Korea Electric Power Corp (KEP) 2014 Q3 法說會逐字稿

(Interpreted). Good morning and good evening. First of all, thank you all for joining this conference call, and now we will begin the conference of the fiscal year 2014 third quarter earnings results by KEPCO.

This conference will start with a presentation, followed by a divisional Q&A session. (Operator Instructions). Now we shall commence the presentation on the fiscal year 2014 third quarter earnings results by KEPCO.

(Interpreted). Good afternoon. This is Weon-Gun Ko, Vice President and Treasurer of KEPCO. On behalf of KEPCO I would like to thank you all for participating in today's conference call to announce earnings results for the third quarter of 2014.

We will begin with a brief presentation on the earnings results, which will be followed by a Q&A session. Today's call will be proceeded in both Korean and English.

Please note that the financial information to be disclosed today is on a preliminary, unaudited and unconsolidated basis in accordance with KIFRS. Any comparison will be on a year-on-year basis between 2013 and 2014. Business strategies, plans, financial estimates and other forward-looking statements included in today's call will be made based on our current expectations and plans. Please be noted that such statements may involve certain risks and uncertainties.

Now senior IR manager, Mr. Changyoung Ji, will begin with an overview of earnings results of the third quarter of 2014, first in Korean and repeated in English.

(Interpreted). Now we will provide the overview in English, starting with operating income. In the third quarter of 2014, KEPCO recorded a net operating income of KRW4.92 trillion. Taking a closer look, operating revenues increased 7.1% to KRW42.52 trillion. This was attributable mainly to 5.7% increase in power sales revenue, totaling in KRW39.17 trillion and 37% increase in revenue from the overseas business, amounting to KRW2.31 trillion.

Moving on to main operating cost, cost of goods sold, SG&A expenses decreased 2.6% to KRW37.65 trillion. Fuel costs decreased 14.3% to KRW15.52 trillion. Power generation, affected by the low power demand, decreased 1.2%, and unit cost of fuel declined by 13.3%. Meanwhile, purchased power cost increased 8.9% to KRW8.89 trillion. Unit cost of purchase decreased 5.7% because of the decrease of unit cost of oil, and purchased volume increased 12.1%. Depreciation cost rose 4.1% to KRW5.06 trillion, mainly due to the newly constructed substations and new facility additions by power plants.

Now let me explain KEPCO's non-operating segments. Net financial loss was KRW1.72 trillion in the third quarter of 2014, which was increased by KRW22b. As a result of the foregoing, we recorded a consolidated net income of KRW2.32 trillion in the third quarter of 2014.

This concludes the overview of KEPCO's earnings results for the third quarter of 2014. Now let me move on to the Q&A session. The Q&A session will be hosted by Mr. Weon-Gun Ko.

(Interpreted). This is Weon-Gun Ko. I'm joined with our IR committee members in charge of major business areas at KEPCO. We are prepared to take any questions. Since we will proceed in both Korean and English, all the Q&As will be interpreted. Please make sure your questions and answers are brief and clear. Please begin.

(Interpreted). Pierre Lau, Citigroup.

Hi. Hello. Good afternoon, KEPCO management. Congratulation to your third-quarter results. I have three questions. The first question is why the tax rate for your third quarter was so high? And the second question is what is the schedule for the commissioning of your three nuclear power unit in 2014 and 2015? And also, how many of your nuclear units still under suspensions and when they would resume operation?

And the last question is, you have increased the generation mix from nuclear and coal in the third quarter, so what would be your guidance regarding the 2014 generation mix, in particular, from nuclear and coal, and also that for 2015? Thank you.

(Interpreted). So maybe I could answer your question about the tax rate. If you look at the tax rate for the third quarter on our consolidated and financial statements, this includes the taxes paid not only at the KEPCO level, but also for the GenCos. And in addition to that, it also includes a deferred corporate income tax. So that is why the tax rate in itself is reflected at a higher level.

(Interpreted). So maybe to go on with regards to the operations of our nuclear power plants. First to talk about Shin-Wolseong number 2, this is slated to start operations or be commissioned in July of 2015. If we go on to number 3 for Shin-Kori, that would be in June of 2015. And then in the case of Shin-Wolseong number 3, then that would be June of 2016. Shin-Kori number 4, excuse me.

(Interpreted). In terms of the maintenance records that we have for the preventative maintenance, there are three nuclear power plants right now that are under maintenance.

For the Hanbit number 3, we do expect it to resume operations in January 28 of next year. In the case of Hanul number 1 -- number 2, excuse me, we expect it to actually take place on November 29 of this year. And then in the case of Shin-Kori number 1, this is facing some issues with regards to the switch controls, and therefore right now we are in the retail invest -- the detailed investigation phase. So as of now, we don't have a timeline on which it will restart operations.

So to give you the pure generation mix that we would have across the board for 2014, first of all, for coal-fired it would be 46%, in terms of our nuclear power plants 35%, and then for LNG 16%.

Does that answer your question?

Yes, but one follow-up question is that do we expect the tax rate in fourth quarter this year to be back to the normal level, 25%?

(Interpreted). So to answer your question, for the fourth quarter with regards to the tax rate on a consolidated basis, it would be difficult to give you a percentage as of that time, because it would depend upon the net asset value increase. If there is any, that would take place at our consolidated subsidiary level.

Okay. Thanks. Thank you very much.

(Interpreted). Yun Hee-Do, Korea Investment and Security.

(Interpreted). So there are two or three questions that I would like to ask you. The first question is with regards to the fuel cost that you have. If you look at the line items there in others right now, in terms of that amount, if you look at the third quarter, it's around KWR23.4b. If you look at it on a cumulative basis, it's KWR110b. And therefore, in terms of the year-to-date numbers, also, it seems to have increased significantly versus on a year-on-year basis. So could you explain what this others is representing? That's the first question that I would like to ask you.

And the second question is a bit more complicated. But if you look at your third-quarter numbers year to date in terms of the consolidated numbers and then the unconsolidated numbers, the net income line, the consolidated versus non-consolidated numbers, seem to show a difference of around KWR1.6 trillion. In the past year, there was actually not a big difference between these two numbers, but it seems that this year there is a significant difference. And therefore from an investor's point of view, it is very difficult for us to estimate what the amount of dividend would be in terms of your payout.

So what is actually behind the difference in these two numbers? For example, would it be that in the case of KHNP and its operations -- I understand that this year, they have seen a significant improvement in their earnings, going from the year 2013 versus 2014 -- so is it a factor of that on the GenCo level as you consolidate this number? Because on a consolidated numbers, it is reflected in your net income, versus on the non-consolidated side it's not reflected. So is this to mean the main reason? Could you confirm that?

And secondly with regards to KHNP's earnings in itself, is the improvement in its operations mainly due to just the fact that for its nuclear power plants everything is back to normal and everything is running as normal? Or is it a factor also including that -- I understand that due to the scandals that it had last year with regards to some faulty part -- that the total compensation that KEPCO, or the damage that you incurred as a results of that, was KWR1.18 trillion.

So therefore, is it your plan -- I had heard from someone that in the case of your plan, that it would be a cost that you would reflect into the price that you levy for KHNP in terms of the price that you purchased their electricity. So is this being applied right now or, if it's not being applied, would then -- would this be a one-off compensation that could actually be reflected into your financials? Because if that is true, then I do believe that there could be a one-off expense of more than KWR1 trillion taking place.

(Interpreted). Maybe to answer your first question about the fuel cost, if you look at others, this is actually the fuel cost related to new -- [the new tax] of -- renewable energy. So for example, it would be the wood pellets and also the solid fuel that is required for that operations. So as RPS is introduced, we have increased our percentage of new renewable energy generation, and therefore we have been using more wood pellets and also more solid fuels than in the past. So as a result of that you can see that this line item has been increasing.

(Interpreted). To answer your question about what the differences are between the consolidated and the non-consolidated numbers and to explain that difference to you, it is due to better performance at the GenCo levels, specifically for KHNP and also for KOSEP. So therefore, for those two GenCos right now, there has been improvement in their performance.

So if you look at KHNP, it is a factor that their utilization ratio has been increasing. So if you look at it on year-on-year basis, there has been an improvement of around 10%, so that has led to better performance there. And then at KOSEP, it is that they have a higher percentage of coal-fueled thermal power plants, and therefore, as a result of that, because the coal costs has been trending down, we do believe that that has resulted in better performance for them.

So from these GenCos on a whole, if you look at the contribution, there has been around KWR2 trillion or above in terms of the profits generated there that has had an impact on our consolidated numbers.

And then if we move on to the KHNP issue, in terms of the improvements of their performance, the lion's share of that is due to their nuclear power plants being up and running, back to normal, versus last year. So it is not that there are any penalties or that the adjusted coefficient has been adjusted. So none of that factor has been reflected in the third quarter. So as mentioned before, it's mostly because the nuclear power plants are up and running as normal.

(Interpreted). So then if I could ask you a follow-up question, I understand that related to the nuclear issues that were -- the faulty parts issue that took place last year, that the damage that KEPCO incurred as a result is KWR1.180 trillion. How has that been compensated by KHNP or how has the cost been passed through to that entity? And what is the progress to date?

(Interpreted). So to interpret the answer, in terms of the damage that we incurred related to the faulty parts for the nuclear power plants last year and in terms of the compensation that we would receive from KHNP from that, that is actually something that was finished last year, and it was reflected into the adjusted coefficient that was used for settlement purposes. So therefore since that was all done and all reflected last year, none of that was reflected in this year.

The follow-up question to that was that then, from KHNP's perspective, was that all fully recognized in the fourth quarter? The follow-up answer to that was that the adjusted coefficient was actually (technical difficulty) in August of last year as a result of that. So in terms of where it would fit on their financials, it was probably across the third quarter and fourth quarter financials. However, it was all done last year.

(Spoken in Korean).

(Interpreted). Yoseop Han, Daewoo Securities.

(Interpreted). So there are a couple of question that I would like to ask you, and one of the questions is related to a question that was asked previously. In terms of your dividend payout, if you look at the Company's past history, it had been based on the non-consolidated performance of the Company. However, for this year, as mentioned before, the consolidated numbers and the non-consolidated numbers show a significant difference. And different from last year, the non-consolidated number is actually a lower number.

So in terms of our forecasting or estimating the dividend payout for this year, should it be based upon the non-consolidated numbers, as was the standard used in the past, or would there be a change in the stance from the Company's perspective? In addition to that, in terms of the trend of there being a gap between the consolidated numbers and the non-consolidated numbers, do you believe that this a trend that will continue going forward?

The second question that I would like to ask you is, with regards to the headquarters and the disposal of that, in terms of the proceeds from that sale, what is the total size and when will that actually come into the Company? And in terms of the dividends from that profit, what is the Company's thoughts about that as of this time?

(Interpreted). So to answer the questions. First, in terms of the dividend, as been the historic standard, up until now the dividend has been based upon our non-consolidated numbers, as you have mentioned. So that has been the general standard that we have used. And as you have mentioned, this year there is a difference between our non-consolidated and consolidated numbers.

However, whether this will be a trend going forward -- I do believe that in terms of the short term, if you look at the GenCos' performance, we do believe that there is a possibility that their performance in the fourth quarter will improve even further because, for example, if you take out the factors that there are some nuclear plants that have been suspended and some were in overhaul, overall the environment looks positive towards that. So we do believe that there is a possibility that performance in the fourth quarter could improve.

However, if you look at the KEPCO non-consolidated performance in the third quarter for our electricity, our overall sales, our revenue, versus our expectations there was not a significant increase there. And in the third quarter versus the fourth quarter, the third quarter usually reflects a higher average sale price, and also the seasonal price that is reflected is usually also higher than the fourth quarter.

So going into the fourth quarter, we don't expect there to be any significant, specific reasons for there to be an improvement in our performance. So all in all, in terms of the difference between the consolidated numbers and the non-consolidated numbers, as long as our non-consolidated performance does not change significantly in terms of the trend, we do believe that that is a gap that will remain for the short term.

In terms of the sale's proceeds from the sale of the headquarters and the dividends related to that, our dividends policy is something that is set by the government, and therefore for any extraordinary dividend, there has not been a discussion about such situation held separately. And there is no discussion that is ongoing with the government right now.

However, if you do look at the government's stance recently, in relation to the normalization of public corporations and also because the government does need to expand its tax revenue, the government has had a general stance that from the public corporations and government agencies, that it is increasing the dividend level. So as a result of that, as we go into the end of this year, and maybe the end of next year also, we do believe that there could be some changes as a result of that difference with regards to the government's attitude. However, to date there has not been any review and any extraordinary dividends related to the sale of the head office.

(Interpreted). So just to clarify once again, in terms of the dividend payout, if you look at the payout ratio, historically it has been in the range of around 25% to 30%. Of course, last year is was slightly off but that has been said. For our estimation purposes, because there is a difference between the consolidated and non-consolidated, for this year should we use the consolidated financials or still it should be the non-consolidated?

(Interpreted). The answer to that is that for dividends, the standard that we would look or the financials that we would look at would be our non-consolidated numbers.

(Interpreted). So could I make one clarification to one of the answers that was given before. In terms of the compensation from KHNP with regards to the forgery of the test results for faulty parts that took place last year and the incident there.

In January of this year, for one of the suspended nuclear power plants, actually it went online around 20 days later than we had initially expected. So actually for that 20 days' worth of losses that we had incurred as a result of that, that was reflected into the settlement adjusted coefficient that was used at the end of June. So therefore, for that 20 days, the amount was actually KRW100b, and that was reflected in this year's financials. So there was a certain portion that was reflected this year.

(Interpreted). So just to clarify, in terms of the dividends and the standard that is used, actually there is no clear set standard on whether it would be on a consolidated basis or a non-consolidated basis. And it is up to the shareholder, the majority shareholder, to make that decision.

If you look at the past history, in terms of the stance of the government before, it had been based upon the non-consolidated numbers. However, whether due to the recent changes in the environment, whether there will be a change in the government stance, that is something of which it is difficult for us to estimate or talk about as of this time.

(Interpreted). Bum Sujin, Samsung Securities.

(Interpreted). So there are four questions that I would like to ask you, in terms of KEPCO and then on the GenCos. I believe that one of the reasons why your effective tax rate is higher is because there is double taxation that is taking place when you do -- when you look at the consolidated numbers. And also added to that, you also have deferred income tax liability that you captured, which is related to the write-off but which is adjusted later on. So, though, in terms of the effective tax rate for the quarter, it does come at a higher number, at the end of the day, for the actual tax payment that you make, I understand that it's not as high, so is this actual explanation the right understanding? Could you confirm that? That would be the first question.

The second question is that, if you look at the fuel costs and also in terms of the generation based off of that fuel, in terms of the generation volume, it looks like, if you compare the growth rates in the generation volume growth and also the fuel cost usage growth, there seems to be a mismatch between the two. For example, if you look at coal on a year-on-year basis, there has not been a lot of growth. However, in terms of the usage volume, it has actually decreased around 8%. The same situation also seems to be taking place for LNG. So, could you explain what that situation is?

And going into the third question, if you look at the fourth quarter, for the unit price for coal and also for LNG, what would be your expectations for those two different types of fuel? And added to that, for the utilization rate for the coal-fired power plants and also the nuclear power plants, if you have some expectation for that, that would be appreciated.

And lastly, if you look at the REC for the third quarter, what was that amount? And then for the full year or for the fourth quarter, what is your expectations for REC?

(Interpreted). So in terms of the corporate tax rate, it is the same situation for KEPCO and also all of the GenCos. And in terms of whether there is a cash outlay related to this -- in terms of the tax rate, I do believe that this is the best way to answer the question, and that it is that, for any taxes that we are levied in terms of the net income from the consolidated subsidiaries that we have, unless there is an actual sales of that subsidiary or a disposal of that subsidiary, actually there's no actual cash outlay that takes place on the tax expenses for that. So, unless that type of activity is engaged in, we do not believe that there will be such a situation at KEPCO or at the GenCo level.

(spoken in Korean)

(spoken in Korean)

(Interpreted). So in terms of the second question that was asked which was that, in terms of the growth rate, if you look at the fuel usage volume, it is growing at a lower level than the actual generation off of that fuel type, in terms of the generation volume. And I asked for a clarification in that respect. However, the Company has said that, for the answer to that, that they would follow up for the answer for that at a later period.

(Interpreted). So to talk about the capacity factor or the utilization by the different types of fuel for the generation. And our expectations are for the nuclear power, I can say that, for the fourth quarter, there is an estimate that we have, and that would be 85.3%. And therefore for the full year, that would take the capacity factor for the full year at 85.4%.

However, in the case of our coal-fired power plant and also in terms of our LNG power plant, for example, for coal-fired, we do actually not have a separate statistics related to that power plant type. But if you look at the five-year historic average, it has been around 95% based on our estimates. And for LNG also, there is no separate guidance number that could be available for you.

And then, if we look at the REC purchase cost, from an accumulated basis from January to September, on a consolidated basis, that number will be KRW348.5b.

And with regards to the specific amount that would be allocated to the third quarter, we will follow up with that number with you later on.

(Interpreted). So if I could ask you some follow-up questions, in addition to the utilization, I actually had asked you about the unit price, for example, for coal and LNG. Could you provide your expectations for the unit price there?

And also for the nuclear power plants, you said that the capacity factor or the utilization would be 85% on average this year. Do you believe that that would be the same level going forward? Do you believe it will be maintained at that level?

And for coal, you said -- you mentioned the historic average. But going forward, do you think that that would be the general level continuously as a trend, or do you believe that, in terms of the actual direction, it could be higher than that or it could be lower than that?

(Interpreted). In terms of the fuel costs, maybe we can provide you with our estimates for the full year. In terms of coal, on a per ton basis, it would be KRW94.6. So therefore it would be KRW94,600 in terms of the cost there. And then for LNG, per ton, it would be around -- it would be KRW1.058m per ton. So therefore, on a per liter basis, it would be KRW752.

(spoken in Korean)

(Interpreted). In addition, one follow-up question is that, from the dividends that are paid from your subsidiaries to KEPCO, if you look at the past payout ratio, it has been around 70%. So in terms of this payout ratio from the subsidiaries to KEPCO, will it continue to be 70% or is there going to be a change in that stance?

(Interpreted). So in terms of the 70% dividend payout ratio that you have just mentioned, that was in a very specific condition in which actually we were in the red, and for our subsidiaries, they were actually in the black. And therefore, because of that specific situation, there was a 70% dividend payout.

However, if you look at the more normal levels of dividend payout from out subsidiaries, it has been at the 30% to 50% range. Because we do want there to be a financial balance between our parent companies and also the subsidiaries, so we do believe that that would be the range.

(Interpreted). Geoffrey Boyd, CLSA.

Hi. Thank you very much for your time on this call. Just I think you had some answers on the last question, I didn't quite catch it, but anyway, I just want to focus on the oil price decline in recent times and what that implies for your LNG cost next year. So I guess, the best question and answer I would love to get would just be, if you took the current oil price and the current coal price and the current FX rate, what would be your fuel cost estimates for 2015? That would be the best answer. But if you don't have that information, then maybe you could talk a little bit about the LNG price.

Like in my calculations, it was $975 per ton paid in the third quarter, about KRW1m per ton. But there's been about a 10% or 15% decline in oil price. Do you expect this to show up in your LNG price by the first quarter of next year? And if so, what sort of price can we expect for LNG?

(Interpreted). So maybe to discuss the relationship between oil prices and LNG prices in Korea. As you have mentioned, there is a link between the LNG price and also the oil price link. However, there is a time lag and that time lag is around two to three months. Therefore, as you have just mentioned, in October there was a significant decrease in oil prices. And we think that that will actually reflect in the prices for LNG in December and the January of next year.

Any more detail on that? Like --

(Interpreted). So unfortunately, there's no information at hand that can be shared with you, but we will follow up with that question later on.

Okay. Thanks.

(Interpreted). Shin Ji Yoon, KTB Investment Securities.

(Interpreted). So there are two questions that I would like to ask you. They are specifically related to your other revenue and other operating expenses item. So if you look at your other revenue in the third quarter, that improved or increased around 15%, whereas your other operating expenses, there was a decrease of around 7%. So [I] believe that this had contributed to your better performance.

The first question that I would like to ask you is that, in terms of your other revenue and other operating expenses, what would be the revenue contribution from UAE and the related expenses related to that project? That would be the first question.

And the second question is that, I do believe that under the government stance of normalizing the irregularities that exist within society, that on your overall labor cost side, from terms of the salaries, to your welfare costs, and all of the other related labor cost side, labor cost, that there has been some savings in the labor cost. And I understand that this accounts for -- the labor cost in itself accounts for around 20% of your other operating expenses. So as a result of that, on the company level, there was a performance evaluation and you received very good marks. So I understand that there is a possibility that some of the cost savings could actually be returned to the employees. Could you follow up on the specifics related to that?

(Interpreted). So maybe to answer your first question about the UAE related revenue and also expenses. For the third quarter, in terms of revenue, there was a recognition of KRW1.73 trillion. And on the expense side, it was around KRW1.6 trillion.

(Interpreted). And with regards to the second question which was the labor cost issue, on that we would like to follow up later after the call.

(Interpreted). [Hao Min Oh], Shinhan Investment Corp.

(Interpreted). So there are three questions that I would like to ask you. First, if you look at your purchase power cost across the board, there has been an increase there. So in terms of the actual unit price there was a decrease. But in terms of total purchase volume, there has been an increase. So if you look at where that actually took place, it seems that the purchase volume from the IPPs has increased, and I do believe that there was an increase in the overhaul days from some of the LNG power plants that sit at your GenCo level, and that was the result -- as a result of that, you had purchased more from the IPPs. So I would like to ask you, is this a trend that you see continuing going forward? And do you believe that that will be the situation? That's the first question.

The second question is that, for your coal-fired power plants, in terms of the utilization, it seems that that has been decreasing as the number of overhaul days has been increasing. So, do you believe that this will be a situation that will go back to normal or do we believe that the increased number of overhaul days would be the new norm going forward?

And lastly, if you look at your equity method valuation gains, it seems that this area has been very strong. Is it because your overseas subsidiaries have been showing stronger performance or is it that coal gas has stronger performance, or is it because you have some disposal gains on some of the shares that you sold in your subsidiaries?

(Interpreted). So maybe to first talk about the power purchase cost. On the LNG side right now, from the IPPs that you have, there has been new capacity that has built out and higher efficiency power plant. So as a result of that, on the IPP side, you can see an increase of around 18%.

From the PPA, actually this is the lower efficient power plants that we have, and therefore there are plans to scrap, for example, POSCO Complex Number 1. However, as a result of that, on the PPA side, you could see that there is a decrease of around 26% that has been reflected, as there are higher-efficient new capacity LNG power plant on the IPP side.

(Interpreted). And maybe to discuss the second question that you talked about, in terms of the overhaul days for the coal-fired power plants. As of the end of last year, at the Ministry of Trade Industry and Energy level, there was a new standard that was introduced in terms of the overhaul days that would be required for such facilities. So as a result of that, this year we can see a lengthier overhaul period.

Because there is no change in that standard, we do believe that next year the overhaul days will be at a similar level to this year,

(Interpreted). So maybe to talk about the equity method valuation gains that we have in the third quarter. From our domestic subsidiaries, on an accumulated basis, the amount that we recognized was KRW63.2. On the overseas side, it was actually 30% higher, and therefore the amount there was KRW81b.

And if you look at the largest improvement, it's actually been that from China, Philippines and also from the Middle East, there has been stronger performance from these entities and that has resulted in the stronger performance.

Also in terms of these disposal gains related to our subsidiaries, from the GenCos, from KOSEP, also East-West Power and also West Power. These three entities also had a sale in some of their investment entities and the ownerships there. So as a result of that, the sales proceeds that was reflected on equity method basis was KRW89.4b.

(Interpreted). So since a lot of time has passed, I believe that we have time for one last question.

(Interpreted). [Jeong Yu Seok], Kyobo Securities.

(Interpreted). So the question that I would actually like to ask you is that, if you look at this year, in July or so, there was the introduction of the consumption tax on coal, and as a result of that, I do believe that was a possibility of you for increasing tariffs. However, because the exchange rate was working in your favor, there was a decision not to do so. However, if you look at the Korean won/US dollar exchange rate right now, the won is getting stronger. So for next year, added to that, there will also be the emissions trading scheme that will be introduced. And therefore, I think that overall, in terms of your costs, that there will be higher costs incurred related to that situation.

So in the beginning of next year, whether electricity tariffs will be increased or not is yet to be seen. But in terms of your proposal to the government for a tariff hike, how much are you proposing?

(Interpreted). So to answer your question, as you have just mentioned, in July of last year it was that on coal there was a new consumption tax that was introduced. And therefore, in terms of our cost base, of course, that was a factor that had led to higher costs.

However, on the flip side of that, if you look at the exchange rate and also oil prices, that has been trending down. So there were factors that offset some of that cost increase.

For 2015, as you have mentioned, in terms of the ETC being introduced, there will be some costs incurred related to that. However, it is not just that one item that we will be looking at but also the oil price trends and the exchange rate trends, all in all, to look at the cost base and therefore make adjustments accordingly. So as of now, it is difficult to talk about what, if any, tariff would be effected as a result of that.

(spoken in Korean)

Right now we will conclude this conference call. Once again, thanks for joining us today. Thank you and goodbye.

(Interpreted). This concludes the fiscal year 2014 third quarter earnings results by KEPCO. Thanks for the participation.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.