., Ltd.		181		0.30	%			18		18		18
Sewon PM Tech Co., Ltd.		963		1.11	%			48		48		48
Dawon Yuhwa Co., Ltd.		506		1.94	%			25		25		25
Ogokbaekkwa Co., Ltd.		101		0.12	%			1		1		1
Shinwonn Toptech Co., Ltd.		834		0.51	%			83		83		83
KMLC Co., Ltd.		281		0.14	%			22		22		22
Seinfood Co., Ltd.		13		0.17	%			7		7		7
TaeSung Eco-Tech. Co., Ltd.		1,368		4.55	%			34		34		34
Kukex Inc.		639		0.05	%			3		3		3
Youngshin Plu Co., Ltd.		104		0.12	%			5		5		5
Chang won Engineering Co., Ltd.		22		0.00	%			4		4		4
Samsung Silup Co., Ltd.		47		0.19	%			5		5		5
Samwon Bio Tech Co., Ltd.		390		0.25	%			6		6		6
IZU KOREA Co. Ltd.		48		0.00	%			2		2		2
Dongdo CNP Co., Ltd.		234		0.36	%			6		6		6
Hando Precision Co.,Ltd		38		0.26	%			4		4		4
Dae Bang Industry Co.,Ltd.		115		0.13	%			6		6		6
S.I.T. Co.,Ltd		2,213		0.44	%			22		22		22

F-70

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

10.

Financial Assets at Fair Value through Other Comprehensive Income, Continued

(2)

Financial assets at fair value through other comprehensive income as of December 31, 2018 and 2019 are as follows, continued:


	2019
	Shares		Ownership				Acquisition cost		Book value		Fair value
							In millions of won
Taejin Hiech Co., Ltd.		78		0.26	%	￦		3		3		3
Headone Co.,Ltd.		69		0.12	%			7		7		7
Enaindustry Co., Ltd.		201		0.09	%			141		141		141
TCT Co., Ltd.		3,277		0.55	%			82		82		82
E-Won Solutech Co., Ltd.		158		0.16	%			40		40		40
MJT Co., Ltd.		1,013		0.20	%			51		51		51
KPL Circuit Co., Ltd.		283		0.08	%			14		14		14
Road Solar Co., Ltd.		12		0.00	%			—		—		—
Sung Ae Co., Ltd.		190		0.80	%			10		10		10
Han Mi Flexible Co.,Ltd.		143		0.20	%			43		43		43
Samhwa Casting Co. Ltd.		200		0.00	%			100		100		100
Millennium PNT Co., Ltd.		227		0.37	%			6		6		6
GN Chem Co., Ltd.		40		0.07	%			1		1		1
GW Industry Co., Ltd.		505		0.07	%			51		51		51
TM Construction co. Ltd		4		0.00	%			—		—		—
Dae Myung Co., Ltd		114		0.08	%			3		3		3
Nanomicart Co., Ltd.		176		1.06	%			35		35		35
Young San Heavy Industries Co., Ltd.		74		0.11	%			7		7		7
Samchungwon Co., Ltd.		15		0.24	%			2		2		2
Wooyang Frozen Foods Co., Ltd.		66		0.82	%			27		27		27
Nanomic Co., Ltd.		94		0.63	%			38		38		38
Dong Hwan Co., Ltd.		25		0.02	%			1		1		1

								266,717		177,968		177,968

						￦		626,056		379,170		379,170

(*1)

The Company used initial cost as their fair value because there was not enough information to determine fair value, and the range of the estimated fair value is wide.

(*2)

The Company has estimated the fair value of Set Holding by using the discounted cash flow method and has recognized the difference between its fair value and book value as gain or loss on valuation of financial assets at FVOCI in other comprehensive income or loss for the year ended December 31, 2019.

F-71

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

11.

Financial Assets at Amortized Cost

Financial assets at amortized cost as of December 31, 2018 and 2019 are as follows:


		2018
		Financial assets at amortized cost		Government grants		Allowance for doubtful accounts		Others		Book value
		In millions of won
Government bonds	￦		3,042		—		—		—		3,042
Others			11,000		—		—		—		11,000

	￦		14,042		—		—		—		14,042

Current	￦		11,956		—		—		—		11,956
Non-current			2,086		—		—		—		2,086


		2019
		Financial assets at amortized cost		Government grants		Allowance for doubtful accounts		Others		Book value
		In millions of won
Government bonds	￦		1,609		—		—		—		1,609
Others			12,000		—		—		—		12,000

	￦		13,609		—		—		—		13,609

Current	￦		12,302		—		—		—		12,302
Non-current			1,307		—		—		—		1,307

12.

Derivatives

(1)

Derivatives as of December 31, 2018 and 2019 are as follows:


		2018				2019
		Current		Non-current		Current		Non-current
		In millions of won
Derivative assets
Currency forward	￦		2,128		12,606		21		43,931
Currency swap			39,979		43,436		27,597		229,258
Interest rate swap			—		2,342		—		7,592
Others(*1)			—		1,844		—		2,634

	￦		42,107		60,228		27,618		283,415

Derivative liabilities
Currency forward	￦		1,956		—		7,081		—
Currency swap			14,881		233,690		59,327		45,184
Interest rate swap			1,439		58,042		451		50,756
Others(*2,3)			2,155		—		6,205		956

	￦		20,431		291,732		73,064		96,896

(*1)

The Company had a put option to sell shares of DS POWER Co., Ltd. and the fair value of the option is recorded in ‘Others’ in the prior year. The Company sold their shares during the year ended December 31, 2019. As described in Note 16, the Company has a right to purchase the shares of

F-72

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

12.

Derivatives, Continued

(1)

Derivatives as of December 31, 2018 and 2019 are as follows, continued:

KOSPO Youngnam Power Co., Ltd., a subsidiary of the Company, and the amount is the fair value of the stock option.

(*2)

The Company has an obligation to settle the convertible preferred stock to financial investors pursuant to the settlement contract with Samcheok Eco Materials Co., Ltd., and the fair value of the obligation is recorded in ‘Others’.

(*3)

The Company has granted stock option to Chester Solar IV SpA, a joint venture of the Company, and 4 other third party investors and recognized its fair value as other derivative liabilities.

(2)

Currency forward contracts which are not designated as hedging instruments as of December 31, 2019 are as follows:


	Contract date		Maturity date		Contract amounts						Contract exchange rate (in won)
Counterparty	Contract date		Maturity date			Pay		Receive			Contract exchange rate (in won)
	In millions of won and thousands of foreign currencies except contract exchange rate information
Hana Bank		2014.04.10		2021.07.12	￦		55,120		USD 52,000	￦		1,060.00
Hana Bank		2014.04.28		2021.07.12			50,784		USD 48,000			1,058.00
Bank of America		2014.04.29		2021.07.12			105,400		USD 100,000			1,054.00
Hana Bank		2014.05.09		2021.07.12			104,600		USD 100,000			1,046.00
Hana Bank		2017.12.22		2021.07.12			105,079		USD 100,000			1,050.79
Korea Development Bank		2017.12.27		2021.07.12			104,849		USD 100,000			1,048.49
Citibank		2019.12.30		2020.01.23			12,943		USD 11,167			1,159.10
Standard Chartered		2019.12.17		2020.01.02			73,871		EUR 56,800			1,300.57
Nonghyup Bank		2019.12.02		2020.01.03			9,436		USD 8,000			1,179.55
Mizuho Bank		2019.12.03		2020.01.06			9,482		USD 8,000			1,185.25
Hana Bank		2019.12.04		2020.01.07			8,350		USD 7,000			1,192.82
Kookmin Bank		2019.12.05		2020.01.09			11,895		USD 10,000			1,189.45
CCB		2019.12.05		2020.01.09			11,895		USD 10,000			1,189.50
Standard Chartered		2019.12.06		2020.01.10			11,891		USD 10,000			1,189.05
Credit Agricole		2019.12.09		2020.01.13			11,885		USD 10,000			1,188.47
Hana Bank		2019.12.10		2020.01.14			11,912		USD 10,000			1,191.23
Korea Development Bank		2019.12.11		2020.01.15			11,925		USD 10,000			1,192.50
Nonghyup Bank		2019.12.11		2020.01.15			5,962		USD 5,000			1,192.45
Mizuho Bank		2019.12.11		2020.01.15			5,963		USD 5,000			1,192.50
CCB		2019.12.12		2020.01.16			7,118		USD 6,000			1,186.35
Morgan Stanley		2019.12.16		2020.01.17			5,854		USD 5,000			1,170.85
Woori Bank		2019.12.19		2020.01.22			11,636		USD 10,000			1,163.55
Shinhan Bank		2019.12.19		2020.01.22			11,635		USD 10,000			1,163.45
CCB		2019.12.27		2020.01.31			11,597		USD 10,000			1,159.65
Kookmin Bank		2019.12.30		2020.02.03			5,786		USD 5,000			1,157.20
Shinhan Bank		2019.12.18		2020.01.07			9,901		USD 8,500			1,164.86
Hana Bank		2019.12.13		2020.01.07			4,678		USD 4,000			1,169.45
Hana Bank		2019.12.20		2020.01.07			8,136		USD 7,000			1,162.23
BNP Paribas		2019.12.27		2020.01.13			3,480		USD 3,000			1,160.10
Societe Generale		2019.12.27		2020.01.13			8,701		USD 7,500			1,160.10
Korea Development Bank		2019.12.30		2020.01.23			4,630		USD 4,000			1,157.40

F-73

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

12.

Derivatives, Continued

(2)

Currency forward contracts which are not designated as hedging instruments as of December 31, 2019 are as follows, continued:


	Contract date		Maturity date		Contract amounts						Contract exchange rate (in won)
Counterparty	Contract date		Maturity date			Pay		Receive			Contract exchange rate (in won)
	In millions of won and thousands of foreign currencies except contract exchange rate information
BNP Paribas		2019.12.12		2020.01.16	￦		4,739		USD 4,000	￦		1,184.85
Mizuho Bank		2019.12.12		2020.01.16			3,558		USD 3,000			1,186.00
MUFG		2019.12.17		2020.01.21			5,823		USD 5,000			1,164.60
Nova Scotia		2019.12.17		2020.01.21			5,824		USD 5,000			1,164.70
BNP Paribas		2019.12.20		2020.01.22			2,290		USD 1,975			1,159.48
Nonghyup Bank		2019.12.20		2020.01.22			11,605		USD 10,000			1,160.50
Nova Scotia		2019.12.30		2020.02.03			5,778		USD 5,000			1,155.65
Mizuho Bank		2019.12.30		2020.02.03			5,777		USD 5,000			1,155.30
HSBC		2019.12.13		2020.09.10			46,580		USD 40,000			1,164.50
Nova Scotia		2019.12.13		2020.09.10			34,959		USD 30,000			1,165.30
Nova Scotia		2019.12.16		2020.12.03			11,657		USD 10,000			1,165.70
Nonghyup Bank		2019.12.16		2020.12.03			23,324		USD 20,000			1,166.20
Mizuho Bank		2019.12.17		2020.01.10			10,537		USD 9,000			1,170.80
Mizuho Bank		2019.12.19		2020.01.13			9,314		USD 8,000			1,164.30
Mizuho Bank		2019.12.24		2020.01.04			5,228		USD 4,500			1,161.85
HSBC		2019.12.26		2020.01.23			10,443		USD 9,000			1,160.30
Mizuho Bank		2019.12.30		2020.01.23			4,624		USD 4,000			1,155.90
Standard Chartered		2019.12.03		2020.01.06			315		USD 266			1,186.05
Nova Scotia		2019.12.06		2020.01.10			4,393		USD 3,700			1,187.35
Credit Agricole		2019.12.06		2020.01.10			4,761		USD 4,000			1,190.35
Nova Scotia		2019.12.10		2020.01.13			1,491		USD 1,250			1,192.70
Standard Chartered		2019.12.12		2020.01.16			8,303		USD 7,000			1,186.10
Credit Agricole		2019.12.12		2020.01.16			5,930		USD 5,000			1,185.95
Societe Generale		2019.12.12		2020.01.16			5,931		USD 5,000			1,186.20
Nova Scotia		2019.12.12		2020.01.16			6,525		USD 5,500			1,186.30
Standard Chartered		2019.12.16		2020.01.21			9,367		USD 8,000			1,170.90
Nova Scotia		2019.12.17		2020.01.21			4,648		USD 4,000			1,162.00
Hana Bank		2019.12.19		2020.01.23			6,055		USD 5,200			1,164.40
Woori Bank		2019.12.20		2020.01.28			9,414		USD 8,100			1,162.20
Shinhan Bank		2019.12.20		2020.01.28			4,939		USD 4,250			1,162.15
Shinhan Bank		2019.12.20		2020.01.28			5,806		USD 5,000			1,161.25
Shinhan Bank		2019.12.26		2020.01.30			7,539		USD 6,500			1,159.85
Woori Bank		2019.12.26		2020.01.30			4,060		USD 3,500			1,159.90
Shinhan Bank		2019.12.30		2020.02.03			4,049		USD 3,500			1,156.80
Hana Bank		2019.07.31		2020.07.14			4,993		USD 4,257			1,173.00

F-74

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

12.

Derivatives, Continued

(3)

Currency swap contracts which are not designated as hedging instruments as of December 31, 2019 are as follows:


Counterparty	Contract year			Contract amount				Contract interest rate			Contract exchange rate (in won, USD)
Counterparty	Contract year			Pay		Receive		Pay	Receive		Contract exchange rate (in won, USD)
	In millions of won and thousands of foreign currencies except contract exchange rate information
Standard Chartered		2014~2029	￦		102,470		USD 100,000	3.14%	3.57%	￦		1,024.70
Societe Generale		2014~2024			105,017		USD 100,000	4.92%	5.13%			1,050.17
Hana Bank		2015~2024			107,970		USD 100,000	4.75%	5.13%			1,079.70
Credit Agricole		2015~2024			94,219		USD 86,920	4.85%	5.13%			1,083.97
Woori Bank		2019~2027			21,708		USD 19,417	5.04%	6.75%			1,118.00
Woori Bank		2019~2024			296,000		USD 250,000	1.21%	2.50%			1,184.00
Korea Development Bank		2019~2024			177,600		USD 150,000	1.24%	2.50%			1,184.00
Hana Bank		2019~2024			118,400		USD 100,000	1.24%	2.50%			1,184.00
Citibank		2012~2022			112,930		USD 100,000	2.79%	3.00%			1,129.30
JP Morgan		2012~2022			112,930		USD 100,000	2.79%	3.00%			1,129.30
Bank of America		2012~2022			112,930		USD 100,000	2.79%	3.00%			1,129.30
Shinhan Bank		2016~2022			112,930		USD 100,000	2.79%	3.00%			1,129.30
HSBC		2012~2022			111,770		USD 100,000	2.89%	3.00%			1,117.70
Hana Bank		2012~2022			111,770		USD 100,000	2.87%	3.00%			1,117.70
Standard Chartered		2012~2022			111,770		USD 100,000	2.89%	3.00%			1,117.70
Deutsche Bank		2012~2022			55,885		USD 50,000	2.79%	3.00%			1,117.70
Nomura		2015~2025			111,190		USD 100,000	2.60%	3.25%			1,111.90
Korea Development Bank		2015~2025			111,190		USD 100,000	2.62%	3.25%			1,111.90
Woori Bank		2015~2025			55,595		USD 50,000	2.62%	3.25%			1,111.90
Hana Bank		2015~2025			55,595		USD 50,000	2.62%	3.25%			1,111.90
Woori Bank		2017~2027			111,610		USD 100,000	2.25%	3.13%			1,116.10
Korea Development Bank		2017~2027			111,610		USD 100,000	2.31%	3.13%			1,116.10
Hana Bank		2017~2027			111,610		USD 100,000	2.31%	3.13%			1,116.10
Korea Development Bank		2018~2028			108,600		HKD 800,000	2.69%	3.35%			135.75
Shinhan Bank		2018~2028			115,388		HKD 850,000	2.66%	3.35%			135.75
Korea Development Bank		2018~2023			170,280		USD 150,000	2.15%	3.75%			1,135.20
Woori Bank		2018~2023			170,280		USD 150,000	2.18%	3.75%			1,135.20
Hana Bank		2018~2023			113,520		USD 100,000	2.17%	3.75%			1,135.20
Shinhan Bank		2018~2023			227,040		USD 200,000	2.17%	3.75%			1,135.20
Citibank		2019~2024			239,956		CHF 200,000	1.44%	0.00%			1,199.78
Korea Development Bank		2019~2027			119,978		CHF 100,000	1.43%	0.05%			1,199.78
HSBC		2019~2024			USD 205,500		AUD 300,000	3M Libor+0.78%	3M BBSW+0.97%			0.69

F-75

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

12.

Derivatives, Continued

(4)

Currency swap contracts which are designated as hedging instruments as of December 31, 2019 are as follows:


Counterparty	Contract year			Contract amount				Contract interest rate			Contract exchange rate (in won, USD)
Counterparty	Contract year			Pay		Receive		Pay	Receive		Contract exchange rate (in won, USD)
	In millions of won and thousands of foreign currencies except contract exchange rate information
HSBC		2014~2020	￦		99,901		AUD 100,000	3.52%	5.75%	￦		999.01
HSBC		2014~2020			100,482		AUD 100,000	3.48%	5.75%			1,004.82
Standard Chartered		2013~2020			USD 117,250		AUD 125,000	3M Libor + 1.25%	5.75%			0.94
Standard Chartered		2014~2020			126,032		USD 117,250	3.55%	3M Libor + 1.25%			1,074.90
Korea Development Bank		2017~2020			114,580		USD 100,000	1.75%	2.38%			1,145.80
Hana Bank		2017~2020			114,580		USD 100,000	1.75%	2.38%			1,145.80
Export-import bank of Korea		2017~2020			114,580		USD 100,000	1.75%	2.38%			1,145.80
Korea Development Bank		2016~2021			121,000		USD 100,000	2.15%	2.50%			1,210.00
Morgan Stanley		2016~2021			121,000		USD 100,000	3M Libor + 2.10%	2.50%			1,210.00
BNP Paribas		2016~2021			121,000		USD 100,000	3M Libor + 2.10%	2.50%			1,210.00
Nomura		2017~2037			52,457		EUR 40,000	2.60%	1.70%			1,311.42
Nomura		2017~2037			59,423		SEK 450,000	2.62%	2.36%			132.05
Korea Development Bank		2019~2022			112,650		USD 100,000	1.80%	3.38%			1,126.50
Kookmin Bank		2019~2022			112,650		USD 100,000	1.80%	3.38%			1,126.50
Woori Bank		2019~2022			112,650		USD 100,000	1.80%	3.38%			1,126.50
Korea Development Bank		2018~2023			320,880		USD 300,000	2.03%	3.75%			1,069.60
BNP Paribas		2019~2024			111,841		CHF 100,000	1.78%	0.13%			1,118.41
Kookmin Bank		2019~2024			111,841		CHF 100,000	1.78%	0.13%			1,118.41
Korea Development Bank		2019~2022			117,340		USD 100,000	1.06%	2.38%			1,173.40
Hana Bank		2019~2022			117,340		USD 100,000	1.06%	2.38%			1,173.40
Kookmin Bank		2019~2022			117,340		USD 100,000	1.06%	2.38%			1,173.40
Hana Bank		2018~2021			212,960		USD 200,000	2.10%	3.00%			1,064.80
Korea Development Bank		2018~2021			212,960		USD 200,000	2.10%	3.00%			1,064.80
Credit Agricole		2014~2020			110,680		USD 100,000	2.29%	2.50%			1,106.80
Societe Generale		2014~2020			55,340		USD 50,000	2.16%	2.50%			1,106.80
Hana Bank		2014~2020			55,340		USD 50,000	2.16%	2.50%			1,106.80
Hana Bank		2014~2020			55,340		USD 50,000	2.21%	2.50%			1,106.80
Standard Chartered		2014~2020			55,340		USD 50,000	2.21%	2.50%			1,106.80
HSBC		2014~2020			55,340		USD 50,000	2.21%	2.50%			1,106.80
Nomura		2014~2020			55,340		USD 50,000	2.21%	2.50%			1,106.80
BNP Paribas		2014~2020			55,340		USD 50,000	2.21%	2.50%			1,106.80
HSBC		2014~2020			55,340		USD 50,000	2.21%	2.50%			1,106.80
Hana Bank		2017~2022			226,600		USD 200,000	1.94%	2.63%			1,133.00
Korea Development Bank		2017~2022			113,300		USD 100,000	1.94%	2.63%			1,133.00
Nomura		2017~2022			113,300		USD 100,000	1.95%	2.63%			1,133.00
Woori Bank		2017~2022			56,650		USD 50,000	1.95%	2.63%			1,133.00
Kookmin Bank		2017~2022			56,650		USD 50,000	1.95%	2.63%			1,133.00

F-76

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

12.

Derivatives, Continued

(4)

Currency swap contracts which are designated as hedging instruments as of December 31, 2019 are as follows, continued:


Counterparty	Contract year			Contract amount				Contract interest rate			Contract exchange rate (in won, USD)
Counterparty	Contract year			Pay		Receive		Pay	Receive		Contract exchange rate (in won, USD)
	In millions of won and thousands of foreign currencies except contract exchange rate information
Korea Development Bank		2018~2023	￦		169,335		USD 150,000	2.26%	3.88%	￦		1,128.90
Woori Bank		2018~2023			169,335		USD 150,000	2.26%	3.88%			1,128.90
Credit Agricole		2018~2023			112,890		USD 100,000	2.26%	3.88%			1,128.90
Hana Bank		2018~2023			56,445		USD 50,000	2.26%	3.88%			1,128.90
Kookmin Bank		2018~2023			56,445		USD 50,000	2.26%	3.88%			1,128.90

(5)

Interest rate swap contracts which are not designated as hedging instruments as of December 31, 2019 are as follows:

Counterparty

Contract
year

Contract
amount

Contract interest rate per annum

Pay

Receive

In millions of
won and
thousands of
USD

Hana Bank

2017~2022

￦

100,000

2.01%

3M CD + 0.24%

Hana Bank

2017~2022

100,000

2.06%

3M CD + 0.27%

Nomura(*1)

2017~2037

30,000

2.05%

3.08%

Hana Bank

2017~2021

200,000

2.45%

3M CD + 0.32%

Nomura(*2)

2018~2038

30,000

2.56%

3.75%

Hana Bank

2018~2023

200,000

2.15%

3M CD + 0.19%

Hana Bank

2018~2023

200,000

2.17%

3M CD + 0.19%

Hana Bank

2018~2023

150,000

2.03%

3M CD + 0.21%

Hana Bank

2019~2024

200,000

1.87%

3M CD + 0.13%

Societe Generale

2017~2022

200,000

3M Libor + 3.44%

3.77%

Nomura

2017~2027

52,457

3M Libor + 2.25%

2.60%

Nomura

2017~2027

59,423

3M Libor + 2.27%

2.62%

Export-Import Bank of Korea

2015~2031

USD 15,893

2.67%

6M USD Libor

ING Bank

2015~2031

USD 7,861

2.67%

6M USD Libor

BNP Paribas

2015~2031

USD 7,861

2.67%

6M USD Libor

(*1)

2.05% of the contract paying interest rate is applied for five years from the date of issuance, and 3M CD + 0.10% is applied thereafter. Depending on exercise of counterparty’s right, it can be reimbursed before the due on the same day of every year starting from September 18, 2022.

(*2)

2.56% of the contract paying interest rate is applied for five years from the date of issuance, and 3M CD + 0.10% is applied thereafter. Depending on exercise of counterparty’s right, it can be reimbursed before the due on the same day of every year starting from June 15, 2023.

F-77

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

12.

Derivatives, Continued

(6)

Interest rate swap contracts which are designated as hedging instruments as of December 31, 2019 are as follows:

Counterparty

Contract
year

Contract
amount

Contract interest rate per annum

Pay

Receive

In millions of
won and
thousands of
USD

BNP Paribas

2009~2027

USD 92,120

4.16%

6M USD Libor

KFW

2009~2027

USD 92,120

4.16%

6M USD Libor

Export-Import Bank of Korea

2016~2036

USD 80,514

3.00%

6M USD Libor

(7)

Gain and loss on valuation and transaction of derivatives for the years ended December 31, 2017, 2018 and 2019 are as follows and included in finance income and expenses in the consolidated statements of comprehensive income (loss):


		Net income effects of valuation gain (loss)									Net income effects of transaction gain (loss)									Other comprehensive income (loss)(*)
		2017			2018			2019			2017			2018			2019			2017		2018			2019
		In millions of won
Currency forward	￦		(41,889	)		12,632			24,265			(28,223	)		23,991			12,488			—		—			—
Currency swap			(843,747	)		145,088			310,732			(137,376	)		123,670			110,813			26,810		(12,516	)		38,802
Interest rate swap			6,909			(2,949	)		(16,231	)		(3,362	)		(364	)		(36,886	)		5,074		6,087			(3,075	)
Other derivatives			4,060			(1,568	)		(1,416	)		—			—			—			—		—			—

	￦		(874,667	)		153,203			317,350			(168,961	)		147,297			86,415			31,884		(6,429	)		35,727

(*)

For the year ended December 31, 2019, the net gain on valuation of derivatives designated as cash flow hedge of ￦19,242 million, net of tax, is included in other comprehensive income or loss.

13.

Other Financial Assets

(1)

Other financial assets as of December 31, 2018 and 2019 are as follows:


		2018						2019
		Current			Non-current			Current			Non-current
		In millions of won
Loans and receivables	￦		123,657			639,673			64,111			725,755
Less: Allowance for doubtful accounts			(12	)		(4,940	)		(31	)		(15,063	)
Less: Present value discount			(992	)		(38,712	)		(847	)		(35,218	)
Long-term / short-term financial instruments(*)			1,869,286			448,741			1,351,971			608,256

	￦		1,991,939			1,044,762			1,415,204			1,283,730

(*)

From prior year, certain financial assets at fair value previously recognized as other financial assets is reclassified to financial assets at fair value through profit or loss upon the adoption of IFRS 9 ‘Financial Instruments’.

F-78

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

13.

Other Financial Assets, Continued

(2)

Loans and receivables as of December 31, 2018 and 2019 are as follows:


		2018
		Face value		Allowance for doubtful accounts			Present value discount			Carrying value
		In millions of won
Short-term loans and receivables
Loans for tuition	￦		33,333		—			(992	)		32,341
Loans for housing			15,572		—			—			15,572
Fisheries loan			320		—			—			320
Other loans			74,432		(12	)		—			74,420

			123,657		(12	)		(992	)		122,653

Long-term loans and receivables
Loans for tuition			414,893		—			(38,659	)		376,234
Loans for housing			167,723		—			—			167,723
Loans for related parties			46,798		(4,930	)		—			41,868
Fisheries loan			640		—			(53	)		587
Other loans			9,619		(10	)		—			9,609

			639,673		(4,940	)		(38,712	)		596,021

	￦		763,330		(4,952	)		(39,704	)		718,674


		2019
		Face value		Allowance for doubtful accounts			Present value discount			Carrying value
		In millions of won
Short-term loans and receivables
Loans for tuition	￦		33,636		—			(847	)		32,789
Loans for housing			17,113		—			—			17,113
Other loans			13,362		(31	)		—			13,331

			64,111		(31	)		(847	)		63,233

Long-term loans and receivables
Loans for tuition			419,905		—			(35,197	)		384,708
Loans for housing			199,454		—			—			199,454
Loans for related parties			89,132		(4,930	)		—			84,202
Other loans			17,264		(10,133	)		(21	)		7,110

			725,755		(15,063	)		(35,218	)		675,474

	￦		789,866		(15,094	)		(36,065	)		738,707

F-79

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

13.

Other Financial Assets, Continued

(3)

Changes in the allowance for doubtful accounts of loans for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017		2018			2019
		In millions of won
Beginning balance	￦		4,532		8,948			4,952
Bad debt expense			2,465		22			10,142
Other			1,951		(4,018	)		—

Ending balance	￦		8,948		4,952			15,094

(4)

Long-term and short-term financial instruments as of December 31, 2018 and 2019 are as follows:


		2018				2019
		Current		Non-current		Current		Non-current
		In millions of won
Time deposits	￦		1,602,285		63,358		1,034,971		257,857
CP			—		—		40,000		—
CD			10,000		—		15,000		—
RP			—		—		40,000		—
Others			257,001		385,383		222,000		350,399

	￦		1,869,286		448,741		1,351,971		608,256

14.

Inventories

Inventories as of December 31, 2018 and 2019 are as follows:


		2018
		Acquisition cost		Valuation allowance			Book value
		In millions of won
Raw materials	￦		3,886,739		(2,609	)		3,884,130
Work-in-progress			189,907		(1,028	)		188,879
Finished goods			50,526		—			50,526
Supplies			1,858,751		(3,907	)		1,854,844
Inventories-in-transit			1,196,113		—			1,196,113
Other inventories			13,761		—			13,761

	￦		7,195,797		(7,544	)		7,188,253

F-80

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

14.

Inventories, Continued


		2019
		Acquisition cost		Valuation allowance			Book value
		In millions of won
Raw materials	￦		3,790,443		(1,430	)		3,789,013
Merchandises			340		—			340
Work-in-progress			165,073		—			165,073
Finished goods			58,280		—			58,280
Supplies			2,121,363		(4,369	)		2,116,994
Inventories-in-transit			906,267		—			906,267
Other inventories			14,733		—			14,733

	￦		7,056,499		(5,799	)		7,050,700

The reversals of the allowance for loss on inventory valuation due to increase in the net realizable value of inventories deducted from cost of sales for the years ended December 31, 2017, 2018 and 2019 were ￦437 million , ￦3,723 million and ￦4,872 million, respectively.

The amounts of loss from inventory valuation included in other gains or losses for the years ended December 31, 2017, 2018 and 2019 were ￦3,875 million, ￦1,953 million and ￦3,127 million, respectively.

15.

Non-Financial Assets

Non-financial assets as of December 31, 2018 and 2019 are as follows:


		2018				2019
		Current		Non-current		Current		Non-current
		In millions of won
Advanced payment	￦		156,073		160,628		147,784		2,694
Prepaid expenses(*1)			290,944		90,449		308,017		84,421
Others(*2)			431,871		76,075		750,576		79,814

	￦		878,888		327,152		1,206,377		166,929

(*1)

Prepaid expenses of ￦4,353 million as of December 31, 2018 was recorded as right-of-assets as of December 31, 2019 due to change in accounting policy.

(*2)

Details of others as of December 31, 2018 and 2019 are as follows:


		2018				2019
		Current		Non-current		Current		Non-current
		In millions of won
Greenhouse gas emissions rights	￦		93,749		—		437,562		—
Other quick assets, etc.(*3)			338,122		76,075		313,014		79,814

	￦		431,871		76,075		750,576		79,814

(*3)

The Company recognized ￦92,128 million of its rights in connection with the securities of Orano Expansion as non-current non-financial assets as of December 31, 2018. The Company recognized an

F-81

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

15.

Non-Financial Assets, Continued

impairment loss of ￦87,023 million as it was determined that there is objective evidence of impairment related to its rights to equity interest in and loans to Orano Expansion for the year ended December 31, 2018. In addition, during the current year, the Company converted its loans with Orano Expansion into equity. The Company recognized an impairment loss of ￦49,201 million as it was determined that there is objective evidence of impairment related to the rights of equity interest in Orano Expansion.

16.

Consolidated Subsidiaries

(1)

Consolidated subsidiaries as of December 31, 2018 and 2019 are as follows:


			Percentage of ownership (%)
Subsidiaries	Key operation activities	Location	2018			2019
Korea Hydro & Nuclear Power Co., Ltd.	Power generation	KOREA		100.00	%		100.00	%
Korea South-East Power Co., Ltd.	Power generation	KOREA		100.00	%		100.00	%
Korea Midland Power Co., Ltd.	Power generation	KOREA		100.00	%		100.00	%
Korea Western Power Co., Ltd.	Power generation	KOREA		100.00	%		100.00	%
Korea Southern Power Co., Ltd.	Power generation	KOREA		100.00	%		100.00	%
Korea East-West Power Co., Ltd.	Power generation	KOREA		100.00	%		100.00	%
KEPCO Engineering & Construction Company, Inc.(*1)	Architectural engineering for utility plant and others	KOREA		65.77	%		65.77	%
KEPCO Plant Service & Engineering Co., Ltd.	Utility plant maintenance and others	KOREA		51.00	%		51.00	%
KEPCO Nuclear Fuel Co., Ltd.	Nuclear fuel	KOREA		96.36	%		96.36	%
KEPCO KDN Co., Ltd.	Electric power information technology and others	KOREA		100.00	%		100.00	%
Garolim Tidal Power Plant Co., Ltd.(*6)	Power generation	KOREA		49.00	%		—
KEPCO International HongKong Ltd.	Holding company	HONG KONG		100.00	%		100.00	%
KEPCO International Philippines Inc.	Holding company	PHILIPPINES		100.00	%		100.00	%
KEPCO Gansu International Ltd.	Holding company	HONG KONG		100.00	%		100.00	%
KEPCO Philippines Holdings Inc.	Holding company	PHILIPPINES		100.00	%		100.00	%
KEPCO Philippines Corporation	Operation of utility plant	PHILIPPINES		100.00	%		100.00	%
KEPCO Ilijan Corporation	Construction and operation of utility plant	PHILIPPINES		51.00	%		51.00	%
KEPCO Lebanon SARL	Operation of utility plant	LEBANON		100.00	%		100.00	%
KEPCO Neimenggu International Ltd.	Holding company	HONG KONG		100.00	%		100.00	%
KEPCO Shanxi International Ltd.	Holding company	HONG KONG		100.00	%		100.00	%
KOMIPO Global Pte Ltd.	Holding company	SINGAPORE		100.00	%		100.00	%
KEPCO Netherlands B.V.	Holding company	NETHERLANDS		100.00	%		100.00	%
KOREA Imouraren Uranium Investment Corp.	Holding company	FRANCE		100.00	%		100.00	%
KEPCO Australia Pty., Ltd.	Resources development	AUSTRALIA		100.00	%		100.00	%
KOSEP Australia Pty., Ltd.	Resources development	AUSTRALIA		100.00	%		100.00	%
KOMIPO Australia Pty., Ltd.	Resources development	AUSTRALIA		100.00	%		100.00	%
KOWEPO Australia Pty., Ltd.	Resources development	AUSTRALIA		100.00	%		100.00	%
KOSPO Australia Pty., Ltd.	Resources development	AUSTRALIA		100.00	%		100.00	%

F-82

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

16.

Consolidated Subsidiaries, Continued

(1)

Consolidated subsidiaries as of December 31, 2018 and 2019 are as follows, continued:


			Percentage of ownership (%)
Subsidiaries	Key operation activities	Location	2018			2019
KEPCO Middle East Holding Company	Holding company	BAHRAIN		100.00	%		100.00	%
Qatrana Electric Power Company	Construction and operation of utility plant	JORDAN		80.00	%		80.00	%
KHNP Canada Energy, Ltd.	Holding company	CANADA		100.00	%		100.00	%
KEPCO Bylong Australia Pty., Ltd.	Resources development	AUSTRALIA		100.00	%		100.00	%
Korea Waterbury Uranium Limited Partnership	Resources development	CANADA		80.00	%		80.00	%
Korea Electric Power Nigeria Ltd.(*7)	Operation of utility plant	NIGERIA		100.00	%		—
KEPCO Holdings de Mexico	Holding company	MEXICO		100.00	%		100.00	%
KST Electric Power Company	Construction and operation of utility plant	MEXICO		56.00	%		56.00	%
KEPCO Energy Service Company	Operation of utility plant	MEXICO		100.00	%		100.00	%
KEPCO Netherlands S3 B.V.	Holding company	NETHERLANDS		100.00	%		100.00	%
PT. KOMIPO Pembangkitan Jawa Bali	Operation of utility plant	INDONESIA		51.00	%		51.00	%
PT. Cirebon Power Service(*2)	Operation of utility plant	INDONESIA		27.50	%		27.50	%
KOWEPO International Corporation	Operation of utility plant	PHILIPPINES		99.99	%		99.99	%
KOSPO Jordan, LLC	Operation of utility plant	JORDAN		100.00	%		100.00	%
EWP Philippines Corporation	Holding company	PHILIPPINES		100.00	%		100.00	%
EWP America Inc.	Holding company	USA		100.00	%		100.00	%
EWP Renewable Corporation	Holding company	USA		100.00	%		100.00	%
DG Fairhaven Power, LLC	Power generation	USA		100.00	%		100.00	%
DG Whitefield, LLC	Power generation	USA		100.00	%		100.00	%
Springfield Power, LLC	Power generation	USA		100.00	%		100.00	%
KNF Canada Energy Limited	Holding company	CANADA		100.00	%		100.00	%
EWP Barbados 1 SRL	Holding company	BARBADOS		100.00	%		100.00	%
California Power Holdings, LLC	Power generation	USA		100.00	%		100.00	%
Gyeonggi Green Energy Co., Ltd.	Power generation	KOREA		62.01	%		62.01	%
PT. Tanggamus Electric Power	Power generation	INDONESIA		52.50	%		52.50	%
Gyeongju Wind Power Co., Ltd.	Power generation	KOREA		70.00	%		70.00	%
KOMIPO America Inc.	Holding company	USA		100.00	%		100.00	%
EWPRC Biomass Holdings, LLC	Holding company	USA		100.00	%		100.00	%
KOSEP USA, INC.	Power generation	USA		100.00	%		100.00	%
PT. EWP Indonesia	Holding company	INDONESIA		99.96	%		99.96	%
KEPCO Netherlands J3 B.V.	Holding company	NETHERLANDS		100.00	%		100.00	%
Korea Offshore Wind Power Co., Ltd.	Power generation	KOREA		100.00	%		100.00	%
Global One Pioneer B.V.	Holding company	NETHERLANDS		100.00	%		100.00	%
Global Energy Pioneer B.V.	Holding company	NETHERLANDS		100.00	%		100.00	%
Mira Power Limited(*3)	Power generation	PAKISTAN		76.00	%		76.00	%
KOSEP Material Co., Ltd.	Recycling fly ashes	KOREA		86.22	%		86.22	%
Commerce and Industry Energy Co., Ltd.(*4)	Power generation	KOREA		59.03	%		85.00	%
KEPCO Singapore Holdings Pte., Ltd.(*7)	Holding company	SINGAPORE		100.00	%		—
KEPCO KPS Philippines Corp.	Utility plant maintenance and others	PHILIPPINES		99.99	%		99.99	%

F-83

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

16.

Consolidated Subsidiaries, Continued

(1)

Consolidated subsidiaries as of December 31, 2018 and 2019 are as follows, continued:


			Percentage of ownership (%)
Subsidiaries	Key operation activities	Location	2018			2019
KOSPO Chile SpA	Holding company	CHILE		100.00	%		100.00	%
PT. KOWEPO Sumsel Operation And Maintenance Services	Utility plant maintenance and others	INDONESIA		95.00	%		95.00	%
HeeMang Sunlight Power Co., Ltd.	Operation of utility plant	KOREA		100.00	%		100.00	%
Fujeij Wind Power Company	Operation of utility plant	JORDAN		100.00	%		100.00	%
KOSPO Youngnam Power Co., Ltd.	Operation of utility plant	KOREA		50.00	%		50.00	%
VI Carbon Professional Private Special Asset Investment Trust 1	Holding company	KOREA		96.67	%		96.67	%
Chitose Solar Power Plant LLC	Power generation	JAPAN		80.10	%		80.10	%
KEPCO Energy Solution Co. Ltd.	Energy service	KOREA		100.00	%		100.00	%
Solar School Plant Co., Ltd.	Power generation	KOREA		100.00	%		100.00	%
KOSPO Power Services Limitada	Utility plant maintenance and others	CHILE		65.00	%		65.00	%
Energy New Industry Specialized Investment Private Investment Trust	Holding company	KOREA		99.01	%		99.01	%
KOEN Bylong Pty., Ltd.	Resources development	AUSTRALIA		100.00	%		100.00	%
KOMIPO Bylong Pty., Ltd.	Resources development	AUSTRALIA		100.00	%		100.00	%
KOWEPO Bylong Pty., Ltd.	Resources development	AUSTRALIA		100.00	%		100.00	%
KOSPO Bylong Pty., Ltd.	Resources development	AUSTRALIA		100.00	%		100.00	%
EWP Bylong Pty., Ltd.	Resources development	AUSTRALIA		100.00	%		100.00	%
KOWEPO Lao International	Utility plant maintenance and others	LAOS		100.00	%		100.00	%
KEPCO US Inc.	Holding company	USA		100.00	%		100.00	%
KEPCO Alamosa LLC	Holding company	USA		50.10	%		50.10	%
KEPCO Solar of Alamosa, LLC (formerly, Cogentrix of Alamosa, LLC)	Power generation	USA		100.00	%		100.00	%
KEPCO-LG CNS Mangilao Holdings LLC(*8)	Holding company	USA		70.00	%		70.00	%
Mangilao Investment LLC	Holding company	USA		100.00	%		100.00	%
KEPCO-LG CNS Mangilao Solar, LLC	Power generation	USA		100.00	%		100.00	%
Jeju Hanlim Offshore Wind Co., Ltd.	Power generation	KOREA		75.99	%		75.99	%
PT. Siborpa Eco Power	Construction and operation of utility plant	INDONESIA		55.00	%		55.00	%
BSK E-New Industry Fund VII	Holding company	KOREA		81.67	%		81.67	%
e-New Industry LB Fund 1	Holding company	KOREA		76.11	%		76.11	%
Songhyun e-New Industry Fund	Holding company	KOREA		80.65	%		80.65	%
PT. Korea Energy Indonesia	Utility plant maintenance and others	INDONESIA		95.00	%		95.00	%
KOLAT SpA	Utility plant maintenance and others	CHILE		100.00	%		100.00	%
KEPCO California, LLC	Holding company	USA		100.00	%		100.00	%
KEPCO Mojave Holdings, LLC	Holding company	USA		100.00	%		100.00	%
Incheon Fuel Cell Co., Ltd.	Power generation	KOREA		60.00	%		60.00	%
KOEN Service Co., Ltd.	Facility maintenance and service	KOREA		100.00	%		100.00	%
KOMIPO Service Co., Ltd.	Facility maintenance and service	KOREA		100.00	%		100.00	%

F-84

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

16.

Consolidated Subsidiaries, Continued

(1)

Consolidated subsidiaries as of December 31, 2018 and 2019 are as follows, continued:


			Percentage of ownership (%)
Subsidiaries	Key operation activities	Location	2018			2019
KOWEPO Service Co., Ltd.	Facility maintenance and service	KOREA		100.00	%		100.00	%
KOSPO Service Co., Ltd.	Facility maintenance and service	KOREA		100.00	%		100.00	%
EWP Service Co., Ltd.	Facility maintenance and service	KOREA		100.00	%		100.00	%
PT. KOMIPO Energy Indonesia	Utility plant maintenance and others	INDONESIA		95.00	%		95.00	%
KNF Partners Co., Ltd.	Facility maintenance	KOREA		—			100.00	%
KOSPO USA Inc.	Holding company	USA		—			100.00	%
Nambu USA LLC	Holding company	USA		—			100.00	%
Tamra Offshore Wind Power Co., Ltd.(*5)	Power generation	KOREA		—			63.00	%
KEPCO MCS Co., Ltd.	Electric meter reading and others	KOREA		—			100.00	%
KEPCO FMS Co., Ltd.	Security service and others	KOREA		—			100.00	%
Firstkeepers Co., Ltd.	Facility maintenance	KOREA		—			100.00	%
Secutec Co., Ltd.	Security service	KOREA		—			100.00	%
SE Green Energy Co., Ltd.(*5)	Power generation	KOREA		—			84.80	%
KEPCO Mangilao America LLC	Holding company	USA		—			100.00	%
Mangilao Intermediate Holdings LLC	Holding company	USA		—			100.00	%
KEPCO CSC Co., Ltd.	Facility maintenance	KOREA		—			100.00	%
KOAK Power Limited	Facility maintenance	PAKISTAN		—			100.00	%
KOMIPO Europe B.V.	Holding company	SWEDEN		—			100.00	%
Haenanum Energy Fund	Holding company	KOREA		—			99.64	%
Paju Ecoenergy Co., Ltd.	Power generation	KOREA		—			89.00	%

(*1)	Considering treasury stocks, the effective percentage of ownership is 66.08%.

(*2)	The effective percentage of ownership is less than 50%. However, this subsidiary is included in the consolidated financial statements as the Company obtained the majority of the voting power through the shareholders’ agreement.

(*3)	As of the reporting date, the annual reporting period of all subsidiaries is December 31, except for Mira Power Limited which is November 30.

(*4)

The Company guarantees a certain return on investment related to Commerce and Industry Energy Co., Ltd. for the financial investors. The financial investors have a right to sell their shares to the Company which can be exercised 84 months after the date of investment. Accordingly, the purchase price including the return on investment is classified as a liability.

(*5)	The entity was reclassified from an associate to a subsidiary due to additional acquisition of interest during the year ended December 31, 2019.

(*6)	The liquidation process is in progress by the appointment of a liquidator, and the Company has been reclassified the invested amount as assets held for sale as of December 31, 2019.

(*7)	The liquidation process has been completed during the year ended December 31, 2019.

(*8)	The Company does not hold a stake, but it is included in subsidiaries because the Company has control over KEPCO-LG CNS Mangilao Holdings LLC with nomination rights among 4 out of 6 board members.

F-85

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

16.

Consolidated Subsidiaries, Continued

(2)

Subsidiaries newly included in or excluded from consolidation for the year ended December 31, 2019 are as follows:

Subsidiaries included in consolidation during the year ended December 31, 2019.


Subsidiary		Reason
KNF Partners Co., Ltd.		Newly established
KOSPO USA Inc.		Newly established
Nambu USA LLC		Newly established
Tamra Offshore Wind Power Co., Ltd.		Additional acquisition
KEPCO MCS Co., Ltd.		Newly established
KEPCO FMS Co., Ltd.		Newly established
Firstkeepers Co., Ltd.		Newly established
Secutec Co., Ltd.		Newly established
SE Green Energy Co., Ltd.		Additional acquisition
KEPCO Mangilao America LLC		Newly established
Mangilao Intermediate Holdings LLC		Newly established
KEPCO CSC Co., Ltd.		Newly established
KOAK Power Limited		Newly established
KOMIPO Europe B.V.		Newly established
Haenanum Energy Fund		Newly established
Paju Ecoenergy Co., Ltd.		Newly established

Subsidiaries excluded from consolidation during the year ended December 31, 2019.


Subsidiary		Reason
KEPCO Singapore Holdings Pte., Ltd.		Liquidated
Korea Electric Power Nigeria Ltd.		Liquidated
Garolim Tidal Power Plant Co., Ltd.		Under liquidation process

(3)

Summary of financial information of consolidated subsidiaries as of and for the years ended December 31, 2018 and 2019 are as follows:


2018
Subsidiaries		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
Korea Hydro & Nuclear Power Co., Ltd.	￦		55,792,704		30,484,104		8,858,717		(137,613	)
Korea South-East Power Co., Ltd.			9,997,758		4,948,553		5,521,038		25,736
Korea Midland Power Co., Ltd.			10,839,218		7,088,013		4,368,467		(38,142	)
Korea Western Power Co., Ltd.			9,902,752		5,965,410		4,841,261		(28,157	)
Korea Southern Power Co., Ltd.			9,810,985		5,463,721		5,539,793		55,439
Korea East-West Power Co., Ltd.			8,744,380		4,092,460		4,933,525		3,345
KEPCO Engineering & Construction Company, Inc.			771,480		310,100		433,701		12,937
KEPCO Plant Service & Engineering Co., Ltd.			1,275,365		296,428		1,239,604		160,791
KEPCO Nuclear Fuel Co., Ltd.			817,416		434,439		230,667		15,835
KEPCO KDN Co., Ltd.			566,807		159,423		622,154		60,016

F-86

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

16.

Consolidated Subsidiaries, Continued

(3)

Summary of financial information of consolidated subsidiaries as of and for the years ended December 31, 2018 and 2019 are as follows, continued:


2018
Subsidiaries		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
Garolim Tidal Power Plant Co., Ltd.	￦		608		345		—		(11	)
KEPCO International HongKong Ltd.			140,101		1		—		3,307
KEPCO International Philippines Inc.			107,948		1,475		—		52,539
KEPCO Gansu International Ltd.			12,047		515		—		(24	)
KEPCO Philippines Holdings Inc.			188,551		9,775		—		53,219
KEPCO Philippines Corporation			6,394		213		—		54
KEPCO Ilijan Corporation			431,444		53,413		99,844		49,631
KEPCO Lebanon SARL			1,509		9,686		—		413
KEPCO Neimenggu International Ltd.			194,336		—		—		20,829
KEPCO Shanxi International Ltd.			519,991		201,732		—		290
KOMIPO Global Pte Ltd.			250,456		961		—		11,478
KEPCO Netherlands B.V.			130,460		77		—		26,550
KOREA Imouraren Uranium Investment Corp.			63,517		171		—		(89,852	)
KEPCO Australia Pty., Ltd.			439,719		14		—		49
KOSEP Australia Pty., Ltd.			37,057		2,832		20,294		7,315
KOMIPO Australia Pty., Ltd.			39,066		4,659		20,294		7,193
KOWEPO Australia Pty., Ltd.			39,341		4,702		20,294		7,316
KOSPO Australia Pty., Ltd.			36,525		3,585		20,294		9,520
KEPCO Middle East Holding Company			101,201		92,862		—		3,043
Qatrana Electric Power Company			484,383		326,486		18,766		21,170
KHNP Canada Energy, Ltd.			49,776		35		—		(26	)
KEPCO Bylong Australia Pty., Ltd.			254,398		315,921		—		(29,573	)
Korea Waterbury Uranium Limited Partnership			20,890		142		—		(74	)
Korea Electric Power Nigeria Ltd.			112		39		727		(93	)
KEPCO Holdings de Mexico			248		57		—		(11	)
KST Electric Power Company			535,807		457,867		109,735		10,274
KEPCO Energy Service Company			1,940		1,454		5,117		(232	)
KEPCO Netherlands S3 B.V.			46,518		38		—		1,226
PT. KOMIPO Pembangkitan Jawa Bali			11,405		5,472		20,320		3,925
PT. Cirebon Power Service			1,588		273		7,228		177
KOWEPO International Corporation			—		8		—		—
KOSPO Jordan LLC			16,315		3,432		34,371		1,907
EWP Philippines Corporation			1,684		829		—		(11	)
EWP America Inc.(*1)			72,525		4,903		29,557		(4,483	)
KNF Canada Energy Limited			1,801		20		—		(45	)
EWP Barbados 1 SRL			268,033		1,581		688		11,221
Gyeonggi Green Energy Co., Ltd.			293,812		185,043		96,442		25,121
PT. Tanggamus Electric Power			216,321		187,502		26,832		9,338
Gyeongju Wind Power Co., Ltd.			122,303		83,348		21,906		8,803

F-87

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

16.

Consolidated Subsidiaries, Continued

(3)

Summary of financial information of consolidated subsidiaries as of and for the years ended December 31, 2018 and 2019 are as follows, continued:


2018
Subsidiaries		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
KOMIPO America Inc.	￦		10,092		572		—		(885	)
KOSEP USA, Inc.			1		4,857		—		4,341
PT. EWP Indonesia			7,444		14		—		3,138
KEPCO Netherlands J3 B.V.			115,978		77		—		(104	)
Korea Offshore Wind Power Co., Ltd.			216,114		36,377		—		(8,473	)
Global One Pioneer B.V.			162		87		—		(113	)
Global Energy Pioneer B.V.			325		74		—		(102	)
Mira Power Limited			277,525		213,104		—		(980	)
KOSEP Material Co., Ltd.			2,862		1,249		3,240		377
Commerce and Industry Energy Co., Ltd.			92,872		88,009		27,937		(6,091	)
KEPCO Singapore Holdings Pte., Ltd.			582		9		—		(31	)
KEPCO KPS Philippines Corp.			7,501		358		4,815		766
KOSPO Chile SpA			139,814		57,502		—		1,016
PT. KOWEPO Sumsel Operation And Maintenance Services			1,313		394		4,343		(654	)
HeeMang Sunlight Power Co., Ltd.			10,915		7,626		146		(192	)
Fujeij Wind Power Company			217,796		212,435		—		(1,033	)
KOSPO Youngnam Power Co., Ltd.			413,472		325,589		369,669		8,155
VI Carbon Professional Private Special Asset Investment Trust 1 (formally, HI Carbon Professional Private Special Asset)			3,002		—		—		12
Chitose Solar Power Plant LLC			115,505		105,079		15,022		872
KEPCO Energy Solution Co., Ltd.			304,103		849		5,584		2,532
Solar School Plant Co., Ltd.			204,282		1,366		1,149		2,033
KOSPO Power Services Limitada			3,045		596		9,610		1,132
Energy New Industry Specialized Investment Private Investment Trust(*2)			66,498		1,014		—		(1,140	)
KOEN Bylong Pty., Ltd.			5,544		26		—		(10	)
KOMIPO Bylong Pty., Ltd.			5,544		26		—		(25	)
KOWEPO Bylong Pty., Ltd.			5,544		26		—		—
KOSPO Bylong Pty., Ltd.			5,544		26		—		(25	)
EWP Bylong Pty., Ltd.			5,544		16		—		(15	)
KOWEPO Lao International			3,800		1,015		2,899		895
KEPCO US Inc.			16,640		—		—		6
KEPCO Alamosa LLC			32,346		79		750		(688	)
KEPCO Solar of Alamosa, LLC (formerly, Cogentrix of Alamosa, LLC)			64,223		48,819		9,015		200
KEPCO-LG CNS Mangilao Holdings LLC			25,642		27,197		—		(1,144	)
Mangilao Investment LLC			25,641		—		—		—
KEPCO-LG CNS Mangilao Solar, LLC			25,406		146		—		(104	)

F-88

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

16.

Consolidated Subsidiaries, Continued

(3)

Summary of financial information of consolidated subsidiaries as of and for the years ended December 31, 2018 and 2019 are as follows, continued:


2018
Subsidiaries		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
Jeju Hanlim Offshore Wind Co., Ltd.	￦		16,557		328		—		(925	)
PT. Siborpa Eco Power			12,363		141		—		(1,771	)
PT. Korea Energy Indonesia			1,183		60		1,459		223
KOLAT SpA			38,362		474		585		(186	)
KEPCO California, LLC			42,171		21		—		(332	)
KEPCO Mojave Holdings, LLC			103,189		65,730		—		(3,959	)
Incheon Fuel Cell Co., Ltd.			23,626		415		—		(201	)
KOEN Service Co., Ltd.			583		31		—		(48	)
KOMIPO Service Co., Ltd.			576		17		—		(41	)
KOWEPO Service Co., Ltd.			750		227		—		(77	)
KOSPO Service Co., Ltd.			576		6		—		(30	)
EWP Service Co., Ltd.			667		97		—		(30	)
PT. KOMIPO Energy Indonesia			2,236		—		—		—

(*1)

Financial information of EWP America Inc. includes that of six other subsidiaries, EWP Renewable Corporation, DG Fairhaven Power, LLC, DG Whitefield, LLC, Springfield Power, LLC, California Power Holdings, LLC, and EWPRC Biomass Holdings, LLC.

(*2)

Financial information of Energy New Industry Specialized Investment Private Investment Trust includes that of three other subsidiaries, BSK E-New Industry Fund VII, e-New Industry LB Fund 1 and Songhyun e-New Industry Fund.


2019
Subsidiaries		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
Korea Hydro & Nuclear Power Co., Ltd.	￦		59,570,219		33,917,275		8,969,072		306,007
Korea South-East Power Co., Ltd.			10,938,358		5,866,642		5,385,387		41,006
Korea Midland Power Co., Ltd.			12,684,828		8,977,766		4,479,707		(28,449	)
Korea Western Power Co., Ltd.			10,514,438		6,637,451		4,448,992		(46,061	)
Korea Southern Power Co., Ltd.			10,884,799		6,608,301		5,084,907		(41,342	)
Korea East-West Power Co., Ltd.			9,724,311		5,022,921		4,855,964		56,698
KEPCO Engineering & Construction Company, Inc.			735,207		242,994		448,635		26,398
KEPCO Plant Service & Engineering Co., Ltd.			1,356,983		294,757		1,244,613		157,737
KEPCO Nuclear Fuel Co., Ltd.			831,604		429,799		309,055		24,618
KEPCO KDN Co., Ltd.			604,458		159,807		625,567		42,205
KEPCO International HongKong Ltd.			138,942		633		—		3,330
KEPCO International Philippines Inc.			107,224		371		—		67,991
KEPCO Gansu International Ltd.			10,448		545		—		(20	)
KEPCO Philippines Holdings Inc.			200,503		6,656		—		66,200
KEPCO Philippines Corporation			6,706		332		—		(52	)
KEPCO Ilijan Corporation			371,377		56,156		95,072		40,818

F-89

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

16.

Consolidated Subsidiaries, Continued

(3)

Summary of financial information of consolidated subsidiaries as of and for the years ended December 31, 2018 and 2019 are as follows, continued:


2019
Subsidiaries		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
KEPCO Lebanon SARL	￦		1,835		9,786		—		255
KEPCO Neimenggu International Ltd.			200,858		—		—		(354	)
KEPCO Shanxi International Ltd.			538,604		208,895		—		151
KOMIPO Global Pte Ltd.			269,302		463		—		10,400
KEPCO Netherlands B.V.			122,577		101		—		948
KOREA Imouraren Uranium Investment Corp.			14,173		111		—		(49,716	)
KEPCO Australia Pty., Ltd.			364		14		—		(395,914	)
KOSEP Australia Pty., Ltd.			32,782		2,911		15,514		3,935
KOMIPO Australia Pty., Ltd.			40,898		2,909		15,514		3,766
KOWEPO Australia Pty., Ltd.			44,182		5,772		15,514		2,761
KOSPO Australia Pty., Ltd.			37,254		5,012		15,514		2,638
KEPCO Middle East Holding Company			102,164		87,834		—		5,934
Qatrana Electric Power Company			490,723		322,857		20,773		21,807
KHNP Canada Energy, Ltd.			44,639		43		—		(10	)
KEPCO Bylong Australia Pty., Ltd.			45,207		355,163		—		(220,909	)
Korea Waterbury Uranium Limited Partnership			20,717		167		—		(77	)
KEPCO Holdings de Mexico			187		25		—		(14	)
KST Electric Power Company			539,952		449,459		55,783		(20,797	)
KEPCO Energy Service Company			2,262		1,995		5,984		(481	)
KEPCO Netherlands S3 B.V.			50,352		49		—		2,637
PT. KOMIPO Pembangkitan Jawa Bali			12,391		5,719		18,722		4,312
PT. Cirebon Power Service			2,089		313		8,049		406
KOWEPO International Corporation			—		10		—		(2	)
KOSPO Jordan, LLC			17,489		1,521		10,878		2,634
EWP Philippines Corporation			1,691		888		—		(111	)
EWP America Inc.(*1)			66,622		2,619		21,719		(6,497	)
KNF Canada Energy Limited			1,933		24		—		(48	)
EWP Barbados 1 SRL			279,295		1,031		2,914		2,368
Gyeonggi Green Energy Co., Ltd.			194,425		159,078		13,717		(73,394	)
PT. Tanggamus Electric Power			228,601		195,826		2,256		(4,529	)
Gyeongju Wind Power Co., Ltd.			113,745		75,427		15,548		3,384
KOMIPO America Inc.			9,424		593		118		(1,033	)
KOSEP USA, Inc.			1		5,147		—		(119	)
PT. EWP Indonesia			34,455		5		—		5,124
KEPCO Netherlands J3 B.V.			120,006		74		—		(79	)
Korea Offshore Wind Power Co., Ltd.			284,495		117,527		—		(12,768	)
Global One Pioneer B.V.			180		73		—		(86	)
Global Energy Pioneer B.V.			348		80		—		(90	)
Mira Power Limited			356,111		285,577		—		(971	)
KOSEP Material Co., Ltd.			2,788		1,186		3,357		22
Commerce and Industry Energy Co., Ltd.			90,637		43,985		32,728		(7,532	)
KEPCO KPS Philippines Corp.			5,198		1,341		6,246		2

F-90

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

16.

Consolidated Subsidiaries, Continued

(3)

Summary of financial information of consolidated subsidiaries as of and for the years ended December 31, 2018 and 2019 are as follows, continued:


2019
Subsidiaries		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
KOSPO Chile SpA	￦		134,827		49,183		—		(456	)
PT. KOWEPO Sumsel Operation And Maintenance Services			135		262		—		(1,104	)
HeeMang Sunlight Power Co., Ltd.			12,185		8,545		643		75
Fujeij Wind Power Company			218,333		196,964		—		5,515
KOSPO Youngnam Power Co., Ltd.			398,495		307,226		318,338		3,514
VI Carbon Professional Private Special Asset Investment Trust 1			3,002		—		—		12
Chitose Solar Power Plant LLC			121,457		106,254		17,103		5,480
KEPCO Energy Solution Co., Ltd.			308,188		2,142		2,843		2,805
Solar School Plant Co., Ltd.			208,730		3,269		1,962		2,553
KOSPO Power Services Limitada			3,244		1,564		10,013		452
Energy New Industry Specialized Investment Private Investment Trust(*2)			100,116		17,359		2,418		(7,735	)
KOEN Bylong Pty., Ltd.			—		39		—		(14	)
KOMIPO Bylong Pty., Ltd.			4		43		—		(14	)
KOWEPO Bylong Pty., Ltd.			4		40		—		(12	)
KOSPO Bylong Pty., Ltd.			4		40		—		(12	)
EWP Bylong Pty., Ltd.			4		40		—		(12	)
KOWEPO Lao International			5,430		575		4,308		1,584
KEPCO US Inc.			17,231		—		—		—
KEPCO Alamosa LLC			33,515		183		145		(311	)
KEPCO Solar of Alamosa, LLC (formerly, Cogentrix of Alamosa, LLC)			65,468		50,348		8,739		(1,902	)
KEPCO-LG CNS Mangilao Holdings LLC			27,439		30,287		—		(1,240	)
Mangilao Investment LLC			39,972		—		—		—
KEPCO-LG CNS Mangilao Solar, LLC			39,373		11		—		(524	)
Jeju Hanlim Offshore Wind Co., Ltd.			14,328		558		—		(2,459	)
PT. Siborpa Eco Power			11,574		71		—		(1,165	)
PT. Korea Energy Indonesia			1,592		121		2,462		323
KOLAT SpA			31,178		167		656		(296	)
KEPCO California, LLC			44,074		936		358		(513	)
KEPCO Mojave Holdings, LLC			103,815		69,544		—		(4,215	)
Incheon Fuel Cell Co., Ltd.			22,669		475		—		(1,010	)
KOEN Service Co., Ltd.			5,347		4,252		25,890		543
KOMIPO Service Co., Ltd.			3,327		2,622		24,556		146
KOWEPO Service Co., Ltd.			4,228		3,302		23,982		389
KOSPO Service Co., Ltd.			3,493		2,788		18,741		135
EWP Service Co., Ltd.			4,786		4,064		20,837		162
PT. KOMIPO Energy Indonesia			2,647		196		1,392		79
KNF partners Co., Ltd.			1,378		890		3,383		187
KOSPO USA Inc.			5,896		127		—		(1,408	)

F-91

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

16.

Consolidated Subsidiaries, Continued

(3)

Summary of financial information of consolidated subsidiaries as of and for the years ended December 31, 2018 and 2019 are as follows, continued:


2019
Subsidiaries		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
Nambu USA LLC	￦		245		1		—		245
Tamra Offshore Wind Power Co., Ltd.			156,708		121,724		19,670		1,154
KEPCO MCS Co., Ltd.			26,510		22,151		129,393		3,408
KEPCO FMS Co., Ltd.			11,336		10,638		37,627		198
Firstkeepers Co., Ltd.			1,552		2,800		121		(2,239	)
Secutec Co., Ltd.			322		229		—		(597	)
SE Green Energy Co., Ltd.			132,727		105,619		—		816
KEPCO Mangilao America LLC			—		—		—		—
Mangilao Intermediate Holdings LLC			13,220		12,774		—		(66	)
KEPCO CSC Co., Ltd.			837		51		—		(14	)
KOAK Power Limited			15,930		—		—		—
KOMIPO Europe B.V.			7,362		—		—		(286	)
Haenanum Energy Fund			28,101		1		—		1
Paju Ecoenergy Co., Ltd.			53,839		—		—		—

(*1)

(*2)

(4)

Significant restrictions on abilities to subsidiaries are as follows:


Company		Nature and extent of any significant restrictions
Gyeonggi Green Energy Co., Ltd.		Acquisition or disposal of assets of more than ￦35 billion, change in the capacity of cogeneration units (except for the change due to performance improvement of equipment, maintenance) will require unanimous consent of all directors of the company.

KOSPO Youngnam Power Co., Ltd.		Dividends can only be paid when all conditions of the loan agreement are satisfied, or prior written consent of financial institutions is obtained. Company’s shares cannot be wholly or partially transferred without prior written consent of financial institutions.

Incheon Fuel Cell Co., Ltd.		Acquisition or disposal of assets of more than ￦20 billion, change in the capacity of cogeneration units (except for the change due to performance improvement of equipment, maintenance) will require unanimous consent of all directors of the company.

F-92

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

16.

Consolidated Subsidiaries, Continued

(5)

As of December 31, 2019, the Company has following entitlements in relation to its subsidiaries as per its shareholder’s agreements:


Company		Nature and extent of any significant restrictions
KOSPO Youngnam Power Co., Ltd.		The Company holds the right to purchase all shares held by the financial investors of KOSPO Youngnam Power Co., Ltd., a subsidiary of the Company, at face value of the issued shares on the 7th and 12th years from the Company’s establishment date.

(6)

Details of non-controlling interests prior to intra-Company eliminations as of and for the years ended December 31, 2017, 2018 and 2019 are as follows:


2017
Description		KEPCO Ilijan Corporation			KEPCO Plant Service & Engineering Co., Ltd.			KEPCO Engineering & Construction Company, Inc.			Others			Total
		In millions of won
Percentage of ownership			49.00	%		49.00	%		33.92	%
Current assets	￦		160,588			623,934			257,529			1,269,175			2,311,226
Non-current assets			314,036			571,152			504,637			2,588,833			3,978,658
Current liabilities			(21,546	)		(278,562	)		(221,860	)		(394,320	)		(916,288	)
Non-current liabilities			(36,255	)		(16,127	)		(83,274	)		(2,014,925	)		(2,150,581	)
Net assets			416,823			900,397			457,032			1,448,763			3,223,015
Book value of non-controlling interests			204,243			441,194			155,025			612,245			1,412,707
Sales			109,183			1,232,113			490,193			719,087			2,550,576
Profit for the period			66,320			135,482			21,222			66,419			289,443
Profit for the period attributable to non-controlling interest			32,497			66,386			7,199			20,447			126,529
Cash flows from operating activities			123,534			129,801			62,578			60,021			375,934
Cash flows from investing activities			(5,276	)		(193,408	)		(8,622	)		(409,353	)		(616,659	)
Cash flows from financing activities before dividends to non-controlling interests			(44,442	)		(15,606	)		(55,504	)		339,432			223,880
Dividends to non-controlling interests			(48,855	)		(14,994	)		(1,419	)		(20,840	)		(86,108	)
Effect of exchange rate fluctuation			(7,432	)		(1,267	)		(101	)		(24,206	)		(33,006	)
Net increase (decrease) of cash and cash equivalents			17,529			(95,474	)		(3,068	)		(54,946	)		(135,959	)

F-93

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

16.

Consolidated Subsidiaries, Continued

(6)

Details of non-controlling interests prior to intra-Company eliminations as of and for the years ended December 31, 2017, 2018 and 2019 are as follows, continued:


2018
Description		KEPCO Ilijan Corporation			KEPCO Plant Service & Engineering Co., Ltd.			KEPCO Engineering & Construction Company, Inc.			Others			Total
		In millions of won
Percentage of ownership			49.00	%		49.00	%		33.92	%
Current assets	￦		163,622			628,725			281,390			956,928			2,030,665
Non-current assets			267,822			646,640			490,090			2,760,500			4,165,052
Current liabilities			(16,819	)		(270,097	)		(248,402	)		(559,552	)		(1,094,870	)
Non-current liabilities			(36,594	)		(26,331	)		(61,698	)		(1,933,583	)		(2,058,206	)
Net assets			378,031			978,937			461,380			1,224,293			3,042,641
Book value of non-controlling interests			185,235			479,679			156,500			680,963			1,502,377
Sales			99,844			1,239,604			433,701			966,037			2,739,186
Profit for the period			49,631			160,791			12,937			92,457			315,816
Profit for the period attributable to non-controlling interests			24,319			78,788			4,388			28,475			135,970
Cash flows from operating activities			92,822			129,700			81,042			110,448			414,012
Cash flows from investing activities			(4,452	)		(123,593	)		(50,569	)		35,167			(143,447	)
Cash flows from financing activities before dividends to non-controlling interests			(53,733	)		(33,737	)		(14,591	)		(374,669	)		(476,730	)
Dividends to non-controlling interests			(51,626	)		(32,414	)		(2,839	)		(23,452	)		(110,331	)
Effect of exchange rate fluctuation			2,840			(124	)		31			1,304			4,051
Net increase (decrease) of cash and cash equivalents			(14,149	)		(60,168	)		13,074			(251,202	)		(312,445	)


2019
Description		KEPCO Ilijan Corporation			KEPCO Plant Service & Engineering Co., Ltd.			KEPCO Engineering & Construction Company, Inc.			Others			Total
		In millions of won
Percentage of ownership			49.00	%		49.00	%		33.92	%
Current assets	￦		173,931			779,764			257,593			864,596			2,075,884
Non-current assets			197,446			577,219			477,614			3,169,317			4,421,596
Current liabilities			(11,990	)		(247,737	)		(223,522	)		(450,311	)		(933,560	)
Non-current liabilities			(44,166	)		(47,020	)		(19,472	)		(2,193,501	)		(2,304,159	)
Net assets			315,221			1,062,226			492,213			1,390,101			3,259,761
Book value of non-controlling interests			154,458			520,491			166,959			551,423			1,393,331
Sales			95,072			1,244,613			448,635			855,023			2,643,343
Profit for the period			40,818			157,737			26,398			(48,963	)		175,990
Profit for the period attributable to non-controlling interests			20,001			77,291			8,954			(24,264	)		81,982
Cash flows from operating activities			101,707			164,373			27,081			219,450			512,611
Cash flows from investing activities			4,458			(89,159	)		47,219			(356,434	)		(393,916	)
Cash flows from financing activities before dividends to non-controlling interests			(68,678	)		(44,332	)		(34,632	)		223,233			75,591
Dividends to non-controlling interests			(48,750	)		(39,466	)		(1,807	)		(9,233	)		(99,256	)
Effect of exchange rate fluctuation			2,111			(593	)		(14	)		2,501			4,005
Net increase (decrease) of cash and cash equivalents			(9,152	)		(9,177	)		37,847			79,517			99,035

F-94

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

16.

Consolidated Subsidiaries, Continued

(7)

Changes in goodwill

(i)

Details of goodwill as of December 31, 2018 and 2019 are as follows:


		2018		2019
		In millions of won
Acquisition cost	￦		2,582		97,977
Less: Accumulated impairment			—		—

Carrying book value	￦		2,582		97,977

(ii)

Changes in goodwill for the years ended December 31, 2018 and 2019 are as follows:


		2018
		Beginning		Increase		Decrease		Ending
		In millions of won
Acquisition cost	￦		2,582		—		—		2,582
Less: Accumulated impairment			—		—		—		—
Carrying book value			2,582		—		—		2,582


		2019
		Beginning		Increase		Decrease		Ending
		In millions of won
Acquisition cost	￦		2,582		95,395		—		97,977
Less: Accumulated impairment			—		—		—		—
Carrying book value			2,582		95,395		—		97,977

(8)

Disposals of subsidiaries

The Company has completed liquidation process of KEPCO Singapore Holdings Pte., Ltd., and Korea Electric Power Nigeria Ltd., and is in the process of liquidating Garolim Tidal Power Plant Co., Ltd., as of December 31, 2019.

(i)

The fair value of proceeds from disposal as of December 31, 2017, 2018 and 2019, respectively, are as follows:


		2017		2018		2019
		In millions of won
Consideration received in cash	￦		—		160		4

	￦		—		160		4

F-95

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

16.

Consolidated Subsidiaries, Continued

(8)

Disposals of subsidiaries, continued

(ii)

The carrying value of assets and liabilities of subsidiaries as of the date the Company lost its control during the years ended December 31, 2017, 2018 and 2019, respectively, are as follows:


		2017		2018			2019
		In millions of won
Assets
Cash and cash equivalents	￦		—		175			97
Trade and other receivables			—		11			—
Other non-financial assets			—		—			1
PP&E and intangible assets			—		—			2
Liabilities
Trade and other payables			—		(28	)		(3	)
Other non-financial liabilities			—		—			(24	)

	￦		—		158			73

(iii)

Gain on disposals of subsidiaries for the years ended December 31, 2017, 2018 and 2019, respectively, are as follows:


		2017		2018			2019
		In millions of won
Fair value of sale price	￦		—		160			4
Net assets disposed			—		(158	)		(73	)
Non-controlling interests			—		—			—
Realization of unrealized gain			—		70			(187	)
Other comprehensive income			—		—			—

Gain (loss) on disposals of subsidiaries(*1)	￦		—		72			(256	)

(*1)

Gain (loss) on disposals of subsidiaries is included in the consolidated statements of comprehensive income (loss).

(iv)

Net cash flow from disposals of subsidiaries for the years ended December 31, 2017, 2018 and 2019, respectively, are as follows:


		2017		2018			2019
		In millions of won
Consideration received in cash	￦		—		160			4
Less: cash held by disposed subsidiaries			—		(175	)		(97	)

Net cash flow	￦		—		(15	)		(93	)

F-96

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

16.

Consolidated Subsidiaries, Continued

(9)

Cash dividends received from subsidiaries for the years ended December 31, 2017, 2018 and 2019, respectively, are as follows:


Subsidiaries		2017		2018		2019
		In millions of won
Korea Hydro & Nuclear Power Co., Ltd.	￦		543,072		281,234		—
Korea South-East Power Co., Ltd.			106,546		33,928		7,143
Korea Midland Power Co., Ltd.			54,305		26,581		—
Korea Western Power Co., Ltd.			66,992		28,996		—
Korea Southern Power Co., Ltd.			60,630		25,780		15,277
Korea East-West Power Co., Ltd.			94,430		61,408		985
KEPCO Engineering & Construction Company, Inc.			2,765		5,531		3,519
KEPCO Plant Service & Engineering Co., Ltd.			15,607		33,739		41,084
KEPCO Nuclear Fuel Co., Ltd.			3,231		1,077		4,219
KEPCO KDN Co., Ltd.			4,352		13,888		19,136
KEPCO International HongKong Ltd.			4,304		23,314		10,243
KEPCO International Philippines Inc.			44,906		52,507		70,480
KEPCO Ilijan Corporation			50,849		53,900		65,776
KEPCO Philippines Holdings Inc.			26,023		—		63,522
KOSEP Australia Pty., Ltd.			—		—		8,120
KOSPO Australia Pty., Ltd.			—		—		4,335
Qatrana Electric Power Company			5,939		6,240		10,313
KEPCO KPS Philippines Corp.			—		—		3,854
Tamra Offshore Wind Power Co., Ltd.			—		—		4,823
KEPCO Netherlands S3 B.V.			—		3,115		874
PT. KOMIPO Pembangkitan Jawa Bali			3,188		20,658		1,971
KEPCO Netherlands J3 B.V.			—		12,090		—
Gyeongju Wind Power Co., Ltd.			—		—		2,800
Energy New Industry Specialized Investment Private Investment Trust			291		—		—
HI Carbon Professional Private Special Asset Investment Trust 1			11		11		11
KOSPO Power Services Limitada			425		993		745
Cogentrix Solar Services, LLC			344		—		—
KEPCO Netherlands B.V.			—		17,424		13,266
PT. Cirebon Power Service			—		382		—
Chitose Solar Power Plant LLC			—		1,986		814

	￦		1,088,210		704,782		353,310

F-97

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures

(1)

Investments in associates and joint ventures as of December 31, 2018 and 2019 are as follows:


2018
Investees	Key operation activities	Location	Percentage of ownership				Acquisition cost		Book value
	In millions of won
<Associates>
Korea Gas Corporation(*1)	Importing and wholesaling LNG	KOREA		20.47	%	￦		94,500		1,701,848
Korea Electric Power Industrial Development Co., Ltd.	Electricity metering and others	KOREA		29.00	%			4,727		21,838
YTN Co., Ltd.	Broadcasting	KOREA		21.43	%			59,000		40,338
Cheongna Energy Co., Ltd.	Generating and distributing vapor and hot/cold water	KOREA		43.90	%			48,353		3,465
Gangwon Wind Power Co., Ltd.(*2)	Power generation	KOREA		15.00	%			5,725		13,220
Hyundai Green Power Co., Ltd.	Power generation	KOREA		29.00	%			88,885		127,160
Korea Power Exchange(*5)	Management of power market and others	KOREA		100.00	%			127,839		251,802
AMEC Partners Korea Ltd.(*3)	Resources development	KOREA		19.00	%			707		209
Hyundai Energy Co., Ltd.(*8)	Power generation	KOREA		30.66	%			71,070		—
Ecollite Co., Ltd.	Artificial light-weight aggregate	KOREA		36.10	%			1,516		—
Taebaek Wind Power Co., Ltd.	Power generation	KOREA		25.00	%			3,810		5,665
Taeback Guinemi Wind Power Co., Ltd.	Power generation	KOREA		25.00	%			3,420		2,569
Pyeongchang Wind Power Co., Ltd.	Power generation	KOREA		25.00	%			3,875		5,419
Daeryun Power Co., Ltd.(*3)	Power generation	KOREA		9.34	%			40,854		26,099
Changjuk Wind Power Co., Ltd.	Power generation	KOREA		30.00	%			3,801		8,086
KNH Solar Co., Ltd.	Power generation	KOREA		27.00	%			1,296		2,337
SPC Power Corporation	Power generation	PHILIPPINES		38.00	%			20,635		57,558
Gemeng International Energy Co., Ltd.	Power generation	CHINA		34.00	%			413,153		647,010
PT. Cirebon Electric Power	Power generation	INDONESIA		27.50	%			40,365		108,628
KNOC Nigerian East Oil Co., Ltd.(*4)	Resources development	NIGERIA		14.63	%			12		—
KNOC Nigerian West Oil Co., Ltd.(*4)	Resources development	NIGERIA		14.63	%			12		—
PT Wampu Electric Power	Power generation	INDONESIA		46.00	%			21,292		31,097
PT. Bayan Resources TBK	Resources development	INDONESIA		20.00	%			615,860		511,646
S-Power Co., Ltd.	Power generation	KOREA		49.00	%			132,300		114,566
Pioneer Gas Power Limited(*7)	Power generation	INDIA		38.50	%			49,831		20,395
Eurasia Energy Holdings	Power generation and resources development	RUSSIA		40.00	%			461		—
Xe-Pian Xe-Namnoy Power Co., Ltd.	Power generation	LAOS		25.00	%			84,374		77,165
Hadong Mineral Fiber Co., Ltd.(*3)	Recycling fly ashes	KOREA		8.33	%			50		—
Green Biomass Co., Ltd.(*10)	Power generation	KOREA		8.80	%			714		115
PT. Mutiara Jawa	Manufacturing and operating floating coal terminal	INDONESIA		29.00	%			2,978		365
Samcheok Eco Materials Co., Ltd.(*9)	Recycling fly ashes	KOREA		2.35	%			686		—
Noeul Green Energy Co., Ltd.	Power generation	KOREA		29.00	%			1,740		8,015
Naepo Green Energy Co., Ltd.	Power generation	KOREA		41.67	%			29,200		—
Goseong Green Energy Co., Ltd.(*2)	Power generation	KOREA		1.12	%			2,900		2,459
Gangneung Eco Power Co., Ltd.(*2)	Power generation	KOREA		1.61	%			2,900		2,495
Shin Pyeongtaek Power Co., Ltd.	Power generation	KOREA		40.00	%			72,000		67,600
Heang Bok Do Si Photovoltaic Power Co., Ltd.	Power generation	KOREA		28.00	%			194		202
Dongducheon Dream Power Co., Ltd.(*14)	Power generation	KOREA		33.61	%			148,105		76,386

F-98

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(1)

Investments in associates and joint ventures as of December 31, 2018 and 2019 are as follows, continued:


2018
Investees	Key operation activities	Location	Percentage of ownership				Acquisition cost		Book value
	In millions of won
Jinbhuvish Power Generation Pvt. Ltd.(*2)	Power generation	INDIA		5.16	%	￦		9,000		—
SE Green Energy Co., Ltd.	Power generation	KOREA		47.76	%			3,821		3,366
Daegu Photovoltaic Co., Ltd.	Power generation	KOREA		29.00	%			1,230		2,002
Jeongam Wind Power Co., Ltd.	Power generation	KOREA		40.00	%			5,580		4,589
Korea Power Engineering Service Co., Ltd.	Construction and service	KOREA		29.00	%			290		4,333
Busan Green Energy Co., Ltd.	Power generation	KOREA		29.00	%			5,243		12,537
Gunsan Bio Energy Co., Ltd.(*2)	Power generation	KOREA		18.87	%			1,000		—
Korea Electric Vehicle Charging Service	Electric vehicle charge service	KOREA		28.00	%			2,800		1,593
Ulleungdo Natural Energy Co., Ltd.	Renewable power generation	KOREA		29.85	%			8,000		4,628
Korea Nuclear Partners Co., Ltd.	Electric material agency	KOREA		29.00	%			290		175
Tamra Offshore Wind Power Co., Ltd.	Power generation	KOREA		27.00	%			8,910		10,401
Korea Electric Power Corporation Fund(*11)	Developing electric enterprises	KOREA		98.09	%			51,500		47,189
Energy Infra Asset Management Co., Ltd.(*3)	Asset management	KOREA		9.90	%			297		665
Daegu clean Energy Co., Ltd.	Renewable power generation	KOREA		28.00	%			140		17
YaksuESS Co., Ltd	Installing ESS related equipment	KOREA		29.00	%			210		460
Nepal Water & Energy Development Company Private Limited(*13)	Construction and operation of utility plant	NEPAL		57.67	%			33,577		30,961
Gwangyang Green Energy Co., Ltd.	Power generation	KOREA		20.00	%			2,000		1,206
PND solar., Ltd	Power generation	KOREA		29.00	%			1,250		1,020
Hyundai Eco Energy Co., Ltd.(*2)	Power generation	KOREA		19.00	%			3,610		3,388
YeongGwang Yaksu Wind Electric. Co., Ltd(*2)	Power generation	KOREA		9.63	%			533		533

								2,338,421		4,064,820

<Joint ventures>
KEPCO-Uhde Inc.(*6)	Power generation	KOREA		52.80	%			11,355		188
Eco Biomass Energy Sdn. Bhd.(*6)	Power generation	MALAYSIA		61.53	%			14,439		—
Shuweihat Asia Power Investment B.V.	Holding company	NETHERLANDS		49.00	%			44,405		27,251
Shuweihat Asia Operation & Maintenance Company(*6)	Maintenance of utility plant	CAYMAN		55.00	%			30		792
Waterbury Lake Uranium L.P.	Resources development	CANADA		34.07	%			26,602		19,032
ASM-BG Investicii AD	Power generation	BULGARIA		50.00	%			16,101		21,379
RES Technology AD	Power generation	BULGARIA		50.00	%			15,595		15,209
KV Holdings, Inc.	Power generation	PHILIPPINES		40.00	%			2,103		1,918
KEPCO SPC Power Corporation(*6)	Construction and operation of utility plant	PHILIPPINES		75.20	%			94,579		208,306
Gansu Datang Yumen Wind Power Co., Ltd.	Power generation	CHINA		40.00	%			16,621		9,981
Datang Chifeng Renewable Power Co., Ltd.	Power generation	CHINA		40.00	%			121,928		166,162

F-99

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(1)

Investments in associates and joint ventures as of December 31, 2018 and 2019 are as follows, continued:


2018
Investees	Key operation activities	Location	Percentage of ownership				Acquisition cost		Book value
	In millions of won
Datang KEPCO Chaoyang Renewable Power Co., Ltd.	Power generation	CHINA		40.00	%	￦		10,858		39,442
Rabigh Electricity Company	Power generation	SAUDI ARABIA		40.00	%			109,743		105,328
Rabigh Operation & Maintenance Company Limited	Maintenance of utility plant	SAUDI ARABIA		40.00	%			70		5,834
Jamaica Public Service Company Limited	Power generation	JAMAICA		40.00	%			301,910		239,632
KW Nuclear Components Co., Ltd.	Manufacturing	KOREA		45.00	%			833		7,708
Busan Shinho Solar Power Co., Ltd.	Power generation	KOREA		25.00	%			2,100		4,761
GS Donghae Electric Power Co., Ltd.	Power generation	KOREA		34.00	%			204,000		240,591
Global Trade Of Power System Co., Ltd.	Exporting products and technology of small or medium business by proxy	KOREA		29.00	%			290		515
Expressway Solar-light Power Generation Co., Ltd.	Power generation	KOREA		29.00	%			1,856		2,676
Daejung Offshore Wind Power Co., Ltd.	Power generation	KOREA		49.90	%			5,190		2,669
Amman Asia Electric Power Company(*6)	Power generation	JORDAN		60.00	%			111,476		177,357
KAPES, Inc.(*6)	R&D	KOREA		51.00	%			5,629		9,079
Dangjin Eco Power Co., Ltd.	Power generation	KOREA		34.00	%			61,540		19,912
Honam Wind Power Co., Ltd.	Power generation	KOREA		29.00	%			3,480		4,860
Chun-cheon Energy Co., Ltd.	Power generation	KOREA		29.90	%			52,700		42,505
Yeonggwangbaeksu Wind Power Co., Ltd.(*3)	Power generation	KOREA		15.00	%			3,000		2,843
Nghi Son 2 Power LLC	Power generation	VIETNAM		50.00	%			2,781		—
Kelar S.A(*6)	Power generation	CHILE		65.00	%			78,060		72,824
PT. Tanjung Power Indonesia	Power generation	INDONESIA		35.00	%			746		7,081
Incheon New Power Co., Ltd.	Power generation	KOREA		29.00	%			461		579
Seokmun Energy Co., Ltd.	Power generation	KOREA		29.00	%			15,370		16,751
Daehan Wind Power PSC	Power generation	JORDAN		50.00	%			3,191		1,632
Barakah One Company(*12)	Power generation	UAE		18.00	%			118		3,807
Nawah Energy Company(*12)	Operation of utility plant	UAE		18.00	%			296		274
MOMENTUM	International thermonuclear experimental reactor construction management	FRANCE		33.33	%			1		582
Daegu Green Power Co., Ltd.	Power generation	KOREA		29.00	%			46,225		41,110
Yeonggwang Wind Power Co., Ltd.	Power generation	KOREA		41.00	%			15,375		15,304
Chester Solar IV SpA(*6)	Power generation	CHILE		81.82	%			1,700		1,851
Chester Solar V SpA(*6)	Power generation	CHILE		81.82	%			525		474
Diego de Almagro Solar SpA(*6)	Power generation	CHILE		81.82	%			2,091		1,663
South Jamaica Power Company Limited	Power generation	JAMAICA		20.00	%			16,231		16,124
Daesan Green Energy Co., Ltd.	Power generation	KOREA		35.00	%			17,850		17,433
RE Holiday Holdings LLC	Power generation	USA		50.00	%			42,948		51,094
RE Pioneer Holdings LLC	Power generation	USA		50.00	%			27,891		38,898
RE Barren Ridge 1 Holdings LLC	Power generation	USA		50.00	%			28,021		41,415
RE Astoria 2 LandCo LLC	Power generation	USA		50.00	%			5,188		5,410
RE Barren Ridge LandCo LLC	Power generation	USA		50.00	%			2,187		1,898

F-100

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(1)

Investments in associates and joint ventures as of December 31, 2018 and 2019 are as follows, continued:


2018
Investees	Key operation activities	Location	Percentage of ownership				Acquisition cost		Book value
	In millions of won
Laurel SpA(*6)	Power generation	CHILE		81.82	%	￦		1,222		921
KIAMCO KOWEPO Bannerton Hold Co Pty Ltd(*3)	Power generation	AUSTRALIA		12.37	%			4,095		3,940
Chile Solar JV SpA	Power generation	CHILE		50.00	%			36,654		36,865
Taebaek Gadeoksan Wind Power Co., Ltd.	Power generation	KOREA		46.58	%			8,500		8,508
Cheong-Song Noraesan Wind Power Co., Ltd.	Power generation	KOREA		24.76	%			2,073		2,073
Chester Solar I SpA(*6)	Power generation	CHILE		81.82	%			1,181		1,181
Solar Philippines Calatagan Corporation	Power generation	PHILIPPINES		38.00	%			47,903		47,903

								1,647,317		1,813,525

						￦		3,985,738		5,878,345

(*1)	The effective percentage of ownership is 21.57% considering treasury stocks.

(*2)

The effective percentage of ownership is less than 20%. However, the Company can exercise significant influence by virtue of its contractual right to appoint directors to the board of directors of the entity, and by strict decision criteria of the Company’s financial and operating policy of the board of directors.

(*3)	The effective percentage of ownership is less than 20%. However, the Company can exercise significant influence by virtue of its contractual right to appoint a director to the board of directors of the entity.

(*4)

The effective percentage of ownership is less than 20%. However, the Company can exercise significant influence by virtue of its contractual right to appoint one out of four members of the steering committee of the entity. Moreover, the Company has significant financial transactions, which can affect its influence on the entity.

(*5)

The effective percentage of ownership is 100%. However, the Government regulates the Company’s ability to make operating and financial decisions over the entity, as the Government requires maintaining arms-length transactions between KPX and the Company’s other subsidiaries. The Company can exercise significant influence by its right to nominate directors to the board of directors of the entity.

(*6)	The effective percentage of ownership is more than 50%. However, according to the shareholders’ agreement, all critical financial and operating decisions must be agreed to by all ownership parties. For this reason, the entities are classified as joint ventures.

(*7)	As of reporting date, the annual reporting period of all associates and joint ventures ends on December 31, except for Pioneer Gas Power Limited whose reporting period ends on March 31.

(*8)

As of December 31, 2018, 15.64% of ownership of Hyundai Energy Co., Ltd. is held by NH Power ll Co., Ltd. and NH Bank. According to the shareholders’ agreement reached on March 2011, not only does the Company have a call option to acquire the investment in Hyundai Energy Co., Ltd. from NH Power ll Co., Ltd. and NH Bank with a certain rate of return, NH Power ll Co., Ltd. and NH Bank also have put options to dispose of their investment to the Company. In connection with this agreement, the Company applied the equity method on the investment in Hyundai Energy Co., Ltd. with 46.30% of ownership.

(*9)	The Company’s effective percentage of ownership excluding the redeemable convertible preferred stock is 25.54%.

(*10)

The effective percentage of ownership is less than 20% but the Company can exercise significant influence by virtue of its contractual right to appoint a director to the board of directors of the entity and the fact that the dominant portion of the investee’s sales transactions is generated from the Company.

(*11)

The effective percentage of ownership is more than 50% but the Company does not hold control over relevant business while it exercises significant influence by participating in the Investment Decision Committee. For this reason, the entity is classified as an associate.

F-101

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(1)

Investments in associates and joint ventures as of December 31, 2018 and 2019 are as follows, continued:

(*12)

The effective percentage of ownership is less than 20% but the Company has joint control over the entity as decisions on the major activities require the unanimous consent of the parties that collectively control the entity.

(*13)

The effective percentage of ownership is more than 50% but the Company does not hold control over the entity according to the shareholders’ agreement. For this reason, the entity is classified as an associate.

(*14)

The effective percentage of ownership is 34.01% considering redeemable convertible preferred stock.


2019
Investees	Key operation activities	Location	Percentage of ownership				Acquisition cost		Book value
	In millions of won
<Associates>
Korea Gas Corporation(*1)	Importing and wholesaling LNG	KOREA		20.47	%	￦		94,500		1,693,967
Korea Electric Power Industrial Development Co., Ltd.	Electricity metering and others	KOREA		29.00	%			4,727		25,393
YTN Co., Ltd.	Broadcasting	KOREA		21.43	%			59,000		39,747
Cheongna Energy Co., Ltd.	Generating and distributing vapor and hot/cold water	KOREA		43.90	%			48,353		1,411
Gangwon Wind Power Co., Ltd.(*2)	Power generation	KOREA		15.00	%			5,725		12,327
Hyundai Green Power Co., Ltd.	Power generation	KOREA		29.00	%			88,885		124,253
Korea Power Exchange(*5)	Management of power market and others	KOREA		100.00	%			127,839		258,899
Hyundai Energy Co., Ltd.(*8)	Power generation	KOREA		30.66	%			71,070		—
Ecollite Co., Ltd.	Artificial light-weight aggregate	KOREA		36.10	%			1,516		—
Taebaek Wind Power Co., Ltd.	Power generation	KOREA		25.00	%			3,810		7,039
Taeback Guinemi Wind Power Co., Ltd.	Power generation	KOREA		25.00	%			3,420		2,553
Pyeongchang Wind Power Co., Ltd.	Power generation	KOREA		25.00	%			3,875		5,877
Daeryun Power Co., Ltd.(*3)	Power generation	KOREA		9.34	%			40,854		26,247
Changjuk Wind Power Co., Ltd.	Power generation	KOREA		30.00	%			3,801		8,520
KNH Solar Co., Ltd.	Power generation	KOREA		27.00	%			1,296		2,382
SPC Power Corporation	Power generation	PHILIPPINES		38.00	%			20,635		63,583
Gemeng International Energy Co., Ltd.	Power generation	CHINA		34.00	%			413,153		670,896
PT. Cirebon Electric Power	Power generation	INDONESIA		27.50	%			40,365		123,425
KNOC Nigerian East Oil Co., Ltd.(*4)	Resources development	NIGERIA		14.63	%			12		—
KNOC Nigerian West Oil Co., Ltd.(*4)	Resources development	NIGERIA		14.63	%			12		—
PT Wampu Electric Power	Power generation	INDONESIA		46.00	%			21,292		29,355
PT. Bayan Resources TBK	Resources development	INDONESIA		20.00	%			615,860		445,141
S-Power Co., Ltd.	Power generation	KOREA		49.00	%			132,300		115,784
Pioneer Gas Power Limited(*7)	Power generation	INDIA		38.50	%			49,831		—
Eurasia Energy Holdings	Power generation and resources development	RUSSIA		40.00	%			461		—
Xe-Pian Xe-Namnoy Power Co., Ltd.	Power generation	LAOS		25.00	%			87,426		72,935
Hadong Mineral Fiber Co., Ltd.(*3)	Recycling fly ashes	KOREA		8.33	%			50		—
Green Biomass Co., Ltd.(*10)	Power generation	KOREA		7.85	%			714		108
PT. Mutiara Jawa	Manufacturing and operating floating coal terminal	INDONESIA		29.00	%			2,978		1,438
Samcheok Eco Materials Co., Ltd.(*9)	Recycling fly ashes	KOREA		2.35	%			686		—
Noeul Green Energy Co., Ltd.	Power generation	KOREA		29.00	%			1,740		6,610
Naepo Green Energy Co., Ltd.	Power generation	KOREA		41.67	%			29,200		—
Goseong Green Energy Co., Ltd.(*2)	Power generation	KOREA		1.12	%			2,900		2,340

F-102

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(1)

Investments in associates and joint ventures as of December 31, 2018 and 2019 are as follows, continued:


2019
Investees	Key operation activities	Location	Percentage of ownership				Acquisition cost		Book value
	In millions of won
Gangneung Eco Power Co., Ltd.(*2)	Power generation	KOREA		1.61	%	￦		2,900		2,430
Shin Pyeongtaek Power Co., Ltd.	Power generation	KOREA		40.00	%			72,000		66,956
Heang Bok Do Si Photovoltaic Power Co., Ltd.	Power generation	KOREA		28.00	%			194		215
Dongducheon Dream Power Co., Ltd.(*14)	Power generation	KOREA		33.61	%			148,105		76,547
Jinbhuvish Power Generation Pvt. Ltd.(*2)	Power generation	INDIA		5.16	%			9,000		—
Daejung Offshore Wind Power Co., Ltd.(*16)	Power generation	KOREA		49.90	%			5,190		2,361
GS Donghae Electric Power Co., Ltd.(*16)	Power generation	KOREA		34.00	%			204,000		255,983
Daegu Photovoltaic Co., Ltd.	Power generation	KOREA		29.00	%			1,230		2,060
Busan Green Energy Co., Ltd.	Power generation	KOREA		29.00	%			5,243		10,637
Gunsan Bio Energy Co., Ltd.(*2)	Power generation	KOREA		18.87	%			1,000		—
Korea Electric Vehicle Charging Service	Electric vehicle charge service	KOREA		28.00	%			2,800		1,063
Korea Nuclear Partners Co., Ltd.	Electric material agency	KOREA		29.00	%			290		—
Korea Electric Power Corporation Fund(*11)	Developing electric enterprises	KOREA		98.09	%			51,500		41,126
Energy Infra Asset Management Co., Ltd.(*3)	Asset management	KOREA		9.90	%			297		791
Daegu clean Energy Co., Ltd.	Renewable power generation	KOREA		28.00	%			140		13
YaksuESS Co., Ltd	Installing ESS related equipment	KOREA		29.00	%			210		516
Nepal Water & Energy Development Company Private Limited(*13)	Construction and operation of utility plant	NEPAL		57.76	%			35,571		31,145
Gwangyang Green Energy Co., Ltd.	Power generation	KOREA		20.00	%			2,000		948
PND solar., Ltd	Power generation	KOREA		29.00	%			1,250		1,144
Hyundai Eco Energy Co., Ltd.(*2)	Power generation	KOREA		19.00	%			3,610		3,781
YeongGwang Yaksu Wind Electric. Co., Ltd(*2)	Power generation	KOREA		9.63	%			533		386
Green Energy Electricity Generation Co., Ltd.	Power generation	KOREA		29.00	%			1,189		163
Korea Energy Solutions Co., Ltd.	R & D	KOREA		20.00	%			300		259
ITR Co., Ltd.	R & D	KOREA		20.00	%			50		33
Structure test network Co., Ltd.	Technical testing and consulting	KOREA		20.00	%			25		21
Namjeongsusang Solar Power Operation Co., Ltd.(*18)	Power generation	KOREA		15.00	%			969		812
Indeck Niles Development, LLC(*23)	Power generation	USA		50.00	%			—		—
Indeck Niles Asset Management, LLC	Power generation	USA		33.33	%			—		87
Hanwha Corporation-linked Sunlight Power Special Private Equity Investment Trust No. 1	Holding company	KOREA		49.00	%			7,105		7,126
Suwon New Power Co., Ltd.	Power generation	KOREA		39.90	%			798		798

F-103

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(1)

Investments in associates and joint ventures as of December 31, 2018 and 2019 are as follows, continued:


2019
Investees	Key operation activities	Location	Percentage of ownership				Acquisition cost		Book value
	In millions of won
KPGE Inc.	Power generation materials business	KOREA		29.00	%	￦		287		287
Gwangbaek Solar Power Investment Co., Ltd.(*21)	Power generation	KOREA		19.00	%			2,054		2,054
Goduk Clean Energy Co., Ltd.(*20)	Fuel cell generation	KOREA		61.00	%			1,830		1,830

								2,539,956		4,251,802

<Joint ventures>
KEPCO-Uhde Inc.(*6)	Power generation	KOREA		52.80	%			11,355		134
Shuweihat Asia Power Investment B.V.	Holding company	NETHERLANDS		49.00	%			44,405		18,318
Shuweihat Asia Operation & Maintenance Company(*6)	Maintenance of utility plant	CAYMAN		55.00	%			30		1,408
Waterbury Lake Uranium L.P.	Resources development	CANADA		33.48	%			26,602		20,562
ASM-BG Investicii AD	Power generation	BULGARIA		50.00	%			16,101		19,376
RES Technology AD	Power generation	BULGARIA		50.00	%			15,595		16,248
KV Holdings, Inc.	Power generation	PHILIPPINES		40.00	%			2,103		2,441
KEPCO SPC Power Corporation(*6)	Construction and operation of utility plant	PHILIPPINES		75.20	%			94,579		214,794
Gansu Datang Yumen Wind Power Co., Ltd.	Power generation	CHINA		40.00	%			16,621		8,149
Datang Chifeng Renewable Power Co., Ltd.	Power generation	CHINA		40.00	%			121,928		185,307
Datang KEPCO Chaoyang Renewable Power Co., Ltd.	Power generation	CHINA		40.00	%			10,858		41,024
Rabigh Electricity Company	Power generation	SAUDI ARABIA		40.00	%			109,743		109,096
Rabigh Operation & Maintenance Company Limited	Maintenance of utility plant	SAUDI ARABIA		40.00	%			70		6,879
Jamaica Public Service Company Limited	Power generation	JAMAICA		40.00	%			301,910		253,607
KW Nuclear Components Co., Ltd.	Manufacturing	KOREA		45.00	%			833		9,052
Busan Shinho Solar Power Co., Ltd.	Power generation	KOREA		25.00	%			2,100		5,045
Global Trade Of Power System Co., Ltd.	Exporting products and technology of small or medium business by proxy	KOREA		29.00	%			290		571
Expressway Solar-light Power Generation Co., Ltd.	Power generation	KOREA		29.00	%			1,856		2,883
Amman Asia Electric Power Company(*6)	Power generation	JORDAN		60.00	%			111,476		192,164
KAPES, Inc.(*6)	R&D	KOREA		51.00	%			5,629		10,832
Honam Wind Power Co., Ltd.	Power generation	KOREA		29.00	%			3,480		4,375
Jeongam Wind Power Co., Ltd.(*16)	Power generation	KOREA		40.00	%			5,580		4,437
Korea Power Engineering Service Co., Ltd.(*16)	Construction and service	KOREA		29.00	%			290		4,902
Chun-cheon Energy Co., Ltd.	Power generation	KOREA		29.90	%			52,700		34,872
Yeonggwangbaeksu Wind Power Co., Ltd.(*3)	Power generation	KOREA		15.00	%			3,000		3,040
Nghi Son 2 Power LLC	Power generation	VIETNAM		50.00	%			2,781		—

F-104

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(1)

Investments in associates and joint ventures as of December 31, 2018 and 2019 are as follows, continued:


2019
Investees	Key operation activities	Location	Percentage of ownership				Acquisition cost		Book value
	In millions of won
Kelar S.A(*6)	Power generation	CHILE		65.00	%	￦		78,060		70,462
PT. Tanjung Power Indonesia	Power generation	INDONESIA		35.00	%			26,892		34,327
Incheon New Power Co., Ltd.	Power generation	KOREA		29.00	%			461		—
Seokmun Energy Co., Ltd.	Power generation	KOREA		29.00	%			15,370		17,342
Daehan Wind Power PSC	Power generation	JORDAN		50.00	%			3,191		1,757
Barakah One Company(*12)	Power generation	UAE		18.00	%			118		—
Nawah Energy Company(*12)	Operation of utility plant	UAE		18.00	%			296		285
MOMENTUM	International thermonuclear experimental reactor construction management	FRANCE		33.33	%			1		553
Daegu Green Power Co., Ltd.	Power generation	KOREA		29.00	%			46,225		22,824
Yeonggwang Wind Power Co., Ltd.	Power generation	KOREA		46.00	%			17,475		17,627
Chester Solar IV SpA	Power generation	CHILE		45.00	%			1,700		672
Chester Solar V SpA	Power generation	CHILE		45.00	%			525		146
Diego de Almagro Solar SpA	Power generation	CHILE		45.00	%			2,091		1,035
South Jamaica Power Company Limited	Power generation	JAMAICA		20.00	%			20,521		13,863
Daesan Green Energy Co., Ltd.	Power generation	KOREA		35.00	%			17,850		17,182
RE Holiday Holdings LLC	Power generation	USA		50.00	%			42,948		42,070
RE Pioneer Holdings LLC	Power generation	USA		50.00	%			27,891		31,156
RE Barren Ridge 1 Holdings LLC	Power generation	USA		50.00	%			28,021		42,916
RE Astoria 2 LandCo LLC	Power generation	USA		50.00	%			5,188		5,602
RE Barren Ridge LandCo LLC	Power generation	USA		50.00	%			2,187		1,966
Laurel SpA	Power generation	CHILE		45.00	%			1,222		595
KIAMCO KOWEPO Bannerton Hold Co Pty Ltd(*3)	Power generation	AUSTRALIA		12.37	%			4,095		4,024
Chile Solar JV SpA	Power generation	CHILE		50.00	%			37,689		34,859
Taebaek Gadeoksan Wind Power Co., Ltd.	Power generation	KOREA		37.78	%			8,500		7,846
Cheong-Song Noraesan Wind Power Co., Ltd.	Power generation	KOREA		29.01	%			3,200		3,043
Chester Solar I SpA	Power generation	CHILE		45.00	%			1,181		1,157
Solar Philippines Calatagan Corporation	Power generation	PHILIPPINES		38.00	%			47,903		48,930
Saemangeum Solar Power Co., Ltd.(*22)	Power generation	KOREA		81.00	%			10,000		8,324
Chungsongmeon BongSan wind power Co., Ltd.	Power generation	KOREA		29.00	%			2,900		2,764
Jaeun Resident Wind Power Plant Co., Ltd.	Power generation	KOREA		29.00	%			2,494		2,198
DE Energia SpA	Power generation	CHILE		49.00	%			8,364		8,665
Dangjin Eco Power Co., Ltd. (newly)(*15)	Power generation	KOREA		34.00	%			25,661		25,661
Haemodum Solar Co., Ltd.	Power generation	KOREA		49.00	%			2,940		2,940
Yangyang Wind Power Co., Ltd.(*17)	Power generation	KOREA		99.54	%			10,800		10,800
HORUS SOLAR, S.A. DE C.V.(*19)	Renewable power generation	MEXICO		14.95	%			3,403		3,403

F-105

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(1)

Investments in associates and joint ventures as of December 31, 2018 and 2019 are as follows, continued:


2019
Investees	Key operation activities	Location	Percentage of ownership				Acquisition cost		Book value
	In millions of won
RECURSOS SOLARES PV DE MEXICO II, S.A. DE C.V.(*19)	Renewable power generation	MEXICO		14.95	%	￦		672		672
SUNMEX RENOVABLES, S.A. DE C.V.(*19)	Renewable power generation	MEXICO		14.95	%			222		222
Stavro Holding II AB	Holding company	SWEDEN		20.00	%			5,524		5,625

								1,475,696		1,663,029

						￦		4,015,652		5,914,831

(*1)	The effective percentage of ownership is 21.57% considering treasury stocks.

(*2)

(*3)	The effective percentage of ownership is less than 20%. However, the Company can exercise significant influence by virtue of its contractual right to appoint a director to the board of directors of the entity.

(*4)

(*5)

The effective percentage of ownership is 100%. However, the Government regulates the Company’s ability to make operating and financial decisions over the entity, as the Government requires maintaining arms-length transactions between KPX and the Company’s other subsidiaries. The Company can exercise significant influence by virtue of right to nominate directors to the board of directors of the entity.

(*6)	The effective percentage of ownership is more than 50%. However, according to the shareholders’ agreement, all critical financial and operating decisions must be agreed to by all ownership parties. For this reason, the entities are classified as joint ventures.

(*7)	As of reporting date, the annual reporting period of all associates and joint ventures ends on December 31, except for Pioneer Gas Power Limited whose reporting period ends on March 31.

(*8)

As of December 31, 2019, 15.64% of ownership of Hyundai Energy Co., Ltd. is held by NH Power ll Co., Ltd. and NH Bank. According to the shareholders’ agreement reached on March 2011, not only does the Company have a call option to acquire the investment in Hyundai Energy Co., Ltd. from NH Power ll Co., Ltd. and NH Bank with a certain rate of return, NH Power ll Co., Ltd. and NH Bank also have put options to dispose of their investment to the Company. In connection with this agreement, the Company applied the equity method on the investment in Hyundai Energy Co., Ltd. with 46.30% of ownership.

(*9)	The Company’s effective percentage of ownership excluding the redeemable convertible preferred stock is 25.54%.

(*10)

(*11)

(*12)

(*13)

F-106

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(1)

Investments in associates and joint ventures as of December 31, 2018 and 2019 are as follows, continued:

(*14)

The effective percentage of ownership is 34.01% considering the conversion of redeemable convertible preferred stock into ordinary stock.

(*15)

Eumseong Natural Gas Power Co., Ltd. and Dangjin Eco Solar Power Co., Ltd. were established by spin-off from Dangjin Eco Power Co., Ltd. After the spin-off, Eumseong Natural Gas Power Co., Ltd. was merged and absorbed by the Company during December 2019.

(*16)

Daejung Offshore Wind Power Co., Ltd. and GS Donghae Electric Power Co., Ltd. are reclassified from joint ventures to associates, and Jeongam Wind Power Co., Ltd. and Korea Power Engineering Service Co., Ltd. are reclassified from associates to joint ventures during the year ended December 31, 2019.

(*17)

The temporary percentage of ownership is more than 50% due to differences in the timing of the payment. The Company is expected to exert significant influence after payment is completed in the first quarter of 2020.

(*18)

The effective percentage of ownership is less than 20%. However, the Company considers the major decision-making body to be the general decision of the board of directors, and the general decision of the board of directors can be passed only by two directors. For this reason, the entities are classified as an associate.

(*19)

The effective percentage of ownership is less than 20%. However, according to the shareholders’ agreement, decisions on the major activities must be agreed to by all ownership parties. For this reason, the entities are classified as joint ventures.

(*20)

The effective percentage of ownership is 61%. However, it seems the Company doesn’t have power on the Goduk Clean Energy Co., Ltd. due to its proportion to make decisions, which is less than 50%. The Company can exercise significant influence on the entity by participating in the board of directors and others. Therefore, the entity is classified as an associate.

(*21)

The effective percentage of ownership is less than 20%. However, the Company can exercise significant influence by virtue of its contractual right to appoint a director to the board of directors of the entity.

(*22)

The effective percentage of ownership is more than 50%. However, according to the shareholders’ agreement, all operation related decisions must be agreed by all ownership parties. For this reason, the entity is classified as a joint venture.

(*23)

Although the investment amount is not paid as of December 31, 2019, the Company has an investment agreement on 50% of the interests. the Company can exercise significant influence by virtue of its contractual right to appoint a director to the board of directors of the entity.

(2)

The fair value of associates which are actively traded on an open market and have a readily available market value as of December 31, 2018 and 2019 are as follows:


Investees		2018		2019
		In millions of won
<Associates>
Korea Electric Power Industrial Development Co., Ltd.	￦		33,609		33,089
Korea Gas Corporation(*)			910,980		715,365
YTN Co., Ltd.			18,900		18,450
SPC Power Corporation			72,710		117,230
PT. Bayan Resources TBK			1,017,601		880,860

(*)

An indicator of impairment has been identified for the Company’s investment in Korea Gas Corporation (‘‘KOGAS’’) for the years ended December 31, 2018 and 2019 as management determined that the carrying amount of the investment in KOGAS at ￦1,701,848 million and ￦1,693,967 million respectively were significantly higher than its fair value. Accordingly, management has assessed the recoverable amount of the investment by estimating the Company’s share of the present value of the estimated future cash flows expected to be generated by KOGAS. The

F-107

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(2)

The fair value of associates which are actively traded on an open market and have a readily available market value as of December 31, 2018 and 2019 are as follows, continued:

carrying amount of KOGAS as at December 31, 2018 and 2019 are supported by the recoverable amount determination and as such, no impairment has been recognized for the years ended December 31, 2018 and 2019.

The recoverable amount estimate is most sensitive to assumptions regarding long-term revenue forecasts as well as the discount rate:

•

Revenue forecasts: price and volume of gas sold are based on the long-term natural gas supply and demand programs approved by the Ministry of Trade, Industry & Energy.

•

Discount rate: the discount rate is derived using the weighted average cost of capital methodology adjusted for any risks that are not reflected in the underlying cash flows. A real post-tax discount rate of 4.80% and 4.70% was applied to post-tax cash flows respectively as at December 31, 2018 and 2019.

Changes in circumstances may affect the assumptions used to determine recoverable amount and could result in an impairment of KOGAS at future reporting dates.

(3)

Changes in investments in associates and joint ventures for the years ended December 31, 2018 and 2019 are as follows:


2018
Investees		Beginning balance		Acquisition		Disposal		Dividends received			Share of income (loss)			Other comprehensive income (loss)			Others			Ending balance
		In millions of won
<Associates>
Korea Gas Corporation	￦		1,618,868		—		—		—			107,952			(24,843	)		(129	)		1,701,848
Korea Electric Power Industrial Development Co., Ltd.			21,838		—		—		(1,872	)		2,584			(102	)		(610	)		21,838
YTN Co., Ltd.			40,606		—		—		(180	)		545			(186	)		(447	)		40,338
Cheongna Energy Co., Ltd.			8,337		—		—		—			(4,872	)		—			—			3,465
Gangwon Wind Power Co., Ltd.			13,855		—		—		(2,272	)		1,637			—			—			13,220
Hyundai Green Power Co., Ltd.			114,806		—		—		(8,889	)		21,243			—			—			127,160
Korea Power Exchange			237,631		—		—		—			16,031			—			(1,860	)		251,802
AMEC Partners Korea Ltd.			215		—		—		—			(6	)		—			—			209
Hyundai Energy Co., Ltd.			—		—		—		—			—			—			—			—
Ecollite Co., Ltd.			—		—		—		—			—			—			—			—
Taebaek Wind Power Co., Ltd.			5,319		—		—		(196	)		542			—			—			5,665
Taeback Guinemi Wind Power Co., Ltd.			3,089		—		—		—			(520	)		—			—			2,569
Pyeongchang Wind Power Co., Ltd.			4,136		—		—		—			1,283			—			—			5,419
Daeryun Power Co., Ltd.(*5)			25,113		—		—		—			(189	)		184			991			26,099
Changjuk Wind Power Co., Ltd.			7,515		—		—		(416	)		987			—			—			8,086
KNH Solar Co., Ltd.			2,218		—		—		—			119			—			—			2,337
SPC Power Corporation			52,283		—		—		(9,549	)		4,235			10,578			11			57,558
Gemeng International Energy Co., Ltd.			649,973		—		—		(11,246	)		15,156			(6,873	)		—			647,010
PT. Cirebon Electric Power			97,410		—		—		(4,432	)		9,385			6,265			—			108,628
KNOC Nigerian East Oil Co., Ltd.			—		—		—		—			2,615			(471	)		(2,144	)		—
KNOC Nigerian West Oil Co., Ltd.			—		—		—		—			2,342			(414	)		(1,928	)		—
PT Wampu Electric Power			29,403		—		—		—			408			1,286			—			31,097
PT. Bayan Resources TBK			451,831		—		—		(33,651	)		74,776			18,690			—			511,646

F-108

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(3)

Changes in investments in associates and joint ventures for the years ended December 31, 2018 and 2019 are as follows, continued:


2018
Investees		Beginning balance		Acquisition		Disposal		Dividends received			Share of income (loss)			Other comprehensive income (loss)			Others			Ending balance
		In millions of won
S-Power Co., Ltd.	￦		116,945		—		—		—			(2,326	)		—			(53	)		114,566
Pioneer Gas Power Limited			38,659		—		—		—			(17,684	)		(580	)		—			20,395
Eurasia Energy Holdings			—		—		—		—			—			—			—			—
Xe-Pian Xe-Namnoy Power Co., Ltd.			61,779		12,893		—		—			(479	)		2,972			—			77,165
Hadong Mineral Fiber Co., Ltd.			—		—		—		—			—			—			—			—
Green Biomass Co., Ltd.			208		—		—		—			(93	)		—			—			115
PT. Mutiara Jawa			—		—		—		—			349			16			—			365
Samcheok Eco Materials Co., Ltd.			—		—		—		—			—			—			—			—
Noeul Green Energy Co., Ltd.			2,067		—		—		—			5,687			—			261			8,015
Naepo Green Energy Co., Ltd.(*4)			20,598		—		—		—			(13,511	)		—			(7,087	)		—
Goseong Green Energy Co., Ltd.			2,597		—		—		—			(138	)		—			—			2,459
Gangneung Eco Power Co., Ltd.			2,583		—		—		—			(88	)		—			—			2,495
Shin Pyeongtaek Power Co., Ltd.			34,903		28,080		—		—			(2,946	)		6,673			890			67,600
Heang Bok Do Si Photovoltaic Power Co., Ltd.			187		—		—		—			15			—			—			202
Dongducheon Dream Power Co., Ltd.			53,233		36,971		—		—			(13,824	)		—			6			76,386
Jinbhuvish Power Generation Pvt. Ltd.			—		—		—		—			—			—			—			—
SE Green Energy Co., Ltd.			3,476		—		—		—			(110	)		—			—			3,366
Daegu Photovoltaic Co., Ltd.			1,718		—		—		(128	)		412			—			—			2,002
Jeongam Wind Power Co., Ltd.			3,763		—		—		—			826			—			—			4,589
Korea Power Engineering Service Co., Ltd.			3,659		—		—		(218	)		929			—			(37	)		4,333
Busan Green Energy Co., Ltd.			7,363		—		—		—			5,037			—			137			12,537
Gunsan Bio Energy Co., Ltd.			—		—		—		—			—			—			—			—
Korea Electric Vehicle Charging Service			1,749		196		—		—			(352	)		—			—			1,593
Ulleungdo Natural Energy Co., Ltd.			6,370		—		—		—			(1,749	)		—			7			4,628
Korea Nuclear Partners Co., Ltd.			383		—		—		—			(208	)		—			—			175
Tamra Offshore Wind Power Co., Ltd.			8,560		—		—		—			1,841			—			—			10,401
Korea Electric Power Corporation Fund			47,974		—		—		—			(505	)		(280	)		—			47,189
Energy Infra Asset Management Co., Ltd.			476		—		—		—			189			—			—			665
Daegu clean Energy Co., Ltd.			11		—		—		—			6			—			—			17
YaksuESS Co., Ltd			194		—		—		—			266			—			—			460
Nepal Water & Energy Development Company Private Limited			30,498		—		—		—			(770	)		1,233			—			30,961
Gwangyang Green Energy Co., Ltd.			1,772		—		—		—			(566	)		—			—			1,206
PND solar., Ltd			1,250		—		—		—			(230	)		—			—			1,020
Hyundai Eco Energy Co., Ltd.			—		3,610		—		—			(222	)		—			—			3,388
YeongGwang Yaksu Wind Electric. Co., Ltd			—		533		—		—			—			—			—			533

			3,837,421		82,283		—		(73,049	)		216,009			14,148			(11,992	)		4,064,820

<Joint ventures>
KEPCO-Uhde Inc.			258		—		—		—			(70	)		—			—			188
Eco Biomass Energy Sdn. Bhd.			—		—		—		—			—			—			—			—

F-109

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(3)

Changes in investments in associates and joint ventures for the years ended December 31, 2018 and 2019 are as follows, continued:


2018
Investees		Beginning balance		Acquisition		Disposal			Dividends received			Share of income (loss)			Other comprehensive income (loss)			Others			Ending balance
		In millions of won
Datang Chaoyang Renewable Power Co., Ltd.(*3)	￦		27,262		—		—			—			743			1,009			(29,014	)		—
Shuweihat Asia Power Investment B.V.			15,675		—		(1,632	)		(499	)		3,075			10,632			—			27,251
Shuweihat Asia Operation & Maintenance Company			663		—		—			(859	)		946			42			—			792
Waterbury Lake Uranium L.P.			19,781		—		—			—			(3	)		(746	)		—			19,032
ASM-BG Investicii AD			21,202		—		—			(1,039	)		2,236			(1,020	)		—			21,379
RES Technology AD			14,375		—		—			—			812			22			—			15,209
KV Holdings, Inc.			1,918		—		—			(735	)		772			(37	)		—			1,918
KEPCO SPC Power Corporation			217,094		—		—			(41,601	)		44,909			(12,092	)		(4	)		208,306
Gansu Datang Yumen Wind Power Co., Ltd.			10,840		—		—			—			(818	)		(41	)		—			9,981
Datang Chifeng Renewable Power Co., Ltd.			171,055		—		—			(18,859	)		14,808			(842	)		—			166,162
Datang KEPCO Chaoyang Renewable Power Co., Ltd.(*3)			11,060		—		—			—			582			(1,214	)		29,014			39,442
Rabigh Electricity Company			99,356		—		—			(29,067	)		13,305			22,371			(637	)		105,328
Rabigh Operation & Maintenance Company Limited			3,987		—		—			(1,147	)		2,820			174			—			5,834
Jamaica Public Service Company Limited			221,153		—		—			(4,472	)		13,099			9,852			—			239,632
KW Nuclear Components Co., Ltd.			6,703		—		—			(208	)		1,213			—			—			7,708
Busan Shinho Solar Power Co., Ltd.			4,346		—		—			(340	)		755			—			—			4,761
GS Donghae Electric Power Co., Ltd.			220,727		—		—			—			20,061			—			(197	)		240,591
Global Trade Of Power System Co., Ltd.			577		—		—			—			(62	)		—			—			515
Expressway Solar-light Power Generation Co., Ltd.			2,463		—		—			—			213			—			—			2,676
KODE NOVUS I LLC(*1)			—		—		—			—			—			1,374			(1,374	)		—
KODE NOVUS II LLC(*2)			—		—		—			—			—			810			(810	)		—
Daejung Offshore Wind Power Co., Ltd.			2,969		—		—			—			(300	)		—			—			2,669
Amman Asia Electric Power Company			145,676		—		—			—			19,604			12,077			—			177,357
KAPES, Inc.			7,476		—		—			—			1,543			—			60			9,079
Dangjin Eco Power Co., Ltd.			57,928		—		—			—			(38,042	)		(65	)		91			19,912
Honam Wind Power Co., Ltd.			4,302		—		—			(348	)		906			—			—			4,860
Chun-cheon Energy Co., Ltd.			48,118		—		—			—			(5,613	)		—			—			42,505
Yeonggwangbaeksu Wind Power Co., Ltd.			2,734		—		—			—			109			—			—			2,843
Nghi Son 2 Power LLC			183		—		—			—			2,657			(2,840	)		—			—
Kelar S.A			67,233		—		—			—			2,732			2,859			—			72,824
PT. Tanjung Power Indonesia			1,776		—		—			—			3,373			1,928			4			7,081
Incheon New Power Co., Ltd.			619		—		—			(41	)		1			—			—			579
Seokmun Energy Co., Ltd.			13,786		—		—			—			2,965			—			—			16,751
Daehan Wind Power PSC			—		2,288		—			—			(1,311	)		37			618			1,632
Barakah One Company			626		—		—			—			2,162			1,019			—			3,807
Nawah Energy Company			258		—		—			—			4			12			—			274
MOMENTUM			391		—		—			—			195			(4	)		—			582

F-110

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(3)

Changes in investments in associates and joint ventures for the years ended December 31, 2018 and 2019 are as follows, continued:


2018
Investees		Beginning balance		Acquisition		Disposal			Dividends received			Share of income (loss)			Other comprehensive income (loss)			Others			Ending balance
		In millions of won
Daegu Green Power Co., Ltd.	￦		42,391		—		—			—			(1,283	)		—			2			41,110
Yeonggwang Wind Power Co., Ltd.			15,294		—		—			—			10			—			—			15,304
Chester Solar IV SpA			1,700		—		—			—			301			(150	)		—			1,851
Chester Solar V SpA			525		—		—			—			(21	)		(30	)		—			474
Diego de Almagro Solar SpA			2,091		—		—			—			(299	)		(129	)		—			1,663
South Jamaica Power Company Limited			6,704		9,141		—			—			(184	)		463			—			16,124
Daesan Green Energy Co., Ltd.			—		17,850		—			—			(417	)		—			—			17,433
RE Holiday Holdings LLC			—		42,948		—			(112	)		8,055			203			—			51,094
RE Pioneer Holdings LLC			—		27,891		—			(979	)		11,585			401			—			38,898
RE Barren Ridge 1 Holdings LLC			—		28,021		—			(1,114	)		13,994			514			—			41,415
RE Astoria 2 LandCo LLC			—		5,188		—			(504	)		866			(140	)		—			5,410
RE Barren Ridge LandCo LLC			—		2,187		—			(202	)		(25	)		(62	)		—			1,898
Laurel SpA			—		1,222		—			—			(309	)		8			—			921
KIAMCO KOWEPO Bannerton Hold Co Pty Ltd			—		4,095		—			—			(23	)		(132	)		—			3,940
Chile Solar JV SpA			—		36,654		—			—			4,453			(5,278	)		1,036			36,865
Taebaek Gadeoksan Wind Power Co., Ltd.			—		8,500		—			—			8			—			—			8,508
Cheong-Song Noraesan Wind Power Co., Ltd.			—		2,073		—			—			—			—			—			2,073
Chester Solar I SpA			—		1,181		—			—			—			—			—			1,181
Solar Philippines Calatagan Corporation			—		47,903		—			—			—			—			—			47,903

			1,493,275		237,142		(1,632	)		(102,126	)		147,092			40,985			(1,211	)		1,813,525

	￦		5,330,696		319,425		(1,632	)		(175,175	)		363,101			55,133			(13,203	)		5,878,345

(*1)	The Company reclassified its shares of KODE NOVUS I LLC to financial assets at FVOCI during the year ended December 31, 2018 due to non-participation of capital increase that resulted in loss of significant influence.

(*2)	The Company sold all of its shares of KODE NOVUS II LLC during the year ended December 31, 2018.

(*3)	Datang Chaoyang Renewable Power Co., Ltd. was merged with Datang KEPCO Chaoyang Renewable Power Co., Ltd. during the year ended December 31, 2018.

(*4)	It was determined that there is objective evidence of impairment due to prolonged operating losses. As a result, the Company recognized an impairment loss of ￦7,087 million in impairment loss on investments in associates and joint ventures for the year ended December 31, 2018.

(*5)	It was determined that there is objective evidence of impairment due to prolonged operating losses. As a result, the Company recognized an impairment loss of ￦820 million in impairment loss on investments in associates and joint ventures for the year ended December 31, 2018.

F-111

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(3)

Changes in investments in associates and joint ventures for the years ended December 31, 2018 and 2019 are as follows, continued:


2019
Investees		Beginning balance		Acquisition		Disposal		Dividends received			Share of income (loss)			Other comprehensive income (loss)			Others			Ending balance
		In millions of won
<Associates>
Korea Gas Corporation	￦		1,701,848		—		—		(25,704	)		8,511			12,687			(3,375	)		1,693,967
Korea Electric Power Industrial Development Co., Ltd.			21,838		—		—		(1,598	)		5,002			—			151			25,393
YTN Co., Ltd.			40,338		—		—		(180	)		(449	)		5			33			39,747
Cheongna Energy Co., Ltd.			3,465		—		—		—			(2,054	)		—			—			1,411
Gangwon Wind Power Co., Ltd.			13,220		—		—		(2,272	)		1,379			—			—			12,327
Hyundai Green Power Co., Ltd.			127,160		—		—		(8,889	)		5,982			—			—			124,253
Korea Power Exchange			251,802		—		—		—			10,907			—			(3,810	)		258,899
AMEC Partners Korea Ltd.			209		—		—		—			—			3			(212	)		—
Hyundai Energy Co., Ltd.			—		—		—		—			—			—			—			—
Ecollite Co., Ltd.			—		—		—		—			—			—			—			—
Taebaek Wind Power Co., Ltd.			5,665		—		—		—			1,374			—			—			7,039
Taeback Guinemi Wind Power Co., Ltd.			2,569		—		—		—			(16	)		—			—			2,553
Pyeongchang Wind Power Co., Ltd.			5,419		—		—		—			458			—			—			5,877
Daeryun Power Co., Ltd.			26,099		—		—		—			173			—			(25	)		26,247
Changjuk Wind Power Co., Ltd.			8,086		—		—		—			434			—			—			8,520
KNH Solar Co., Ltd.			2,337		—		—		—			45			—			—			2,382
SPC Power Corporation			57,558		—		—		(14,229	)		5,929			14,286			39			63,583
Gemeng International Energy Co., Ltd.			647,010		—		—		(11,468	)		26,300			9,209			(155	)		670,896
PT. Cirebon Electric Power			108,628		—		—		—			11,079			(65	)		3,783			123,425
KNOC Nigerian East Oil Co., Ltd.			—		—		—		—			(27	)		(380	)		407			—
KNOC Nigerian West Oil Co., Ltd.			—		—		—		—			(29	)		(349	)		378			—
PT Wampu Electric Power			31,097		—		—		—			(2,867	)		2			1,123			29,355
PT. Bayan Resources TBK			511,646		—		—		(71,100	)		6,181			(1,586	)		—			445,141
S-Power Co., Ltd.			114,566		—		—		—			1,218			—			—			115,784
Pioneer Gas Power Limited			20,395		—		—		—			(20,784	)		389			—			—
Eurasia Energy Holdings			—		—		—		—			—			—			—			—
Xe-Pian Xe-Namnoy Power Co., Ltd.			77,165		3,052		—		—			(10,210	)		2,928			—			72,935
Hadong Mineral Fiber Co., Ltd.			—		—		—		—			—			—			—			—
Green Biomass Co., Ltd.			115		—		—		—			(73	)		—			66			108
PT. Mutiara Jawa			365		—		—		—			1,031			42			—			1,438
Samcheok Eco Materials Co., Ltd.			—		—		—		—			—			—			—			—
Noeul Green Energy Co., Ltd.			8,015		—		—		—			(1,395	)		—			(10	)		6,610
Naepo Green Energy Co., Ltd.			—		—		—		—			—			—			—			—
Goseong Green Energy Co., Ltd.			2,459		—		—		—			(119	)		—			—			2,340
Gangneung Eco Power Co., Ltd.			2,495		—		—		—			(65	)		—			—			2,430
Shin Pyeongtaek Power Co., Ltd.			67,600		—		—		—			(827	)		198			(15	)		66,956
Heang Bok Do Si Photovoltaic Power Co., Ltd.			202		—		—		—			13			—			—			215
Dongducheon Dream Power Co., Ltd.			76,386		—		—		—			441			—			(280	)		76,547
Jinbhuvish Power Generation Pvt. Ltd.			—		—		—		—			—			—			—			—

F-112

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(3)

Changes in investments in associates and joint ventures for the years ended December 31, 2018 and 2019 are as follows, continued:


2019
Investees		Beginning balance		Acquisition		Disposal		Dividends received			Share of income (loss)			Other comprehensive income (loss)			Others			Ending balance
		In millions of won
Daejung Offshore Wind Power Co., Ltd.	￦		—		—		—		—			—			—			2,361			2,361
GS Donghae Electric Power Co., Ltd.			—		—		—		—			—			—			255,983			255,983
SE Green Energy Co., Ltd.			3,366		—		—		—			—			(75	)		(3,291	)		—
Daegu Photovoltaic Co., Ltd.			2,002		—		—		(327	)		385			—			—			2,060
Jeongam Wind Power Co., Ltd.			4,589		—		—		—			(152	)		—			(4,437	)		—
Korea Power Engineering Service Co., Ltd.			4,333		—		—		—			508			—			(4,841	)		—
Busan Green Energy Co., Ltd.			12,537		—		—		—			(1,884	)		—			(16	)		10,637
Gunsan Bio Energy Co., Ltd.			—		—		—		—			—			—			—			—
Korea Electric Vehicle Charging Service			1,593		—		—		—			(515	)		—			(15	)		1,063
Ulleungdo Natural Energy Co., Ltd.			4,628		—		—		—			(1	)		—			(4,627	)		—
Korea Nuclear Partners Co., Ltd.(*1)			175		—		—		—			(79	)		—			(96	)		—
Tamra Offshore Wind Power Co., Ltd.			10,401		—		—		—			—			—			(10,401	)		—
Korea Electric Power Corporation Fund			47,189		—		—		—			(6,931	)		868			—			41,126
Energy Infra Asset Management Co., Ltd.			665		—		—		—			126			—			—			791
Daegu clean Energy Co., Ltd.			17		—		—		—			(4	)		—			—			13
YaksuESS Co., Ltd			460		—		—		—			56			—			—			516
Nepal Water & Energy Development Company Private Limited			30,961		—		—		—			(854	)		1,038			—			31,145
Gwangyang Green Energy Co., Ltd.			1,206		—		—		—			(258	)		—			—			948
PND solar., Ltd			1,020		—		—		—			124			—			—			1,144
Hyundai Eco Energy Co., Ltd.			3,388		—		—		—			393			—			—			3,781
YeongGwang Yaksu Wind Electric. Co., Ltd			533		—		—		—			(147	)		—			—			386
Green Energy Electricity Generation Co., Ltd.			—		1,189		—		—			(1,026	)		—			—			163
Korea Energy Solutions Co., Ltd.			—		300		—		—			(41	)		—			—			259
ITR Co., Ltd.			—		50		—		—			(17	)		—			—			33
Structure test network Co., Ltd.			—		25		—		—			(4	)		—			—			21
Namjeongsusang Solar Power Operation Co., Ltd.			—		969		—		—			(157	)		—			—			812
Indeck Niles Development, LLC			—		—		—		—			—			—			—			—
Indeck Niles Asset Management, LLC			—		—		—		(245	)		333			(1	)		—			87
Hanwha Corporation-linked Sunlight Power Special Private Equity Investment Trust No. 1			—		7,105		—		—			21			—			—			7,126
Suwon New Power Co., Ltd.			—		798		—		—			—			—			—			798
KPGE Inc.			—		287		—		—			—			—			—			287
Gwangbaek Solar Power Investment Co., Ltd.			—		2,054		—		—			—			—			—			2,054
Goduk Clean Energy Co., Ltd.			—		1,830		—		—			—			—			—			1,830

	￦		4,064,820		17,659		—		(136,012	)		37,418			39,199			228,718			4,251,802

F-113

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(3)

Changes in investments in associates and joint ventures for the years ended December 31, 2018 and 2019 are as follows, continued:


2019
Investees		Beginning balance		Acquisition		Disposal			Dividends received			Share of income (loss)			Other comprehensive income (loss)			Others			Ending balance
		In millions of won
<Joint ventures>
KEPCO-Uhde Inc.	￦		188		—		—			—			(54	)		—			—			134
Eco Biomass Energy Sdn. Bhd.			—		—		—			—			—			—			—			—
Shuweihat Asia Power Investment B.V.			27,251		—		—			(2,176	)		5,288			(12,045	)		—			18,318
Shuweihat Asia Operation & Maintenance Company			792		—		—			(907	)		1,040			(1	)		484			1,408
Waterbury Lake Uranium L.P.			19,032		—		—			—			22			1,508			—			20,562
ASM-BG Investicii AD			21,379		—		—			(4,760	)		2,442			315			—			19,376
RES Technology AD			15,209		—		—			—			963			76			—			16,248
KV Holdings, Inc.			1,918		—		—			(372	)		751			144			—			2,441
KEPCO SPC Power Corporation			208,306		—		—			(45,349	)		48,043			3,781			13			214,794
Gansu Datang Yumen Wind Power Co., Ltd.			9,981		—		—			—			(2,050	)		218			—			8,149
Datang Chifeng Renewable Power Co., Ltd.			166,162		—		—			—			16,325			2,820			—			185,307
Datang KEPCO Chaoyang Renewable Power Co., Ltd.			39,442		—		—			—			875			707			—			41,024
Rabigh Electricity Company			105,328		—		—			—			4,355			(1,734	)		1,147			109,096
Rabigh Operation & Maintenance Company Limited			5,834		—		—			(2,222	)		3,070			197			—			6,879
Jamaica Public Service Company Limited			239,632		—		—			(4,631	)		10,166			8,440			—			253,607
KW Nuclear Components Co., Ltd.			7,708		—		—			(208	)		1,552			—			—			9,052
Busan Shinho Solar Power Co., Ltd.			4,761		—		—			(430	)		714			—			—			5,045
GS Donghae Electric Power Co., Ltd.			240,591		—		—			(10,200	)		25,787			—			(256,178	)		—
Global Trade Of Power System Co., Ltd.			515		—		—			—			56			—			—			571
Expressway Solar-light Power Generation Co., Ltd.			2,676		—		—			—			207			—			—			2,883
Daejung Offshore Wind Power Co., Ltd.			2,669		—		—			—			(308	)		—			(2,361	)		—
Amman Asia Electric Power Company			177,357		—		—			—			20,648			(5,841	)		—			192,164
KAPES, Inc.			9,079		—		—			—			1,767			—			(14	)		10,832
Dangjin Eco Power Co., Ltd.			19,912		—		(5,359	)		—			(657	)		16			(13,912	)		—
Honam Wind Power Co., Ltd.			4,860		—		—			(587	)		102			—			—			4,375
Jeongam Wind Power Co., Ltd.			—		—		—			—			—			—			4,437			4,437
Korea Power Engineering Service Co., Ltd.			—		—		—			—			—			—			4,902			4,902
Chun-cheon Energy Co., Ltd.(*3)			42,505		—		—			—			(7,385	)		—			(248	)		34,872
Yeonggwangbaeksu Wind Power Co., Ltd.			2,843		—		—			—			197			—			—			3,040
Nghi Son 2 Power LLC			—		—		—			—			—			—			—			—
Kelar S.A			72,824		—		—			—			3,435			(8,416	)		2,619			70,462
PT. Tanjung Power Indonesia			7,081		26,146		—			—			5,601			(4,489	)		(12	)		34,327
Incheon New Power Co., Ltd.(*4)			579		—		—			—			(232	)		—			(347	)		—
Seokmun Energy Co., Ltd.			16,751		—		—			—			591			—			—			17,342

F-114

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(3)

Changes in investments in associates and joint ventures for the years ended December 31, 2018 and 2019 are as follows, continued:


2019
Investees		Beginning balance		Acquisition		Disposal			Dividends received			Share of income (loss)			Other comprehensive income (loss)			Others			Ending balance
		In millions of won
Daehan Wind Power PSC	￦		1,632		—		—			—			66			59			—			1,757
Barakah One Company			3,807		—		—			—			(2,668	)		(1,139	)		—			—
Nawah Energy Company			274		—		—			—			—			11			—			285
MOMENTUM			582		—		—			(411	)		380			2			—			553
Daegu Green Power Co., Ltd.(*2)			41,110		—		—			—			3,599			—			(21,885	)		22,824
Yeonggwang Wind Power Co., Ltd.			15,304		2,100		—			—			223			—			—			17,627
Chester Solar IV SpA			1,851		—		—			—			(1,746	)		(55	)		622			672
Chester Solar V SpA			474		—		—			—			(619	)		(6	)		297			146
Diego de Almagro Solar SpA			1,663		—		—			—			(1,014	)		(86	)		472			1,035
South Jamaica Power Company Limited			16,124		4,290		—			—			(7,131	)		580			—			13,863
Daesan Green Energy Co., Ltd.			17,433		—		—			—			(251	)		—			—			17,182
RE Holiday Holdings LLC			51,094		—		—			—			(6,525	)		(2,500	)		1			42,070
RE Pioneer Holdings LLC			38,898		—		—			(939	)		(5,507	)		(1,296	)		—			31,156
RE Barren Ridge 1 Holdings LLC			41,415		—		—			(1,152	)		4,609			(1,957	)		1			42,916
RE Astoria 2 LandCo LLC			5,410		—		—			(430	)		430			192			—			5,602
RE Barren Ridge LandCo LLC			1,898		—		—			(194	)		172			90			—			1,966
Laurel SpA			921		—		—			—			(665	)		(82	)		421			595
KIAMCO KOWEPO Bannerton Hold Co Pty Ltd			3,940		—		—			—			(28	)		112			—			4,024
Chile Solar JV SpA			36,865		—		—			—			842			(2,849	)		1			34,859
Taebaek Gadeoksan Wind Power Co., Ltd.			8,508		—		—			—			(651	)		(9	)		(2	)		7,846
Cheong-Song Noraesan Wind Power Co., Ltd.			2,073		1,127		—			—			(153	)		(4	)		—			3,043
Chester Solar I SpA			1,181		—		—			—			(112	)		(79	)		167			1,157
Solar Philippines Calatagan Corporation			47,903		—		—			(4,633	)		4,305			1,355			—			48,930
Saemangeum Solar Power Co., Ltd.			—		10,000		—			—			(1,676	)		—			—			8,324
Chungsongmeon BongSan wind power Co., Ltd.			—		2,900		—			—			(136	)		—			—			2,764
Jaeun Resident Wind Power Plant Co., Ltd			—		2,494		—			—			(296	)		—			—			2,198
DE Energia SpA			—		8,364		—			—			647			(346	)		—			8,665
Eumseong Natural Gas Power Co., Ltd.			—		—		—			—			—			—			—			—
Dangjin Eco Power Co., Ltd. (newly)			—		9,180		—			—			—			—			16,481			25,661
Haemodum Solar Co., Ltd.			—		2,940		—			—			—			—			—			2,940
Yangyang Wind Power Co., Ltd.			—		10,800		—			—			—			—			—			10,800
HORUS SOLAR, S.A. DE C.V.			—		3,403		—			—			—			—			—			3,403
RECURSOS SOLARES PV DE MEXICO II, S.A. DE C.V.			—		672		—			—			—			—			—			672
SUNMEX RENOVABLES, S.A. DE C.V.			—		222		—			—			—			—			—			222
Stavro Holding II AB			—		5,524		—			—			(4	)		122			(17	)		5,625

			1,813,525		90,162		(5,359	)		(79,601	)		129,402			(22,189	)		(262,911	)		1,663,029

	￦		5,878,345		107,821		(5,359	)		(215,613	)		166,820			17,010			(34,193	)		5,914,831

F-115

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(3)

Changes in investments in associates and joint ventures for the years ended December 31, 2018 and 2019 are as follows, continued:

(*1)	It was determined that there is objective evidence of impairment due to prolonged operating losses. As a result, the Company recognized an impairment loss of ￦96 million in impairment loss on investments in associates and joint ventures for the year ended December 31, 2019.

(*2)	It was determined that there is objective evidence of impairment due to prolonged operating losses. As a result, the Company recognized an impairment loss of ￦21,827 million in impairment loss on investments in associates and joint ventures for the year ended December 31, 2019.

(*3)	It was determined that there is objective evidence of impairment due to prolonged operating losses. As a result, the Company recognized an impairment loss of ￦248 million in impairment loss on investments in associates and joint ventures for the year ended December 31, 2019.

(*4)	It was determined that there is objective evidence of impairment due to prolonged operating losses. As a result, the Company recognized an impairment loss of ￦347 million in impairment loss on investments in associates and joint ventures for the year ended December 31, 2019.

(4)

Summary of financial information of associates and joint ventures as of and for the years ended December 31, 2018 and 2019 are as follows:


2018
Investees		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
<Associates>
Korea Gas Corporation(*1)	￦		39,689,692		31,186,488		26,185,038		523,480
Korea Electric Power Industrial Development Co., Ltd.			144,425		69,123		325,694		9,987
YTN Co., Ltd.			286,964		98,682		132,382		1,587
Cheongna Energy Co., Ltd.			431,234		428,921		64,594		(11,110	)
Gangwon Wind Power Co., Ltd.			89,614		1,805		25,407		10,926
Hyundai Green Power Co., Ltd.			1,127,220		688,738		501,798		66,925
Korea Power Exchange			304,318		52,516		108,571		16,031
AMEC Partners Korea Ltd.			1,113		14		—		(26	)
Hyundai Energy Co., Ltd.			470,818		527,590		101,998		(33,947	)
Ecollite Co., Ltd.			1,944		312		—		(68	)
Taebaek Wind Power Co., Ltd.			36,986		14,325		8,233		2,170
Taeback Guinemi Wind Power Co., Ltd.			10,929		653		—		(2,082	)
Pyeongchang Wind Power Co., Ltd.			82,038		60,362		12,615		4,249
Daeryun Power Co., Ltd.			798,569		510,358		62,252		(4,958	)
Changjuk Wind Power Co., Ltd.			33,148		6,194		7,929		3,291
KNH Solar Co., Ltd.			22,598		13,942		3,586		439
SPC Power Corporation			225,599		16,819		50,317		37,355
Gemeng International Energy Co., Ltd.			7,155,937		4,420,561		1,921,367		120,558
PT. Cirebon Electric Power			876,069		481,061		274,962		33,144
KNOC Nigerian East Oil Co., Ltd.			78,841		152,017		—		(398	)
KNOC Nigerian West Oil Co., Ltd.			70,437		137,663		—		(400	)

F-116

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(4)

Summary of financial information of associates and joint ventures as of and for the years ended December 31, 2018 and 2019 are as follows, continued:


2018
Investees		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
PT Wampu Electric Power	￦		223,009		155,406		13,463		4,624
PT. Bayan Resources TBK			1,388,199		566,890		1,707,387		521,666
S-Power Co., Ltd.			825,354		588,022		551,378		(6,185	)
Pioneer Gas Power Limited			311,742		316,810		—		(45,934	)
Eurasia Energy Holdings			572		1,020		—		—
Xe-Pian Xe-Namnoy Power Co., Ltd.			1,015,013		702,187		—		(1,214	)
Hadong Mineral Fiber Co., Ltd.			203		231		—		—
Green Biomass Co., Ltd.			4,411		3,107		909		(1,057	)
PT. Mutiara Jawa			24,022		22,763		14,393		3,917
Samcheok Eco Materials Co., Ltd.			24,391		2,921		4,135		(1,836	)
Noeul Green Energy Co., Ltd.			147,886		120,249		58,686		19,453
Naepo Green Energy Co., Ltd.			93,194		76,190		6,459		(6,623	)
Goseong Green Energy Co., Ltd.			1,891,662		1,659,415		—		(7,323	)
Gangneung Eco Power Co., Ltd.			813,938		651,621		—		(4,194	)
Shin Pyeongtaek Power Co., Ltd.			674,100		511,582		—		682
Heang Bok Do Si Photovoltaic Power Co., Ltd.			2,630		1,915		455		52
Dongducheon Dream Power Co., Ltd.			1,512,510		1,244,178		828,430		(22,864	)
Jinbhuvish Power Generation Pvt. Ltd.			63,163		13,044		—		—
SE Green Energy Co., Ltd.			7,048		—		—		(230	)
Daegu Photovoltaic Co., Ltd.			16,828		9,923		3,695		1,645
Jeongam Wind Power Co., Ltd.			93,444		81,971		1,559		2,154
Korea Power Engineering Service Co., Ltd.			18,609		3,666		20,809		3,207
Busan Green Energy Co., Ltd.			195,227		151,995		77,011		17,370
Gunsan Bio Energy Co., Ltd.			8,990		20,660		—		(4,420	)
Korea Electric Vehicle Charging Service			15,019		9,328		8,615		(1,056	)
Ulleungdo Natural Energy Co., Ltd.			17,134		1,625		—		(5,855	)
Korea Nuclear Partners Co., Ltd.			615		12		80		(707	)
Tamra Offshore Wind Power Co., Ltd.			170,238		131,717		21,701		4,077
Korea Electric Power Corporation Fund			48,280		176		1,315		(649	)
Energy Infra Asset Management Co., Ltd.			7,225		507		5,757		2,193
Daegu clean Energy Co., Ltd.			389		328		—		(190	)
YaksuESS Co., Ltd			7,525		5,944		2,094		1,259
Nepal Water & Energy Development Company Private Limited			55,453		4,249		—		(984	)
Gwangyang Green Energy Co., Ltd.			29,234		23,293		—		(2,831	)
PND solar., Ltd			42,283		39,297		1,094		(795	)
Hyundai Eco Energy Co., Ltd.			165,555		148,852		—		(2,193	)
YeongGwang Yaksu Wind Electric. Co., Ltd			46,027		43,606		7,604		(493	)

F-117

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(4)

Summary of financial information of associates and joint ventures as of and for the years ended December 31, 2018 and 2019 are as follows, continued:


2018
Investees		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
<Joint ventures>
KEPCO-Uhde Inc.	￦		403		34		18		(139	)
Eco Biomass Energy Sdn. Bhd.			—		—		—		—
Shuweihat Asia Power Investment B.V.			55,614		—		—		(187	)
Shuweihat Asia Operation & Maintenance Company			1,472		31		2,391		1,719
Waterbury Lake Uranium L.P.			55,933		64		—		—
ASM-BG Investicii AD			84,924		42,166		12,745		4,406
RES Technology AD			69,609		39,192		7,879		1,567
KV Holdings, Inc.			4,795		—		8		1,257
KEPCO SPC Power Corporation			312,093		35,091		184,046		59,543
Gansu Datang Yumen Wind Power Co., Ltd.			79,354		54,402		8,323		(2,046	)
Datang Chifeng Renewable Power Co., Ltd.			751,551		336,024		117,270		37,159
Datang KEPCO Chaoyang Renewable Power Co., Ltd.			190,951		92,347		18,824		2,557
Rabigh Electricity Company			2,448,690		2,003,050		274,184		38,789
Rabigh Operation & Maintenance Company Limited			26,172		11,587		26,387		7,173
Jamaica Public Service Company Limited			1,396,421		827,837		992,677		32,507
KW Nuclear Components Co., Ltd.			24,598		7,077		6,031		2,543
Busan Shinho Solar Power Co., Ltd.			45,538		26,494		7,901		3,018
GS Donghae Electric Power Co., Ltd.			2,259,129		1,551,509		787,425		58,976
Global Trade Of Power System Co., Ltd.			2,039		263		1,368		(134	)
Expressway Solar-light Power Generation Co., Ltd.			18,443		9,215		2,986		692
Daejung Offshore Wind Power Co., Ltd.			6,440		1,091		—		(590	)
Amman Asia Electric Power Company			792,532		496,791		23,676		32,674
KAPES, Inc.			82,494		64,691		57,047		4,710
Dangjin Eco Power Co., Ltd.			51,125		260		—		(111,789	)
Honam Wind Power Co., Ltd.			43,713		27,066		7,700		3,122
Chun-cheon Energy Co., Ltd.			666,050		523,904		320,950		(19,133	)
Yeonggwangbaeksu Wind Power Co., Ltd.			99,368		80,450		11,366		734
Nghi Son 2 Power LLC			477,947		561,266		144,381		8,979
Kelar S.A			626,206		518,135		87,507		8,587
PT. Tanjung Power Indonesia			505,551		485,321		109,029		9,717
Incheon New Power Co., Ltd.			6,559		4,563		2,687		3
Seokmun Energy Co., Ltd.			253,544		195,782		50,052		10,224
Daehan Wind Power PSC			33,081		29,817		—		(1,799	)
Barakah One Company			21,480,187		21,459,035		—		(3,062	)

F-118

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(4)

Summary of financial information of associates and joint ventures as of and for the years ended December 31, 2018 and 2019 are as follows, continued:


2018
Investees		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
Nawah Energy Company	￦		70,386		68,864		—		—
MOMENTUM			7,476		5,730		16,933		520
Daegu Green Power Co., Ltd.			591,263		523,972		291,734		(4,424	)
Yeonggwang Wind Power Co., Ltd.			255,777		219,013		—		(145	)
Chester Solar IV SpA			15,307		13,114		1,415		609
Chester Solar V SpA			4,759		4,324		298		(19	)
Diego de Almagro Solar SpA			21,317		19,399		78		(340	)
South Jamaica Power Company Limited			294,341		213,723		—		(932	)
Daesan Green Energy Co., Ltd.			52,582		2,774		—		(1,192	)
RE Holiday Holdings LLC			334,742		232,553		9,451		1,319
RE Pioneer Holdings LLC			252,512		174,717		12,364		6,544
RE Barren Ridge 1 Holdings LLC			221,304		138,473		10,567		8,625
RE Astoria 2 Land Co LLC			11,030		210		619		583
RE Barren Ridge Land Co LLC			3,881		84		248		230
Laurel SpA			5,475		4,572		—		(369	)
KIAMCO KOWEPO Bannerton Hold Co Pty Ltd			31,958		173		—		(222	)
Chile Solar JV SpA			73,740		10		73		8,906
Taebaek Gadeoksan Wind Power Co., Ltd.			18,766		499		—		18
Cheong-Song Noraesan Wind Power Co., Ltd.			8,221		24		—		—
Chester Solar I SpA			1,712		562		—		(81	)
Solar Philippines Calatagan Corporation			121,650		51,219		16,689		8,732

(*1)	The profit recognized for the years ended December 31, 2018 and 2019 are reduced by of the associate entity’s net income attributable to non-controlling interests.


2019
Investees		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
<Associates>
Korea Gas Corporation(*1)	￦		39,311,855		31,165,334		24,982,640		38,764
Korea Electric Power Industrial Development Co., Ltd.			186,434		98,872		306,026		17,467
YTN Co., Ltd.			281,699		96,211		127,782		(1,230	)
Cheongna Energy Co., Ltd.			383,034		383,288		68,626		(2,567	)
Gangwon Wind Power Co., Ltd.			83,528		1,674		24,116		9,380
Hyundai Green Power Co., Ltd.			1,086,738		658,279		507,653		26,222
Korea Power Exchange			315,683		54,926		107,034		8,268
Hyundai Energy Co., Ltd.			465,238		549,940		91,842		(27,882	)
Ecollite Co., Ltd.			1,838		304		—		(97	)
Taebaek Wind Power Co., Ltd.			36,182		8,027		6,177		5,494

F-119

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(4)

Summary of financial information of associates and joint ventures as of and for the years ended December 31, 2018 and 2019 are as follows, continued:


2019
Investees		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
Taeback Guinemi Wind Power Co., Ltd.	￦		35,061		24,847		349		(61	)
Pyeongchang Wind Power Co., Ltd.			79,756		56,248		10,713		2,010
Daeryun Power Co., Ltd.			802,546		512,757		163,129		1,836
Changjuk Wind Power Co., Ltd.			29,875		1,476		6,076		1,447
KNH Solar Co., Ltd.			20,465		11,641		3,377		278
SPC Power Corporation			250,544		22,459		63,218		39,876
Gemeng International Energy Co., Ltd.			6,758,957		4,785,740		2,024,730		95,435
PT. Cirebon Electric Power			852,457		403,639		277,370		39,581
KNOC Nigerian East Oil Co., Ltd.			58,402		134,361		—		(182	)
KNOC Nigerian West Oil Co., Ltd.			54,275		124,086		—		(180	)
PT Wampu Electric Power			222,266		158,451		18,165		(2,315	)
PT. Bayan Resources TBK			1,302,637		622,576		1,707,387		252,855
S-Power Co., Ltd.			805,622		566,025		576,554		2,319
Pioneer Gas Power Limited			309,059		367,399		—		(54,501	)
Eurasia Energy Holdings			592		1,056		—		—
Xe-Pian Xe-Namnoy Power Co., Ltd.			1,194,125		898,023		6,731		(40,437	)
Hadong Mineral Fiber Co., Ltd.			203		231		—		—
Green Biomass Co., Ltd.			3,866		2,487		17		(925	)
PT. Mutiara Jawa			26,109		21,150		11,196		3,396
Samcheok Eco Materials Co., Ltd.			26,625		3,209		10,876		1,946
Noeul Green Energy Co., Ltd.			137,370		114,578		36,435		(4,810	)
Naepo Green Energy Co., Ltd.			77,070		99,345		6,572		(31,577	)
Goseong Green Energy Co., Ltd.			3,399,058		3,177,210		—		(10,276	)
Gangneung Eco Power Co., Ltd.			1,362,692		1,204,202		—		(3,830	)
Shin Pyeongtaek Power Co., Ltd.			981,387		807,107		119,162		11,847
Heang Bok Do Si Photovoltaic Power Co., Ltd.			2,483		1,722		454		47
Dongducheon Dream Power Co., Ltd.			1,474,224		1,206,478		689,414		2,849
Jinbhuvish Power Generation Pvt. Ltd.			64,111		13,240		—		—
Daejung Offshore Wind Power Co., Ltd.			6,181		1,450		—		(617	)
GS Donghae Electric Power Co., Ltd.			2,301,774		1,548,883		688,055		75,842
Daegu Photovoltaic Co., Ltd.			15,486		8,385		3,639		1,442
Busan Green Energy Co., Ltd.			173,537		136,857		52,256		(6,496	)
Gunsan Bio Energy Co., Ltd.			10,614		28,062		—		(5,777	)
Korea Electric Vehicle Charging Service			12,810		9,013		8,428		(1,841	)
Korea Nuclear Partners Co., Ltd.			928		375		1,441		(50	)
Korea Electric Power Corporation Fund			42,162		239		127		(5,430	)
Energy Infra Asset Management Co., Ltd.			8,712		721		5,118		1,415
Daegu clean Energy Co., Ltd.			371		323		—		(14	)
YaksuESS Co., Ltd			7,325		5,551		1,191		363

F-120

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(4)

Summary of financial information of associates and joint ventures as of and for the years ended December 31, 2018 and 2019 are as follows, continued:


2019
Investees		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
Nepal Water & Energy Development Company Private Limited	￦		78,309		26,783		—		(1,380	)
Gwangyang Green Energy Co., Ltd.			28,816		24,164		—		(1,007	)
PND solar., Ltd			40,941		37,526		6,908		1,665
Hyundai Eco Energy Co., Ltd.			209,395		190,622		13,343		1,306
YeongGwang Yaksu Wind Electric. Co., Ltd			46,488		45,594		6,511		(1,510	)
Green Energy Electricity Generation Co., Ltd.			33,937		36,060		—		(5,923	)
Korea Energy Solutions Co., Ltd.			1,285		18		134		(233	)
ITR Co., Ltd.			376		214		167		(88	)
Structure test network Co., Ltd.			89		249		76		(72	)
Namjeongsusang Solar Power Operation Co., Ltd.			34,595		29,310		—		(1,149	)
Indeck Niles Development, LLC			49,465		174		—		(25,430	)
Indeck Niles Asset Management, LLC			271		9		1,513		753
Hanwha Corporation-linked Sunlight Power Special Private Equity Investment Trust No. 1			14,559		15		59		44
Suwon New Power Co., Ltd.			2,000		—		—		—
KPGE Inc.			984		—		—		(6	)
Gwangbaek Solar Power Investment Co., Ltd.			193,464		183,063		7,635		(355	)
Goduk Clean Energy Co., Ltd.			3,000		—		—		—

<Joint ventures>
KEPCO-Uhde Inc.			270		7		—		(107	)
Shuweihat Asia Power Investment B.V.			37,389		5		—		(159	)
Shuweihat Asia Operation & Maintenance Company			2,605		45		2,570		1,892
Waterbury Lake Uranium L.P.			61,548		4		—		—
ASM-BG Investicii AD			78,191		39,439		13,200		4,894
RES Technology AD			66,821		34,325		8,384		1,914
KV Holdings, Inc.			6,101		—		25		1,876
KEPCO SPC Power Corporation			308,274		22,643		187,867		64,152
Gansu Datang Yumen Wind Power Co., Ltd.			77,313		56,941		6,106		(5,175	)
Datang Chifeng Renewable Power Co., Ltd.			765,598		302,329		122,398		40,371
Datang KEPCO Chaoyang Renewable Power Co., Ltd.			189,157		86,596		23,910		2,188
Rabigh Electricity Company			2,538,719		2,100,347		208,514		1,567
Rabigh Operation & Maintenance Company Limited			36,121		18,923		23,777		7,203
Jamaica Public Service Company Limited			1,543,049		940,609		1,035,399		32,828
KW Nuclear Components Co., Ltd.			31,326		10,820		11,305		3,837
Busan Shinho Solar Power Co., Ltd.			42,318		22,137		7,843		2,856

F-121

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(4)

Summary of financial information of associates and joint ventures as of and for the years ended December 31, 2018 and 2019 are as follows, continued:


2019
Investees		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
Global Trade Of Power System Co., Ltd.	￦		2,993		1,025		3,323		134
Expressway Solar-light Power Generation Co., Ltd.			17,653		7,712		2,991		709
Amman Asia Electric Power Company			821,997		501,723		23,866		34,424
KAPES, Inc.			124,396		103,158		93,831		3,465
Honam Wind Power Co., Ltd.			39,680		24,703		5,365		354
Jeongam Wind Power Co., Ltd.			94,134		83,041		11,644		2,005
Korea Power Engineering Service Co., Ltd.			19,052		2,150		12,284		1,749
Chun-cheon Energy Co., Ltd.			607,823		490,375		313,438		(24,490	)
Yeonggwangbaeksu Wind Power Co., Ltd.			99,552		79,322		11,739		1,342
Nghi Son 2 Power LLC			1,589,928		1,795,578		1,008,326		71,803
Kelar S.A			634,633		530,335		86,702		8,867
PT. Tanjung Power Indonesia			654,365		556,287		109,825		16,489
Incheon New Power Co., Ltd.			4,749		3,553		1,951		(800	)
Seokmun Energy Co., Ltd.			242,332		182,533		44,733		2,606
Daehan Wind Power PSC			89,904		86,390		—		(767	)
Barakah One Company			24,330,632		24,546,421		—		(112,114	)
Nawah Energy Company			120,987		119,405		—		3
MOMENTUM			8,904		7,245		21,171		1,099
Daegu Green Power Co., Ltd.			579,593		500,092		301,339		4,899
Yeonggwang Wind Power Co., Ltd.			262,610		225,361		24,256		(2,032	)
Chester Solar IV SpA			13,443		12,079		1,590		(1,057	)
Chester Solar V SpA			4,677		4,625		519		(402	)
Diego de Almagro Solar SpA			18,984		16,901		1,954		(1,104	)
South Jamaica Power Company Limited			364,347		295,029		7,224		(35,650	)
Daesan Green Energy Co., Ltd.			232,170		183,079		—		(717	)
RE Holiday Holdings LLC			331,862		247,722		18,744		(345	)
RE Pioneer Holdings LLC			246,571		184,258		12,207		(1,912	)
RE Barren Ridge 1 Holdings LLC			209,850		124,017		10,384		7,630
RE Astoria 2 Land Co LLC			11,422		217		656		651
RE Barren Ridge Land Co LLC			4,019		87		262		260
Laurel SpA			12,979		12,076		961		(1,130	)
KIAMCO KOWEPO Bannerton Hold Co Pty Ltd			32,883		425		—		(232	)
Chile Solar JV SpA			69,903		186		591		1,686
Taebaek Gadeoksan Wind Power Co., Ltd.			70,270		49,500		—		(1,602	)
Cheong-Song Noraesan Wind Power Co., Ltd.			51,247		40,969		—		(549	)
Chester Solar I SpA			7,859		5,842		—		(204	)
Solar Philippines Calatagan Corporation			98,577		47,956		18,720		11,331
Saemangeum Solar Power Co., Ltd.			13,740		3,270		—		(1,875	)

F-122

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(4)

Summary of financial information of associates and joint ventures as of and for the years ended December 31, 2018 and 2019 are as follows, continued:


2019
Investees		Total assets		Total liabilities		Sales		Profit (loss) for the year
		In millions of won
Chungsongmeon BongSan wind power Co., Ltd.	￦		27,659		24,272		—		(1,365	)
Jaeun Resident Wind Power Plant Co., Ltd			31,402		23,823		—		(844	)
DE Energia SpA			64,959		50,971		1,254		(2,645	)
Dangjin Eco Power Co., Ltd. (newly)			99,907		25,436		107		(737	)
Haemodum Solar Co., Ltd.			7,237		1,237		—		—
Yangyang Wind Power Co., Ltd.			10,764		—		—		(11	)
HORUS SOLAR, S.A. DE C.V.			10,566		8,503		—		(7	)
RECURSOS SOLARES PV DE MEXICO II, S.A. DE C.V.			3,848		2,885		—		22
SUNMEX RENOVABLES, S.A. DE C.V.			3,170		2,171		—		13
Stavro Holding II AB			28,141		13		—		(18	)

(*1) The profit recognized for the years ended December 31, 2018 and 2019 are reduced by the associate entity’s net income attributable to non-controlling interests.

(5)

Financial information of associates and joint ventures reconciled to the Company’s investments in consolidated financial statements as of December 31, 2018 and 2019 are as follows:


2018
Investees		Net assets			Percentage of ownership(*)			Share in net assets			Investment differential		Intercompany transaction			Others			Book value
		In millions of won
<Associates>
Korea Gas Corporation	￦		8,503,204			21.57	%		1,834,141			—		—			(132,293	)		1,701,848
Korea Electric Power Industrial Development Co., Ltd.			75,302			29.00	%		21,838			—		—			—			21,838
YTN Co., Ltd.			188,282			21.43	%		40,346			—		(6	)		(2	)		40,338
Cheongna Energy Co., Ltd.			2,313			43.90	%		1,015			2,584		(134	)		—			3,465
Gangwon Wind Power Co., Ltd.			87,809			15.00	%		13,171			—		—			49			13,220
Hyundai Green Power Co., Ltd.			438,482			29.00	%		127,160			—		—			—			127,160
Korea Power Exchange			251,802			100.00	%		251,802			—		—			—			251,802
AMEC Partners Korea Ltd.			1,099			19.00	%		209			—		—			—			209
Hyundai Energy Co., Ltd.			(56,772	)		46.30	%		(26,285	)		—		(996	)		27,281			—
Ecollite Co., Ltd.			1,632			36.10	%		589			—		—			(589	)		—
Taebaek Wind Power Co., Ltd.			22,661			25.00	%		5,665			—		—			—			5,665
Taeback Guinemi Wind Power Co., Ltd.			10,276			25.00	%		2,569			—		—			—			2,569
Pyeongchang Wind Power Co., Ltd.			21,676			25.00	%		5,419			—		—			—			5,419
Daeryun Power Co., Ltd.			288,211			9.34	%		26,919			—		—			(820	)		26,099
Changjuk Wind Power Co., Ltd.			26,954			30.00	%		8,086			—		—			—			8,086
KNH Solar Co., Ltd.			8,656			27.00	%		2,337			—		—			—			2,337
SPC Power Corporation			208,780			38.00	%		79,336			—		—			(21,778	)		57,558
Gemeng International Energy Co., Ltd.			2,735,376			34.00	%		930,028			—		—			(283,018	)		647,010
PT. Cirebon Electric Power			395,008			27.50	%		108,628			—		—			—			108,628

F-123

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(5)

Financial information of associates and joint ventures reconciled to the Company’s investments in consolidated financial statements as of December 31, 2018 and 2019 are as follows, continued:


2018
Investees		Net assets			Percentage of ownership(*)			Share in net assets			Investment differential		Intercompany transaction			Others			Book value
		In millions of won
KNOC Nigerian East Oil Co., Ltd.	￦		(73,176	)		14.63	%		(10,706	)		—		—			10,706			—
KNOC Nigerian West Oil Co., Ltd.			(67,226	)		14.63	%		(9,835	)		—		—			9,835			—
PT Wampu Electric Power			67,603			46.00	%		31,097			—		—			—			31,097
PT. Bayan Resources TBK			821,309			20.00	%		164,262			423,763		—			(76,379	)		511,646
S-Power Co., Ltd.			237,332			49.00	%		116,293			—		(1,727	)		—			114,566
Pioneer Gas Power Limited			(5,068	)		38.50	%		(1,951	)		22,278		—			68			20,395
Eurasia Energy Holdings			(448	)		40.00	%		(179	)		—		—			179			—
Xe-Pian Xe-Namnoy Power Co., Ltd.			312,826			25.00	%		78,207			253		(1,006	)		(289	)		77,165
Hadong Mineral Fiber Co., Ltd.			(28	)		8.33	%		(2	)		—		—			2			—
Green Biomass Co., Ltd.			1,304			8.80	%		115			—		—			—			115
PT. Mutiara Jawa			1,259			29.00	%		365			—		—			—			365
Samcheok Eco Materials Co., Ltd.			21,470			2.35	%		505			—		—			(505	)		—
Noeul Green Energy Co., Ltd.			27,637			29.00	%		8,015			—		—			—			8,015
Naepo Green Energy Co., Ltd.			17,004			41.67	%		7,085			—		—			(7,085	)		—
Goseong Green Energy Co., Ltd.			232,247			1.12	%		2,590			—		(131	)		—			2,459
Gangneung Eco Power Co., Ltd.			162,317			1.61	%		2,615			—		(120	)		—			2,495
Shin Pyeongtaek Power Co., Ltd.			162,518			40.00	%		65,007			12,800		(10,207	)		—			67,600
Heang Bok Do Si Photovoltaic Power Co., Ltd.			715			28.00	%		200			—		—			2			202
Dongducheon Dream Power Co., Ltd.			268,332			34.01	%		91,260			1,757		(4,049	)		(12,582	)		76,386
Jinbhuvish Power Generation Pvt. Ltd.			50,119			5.16	%		2,586			—		—			(2,586	)		—
SE Green Energy Co., Ltd.			7,048			47.76	%		3,366			—		—			—			3,366
Daegu Photovoltaic Co., Ltd.			6,905			29.00	%		2,002			—		—			—			2,002
Jeongam Wind Power Co., Ltd.			11,473			40.00	%		4,589			—		—			—			4,589
Korea Power Engineering Service Co., Ltd.			14,943			29.00	%		4,333			—		—			—			4,333
Busan Green Energy Co., Ltd.			43,232			29.00	%		12,537			—		—			—			12,537
Gunsan Bio Energy Co., Ltd.			(11,670	)		18.87	%		(2,202	)		—		—			2,202			—
Korea Electric Vehicle Charging Service			5,691			28.00	%		1,593			—		—			—			1,593
Ulleungdo Natural Energy Co., Ltd.			15,509			29.85	%		4,629			—		—			(1	)		4,628
Korea Nuclear Partners Co., Ltd.			603			29.00	%		175			—		—			—			175
Tamra Offshore Wind Power Co., Ltd.			38,521			27.00	%		10,401			—		—			—			10,401
Korea Electric Power Corporation Fund			48,104			98.09	%		47,185			—		—			4			47,189
Energy Infra Asset Management Co., Ltd.			6,718			9.90	%		665			—		—			—			665
Daegu clean Energy Co., Ltd.			61			28.00	%		17			—		—			—			17
YaksuESS Co., Ltd			1,581			29.00	%		458			—		—			2			460
Nepal Water & Energy Development Company Private Limited			51,204			57.67	%		29,529			972		—			460			30,961
Gwangyang Green Energy Co., Ltd.			5,941			20.00	%		1,188			18		—			—			1,206
PND solar., Ltd			2,986			29.00	%		866			154		—			—			1,020
Hyundai Eco Energy Co., Ltd.			16,703			19.00	%		3,174			214		—			—			3,388
YeongGwang Yaksu Wind Electric. Co., Ltd			2,421			9.63	%		233			300		—			—			533

<Joint ventures>
KEPCO-Uhde Inc.			369			50.85	%		188			—		—			—			188
Eco Biomass Energy Sdn. Bhd.			—			61.53	%		—			—		—			—			—

F-124

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(5)

Financial information of associates and joint ventures reconciled to the Company’s investments in consolidated financial statements as of December 31, 2018 and 2019 are as follows, continued:


2018
Investees		Net assets			Percentage of ownership(*)			Share in net assets			Investment differential			Intercompany transaction			Others			Book value
		In millions of won
Shuweihat Asia Power Investment B.V.	￦		55,614			49.00	%		27,251			—			—			—			27,251
Shuweihat Asia Operation & Maintenance Company			1,441			55.00	%		793			—			—			(1	)		792
Waterbury Lake Uranium L.P.			55,869			34.07	%		19,032			—			—			—			19,032
ASM-BG Investicii AD			42,758			50.00	%		21,379			—			—			—			21,379
RES Technology AD			30,417			50.00	%		15,209			—			—			—			15,209
KV Holdings, Inc.			4,795			40.00	%		1,918			—			—			—			1,918
KEPCO SPC Power Corporation			277,002			75.20	%		208,306			—			—			—			208,306
Gansu Datang Yumen Wind Power Co., Ltd.			24,952			40.00	%		9,981			—			—			—			9,981
Datang Chifeng Renewable Power Co., Ltd.			415,527			40.00	%		166,211			—			—			(49	)		166,162
Datang KEPCO Chaoyang Renewable Power Co., Ltd.			98,604			40.00	%		39,442			—			—			—			39,442
Rabigh Electricity Company			445,640			40.00	%		178,256			—			(70,977	)		(1,951	)		105,328
Rabigh Operation & Maintenance Company Limited			14,585			40.00	%		5,834			—			—			—			5,834
Jamaica Public Service Company Limited			568,584			40.00	%		227,434			(80,161	)		—			92,359			239,632
KW Nuclear Components Co., Ltd.			17,521			45.00	%		7,884			—			—			(176	)		7,708
Busan Shinho Solar Power Co., Ltd.			19,044			25.00	%		4,761			—			—			—			4,761
GS Donghae Electric Power Co., Ltd.			707,620			34.00	%		240,591			—			—			—			240,591
Global Trade Of Power System Co., Ltd.			1,776			29.00	%		515			—			—			—			515
Expressway Solar-light Power Generation Co., Ltd.			9,228			29.00	%		2,676			—			—			—			2,676
Daejung Offshore Wind Power Co., Ltd.			5,349			49.90	%		2,669			—			—			—			2,669
Amman Asia Electric Power Company			295,741			60.00	%		177,445			—			—			(88	)		177,357
KAPES, Inc.			17,803			51.00	%		9,079			—			—			—			9,079
Dangjin Eco Power Co., Ltd.			50,865			34.00	%		17,294			2,618			—			—			19,912
Honam Wind Power Co., Ltd.			16,647			29.00	%		4,828			32			—			—			4,860
Chun-cheon Energy Co., Ltd.			142,146			29.90	%		42,502			3			—			—			42,505
Yeonggwangbaeksu Wind Power Co., Ltd.			18,918			15.00	%		2,837			6			—			—			2,843
Nghi Son 2 Power LLC			(83,319	)		50.00	%		(41,660	)		—			—			41,660			—
Kelar S.A			108,071			65.00	%		70,246			2,470			—			108			72,824
PT. Tanjung Power Indonesia			20,230			35.00	%		7,081			—			—			—			7,081
Incheon New Power Co., Ltd.			1,996			29.00	%		579			—			—			—			579
Seokmun Energy Co., Ltd.			57,762			29.00	%		16,751			—			—			—			16,751
Daehan Wind Power PSC			3,264			50.00	%		1,632			—			—			—			1,632
Barakah One Company			21,152			18.00	%		3,807			—			—			—			3,807
Nawah Energy Company			1,522			18.00	%		274			—			—			—			274
MOMENTUM			1,746			33.33	%		582			—			—			—			582
Daegu Green Power Co., Ltd.			67,291			29.00	%		19,514			84			—			21,512			41,110
Yeonggwang Wind Power Co., Ltd.			36,764			41.00	%		15,074			230			—			—			15,304
Chester Solar IV SpA			2,193			81.82	%		1,794			57			—			—			1,851
Chester Solar V SpA			435			81.82	%		356			118			—			—			474
Diego de Almagro Solar SpA			1,918			81.82	%		1,569			94			—			—			1,663

F-125

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(5)

Financial information of associates and joint ventures reconciled to the Company’s investments in consolidated financial statements as of December 31, 2018 and 2019 are as follows, continued:


2018
Investees		Net assets		Percentage of ownership(*)			Share in net assets		Investment differential		Intercompany transaction		Others		Book value
		In millions of won
South Jamaica Power Company Limited	￦		80,618		20.00	%		16,124		—		—		—		16,124
Daesan Green Energy Co., Ltd.			49,808		35.00	%		17,433		—		—		—		17,433
RE Holiday Holdings LLC			102,189		50.00	%		51,094		—		—		—		51,094
RE Pioneer Holdings LLC			77,795		50.00	%		38,898		—		—		—		38,898
RE Barren Ridge 1 Holdings LLC			82,831		50.00	%		41,415		—		—		—		41,415
RE Astoria 2 LandCo LLC			10,820		50.00	%		5,410		—		—		—		5,410
RE Barren Ridge LandCo LLC			3,797		50.00	%		1,898		—		—		—		1,898
Laurel SpA			903		81.82	%		739		182		—		—		921
KIAMCO KOWEPO Bannerton Hold Co Pty Ltd			31,785		12.37	%		3,931		9		—		—		3,940
Chile Solar JV SpA			73,730		50.00	%		36,865		—		—		—		36,865
Taebaek Gadeoksan Wind Power Co., Ltd.			18,267		46.58	%		8,508		—		—		—		8,508
Cheong-Song Noraesan Wind Power Co., Ltd.			8,197		24.76	%		2,029		44		—		—		2,073
Chester Solar I SpA			1,150		81.82	%		940		241		—		—		1,181
Solar Philippines Calatagan Corporation			70,431		38.00	%		26,764		21,139		—		—		47,903

(*)	The percentage of ownership shown above is after considering the treasury stocks and others.


2019
Investees		Net assets			Percentage of ownership(*)			Share in net assets			Investment differential		Intercompany transaction			Others			Book value
		In millions of won
<Associates>
Korea Gas Corporation	￦		8,146,521			21.57	%		1,757,205			—		—			(63,238	)		1,693,967
Korea Electric Power Industrial Development Co., Ltd.			87,562			29.00	%		25,393			—		—			—			25,393
YTN Co., Ltd.			185,488			21.43	%		39,747			—		—			—			39,747
Cheongna Energy Co., Ltd.			(254	)		43.90	%		(112	)		2,584		(1,061	)		—			1,411
Gangwon Wind Power Co., Ltd.			81,854			15.00	%		12,278			49		—			—			12,327
Hyundai Green Power Co., Ltd.			428,459			29.00	%		124,253			—		—			—			124,253
Korea Power Exchange			260,757			100.00	%		260,757			—		—			(1,858	)		258,899
Hyundai Energy Co., Ltd.			(84,702	)		46.30	%		(39,217	)		—		(954	)		40,171			—
Ecollite Co., Ltd.			1,534			36.10	%		554			—		—			(554	)		—
Taebaek Wind Power Co., Ltd.			28,155			25.00	%		7,039			—		—			—			7,039
Taeback Guinemi Wind Power Co., Ltd.			10,214			25.00	%		2,553			—		—			—			2,553
Pyeongchang Wind Power Co., Ltd.			23,508			25.00	%		5,877			—		—			—			5,877
Daeryun Power Co., Ltd.			289,789			9.34	%		27,066			—		—			(819	)		26,247
Changjuk Wind Power Co., Ltd.			28,399			30.00	%		8,520			—		—			—			8,520
KNH Solar Co., Ltd.			8,824			27.00	%		2,382			—		—			—			2,382
SPC Power Corporation			228,085			38.00	%		86,672			—		—			(23,089	)		63,583
Gemeng International Energy Co., Ltd.			1,973,217			34.00	%		670,896			—		—			—			670,896
PT. Cirebon Electric Power			448,818			27.50	%		123,425			—		—			—			123,425
KNOC Nigerian East Oil Co., Ltd.			(75,959	)		14.63	%		(11,113	)		—		—			11,113			—
KNOC Nigerian West Oil Co., Ltd.			(69,811	)		14.63	%		(10,213	)		—		—			10,213			—
PT Wampu Electric Power			63,815			46.00	%		29,355			—		—			—			29,355

F-126

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(5)

Financial information of associates and joint ventures reconciled to the Company’s investments in consolidated financial statements as of December 31, 2018 and 2019 are as follows, continued:


2019
Investees		Net assets			Percentage of ownership(*)			Share in net assets			Investment differential		Intercompany transaction			Others			Book value
		In millions of won
PT. Bayan Resources TBK	￦		680,061			20.00	%		136,012			385,508		—			(76,379	)		445,141
S-Power Co., Ltd.			239,597			49.00	%		117,403			—		(1,619	)		—			115,784
Pioneer Gas Power Limited			(58,340	)		38.50	%		(22,459	)		22,278		—			181			—
Eurasia Energy Holdings			(464	)		40.00	%		(186	)		—		—			186			—
Xe-Pian Xe-Namnoy Power Co., Ltd.			296,102			25.00	%		74,026			305		(1,106	)		(290	)		72,935
Hadong Mineral Fiber Co., Ltd.			(28	)		8.33	%		(2	)		—		—			2			—
Green Biomass Co., Ltd.			1,379			7.85	%		108			—		—			—			108
PT. Mutiara Jawa			4,959			29.00	%		1,438			—		—			—			1,438
Samcheok Eco Materials Co., Ltd.			23,416			25.54	%		5,980			—		—			(5,980	)		—
Noeul Green Energy Co., Ltd.			22,792			29.00	%		6,610			—		—			—			6,610
Naepo Green Energy Co., Ltd.			(22,275	)		41.67	%		(9,281	)		2		—			9,279			—
Goseong Green Energy Co., Ltd.			221,848			1.12	%		2,474			—		(134	)		—			2,340
Gangneung Eco Power Co., Ltd.			158,490			1.61	%		2,553			—		(123	)		—			2,430
Shin Pyeongtaek Power Co., Ltd.			174,280			40.00	%		69,712			12,800		(15,556	)		—			66,956
Heang Bok Do Si Photovoltaic Power Co., Ltd.			761			28.00	%		213			—		—			2			215
Dongducheon Dream Power Co., Ltd.			267,746			34.01	%		91,060			1,757		(3,688	)		(12,582	)		76,547
Jinbhuvish Power Generation Pvt. Ltd.			50,871			5.16	%		2,625			—		—			(2,625	)		—
Daejung Offshore Wind Power Co., Ltd.			4,731			49.90	%		2,361			—		—			—			2,361
GS Donghae Electric Power Co., Ltd.			752,891			34.00	%		255,983			—		—			—			255,983
Daegu Photovoltaic Co., Ltd.			7,101			29.00	%		2,060			—		—			—			2,060
Busan Green Energy Co., Ltd.			36,680			29.00	%		10,637			—		—			—			10,637
Gunsan Bio Energy Co., Ltd.			(17,448	)		18.87	%		(3,292	)		—		—			3,292			—
Korea Electric Vehicle Charging Service			3,797			28.00	%		1,063			—		—			—			1,063
Korea Nuclear Partners Co., Ltd.			553			29.00	%		160			—		—			(160	)		—
Korea Electric Power Corporation Fund			41,923			98.09	%		41,122			—		—			4			41,126
Energy Infra Asset Management Co., Ltd.			7,991			9.90	%		791			—		—			—			791
Daegu clean Energy Co., Ltd.			48			28.00	%		13			—		—			—			13
YaksuESS Co., Ltd			1,774			29.00	%		514			2		—			—			516
Nepal Water & Energy Development Company Private Limited			51,526			58.59	%		30,173			972		—			—			31,145
Gwangyang Green Energy Co., Ltd.			4,652			20.00	%		930			18		—			—			948
PND solar., Ltd			3,415			29.00	%		990			154		—			—			1,144
Hyundai Eco Energy Co., Ltd.			18,773			19.00	%		3,567			214		—			—			3,781
YeongGwang Yaksu Wind Electric. Co., Ltd			894			9.63	%		86			300		—			—			386
Green Energy Electricity Generation Co., Ltd.			(2,123	)		29.00	%		(616	)		779		—			—			163
Korea Energy Solutions Co., Ltd.			1,267			20.00	%		253			6		—			—			259
ITR Co., Ltd.			162			20.00	%		32			1		—			—			33
Structure test network Co., Ltd.			(160	)		20.00	%		(32	)		53		—			—			21
Namjeongsusang Solar Power Operation Co., Ltd.			5,285			15.00	%		793			19		—			—			812
Indeck Niles Development, LLC			49,291			50.00	%		24,646			—		—			(24,646	)		—
Indeck Niles Asset Management, LLC			262			33.33	%		87			—		—			—			87
Hanwha Corporation-linked Sunlight Power Special Private Equity Investment Trust No. 1			14,544			49.00	%		7,126			—		—			—			7,126
Suwon New Power Co., Ltd.			2,000			33.10	%		662			—		—			136			798
KPGE Inc.			984			29.00	%		285			—		—			2			287
Gwangbaek Solar Power Investment Co., Ltd.			10,401			19.00	%		1,976			78		—			—			2,054
Goduk Clean Energy Co., Ltd.			3,000			61.00	%		1,830			—		—			—			1,830

F-127

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(5)

Financial information of associates and joint ventures reconciled to the Company’s investments in consolidated financial statements as of December 31, 2018 and 2019 are as follows, continued:


2019
Investees		Net assets			Percentage of ownership(*)			Share in net assets			Investment differential			Intercompany transaction			Others			Book value
		In millions of won

<Joint ventures>
KEPCO-Uhde Inc.	￦		263			50.80	%		134			—			—			—			134
Shuweihat Asia Power Investment B.V.			37,384			49.00	%		18,318			—			—			—			18,318
Shuweihat Asia Operation & Maintenance Company			2,560			55.00	%		1,408			—			—			—			1,408
Waterbury Lake Uranium L.P.			61,544			33.41	%		20,562			—			—			—			20,562
ASM-BG Investicii AD			38,752			50.00	%		19,376			—			—			—			19,376
RES Technology AD			32,496			50.00	%		16,248			—			—			—			16,248
KV Holdings, Inc.			6,101			40.00	%		2,441			—			—			—			2,441
KEPCO SPC Power Corporation			285,631			75.20	%		214,794			—			—			—			214,794
Gansu Datang Yumen Wind Power Co., Ltd.			20,372			40.00	%		8,149			—			—			—			8,149
Datang Chifeng Renewable Power Co., Ltd.			463,269			40.00	%		185,307			—			—			—			185,307
Datang KEPCO Chaoyang Renewable Power Co., Ltd.			102,561			40.00	%		41,024			—			—			—			41,024
Rabigh Electricity Company			438,372			40.00	%		175,349			—			(65,450	)		(803	)		109,096
Rabigh Operation & Maintenance Company Limited			17,198			40.00	%		6,879			—			—			—			6,879
Jamaica Public Service Company Limited			602,440			40.00	%		240,976			(80,161	)		—			92,792			253,607
KW Nuclear Components Co., Ltd.			20,506			45.00	%		9,228			—			—			(176	)		9,052
Busan Shinho Solar Power Co., Ltd.			20,181			25.00	%		5,045			—			—			—			5,045
Global Trade Of Power System Co., Ltd.			1,968			29.00	%		571			—			—			—			571
Expressway Solar-light Power Generation Co., Ltd.			9,941			29.00	%		2,883			—			—			—			2,883
Amman Asia Electric Power Company			320,274			60.00	%		192,164			—			—			—			192,164
KAPES, Inc.			21,238			51.00	%		10,832			—			—			—			10,832
Honam Wind Power Co., Ltd.			14,977			29.00	%		4,343			32			—			—			4,375
Jeongam Wind Power Co., Ltd.			11,093			40.00	%		4,437			—			—			—			4,437
Korea Power Engineering Service Co., Ltd.			16,902			29.00	%		4,902			—			—			—			4,902
Chun-cheon Energy Co., Ltd.			117,448			29.90	%		35,117			—			—			(245	)		34,872
Yeonggwangbaeksu Wind Power Co., Ltd.			20,230			15.00	%		3,035			5			—			—			3,040
Nghi Son 2 Power LLC			(205,650	)		50.00	%		(102,825	)		—			—			102,825			—
Kelar S.A			104,298			65.00	%		67,794			2,668			—			—			70,462
PT. Tanjung Power Indonesia			98,078			35.00	%		34,327			—			—			—			34,327
Incheon New Power Co., Ltd.			1,196			29.00	%		347			—			—			(347	)		—
Seokmun Energy Co., Ltd.			59,799			29.00	%		17,342			—			—			—			17,342
Daehan Wind Power PSC			3,514			50.00	%		1,757			—			—			—			1,757
Barakah One Company			(215,789	)		18.00	%		(38,842	)		—			(77,254	)		116,096			—
Nawah Energy Company			1,582			18.00	%		285			—			—			—			285
MOMENTUM			1,659			33.33	%		553			—			—			—			553
Daegu Green Power Co., Ltd.			79,501			54.24	%		43,124			84			—			(20,384	)		22,824
Yeonggwang Wind Power Co., Ltd.			37,249			46.00	%		17,135			492			—			—			17,627
Chester Solar IV SpA			1,364			45.00	%		614			58			—			—			672
Chester Solar V SpA			52			45.00	%		23			123			—			—			146
Diego de Almagro Solar SpA			2,083			45.00	%		937			98			—			—			1,035
South Jamaica Power Company Limited			69,318			20.00	%		13,863			—			—			—			13,863
Daesan Green Energy Co., Ltd.			49,091			35.00	%		17,182			—			—			—			17,182
RE Holiday Holdings LLC			84,140			50.00	%		42,070			—			—			—			42,070
RE Pioneer Holdings LLC			62,313			50.00	%		31,156			—			—			—			31,156

F-128

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(5)

Financial information of associates and joint ventures reconciled to the Company’s investments in consolidated financial statements as of December 31, 2018 and 2019 are as follows, continued:


2019
Investees		Net assets		Percentage of ownership(*)			Share in net assets		Investment differential		Intercompany transaction		Others			Book value
		In millions of won
RE Barren Ridge 1 Holdings LLC	￦		85,833		50.00	%		42,916		—		—		—			42,916
RE Astoria 2 LandCo LLC			11,205		50.00	%		5,602		—		—		—			5,602
RE Barren Ridge LandCo LLC			3,932		50.00	%		1,966		—		—		—			1,966
Laurel SpA			903		45.00	%		406		189		—		—			595
KIAMCO KOWEPO Bannerton Hold Co Pty Ltd			32,458		12.37	%		4,015		9		—		—			4,024
Chile Solar JV SpA			69,717		50.00	%		34,859		—		—		—			34,859
Taebaek Gadeoksan Wind Power Co., Ltd.			20,770		37.78	%		7,846		—		—		—			7,846
Cheong-Song Noraesan Wind Power Co., Ltd.			10,278		29.01	%		2,982		61		—		—			3,043
Chester Solar I SpA			2,017		45.00	%		908		249		—		—			1,157
Solar Philippines Calatagan Corporation			50,621		38.00	%		19,236		29,694		—		—			48,930
Saemangeum Solar Power Co., Ltd.			10,470		81.00	%		8,481		—		—		(157	)		8,324
Chungsongmeon BongSan wind power Co., Ltd.			3,387		29.00	%		982		1,782		—		—			2,764
Jaeun Resident Wind Power Plant Co., Ltd			7,579		29.00	%		2,198		—		—		—			2,198
DE Energia SpA			13,988		49.00	%		6,854		—		—		1,811			8,665
Dangjin Eco Power Co., Ltd. (newly)			74,471		34.00	%		25,320		341		—		—			25,661
Haemodum Solar Co., Ltd.			6,000		49.00	%		2,940		—		—		—			2,940
Yangyang Wind Power Co., Ltd.			10,764		99.54	%		10,714		86		—		—			10,800
HORUS SOLAR, S.A. DE C.V.			2,063		14.95	%		308		3,095		—		—			3,403
RECURSOS SOLARES PV DE MEXICO II, S.A. DE C.V.			963		14.95	%		144		528		—		—			672
SUNMEX RENOVABLES, S.A. DE C.V.			999		14.95	%		149		73		—		—			222
Stavro Holding II AB			28,128		20.00	%		5,625		—		—		—			5,625

(*)	The percentage of ownership shown above is after considering the treasury stocks and others.

(6)

As of December 31, 2018, and 2019, unrecognized equity interest in investments in associates and joint ventures whose book value has been reduced to zero due to accumulated losses are as follows:


		2018					2019
		Unrecognized equity interest			Accumulated unrecognized equity interest		Unrecognized equity interest			Accumulated unrecognized equity interest
		In millions of won
Hadong Mineral Fiber Co., Ltd.	￦		—			2		—			2
PT. Mutiara Jawa			(746	)		—		—			—
Eurasia Energy Holdings			7			179		6			185
Gunsan Bio Energy Co., Ltd.			916			2,202		1,090			3,292
Daehan Wind Power PSC			(412	)		—		—			—
Hyundai Energy Co., Ltd.			25,841			25,841		12,890			38,731
Nghi Son 2 Power LLC			41,659			41,659		61,165			102,824
Samcheok Eco Materials Co., Ltd.			1,285			1,285		(497	)		788
Naepo Green Energy Co., Ltd.			—			—		9,281			9,281
Barakah One Company			—			—		116,096			116,096
Pioneer Gas Power Limited			—			—		114			114

F-129

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(7)

As of December 31, 2019, shareholders’ agreements on investments in associates and joint ventures that may cause future economic resource or cash outflows are as follows:

(i)

Gemeng International Energy Co., Ltd.

Gemeng International Energy Co., Ltd. issued put options on 8% of its shares to its financial investors, KEPCO Woori Sprott PEF (NPS Co-Pa PEF). If the investment fund is not collected until the maturity date (December 25, 2023, two years extension is possible), PEF can exercise the option at strike price which is the same as a principal investment price (including operating fees ratio of below 1% per annum), and also, the Company provided a performance guarantee on this agreement.

(ii)

Hyundai Energy Co., Ltd.

The Company had placed guarantees for a fixed return on the investment to NH Power II Co., Ltd. and National Agricultural Cooperative Federation (“NACF”) and had obtained the rights to acquire the investment securities in return preferentially. In addition, NH Power II Co., Ltd. and NACF have a right, which can be exercised for 30 days starting from 2 months to 1 month prior to 17 years after the termination date of the contract to sell their shares to the Company.

(iii)

Taebaek Wind Power Co., Ltd.

In the case where non-controlling shareholders decide to dispose of their shares in Taebaek Wind Power Co., Ltd. after the warrant period of defect repair for wind power generator has expired, the Company acquires those shares at fair value. The acquisition is to be made after the conditions of the acquisition are discussed among the parties involved, with consideration of various factors such as financial status and business situation.

(iv)

Pyeongchang Wind Power Co., Ltd.

In the case where non-controlling shareholders decide to dispose of their shares in Pyeongchang Wind Power Co., Ltd. after commercial operation of the power plant has started, the Company acquires those shares at fair value. The acquisition is to be made after the conditions of the acquisition are discussed among the parties involved, with the careful consideration of various factors such as financial status and business situation.

(v)

Jeongam Wind Power Co., Ltd.

In the case where non-controlling shareholders decide to dispose of their shares in Jeongam Wind Power Co., Ltd. after the construction of the power plant has been completed, the Company is obligated to acquire those shares at fair value.

(vi)

Daegu Green Power Co., Ltd.

The Company has a right to purchase all the shares of Daegu Green Power Co., Ltd. held by the financial investors at the yield-based transfer amount agreed with the shareholders.The Company can exercise its right 5, 10 and 13 years after the date of the investment.

The Company has a right to purchase all or part of the shares of Daegu Green Power Co., Ltd. held by Lotte Engineering & Construction Co. at the yield-based transfer amount agreed with the shareholders.

(vii)

Taebaek Guinemi Wind Power Co., Ltd.

At the commencement of the operation of the facility, the Company has a right to purchase all or part of the shares from the shareholders at fair value.

F-130

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(7)

As of December 31, 2019, shareholders’ agreements on investments in associates and joint ventures that may cause future economic resource or cash outflows are as follows, continued:

(viii)

Hyundai Green Power Co., Ltd.

As of December 31, 2019, Hyundai Green Power Co., Ltd., an associate of the Company, which engages in the byproduct gas power generating business, entered into a project financing agreement with a limit of ￦919.2 billion with Korea Development Bank and others. At a certain period in the future, the Company has call option against the financial investors (Korea Development Bank and others) and also has an obligation to purchase its shares when claimed by the financial investors. At a certain period in the future, the Company has put option against Hyundai Steel Company and a third party designated by Hyundai Steel Company (collectively, “Hyundai Steel Company”), the operating investor of Hyundai Green Power Co., Ltd., according to the conditions of the agreement and also has an obligation to sell its shares upon request from Hyundai Steel Company.

(ix)

YeongGwang Yaksu Wind Electric. Co., Ltd.

As of December 31, 2019, YeongGwang Yaksu Wind Electric. Co., Ltd., an associate of the Company, which engages in the wind power generating business in YeongGwang, Jeonra-namdo, and entered into a project financing agreement with a limit of ￦46 billion IBK and others. The Company set the shares of YeongGwang Yaksu Wind Electric. Co., Ltd. as a collateral for the project financing to the lenders.

(x)

Yeonggwang Wind Power Co., Ltd.

In case the Company intends to purchase all or part of the shares from Daehan Green Energy Co., Ltd., which is a non-controlling shareholder, Daehan Green Energy Co., Ltd. has an obligation to evaluate the shares at fair value and transfer them to the Company.

(xi)

Chester Solar I SpA

According to the shareholders’ agreement, the Company has an obligation to purchase the shares at the agreed yield-based transfer price on the agreed date of exercise. According to the shareholders’ agreement, when Sprott Chile SolarISpA intends to sell its shares.

(xii)

Chester Solar IV SpA

(xiii)

Chester Solar V SpA

(xiv)

Diego de Almagro Solar SpA

F-131

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(7)

As of December 31, 2019, shareholders’ agreements on investments in associates and joint ventures that may cause future economic resource or cash outflows are as follows, continued:

(xv)

Laurel SpA

(8)

Significant restrictions on the Company’s abilities on associates or joint ventures are as follows:


Company		Nature and extent of any significant restrictions
Daegu Green Power Co., Ltd.		Dividends can only be paid when all conditions of the loan agreement are satisfied, or prior written consent of financial institutions is obtained. Shares cannot be wholly or partially transferred without prior written consent of financial institutions is obtained.

Taebaek Wind Power Co., Ltd.		Financial institutions can reject or defer an approval with regard to the request for fund executions on subordinated loans of shareholders in order to pay senior loans based on the loan agreement. Dividends can only be paid when all conditions of the loan agreement are satisfied, or prior written consent of financial institutions is obtained. Shares cannot be wholly or partially transferred without prior written consent of financial institutions is obtained.

Pyeongchang Wind Power Co., Ltd.		Principals on subordinated loans or dividends can only be paid when all conditions of the loan agreement are satisfied, or prior written consent of financial institutions is obtained. Shares cannot be wholly or partially transferred without prior written consent of financial institutions is obtained.

Daeryun Power Co., Ltd.		Principals on subordinated loans or dividends can only be paid when all conditions of the loan agreement are satisfied, or prior written consent of financial institutions is obtained and Shares cannot be wholly or partially transferred without consent of the majority of lenders is obtained.

KNH Solar Co., Ltd.		Principal and interest, dividends to shareholders cannot be paid without written consent of financial institutions. Also, Shares cannot be wholly or partially transferred without consent of other shareholders is obtained.

Jeongam Wind Power Co., Ltd.		Dividends can only be paid when all conditions of the loan agreement are satisfied and reimbursement to the lender can be restricted depending on the priority of the loans. Also, Shares cannot be wholly or partially transferred without consent of the stakeholders is obtained.

Korea Power Engineering Service Co., Ltd.		Shares cannot be wholly or partially transferred without consent of the board of directors is obtained.

F-132

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

17.

Investments in Associates and Joint Ventures, Continued

(8)

Significant restrictions on the Company’s abilities on associates or joint ventures are as follows, continued:


Company		Nature and extent of any significant restrictions

Daehan Wind Power PSC		Dividends can only be paid when all conditions of the loan agreement are satisfied. Also, Shares cannot be wholly or partially transferred without consent of the stakeholders is obtained.

Daejung Offshore Wind Power Co., Ltd.		Before the commencement of the operation, shares cannot be wholly or partially transferred without consent of the stakeholders is obtained.

Naepo Green Energy Co., Ltd.		Shares cannot be wholly or partially transferred without consent of the stakeholders is obtained.

Samcheok Eco Materials Co., Ltd.		Dividends can only be paid when all conditions of the shareholder’s agreement are satisfied. Also, shares cannot be wholly or partially transferred without consent of the stakeholders is obtained.

KPGE Inc.		Shares cannot be wholly or partially transferred without consent of the stakeholders is obtained.

Taebaek Guinemi Wind Power Co., Ltd.		Dividends can only be paid when all conditions of the shareholder’s agreement are satisfied. Also, shares cannot be wholly or partially transferred without consent of the stakeholders is obtained.

Indeck Niles Asset Management, LLC		Shares cannot be wholly or partially transferred without consent of the stakeholders is obtained.

Indeck Niles Development, LLC		Shares cannot be wholly or partially transferred without consent of the stakeholders is obtained.

Chester Solar IV SpA		Shares cannot be wholly or partially transferred without consent of the stakeholders is obtained.

Chester Solar V SpA		Shares cannot be wholly or partially transferred without consent of the stakeholders is obtained.

Diego de Almagro Solar Spa		Shares cannot be wholly or partially transferred without consent of the stakeholders is obtained.

Laurel SpA		Shares cannot be wholly or partially transferred without consent of the stakeholders is obtained.

Kelar S.A.		Dividends can only be paid when all conditions of the loan agreement are satisfied. Also, Shares cannot be wholly or partially transferred without consent of the stakeholders is obtained.

F-133

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

18.

Property, Plant and Equipment

(1)

Property, plant and equipment as of December 31, 2018 and 2019 are as follows:


		2018
		Acquisition cost		Government grants			Accumulated depreciation			Accumulated impairment losses			Book value
		In millions of won
Land	￦		13,554,292		(21,968	)		—			—			13,532,324
Buildings			19,431,536		(63,189	)		(7,494,176	)		(3,669	)		11,870,502
Structures			66,335,506		(190,854	)		(23,615,312	)		(8,399	)		42,520,941
Machinery			82,047,823		(173,242	)		(34,151,878	)		(439,350	)		47,283,353
Ships			3,655		—			(3,353	)		—			302
Vehicles			287,954		(4,220	)		(215,649	)		(116	)		67,969
Equipment			1,558,309		(418	)		(1,175,408	)		(42	)		382,441
Tools			1,073,145		(675	)		(880,432	)		(38	)		192,000
Construction-in- progress			29,026,880		(54,740	)		—			(205,713	)		28,766,427
Finance lease assets			2,390,701		(26	)		(2,194,971	)		—			195,704
Asset retirement costs			9,424,181		—			(3,706,004	)		(146,423	)		5,571,754
Others			11,875,394		—			(9,515,917	)		—			2,359,477

	￦		237,009,376		(509,332	)		(82,953,100	)		(803,750	)		152,743,194


		2019
		Acquisition cost		Government grants			Accumulated depreciation			Accumulated impairment losses			Book value
		In millions of won
Land	￦		13,848,063		(21,817	)		—			—			13,826,246
Buildings			20,756,351		(61,920	)		(8,305,683	)		(4,962	)		12,383,786
Structures			70,900,343		(186,554	)		(25,711,840	)		(9,633	)		44,992,316
Machinery			89,224,339		(158,907	)		(38,865,392	)		(451,647	)		49,748,393
Ships			3,104		—			(2,903	)		—			201
Vehicles			309,829		(2,275	)		(239,128	)		(116	)		68,310
Equipment			1,716,210		(241	)		(1,342,053	)		(42	)		373,874
Tools			1,098,127		(403	)		(934,023	)		(40	)		163,661
Construction-in-progress			28,584,806		(61,211	)		—			(165,336	)		28,358,259
Right-of-use assets			7,574,010		—			(2,790,437	)		—			4,783,573
Asset retirement costs			11,690,188		—			(4,169,238	)		(146,423	)		7,374,527
Others			12,955,782		—			(10,327,101	)		—			2,628,681

	￦		258,661,152		(493,328	)		(92,687,798	)		(778,199	)		164,701,827

F-134

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

18.

Property, Plant and Equipment, Continued

(2)

Changes in property, plant and equipment for the years ended December 31, 2018 and 2019 are as follows:


		2018
		Beginning balance			Acquisition			Disposal			Depreciation			*Impairment(1)**			Others			Ending balance
		In millions of won
Land	￦		13,318,542			2,254			(18,240	)		—			—			251,736			13,554,292
(Government grants)			(21,968	)		—			—			—			—			—			(21,968	)
Buildings			12,053,526			10,156			(8,545	)		(767,845	)		(1,896	)		648,295			11,933,691
(Government grants)			(63,539	)		(4,213	)		31			6,836			—			(2,304	)		(63,189	)
Structures			44,104,778			11,123			(587,278	)		(2,476,278	)		(360	)		1,659,810			42,711,795
(Government grants)			(196,414	)		—			3,270			10,292			—			(8,002	)		(190,854	)
Machinery(*2)			46,875,798			460,676			(250,159	)		(4,973,252	)		(393,839	)		5,737,371			47,456,595
(Government grants)			(183,188	)		(1,185	)		823			18,099			—			(7,791	)		(173,242	)
Ships			403			—			—			(103	)		—			2			302
Vehicles			81,038			2,774			(402	)		(32,620	)		—			21,399			72,189
(Government grants)			(6,322	)		(45	)		—			2,146			—			1			(4,220	)
Equipment			420,672			36,884			(265	)		(187,821	)		(36	)		113,425			382,859
(Government grants)			(761	)		(22	)		—			365			—			—			(418	)
Tools			200,663			12,331			(268	)		(83,283	)		(6	)		63,238			192,675
(Government grants)			(1,027	)		(44	)		—			432			—			(36	)		(675	)
Construction-in-progress			25,572,541			11,749,397			(47,463	)		—			(167,603	)		(8,285,705	)		28,821,167
(Government grants)			(49,084	)		(23,895	)		—			—			—			18,239			(54,740	)
Finance lease assets			297,679			—			—			(101,888	)		—			(61	)		195,730
(Government grants)			(27	)		—			—			1			—			—			(26	)
Asset retirement costs			6,039,484			1,988			—			(610,435	)		(146,424	)		287,141			5,571,754
Others			2,439,620			8,691			(715	)		(709,579	)		—			621,460			2,359,477

	￦		150,882,414			12,266,870			(909,211	)		(9,904,933	)		(710,164	)		1,118,218			152,743,194

(*1)

Korea Hydro & Nuclear Power Co., Ltd. And Korea Western Power Co., Ltd., 100% owned subsidiaries, have determined that there are impairment indicators for the shutdowns of certain power generation units and fire, and performed an impairment test over the individual assets. As a result, the Company recognized the amount of the carrying amount in excess of its recoverable amount as an impairment loss in the consolidated statements of comprehensive income.

(*2)

As described in Note 26, the amount of acquisition of machinery includes ￦204,787 million of that the Company believes the possibility of economic benefit outflow is probable on the request for additional construction costs of Hyundai E&C, GS Engineering & Construction Corp. and Hansol SeenTec Co., Ltd.

F-135

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

18.

Property, Plant and Equipment, Continued

(2)

Changes in property, plant and equipment for the years ended December 31, 2018 and 2019 are as follows, continued:


		2019
		Beginning balance			Effect of change in accounting policy			Acquisition			Disposal			Depreciation			Impairment (1,4)			Others (2,3)			Ending balance
		In millions of won
Land	￦		13,554,292			—			40,752			(29,205	)		—			(25,626	)		307,850			13,848,063
(Government grants)			(21,968	)		—			—			151			—			—			—			(21,817	)
Buildings			11,933,691			—			3,195			(23,409	)		(821,680	)		(1,293	)		1,355,202			12,445,706
(Government grants)			(63,189	)		—			(592	)		—			6,214			—			(4,353	)		(61,920	)
Structures			42,711,795			—			1,663			(470,230	)		(2,399,283	)		(1,234	)		5,336,159			45,178,870
(Government grants)			(190,854	)		—			—			2,405			9,373			—			(7,478	)		(186,554	)
Machinery			47,456,595			—			326,606			(248,951	)		(5,452,669	)		(12,247	)		7,837,966			49,907,300
(Government grants)			(173,242	)		—			(1,050	)		635			17,993			—			(3,243	)		(158,907	)
Ships			302			—			—			—			(100	)		—			(1	)		201
Vehicles			72,189			—			3,789			4,558			(33,650	)		—			23,699			70,585
(Government grants)			(4,220	)		—			(228	)		5			2,170			—			(2	)		(2,275	)
Equipment			382,859			—			47,532			(162	)		(199,376	)		(227	)		143,489			374,115
(Government grants)			(418	)		—			(81	)		—			262			—			(4	)		(241	)
Tools			192,675			—			20,956			(31	)		(87,708	)		—			38,172			164,064
(Government grants)			(675	)		—			—			—			281			—			(9	)		(403	)
Construction-in-progress			28,821,167			—			13,544,091			(199,853	)		—			(8,828	)		(13,737,107	)		28,419,470
(Government grants)			(54,740	)		—			12,338			—			—			—			(18,809	)		(61,211	)
Finance lease assets			195,730			(195,730	)		—			—			—			—			—			—
(Government grants)			(26	)		26			—			—			—			—			—			—
Right-of-use assets			—			5,143,651			220,996			—			(581,074	)		—			—			4,783,573
Asset retirement costs			5,571,754			—			—			—			(626,856	)		—			2,429,629			7,374,527
Others			2,359,477			—			1,388			(221	)		(800,653	)		(581	)		1,069,271			2,628,681

	￦		152,743,194			4,947,947			14,221,355			(964,308	)		(10,966,756	)		(50,036	)		4,770,431			164,701,827

(*1)	KEPCO Bylong Australia Pty., Ltd., 100% owned subsidiary, performed an impairment test over its land and others. The Company recognized the amount of the carrying amount in excess of its recoverable amount as an impairment loss.

(*2)	‘Others’ include the amounts of assets acquired by the business combination. (see Note 51)

(*3)	‘Others’ include immaterial amounts which have been reclassed from Construction-in-progress to other assets in the current period to reflect assets that had finished construction in the prior periods.

(*4)	As described in Note 2, the Company recognized impairment loss of ￦3,819 million related to Wolsong unit 1, Shin-Hanul unit 3 and 4 and reversal of impairment loss of ￦16,693 million related to Wolsong unit 1.

F-136

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

19.

Investment Properties

(1)

Investment properties as of December 31, 2018 and 2019 are as follows:


		2018
		Acquisition cost		Government grants			Accumulated depreciation			Book value
		In millions of won
Land	￦		139,940		—			—			139,940
Buildings			34,801		(50	)		(15,132	)		19,619

	￦		174,741		(50	)		(15,132	)		159,559


		2019
		Acquisition cost		Government grants			Accumulated depreciation			Book value
		In millions of won
Land	￦		129,897		—			—			129,897
Buildings			64,590		(13	)		(35,894	)		28,683

	￦		194,487		(13	)		(35,894	)		158,580

(2)

Changes in investment properties for the years ended December 31, 2018 and 2019 are as follows:


		2018
		Beginning balance			Depreciation			Others			Ending balance
		In millions of won
Land	￦		264,205			—			(124,265	)		139,940
Buildings			20,592			(924	)		1			19,669
(Government grants)			(83	)		1			32			(50	)

	￦		284,714			(923	)		(124,232	)		159,559


		2019
		Beginning balance			Depreciation			*Others()**			Ending balance
		In millions of won
Land	￦		139,940			—			(10,043	)		129,897
Buildings			19,669			(5,070	)		14,097			28,696
(Government grants)			(50	)		1			36			(13	)

	￦		159,559			(5,069	)		4,090			158,580

(*)

As described in Note 42, the Company reclassified land and buildings amounting to ￦2,765 million and ￦19,369 million, respectively, from assets held-for-sale to investment properties during the year ended December 31, 2019.

F-137

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

19.

Investment Properties, Continued

(3)

Income and expenses related to investment properties for the years ended December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Rental income	￦		9,494			9,782
Operating and maintenance expenses related to rental income			(923	)		(1,257	)
Operating and maintenance expenses not related to rental income			—			(3,812	)

	￦		8,571			4,713

(4)

Fair value of investment properties as of December 31, 2018 and 2019 are as follows:


		2018				2019
		Book value		Fair value		Book value		Fair value
		In millions of won
Land	￦		139,940		167,178		129,897		202,042
Buildings			19,619		23,276		28,683		38,046

	￦		159,559		190,454		158,580		240,088

The fair values of the investment properties as of the reporting date were determined in consideration of the fluctuation on the publicly announced individual land price after the IFRS transition date (January 1, 2010).

(5)

All of the Company’s investment property is held under freehold interests.

20.

Construction Contracts

(1)

Changes in total contract amount in which revenue is not yet recognized for the years ended December 31, 2017, 2018 and 2019 are as follows:

2017

Beginning
balance

Increase
(decrease)(*)

Recognized as
revenue

Ending
balance

In millions of won

Nuclear power plant construction in UAE and others

￦

7,236,888

151,891

(3,212,184

)

4,176,595

(*)

For the year ended December 31, 2017, the increased balance of contracts from new orders and other is ￦438,142 million and the decreased balance of contracts due to changes in scope of construction work is ￦286,251 million.

F-138

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

20.

Construction Contracts, Continued

(1)

Changes in total contract amount in which revenue is not yet recognized for the years ended December 31, 2017, 2018 and 2019 are as follows, continued:

2018

Beginning
balance

Increase
(decrease)(*)

Recognized as
revenue

Ending
balance

In millions of won

Nuclear power plant construction in UAE and others

￦

4,176,595

1,186,584

(1,742,391

)

3,620,788

(*)

For the year ended December 31, 2018, the increased balance of contracts from new orders and foreign exchange impact is ￦1,207,097 million and the decreased balance of contracts due to changes in scope of construction work is ￦20,513 million.

2019

Beginning
balance

Increase
(decrease)(*)

Recognized as
revenue

Ending
balance

In millions of won

Nuclear power plant construction in UAE and others

￦

3,620,788

379,269

(1,264,916

)

2,735,141

(*)

For the year ended December 31, 2019, the increased balance of contracts from new orders and foreign exchange impact is ￦390,224 million and the decreased balance of contracts due to changes in scope of construction work is ￦10,955 million.

(2)

Accumulated earned revenue, expense and others related to the Company’s construction contracts as of December 31, 2018 and 2019 are as follows:

2018

Accumulated
earned revenue

Accumulated
expense

Accumulated
profit

Unearned
advance receipts

In millions of won

Nuclear power plant construction in UAE and others

￦

19,801,220

18,651,188

1,150,032

—

2019

Accumulated
earned revenue

Accumulated
expense

Accumulated
profit

Unearned
advance receipts

In millions of won

Nuclear power plant construction in UAE and others

￦

20,971,487

19,566,647

1,404,840

—

F-139

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

20.

Construction Contracts, Continued

(3)

Gross amount due from customers recognized as contract assets and due to customers recognized as contract liabilities for contract work as of December 31, 2018 and 2019 are as follows:

2018

2019

Contract
assets(*1)

Contract
liabilities(*2)

Contract
assets(*1)

Contract
liabilities(*2)

In millions of won

Nuclear power plant construction in UAE and others

￦

36,232

350,460

53,827

73,420

(*1)

Included in trade and other receivables, net, in the consolidated statements of financial position. The balance of receivables from construction contracts are ￦35,218 million and ￦46,489 million, as of December 31, 2018 and 2019, respectively.

(*2)

Included in non-financial liabilities in the consolidated statements of financial position.

21.

Intangible Assets other than Goodwill

(1)

Intangible assets as of December 31, 2018 and 2019 are as follows:


		2018
		Acquisition cost		Government grants			Accumulated amortization			Accumulated impairment losses			Book value
		In millions of won
Software	￦		619,662		(420	)		(461,981	)		—			157,261
Licenses and franchises			3,398		—			(3,398	)		—			—
Copyrights, patents rights and other industrial rights			97,033		—			(29,921	)		—			67,112
Mining rights			561,945		—			(27,421	)		—			534,524
Development expenditures			878,462		(2,110	)		(785,976	)		—			90,376
Intangible assets under development			83,381		(10,564	)		—			(12,845	)		59,972
Usage rights of donated assets and other			459,682		—			(372,671	)		—			87,011
Leasehold rights			25,482		—			(19,930	)		—			5,552
Greenhouse gas emissions rights			7,050		—			—			—			7,050
Others			333,621		—			(104,486	)		(12,051	)		217,084

	￦		3,069,716		(13,094	)		(1,805,784	)		(24,896	)		1,225,942

F-140

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

21.

Intangible Assets other than Goodwill, Continued

(1)

Intangible assets as of December 31, 2018 and 2019 are as follows, continued:


		2019
		Acquisition cost		Government grants			Accumulated amortization			Accumulated impairment losses			Book value
		In millions of won
Software	￦		707,731		(235	)		(542,736	)		—			164,760
Licenses and franchises			3,398		—			(3,398	)		—			—
Copyrights, patents rights and other industrial rights			102,828		—			(40,389	)		(9,178	)		53,261
Mining rights			584,969		—			(28,456	)		(512,790	)		43,723
Development expenditures			916,834		(1,492	)		(822,972	)		(19	)		92,351
Intangible assets under development			73,335		(11,029	)		—			(12,845	)		49,461
Usage rights of donated assets and other			582,825		—			(389,664	)		—			193,161
Leasehold rights			25,989		—			(20,671	)		—			5,318
Greenhouse gas emissions rights			41,656		—			—			—			41,656
Others			557,749		(79	)		(119,446	)		(11,939	)		426,285

	￦		3,597,314		(12,835	)		(1,967,732	)		(546,771	)		1,069,976

(2)

Changes in intangible assets for the years ended December 31, 2018 and 2019 are as follows:


		2018
		Beginning balance			Acquisition		Disposal			Amortization			*Impairment()**			Others			Ending balance
		In millions of won
Software	￦		125,891			10,861		(1	)		(53,755	)		—			74,685			157,681
(Government grants)			(486	)		—		—			254			—			(188	)		(420	)
Copyrights, patents rights and other industrial rights			23,981			28		—			(8,665	)		(13	)		51,781			67,112
Mining rights			539,633			29,687		—			(3,186	)		—			(31,610	)		534,524
Development expenditures			84,518			823		—			(27,100	)		—			34,245			92,486
(Government grants)			(3,702	)		—		—			1,591			—			1			(2,110	)
Intangible assets under development			139,910			67,383		—			—			(8,912	)		(127,845	)		70,536
(Government grants)			(10,540	)		—		—			—			799			(823	)		(10,564	)
Usage rights of donated assets and other			101,658			—		—			(13,307	)		—			(1,340	)		87,011
(Government grants)			(11	)		—		—			11			—			—			—
Leasehold rights			5,044			—		—			(667	)		—			1,175			5,552
Greenhouse gas emissions rights			—			—		—			—			—			7,050			7,050
Others			181,225			1,805		(8	)		(14,114	)		(14	)		48,190			217,084
(Government grants)			—			—		—			—			—			—			—

	￦		1,187,121			110,587		(9	)		(118,938	)		(8,140	)		55,321			1,225,942

F-141

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

21.

Intangible Assets other than Goodwill, Continued

(2)

Changes in intangible assets for the years ended December 31, 2018 and 2019 are as follows, continued:

(*)	Includes ￦8,104 million of impairment loss on the intangible assets under development in relation to the technology development of heat transfer tube owned by KEPCO Nuclear Fuel Co., Ltd., 96.36% owned subsidiary.


		2019
		Beginning balance			Acquisition		Disposal			Amortization			*Impairment(1)**			*Others(2)**			Ending balance
		In millions of won
Software	￦		157,681			42,694		(774	)		(81,883	)		—			47,277			164,995
(Government grants)			(420	)		—		—			202			—			(17	)		(235	)
Copyrights, patents rights and other industrial rights			67,112			171		(325	)		(9,196	)		—			(4,501	)		53,261
Mining rights			534,524			8,742		—			(7,186	)		(513,519	)		21,162			43,723
Development expenditures			92,486			687		—			(28,901	)		(68	)		29,639			93,843
(Government grants)			(2,110	)		—		—			833			—			(215	)		(1,492	)
Intangible assets under development			70,536			56,082		—			—			—			(66,128	)		60,490
(Government grants)			(10,564	)		—		—			—			—			(465	)		(11,029	)
Usage rights of donated assets and other			87,011			—		—			(15,632	)		—			121,782			193,161
(Government grants)			—			—		—			—			—			—			—
Leasehold rights			5,552			—		—			(741	)		—			507			5,318
Greenhouse gas emissions rights			7,050			118,743		(7,058	)		—			—			(77,079	)		41,656
Others			217,084			2,307		(164	)		(14,413	)		(22	)		221,572			426,364
(Government grants)			—			—		—			2			—			(81	)		(79	)

	￦		1,225,942			229,426		(8,321	)		(156,915	)		(513,609	)		293,453			1,069,976

(*1)	KEPCO Australia Pty., Ltd. and KEPCO Bylong Australia Pty., Ltd., 100% owned subsidiaries, performed an impairment test over the mining rights and the Company recognized the amount of the carrying amount in excess of its recoverable amount as an impairment loss.

(*2)	‘Others’ include the business rights amounting to ￦172,434 million increased from the business combination between Korea East-West Power Co., Ltd. and Eumseong Natural Gas Power Co., Ltd. (see note 51)

F-142

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

21.

Intangible Assets other than Goodwill, Continued

(3)

Significant specific intangible assets as of December 31, 2018 and 2019 are as follows:


2018
Type	Description	Currency	Amount		Remaining useful lives
	In millions of won and thousands of Australian dollars
Software	ERP system and others	KRW		783	2 years and 2 months ~ 2 years and 4 months
	Electricity sales information system	KRW		6,477	4 years
Copyrights, patents rights and other industrial rights	Smart technology verification and standard design project conducting right	KRW		9,256	3 years and 9 months
	Contributions to ARP NRC DC	KRW		46,594	9 years
Mining rights	Mining right of Bylong mine	AUD		401,225	— (*)
Development expenditures	Electricity sales information system	KRW		22,337	3 years and 3 months
Usage rights of donated assets and others	Sejong Haengbogdosi sharing charge Dangjin power plant load facility usage right	KRW KRW		35,923 14,167	7 years and 11 months 2 years and 3 months
Others	Occupancy and use of public waters	KRW		97,858	18 years and 1 month

(*)	Mining rights are amortized using the units-of-production method and the amortization has not commenced yet.


2019
Type	Description	Currency	Amount		Remaining useful lives
	In millions of won and thousands of Australian dollars
Software	ERP system and others	KRW		432	1 year and 2 months ~ 1 year and 4 months
	Electricity sales information system	KRW		4,824	3 years
Copyrights, patents rights and other industrial rights	Smart technology verification and standard design project conducting right	KRW		6,787	2 years and 9 months
	Contributions to ARP NRC DC	KRW		34,755	8 years
Mining rights	Mining right of Bylong mine	AUD		—	— (*)
Development expenditures	Electricity sales information system	KRW		15,283	2 years and 3 months
Usage rights of donated assets and others	Sejong Haengbogdosi sharing charge Dangjin power plant load facility usage right	KRW KRW		31,385 7,870	6 years and 11 months 1 year and 3 months
Others	Occupancy and use of public waters	KRW		92,446	17 years and 1 month
	Business rights	KRW		171,955	29 years and 11 months

(*)	The carrying amount of mining right does not exist, because KEPCO Australia Pty., Ltd. and KEPCO Bylong Australia Pty., Ltd. recognized impairment losses in full during the year ended December 31, 2019.

F-143

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

21.

Intangible Assets other than Goodwill, Continued

(4)

For the years ended December 31, 2017, 2018 and 2019, the Company recognized research and development expenses of ￦721,437 million, ￦723,888 million and ￦735,715 million, respectively.

22.

Trade and Other Payables

Trade and other payables as of December 31, 2018 and 2019 are as follows:


		2018				2019
		Current		Non-current		Current		Non-current
		In millions of won
Trade payables	￦		3,411,830		—		2,859,721		—
Other trade payables			1,630,860		2,626,876		1,952,659		2,446,714
Accrued expenses			1,127,796		1,859		1,028,869		2,033
Leasehold deposits received			1,949		1,084		2,571		709
Other deposits received			169,317		72,453		163,382		68,702
Lease liabilities			—		—		635,349		4,434,784
Finance lease liabilities			57,200		226,606		—		—
Dividends payable			6,443		—		6,851		—
Others(*)			—		12,818		—		12,818

	￦		6,405,395		2,941,696		6,649,402		6,965,760

(*)

Details of others as of December 31, 2018 and 2019 are as follows:


		2018				2019
		Current		Non-current		Current		Non-current
		In millions of won
Advance received from local governments	￦		—		5,818		—		5,818
Others			—		7,000		—		7,000

	￦		—		12,818		—		12,818

F-144

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

23.

Borrowings and Debt Securities

(1)

Borrowings and debt securities as of December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Current liabilities
Short-term borrowings	￦		860,602			1,098,555
Current portion of long-term borrowings			312,994			217,579
Current portion of debt securities			6,790,778			7,545,485
Less : Current portion of discount on long-term borrowings			(972	)		(1,000	)
Less : Current portion of discount on debt securities			(1,974	)		(2,780	)
Add : Current portion of premium on debt securities			20			—

			7,961,448			8,857,839

Non-current liabilities
Long-term borrowings			3,280,015			3,411,052
Debt securities			49,905,077			55,716,183
Less : Discount on long-term borrowings			(22,000	)		(21,309	)
Less : Discount on debt securities			(89,913	)		(88,920	)
Add: Premium on debt securities			—			1,696

			53,073,179			59,018,702

	￦		61,034,627			67,876,541

(2)

Repayment schedule of borrowings and debt securities as of December 31, 2018 and 2019 are as follows:


2018
Type		Borrowings		Debt Securities
		In millions of won
Less than 1 year	￦		1,173,596		6,790,778
1~ 5 years			1,911,226		30,175,734
Over 5 years			1,368,789		19,729,343

	￦		4,453,611		56,695,855


2019
Type		Borrowings		Debt Securities
		In millions of won
Less than 1 year	￦		1,316,134		7,545,485
1~ 5 years			2,113,404		31,552,963
Over 5 years			1,297,648		24,163,220

	￦		4,727,186		63,261,668

F-145

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

23.

Borrowings and Debt Securities, Continued

(3)

Short-term borrowings as of December 31, 2018 and 2019 are as follows:

2018

Type

Creditor

Interest rate (%)

Maturity

Foreign
currency

Local
currency

In millions of won and thousands of foreign currencies

Local short-term
borrowings

KTB Investment and
securities and others

2.05~2.51

2019.01.04~

2019.02.20

—

￦

674,000

Foreign short-term
borrowings

SCNT and others

4.60~6.50

2019.12.03

USD 8,955

10,013

Foreign short-term
borrowings

BDO Unibank

6.59

2020.12.17(*)

PHP 450,000

9,581

Local bank overdraft

Nonghyup Bank

2.59~3.09

2019.01.10~

2019.12.31

—

142,773

Local bank overdraft

Woori Bank

Standard overdraft
rate+1.09

2019.02.26

—

24,235

￦

860,602

2019

Type

Creditor

Interest rate (%)

Maturity

Foreign
currency

Local
currency

In millions of won and thousands of foreign currencies

Local short-term
borrowings

DB financial investment and others

2.00~2.20

2020.01.13~
2020.02.05

—

￦

280,000

Foreign short-term
borrowings

LG-CNS

4.60

2020.06.30

USD 23,699

27,439

Foreign short-term
borrowings

BDO Unibank

3.92

2020.12.20

PHP 225,000

5,130

Foreign short-term
borrowings

Mizuho Bank

4.60

2020.06.30

USD 11,027

12,767

Electronic short-term
bonds

Mirae asset daewoo and others

1.72~2.20

2020.01.10~
2020.02.05

—

400,000

Local bank overdraft

Korea development Bank and others

1.98~2.75

2020.01.01~
2020.04.16

—

373,219

￦

1,098,555

(*)

The contractual maturity is 2020 but is classified as short-term borrowing due to intention of early payment in 3 months after borrowing.

F-146

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

23.

Borrowings and Debt Securities, Continued

(4)

Long-term borrowings as of December 31, 2018 and 2019 are as follows:


2018
Type		Interest rate (%)	Maturity	Foreign currency		Local currency
		In millions of won and thousands of foreign currencies
Local long-term borrowings
Korea Development Bank	Others	0.50	2019~2044		—	￦	4,154
	Facility	2.45~4.60	2023~2028		—		66,793
	Operating funds	2.59~3.56	2020~2021		—		67,000
	Operating funds	1yr KoFC bond rate+0.95	2020		—		14,000
Hana Bank	Commercial Paper	3M CD+0.19~0.32	2021~2023		—		950,000
	Facility	4.60	2028		—		13,781
	Facility	3yr KTB rate-1.25	2019~2028		—		8,072
IBK	PF Refinancing	CD+1.25	2030		—		22,500
Export-Import Bank of Korea	Project loans	1.50	2026		—		22,096
	Operating funds	2.21	2020		—		35,000
Korea Energy Agency	Development of power resources	3yr KTB rate-2.25	2023~2025		—		5,558
	Facility	3yr KTB rate-2.25	2019~2024		—		2,589
	Project loans	—	2023		—		1,197
	Others	KTB rate -2.25	2024~2028		—		17,347
Shinhan Bank	Collateral borrowing	2.32	2019		—		30,000
	Facility	CB rate+1.10	2028		—		20,672
	Others	3.95	2035		—		103,851
	Others	Standard overdraft rate+1.00	2035		—		103,851
Kookmin Bank	Facility	3.16	2020		—		10,000
	Facility	MOR+0.79	2023		—		30,333
Others	Facility	1.75~4.60	2026~2036		—		168,080
	Facility	CB rate+1.10~1.60	2023~2036		—		52,810
	PF Refinancing	4.10	2030		—		62,500
	Others	4.50~7.90	2022~2039		—		102,347

							1,914,531

F-147

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

23.

Borrowings and Debt Securities, Continued

(4)

Long-term borrowings as of December 31, 2018 and 2019 are as follows, continued:

2018

Type

Interest rate (%)

Maturity

Foreign
currency

Local
currency

In millions of won and thousands of foreign currencies

Foreign long-term borrowings

Korea Energy Agency

Project loans

—

2021~2023

USD 8,744

9,776

Export-Import Bank of Korea and others

Direct loan and others

1M Libor+1.80~

3.20

2036

USD 123,909

138,542

Direct loan and others

3M Libor+2.75~

3.70

2027

JOD 158,524

249,783

Commercial loan and others

3M Libor+1.50~

2.50

2030~2033

USD 277,538

310,315

PF Loan

6M Libor+1.70~

2.50

2032

USD 126,798

141,773

Others

3.88

2021

USD 278,105

310,427

SCNT and others

Shareholder’s loan

8.00

2031

JOD 4,853

7,647

Shareholder’s loan

6.50~8.00

2023

USD 44,680

49,956

PT PJB

Shareholder’s loan

12.75

2019

IDR 5,569,304

428

Samsung Life Insurance and others

Syndicated Loan

3.10

2032

JPY 5,286,835

53,565

Woori Bank and others

Syndicated Loan

JPY 6M Libor+2.00

2032

JPY 3,410,381

34,553

SMBC and others

Equity Bridge Loan

1M Libor+0.90

2019

USD 44,019

49,218

IFC and others

Others

6M Libor+5.00

2031

PKR 25,900,420

206,944

Federal Financing Bank and others

PF loan

2.39~13.00

2031~2038

USD 102,322

114,406

Others

—

2019

USD 1,025

1,145

1,678,478

3,593,009

Less : Discount on long-term borrowings

(22,972

)

Less : Current portion of long-term borrowings

(312,994

)

Add : Current portion of discount on long-term borrowings

972

￦

3,258,015

F-148

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

23.

Borrowings and Debt Securities, Continued

(4)

Long-term borrowings as of December 31, 2018 and 2019 are as follows, continued:


2019
Type		Interest rate (%)	Maturity	Foreign currency		Local currency
		In millions of won and thousands of foreign currencies
Local long-term borrowings
Korea Development Bank	Others	0.50	2020~2044		—	￦	3,500
	Facility	2.50~4.60	2023~2028		—		59,845
	Operating funds	2.33~3.04	2020~2022		—		55,000
	Operating funds	1yr KoFC bond rate +0.95	2020~2022		—		24,000
Hana Bank	Commercial Paper	3M CD+0.13~0.32	2021~2024		—		1,150,000
	Facility	4.60	2028		—		12,466
	Facility	3yr KTB rate-1.25	2020~2028		—		6,699
IBK	PF Refinancing	CD+1.25	2030		—		10,497
Export-Import Bank of Korea	Project loans	1.50	2026		—		19,150
	Operating funds	2.21	2020		—		35,000
Korea Energy Agency	Development of power resources	3yr KTB rate-2.25	2023~2025		—		4,350
	Facility	3yr KTB rate-2.25	2020~2024		—		2,058
	Project loans	—	2023		—		1,197
	Others	KTB rate-2.25	2024~2028		—		15,696
Shinhan Bank	Facility	CB rate+1.10	2028		—		18,698
	Others	3.95	2035		—		99,146
	Others	Standard overdraft rate+1.00	2035		—		99,146
Kookmin Bank	Facility	3.16	2020		—		10,000
	Facility	MOR+0.79	2023		—		23,333
Others	Facility	1.75~6.80	2026~2036		—		390,044
	Facility	CB rate+1.10~1.60 Standard overdraft rate+2.45	2023~2036		—		111,834
	PF Refinancing	4.10	2030		—		29,159
	Others	4.50~7.90	2022~2039		—		102,348

							2,283,166

F-149

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

23.

Borrowings and Debt Securities, Continued

(4)

Long-term borrowings as of December 31, 2018 and 2019 are as follows, continued:

2019

Type

Interest rate (%)

Maturity

Foreign
currency

Local
currency

In millions of won and thousands of foreign currencies

Foreign long-term borrowings

Korea Energy Agency

Project loans

—

2021~2023

USD 8,744

10,123

Export-Import Bank of Korea and others

Direct loan and others

1M Libor+1.80~3.20

2036

USD 101,912

117,994

Direct loan and others

3M Libor+2.75~3.70

2027

JOD 146,380

239,039

PF Loan

6M Libor+2.50~2.70

2032

USD 118,684

137,412

Others

3.88

2021

USD 289,709

334,685

SCNT and others

Shareholder’s loan

6.50~8.00

2023

USD 13,000

15,051

Shareholder’s loan

8.00

2031

JOD 4,853

7,925

Samsung Life Insurance and others

Syndicated Loan

3.10

2032

JPY 4,981,038

52,972

Woori Bank and others

Syndicated Loan

JPY 6M Libor+2.00

2032

JPY 3,213,121

34,171

IFC and others

Others

6M Libor+5.00

2031

PKR 37,252,930

278,652

Federal Financing Bank and others

PF Loan

2.39~13.00

2031~2038

USD 101,380

117,377

Others

—

USD 57

1,345,465

3,628,631

Less : Discount on long-term borrowings

(22,309

)

Less : Current portion of long-term borrowings

(217,579

)

Add : Current portion of discount on long-term borrowings

1,000

￦

3,389,743

(5)

Local debt securities as of December 31, 2018 and 2019 are as follows:


	Issue date		Maturity		Interest rate (%)		2018			2019
	In millions of won
Electricity Bonds		2010.04.08~ 2019.12.30		2020.01.12~ 2049.10.24	1.32~5.26	￦		24,480,000			28,450,000
Corporate Bonds(*)		2009.10.16~ 2019.12.19		2020.02.22~ 2049.12.19	1.29~6.00			23,223,228			24,463,577

								47,703,228			52,913,577
Less : Discount on local debt securities								(41,247	)		(42,274	)
Less : Current portion of local debt securities								(5,330,000	)		(6,340,000	)
Add : Current portion of discount on local debt securities								1,035			1,409

						￦		42,333,016			46,532,712

F-150

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

23.

Borrowings and Debt Securities, Continued

(5)

Local debt securities as of December 31, 2018 and 2019 are as follows, continued:

(*)	Corporate bonds of HeeMang Sunlight Power Co., Ltd. amounting to ￦2,697 million can be redeemed every March 31 after five years from its issue date, March 31, 2016.

(6)

Foreign debt securities as of December 31, 2018 and 2019 are as follows:


	2018
Type	Issue date		Maturity		Interest rate (%)		Foreign currency			Local currency
	In millions of won and thousands of foreign currencies
FY-96		1996.04.01~ 1996.12.06		2026.12.01~ 2096.04.01		6.00~8.37		USD 249,071	￦		278,488
FY-97		1997.01.31~ 1997.08.04		2027.02.01~ 2027.08.01		6.75~7.00		USD 314,717			351,885
FY-04		2004.04.23		2034.04.23		5.13		USD 286,920			320,805
FY-11		2011.07.13		2021.07.13		4.75		USD 500,000			559,050
FY-12		2012.09.19		2022.09.19		3.00		USD 750,000			838,575
FY-13		2013.09.26~ 2013.10.23		2019.03.26~ 2019.04.23		1.50~1.63		CHF 400,000			454,488
FY-13		2013.09.25		2020.09.25		5.75		AUD 325,000			256,038
FY-14		2014.02.11~ 2014.12.02		2019.02.11~ 2029.07.30		2.38~3.57		USD 1,500,000			1,677,150
FY-15		2015.06.15		2025.06.15		3.25		USD 300,000			335,430
FY-16		2016.01.21		2021.07.21		2.50		USD 300,000			335,430
FY-17		2017.04.12~ 2017.07.25		2020.04.12~ 2027.07.25		2.38~3.13		USD 1,100,000			1,229,910
FY-17		2017.10.30		2037.10.30		1.70		EUR 40,000			51,166
FY-17		2017.11.16		2037.11.16		2.36		SEK 450,000			56,061
FY-18		2018.01.29~ 2018.07.25		2021.01.29~ 2023.07.25		3.00~3.88		USD 1,800,000			2,012,580
FY-18		2018.03.13		2028.03.13		3.35		HKD 1,650,000			235,571

											8,992,627
Less : Discount on foreign debt securities											(50,640	)
Add : Premium on foreign debt securities											20
Less : Current portion of foreign debt securities											(1,460,778	)
Add : Current portion of discount on foreign debt securities											939
Less: Current portion of premium on foreign debt securities											(20	)

									￦		7,482,148

F-151

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

23.

Borrowings and Debt Securities, Continued

(6)

Foreign debt securities as of December 31, 2018 and 2019 are as follows, continued:


	2019
Type	Issue date		Maturity		Interest rate (%)	Foreign currency			Local currency
	In millions of won and thousands of foreign currencies
FY-96		1996.04.01~ 1996.12.06		2026.12.01~ 2096.04.01	6.00~7.95		USD 249,074	￦		288,379
FY-97		1997.01.31~ 1997.08.04		2027.02.01~ 2027.08.01	6.75~7.00		USD 314,717			364,379
FY-04		2004.04.23		2034.04.23	5.13		USD 286,920			332,196
FY-11		2011.07.13		2021.07.13	4.75		USD 500,000			578,900
FY-12		2012.09.19		2022.09.19	3.00		USD 750,000			868,350
FY-13		2013.09.25		2020.09.25	5.75		AUD 325,000			263,361
FY-14		2014.07.30~ 2014.12.02		2020.06.02~ 2029.07.30	2.50~3.57		USD 600,000			694,680
FY-15		2015.06.15		2025.06.15	3.25		USD 300,000			347,340
FY-16		2016.01.21		2021.07.21	2.50		USD 300,000			347,340
FY-17		2017.04.12~ 2017.07.25		2020.04.12~ 2027.07.25	2.38~3.13		USD 1,100,000			1,273,580
FY-17		2017.10.30		2037.10.30	1.70		EUR 40,000			51,897
FY-17		2017.11.16		2037.11.16	2.36		SEK 450,000			55,737
FY-18		2018.01.29~ 2018.07.25		2021.01.29~ 2023.07.25	3.00~3.88		USD 1,800,000			2,084,040
FY-18		2018.03.13		2028.03.13	3.35		HKD 1,650,000			245,289
FY-19		2019.01.22~ 2019.06.24		2022.01.22~ 2024.06.24	2.50~3.38		USD 800,000			926,240
FY-19		2019.02.27		2024.02.27	0.13		CHF 200,000			239,104
FY-19		2019.07.19		2024.07.19~ 2027.07.19	0~0.05		CHF 300,000			358,656
FY-19		2019.07.22		2022.07.22	2.38		USD 300,000			347,340
FY-19		2019.10.31		2024.10.30	3M BBSW+97bp		AUD 300,000			243,102
FY-19		2019.12.19		2037.12.31	3.3~5.7		USD 378,460			438,181

										10,348,091
Less : Discount on foreign debt securities										(49,426	)
Add : Premium on foreign debt securities										1,696
Less : Current portion of foreign debt securities										(1,205,485	)
Add : Current portion of discount on foreign debt securities										1,371

								￦		9,096,247

F-152

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

23.

Borrowings and Debt Securities, Continued

(7)

Changes in borrowings and debt securities for the years ended December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Beginning balance	￦		54,747,392			61,034,627
Cash flow			5,972,336			6,342,074
Effect of exchange rate fluctuations			322,515			494,414
Increase from the business combination			—			2,900
Others			(7,616	)		2,526

Ending balance	￦		61,034,627			67,876,541

24.

Lease

1)	Company as a lessee

(1)

Lease contracts

The Company had recognized finance lease assets and liabilities only for those lease contracts classified as finance lease contracts under IAS 17 ‘Lease’. However, upon adoption of IFRS 16 ‘Lease’, the Company additionally recognized right-of-use assets and lease liabilities for those lease contracts that were classified operating lease previously under IAS 17 ‘Lease’.

The Company applies the short-term leases recognition exemption to its lease contracts that have a lease term of 12 months or less from the commencement date, and recognized ￦20,127 million as expense for the year ended December 31, 2019. The Company also applies the leases of low-value assets recognition exemption to leases contracts with underlying assets considered to be low value (i.e., approximately less than ￦5 million), and recognized ￦1,616 million as expense for the year ended December 31, 2019.

(2)

Right-of-use assets as of December 31, 2019 are as follows:


		2019
		Acquisition cost		Government grants		Accumulated depreciation			Book value
		In millions of won
Land	￦		693,103		—		(49,029	)		644,074
Buildings			54,980		—		(20,403	)		34,577
Structures			28,198		—		(2,554	)		25,644
Machinery			1,308		—		(484	)		824
Ships			4,113,754		—		(425,465	)		3,688,289
Vehicles			20,817		—		(7,109	)		13,708
Others(*)			2,661,850		—		(2,285,393	)		376,457

	￦		7,574,010		—		(2,790,437	)		4,783,573

F-153

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

24.

Lease, Continued

(2)

Right-of-use assets as of December 31, 2019 are as follows, continued:

(*)

Including power purchase agreements (“PPA”) with GS EPS and two other LNG combined power suppliers.

(3)

Changes in right-of-use assets for the year ended December 31, 2019 are as follows:


		Beginning balance		Changes in accounting policies(*)		Increase		Depreciation			Ending balance
		In millions of won
Land	￦		—		684,386		8,717		(49,029	)		644,074
Buildings			—		36,874		18,106		(20,403	)		34,577
Structures			—		20,840		7,358		(2,554	)		25,644
Machinery			—		—		1,308		(484	)		824
Ships			—		3,986,947		126,807		(425,465	)		3,688,289
Vehicles			—		11,258		9,559		(7,109	)		13,708
Others(*)			—		403,346		49,141		(76,030	)		376,457

	￦		—		5,143,651		220,996		(581,074	)		4,783,573

(*)

Including transferred amount of ￦195,704 million, which was classified as finance lease assets as of December 31, 2018.

(4)

Lease liabilities as of December 31, 2018 and December 31, 2019 are as follows:


		2018
		Minimum lease payment		Present value of minimum lease payment
		In millions of won
Less than 1 year	￦		87,709		57,200
1 ~ 5 years			228,783		170,676
More than 5 years			65,250		55,930

	￦		381,742		283,806


		2019
		In millions of won
Less than 1 year	￦		686,445
1 ~ 5 years			2,334,883
More than 5 years			2,735,681

			5,757,009
Less : Discount			(686,876	)

Present value of lease payment	￦		5,070,133

F-154

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

24.

Lease, Continued

(5)

The details of the liquidity classification of lease liabilities (Prior year : finance lease liabilities) as of December 31, 2018 and 2019 are as follows:


		2018		2019
		In millions of won
Current lease liabilities	￦		57,200		635,349
Non-current lease liabilities			226,606		4,434,784

	￦		283,806		5,070,133

(6)

Changes in lease liabilities for the years ended December 31, 2018 and 2019 are as follows:

2018

Beginning
balance

Acquisition

Decrease

Ending
balance

In millions of won

Finance lease liabilities

￦

418,260

—

(134,454

)

283,806


		2019
		Beginning balance		Changes in accounting policies		Increase		Decrease			Interest expenses		*Others()**		Ending balance
		In millions of won
Lease liabilities	￦		283,806		4,943,584		218,800		(659,387	)		85,950		197,380		5,070,133

(*)

Including translation effect of foreign currency lease liabilities and others.

(7)

Details of expense relating to lease contracts as lessee for the year ended December 31, 2019 are as follows:


		2019
		In millions of won
Depreciation of right-of-use assets	￦		581,074
Interest expenses of lease liabilities			85,950
Leases expenses for short-term leases			20,127
Leases expenses for leases of low-value assets			1,616
Variable lease payments			(15,912	)

	￦		672,855

(8)

Minimum lease payment and contingent rent payment recognized as an expense as a lessee for the year ended December 31, 2018 are as follows:


		2018
		In millions of won
Minimum lease payment	￦		111,530
Contingent rent payment			(18,872	)

	￦		92,658

F-155

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

24.

Lease, Continued

(9)

The total cash outflow related to the lease contract, including cash outflows due to short-term leases and leases of low-value asset leases, amounts to ￦665,218 million.

2)	Company as a lessor

(1)

Finance lease contracts

The Company entered into power purchase agreements (“PPA”) with Jordan Electric Power Company to provide a 373MW level Qatrana gas combined power plant over a 25-year lease term, and an 89.1MW level Fujeij wind power plant over a 20-year lease term. Also, the Company has provided fly-ash pipe conduit as finance leases with an average lease term of 7 years. In addition, the Company provides 30 energy storage system installation projects and 96 energy efficiency contracts as finance leases with a lease term of 1 to 10 years. Also, the Company entered into a PPA with the Comission Federal de Electricidad in Mexico to provide for 25 years (from December 2013 to November 2038) all electricity generated from the power plant after completion of its construction and collect rates consisting of fixed costs (to recover the capital) and variable costs during the contracted period.

(2)

Profit and loss related to finance lease:


		2019
		In millions of won
Finance income on the net investment in the lease	￦		97,392

(3)

Maturity analysis of the lease payments receivable and reconciliation of the undiscounted lease payments to the net investment in the lease as of December 31, 2019 are as follows:


		2019
		In millions of won
Less than 1 year	￦		173,093
1 ~ 2 years			150,895
2 ~ 3 years			150,596
3 ~ 4 years			149,364
4 ~ 5 years			145,964
More than 5 years			1,740,652

			2,510,564
Less : Unearned finance income			(1,331,723	)

Net investment in the lease	￦		1,178,841

The implicit interest rate for a lease term is determined on the lease contract date. The implicit interest rate of the finance lease contracts is from 3.5% up to 16.48% per year as of December 31, 2019. (prior year : 3.5% ~ 9.12%)

F-156

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

24.

Lease, Continued

(4)

Finance lease receivables as of December 31,2018 are as follows:


		2018
		Minimum lease payment		Present value of minimum lease payment
		In millions of won
Less than 1 year	￦		124,918		84,688
1 ~ 5 years			467,518		223,622
More than 5 years			1,333,016		675,036

	￦		1,925,452		983,346

(5)

Changes in the allowance for doubtful accounts of finance lease receivables for the year ended December 31, 2018 and 2019 are as follows:


		2018		2019
		In millions of won
Beginning balance	￦		—		1,133
Bad debt expense			1,133		—
Reversal of allowance for doubtful accounts			—		(271	)

Ending balance	￦		1,133		862

25.

Employment Benefits

(1)

Employment benefit obligations as of December 31, 2018 and 2019 are as follows:


		2018		2019
		In millions of won
Net defined benefit asset	￦		—		(1,047	)
Net defined benefit obligations			1,638,785		1,925,134
Other long-term employee benefit obligations			6,284		4,720

	￦		1,645,069		1,928,807

(2)

Principal assumptions on actuarial valuation as of December 31, 2018 and 2019 are as follows:


	2018		2019
Discount rate		2.24%~2.90%		1.92%~2.05%
Future salary and benefit levels		4.88%		4.39%
Weighted average duration		13.71 years		13.23 years

F-157

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

25.

Employment Benefits, Continued

(3)

Details of expense relating to defined benefit plans for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017			2018			2019
		In millions of won
Current service cost	￦		392,820			369,899			440,300
Interest cost			79,524			87,687			83,619
Expected return on plan assets			(31,307	)		(42,135	)		(41,597	)
Past service cost			—			—			301,442
Loss from settlement			(1,055	)		(767	)		(2,017	)

	￦		439,982			414,684			781,747

Expenses as described above are recognized in those items below in the financial statements.


		2017		2018		2019
		In millions of won
Cost of sales	￦		332,249		308,672		580,623
Selling and administrative expenses			59,111		51,903		120,455
Others (Construction-in-progress and others)			48,622		54,109		80,669

	￦		439,982		414,684		781,747

In addition, for the years ended December 31, 2017, 2018 and 2019, employee benefit obligations expenses of ￦65,603 million, ￦66,833 million and ￦71,844 million, respectively, are recognized as cost of sales, and ￦11,983 million, ￦13,204 million and ￦12,775 million, respectively, are recognized as selling and administrative expenses, and ￦13,332 million, ￦14,189 million and ￦13,893 million, respectively, are recognized as construction-in-progress and others, relates to the Company’s defined contribution plans.

(4)

Details of defined benefit obligations as of December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Present value of defined benefit obligation from funded plans	￦		3,414,116			4,035,400
Fair value of plan assets			(1,775,331	)		(2,111,313	)

			1,638,785			1,924,087
Present value of defined benefit obligation from unfunded plans			—			—

Net liabilities incurred from defined benefit plans	￦		1,638,785			1,924,087

F-158

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

25.

Employment Benefits, Continued

(5)

Changes in the present value of defined benefit obligations for the years ended December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Beginning balance	￦		2,951,842			3,414,116
Current service cost			369,899			440,300
Interest cost(*)			87,687			83,619
Remeasurement component			154,939			(93,736	)
Past service cost			—			301,442
Loss from settlement			(767	)		(2,018	)
Actual payments			(149,454	)		(108,057	)
Others			(30	)		(266	)

Ending balance	￦		3,414,116			4,035,400

(*)

Corporate bond (AAA rated) yield at year-end is applied to measure the interest cost on employee benefit obligations.

(6)

Changes in the fair value of plan assets for the years ended December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Beginning balance	￦		1,475,641			1,775,331
Expected return			42,135			41,597
Remeasurement component			(12,308	)		(11,186	)
Contributions by the employers			330,064			348,386
Actual payments			(60,201	)		(42,815	)

Ending balance	￦		1,775,331			2,111,313

In addition, loss on accumulated remeasurement component amounting to ￦219,381 million and ￦117,779 million has been recognized as other comprehensive income or loss for the years ended December 31, 2018 and 2019, respectively.

(7)

Details of the fair value of plan assets as of December 31, 2018 and 2019 are as follows:


		2018		2019
		In millions of won
Equity instruments	￦		96,823		189,235
Debt instruments			510,184		648,265
Bank deposit			275,518		199,743
Others			892,806		1,074,070

	￦		1,775,331		2,111,313

For the years ended December 31, 2018 and 2019, actual returns on plan assets amounted to ￦29,827 million and ￦30,411 million, respectively.

F-159

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

25.

Employment Benefits, Continued

(8)

Remeasurement component recognized in other comprehensive income (loss) for the years ended December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Actuarial gain from changes in financial assumptions	￦		186,428			(2,916	)
Experience adjustments, etc.			(31,489	)		(90,820	)
Expected return			12,308			11,186

	￦		167,247			(82,550	)

Remeasurement component recognized as other comprehensive income or loss is recorded in retained earnings.

26.

Provisions

(1)

Provisions as of December 31, 2018 and 2019 are as follows:


		2018				2019
		Current		Non-current		Current		Non-current
		In millions of won
Employment benefits
Provisions for employment benefits	￦		976,347		—		975,619		—
Litigation
Litigation provisions			40,157		37,636		39,177		49,221
Decommissioning cost
Nuclear plants			—		13,388,134		—		15,994,039
Spent fuel			—		1,291,354		401,741		953,539
Radioactive waste			4,310		1,680,698		77,053		1,811,029
PCBs			—		147,668		—		152,981
Other recovery provisions			—		10,477		—		10,773
Others
Power plant regional support program			137,668		—		140,133		—
Transmission regional support program			151,698		—		139,785		—
Provisions for tax			6,845		—		—		—
Provisions for financial guarantee			1,320		14,266		111		81,246
Provisions for RPS			93,919		—		2,889		—
Provisions for greenhouse gas emissions obligations			136,187		—		682,459		—
Others			46,347		15,515		145,754		13,220

	￦		1,594,798		16,585,748		2,604,721		19,066,048

F-160

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

26.

Provisions, Continued

(2)

Changes in provisions for the years ended December 31, 2018 and 2019 are as follows:


		2018
		Beginning balance		Increase in provision		Payment			Reversal			Others			Ending balance
		In millions of won
Employment benefits
Provisions for employment benefits	￦		913,787		912,440		(843,281	)		(6,599	)		—			976,347
Litigation
Litigation provisions(*)			73,576		234,517		(216,187	)		(13,847	)		(266	)		77,793
Decommissioning cost
Nuclear plants			13,007,228		411,316		(30,410	)		—			—			13,388,134
Spent fuel			1,339,046		435,007		(482,699	)		—			—			1,291,354
Radioactive waste			1,638,371		112,815		(66,178	)		—			—			1,685,008
PCBs			180,087		4,600		(13,758	)		(23,261	)		—			147,668
Other recovery provisions			6,659		2,125		—			—			1,693			10,477
Others
Power plant regional support program			153,756		46,366		(71,978	)		—			9,524			137,668
Transmission regional support program			243,365		141,661		(233,328	)		—			—			151,698
Provisions for tax			61		6,821		—			—			(37	)		6,845
Provisions for financial guarantee			23,475		1,179		(67	)		(8,432	)		(569	)		15,586
Provisions for RPS			271,624		297,802		(475,507	)		—			—			93,919
Provisions for greenhouse gas emissions obligations			414,252		131,860		(350,356	)		(59,569	)		—			136,187
Others			96,925		44,732		(82,632	)		(745	)		3,582			61,862

	￦		18,362,212		2,783,241		(2,866,381	)		(112,453	)		13,927			18,180,546

(*)

As described in Note 50.(1), the Company believes that the possibility of economic benefit outflow is probable on the request for additional construction costs of Hyundai E&C, GS Engineering & Construction Corp. and Hansol SeenTec Co., Ltd. For this reason, the Company recognized ￦204,787 million of provision in addition to property, plant and equipment.

F-161

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

26.

Provisions, Continued

(2)

Changes in provisions for the years ended December 31, 2018 and 2019 are as follows, continued:


		2019
		Beginning balance		Increase in provision		Payment			Reversal			Others		Ending balance
		In millions of won
Employment benefits
Provisions for employment benefits	￦		976,347		900,033		(879,980	)		(20,781	)		—		975,619
Litigation
Litigation provisions			77,793		59,366		(17,236	)		(31,525	)		—		88,398
Decommissioning cost
Nuclear plants			13,388,134		2,639,562		(33,657	)		—			—		15,994,039
Spent fuel			1,291,354		440,029		(376,103	)		—			—		1,355,280
Radioactive waste			1,685,008		209,551		(6,787	)		—			310		1,888,082
PCBs			147,668		14,251		(8,938	)		—			—		152,981
Other recovery provisions			10,477		2,020		(2,033	)		—			309		10,773
Others
Power plant regional support program			137,668		41,341		(48,390	)		—			9,514		140,133
Transmission regional support program			151,698		169,616		(181,529	)		—			—		139,785
Provisions for tax			6,845		—		—			(6,847	)		2		—
Provisions for financial guarantee			15,586		83,910		(16,589	)		(1,551	)		1		81,357
Provisions for RPS			93,919		222,119		(313,149	)		—			—		2,889
Provisions for greenhouse gas emissions obligations			136,187		724,002		(152,463	)		(25,267	)		—		682,459
Others			61,862		113,751		(16,217	)		(833	)		411		158,974

	￦		18,180,546		5,619,551		(2,053,071	)		(86,804	)		10,547		21,670,769

27.

Government Grants

(1)

Government grants as of December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Land	￦		(21,968	)		(21,817	)
Buildings			(63,189	)		(61,920	)
Structures			(190,854	)		(186,554	)
Machinery			(173,242	)		(158,907	)
Vehicles			(4,220	)		(2,275	)
Equipment			(418	)		(241	)
Tools			(675	)		(403	)
Construction-in-progress			(54,740	)		(61,211	)
Finance lease assets			(26	)		—
Investment properties			(50	)		(13	)
Software			(420	)		(235	)
Development expenditures			(2,110	)		(1,492	)
Intangible assets under development			(10,564	)		(11,029	)
Other intangible assets other than goodwill			—			(79	)

	￦		(522,476	)		(506,176	)

F-162

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

27.

Government Grants, Continued

(2)

Changes in government grants for the years ended December 31, 2018 and 2019 are as follows:


		2018
		Beginning balance			Receipt			Acquisition		Offset the items of depreciation expense and others		Disposal		Others			Ending balance
		In millions of won
Cash	￦		—			(30,416	)		—		—		—		30,416			—
Land			(21,968	)		—			—		—		—		—			(21,968	)
Buildings			(63,539	)		—			—		6,836		31		(6,517	)		(63,189	)
Structures			(196,414	)		—			—		10,292		3,270		(8,002	)		(190,854	)
Machinery			(183,188	)		—			—		18,099		823		(8,976	)		(173,242	)
Vehicles			(6,322	)		—			—		2,146		—		(44	)		(4,220	)
Equipment			(761	)		—			—		365		—		(22	)		(418	)
Tools			(1,027	)		—			—		432		—		(80	)		(675	)
Construction-in-progress			(49,084	)		—			18,239		—		—		(23,895	)		(54,740	)
Finance lease assets			(27	)		—			—		1		—		—			(26	)
Investment properties			(83	)		—			—		1		—		32			(50	)
Software			(486	)		—			—		254		—		(188	)		(420	)
Development expenditures			(3,702	)		—			—		1,591		—		1			(2,110	)
Intangible assets under development			(10,540	)		—			—		—		—		(24	)		(10,564	)
Usage rights of donated assets and other			(11	)		—			—		11		—		—			—

	￦		(537,152	)		(30,416	)		18,239		40,028		4,124		(17,299	)		(522,476	)

F-163

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

27.

Government Grants, Continued

(2)

Changes in government grants for the years ended December 31, 2018 and 2019 are as follows, continued:


		2019
		Beginning balance			Receipt			Acquisition		Offset the items of depreciation expense and others		Disposal		Others			Ending balance
		In millions of won
Cash	￦		—			(21,705	)		—		—		—		21,705			—
Land			(21,968	)		—			—		—		151		—			(21,817	)
Buildings			(63,189	)		—			—		6,214		—		(4,945	)		(61,920	)
Structures			(190,854	)		—			—		9,373		2,405		(7,478	)		(186,554	)
Machinery			(173,242	)		—			—		17,993		635		(4,293	)		(158,907	)
Vehicles			(4,220	)		—			—		2,170		5		(230	)		(2,275	)
Equipment			(418	)		—			—		262		—		(85	)		(241	)
Tools			(675	)		—			—		281		—		(9	)		(403	)
Construction-in-progress			(54,740	)		—			12,338		—		—		(18,809	)		(61,211	)
Finance lease assets			(26	)		—			—		—		—		26			—
Investment properties			(50	)		—			—		1		—		36			(13	)
Software			(420	)		—			—		202		—		(17	)		(235	)
Development expenditures			(2,110	)		—			—		833		—		(215	)		(1,492	)
Intangible assets under development			(10,564	)		—			—		—		—		(465	)		(11,029	)
Others			—			—			—		2		—		(81	)		(79	)

	￦		(522,476	)		(21,705	)		12,338		37,331		3,196		(14,860	)		(506,176	)

28.

Deferred Revenues

Deferred revenue for the years ended December 31, 2018 and 2019 are as follows which included in current and non-current non-financial liabilities in the consolidated statements of financial position:


		2018			2019
		In millions of won
Beginning balance	￦		8,325,181			8,606,563
Increase during the current year			875,930			1,199,783
Recognized as revenue during the current year			(594,548	)		(604,808	)

Ending balance	￦		8,606,563			9,201,538

F-164

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

29.

Non-financial Liabilities

Non-financial liabilities as of December 31, 2018 and 2019 are as follows:


		2018				2019
		Current		Non-current		Current		Non-current
		In millions of won
Advance received	￦		3,724,238		80,937		3,825,240		192,863
Unearned revenue			63,038		4,690		30,988		6,589
Deferred revenue			556,072		8,050,491		590,928		8,610,610
Withholdings			172,454		10,856		160,977		10,901
Others			1,058,239		13,059		1,080,220		13,489

	￦		5,574,041		8,160,033		5,688,353		8,834,452

30.

Contributed Capital

(1)

Details of shares issued as of December 31, 2018 and 2019 are as follows:

2018

Shares
authorized

Shares issued

Par value
per share
(in won)

Owned by
government(*)

Owned by
others

Total

In millions of won except share information

Common shares

1,200,000,000

641,964,077

￦

5,000

1,640,385

1,569,435

3,209,820

(*)

Korea Development Bank’s interest of ￦1,056,176 million is included.

2019

Shares
authorized

Shares issued

Par value
per share
(in won)

Owned by
government(*)

Owned by
others

Total

In millions of won except share information

Common shares

1,200,000,000

641,964,077

￦

5,000

1,640,385

1,569,435

3,209,820

(*)

Korea Development Bank’s interest of ￦1,056,176 million is included.

(2)

Details in number of outstanding capital stock for the years ended December 31, 2018 and 2019 are as follows.


	2018		2019
	Number of shares
Beginning balance		641,964,077		641,964,077

Ending balance		641,964,077		641,964,077

(3)

Details of share premium as of December 31, 2018 and 2019 are as follows:

2018

2019

In millions of won

Share premium

￦

843,758

F-165

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

31.

Retained Earnings and Dividends Paid

(1)

Details of retained earnings as of December 31, 2018 and 2019 are as follows:


		2018		2019
		In millions of won
Legal reserve(*)	￦		1,604,910		1,604,910
Voluntary reserves			35,906,267		34,785,425
Retained earnings before appropriations			14,007,942		12,811,798

Retained earnings	￦		51,519,119		49,202,133

(*)

The KEPCO Act requires KEPCO 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 KEPCO’s 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.

(2)

Details of voluntary reserves as of December 31, 2018 and 2019 are as follows:


		2018		2019
		In millions of won
Reserve for investment on social overhead capital	￦		5,277,449		5,277,449
Reserve for research and human development(*)			330,000		330,000
Reserve for business expansion			30,088,818		28,967,976
Reserve for equalizing dividends			210,000		210,000

	￦		35,906,267		34,785,425

(*)

The reserve for research and human development is appropriated by KEPCO to use as qualified tax credits to reduce corporate tax liabilities. The reserve is available for cash dividends for a certain period as defined by the Restriction of Special Taxation Act of Korea.

(3)

Changes in retained earnings for the years ended December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Beginning balance	￦		53,370,558			51,519,119
Effect of change in accounting policy			71,928			—
Net profit (loss) for the period attributed to owner of the Company			(1,314,567	)		(2,345,517	)
Changes in equity method retained earnings			(1,153	)		(6,789	)
Remeasurements of defined benefit liability, net of tax			(100,495	)		36,160
Transfer of gain (loss) on valuation of financial assets through other comprehensive income			—			(840	)
Dividends paid			(507,152	)		—

Ending balance	￦		51,519,119			49,202,133

F-166

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

31.

Retained Earnings and Dividends Paid, Continued

(4)

Dividends paid for the years ended December 31, 2017, 2018 and 2019 are as follows:

2017

In millions of won

Number of
shares issued

Number of
treasury stocks

Number of
shares eligible for
dividends

Dividends paid
per share

Dividends
paid

(In won)

Common shares

641,964,077

—

641,964,077

￦

1,980

1,271,089

2018

In millions of won

Number of
shares issued

Number of
treasury stocks

Number of
shares eligible for
dividends

Dividends paid
per share

Dividends
paid

(In won)

Common shares

641,964,077

—

641,964,077

￦

790

507,152

2019

In millions of won

Number of
shares issued

Number of
treasury stocks

Number of
shares eligible for
dividends

Dividends paid
per share

Dividends
paid

(In won)

Common shares

641,964,077

—

641,964,077

￦

—

(5)

Changes in retained earnings of investments in associates and joint ventures for the years ended December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Beginning balance	￦		5,122			3,969
Changes			(1,153	)		(6,789	)

Ending balance	￦		3,969			(2,820	)

(6)

Changes in remeasurement components for the years ended December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Beginning balance	￦		(43,513	)		(219,381	)
Changes			(154,198	)		76,395
Income tax effect			53,703			(40,235	)
Transfer to reserve for business expansion			(75,373	)		65,442

Ending balance	￦		(219,381	)		(117,779	)

32.

Statement of Disposition of Deficit

For the year ended December 31, 2018, KEPCO’s retained earnings were appropriated on March 22, 2019. For the year ended December 31, 2019, KEPCO’s deficits were appropriated on March 27, 2020. Statements

F-167

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

32.

Statement of Disposition of Deficit, Continued

of disposition of deficit and appropriation of retained earnings of KEPCO, the controlling company, for the years ended December 31, 2018 and 2019, respectively, are as follows:


		2018			2019
		In millions of won except for dividends per share
I. Retained earnings before appropriations (undisposed deficit)
Unappropriated retained earnings carried over from prior years	￦		—			—
Effect of change in accounting policy			39,813			—
Net income (loss)			(1,095,213	)		(2,594,957	)
Remeasurements of the defined benefit plan			(65,442	)		(11,402	)

			(1,120,842	)		(2,606,359	)

II. Transfer from voluntary reserves			1,120,842			2,606,359

III. Subtotal (I+II)			—			—

IV. Appropriations of retained earnings			—			—
V. Unappropriated retained earnings to be carried over forward to subsequent year			—			—

33.

Hybrid Bonds

Hybrid bonds classified as equity (non-controlling interest) as of December 31, 2018 and 2019 are as follows:


Issuer	Hybrid bond	Issued date		Maturity		Yield (%)			2018			2019
	In millions of won
Korea South-East Power Co., Ltd.	1st hybrid bond		2012.12.07		2042.12.06		4.38	￦		170,000			170,000
Korea South-East Power Co., Ltd.	2nd hybrid bond		2012.12.07		2042.12.06		4.44			230,000			230,000
Expense of issuance										(1,090	)		(1,090	)

								￦		398,910			398,910

Although these instruments have contractual maturity dates, the contractual agreements allow these subsidiaries to indefinitely extend the maturity dates and defer the payment of interest without modification to the other terms of the instruments. When the Company decides not to pay dividends on ordinary shares, they are not required to pay interest on the hybrid bonds.

Substantially, as these instruments have no contractual obligation to pay principal and interest, these instruments have been classified as equity (non-controlling interest) in the Company’s consolidated financial statements.

F-168

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

34.

Other Components of Equity

(1)

Other components of equity of the parent as of December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Other capital surplus	￦		1,234,825			1,226,364
Accumulated other comprehensive loss			(358,570	)		(280,730	)
Other equity			13,294,973			13,294,973

	￦		14,171,228			14,240,607

(2)

Changes in other capital surplus for the years ended December 31, 2018 and 2019 are as follows:


		2018						2019
		Gains on disposal of treasury stocks		Others		Subtotal		Gains on disposal of treasury stocks		Others			Subtotal
		In millions of won
Beginning balance	￦		387,524		846,269		1,233,793		387,524		847,301			1,234,825
Issuance of share capital of subsidiary			—		1,032		1,032		—		—			—
Others			—		—		—		—		(8,461	)		(8,461	)

Ending balance	￦		387,524		847,301		1,234,825		387,524		838,840			1,226,364

(3)

Changes in accumulated other comprehensive income (loss) for the years ended December 31, 2018 and 2019 are as follows:


		2018
		Financial asset at fair value through other comprehensive income valuation reserve			Shares in other comprehensive income of investments in associates and joint ventures		Reserve for overseas operations translation credit			Reserve for gain (loss) on valuation of derivatives			Total
		In millions of won
Beginning balance	￦		29,268			66,464		(318,159	)		(49,030	)		(271,457	)
Effect of change in accounting Policy			(76,851	)		—		—			—			(76,851	)
Changes in the unrealized fair value of financial assets at FVOCI, net of tax			(34,125	)		—		—			—			(34,125	)
Shares in other comprehensive income of associates and joint ventures, net of tax			—			57,089		—			—			57,089
Foreign currency translation of foreign operations, net of tax			—			—		(32,086	)		—			(32,086	)
Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax			—			—		—			(1,140	)		(1,140	)

Ending balance	￦		(81,708	)		123,553		(350,245	)		(50,170	)		(358,570	)

F-169

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

34.

Other Components of Equity, Continued

(3)

Changes in accumulated other comprehensive income (loss) for the years ended December 31, 2018 and 2019 are as follows, continued:


		2019
		Financial asset at fair value through other comprehensive income valuation reserve			Shares in other comprehensive income of investments in associates and joint ventures		Reserve for overseas operations translation credit			Reserve for gain (loss) on valuation of derivatives			Total
		In millions of won
Beginning balance	￦		(81,708	)		123,553		(350,245	)		(50,170	)		(358,570	)
Changes in the unrealized fair value of financial assets at FVOCI, net of tax			(10,891	)		—		—			—			(10,891	)
Shares in other comprehensive income of associates and joint ventures, net of tax			—			19,343		—			—			19,343
Foreign currency translation of foreign operations, net of tax			—			—		55,347			—			55,347
Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax			—			—		—			14,041			14,041

Ending balance	￦		(92,599	)		142,896		(294,898	)		(36,129	)		(280,730	)

(4)

Details of changes in other equity for the years ended December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Statutory revaluation reserve	￦		13,295,098			13,295,098
Changes in other equity			(125	)		(125	)

	￦		13,294,973			13,294,973

F-170

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

35.

Sales

Details of sales for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017				2018				2019
		Domestic		Overseas		Domestic		Overseas		Domestic		Overseas
		In millions of won
[Type of goods and services]
Sales of goods	￦		55,373,316		399,232		57,514,866		382,938		56,609,330		285,546
Electricity			54,649,882		—		56,842,011		—		55,939,001		—
Heat supply			205,838		—		216,117		—		220,948		—
Others			517,596		399,232		456,738		382,938		449,381		285,546
Sales related to rendering of services			186,990		164,167		176,539		216,328		222,106		186,184
Sales of construction services			92,501		3,119,683		108,586		1,633,805		110,692		1,154,224

	￦		55,652,807		3,683,082		57,799,991		2,233,071		56,942,128		1,625,954

[Timing of revenue recognition]
Performance obligations satisfied at a point in time	￦		55,373,316		399,232		57,514,866		382,938		56,609,330		285,546
Performance obligations satisfied over time			279,491		3,283,850		285,125		1,850,133		332,798		1,340,408

	￦		55,652,807		3,683,082		57,799,991		2,233,071		56,942,128		1,625,954

F-171

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

36.

Selling and Administrative Expenses

(1)

Selling and administrative expenses for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017		2018		2019
		In millions of won
Salaries	￦		735,383		757,819		775,204
Retirement benefit expense			71,094		65,107		157,272
Welfare and benefit expense			179,406		132,089		120,463
Insurance expense			15,414		12,181		12,427
Depreciation			190,245		214,499		232,510
Amortization of intangible assets			44,990		54,153		76,547
Bad debt expense			126,714		39,784		(12,719	)
Commission			673,740		714,096		632,849
Advertising expense			114,519		30,894		34,453
Training expense			7,027		6,277		7,174
Vehicle maintenance expense			9,998		10,148		9,525
Publishing expense			3,672		3,307		3,414
Business promotion expense			3,700		2,785		3,038
Rent expense			38,380		42,851		40,505
Telecommunication expense			24,916		23,505		8,451
Transportation expense			495		686		865
Taxes and dues			48,395		46,424		58,666
Expendable supplies expense			7,731		6,166		6,682
Water, light and heating expense			10,545		12,629		11,867
Repairs and maintenance expense			63,477		62,580		88,576
Ordinary development expense			211,417		215,494		224,463
Travel expense			16,658		14,363		15,652
Clothing expense			8,410		10,108		9,369
Survey and analysis expense			698		705		848
Membership fee			1,122		1,043		969
Others			154,709		148,197		150,506

	￦		2,762,855		2,627,890		2,669,576

(2)

Other selling and administrative expenses for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017		2018		2019
		In millions of won
Accommodation development expenses	￦		55,799		52,822		53,945
Miscellaneous wages			32,300		32,447		39,794
Litigation and filing expenses			11,881		12,853		21,768
Compensation for damages			12,297		19,193		(1,924	)
Outsourcing expenses			2,647		3,036		3,293
Reward expenses			2,786		2,713		2,858
Overseas market development expenses			1,876		1,361		1,997
Others			35,123		23,772		28,775

	￦		154,709		148,197		150,506

F-172

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

37.

Other Income and Expenses

(1)

Other income for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017		2018		2019
		In millions of won
Reversal of other provisions	￦		35,265		12,700		16,542
Reversal of other allowance for doubtful accounts			2,166		143		—
Gains on government grants			430		482		281
Gains on assets contributed			4,218		17,336		6,921
Gains on liabilities exempted			3,166		10,303		916
Compensation and reparations revenue			89,196		89,901		113,292
Revenue from research contracts			12,580		6,818		5,276
Income related to transfer of assets from customers			478,973		594,548		604,808
Rental income			192,136		186,631		191,088
Others			50,988		51,032		58,849

	￦		869,118		969,894		997,973

(2)

Details of “others” included in other income for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017		2018		2019
		In millions of won
Refund of claim for rectification	￦		9,655		8,933		1,969
Adjustment of research project			3,884		2,267		3,294
Maintenance expenses on lease building			135		176		153
Training expenses			3,045		3,220		3,167
Deposit redemption			34		7		436
Reversal of expenses on litigation			360		753		9,926
Revenue on royalty fee			2,888		6,909		—
Reimbursement of insurance fee			1,498		7,145		610
Gains on guarantee contracts			456		39		135
Others			29,033		21,583		39,159

	￦		50,988		51,032		58,849

F-173

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

37.

Other Income and Expenses, Continued

(3)

Other expenses for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017		2018		2019
		In millions of won
Compensation and indemnification expense	￦		37		23,437		403
Accretion expenses of other provisions			7,535		41,924		7,939
Depreciation expenses on investment properties			1,176		923		5,069
Depreciation expenses on idle assets			6,644		6,547		6,542
Other bad debt expense			1,778		17,827		29,348
Donations			119,421		63,743		64,752
Others			43,464		76,929		127,860

	￦		180,055		231,330		241,913

(4)

Details of “others” included in other expenses for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017		2018		2019
		In millions of won
Operating expenses related to the idle assets	￦		136		47		49
Research grants			1,180		461		399
Supporting expenses on farming and fishing village			11,956		13,537		13,991
Operating expenses on fitness center			3,498		4,788		5,234
Expenses on adjustment of research and development grants			806		404		554
Taxes and dues			2,270		199		188
Expenses on R&D supporting			5,459		53		67
Others			18,159		57,440		107,378

	￦		43,464		76,929		127,860

F-174

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

38.

Other Gains (Losses)

(1)

Composition of other gains (losses) for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017			2018			2019
		In millions of won
Other gains
Gains on disposal of property, plant, and equipment	￦		48,316			98,077			43,784
Gains on disposal of intangible assets			564			12			206
Reversal of impairment loss on property, plant and equipment			—			—			16,692
Reversal of impairment loss on intangible assets			54			17			—
Gains on foreign currency translation			20,485			14,905			16,340
Gains on foreign currency transaction			93,151			47,297			53,152
Gains on insurance proceeds			400			—			17,410
Others			269,562			221,556			238,688

Other losses
Losses on disposal of property, plant and equipment			(70,514	)		(60,704	)		(72,508	)
Losses on disposal of intangible assets			(183	)		(43	)		(827	)
Impairment loss on property, plant and equipment			(51,067	)		(710,162	)		(50,034	)
Impairment loss on intangible assets			(20	)		(8,112	)		(513,609	)
Impairment loss on other non-current assets			—			(87,024	)		(49,620	)
Losses on foreign currency translation			(25,495	)		(7,678	)		(8,757	)
Losses on foreign currency transaction			(36,241	)		(65,366	)		(55,283	)
Others			(92,385	)		(63,899	)		(217,892	)

	￦		156,627			(621,124	)		(582,258	)

F-175

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

38.

Other Gains (Losses), Continued

(2)

Details of “others” included in other gains for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017		2018		2019
		In millions of won
Gains on disposal of inventories	￦		6,024		6,350		3,424
Gains on proxy collection of TV license fee			39,711		40,450		41,013
Gains on compensation of impaired electric poles			1,526		1,166		1,372
Gains on compensation for infringement on contract			18,990		3,648		—
Gains on harbor facilities dues			3,025		3,803		3,741
Gains on technical fees			2,105		2,026		3,044
Reversal of occupation development training fees			1,697		1,602		1,472
Gains on disposal of waste			4,261		4,232		5,317
Gains on insurance			10,410		22,382		812
Gains on tax rebate			2,161		542		341
Gains on other commission			4,790		4,347		1,111
Gains on disposal of assets held-for-sale			—		—		23,778
Others			174,862		131,008		153,263

	￦		269,562		221,556		238,688

(3)

Details of “others” included in other losses for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017		2018		2019
		In millions of won
Losses on valuation of inventories	￦		3,875		1,953		3,127
Losses on disposal of inventories			3,273		3,555		10,456
Losses due to disaster			5,374		2,129		7,635
Losses on rounding adjustment of electric charge surtax			1,253		1,265		1,268
Losses on adjustments of levies			1		—		—
Forfeit of taxes and dues			656		—		—
Others			77,953		54,997		195,406

	￦		92,385		63,899		217,892

F-176

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

39.

Finance Income

(1)

Finance income for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017		2018		2019
		In millions of won
Interest income	￦		206,143		223,767		268,118
Dividends income			11,477		12,777		13,838
Gains on disposal of financial assets			1,130		1,838		3,866
Gains on valuation of financial assets at fair value through profit or loss			12		8,495		5,575
Gains on valuation of derivatives			16,165		199,943		362,735
Gains on transaction of derivatives			29,257		179,745		157,961
Gains on foreign currency translation			1,115,832		143,254		175,839
Gains on foreign currency transactions			150,602		27,051		21,774

	￦		1,530,618		796,870		1,009,706

(2)

Details of interest income included in finance income for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017		2018		2019
		In millions of won
Cash and cash equivalents	￦		35,474		40,704		42,861
Financial assets at fair value through profit or loss			290		21,713		29,411
Financial assets at amortized cost			—		89		539
Held-to-maturity investments			82		—		—
Loans			30,014		21,925		63,448
Short-term financial instrument			29,412		41,025		49,070
Long-term financial instrument			8,144		7,920		12,794
Other financial assets			—		1		54
Trade and other receivables			102,727		90,390		69,941

	￦		206,143		223,767		268,118

F-177

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

40.

Finance Expenses

(1)

Finance expenses for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017		2018		2019
		In millions of won
Interest expense	￦		1,789,552		1,868,458		2,046,811
Losses on sale of financial assets			2,343		1		2,106
Losses on valuation of financial assets at fair value through profit or loss			—		6,616		4,513
Impairment of available-for-sale financial assets			2,713		—		—
Losses on valuation of derivatives			890,832		46,740		45,385
Losses on transaction of derivatives			198,218		32,448		71,546
Losses on foreign currency translation			207,944		393,859		553,731
Losses on foreign currency transaction			35,175		121,763		55,509
Losses on repayment of financial liabilities			5		—		—
Other			1,170		858		2,555

	￦		3,127,952		2,470,743		2,782,156

(2)

Details of interest expense included in finance expenses for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017			2018			2019
		In millions of won
Trade and other payables	￦		57,160			42,830			94,019
Short-term borrowings			35,891			32,545			42,971
Long-term borrowings			87,011			92,243			119,806
Debt securities			1,698,232			1,771,544			1,827,511
Other financial liabilities			491,665			505,112			558,464

			2,369,959			2,444,274			2,642,771

Less: Capitalized borrowing costs			(580,407	)		(575,816	)		(595,960	)

	￦		1,789,552			1,868,458			2,046,811

Capitalization rates for the years ended December 31, 2017, 2018 and 2019 are 2.30%~3.60%, 2.17%~3.86% and 2.37%~3.44%, respectively.

F-178

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

41.

Income Taxes

(1)

Income tax expense (benefit) for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017			2018			2019
		In millions of won
Current income tax expense
Payment of income tax	￦		881,583			378,715			538,223
Adjustment in respect of prior years due to change in estimate			4,484			(195,648	)		(176,441	)
Current income tax directly recognized in equity			(56,098	)		101,528			(53,302	)
Effect of change in accounting policy			—			1,780			—

			829,969			286,375			308,480

Deferred tax expense
Generation and realization of temporary differences			1,283,012			(495,658	)		(636,984	)
Changes of unrecognized tax losses, tax credit and temporary differences for prior periods			44,573			(28,509	)		(22,469	)
Changes in deferred tax on tax losses carryforwards			—			(572,305	)		(582,011	)
Tax credit carryforwards			15,270			(16,224	)		(71,306	)
Amount due to change in tax rate or regulations			—			—			1,987

			1,342,855			(1,112,696	)		(1,310,783	)

Income tax expense (benefit)	￦		2,172,824			(826,321	)		(1,002,303	)

F-179

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

41.

Income Taxes, Continued

(2)

Reconciliation between actual income tax expense and amount computed by applying the statutory tax rate to income before income taxes for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017			2018			2019
		In millions of won
Profit (loss) before income tax	￦		3,614,218			(2,000,819	)		(3,265,838	)

Income tax expense (benefit) computed at applicable tax rate(*1)			874,641			(550,225	)		(898,105	)
Adjustments
Effect of applying gradual tax rate			(5,082	)		(1,408	)		10,362
Effect of non-taxable income			(32,032	)		(1,705	)		(9,990	)
Effect of non-deductible expenses			15,032			40,151			12,197
Effect of tax losses that are not recognized as deferred tax asset			—			2,086			57,490
Effects of tax credits and deduction			(161,069	)		(39,471	)		(76,983	)
Recognition (reversal) of unrecognized deferred tax asset, net			44,573			(28,509	)		(22,469	)
Effect of change in deferred tax due to change in tax rate			1,055,154			261			16,848
Deferred tax related to investments in subsidiaries and associates			394,145			(52,618	)		147,598
Others, net			(17,022	)		765			(62,810	)

			1,293,699			(80,448	)		72,243
Adjustment in respect of prior years due to change in estimate			4,484			(195,648	)		(176,440	)

Income tax expense (benefit)	￦		2,172,824			(826,321	)		(1,002,302	)

Effective tax rate			60	%		(*2	)		(*2	)

(*1)

Applicable tax rate is 24.2% as of December 31, 2017, and 27.5% as of December 31, 2018 and 2019.

(*2)

The effective tax rate for the year ended December 31, 2018 and 2019 is not calculated for income tax benefit.

(3)

Income tax directly adjusted to shareholders’ equity (except for accumulated other comprehensive income (loss)) for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017			2018		2019
		In millions of won
Dividends of hybrid bond	￦		5,248			4,273		3,432
Effect of change in effective tax rate			(25	)		—		—

	￦		5,223			4,273		3,432

F-180

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

41.

Income Taxes, Continued

(4)

Income tax recognized as other comprehensive income (loss) for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017			2018			2019
		In millions of won
Income tax recognized as other comprehensive income (loss)
Gain (loss) on valuation of financial assets at fair value through other comprehensive income	￦		—			35,798			(4,217	)
Loss on valuation of available-for-sale financial assets			(2,551	)		—			—
Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax			(11,016	)		6,639			(15,642	)
Remeasurement of defined benefit obligations			(80,645	)		53,703			(40,235	)
Investments in associates			8,649			6,592			4,275
Others			24,242			(5,477	)		(914	)

	￦		(61,321	)		97,255			(56,733	)

F-181

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

41.

Income Taxes, Continued

(5)

Changes in deferred tax assets (liabilities) recognized in the statements of financial position for the years ended December 31, 2018 and 2019 are as follows:


		2018
		Beginning balance			Amounts recognized in profit or loss			Amount recognized in other comprehensive income (loss)			Amounts recognized directly in equity		Ending balance
		In millions of won
Deferred tax on temporary differences
Employee benefits	￦		498,694			42,144			53,703			—		594,541
Cash flow hedge			65,445			(32,623	)		6,639			—		39,461
Investments in associates or subsidiaries			(8,668,016	)		(5,447	)		6,592			—		(8,666,871	)
Property, plant and equipment			(6,860,440	)		337,662			—			—		(6,522,778	)
Finance lease			(426,949	)		(26,125	)		—			—		(453,074	)
Intangible assets			7,648			(1,593	)		—			—		6,055
Financial assets at fair value through profit or loss			890			(871	)		—			—		19
Financial assets at fair value through other comprehensive income			(8,843	)		(1,379	)		35,798			—		25,576
Deferred revenue			230,711			(10,969	)		—			—		219,742
Provisions			4,822,833			(21,887	)		—			—		4,800,946
Doubtful receivables			59			—			—			—		59
Other finance liabilities			32,755			2,465			—			4,273		39,493
Gains or losses on foreign exchange translation			(1,354	)		28,434			—			—		27,080
Allowance for doubtful accounts			42,931			15,825			—			—		58,756
Accrued income			(1,825	)		(1,089	)		—			—		(2,914	)
Special deduction for property, plant and equipment			(200,927	)		(10,819	)		—			—		(211,746	)
Reserve for research and human development			(3,041	)		3,041			—			—		—
Others			952,754			105,869			(5,477	)		—		1,053,146

			(9,516,675	)		422,638			97,255			4,273		(8,992,509	)

Deferred tax on unused tax losses and tax credit
Unused tax losses			—			554,457			—			—		554,457
Excess of donation limit			—			17,848			—			—		17,848
Tax credit			20,431			16,225			—			—		36,656

			20,431			588,530			—			—		608,961

	￦		(9,496,244	)		1,011,168			97,255			4,273		(8,383,548	)

F-182

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

41.

Income Taxes, Continued

(5)

Changes in deferred tax assets (liabilities) recognized in the statements of financial position for the years ended December 31, 2018 and 2019 are as follows, continued:


		2019
		Beginning balance			Amounts recognized in profit or loss			Amount recognized in other comprehensive income (loss)			Amounts recognized directly in equity			*Others()**			Ending balance
		In millions of won
Deferred tax on temporary differences
Employee benefits	￦		594,541			94,541			(40,235	)		—			—			648,847
Cash flow hedge			39,461			(23,977	)		(15,642	)		(841	)		—			(999	)
Investments in associates or subsidiaries			(8,666,871	)		(3,131	)		4,275			—			—			(8,665,727	)
Property, plant and equipment			(6,522,778	)		(592,440	)		—			—			—			(7,115,218	)
Finance lease			(453,074	)		292,631			—			—			—			(160,443	)
Intangible assets			6,055			(20,232	)		—			—			(41,729	)		(55,906	)
Financial assets at fair value through profit or loss			19			322			—			—			—			341
Financial assets at fair value through other comprehensive income			25,576			(3,114	)		(4,217	)		—			—			18,245
Deferred revenue			219,742			(6,739	)		—			—			—			213,003
Provisions			4,800,946			655,973			—			—			—			5,456,919
Doubtful receivables			59			—			—			—			—			59
Other finance liabilities			39,493			(4,402	)		—			4,273			—			39,364
Gains or losses on foreign exchange translation			27,080			30,881			—			—			—			57,961
Allowance for doubtful accounts			58,756			(1,149	)		—			—			—			57,607
Accrued income			(2,914	)		(1,462	)		—			—			—			(4,376	)
Special deduction for property, plant and equipment			(211,746	)		(3,627	)		—			—			—			(215,373	)
Others			1,053,146			290,484			(914	)		—			—			1,342,716

			(8,992,509	)		704,559			(56,733	)		3,432			(41,729	)		(8,382,980	)

Deferred tax on unused tax losses and tax credit
Unused tax losses			554,457			557,356			—			—			—			1,111,813
Excess of donation limit			17,848			18,847			—			—			—			36,695
Tax credit			36,656			70,870			—			—			—			107,526

			608,961			647,073			—			—			—			1,256,034

	￦		(8,383,548	)		1,351,632			(56,733	)		3,432			(41,729	)		(7,126,946	)

(*)

‘Others’ include amount changed due to business combination. (see Note 51)

F-183

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

41.

Income Taxes, Continued

(6)

Deferred tax assets (liabilities) recognized in the statements of financial position as of December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Deferred tax assets	￦		1,233,761			1,437,829
Deferred tax liabilities			(9,617,309	)		(8,564,775	)

	￦		(8,383,548	)		(7,126,946	)

(7)

Details of deductible temporary differences, tax losses and unused tax credits for which no deferred tax assets were recognized as of December 31, 2018 and 2019 are as follows:

2018

2019

In millions of won

Deductible temporary differences

￦

442,391

541,449

42.

Assets Held-for-Sale

Assets held-for-sale as of December 31, 2018 and 2019 are as follows:


		2018		2019
		In millions of won
Land(*1)	￦		2,765		23,002
Building(*1)			19,369		193
Investments(*2, 3, 4)			747		4,921

	￦		22,881		28,116

(*1)

The board of directors of KEPCO Engineering & Construction Company, Inc., a subsidiary of the Company, determined to dispose the premises in Yongin as part of the government’s plan to relocate state-run companies for balanced national development and moved the head office to Gimcheon, Gyeongsangbukdo, in August 2015. As the Company believes the book value of Yongin premises will be recovered by a disposal transaction rather than continuous operation, its reclassified buildings, land and structures as assets held-for-sale. However, since the sale price of the premises has been expected to rise in accordance with the development plan in Yongin, Gyeonggi Province, the Company has not actively carried out the procedure for the sale since May 2019. For this reason, the premises no longer satisfy the definition of assets held-for-sale by as prescribed by IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’, due to the period required to complete the sale is expected to be more than one year under the circumstances that can be controlled by the Company. Accordingly, the Company reclassified the premises as investment properties.

(*2)

Ulleungdo Natural Energy Co., Ltd. was in the process of liquidating its business as of December 31, 2019 and has been reclassified to assets held-for-sale, accordingly.

(*3)

Garolim Tidal Power Plant Co., Ltd. was in the process of liquidating its business as of December 31, 2019 and has been reclassified to assets held-for-sale, accordingly.

F-184

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

42.

Assets Held-for-Sale, Continued

(*4)

As of December 31, 2018, the Company reclassified investment of its subsidiary, KOWEPO India Private Limited, as assets held-for-sale due to the decision to liquidate the company. The liquidation process was completed during the year ended December 31, 2019.

43.

Expenses Classified by Nature

Expenses classified by nature for the years ended December 31, 2017, 2018 and 2019 are as follows:


		2017
		Selling and administrative expenses		Cost of sales		Total
		In millions of won
Raw materials used	￦		—		15,924,707		15,924,707
Salaries			735,383		3,479,591		4,214,974
Retirement benefit expense			71,094		397,852		468,946
Welfare and benefit expense			179,406		543,738		723,144
Insurance expense			15,414		90,677		106,091
Depreciation			190,245		9,461,974		9,652,219
Amortization of intangible assets			44,990		68,682		113,672
Bad debt expense			126,714		—		126,714
Commission			673,740		469,695		1,143,435
Advertising expense			114,519		10,917		125,436
Training expense			7,027		14,362		21,389
Vehicle maintenance expense			9,998		7,468		17,466
Publishing expense			3,672		4,248		7,920
Business promotion expense			3,700		4,973		8,673
Rent expense			38,380		148,509		186,889
Telecommunication expense			24,916		73,956		98,872
Transportation expense			495		9,145		9,640
Taxes and dues			48,395		437,643		486,038
Expendable supplies expense			7,731		31,994		39,725
Water, light and heating expense			10,545		30,150		40,695
Repairs and maintenance expense			63,477		2,047,943		2,111,420
Ordinary development expense			211,417		510,020		721,437
Travel expense			16,658		69,015		85,673
Clothing expense			8,410		4,985		13,395
Survey and analysis expense			698		3,661		4,359
Membership fee			1,122		8,482		9,604
Power purchase			—		14,264,331		14,264,331
Others			154,709		3,980,137		4,134,846

	￦		2,762,855		52,098,855		54,861,710

F-185

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

43.

Expenses Classified by Nature, Continued


		2018
		Selling and administrative expenses		Cost of sales		Total
		In millions of won
Raw materials used	￦		—		19,537,928		19,537,928
Salaries			757,819		3,478,804		4,236,623
Retirement benefit expense			65,107		375,505		440,612
Welfare and benefit expense			132,089		464,483		596,572
Insurance expense			12,181		93,876		106,057
Depreciation			214,499		9,683,887		9,898,386
Amortization of intangible assets			54,153		64,785		118,938
Bad debt expense			39,784		—		39,784
Commission			714,096		475,188		1,189,284
Advertising expense			30,894		9,419		40,313
Training expense			6,277		14,096		20,373
Vehicle maintenance expense			10,148		7,809		17,957
Publishing expense			3,307		3,530		6,837
Business promotion expense			2,785		3,860		6,645
Rent expense			42,851		171,132		213,983
Telecommunication expense			23,505		82,568		106,073
Transportation expense			686		4,537		5,223
Taxes and dues			46,424		440,317		486,741
Expendable supplies expense			6,166		31,844		38,010
Water, light and heating expense			12,629		34,640		47,269
Repairs and maintenance expense			62,580		2,156,668		2,219,248
Ordinary development expense			215,494		508,394		723,888
Travel expense			14,363		67,064		81,427
Clothing expense			10,108		4,368		14,476
Survey and analysis expense			705		3,929		4,634
Membership fee			1,043		11,563		12,606
Power purchase			—		18,307,289		18,307,289
Others			148,197		2,170,238		2,318,435

	￦		2,627,890		58,207,721		60,835,611

F-186

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

43.

Expenses Classified by Nature, Continued


		2019
		Selling and administrative expenses			Cost of sales		Total
		In millions of won
Raw materials used	￦		—			17,084,029		17,084,029
Salaries			775,204			3,834,772		4,609,976
Retirement benefit expense			157,272			652,467		809,739
Welfare and benefit expense			120,463			443,482		563,945
Insurance expense			12,427			93,702		106,129
Depreciation			232,510			10,734,246		10,966,756
Amortization of intangible assets			76,547			80,368		156,915
Bad debt expense			(12,719	)		—		(12,719	)
Commission			632,849			378,861		1,011,710
Advertising expense			34,453			9,852		44,305
Training expense			7,174			16,903		24,077
Vehicle maintenance expense			9,525			7,652		17,177
Publishing expense			3,414			3,423		6,837
Business promotion expense			3,038			3,981		7,019
Rent expense			40,505			176,413		216,918
Telecommunication expense			8,451			11,034		19,485
Transportation expense			865			4,555		5,420
Taxes and dues			58,666			481,684		540,350
Expendable supplies expense			6,682			32,999		39,681
Water, light and heating expense			11,867			32,378		44,245
Repairs and maintenance expense			88,576			2,210,278		2,298,854
Ordinary development expense			224,463			511,252		735,715
Travel expense			15,652			68,581		84,233
Clothing expense			9,369			7,539		16,908
Survey and analysis expense			848			3,949		4,797
Membership fee			969			12,730		13,699
Power purchase			—			18,269,732		18,269,732
Others			150,506			2,612,973		2,763,479

	￦		2,669,576			57,779,835		60,449,411

44.

Earnings (Loss) Per Share

(1)

Basic earnings (loss) per share for the years ended December 31, 2017, 2018 and 2019 are as follows:


Type		2017		2018			2019
		In won
Basic earnings (loss) per share	￦		2,023		(2,048	)		(3,654	)

F-187

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

44.

Earnings (Loss) Per Share, Continued

(2)

Diluted earnings (loss) per share for the years ended December 31, 2017, 2018 and 2019 are as follows:


Type		2017		2018			2019
		In won
Diluted earnings (loss) per share	￦		2,023		(2,048	)		(3,654	)

(3)

Basic earnings (loss) per share

Net profit (loss) for the period and weighted average number of common shares used in the calculation of basic earnings (loss) per share for the years ended December 31, 2017, 2018 and 2019 are as follows:


Type		2017		2018			2019
		In millions of won except number of shares
Net profit (loss) attributable to controlling interest	￦		1,298,720		(1,314,567	)		(2,345,517	)
Profit (loss) used in the calculation of total basic earnings (loss) per share			1,298,720		(1,314,567	)		(2,345,517	)
Weighted average number of common shares			641,964,077		641,964,077			641,964,077

(4)

Diluted earnings (loss) per share

Diluted earnings (loss) per share is calculated by applying adjusted weighted average number of common shares under the assumption that all dilutive potential common shares are converted to common shares.

Earnings (loss) used in the calculation of total diluted earnings per share for the years ended December 31, 2017, 2018 and 2019 are as follows:


Type		2017		2018			2019
		In millions of won
Profit (loss) used in the calculation of total diluted earnings (loss) per share	￦		1,298,720		(1,314,567	)		(2,345,517	)

Weighted average common shares used in calculating diluted earnings (loss) per share are adjusted from weighted average common shares used in calculating basic earnings (loss) per share. Detailed information of the adjustment for the years ended December 31, 2017, 2018 and 2019 are as follows:


Type	2017		2018		2019
	In number of shares
Weighted average number of common shares		641,964,077		641,964,077		641,964,077
Diluted weighted average number of shares		641,964,077		641,964,077		641,964,077

F-188

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

44.

Earnings (Loss) Per Share, Continued

(5)

There are no potential dilutive instruments, thus diluted earnings (loss) per share are same as basic earnings (loss) per share for the years ended December 31, 2017, 2018 and 2019.

45.

Risk Management

(1)

Capital risk management

The Company manages its capital to ensure that entities in the Company will be able to continue while maximizing the return to shareholder through the optimization of the debt and equity balance. The capital structure of the Company consists of net debt (offset by cash and cash equivalents) and equity. The Company’s overall capital risk management strategy remains consistent with the prior year.

Details of the Company’s capital management accounts as of December 31, 2018 and 2019 are as follows:


		2018			2019
		In millions of won
Total borrowings and debt securities	￦		61,034,627			67,876,541
Cash and cash equivalents			1,358,345			1,810,129

Net borrowings and debt securities			59,676,282			66,066,412

Total shareholders’ equity			71,092,762			68,889,649

Debt to equity ratio			83.94	%		95.90	%

(2)

Financial risk management

The Company is exposed to various risks related to its financial instruments, such as, market risk (currency risk, interest rate risk, price risk), credit risk. The Company monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. The Company uses derivative financial instruments to hedge certain risk exposures. The Company’s overall financial risk management strategy remains consistent with the prior year.

(i)

Credit risk

Credit risk is the risk of finance loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises primarily from the sales activities, securities and derivatives. In addition, credit risk exposure may exist within financial guarantees and unused line of credits. As these financial institutions the Company makes transactions with are reputable financial institutions, the credit risk from them are considered limited. The Company decides credit transaction limits based on evaluation of client’s credit, through information obtained from the credit bureau and disclosed financial position at committing contracts.

①

Credit risk management

Electricity sales, the main operations of the Company are the necessity for daily life and industrial activities of Korean nationals and have importance as one of the national key industries. The Company dominates the domestic market supplying electricity to customers. The Company is not exposed to significant credit risk as customers of the Company are diverse and are from various industries and areas. The Company uses publicly available information and its own internal data related to trade receivables, to rate its major customers and to measure the credit risk that a counter party will default on a contractual obligation. For the incurred but not recognized loss, it is measured considering overdue period.

F-189

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

45.

Risk Management, Continued

(2)

Financial risk management, continued

②

Impairment and allowance account

In accordance with the Company policies, individual material financial assets are assessed on a regular basis, trade receivables that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Value of the acquired collateral (including the confirmation of feasibility) and estimated collectable amounts are included in this assessment.

Allowance for bad debts assessed on a collective basis are recognized for (i) the group of assets which individually are not material and (ii) incurred but not recognized losses that are assessed using statistical methods, judgment and past experience.

Book values of the financial assets represent the maximum exposed amounts of the credit risk. Details of the Company’s level of maximum exposure to credit risk as of December 31, 2018 and 2019 are as follows:


		2018		2019
		In millions of won
Cash and cash equivalents	￦		1,358,345		1,810,129
Financial assets at fair value through profit or loss			920,935		747,261
Derivative assets (trading)			37,631		165,204
Financial assets at amortized cost			14,042		13,609
Loans			718,674		738,707
Long-term/short-term financial instruments			2,318,027		1,960,227
Derivative assets (applying hedge accounting)			64,704		145,829
Trade and other receivables			9,613,437		9,703,749
Financial guarantee contracts(*)			1,310,817		3,338,566

(*)

Maximum exposure associated with the financial guarantee contracts is the maximum amounts of the obligation.

As of the reporting date, there are no financial assets and non-financial assets that were acquired through the exercise of the right of collateralized assets and reinforcement of credit arrangement.

(ii)

Market risk

Market risk is the risk that the Company’s fair values of the financial instruments or future cash flows are affected by the changes in the market. Market risk consists of interest rate risk, currency risk and other price risk.

(iii)

Sensitivity analysis

Significant assets and liabilities with uncertainties in underlying assumptions

F-190

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

45.

Risk Management, Continued

(2)

Financial risk management, continued

①

Defined benefit obligation

A sensitivity analysis of defined benefit obligation assuming a 1% increase and decrease movements in the actuarial valuation assumptions as of December 31, 2018 and 2019 are as follows:


			2018						2019
Type	Accounts		1% Increase			1% Decrease			1% Increase			1% Decrease
			In millions of won
Future salary increases	Increase (decrease) in defined benefit obligation	￦		416,956			(363,820	)		442,748			(386,147	)
Discount rate	Increase (decrease) in defined benefit obligation			(377,221	)		445,833			(402,099	)		475,765

Changes of employee benefits assuming a 1% increase and decrease movements in discount rate on plan asset for the years ended December 31, 2018 and 2019 are ￦14,646 million and ￦17,734 million, respectively.

②

Provisions

Changes in provisions due to movements in underlying assumptions as of December 31, 2018 and 2019 are as follows:


Type	Accounts	2018			2019
PCBs	Inflation rate		1.27	%		1.09	%
	Discount rate		2.18	%		1.97	%
Nuclear plants	Inflation rate		1.21	%		1.10	%
	Discount rate		2.94	%		2.43	%
Spent fuel	Inflation rate		2.93	%		2.93	%
	Discount rate		4.49	%		4.49	%

A sensitivity analysis of provisions assuming a 0.1% increase and decrease movements in the underlying assumptions as of December 31, 2018 and 2019 are as follows:


			2018						2019
Type	Accounts		0.1% Increase			0.1% Decrease			0.1% Increase			0.1% Decrease
			In millions of won
Discount rate	PCBs	￦		(623	)		627			(527	)		530
	Nuclear plants			(256,513	)		263,595			(316,184	)		325,828
	Spent fuel			(49,182	)		51,098			(51,607	)		53,621
Inflation rate	PCBs			632			(629	)		534			(532	)
	Nuclear plants			294,984			(287,110	)		346,082			(336,182	)
	Spent fuel			51,837			(49,961	)		54,396			(52,424	)

F-191

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

45.

Risk Management, Continued

(2)

Financial risk management, continued

Management judgment effected by uncertainties in underlying assumptions

①

Foreign currency risk

The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities as of December 31, 2018 and 2019 are as follows:


	Assets				Liabilities
Type	2018		2019		2018		2019
	In thousands of foreign currencies
AED		10,513		57,403		5,890		40,061
AUD		143		143		717,712		1,036,785
BDT		71,575		85,547		1,175		635
BWP		1,214		1,437		—		—
CAD		96		86		4		3,112
CHF		—		—		400,000		500,753
CNY		—		—		26,140		26,140
CZK		—		—		—		243
EUR		337		208		105,673		111,199
GBP		—		—		1		191
GHS		25,794		—		—		—
HKD		—		—		1,650,000		1,648,815
IDR		60,568		376,136		206,935		219,801
INR		1,228,795		1,244,170		183,963		210,232
JOD		2,764		1,516		5		147
JPY		35,935		109,970		390,921		314,402
KZT		319		319		—		—
MGA		3,318,447		3,858,201		170,641		133,403
MMK		25,208		29,651		—		—
PHP		709,285		175,210		66,985		130,073
PKR		305,542		354,361		3,588		4,366
SAR		2,024		2,653		—		480
SEK		—		—		450,000		449,072
USD		1,422,510		1,227,054		8,103,602		9,963,928
UYU		39,898		58,781		4,253		8,213
VND		—		418,998		—		1,375
ZAR		170		450		4		6

F-192

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

45.

Risk Management, Continued

(2)

Financial risk management, continued

A sensitivity analysis on the Company’s income for the period assuming a 10% increase and decrease in currency exchange rates as of December 31, 2018 and 2019 are as follows:


		2018					2019
Type		10% Increase			10% Decrease		10% Increase			10% Decrease
		In millions of won
Increase (decrease) of profit before income tax	￦		(887,561	)		887,561		(1,197,530	)		1,197,530
Increase (decrease) of shareholder’s equity(*)			(887,561	)		887,561		(1,197,530	)		1,197,530

(*)

The effect on the shareholders’ equity excluding the impact of income taxes.

The sensitivity analysis above is conducted for monetary assets and liabilities denominated in foreign currencies other than functional currency, without consideration of hedge effect of related derivatives, as of December 31, 2018 and 2019.

To manage its foreign currency risk related to foreign currency denominated receivables and payables, the Company has a policy to enter into currency forward agreements. In addition, to manage its foreign currency risk related to foreign currency denominated expected sales transactions and purchase transactions, the Company enters into cross-currency swap agreements.

②

Interest rate risk

The Company is exposed to interest rate risk due to its borrowing with floating interest rates. A 1% increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

The Company’s borrowings and debt securities with floating interest rates as of December 31, 2018 and 2019 are as follows:


Type		2018		2019
		In millions of won
Short-term borrowings	￦		24,235		—
Long-term borrowings			2,358,860		2,273,579
Debt securities			—		243,102

	￦		2,383,095		2,516,681

A sensitivity analysis on the Company’s long-term borrowings and debt securities assuming a 1% increase and decrease in interest rates, without consideration of hedge effect of related derivatives for the years ended December 31, 2018 and 2019 are as follows:


		2018					2019
Type		1% Increase			1% Decrease		1% Increase			1% Decrease
		In millions of won
Increase (decrease) of profit before income tax	￦		(23,831	)		23,831		(25,167	)		25,167
Increase (decrease) of shareholder’s equity(*)			(23,831	)		23,831		(25,167	)		25,167

(*)

The effect on the shareholders’ equity excluding the impact of income taxes.

F-193

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

45.

Risk Management, Continued

(2)

Financial risk management, continued

To manage its interest rate risks, the Company enters into certain interest swap agreements or maintains an appropriate mix of fixed and floating rate borrowings.

③

Electricity rates risk

The Company is exposed to electricity rates risk due to the rate regulation of the government which considers the effect of electricity rate on the national economy.

A sensitivity analysis on the Company’s income for the period assuming a 1% increase and decrease in price of electricity for the years ended December 31, 2018 and 2019 are as follows:


		2018					2019
Type		1% Increase		1% Decrease			1% Increase		1% Decrease
		In millions of won
Increase (decrease) of profit before income tax	￦		568,420		(568,420	)		559,390		(559,390	)
Increase (decrease) of shareholder’s equity(*)			568,420		(568,420	)		559,390		(559,390	)

(*)

The effect on the shareholders’ equity excluding the impact of income taxes.

(iv)

Liquidity risk

The Company has established an appropriate liquidity risk management framework for the management of the Company’s short, medium and long-term funding and liquidity management requirements. The Company manages liquidity risk by continuously monitoring forecasted and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

In addition, the Company has established credit lines on its trade financing and bank overdrafts, and through payment guarantees it has received, it maintains an adequate credit (borrowing) line. In addition, the Company has the ability to utilize excess cash or long-term borrowings for major construction investments.

The following table shows the details of maturities of non-derivative financial liabilities as of December 31, 2018 and 2019. This table, based on the undiscounted cash flows of the non-derivative financial liabilities including estimated interests, has been prepared based on the respective liabilities’ earliest maturity date.


		2018
Type		Less than 1 year		1~2 Years		2~5 Years		More than 5 years		Total
		In millions of won
Borrowings and debt securities	￦		10,204,471		9,274,378		28,143,311		25,312,534		72,934,694
Finance lease liabilities			87,709		87,709		141,074		65,250		381,742
Trade and other payables			6,348,195		150,479		375,661		2,188,950		9,063,285
Financial guarantee contracts(*)			91,722		855,488		363,607		—		1,310,817

	￦		16,732,097		10,368,054		29,023,653		27,566,734		83,690,538

F-194

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

45.

Risk Management, Continued

(2)

Financial risk management, continued


		2019
Type		Less than 1 year		1~2 Years		2~5 Years		More than 5 years		Total
		In millions of won
Borrowings and debt securities	￦		10,660,737		10,997,510		27,881,873		30,859,669		80,399,789
Lease liabilities			686,445		617,449		1,717,434		2,735,681		5,757,009
Trade and other payables			6,014,054		382,809		971,469		1,176,697		8,545,029
Financial guarantee contracts(*)			937,091		302,186		32,314		2,066,975		3,338,566

	￦		18,298,327		12,299,954		30,603,090		36,839,022		98,040,393

(*)

This represents the total guarantee amounts associated with the financial guarantee contracts. Financial guarantee liabilities which are recognized as of December 31, 2018 and 2019 are ￦15,586 million and ￦81,357 million, respectively.

The expected maturities for non-derivative financial assets as of December 31, 2018 and 2019 in detail are as follows:


		2018
Type		Less than 1 year		1~5 Years		More than 5 years		*Other()**		Total
		In millions of won
Cash and cash equivalents	￦		1,358,345		—		—		—		1,358,345
Financial assets at fair value through other comprehensive income			—		—		—		399,495		399,495
Financial assets at amortized cost			11,956		2,086		—		—		14,042
Loans			123,646		314,744		319,988		—		758,378
Long-term/short-term financial instruments			1,869,286		278,899		164,057		5,785		2,318,027
Financial assets at fair value through profit or loss			313,893		81,828		483,398		41,816		920,935
Trade and other receivables			7,795,619		1,067,800		701,743		57,651		9,622,813

	￦		11,472,745		1,745,357		1,669,186		504,747		15,392,035

F-195

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

45.

Risk Management, Continued

(2)

Financial risk management, continued


		2019
Type		Less than 1 year		1~5 Years		More than 5 years		*Other()**		Total
		In millions of won
Cash and cash equivalents	￦		1,810,129		—		—		—		1,810,129
Financial assets at fair value through other comprehensive income			—		—		—		379,170		379,170
Financial assets at amortized cost			12,302		1,307		—		—		13,609
Loans			64,081		346,583		336,502		27,606		774,772
Long-term/short-term financial instruments			1,351,971		269,863		—		338,393		1,960,227
Financial assets at fair value through profit or loss			131,385		79		—		615,797		747,261
Trade and other receivables			7,703,746		980,951		818,431		207,979		9,711,107

	￦		11,073,614		1,598,783		1,154,933		1,568,945		15,396,275

(*)

The maturities cannot be presently determined.

Derivative liabilities classified by maturity periods which from reporting date to maturity dates as per the contracts as of December 31, 2018 and 2019 are as follows:


		2018
Type		Less than 1 year		1~2 Years			2~5 Years		More than 5 years			Total
		In millions of won
Net settlement
—Trading	￦		—		—			—		—			—
Gross settlement
—Trading			5,734		16,565			28,283		40,124			90,706
—Hedging			5,154		(43,447	)		71,840		(40,917	)		(7,370	)

	￦		10,888		(26,882	)		100,123		(793	)		83,336


		2019
Type		Less than 1 year			1~2 Years			2~5 Years			More than 5 years			Total
		In millions of won
Net settlement
—Trading	￦		(3,017	)		—			—			—			(3,017	)
Gross settlement
—Trading			(15,011	)		(8,295	)		(39,654	)		4,235			(58,725	)
—Hedging			(59,846	)		(21,466	)		(1,914	)		(33,588	)		(116,814	)

	￦		(77,874	)		(29,761	)		(41,568	)		(29,353	)		(178,556	)

F-196

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

45.

Risk Management, Continued

(3)

Fair value risk

The fair value of the Company’s actively-traded financial instruments (i.e., FVTPL, FVOCI, etc.) is based on the traded market-price as of the reporting period end. The fair value of the Company’s financial assets is the amount which the asset could be exchanged for or the amount a liability could be settled for.

The fair values of financial instruments where no active market exists or where quoted prices are not otherwise available are determined by using valuation techniques. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. If there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, the Company uses that technique.

For trade receivables and payables, the Company considers the carrying value net of impairment as fair value. While for disclosure purposes, the fair value of financial liabilities are estimated by discounting the financial instruments with similar contractual cash flows based on the effective interest method.

(i)

Fair value and book value of financial assets and liabilities as of December 31, 2018 and 2019 are as follows:


		2018				2019
Type		Book value		Fair value		Book value		Fair value
		In millions of won
Assets recognized at fair value
Financial assets at fair value through other comprehensive income	￦		399,495		399,495		379,170		379,170
Derivative assets (trading)			37,631		37,631		165,204		165,204
Derivative assets (applying hedge accounting)			64,704		64,704		145,829		145,829
Financial assets at fair value through profit or loss			920,935		920,935		747,261		747,261

	￦		1,422,765		1,422,765		1,437,464		1,437,464

Assets carried at amortized cost
Financial assets at amortized cost	￦		14,042		14,042		13,609		13,609
Loans and receivables			718,674		718,674		738,707		738,707
Long-term financial instruments			448,741		448,741		608,256		608,256
Short-term financial instruments			1,869,286		1,869,286		1,351,971		1,351,971
Trade and other receivables			9,613,437		9,613,437		9,703,749		9,703,749
Cash and cash equivalents			1,358,345		1,358,345		1,810,129		1,810,129

	￦		14,022,525		14,022,525		14,226,421		14,226,421

F-197

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

45.

Risk Management, Continued

(3)

Fair value risk, continued


		2018				2019
Type		Book value		Fair value		Book value		Fair value
		In millions of won
Liabilities recognized at fair value
Derivative liabilities (trading)	￦		99,010		99,010		53,147		53,147
Derivative liabilities (applying hedge accounting)			213,153		213,153		116,813		116,813

	￦		312,163		312,163		169,960		169,960

Liabilities carried at amortized cost
Secured borrowings	￦		741,029		741,029		227,135		227,135
Unsecured bond			56,603,988		58,804,070		63,171,664		66,917,421
Lease liabilities			—		—		5,070,133		5,070,133
Finance lease liabilities			283,806		283,806		—		—
Unsecured borrowings			3,522,602		3,950,517		4,104,523		4,113,955
Trade and other payables(*)			9,063,285		9,063,285		8,545,029		8,545,029
Bank overdraft			167,008		167,008		373,219		373,219

	￦		70,381,718		73,009,715		81,491,703		85,246,892

(*)

Excludes lease liabilities (current year) and finance lease liabilities (prior year)

(ii)

Interest rates used for determining fair value

The interest rates used to discount estimated cash flows, when applicable, are based on the government yield curve at the reporting date plus an adequate credit spread.

The discount rate used for calculating fair value as of December 31, 2018 and 2019 are as follows:


Type	2018		2019
Derivatives		0.02% ~ 4.16%		0.01% ~ 4.16%
Borrowings and debt securities		0.51% ~ 5.14%		0.17% ~ 3.90%
Lease		3.50% ~ 10.83%		1.38% ~ 10.83%

(iii)

Fair value hierarchy

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, classified as Level 1, 2 or 3, based on the degree to which the fair value is observable.

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

Level 3: Inputs that are not based on observable market data.

F-198

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

45.

Risk Management, Continued

(3)

Fair value risk, continued

Fair values of financial instruments by hierarchy level as of December 31, 2018 and 2019 are as follows:


		2018
Type		Level 1		Level 2		Level 3		Total
		In millions of won
Financial assets at fair value
Financial assets at fair value through other comprehensive income	￦		210,056		—		189,439		399,495
Derivative assets			—		100,490		1,845		102,335
Financial assets at fair value through profit or loss			106,600		809,283		5,052		920,935

	￦		316,656		909,773		196,336		1,422,765

Financial liabilities at fair value
Derivative liabilities	￦		—		310,008		2,155		312,163


		2019
Type		Level 1		Level 2		Level 3		Total
		In millions of won
Financial assets at fair value
Financial assets at fair value through other comprehensive income	￦		201,202		—		177,968		379,170
Derivative assets			—		308,399		2,634		311,033
Financial assets at fair value through profit or loss			—		742,105		5,156		747,261

	￦		201,202		1,050,504		185,758		1,437,464

Financial liabilities at fair value
Derivative liabilities	￦		—		169,960		—		169,960

The fair value of financial assets (FVTPL and FVOCI) publicly traded is measured at the closing bid price quoted at the end of the reporting period. Meanwhile, the fair value of unquoted financial assets (FVTPL and FVOCI) is calculated using the valuation results from an external pricing service in which weighted average borrowing rates of interest of evaluated companies are used as a discount rate. The fair value of derivatives is measured using valuation model which is determined at the present value of estimated future cash flows discounted at current market interest rate.

F-199

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

45.

Risk Management, Continued

(3)

Fair value risk, continued

Changes of financial assets and liabilities which are classified as level 3 for the years ended December 31, 2018 and 2019 are as follows:


		2018
		Beginning balance		Effect of change in accounting policy		Acquisition		Reclassified category		Valuation			Disposal			Foreign currency translation		Ending balance
		In millions of won
Financial assets at fair value
Financial assets at fair value through profit or loss
Cooperative	￦		—		5,038		—		—		14			—			—		5,052
Financial assets at fair value through other comprehensive income
Unlisted securities			—		197,450		—		—		(11,744	)		(326	)		4,059		189,439


		2019
		Beginning balance		Effect of change in accounting policy		Acquisition		Reclassified category		Valuation		Disposal			Foreign currency translation		Ending balance
		In millions of won
Financial assets at fair value
Financial assets at fair value through profit or loss
Cooperative	￦		5,052		—		40		—		64		—			—		5,156
Financial assets at fair value through other comprehensive income
Unlisted securities			189,439		—		1,876		—		3,715		(19,315	)		2,253		177,968

46.

Service Concession Arrangements

(1)

Gas Complex • Thermal Power Plant at Ilijan, Philippines (BOT)

(i)

Significant terms and concession period of the arrangement

The Company has entered into a contract with National Power Corporation (the “NPC”), based in the Republic of the Philippines whereby the Company can collect the electricity rates which are composed of fixed costs and variable costs during the concession period from 2002 to 2022 after building, rehabilitating, and operating the power plant.

(ii)

Rights and classification of the arrangement

The Company has the rights to use and own the power plant during the concession period from 2002 to 2022. At the end of the concession period, the Company has an obligation to transfer its ownership of the power plant to NPC.

F-200

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

46.

Service Concession Arrangements, Continued

(1)

Gas Complex • Thermal Power Plant at Ilijan, Philippines (BOT), continued

(iii)

The Company’s expected future collections of service concession arrangements as of December 31, 2019 are as follows:


Type		Amounts
		In millions of won
Less than 1 year	￦		120,937
1~ 2 years			120,937
2~ 3 years			50,390

	￦		292,264

(2)

Hydroelectric Power Generation at Semangka, Indonesia (BOT)

(i)

Significant terms and concession period of the arrangement

The Company has entered into a contract with PT. Perusahaan Listrik Negara (the “PLN”) whereby the Company provides electricity generated and charge tariff rates designed to recover capital cost, fixed O&M cost, water usage cost, variable O&M cost and special facilities cost during the concession period after building, rehabilitating, and operating the power plant for approximately 30 years (2018~2048) subsequent to the completion of plant construction.

(ii)

Rights and classification of the arrangement

The Company has the rights to use and own the power plant during the concession period from 2018 to 2048. At the end of the concession period, PNL has an option to take over the ownership of the power plant from the Company.

(iii)

The Company’s expected future collections of service concession arrangements as of December 31, 2019 are as follows:


Type		Amounts
		In millions of won
Less than 1 year	￦		28,921
1~ 2 years			28,853
2~ 3 years			28,885
Over 3 years			587,972

	￦		674,631

F-201

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties

(1)

Related parties of the Company as of December 31, 2019 are as follows:


Type		Related party
Parent		Republic of Korea government

Subsidiaries (119 subsidiaries)		Korea Hydro & Nuclear Power Co., Ltd., Korea South-East Power Co., Ltd., Korea Midland Power Co., Ltd., Korea Western Power Co., Ltd., Korea Southern Power Co., Ltd., Korea East-West Power Co., Ltd., KEPCO Engineering & Construction Company, Inc., KEPCO Plant Service & Engineering Co., Ltd., KEPCO Nuclear Fuel Co., Ltd., KEPCO KDN Co., Ltd., Gyeonggi Green Energy Co., Ltd., Korea Offshore Wind Power Co., Ltd., KOSEP Material Co., Ltd., KEPCO International HongKong Ltd., KEPCO International Philippines Inc., KEPCO Philippines Corporation, KEPCO Ilijan Corporation, KEPCO Gansu International Ltd., KEPCO Philippines Holdings Inc., KEPCO Lebanon SARL, KEPCO Neimenggu International Ltd., KEPCO Australia Pty., Ltd., KEPCO Shanxi International Ltd., KOMIPO Global Pte Ltd., KOSEP Australia Pty., Ltd., KOMIPO Australia Pty., Ltd., KOWEPO Australia Pty., Ltd., KOSPO Australia Pty., Ltd., KEPCO Netherlands B.V., KOREA Imouraren Uranium Investment Corp., KEPCO Middle East Holding Company, Qatrana Electric Power Company, KOWEPO International Corporation, KOSPO Jordan LLC, Korea Waterbury Uranium Limited Partnership, PT. Cirebon Power Service, EWP America Inc., KHNP Canada Energy, Ltd., KEPCO Bylong Australia Pty., Ltd., KNF Canada Energy Limited, KEPCO Holdings de Mexico, KST Electric Power Company S.A.P.I. de C.V., KEPCO Energy Service Company, KEPCO Netherlands S3 B.V., PT. KOMIPO Pembangkitan Jawa Bali, EWP Barbados 1 SRL, PT. Tanggamus Electric Power, KOMIPO America Inc., KOSEP USA, Inc., PT. EWP Indonesia, KEPCO Netherlands J3 B.V., Global One Pioneer B.V., Global Energy Pioneer B.V., Mira Power Limited, EWP Philippines Corporation, KEPCO KPS Philippines Corp., KOSPO Chile SpA, PT. KOWEPO Sumsel Operation And Maintenance Services, Commerce and Industry Energy Co., Ltd., Gyeongju Wind Power Co., Ltd., California Power Holdings, LLC, DG Fairhaven Power, LLC, DG Whitefield, LLC, EWP Renewable Corporation, EWPRC Biomass Holdings, LLC, Springfield Power, LLC, HeeMang Sunlight Power Co., Ltd., Fujeij Wind Power Company, KOSPO Youngnam Power Co., Ltd., VI Carbon Professional Private Special Asset Investment Trust 1, Chitose Solar Power Plant LLC., Solar School Plant Co., Ltd., KEPCO Energy Solution Co., Ltd., KOSPO Power Services Limitada, KOEN Bylong Pty., Ltd., KOWEPO Bylong Pty., Ltd., KOSPO Bylong Pty., Ltd., EWP Bylong Pty., Ltd., KOWEPO Lao International, KOMIPO Bylong Pty., Ltd., Energy New Industry Specialized Investment Private Investment Trust., KEPCO US Inc., KEPCO Alamosa LLC, KEPCO Solar of Alamosa, LLC (formerly, Cogentrix of Alamosa, LLC), KEPCO-LG CNS Mangilao Holdings LLC, Mangilao Investment LLC,

F-202

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(1)

Related parties of the Company as of December 31, 2019 are as follows, continued:


Type		Related party
		KEPCO-LG CNS Mangilao Solar, LLC, Jeju Hanlim Offshore Wind Co., Ltd., PT. Siborpa Eco Power, e-New Industry LB Fund 1, Songhyun e-New Industry Fund, BSK E-New Industry Fund VII, PT. Korea Energy Indonesia, KOLAT SpA, KEPCO California, LLC, KEPCO Mojave Holdings, LLC, Incheon Fuel Cell Co., Ltd., KOEN Service Co., Ltd., KOMIPO Service Co., Ltd., KOWEPO Service Co., Ltd., KOSPO Service Co., Ltd., EWP Service Co., Ltd., PT. KOMIPO Energy Indonesia, KNF partners Co., Ltd., KOSPO USA Inc., Nambu USA LLC, Tamra Offshore Wind Power Co., Ltd., KEPCO MCS Co., Ltd., KEPCO FMS Co., Ltd., Firstkeepers Co., Ltd., Secutec Co., Ltd., SE Green Energy Co., Ltd., KEPCO Mangilao America LLC, Mangilao Intermediate Holdings LLC, KEPCO CSC Co., Ltd., KOAK Power Limited, KOMIPO Europe B.V., Haenanum Energy Fund, Paju Ecoenergy Co., Ltd.

Associates (66 associates)		Dongducheon Dream Power Co., Ltd., Korea Gas Corporation, Daegu Photovoltaic Co., Ltd., Haeng Bok Do Si Photovoltaic Power Co., Ltd., Korea Electric Power Industrial Development Co., Ltd., Goseong Green Energy Co., Ltd., Gangneung Eco Power Co., Ltd., Shin Pyeongtaek Power Co., Ltd., Naepo Green Energy Co., Ltd., Noeul Green Energy Co., Ltd., YTN Co., Ltd., Cheongna Energy Co., Ltd., Samcheok Eco Materials Co., Ltd., Gangwon Wind Power Co., Ltd., Gwangyang Green Energy Co., Ltd., Hyundai Green Power Co., Ltd., Korea Power Exchange, Hyundai Energy Co., Ltd., Ecollite Co., Ltd., Taebaek Wind Power Co., Ltd., Taebaek Guinemi Wind Power Co., Ltd., Pyeongchang Wind Power Co., Ltd., Daeryun Power Co., Ltd., Changjuk Wind Power Co., Ltd., KNH Solar Co., Ltd., S-Power Co., Ltd., Hadong Mineral Fiber Co., Ltd., Green Biomass Co., Ltd., SPC Power Corporation, Gemeng International Energy Co., Ltd., PT. Cirebon Electric Power, KNOC Nigerian East Oil Co., Ltd., KNOC Nigerian West Oil Co., Ltd., PT. Wampu Electric Power, PT. Bayan Resources TBK, Nepal Water & Energy Development Company Private Limited, Pioneer Gas Power Limited, Eurasia Energy Holdings, Xe-Pian Xe-Namnoy Power Co., Ltd., PT. Mutiara Jawa, Jinbhuvish Power Generation Pvt. Ltd., Daejung Offshore Wind Power Co., Ltd., GS Donghae Electric Power Co., Ltd., Busan Green Energy Co., Ltd., Gunsan Bio Energy Co., Ltd., Korea Electric Vehicle Charging Service, Korea Nuclear Partners Co., Ltd., Korea Electric Power Corporation Fund, Energy Infra Asset Management Co., Ltd., Daegu clean Energy Co., Ltd., YaksuESS Co., Ltd., PND solar Co., Ltd., Hyundai Eco Energy Co., Ltd., YeongGwang Yaksu Wind Electric. Co., Ltd., Green Energy Electricity Generation Co., Ltd., Korea Energy Solutions Co., Ltd., ITR Co., Ltd., Structure test network Co., Ltd., Namjeongsusang Solar Power Operatin Co., Ltd., Indeck Niles Development, LLC, Indeck Niles Asset Management, LLC, Hanwha Corporation-linked Sunlight Power Special Private Equity Investment Trust No. 1

F-203

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(1)

Related parties of the Company as of December 31, 2019 are as follows, continued:


		Suwon New Power Co., Ltd., KPG Co., Ltd., Gwangbaek Solar Power Investment Co., Ltd., Goduk Clean Energy Co., Ltd.

Joint ventures (64 joint ventures)		Daegu Green Power Co., Ltd., KEPCO SPC Power Corporation, KAPES, Inc., Honam Wind Power Co., Ltd., Jeongam Wind Power Co., Ltd., Korea Power Engineering Service Co., Ltd., Seokmun Energy Co., Ltd., Incheon New Power Co., Ltd., Chun-cheon Energy Co., Ltd., Yeonggwangbaeksu Wind Power Co., Ltd., KW Nuclear Components Co., Ltd., KEPCO-Uhde Inc., Busan Shinho Solar Power Co., Ltd., Global Trade Of Power System Co., Ltd., Expressway Solar-light Power Generation Co., Ltd., Gansu Datang Yumen Wind Power Co., Ltd., Datang Chifeng Renewable Power Co., Ltd., Rabigh Electricity Company, Rabigh Operation & Maintenance Company Limited, Datang KEPCO Chaoyang Renewable Power Co., Ltd., Shuweihat Asia Power Investment B.V., Shuweihat Asia Operation & Maintenance Company, Waterbury Lake Uranium L.P., ASM-BG Investicii AD, RES Technology AD, Jamaica Public Service Company Limited, KV Holdings, Inc., Amman Asia Electric Power Company, Kelar S.A, PT. Tanjung Power Indonesia, Nghi Son 2 Power LLC, Daehan Wind Power PSC, MOMENTUM, Barakah One Company, Nawah Energy Company, Yeonggwang Wind Power Co., Ltd., Chester Solar IV SpA, Chester Solar V SpA, Diego de Almagro Solar SpA, South Jamaica Power Company Limited, Daesan Green Energy Co.,Ltd., RE Holiday Holdings LLC, RE Pioneer Holdings LLC, RE Barren Ridge 1 Holdings LLC, RE Astoria 2 LandCo LLC, RE Barren Ridge LandCo LLC, Laurel SpA, KIAMCO KOWEPO Bannerton Hold Co Pty Ltd, Chile Solar JV SpA, Taebaek Gadeoksan Wind Power Co., Ltd., Cheong-Song Noraesan Wind Power Co., Ltd., Chester Solar I SpA, Solar Philippines Calatagan Corporation, Saemangeum Solar Power Co., Ltd., Chungsongmeon BongSan wind power Co., Ltd., Jaeun Resident Wind Power Plant Co., Ltd., DE Energia SpA, Dangjin Eco Power Co., Ltd., Haemodum Solar Co., Ltd., Yangyang Wind Power Co., Ltd., HORUS SOLAR, S.A. DE C.V., RECURSOS SOLARES PV DE MEXICO II, S.A. DE C.V., SUNMEX RENOVABLES, S.A. DE C.V., Stavro Holding II AB

Others (3 others)		Korea Development Bank, Ulleungdo Natural Energy Co., Ltd., Garolim Tidal Power Plant Co., Ltd.

F-204

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(2)

Transactions between the Company and its subsidiaries are eliminated during the consolidation and are not disclosed in notes.

(3)

Related party transactions for the years ended December 31, 2017, 2018 and 2019 are as follows:

<Sales and Others>


				Sales and others
Company name	Transaction type			2017		2018		2019
				In millions of won
<Associates>
Dongducheon Dream Power Co., Ltd.		Electricity sales	￦		17,041		6,093		7,071
Korea Gas Corporation		Electricity sales			88,011		99,933		116,484
Daejung Offshore Wind Power Co., Ltd.		Electricity sales			1		1		1
Daegu Photovoltaic Co., Ltd.		Electricity sales			349		128		327
KS Solar Co., Ltd.		Electricity sales			5		—		—
Heang Bok Do Si Photovoltaic Power Co., Ltd.		Electricity sales			2		2		2
Korea Electric Power Industrial Development Co., Ltd.		Service			14,044		10,422		11,085
Goseong Green Energy Co., Ltd.		Electricity sales			24,069		10,024		19,245
Gangneung Eco Power Co., Ltd.		Service			2,391		4,928		7,446
Shin Pyeongtaek Power Co., Ltd.		Electricity sales			9,025		8,468		21,218
Naepo Green Energy Co., Ltd.		Electricity sales			185		160		154
Noeul Green Energy Co., Ltd.		Electricity sales			32		30		30
Samcheok Eco Materials Co., Ltd.		Electricity sales			237		605		627
YTN Co., Ltd.		Electricity sales			1,987		2,043		2,257
Busan Green Energy Co., Ltd.		Electricity sales			120		19		18
Gunsan Bio Energy Co., Ltd.		Electricity sales			—		3,611		4,755
Korea Electric Vehicle Charging Service		Electricity sales			700		578		1,029
Tamra Offshore Wind Power Co., Ltd.		Electricity sales	￦		55		58		—
Daegu clean Energy Co., Ltd.		Electricity sales			421		126		—
Cheongna Energy Co., Ltd.		Service			7,980		11,688		9,922
Gangwon Wind Power Co., Ltd.		Electricity sales			994		2,402		2,433
Gwangyang Green Energy Co., Ltd.		Electricity sales			—		874		122
Hyundai Green Power Co., Ltd.		Design service			14,280		14,031		13,106
Korea Power Exchange		Service			8,446		6,854		7,670
Hyundai Energy Co., Ltd.		Service			15,627		1,718		3,437
Taebaek Wind Power Co., Ltd.		Service			813		614		991
Taeback Guinemi Wind Power Co., Ltd.		Electricity sales			—		—		77
Pyeongchang Wind Power Co., Ltd.		Design service			1,176		1,166		1,189
Daeryun Power Co., Ltd.		Electricity sales			1,796		1,731		1,879
Changjuk Wind Power Co., Ltd.		Electricity sales			788		758		927
GS Donghae Power Co., Ltd.		Electricity sales			11,204		7,238		15,792
KNH Solar Co., Ltd.		Electricity sales			17		17		17
S-Power Co., Ltd.		Service			12,852		9,118		6,535
PND solar Co., Ltd		Electricity sales			—		12		407
Hyundai Ecoenergy Co., Ltd.		Electricity sales			—		—		117
YeongGwang Yaksu Wind Electric. Co., Ltd.		Electricity sales			—		—		81

F-205

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(3)

Related party transactions for the years ended December 31, 2017, 2018 and 2019 are as follows, continued:


			Sales and others
Company name	Transaction type		2017		2018		2019
			In millions of won
Korea Energy Solution Co., Ltd.		Electricity sales		—		—		52
Suwon New Power Co., Ltd.		Electricity sales		—		—		5,606
9 Associates (Overseas)		Electricity sales and others		21,864		60,318		98,450

<Joint ventures>
Daegu Green Power Co., Ltd.		Electricity sales		1,131		1,022		1,151
KAPES, Inc.		Commission		1,420		648		504
Dangjin Eco Power Co., Ltd.		Technical fee		670		3,424		4
Honam Wind Power Co., Ltd.		Electricity sales		552		415		657
Jeongam Wind Power Co., Ltd.		Electricity sales		30		724		1,198
Korea Power Engineering Service Co., Ltd.		Service		1,317		840		348
Seokmun Energy Co., Ltd.		Service		1,765		1,897		1,495
Incheon New Power Co., Ltd.		Construction revenue		539		568		354
Chun-cheon Energy Co., Ltd.		Electricity sales		4,855		2,471		2,397
Yeonggwangbaeksu Wind Power Co., Ltd.		Electricity sales		1,654		1,540		1,744
Yeonggwang Wind Power Co., Ltd.		Electricity sales		—		46		705
KW Nuclear Components Co., Ltd.		Service		644		839		721
KEPCO-Uhde Inc.		Service		34		17		15
Busan Shinho Solar Power Co., Ltd.		Electricity sales		87		362		452
Daesan Green Energy Co., Ltd.		Electricity sales		—		—		39
Cheong-Song Noraesan Wind Power Co., Ltd.		Electricity sales		—		—		6
Saemangeum Solar Power Co., Ltd.		Service		—		—		2,230
Jaeun Resident Wind Power Plant Co., Ltd.		Electricity sales		—		—		105
25 Joint ventures (Overseas)		Electricity sales and others		131,343		206,054		1,275,279

<Others>
Yeongwol Energy Station Co., Ltd.		Service		830		373		—
DS POWER Co., Ltd.		Service		5,819		565		—
Ulleungdo Natural Energy Co., Ltd.		Service		1,013		292		—
Korea Development Bank		Electricity sales		3,239		3,524		3,948
		Interest income		1,685		4,438		2,091

F-206

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(3)

Related party transactions for the years ended December 31, 2017, 2018 and 2019 are as follows, continued:

<Purchase and Others>


				Purchase and others
Company name	Transaction type			2017		2018		2019
				In millions of won
<Associates>
Dongducheon Dream Power Co., Ltd.		Electricity purchase	￦		813,440		828,547		689,510
Korea Gas Corporation		Purchase of power generation fuel			3,245,519		5,191,243		4,049,486
Daegu Photovoltaic Co., Ltd.		REC purchase			3,646		3,745		3,626
KS Solar Co., Ltd.		REC purchase			900		—		—
Heang Bok Do Si Photovoltaic Power Co., Ltd.		Rental fee and others			570		455		450
Korea Electric Power Industrial Development Co., Ltd.		Electricity metering service fee			289,293		261,668		245,057
Goseong Green Energy Co., Ltd.		Electricity purchase			—		—		32
Gangneung Eco Power Co., Ltd.		Service			—		19		—
Shin Pyeongtaek Power Co., Ltd.		Electricity purchase			—		—		119,162
Noeul Green Energy Co., Ltd.		REC purchase			15,862		18,282		22,767
Samcheok Eco Materials Co., Ltd.		Electricity purchase			14		3,819		9,425
YTN Co., Ltd.		Electricity purchase			731		322		333
Busan Green Energy Co., Ltd.		Electricity purchase			12,189		25,123		13,811
Gunsan Bio Energy Co., Ltd.		Electricity purchase			—		—		3,022
Korea Electric Vehicle Charging Service		Electricity purchase			1,093		605		536
Tamra Offshore Wind Power Co., Ltd.		Electricity purchase			2,105		8,371		—
Cheongna Energy Co., Ltd.		Service			59		58		58,747
YaksuESS Co., Ltd		Service			—		—		1,191
Gangwon Wind Power Co., Ltd.		Electricity purchase			25,968		25,407		24,116
Hyundai Green Power Co., Ltd.		Electricity purchase			458,378		480,815		507,662
Korea Power Exchange		Trading Fees			207,855		137,489		120,509
Hyundai Energy Co., Ltd.		Electricity purchase			87,607		3,445		2,847
Taebaek Wind Power Co., Ltd.		REC purchase			6,534		8,582		7,070
Taeback Guinemi Wind Power Co., Ltd.		Electricity purchase			—		—		349
Pyeongchang Wind Power Co., Ltd.		Service			4,033		6,994		5,188
Daeryun Power Co., Ltd.		Electricity purchase			146,189		184,063		144,862
Changjuk Wind Power Co., Ltd.		Electricity purchase			6,981		7,929		6,994
GS Donghae Electric Power Co., Ltd.		Electricity purchase			351,367		780,233		681,379
KNH Solar Co., Ltd.		Electricity purchase			3,947		3,586		3,377
S-Power Co., Ltd.		Electricity purchase			457,329		507,875		522,469
Hadong Mineral Fiber Co., Ltd.		Service			—		60		—
Green Biomass Co., Ltd.		Woodchip purchase			1,345		440		—
YeongGwang Yaksu Wind Electric. Co., Ltd		Electricity purchase			—		2,437		6,511
PND solar., Ltd		Service			—		—		557
Hyundai Ecoenergy Co., Ltd.		Electricity purchase			—		—		6,810
Korea Energy Solution Co., Ltd.		Electricity purchase			—		—		15
9 Associates (Overseas)		Electricity purchase and others			72		31		—

F-207

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(3)

Related party transactions for the years ended December 31, 2017, 2018 and 2019 are as follows, continued:


			Purchase and others
Company name	Transaction type		2017		2018		2019
			In millions of won

<Joint ventures>
Daegu Green Power Co., Ltd.		Electricity purchase		252,024		287,008		296,464
KAPES, Inc.		Service		164,165		77,758		142,511
Honam Wind Power Co., Ltd.		Electricity purchase		5,962		7,700		5,306
Korea Power Engineering Service Co., Ltd.		Service		1,292		1,765		1,774
Seokmun Energy Co., Ltd.		REC purchase		21,674		31,759		26,370
Chun-cheon Energy Co., Ltd.		REC purchase		194,136		320,954		313,471
Yeonggwangbaeksu Wind Power Co., Ltd.		Electricity purchase		11,124		11,366		11,739
Yeonggwang Wind Power Co., Ltd.		Electricity purchase		—		—		11,940
Busan Shinho Solar Power Co., Ltd.		REC purchase		7,984		7,901		7,843
Global Trade Of Power System Co., Ltd.		Service		414		565		502
Expressway Solar-light Power Generation Co., Ltd.		Electricity purchase		2,941		3,513		3,067
25 Joint ventures (Overseas)		Electricity purchase and others		2,785		1,404		7,232

<Others>
Yeongwol Energy Station Co., Ltd.		REC purchase		14,256		4,019		—
Ulleungdo Natural Energy Co., Ltd.		Service		119		63		—
Korea Development Bank		Interest expense		4,573		5,043		4,063
		Dividend paid		418,407		166,876		20

(4)

Receivables and payables arising from related party transactions as of December 31, 2018 and 2019 are as follows:


			Receivables				Payables
Company name	Type		2018		2019		2018		2019
			In millions of won
<Associates>
Dongducheon Dream Power Co., Ltd.	Trade receivables	￦		332		323		—		—
	Non-trade receivables and others			298		267		—		—
	Trade payables			—		—		74,651		85,920
	Non-trade payables and others			—		—		10		12
Korea Gas Corporation	Trade receivables			9,439		9,267		—		—
	Non-trade receivables and others			498		38		—		—
	Trade payables			—		—		601,092		462,138
	Non-trade payables and others			—		—		314		560
Daegu Photovoltaic Co., Ltd.	Trade payables			—		—		83		69
Korea Power Engineering Service Co., Ltd.	Trade receivables			—		74		—		—
Korea Electric Power Industrial Development Co., Ltd.	Trade receivables			278		243		—		—
Korea Electric Power Industrial Development Co., Ltd.	Non-trade receivables and others			51		43		—		—
	Trade payables			—		—		—		3,756
	Non-trade payables and others			—		—		13,102		3,827
Goseong Green Energy Co., Ltd.	Trade receivables			—		103		—		—
	Non-trade receivables and others			—		5,285		—		—
	Non-trade payables and others			—		—		43,020		65,626

F-208

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(4)

Receivables and payables arising from related party transactions as of December 31, 2018 and 2019 are as follows, continued:


		Receivables				Payables
Company name	Type	2018		2019		2018		2019
		In millions of won
Gangneung Eco Power Co., Ltd.	Trade receivables		1		115		—		—
	Non-trade receivables and others		99		65		—		—
Shin Pyeongtaek Power Co., Ltd.	Trade receivables		123		1,013		—		—
	Non-trade receivables and others		242		2,281		—		—
	Trade payables		—		—		—		64,696
	Non-trade payables and others		—		—		82		61
Naepo Green Energy Co., Ltd.	Trade receivables		17		18		—		—
Noeul Green Energy Co., Ltd.	Trade receivables		3		3		—		—
	Non-trade payables and others		—		—		8,774		1,855
Samcheok Eco Materials Co., Ltd.	Trade receivables		61		59		—		—
YTN Co., Ltd.	Trade receivables		98		97		—		—
	Non-trade payables and others		—		—		11		—
Busan Green Energy Co., Ltd.	Trade receivables		1		1		—		—
	Non-trade payables and others		—		—		10,882		606
Gunsan Bio Energy Co., Ltd.	Non-trade receivables and others		3,458		—		—		—
Korea Electric Vehicle Charging Service	Trade receivables		69		137		—		—
	Non-trade receivables and others		354		529		—		—
	Non-trade payables and others		—		—		56		—
Daegu Clean Energy Co., Ltd.	Non-trade receivables and others		17		—		—		—
Cheongna Energy Co., Ltd.	Trade receivables		183		1,074		—		—
Yaksu ESS Co., Ltd.	Trade payables		—		—		—		525
Gangwon Wind Power Co., Ltd.	Trade receivables		10		7		—		—
	Trade payables		—		—		2,547		2,979
Gwangyang Green Energy Co., Ltd.	Non-trade receivables and others		—		1,334		—		—
Hyundai Green Power Co., Ltd.	Trade receivables		390		502		—		—
	Trade payables		—		—		38,072		41,587
Korea Power Exchange	Trade receivables		847		1,142		—		—
	Non-trade receivables and others		229		114		—		—
	Non-trade payables and others		—		—		1,214		4,160
Hyundai Energy Co., Ltd.	Trade receivables		57		128		—		—
	Non-trade receivables and others		9,664		12,532		—		—
	Trade payables		—		—		259		175
	Non-trade payables and others		—		—		8,021		9,178

F-209

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(4)

Receivables and payables arising from related party transactions as of December 31, 2018 and 2019 are as follows, continued:


				Receivables				Payables
Company name	Type			2018		2019		2018		2019
				In millions of won
<Associates>
Ecollite Co., Ltd.		Non-trade receivables and others	￦		210		210		—		—
Taebaek Wind Power Co., Ltd.		Trade payables			—		—		453		358
		Non-trade payables and others			—		—		291		243
Taebaek Guinemi Wind Power Co., Ltd.		Non-trade receivables and others			—		2		—		—
		Trade payables			—		—		—		190
Pyeongchang Wind Power Co., Ltd.		Trade receivables			4		4		—		—
		Non-trade payables			—		—		25		—
Daeryun Power Co., Ltd.		Trade receivables			178		144		—		—
		Trade payables			—		—		15,845		19,843
Changjuk Wind Power Co., Ltd.		Trade payables			—		—		455		447
		Non-trade payables and others			—		—		273		280
GS Donghae Electric power Co., Ltd.		Trade receivables			245		175		—		—
		Non-trade receivables and others			2,537		367		—		—
		Trade payables			—		—		69,820		69,811
		Non-trade payables and others			—		—		59		16
KNH Solar Co., Ltd.		Trade receivables			1		1		—		—
S-Power Co., Ltd.		Trade receivables			922		89		—		—
		Non-trade receivables and others			34		43		—		—
		Trade payables			—		—		56,897		53,705
		Non-trade payables and others			—		—		16		—
PND solar., Ltd.		Trade receivables			3		—		—		—
Hyundai Ecoenergy Co., Ltd.		Trade receivables			—		16		—		—
YeongGwang Yaksu Wind Electric. Co., Ltd.		Trade receivables			—		5		—		—
		Trade payables			—		—		2,679		—
Cheong-Song Noraesan Wind Power Co., Ltd.		Trade receivables			—		1		—		—
Suwon New Power Co., Ltd.		Non-trade receivables and others			—		2,939		—		—
4 Associates (Overseas)		Non-trade receivables and others			455		1,112		—		—

<Joint ventures>
Daegu Green Power Co., Ltd.		Trade receivables			110		113		—		—
		Non-trade receivables and others			12		1		—		—
		Trade payables			—		—		32,609		28,980
KAPES, Inc.		Trade receivables			—		1		—		—
		Non-trade receivables and others			253		—		—		—
		Non-trade payables and others			—		—		338		50,738
Dangjin Eco Power Co., Ltd.		Trade receivables			—		2		—		—
		Non-trade receivables and others			18		—		—		—

F-210

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(4)

Receivables and payables arising from related party transactions as of December 31, 2018 and 2019 are as follows, continued:


				Receivables				Payables
Company name	Type			2018		2019		2018		2019
				In millions of won
Honam Wind Power Co., Ltd.		Trade payables			—		—		432		347
		Non-trade payables			—		—		3,573		1,671
Jeongam Wind Power Co., Ltd.		Trade receivables			151		165		—		—
		Non-trade payables and others			—		—		2		6
Korea Power Engineering Service Co., Ltd.		Non-trade receivables			—		74		—		—
Seokmun Energy Co., Ltd.		Trade receivables	￦		39		51		—		—
		Non-trade receivables			303		136		—		—
		Non-trade payables			—		—		5,043		4,750
Incheon New Power Co., Ltd.		Trade receivables			128		—		—		—
Chun-cheon Energy Co., Ltd.		Trade receivables			20		260		—		—
		Non-trade receivables and others			308		5,362		—		—
		Trade payables			—		—		33,796		23,438
<Joint ventures>
Yeonggwangbaeksu Wind Power Co., Ltd.		Trade receivables			7		6		—		—
		Non-trade receivables			—		157		—		—
		Trade payables			—		—		736		671
		Non-trade payables			—		—		789		1,526
Yeonggwang Wind Power Co., Ltd.		Trade receivables			10		10		—		—
		Non-trade receivables and others			—		54		—		—
		Non-trade payables and others			—		—		—		2,432
KW Nuclear Components Co., Ltd.		Trade receivables			4		4		—		—
		Non-trade receivables and others			31		15		—		—
KEPCO-Uhde Inc.		Non-trade payables			—		—		4		9
Busan Shinho Solar Power Co., Ltd.		Trade receivables			2		2		—		—
		Trade payables			—		—		175		148
		Non-trade payables			—		—		717		733
Daesan Green Energy Co., Ltd.		Trade receivables			—		6		—		—
Cheong-Song Noraesan Wind Power Co., Ltd.		Trade receivables			—		1		—		—
Saemangeum Solar Power Co., Ltd.		Non-trade receivables and others			—		2,197		—		—
14 Joint ventures (Overseas)		Trade receivables			30,208		51,700		—		—
		Non-trade receivables and others			740		13,652		—		—
		Non-trade payables and others			—		—		18,379		87,404

<Others>
Korea Development Bank		Accrued interest income			1,147		1,630		—		—
		Non-trade receivables and others			12,125		146,416		—		—
		Non-trade payables and others			—		—		218		152
		Derivatives			27,306		41,368		18,095		6,531

F-211

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(5)

Loans and others arising from related party transactions as of December 31, 2018 and 2019 are as follows:


Type	Company name		Beginning balance			Loans			Collection			Others			Ending balance
			In millions of won
Associates	KNOC Nigerian East Oil Co., Ltd., KNOC Nigerian West Oil Co., Ltd.	￦		27,634			132			—			910			28,676
	(Allowance for doubtful accounts)			(6,065	)		—			—			(1,260	)		(7,325	)
Associates	PT. Cirebon Electric Power			8,696			—			(8,900	)		782			578
Associates	Xe-Pian Xe-Namnoy Power Co., Ltd.			1,413			20,148			—			(606	)		20,955
Associates	PT. Wampu Electric Power			14,880			—			—			1,622			16,502
Associates	Gunsan Bio Energy Co., Ltd.			9,396			3,000			—			—			12,396
	(Allowance for doubtful accounts)			—			(10,128	)		—			—			(10,128	)
Associates	Hyundai Energy Co., Ltd.	￦		2,465			—			—			—			2,465
	(Allowance for doubtful accounts)			(2,465	)		—			—			—			(2,465	)
Joint ventures	Recursos Solares PV de Mexico II SA DE CV			—			1,054			—			1			1,055
Joint ventures	Horus Solar SA DE CV			—			3,320			—			3			3,323
Joint ventures	SUNMEX RENOVABLES SA DE CV			—			144			—			—			144
Joint ventures	Kelar S.A			48,694			—			(8,320	)		1,784			42,158
Joint ventures	Chester Solar IV SpA			—			1,688			(1,688	)		—			—
Joint ventures	Chester Solar V SpA			—			535			(535	)		—			—
Joint ventures	Diego de Almagro Solar SpA			—			2,101			(2,101	)		—			—
Joint ventures	Chun-cheon Energy Co., Ltd.			616			4,441			—			—			5,057
Joint ventures	Dangjin Eco Power Co., Ltd. (before the spin-off)			—			2,600			(2,600	)		—			—
Joint ventures	DE energia SpA			—			6,799			—			(167	)		6,632
Joint ventures	Eumseong Natural Gas Power Co., Ltd.(*1)			—			20,000			(20,000	)		—			—

		￦		105,264			55,834			(44,144	)		3,069			120,023

(*1)	Eumseong Natural Gas Power Co., Ltd. was established by spin-off from Dangjin Eco Power Co., Ltd. and merged by the Company during the year ended December 31, 2019.

(6)

Borrowings arising from related party transactions as of December 31, 2018 and 2019 are as follows:


Related parties	Type		Beginning balance		Borrowings		Repayment			Others			Ending balance
			In millions of won
Korea Development Bank	Facility	￦		66,793		5,700		(12,648	)		—			59,845
	Others			4,154		—		(654	)		—			3,500
	Operating funds			81,000		172,442		(73,992	)		(450	)		179,000
	Syndicated Loan			17,277		—		(1,055	)		863			17,085

F-212

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(7)

Guarantees provided to associates or joint ventures as of December 31, 2019 are as follows:


Primary guarantor	Principal obligor	Type of guarantees	Credit limit		Guarantee
			In millions of won and thousands of foreign currencies
Korea Electric Power Corporation	Shuweihat Asia Operation & Maintenance Company	Performance guarantees		USD 11,000	Shuweihat Asia Power Investment B.V.

Korea Electric Power Corporation	Rabigh Operation & Maintenance Company Limited	Performance guarantees and others		USD 1,387	Rabigh Electricity Company

Korea Electric Power Corporation	Nghi Son 2 Power LLC	Performance guarantees		USD 70,000	SMBC Ho Chi Minh and others
Korea Electric Power Corporation	Barakah One Company	Debt guarantees		USD 900,000	Export-Import Bank of Korea and others

		Performance guarantees and others		USD 4,430,240

Korea Electric Power Corporation	RE Holiday Holdings LLC	Performance guarantees		USD 223,000	EPS Renewables Holdings, LLC, Santander Bank and others

Korea Electric Power Corporation	RE Pioneer Holdings LLC	Performance guarantees		USD 170,000	EPS Renewables Holdings, LLC, Santander Bank and others

Korea Electric Power Corporation	RE Barren Ridge 1 Holdings LLC	Performance guarantees		USD 149,000	EPS Renewables Holdings, LLC, Santander Bank and others

Korea Electric Power Corporation	Rabigh Electricity Company	Performance guarantees		SAR 6,508	Hana Bank

Korea Electric Power Corporation		Debt guarantees		SAR 80,000

F-213

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(7)

Guarantees provided to associates or joint ventures as of December 31, 2019 are as follows, continued:


Primary guarantor	Principal obligor	Type of guarantees	Credit limit		Guarantee
			In millions of won and thousands of foreign currencies

Korea Electric Power Corporation	Shuweihat Asia Power Investment B.V.	Performance guarantees		USD 100,000	ING Bank

Korea Electric Power Corporation	Amman Asia Electric Power Company

Korea Western Power Co., Ltd.	Cheongna Energy Co., Ltd.	Collateralized money invested		KRW 1,411	Hana Bank and others
		Guarantees for supplemental funding and others(*1)		—
Korea Western Power Co., Ltd.	Xe-Pian Xe-Namnoy Power Co., Ltd.	Payment guarantees for business reserve		USD 2,500	Krung Thai Bank
		Collateralized money invested		KRW 72,935
		Impounding bonus guarantees		USD 5,000	SK E&C

Korea Western Power Co., Ltd.	Rabigh Operation & Maintenance Company Limited	Performance guarantees and others		SAR 5,600	Saudi Arabia British Bank

Korea Western Power Co., Ltd.	Daegu Photovoltaic Co., Ltd.	Collateralized money invested		KRW 2,060	Korea Development Bank

Korea Western Power Co., Ltd.	Dongducheon Dream Power Co., Ltd.	Collateralized money invested(*7)		KRW 41,531	Kookmin Bank and others
		Debt guarantees		KRW 20,300	BNK Securities and others

Korea Western Power Co., Ltd.	PT. Mutiara Jawa	Collateralized money invested		KRW 1,438	Woori Bank Nonghyup Bank
Korea Western Power Co., Ltd.	Haeng Bok Do Si Photovoltaic Power Co., Ltd.	Collateralized money invested		KRW 215	Woori Bank Nonghyup Bank

F-214

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(7)

Guarantees provided to associates or joint ventures as of December 31, 2019 are as follows, continued:


Primary guarantor	Principal obligor	Type of guarantees	Credit limit		Guarantee
			In millions of won and thousands of foreign currencies

Korea Western Power Co., Ltd.	Shin Pyeongtaek Power Co., Ltd.	Collateralized money invested		KRW 66,956	Kookmin Bank
		Guarantees for supplemental funding(*1)		—	Kookmin Bank and others

Korea East-West Power Co., Ltd.	Busan Shinho Solar Power Co., Ltd.	Collateralized money invested		KRW 5,045	Korea Development Bank and others

Korea East-West Power Co., Ltd.	Seokmun Energy Co., Ltd.	Collateralized money invested		KRW 17,342	Kookmin Bank and others
		Guarantees for supplemental funding(*1)		—

Korea East-West Power Co., Ltd.	Chun-cheon Energy Co., Ltd.	Collateralized money invested		KRW 34,872	Kookmin Bank and others
		Guarantees for supplemental funding(*1)		KRW 20,000
Korea East-West Power Co., Ltd.	Honam Wind Power Co., Ltd.	Collateralized money invested		KRW 4,375	Shinhan Bank and others
		Guarantees for supplemental funding(*1)		—

Korea East-West Power Co., Ltd.	GS Donghae Electric Power Co., Ltd.	Collateralized money invested		KRW 255,983	Korea Development Bank and others
		Guarantees for supplemental funding(*1)		—

Korea East-West Power Co., Ltd.	Yeonggwangbaeksu Wind Power Co., Ltd.	Collateralized money invested		KRW 3,040	Kookmin Bank and others

Korea East-West Power Co., Ltd.	Yeonggwang Wind Power Co., Ltd.	Collateralized money invested		KRW 17,627	KDB Capital Corporation and others
		Guarantees for supplemental funding(*1)		—

F-215

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(7)

Guarantees provided to associates or joint ventures as of December 31, 2019 are as follows, continued:


Primary guarantor	Principal obligor	Type of guarantees	Credit limit		Guarantee
			In millions of won and thousands of foreign currencies

Korea East-West Power Co., Ltd.	Daesan Green Energy Co., Ltd.	Collateralized money invested		KRW 17,182	IBK
		Guarantees for supplemental funding(*1)		KRW 18,989	IBK

Korea East-West Power Co., Ltd.	Taebaek Gadeoksan Wind Power Co., Ltd.	Collateralized money invested		KRW 7,846	Samsung Fire & Marine Insurance Co., Ltd. and others

Korea East-West Power Co., Ltd.	PT. Tanjung Power Indonesia	Debt guarantees		USD 24,544	Sumitomo Mitsui Banking Corporation
		Other guarantees		USD 3,150	PT Adaro Indonesia
		Guarantees for supplemental funding(*1)		—	Sumitomo Mitsui Banking Corporation and others
		Collateralized money invested		KRW 34,327	MUFG and others

Korea East-West Power Co., Ltd.	South Jamaica Power Company Limited	Performance guarantees		USD 14,400	Societe Generale
		Collateralized money invested		KRW 13,863	JCSD Trustee Services Limited and others

EWP Barbados 1 SRL	South Jamaica Power Company Limited	Guarantees for supplemental funding(*1, 3)		—	JCSD Trustee Services Limited and others

Korea East-West Power Co., Ltd.	DE Energia SpA	Collateralized money invested		KRW 8,665	Mirae Asset Daewoo Co., Ltd. and others

Korea East-West Power Co., Ltd.		Debt guarantees		KRW 6,632

Korea Southern Power Co., Ltd.	KNH Solar Co., Ltd.	Collateralized money invested		KRW 2,382	Shinhan Bank and Kyobo Life Insurance Co., Ltd.
		Performance guarantees and guarantees for supplemental funding(*1)		—

F-216

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(7)

Guarantees provided to associates or joint ventures as of December 31, 2019 are as follows, continued:


Primary guarantor	Principal obligor	Type of guarantees	Credit limit		Guarantee
			In millions of won and thousands of foreign currencies

Korea Southern Power Co., Ltd.	Daeryun Power Co., Ltd.	Collateralized money invested		KRW 26,247	Korea Development Bank and others
		Guarantees for supplemental funding and others(*1)		KRW 8,000

Korea Southern Power Co., Ltd.	Daegu Green Power Co., Ltd.	Collateralized money invested		KRW 22,824	Shinhan Bank and others
		Performance guarantees		—

Korea Southern Power Co., Ltd.	Kelar S.A	Performance guarantees		USD 61,692	Hana Bank, MUFG

Korea Southern Power Co., Ltd.	Daehan Wind Power PSC	Debt guarantees(*9)		USD 16,000	Shinhan Bank
		Performance guarantees		USD 3,600
		Debt guarantees(*9)		USD 240
		Performance Debt guarantees(*9)		USD 1,898	Hana Bank

Korea Southern Power Co., Ltd.	Pyeongchang Wind Power Co., Ltd.	Collateralized money invested		KRW 5,877	Woori Bank and Shinhan Bank and others
		Performance guarantees		—

Korea Southern Power Co., Ltd.	Taebaek Guinemi Wind Power Co., Ltd.	Collateralized money invested		KRW 2,553	IBK
		Guarantees for supplemental funding(*1)		—

Korea Southern Power Co., Ltd.	Jeongam Wind Power Co., Ltd.	Guarantees for supplemental funding(*1) and performance guarantees		—	SK Securities.Co., LTD., KDB Capital Corporation, and others
		Collateralized money invested		KRW 4,437

Korea Southern Power Co., Ltd.	Taebaek Wind Power Co., Ltd.	Guarantees for supplemental funding(*1)		—	Shinhan Bank and others

F-217

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(7)

Guarantees provided to associates or joint ventures as of December 31, 2019 are as follows, continued:


Primary guarantor	Principal obligor	Type of guarantees	Credit limit		Guarantee
			In millions of won and thousands of foreign currencies

Korea Southern Power Co., Ltd.	Samcheok Eco Materials Co., Ltd.	Payment guarantees(*4,7)		—	SEM Investment Co., Ltd.

Kospo Chile SpA	Kelar S.A.	Collateralized money invested		KRW 70,462	Export-Import Bank of Korea and others
	Chester Solar I SpA	Collateralized money invested		KRW 1,157	IBK
	Chester Solar IV SpA	Collateralized money invested		KRW 672
	Chester Solar V SpA	Collateralized money invested		KRW 146
	Diego de Almagro Solar Spa	Collateralized money invested		KRW 1,035
	Laurel SpA	Collateralized money invested		KRW 595

Korea Midland Power Co., Ltd.	YeongGwang Yaksu Wind Electric. Co., Ltd.	Collateralized money invested		KRW 386	IBK and others

Korea Midland Power Co., Ltd.	Hyundai Green Power Co., Ltd.	Collateralized money invested		KRW 124,253	Korea Development Bank and others

Korea Midland Power Co., Ltd.	PT. Cirebon Electric Power	Debt guarantees		USD 11,248	Mizuho Bank

Korea Midland Power Co., Ltd.	PT. Wampu Electric Power	Debt guarantees		USD 4,854	SMBC

Korea Midland Power Co., Ltd.	Green Energy Electricity Generation Co., Ltd.	Collateralized money invested		KRW 163	IBK
		Guarantees for supplemental funding and others(*1)		—	IBK and others

Korea Midland Power Co., Ltd.	YaksuESS Co., Ltd.	Collateralized money invested		KRW 516	IBK

Korea Midland Power Co., Ltd.	Namjeongsusang Solar Power Operatin Co., Ltd.	Collateralized money invested		KRW 812	IBK

F-218

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(7)

Guarantees provided to associates or joint ventures as of December 31, 2019 are as follows, continued:


Primary guarantor	Principal obligor	Type of guarantees	Credit limit		Guarantee
			In millions of won and thousands of foreign currencies

Korea Midland Power Co., Ltd.	Gwangbaek Solar Power Investment Co., Ltd.	Collateralized money invested		KRW 2,054	IBK

Korea South-East Power Co., Ltd.	Hyundai Energy Co., Ltd.	Collateralized money invested(*5)		—	IBK

		Guarantees for supplemental funding and others(*1,6)		KRW 76,800	NH investment & securities Co., Ltd. and others

Korea South-East Power Co., Ltd.	S-Power Co., Ltd.	Collateralized money invested		KRW 115,784	Korea Development Bank and others

Korea South-East Power Co., Ltd.	RES Technology AD	Collateralized money invested		KRW 16,248	UniCredit Bulbank and others

Korea South-East Power Co., Ltd.	ASM-BG Investicii AD	Collateralized money invested		KRW 19,376	UniCredit Bulbank and others

Korea South-East Power Co., Ltd.	Expressway Solar-light Power Generation Co., Ltd.	Guarantees for supplemental funding(*1,2)		KRW 2,500	Woori Bank

Korea South-East Power Co., Ltd.	Goseong Green Energy Co., Ltd.	Collateralized money invested		KRW 2,340	Kyobo Life Insurance Co., Ltd. and others

Korea South-East Power Co., Ltd.	Gangneung Eco Power Co., Ltd.	Collateralized money invested		KRW 2,430	Kyobo Life Insurance Co., Ltd. and others

Korea South-East Power Co., Ltd.	PND solar., Ltd.	Collateralized money invested		KRW 1,144	IBK

Korea South-East Power Co., Ltd.	Hyundai Eco Energy Co., Ltd.	Collateralized money invested		KRW 3,781	Samsung Life Insurance and others

Korea South-East Power Co., Ltd.	Jaeun Resident Wind Power Plant Co., Ltd.	Collateralized money invested		KRW 2,198	IBK

F-219

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(7)

Guarantees provided to associates or joint ventures as of December 31, 2019 are as follows, continued:


Primary guarantor	Principal obligor	Type of guarantees	Credit limit		Guarantee
			In millions of won and thousands of foreign currencies

Korea South-East Power Co., Ltd.	Cheongsong Myeonbongsan Wind Power Plant Co., Ltd.	Collateralized money invested		KRW 2,764	Kyobo Life Insurance Co., Ltd. and others

Korea Hydro & Nuclear Power Co., Ltd.	Noeul Green Energy Co., Ltd.	Collateralized money invested		KRW 6,611	Hana Bank and others
		Guarantees for supplemental funding(*1)		—

Korea Hydro & Nuclear Power Co., Ltd.	Busan Green Energy Co., Ltd.	Collateralized money invested		KRW 10,636	Shinhan Bank and others

Korea Hydro & Nuclear Power Co., Ltd.	Cheong-Song Noraesan Wind Power Co., Ltd.	Collateralized money invested		KRW 3,044	Woori Bank and others
		Guarantees for supplemental funding(*1)		—

KEPCO Plant Service & Engineering Co., Ltd.	Incheon New Power Co., Ltd.	Collateralized money invested(*8)		—	Shinhan Bank
		Guarantees for supplemental funding(*1)		—

(*1)	The Company guarantees to provide supplemental funding for business with respect to excessive business expenses or insufficient repayment of borrowings.

(*2)

The Company has granted the right to Hana Financial Investment Co., Ltd., as an agent for the creditors to Expressway Solar-light Power Generation Co., Ltd. (“ESPG”), to the effect that in the event of acceleration of ESPG’s payment obligations under certain borrowings to such creditors, Hana Financial may demand the Company to dispose of shares in ESPG held by the Company and apply the resulting proceeds to repayment of ESPG’s obligations.

(*3)	This includes a guarantee for the shareholder’s capital payment in connection with the business of 190MW gas complex thermal power plant in Jamaica. EWP Barbados 1 SRL’s capital contribution amount is USD 18,400,000 and there is no residual guarantee amount among total collateral limit.

(*4)

Controlling and non-controlling common shareholders of Samcheok Eco Materials Co., Ltd. have pre-emption rights, if preferred shareholders intend to sell their shares until December 23, 2020. And promised yield of the preferred stock is guaranteed through the transaction. As of December 31, 2019, the Company has recognized derivative liabilities of ￦6,205 million related to the guarantee. Meanwhile, the

F-220

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(7)

Guarantees provided to associates or joint ventures as of December 31, 2019 are as follows, continued:

Company is under an agreement with Samcheok Eco Materials Co., Ltd. that if a damage incurs related to the fulfillment of obligations pursuant to the mandatory contract of coal ash supply, compensation for the expected amount of the damage should be settled.

(*5)	The Company recognized an impairment loss on all of the equity securities of Hyundai Energy Co., Ltd. in prior years, and the acquisition cost of the securities provided as collateral is ￦47,067 million.

(*6)	Pursuant to the guarantee agreement, the Company recognized other provisions of ￦28,717 million as the possibility of economic benefit outflow to fulfill the obligation was deemed probable and the amount could be reasonably estimated.

(*7)	The common stocks of Dongducheon Dream Power Co., Ltd. held by the Company were pledged as collateral.

(*8)	The Company recognized an impairment loss on all of the equity securities of Incheon New Power Co., Ltd. during the year ended December 31,2019, and the acquisition cost of the securities provided as collateral is ￦461 million.

(*9)	The Company provided a payment guarantee to Daehan Wind Power PSC for reimbursement of Equity Bridge Loan(EBL), opening LC for Debt Service Reserve Account(DSRA), guarantee for the swap termination costs and others.

(8)

As of December 31, 2019, there is no financial guarantee contract provided by related parties.

(9)

Derivatives transactions with related parties as of December 31, 2019 are as follows:

(i)

Currency Swap


Counterparty	Contract year			Contract Amount				Contract interest rate per annum							Contract exchange rate
Counterparty	Contract year			Pay		Receive		Pay (%)			Receive (%)				Contract exchange rate
	In millions of won and thousands of foreign currencies
Korea Development Bank		2019~2024	￦		177,600		USD 150,000		1.24	%		2.50	%	￦		1,184.00
		2015~2025			111,190		USD 100,000		2.62	%		3.25	%			1,111.90
		2017~2027			111,610		USD 100,000		2.31	%		3.13	%			1,116.10
		2018~2028			108,600		HKD 800,000		2.69	%		3.35	%			135.75
		2018~2023			170,280		USD 150,000		2.15	%		3.75	%			1,135.20
		2019~2027			119,978		CHF 100,000		1.43	%		0.05	%			1,199.78
		2017~2020			114,580		USD 100,000		1.75	%		2.38	%			1,145.80
		2016~2021			121,000		USD 100,000		2.15	%		2.50	%			1,210.00
		2019~2022			112,650		USD 100,000		1.80	%		3.38	%			1,126.50
		2018~2023			320,880		USD 300,000		2.03	%		3.75	%			1,069.60
		2019~2022			117,340		USD 100,000		1.06	%		2.38	%			1,173.40
		2018~2021			212,960		USD 200,000		2.10	%		3.00	%			1,064.80
		2017~2022			113,300		USD 100,000		1.94	%		2.63	%			1,133.00
		2018~2023			169,335		USD 150,000		2.26	%		3.88	%			1,128.90

F-221

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

47.

Related Parties, Continued

(9)

Derivatives transactions with related parties as of December 31, 2019 are as follows, continued:

(ii)

Currency forward


Counterparty	Contract date		Maturity date			Contract amounts					Contract exchange rate
Counterparty	Contract date		Maturity date			Pay		Receive			Contract exchange rate
	In millions of won and thousands of foreign currencies
Korea Development Bank		2017.12.27		2021.07.12	￦		104,849		USD 100,000	￦		1,048.49
		2019.12.11		2020.01.15			11,925		USD 10,000			1,192.50
		2019.12.30		2020.01.23			4,630		USD 4,000			1,157.40

(10)

The Company considers executive directors and executive head officer in charge of planning, operation, control of business activity as the key members of management. Salaries and other compensations to the key members of management of the Company for the years ended December 31, 2017, 2018 and 2019 are as follows:


Type		2017		2018		2019
		In millions of won
Salaries	￦		1,271		1,106		1,315
Employee benefits			54		24		31

	￦		1,325		1,130		1,346

48.

Non-Cash Transactions

(1)

Significant non-cash investing and financing transactions for the years ended December 31, 2017, 2018, and 2019 are as follows:


Transactions		2017		2018		2019
		In millions of won
Transfer from construction-in-progress to other assets	￦		13,676,233		8,656,252		14,052,094
Recognition of asset retirement cost and related provision for decommissioning costs			2,494,802		310,272		2,425,668
Transfer from provision for disposal of spent nuclear fuel to accrued expenses			342,861		482,699		376,103
Transfer from long-term borrowings and debt securities to current portion of long-term borrowings and debt securities			—		7,100,846		7,759,284
Transfer of right-of-use assets due to change in accounting policy			—		—		5,364,647

F-222

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

48.

Non-Cash Transactions, Continued

(2)

Changes in liabilities incurred from financing activities for the years ended December 31, 2018, and 2019 are as follows:


		2018
							Non-cash changes
		Beginning balance		Cash flows			Increase		Changes in accounting policies		Effect of exchange rate fluctuations and others		Increase from the business combination		Ending balance
		In millions of won
Borrowings and debt securities	￦		54,747,392		5,972,336			—		—		314,899		—		61,034,627
Finance lease liabilities			418,260		(134,454	)		—		—		—		—		283,806

	￦		55,165,652		5,837,882			—		—		314,899		—		61,318,433


		2019
							Non-cash changes
		Beginning balance		Cash flows			Increase		Changes in accounting policies		Effect of exchange rate fluctuations and others		Increase from the business combination		Ending balance
		In millions of won
Borrowings and debt securities	￦		61,034,626		6,342,074			—		—		496,940		2,900		67,876,540
Lease liabilities			283,806		(573,437	)		218,800		4,943,584		197,380		—		5,070,133

	￦		61,318,432		5,766,877			218,800		4,943,584		694,080		2,900		72,946,673

49.

Commitments for Expenditure

(1)

The commitments for acquisition of property, plant and equipment as of December 31, 2018 and 2019 are as follows:


		2018				2019
Contracts		Amounts		Balance		Amounts		Balance
		In millions of won
Purchase of cable (PVC, 1C, 2000SQ) 153,000M and others (Shin-Bupyung-Youngseo)	￦		56,183		37,309		56,408		24,721
Purchase of cable (PVC, 1C, 2500SQ) 103,374M and others (Bukdangjin-Shin-Tangjung)			44,315		31,801		45,390		32,876
Purchase of GIS (362kV, 6300A, 63kA) 23CB – Youngseo S/S			34,500		34,500		36,143		36,143
Purchase of GIS (362kV, 6300A, 63kA) 26CB – Hwasung S/S			29,143		18,194		40,010		15,300
Purchase of GIS (362kV, 6300A, 63kA) 27CB – Kwangyang S/S			37,694		10,491		37,744		9,700
Purchase of Concrete Poles (10M, 350KGF) 121,900 and 6 others			133,387		13,343		—		—

F-223

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

49.

Commitments for Expenditure, Continued

(1)

The commitments for acquisition of property, plant and equipment as of December 31, 2018 and 2019 are as follows, continued:


	2018				2019
Contracts	Amounts		Balance		Amounts		Balance
	In millions of won
Purchase of cable (TR CNCE-W/AL, 1C, 400SQ) 3,504,000M		66,240		38,998		66,240		—
Purchase of cable (FR CNCO-W, 1C, 325SQ) 1,400,000		57,475		48,598		59,716		37,249
Purchase of switch (Eco) 9,360 units		40,631		34,797		40,631		24,031
Purchase of cable (TR CNCE-W/AL, 1C, 400SQ) 2,654,400M		—		—		36,063		6,243
Construction of Shin-Kori units (#3,4)		7,363,514		3,211		7,498,951		—
Construction of Shin-Kori units (#5,6)		8,625,387		5,930,099		8,625,387		4,479,956
Construction of Shin-Hanul units (#1,2)		7,982,342		355,704		8,306,149		—
Other 27 contracts		269,681		161,243		352,710		122,890
Service of designing Seoul Combined units (#1,2)		29,996		4,744		30,778		2,119
Purchase of main machine for construction of Seoul Combined units (#1,2)		365,164		51,165		331,249		15,918
Construction of Seoul Combined units (#1,2)		285,890		27,125		387,722		31,150
Purchase of smoke eliminating machine for construction of Shin-Boryeong units (#1,2)		172,609		13,986		157,618		—
Service of designing Shin-Boryeong units (#1,2)		120,199		1,076		120,668		888
Purchase of main machine for construction of Shin-Boryeong units (#1,2)		866,065		4,981		816,317		4,955
Purchase of furnace for construction of Shin-Seocheon thermal power plant		305,209		74,631		305,209		43,388
Purchase of turbine generator for construction of Shin-Seocheon thermal power plant		104,402		57,968		105,226		10,736
Electricity construction of Shin-Seocheon thermal power plant		217,848		174,122		231,196		87,874
Purchase of main machine for Jeju LNG combined		166,287		11,272		166,287		12,088
Service of designing Taean IGCC plant units		46,001		3,161		46,101		2,332
Service of designing Taean units (#9,10)		112,344		13,338		112,483		12,862
Purchase of furnace for construction of Taean units (#9,10)		556,504		18,502		556,206		17,579
Purchase of turbine generator for construction of Taean units (#9,10)		214,462		10,422		214,208		10,857
Purchase of coal handling machine for construction of Taean (#9,10) and IGCC units (conditional contract for installation)		205,764		282		205,764		282
Purchase of oxygen plant for construction of Taean IGCC units		96,068		1,552		97,345		1,630
Purchase of gas turbine and turbine equipment of Gimpo combined heat & power plant		—		—		104,600		104,600
Purchase of coal handling machine for construction of Samcheok units (#1,2)		307,925		48,736		282,927		42,785

F-224

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

49.

Commitments for Expenditure, Continued

(1)

The commitments for acquisition of property, plant and equipment as of December 31, 2018 and 2019 are as follows, continued:


	2018				2019
Contracts	Amounts		Balance		Amounts		Balance
	In millions of won
Purchase of furnace for construction of Samcheok units (#1,2)		1,092,287		12,215		1,066,824		11,771
Purchase of turbine main equipment for Samcheok units (#1,2)		212,188		348		223,550		132
Purchase of main equipment for Namjeju		146,594		134,949		138,486		84,982

(2)

As of December 31, 2019, details of contracts for inventory purchase commitment are as follows:

The Company imports all of its uranium ore concentrates from sources outside Korea (including the United States, United Kingdom, Kazakhstan, France, Russia, South Africa, Canada and Australia) which are paid for with currencies other than Won, primarily in U.S. dollars. In order to ensure stable supply, the Company entered into long-term and medium-term contracts with various suppliers, and supplements such supplies with purchases of fuels on spot markets. The long-term and medium-term contract periods vary among contractors and the stages of fuel manufacturing process. Contract prices for processing of uranium are generally based on market prices. Contract periods for ore concentrates, conversion, enrichment and design and fabrication are as follows:


Type	Periods		Contracted quantity
Concentrate		2019 ~ 2030		38,990 Ton U3O8
Transformed		2019 ~ 2030		21,969 Ton U
Enrichment		2019 ~ 2030		17,060 Ton SWU
Molded (Light)		2019 ~ 2020		756 Ton U
Molded (Medium))		2019 ~ 2020		401 Ton U
Molded (Initial core)		2019 ~ 2022		415 Ton U

50.

Contingencies and Commitments

(1)

Ongoing litigations and claims related with contingent liabilities and contingent assets as of December 31, 2018 and 2019 are as follows:


	2018				2019
	Number of cases		Claim amount		Number of cases		Claim amount
	In millions of won
As the defendant		570	￦	673,882		586	￦	697,835
As the plaintiff		174		793,491		199		707,287

As of December 31, 2019, among the litigations mentioned above, there are ongoing litigations of KHNP, a subsidiary of KEPCO, against KEPCO Engineering & Construction Company, Inc., a subsidiary of KEPCO, as a co-defendant (one case amounting to ￦65,927 million).

A group of plaintiffs (consisting of 2,167 individuals) filed a lawsuit against NSSC (Nuclear Safety and Security Commission) regarding NSSC’s approval on May 18, 2015 of extending the operation of Wolsong

F-225

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

50.

Contingencies and Commitments, Continued

(1)

Ongoing litigations and claims related with contingent liabilities and contingent assets as of December 31, 2018 and 2019 are as follows, continued:

unit 1 nuclear power plant. The appeal was ongoing as of December 31, 2019. Also, Greenpeace and others filed an administrative litigation against NSSC requesting cancelation of the construction permit of Shin-Kori unit 5 and 6 in September 12, 2016 and lost the lawsuit in February 14, 2019. They appealed the case in March 18, 2019. The Company joined these litigations as a stakeholder after obtaining permission from the Court.

As of December 31, 2019, in connection with Shin-Hanul unit 3 & 4, the Company has received communications from a vendor for costs incurred for the preliminary work of the main equipment and associated compensation due to the discontinuation of the construction. The Company does not believe that it has a present obligation to this vendor, and that it is probable that the Company will prevail if a lawsuit is filed against the Company. In addition, the Company cannot reliably estimate the potential economic outflow related to the obligation as of December 31, 2019.

The long-term service contract between Gyeonggi Green Energy Co., Ltd. (Gyeonggi Green Energy) and its fuel cell supplier expired during the year ended December 31, 2018. Gyeonggi Green Energy had been in negotiations to renew the contract as the creditors requested, and, as a result, Gyeonggi Green Energy renewed the long-term service contract with fuel cell supplier on August 30, 2019. Accordingly, the Company has obtained approval from the creditors for long-term service contracts with the fuel cell supplier.

The Company is the defendant against a number of claims. The following is potentially significant ongoing claims pertaining to the Company:

In December 2013, the Supreme Court of Korea ruled that regular bonuses also fall under the category of ordinary wages on the condition that those bonuses are paid regularly and uniformly. Also, the Supreme Court ruled that employees are entitled to retroactively demand certain wages based on the new ordinary wages that include regular bonuses as additional wages. However, the request may be limited to the extent of the principle of good faith.

The Company believes that the possibility of economic benefit outflow is probable on the ongoing and the expected lawsuit. For this reason, the Company recognized ￦28,579 million of other provision in relation to the lawsuit as of December 31, 2019.

In addition to the abovementioned significant ongoing claims, there are 15 arbitration cases pertaining to the Company as of December 31, 2019 and the significant arbitration cases for the year ended December 31, 2019 are as follows:

①

KEPCO and KEPCO KDN Co., Ltd., a subsidiary of KEPCO, have been accused of breach of contract in relation to ERP software, which is provided by SAP Korea Ltd. The litigation was filed in the International Chamber of Commerce International Court of Arbitration, but the Company has not recognized any provision because the probability of economic benefit outflow is remote and the related amount cannot be reliably estimated.

②

In 2016, Hyundai E&C, GS Engineering & Construction Corp. and Hansol SeenTec Co., Ltd. filed an arbitration against the Company to the Korea Commercial Arbitration Board in relation to the request for additional construction costs. As described in Note 26.(2), the Company recognized the litigation provisions of ￦204,787 million in relation to this arbitration case and made the payment according to the results of this arbitration during the year ended December 31, 2018.

F-226

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

50.

Contingencies and Commitments, Continued

(1)

Ongoing litigations and claims related with contingent liabilities and contingent assets as of December 31, 2018 and 2019 are as follows, continued:

③

In 2016, Halla Corporation filed an arbitration against the Company to the Korea Commercial Arbitration Board in relation to the request for additional construction costs and the Company filed an arbitration against Halla Corporation to the Korea Commercial Arbitration Board in relation to the request for a penalty payment for the delayed construction work. The Company has recognized ￦19,754 million as a provision for the best estimate of the expenditure required to fulfill its obligations in relation to this arbitration as of December 31, 2019. After the reporting period, the Company has recognized reversal of the provision amounting to ￦19,754 million according to the settlement from the authority.

④

The Company has filed for arbitration against IL KWANG E&C Co., Ltd. to the Korea Commercial Arbitration Board, in relation to damage claims received as of December 31, 2019.

⑤

In relation to the electric power IT modernization project in Kerala, India, Enzen, a subcontractor, filed an arbitration against the Company to the Indian Council of Arbitration due to disagreements in the contract, but the Company has not recognized any provision because the amount and timing of economic benefit outflow cannot be reasonably estimated.

(2)

Guarantees of payments and commitments provided to other companies as of December 31, 2018 and 2019 are as follows:

①

The Company has outstanding borrowings with a limit of USD 275,600 thousand from its creditors such as International Finance Corporation. Regarding the borrowing contract, the Company has guaranteed capital contribution of USD 69,808 thousand and additional contribution up to USD 19,000 thousand for contingencies, if any. Moreover, for one of the electricity purchasers, Central Power Purchasing Agency Guarantee Ltd., the Company has provided payment guarantee up to USD 2,777 thousand, in case of construction delay or insufficient contract volume after commencement of the construction.

②

The Company has provided PT. Perusahaan Listrik Negara performance guarantee up to USD 2,293 thousand and investment guarantee up to USD 43,500 thousand to Mizuho bank and others in proportion to its ownership in the electricity purchase contract with PT. Cirebon Energi Prasarana in relation to the second electric power generation business in Cirebon, Indonesia.

③

The Company has provided MUFG Bank, Ltd. (MUFG) (formerly, the Bank of Tokyo Mitsubishi UFJ. Ltd. (BTMU)) borrowing guarantee up to USD 41,258 thousand proportion to its ownership in the equity bridge loan guarantee with PT. Cirebon Energi Prasarana in relation to the second electric power generation business in Cirebon, Indonesia.

④

The Company has provided the Export-Import Bank of Korea, BNP Paribas and ING Bank guarantee of mutual investment of USD 2,192 thousand, which is equivalent to the ownership interest of PT BS Energy and PT Nusantara Hydro Alam, in order to guarantee the expenses related to hydroelectric power business of Tanggamus, Indonesia.

⑤

The Company has provided the Export-Import Bank of Korea and SMBC guarantee of mutual investment of USD 401 thousand, which is equivalent to the ownership interest of PT Mega Power Mandiri, in order to guarantee the expenses related to hydroelectric power business of PT. Wampu Electric Power, an associate of the Company.

F-227

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

50.

Contingencies and Commitments, Continued

(2)

Guarantees of payments and commitments provided to other companies as of December 31, 2018 and 2019 are as follows, continued:

⑥

The Company provides the DekaBank with an investment guarantee of EUR 13,800 thousand to Stavro Vind AB, to enter into a loan contract for the Sweden Wind Power (Stavro) construction operation project.

⑦

The Company is obligated to complete the construction of the waste oil refining for power generation business of Next energy Co.,Ltd. (contract amount : ￦14,700 million) as a construction company. The Company is liable to compensate to financial institution agents for the liquidated damages in case of incompletion of the construction. Also, the Company has made performance guarantee agreement with Next energy Co.,Ltd. after the completion of the construction, which obliges the Company to provide supplemental funding if the amount of power generated or the operation time of the power plant does not reach the agreed level. The Company expected outflow of resources is probable due to guarantee of completing the construction. Hence, the Company recognized revenue over time after deducting ￦5,244 million as the variable consideration for the contract amount of the project.

(3)

Credit lines provided by financial institutions as of December 31, 2019 are as follows:

Commitments

Financial institutions

Currency

Limited amount

Used amount

In millions of won and thousands of foreign
currencies

Commitments on Bank-overdraft

Nonghyup Bank and others

KRW

1,825,500

373,219

Commitments on Bank-daylight overdraft

Nonghyup Bank and others

KRW

280,000

—

Limit amount available for CP

Hana Bank and others

KRW

1,250,000

1,150,000

Limit amount available for card

Hana Bank and others

KRW

51,904

6,686

Banco de Oro

PHP

5,000

3,000

Loan limit

Kookmin Bank and others

KRW

1,050,503

685,429

DBS Bank and others

USD

2,492,700

14,400

Certification of payment on payables from foreign country

Nonghyup Bank

USD

4,680

3,892

Certification of payment on L/C

Shinhan Bank

KRW

7,749

—

Shinhan Bank and others

USD

1,051,334

171,975

Societe Generale

MYR

2,500

F-228

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

50.

Contingencies and Commitments, Continued

(3)

Credit lines provided by financial institutions as of December 31, 2019 are as follows, continued:


Commitments	Financial institutions	Currency	Limited amount		Used amount
		In millions of won and thousands of foreign currencies
Certification of Performance guarantee on contract	Seoul Guarantee Insurance and others	KRW		84,011		66,892
	First Abu Dhabi Bank and others	USD		596,862		465,093
	Korea Development Bank and others	JPY		637,495		637,495
	Hana Bank and others	EUR		4,158		4,158
	Hana Bank and others	INR		191,883		191,883
	Hana Bank	CAD		464		464
	Shinhan Bank	ZAR		55,730		55,730
Certification of bidding	Hana Bank	USD		10,000		197
Advance payment bond, Warranty bond, Retention bond and others	Seoul Guarantee Insurance	KRW		44,047		44,047
	Export-Import Bank of Korea and others	USD		714,654		649,402
	Hana Bank	SAR		86,508		86,508
	SMBC Bank	QAR		15,000		15,000
Others	Nonghyup Bank and others	KRW		537,064		47,638
	Export-Import Bank of Korea and others	USD		1,562,194		1,315,378
	Shinhan Bank	JPY		381,210		381,210
	Standard Chartered	AED		50		50
Inclusive credit	Hana Bank	KRW		8,000		772
	Hana Bank and others	USD		30,975		17,502
	Shinhan Bank	INR		92,348		92,348
Trade finance	BNP Paribas and others	USD		700,000		—

F-229

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

50.

Contingencies and Commitments, Continued

(4)

As of December 31, 2019, blank check and assets provided as collaterals or pledges to financial institutions by the Company are follows:

Guarantor

Guarantee

Type of guarantee

Currency

Amount

Description

In millions of won and thousands of foreign currencies

Mira Power Limited

International Finance

Corporation and

others

Property, plant and

equipment and others

USD

275,600

Collateral for borrowings(*1)

Tamra Offshore Wind Power Co., Ltd.

Kyobo Life Insurance Co., Ltd. and others

Property, plant and

equipment and others

KRW

171,600

Collateral for borrowings(*2)

SE Green Energy Co., Ltd.

DB Insurance Co., Ltd. and others

Property, plant and

equipment and others

KRW

149,500

Collateral for borrowings(*2)

Gyeonggi Green Energy Co., Ltd.

Korea

Development

Bank and others

Cash and cash

equivalents

KRW

327,080

Collateral for borrowings(*2)

Commerce and Industry Energy Co., Ltd.

IBK and others

Land, buildings,

structures and

machinery and others

KRW

110,500

Collateral for borrowings(*2)

KOSPO Youngnam Power Co., Ltd.

Shinhan Bank

and others

Cash and cash

equivalents

KRW

396,120

Collateral for borrowings(*2)

Gyeongju Wind Power Co., Ltd.

Samsung Fire &

Marine Insurance

Co., Ltd. and

Others

Property, plant and

equipment and others

KRW

110,240

Collateral for borrowings (*2)

Korea Offshore Wind Power Co., Ltd.

Woori Bank and

Others

Utility plant and others

KRW

293,400

Collateral for borrowings(*2)

Qatrana Electric Power Company

The Islamic

Development

Bank and others

Finance lease receivable

and property, plant and equipment and others

JOD

236,570

Collateral for borrowings(*1)

KST Electric Power Company

The Export—Import

Bank of Korea and

others

Finance lease receivable

and property, plant and equipment and others

USD

401,277

Collateral for debt securities(*1)

(*1)	This is based on the amount of loan commitment limit.

(*2)	As of December 31, 2019, the Company has established guarantees for pledge for transfer of rights of long-term borrowings, pledge for insurance claims, pledge for shares, etc.

F-230

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

50.

Contingencies and Commitments, Continued

(4)

As of December 31, 2019, blank check and assets provided as collaterals or pledges to financial institutions by the Company are follows, continued:

The Company has ￦1,197 million of project loans from Korea Energy Agency as of December 31, 2019. The Company has provided a blank check as a repayment guarantee.

(5)

The Company temporarily suspended operations of the Gangneung hydroelectric generating plant, with a carrying amount of ￦75,634 million as of December 31, 2019, to improve the quality of water used in generating electricity. The expenses related to the suspension of operations of ￦49 million and depreciation on the idle assets of ￦6,542 million are recorded in other expenses for the year ended December 31, 2019. Regarding the improvement of water quality, the results of damages compensation for the local residents cannot be reasonably estimated, and the Company is in negotiations with Gangneung City and related stakeholders to restart the Gangneung hydroelectric generating plant as of December 31, 2019.

(6)

Due to the Korean government’s announcement of suspension of operation in the Gaeseong Industrial District, it is uncertain if the Company can exercise the property rights for the Company’s facility in the Gaeseong Industrial District as of December 31, 2019. The book value of facility is ￦16,611 million and the amount of trade receivables related to the companies residing in Gaeseong industrial complex is ￦2,911 million. The outcome of this event cannot be reasonably estimated as of December 31, 2019.

(7)

In connection with the electric power IT modernization project in Kerala, India, negotiations are underway due to disagreements in the contract regarding the existence and the scope of a warranty obligation. However, the Company has not recognized any provision because the amount and timing of economic benefit outflow cannot be reasonably estimated as of December 31, 2019.

51.

Business Combination

(1)

The details of business combinations that occurred for the year ended December 31, 2019 are as follows:


Company	Key operation activities	Date of merger		Transfer price
	In millions of won
Eumseong Natural Gas Power Co., Ltd.	Power generation		2019.12.23		225,758

Eumseong Natural Gas Power Co., Ltd. was established in August 2019 by spin-off from Dangjin Eco Power Co., Ltd., and obtained the license for LNG combined power generation under the 8th Basic Plan for Long-Term Electricity Supply and Demand. Korea East-West Power Co., Ltd., a subsidiary of the Company, acquired 100% of its interest in Eumseong Natural Gas Power Co., Ltd. for stable power supply and profit generation through diversification of power sources, and merged with Eumseong Natural Gas Power Co., Ltd. on December 23, 2019.

F-231

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

51.

Business Combination, Continued

(2)

Details of the transfer price at fair value given by the acquirer of the business combination for the year ended December 31, 2019 are as follows:


Type		Amounts
		In millions of won
Cash and cash equivalents	￦		156,700
Other trade payables			10,000
Fair value of the shares owned before the acquisition			59,058

	￦		225,758

(3)

The fair values of assets and liabilities acquired through the business combination at the acquisition date for the year ended December 31, 2019 are as follows:


Type		Amounts
		In millions of won
Fair value of the identifiable assets	￦
Current assets
Cash and cash equivalents			2,389
Trade and other receivables			55
Non-current assets
Property, plant and equipment			54
Intangible assets			172,434
Other assets			60
Fair value of the identifiable liabilities
Current liabilities
Borrowings			(2,900	)
Non-current liabilities
Deferred tax liabilities			(41,729	)

	￦		130,363

(4)

Details of goodwill resulting from the business combination for the year ended December 31, 2019 are as follows:


Type		Amounts
		In millions of won
Fair value of transfer price	￦		225,758
Less : Fair value of the identifiable net assets			(130,363	)

	￦		95,395

Goodwill arose from the business combination due to the transfer price including the premium to obtain control paid in order to acquire Eumseong Natural Gas Power Co., Ltd. It also includes expectation of synergy effect and future growth in profits derived from business combination with LNG combined power

F-232

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

51.

Business Combination, Continued

(4)

Details of goodwill resulting from the business combination for the year ended December 31, 2019 are as follows, continued:

generation project. These business rights can be separated from goodwill which satisfies the recognition requirements and thus the business rights have been recognized as a separate intangible asset.

On the contrary, the expected benefits such as direct fuel acquisition and reduce costs for O&M did not satisfy the recognition requirements for identifiable intangible assets and thus were not recognized separately from the goodwill.

(5)

Net cash outflows from the business combination for the year ended December 31, 2019 are as follows:


Type		Amounts
		In millions of won
Cash paid for the acquisition	￦		156,700
Less : Cash and cash equivalents received			(2,389	)

	￦		154,311

(6)

Fees for legal service, due diligence and others relating to the business combination amounted to ￦24 million.

The fees were excluded from the transfer price and recognized as selling and administrative expenses in the statement of comprehensive income (loss) for the year ended December 31, 2019.

(7)

There is no sale or net profit included in the statement of comprehensive income (loss) for the year ended December 31,2019, in relation to additional business launched by Eumseong Natural Gas Power Co., Ltd.

52.

Subsequent Events

(1)

Subsequent to December 31, 2019, Korea South-East Power Co., Ltd., Korea Midland Power Co., Ltd. and Korea Hydro & Nuclear Power Co., Ltd. issued a foreign bond and corporate bonds for funding debt repayment, facility investments, and operations as follows:


Company	Type	Issue date		Maturity		Interest rate			Amount
	In millions of won and thousands of foreign currencies
Korea South-East Power Co., Ltd.	Foreign bond		2020.02.03		2025.02.03		2.13	%	USD 300,000

Korea Midland Power Co., Ltd.	#54-1 non-guaranteed corporate bond		2020.02.25		2040.02.25		1.53	%	KRW 50,000

	#54-2 non-guaranteed corporate bond		2020.02.25		2050.02.25		1.53	%	KRW 120,000

F-233

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements, Continued

December 31, 2019

52.

Subsequent Events, Continued

(1)


Company	Type	Issue date		Maturity		Interest rate			Amount
	In millions of won and thousands of foreign currencies

	#55 non-guaranteed corporate bond		2020.03.18		2040.03.18		1.59	%	KRW 80,000

Korea Hydro & Nuclear Power Co., Ltd.	#55-1 non-guaranteed corporate bond		2020.04.02		2040.04.02		1.80	%	KRW 50,000

	#55-2 non-guaranteed corporate bond		2020.04.02		2050.04.02		1.80	%	KRW 50,000

(2)

Subsequent to December 31, 2019, Korea Western Power Co., Ltd. borrowed foreign short-term borrowings for funding operations. Details of the foreign short-term borrowings are as follows:


Company	Type	Issue date		Maturity		Interest rate			Amount
	Thousands of foreign currencies
Korea Western Power Co., Ltd.	Foreign short-term borrowings		2020.02.06		2020.05.06		1.97	%	USD 24,658
	Foreign short-term borrowings		2020.02.26		2020.05.26		1.86	%	USD 7,329

F-234