(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 Second Quarter Earnings Results by KEPCO. This conference will start with a presentation followed by a brief Q&A session. (Operator Instructions). Now we shall commence the presentation on the fiscal year 2014 second quarter earnings result by KEPCO.

(Interpreted). Good afternoon, this is Bon-Woo Koo, 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 first half of 2014. We will begin with a brief presentation on the earnings result, which will be followed by a Q&A session. Today’s call will be presented 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 include certain risks and uncertainties. Now Senior IR Manager, Mr. Changyoung Ji will begin with an overview of earnings results of the first half of 2014, first in Korean and repeated in English.

(Interpreted). Now we will provide you with overview in English, starting with operating income. In the first half of 2014 KEPCO reported a net operating income of KRW2.06 trillion. Taking a closer look, operating revenues increased 8.6% to KRW27.66 trillion. This was attributable mainly to 6.9% increase in power sales revenue, totaling in KRW25.37 trillion and 22% increase in revenue from the overseas business amounting to KRW1.53 trillion. Moving on to main operating cost, SG&A expenses decreased 1.2% to KRW25.61 trillion. Fuel cost decreased 11.7% to KRW10.77 trillion. Power generation affected by the low power demand decreased 0.7% and unit cost of fuel declined by 11.1%. Meanwhile purchased power cost increased 7.2% to KRW5.98 trillion. Unit cost of purchase decreased 3.9% because of the decrease of unit cost of oil and purchase volume increased 8.5%. Depreciation cost rose 4.2% to KRW3.37 trillion mainly due to the newly constructed substations and new facility additions by power plants. Now let me explain KEPCO’s non-operating statements. Net financial loss was KRW1.13 trillion in the first half of 2014 which was improved by KRW228 billion. This was mainly due to the Korean won appreciation against U.S. dollar resulting in the decrease of FX translations loss. As a result of the foregoing we recorded a consolidated net income of KRW753 billion in the first half of 2014. This concludes the overview of KEPCO earnings results for the first half of 2014. Now let me move on to the Q&A session. Q&A session will be hosted by Mr. Bon-Woo Koo.

(Interpreted). This is Bon-Woo Koo, 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 Q&A’s will be interpreted. Please make sure your questions and answers are brief and clear. Please begin.

(Operator Instructions). The first question will be given by Pierre Lau from Citigroup. Please go ahead, sir. Pierre Lau – Citigroup: Hi, good afternoon management. Thanks for your time hosting this conference call. I’m Pierre Lau from Citigroup. I have four questions. The first one is that in your first half 2014 results, the item called other operating expenses increased 16% year-on-year in the first half to KRW4.18 trillion, it’s increased a lot. And also if you look at second quarter, that item increased by 25% year-on-year to KRW2.4 trillion. So what were the key reasons for the sharp increase in other operating expenses for your company? This is question one. Question two is what is your target generation mix in 2014, including say how many percent from coal, percentage from nuclear, percentage from LNG etcetera? The third question is about your coal cost. In the second quarter, your coal cost was average KRW91,600 per ton, so what is your forecast for the third quarter as we have the coal import tax effective from early July? And the last question is, how much money that you play to raise from disposal of non-coal asset in 2014 and in first half, how much have you raised so for? Thank you.

(Interpreted). Allow me to answer your first question regarding the other operating expenses that was the main point of your first question. The majority of that was attributed to the expenses related to facilities and materials which amounted to KRW455 billion at 6.7% ratio. And outside of that the additional expenses that were incurred were related to the EPC business and other group company business related expenses. Now I’d like to go on to answering your second question regarding the generation mix for the year 2014. Our estimates and expectations for the 2014 generation mix are as follows. LNG 16%, coal 46%, nuclear 36% and the remaining 3% will be attributed to oil and hydro. Regarding your third question about coal cost, for the first quarter the coal cost per ton was KRW90,000, for the second quarter KRW87,000 per ton and for the third and fourth quarter as semester expected to be at around KRW107,000. Regarding your fourth question that is related to asset disposal and how much finance you expect to raise with the disposal of the assets. Well, with this we expect to dispose 12% of our shares in PPAs and 19.9% of ENC. With those two disposals we expect to raise about KRW720 billion. Regarding the other affiliate companies for LGU such where we have an investment, we expect to dispose 8.8% of our shares there raising KRW390 billion and for PPA 29% as the disposal is expected for this year amounting for KRW37.8 billion. Pierre Lau – Citigroup: Okay. Thanks for your reply. The first question, you said most of the increase of that part of operating expenses including above KRW455 billion from some facilities. Could you be more specific about what kind of facilities for that and whether we should expect similar expenses in second half this year?

(Interpreted). Allow me to elaborate further on the answer to the first question. The initial as given about an increase compared to the previous year of KRW455 billion was mostly related to the UAE business related materials purchasing which amounted to KRW1.129 billion. And in the second half of this year, because the UAE related operations and – I’m sorry, the UAE related construction will proceed and progress even further so we expect these related cost to increase even further during the second half of this year. Outside of that we have additional expenses including the tax related areas and welfare, cost related areas and RPS and all of this will amount to KRW2.4 trillion for the second half of this year. Pierre Lau – Citigroup: Okay. Thank you very much.

(Interpreted). Currently six participants are waiting with their questions. The following question is by Deok-sang Yoo from Dongbu Securities. Please go ahead sir. Deok-sang Yoo – Dongbu Securities: (Interpreted). Yes, I have three questions. First of all regarding the purchase power, I think that the volume purchase from LNG facilities was decreased by 28% and from PPA is also decreased by 27% versus purchasing from market IPP that portion grew by 22%. So, I would like to ask what was the reason behind that, is it due to the fact that the newer market IPP facilities are of high efficiency types, is that the main reason or is it because of more aggressive utilization rate of the IPPs in the beginning of introducing these newer facilities? That is my first question. Second question is related to the utilization rate of nuclear power plants, it seems quite positive until the second quarter but I’d like to ask about what you expect for the third quarter and beyond. Compared to the initial phase of 2014 when the utilization rate seems to be at around 90%, I think for the second half, the expectations are a bit lower 3 to 4 percentage points lower so I’d like to ask what is the reason behind that difference? The third question that I have is the equity income and loss of affiliates could you give me an update on what you foresee in any increases or differences out there?

(Interpreted). I would like to first of all answer the first question. As you have rightly noted a portion from PPA has decreased and that is mostly due to the introduction of high efficiency facilities by IPP. IPP area, the S&P has actually fallen. For the PPAs, the LNG price has increased but the actual generation volume has decreased. All me to answer your second question regarding the generation from nuclear power plant, currently the nuclear safety committee is going through strengthened reviews and audit processes. And therefore the plant maintenance period has been extended more than the past. For example, currently Hanul unit-3 which was supposed to enter into activity from end of July, that cushion has been actually delayed until the month of October. So Q2 build situation, the utilization rate of the IPP has been lower than previously.

(Interpreted). Yes, I’d like to answer the third question regarding the equity income of affiliates. This was mostly attributable to the income of affiliates that are overseas. For example, KSPC, NSPC of Silk team, they had an increase of KRW13.1 billion and also our affiliate company in China raised KRW23 billion. Deok-sang Yoo – Dongbu Securities: (Interpreted). I’d like to add an additional question regarding the first one that I had asked earlier. So according to the answer that you have given is expected that more additional high efficiency facilities of the market ITCs will be increasing. Does that mean that in the foreseeable future you expect that the portion of LNGs, LG facilities in KEPCO will continue to decrease?

(Interpreted). Allow me to answer that question. First of all to begin with, due to the characteristics of generation facilities as the facilities get older their efficiencies are bound to get lower so that’s one main context to take into consideration as a background. However, looking ahead into the future, whether it’s from the PPAs or from the KEPCO GENCO, if the facilities are older then of course they will be lower in our priority in terms of our sourcing. However, recently if you look at the LNG based facilities, even if they are from the private sector they tend to come in as a joint-venture with our GENCO. So, it is very difficult to give you just a flat definitive answer in one way or another.

(Interpreted). The following question is by Ji Yoon Shin from KTB & Securities. Please go ahead. Ji Yoon Shin – KTB & Securities: (Interpreted). Yes, I have three questions the first two will be related to some of the previous questions. The first question is regarding the expenses incurred in the UAE business. If you look at the figures for the first half, I think that amounts to about KRW1.1 trillion or above that but revenues coming in from the UAE business is also approximately similar in size. So, I would like to ask how much exactly was the revenue coming in from the UAE business and I would assume that it is more or less a breakeven point or a little bit of a minor loss? But in the future as well, I would like to identify how much would be the margin in terms of the UAE businesses, business going on forward. So, if you could give us some guidance as to what level you see as being the appropriate level of revenue and cost for the UAE business, I believe that that would be helpful? Secondly, I would like to ask about the NPP utilization rate, you have provided previously guidance by quarter. Could you give me some more exact figures for what you see for NPP utilization rate for the third quarter and the fourth quarter? The third question is related to the foreign currency, FOREX related gains and losses as well as derivatives related of gains and losses. It seems that looking at the figures for the first half they come to almost zero in terms of the net amount. Does it include the hedging results coming from the FX exchange rate calculations that you have already taken into consideration within the hedging?

(Interpreted). Allow me to answer your first question regarding the UAE business’ revenue. For the first half the revenue was KRW1.137 trillion which is KRW395 billion, increase versus the same period of the previous year. We are able to disclose to the expenses and the revenue figures. However for the margin, it will be quite difficult for us to disclose that figure specifically due to the fact that this will have an impact or an influence on other nuclear power facility overseas businesses that we are pursuing. So I’d like to ask you to kindly understand that we are not able to disclose the margins. Yes, I’d like to go on to your second question. If you remember the answer to a previous question that I gave and especially about Hanul unit-3 and the situation there, this situation has brought about the fact that for the third quarter the utilization rate for the nuclear power side would be a bit lower than originally forecasted. The second half average that we forecast as of now is 84% to 88% between 84% and 88%.

(Interpreted). Regarding your third question the foreign currency denominated borrowings that we have, well, 87% of that portion has actually been hedged. So the situation that you mentioned about the size of the FX income and loss and derivative income and loss that doesn’t necessarily has to be the same size. However it just happened to be coincidental this time around that the size was similar.

(Interpreted). Currently four participants are waiting with their questions. The following question is given by Hee-do Yun from Korea Investment Securities. Please go ahead sir. Hee-do Yun – Korea Investment Securities: (Interpreted). There are two questions, allow me to interpret the two questions initially and then I will interpret the answer to the first question. The first question was regarding the PPA side, the gentlemen with the question had explained that it was difficult to understand according to his current understanding of the agreement to the PPA because the PPA that already has that contract with KEPCO have the right to sell what they have generated and KEPCO has the duty to purchase what has been generated by the PPA companies. But his question was that it was difficult to understand why there was a 27% decrease in the first half for the PPA portion?

(Interpreted). The answer to that question was, even among the PPA companies there have been new facilities that have come online that have a higher level of efficiency which means that the existing older facilities portion has been decreased. And specifically some PPA companies namely POSCO Energy and GS Power, their utilization rate of facilities have been decrease in the same period. And that is what has attributed to that decrease. Hee-do Yun – Korea Investment Securities: (Interpreted). Allow me to interpret the second question that was given. For the first half on an accumulative basis if you look at the non-consolidated results, we see that there was loss of KRE540 billion whereas for the consolidated there was a profit of KRW752 billion. So from the perspective of making some forecast and expectations about dividend, of course in the third quarter and the fourth quarter the gap between these two figures will probably been narrower. But what kind of guidance can you provide in terms of expectations for dividends?

(Interpreted). Yes, I would like to answer your second question regarding the gap or the difference between the consolidated and the non-consolidated earnings results. You have mentioned the gap and that is true. But for the first half of this year, there was actually among the GENCO KHNP and also Korea Southeast Power, these two companies had very good earnings for the quarter, they recorded I believe KRW1 billion and KRW300 billion respective. So those two companies reported earnings of KRW1.3 trillion. And for the other GENCOs in total they reported about KRW120 billion. So that portion needs to be taken into consideration. And I believe that for the dividends as well that portion should be reflective. For the second quarter, another thing to take into consideration is the electricity of tariff or the price, so there is a difference in the unit price of electricity depending on the season. There may be up to 30% to 40% of a difference depending on which season, especially if you look at the spring time versus the winter period peak time, there may be up to even twice or three times size difference. So, in third quarter, I believe that due to these elements, the gap between non-consolidated and consolidated earnings results will be narrower than what we have seen. And in the consolidated side, for K and P especially, Shin-Kori 1 and 2 and in-Onsan unit 1 they have gone into full operation for a while now. So I believe that those have had an influence on the earnings results. Regarding your question about dividend related guidelines, I would like to answer that question. Last year, our dividend ratio was 23.5%. For this year, it is true that we expect our earnings results to be very much improved and taken into consideration the level of dividends that we had maintained prior to the 2008 timeline which was at around 30%, it may seem like we can increase this. However, the government policy has a lot to do with what will be decided. The government policy right now as you have probably read in stories and heard on the news, has a policy of increasing the dividend, the ratio. But the ultimate decision will have to be done after we have discussions with the government. Because although it is forecasted that our earnings results would be more positive to this year, the actual decision will have to be made by the government depending on what trends we see throughout the year about our earnings results.

(Interpreted). The following question is by Josh Bae from UBS. Please go ahead sir. Josh Bae – UBS: Yes, hi, thank you for the opportunity. I have two questions. First is on the three nuclear plants that are scheduled to start operations, the Incheon number 2, Shin-Kori number 3 and 4. I think you mentioned last time that these plants would start operation sometime next year. If you could please give us an update on the progress and your expectation on when the operations will start? The second question is on your effective tax rate. For the first half, it seems that effective tax rate was over 40% and when looking at just the second quarter, it was above 50%. If you could let us know what the reason was for this high tax rate and also tax rate you expect for the full year? Thank you.

(Interpreted). Regarding your first question for the progress relating to the nuclear power plants that will enter into operations, for Icheon number 2, the situation is that the regulatory body has still not made a definite decision on the policy regarding the trials and tests for the companies that are coming in. And that has been delaying the overall project. For Shin-Kori 3 and 4, regarding the replacement of cable project that is going on right now, that period has also been postponed compared to the original plan. So the permit has initially been expecting that the power plants will go into operation after being construction, after the construction is completed in August or September of 2014. However, as of now that timeline has been delayed so we do not have a definitive expectation of when the operation will begin for those power plants. We expect it to be after 2015 or somewhere in 2016.

(Interpreted). Yes, I’d like to answer your second question regarding the tax rate, specifically for the consolidated earnings results. In this case, it includes the tax rate not only for KEPCO itself but also for the GENCOs and the subsidiaries of the GENCOs as well the companies that our company has made investments into. And therefore, combined together that has resulted in a high-level of tax rate.

Does that answer to your questions? Josh Bae – UBS: Yes. What’s effective tax rate should we expect for the full year?

(Interpreted). I think it is difficult for us to give our estimates about the effective tax rate yet. I think we still have to keep an eye on the trends. Josh Bae – UBS: And can I just confirm your answer on the first question. So for Incheon number 2, Shin-Kori number 3 and 4, we should expect all three to start operations in mid-2015 or later, is that correct?

(Interpreted). Yes, allow me to answer that question. For Incheon Unit-2, we expect operations for Incheon 2. Yes, allow me to answer that question once again. For Incheon 2 the timeline that we expect for Incheon 2 to go into operation will be after February of 2015 because still it is waiting for the permit for operation.

Does that answer your question, Mr. Bae. Josh Bae – UBS: Yes, thank you.

(Interpreted). The following question is from Sujin Bum from Samsung Securities. Please go ahead madam. Sujin Bum – Samsung Securities: (Interpreted). Yes, I have two questions. The first one is the generation from coal for second half seems to be quite low. Could you give just a guideline for the first quarter and fourth quarter coal generation portion? Do you expect that to increase? And the second question that I have is the estimate of revenues for the first and second quarter has been at a minus, but compared to what we have seen in last year or similar to what we have seen in last year, do you expect it to turnaround to a plus from the first quarter onwards?

(Interpreted). Yes, allow me to answer your first question. Regarding the power plant operated with coal, the utilization rate for the first quarter was 95.4% and for the second quarter was 85.5%. Therefore the figure for the first half of this year was 90.5%. That was the utilization rate. Of course the coal price level seems to be stabilizing on a lower trend. However due to the increased utilization rate of nuclear power plants and the proportion that it takes up, means that the other proportions coming from oil, coal and energy are decreasing. So, although it is difficult for us to give you an exact figure or estimates for the second half, it is possible that that will decrease in the second half. Sujin Bum – Samsung Securities: (Interpreted). The second question was repeated once again, the second question was. If you look at the revenue portion, especially for the electricity sales portion, there is the additional or other revenue. And quarter-by-quarter that portion came to fluctuate more or less. In previous years, we have seen how in the first half they recorded a minus but in the second half it recorded a plus. And that tends up to compensate for the sale side in previous years. So, what my question was, was do you expect similar things to happen for second half of 2014?

(Interpreted). Concerning your second question, we do not have any forecast for the second half as of yet. If you would allow, we would like to follow-up with you later after looking into further. Sujin Bum – Samsung Securities: (Interpreted). Then if I may add on for your first question, or to answer to your first question, related to your answer then does this mean that the coal generation side will decrease even further in the second half?

(Interpreted). Yes, allow me to answer that question. Regarding the coal generation facility, last year the utilization rate for coal facilities was higher than the usual due to the specific supply demand situation. This year, we have also had the new facilities, new coal based facilities coming online. And there we have had seen some – we had seen some overhaul occurring more than what we had expected so, that maybe a reason behind the figures that we have seen in the first half. For the year wide basis, for 2014, we believe that the coal facilities’ utilization rate will be more similar to 2012 figures rather than 2013 figures. In 2012, the coal generation expertise or the utilization rate of 92.6%, so this year we expect it to be between 92% to 95%.

(Interpreted). The following question is by (inaudible) from Canacol Energy Investment Advisory Group. Please go ahead, sir.

(Interpreted). Yes, I have two questions. First one is related to tariff increases and second is related to what you forecast for earnings results for next year. The first question if I may elaborate further, do you believe that increase or hikes of tariffs is necessary in order to prevent excessive consumption of electricity energy among the population. And the second question if I may elaborate further, do you believe the cost decrease and generation mix, the current situations will continue to develop so that next year’s earnings results will be more positive?

(Interpreted). Regarding your first question about tariff related forecast, well, looking at the second quarter results, I believe that for this year, our KEPCO earnings results for 2014 will be very positive especially taking into consideration the tariff hike took place in November of last year. We have had not only the actual tariff increase of 3%, we’ve had additional factors making an influence such as expanding the peak period to include the month of June and also the peak loads time has been expanded one hour. So those will also have an influence and that influence will be respected. Additionally, we have the full operation of nuclear power plant that will have a positive effect on our earnings results as well. However there are some elements that we can foresee for example, the increase of carbon consumption task which will be applied from the second half that will create some tariff hikes factors. However, tariff increases are not to be decided by us alone, this has to follow the government policy. And therefore depending on the second half results and looking at the overall cost related to our operations, if there is a factor that requires tariff increase and we will discuss this with the government and follow the government policies regarding that. And allow me to go on to your second question which may be linked to my previous answer. And that is regarding our earnings results and what we forecast there. Currently, given the fact that the fuel costs are at a relatively lower level than previously and being stabilized especially for coal prices. And additionally, if you take into – if you consider the fact that the NPPs are being operated fully, this means that we are quite confident that our results will be even more positive in the future. In addition, the foreign exchange rate with the Korean Won appreciation, this is a favorable situation for us. And with newer and nuclear power plants coming online and going into operation from 2015 onwards, that will have a favorable effect as well. So, we believe that after 2015, we’ll be able to once again recover the rate of return that we’ve seen prior to 2008.

(Interpreted). The last question is by (inaudible) Financial Investment. Please go ahead, sir.

(Interpreted). Yes, I have two questions. First of all, regarding the coal costs, if you look at the third quarter coal cost in your previous answer you mentioned that that will be at KRW107,000 per ton. And it seems that the consumption tax has been reflected into that figure. If that is the case, if what I assume is actually correct, does that mean that the actual purchasing unit price for coal is not much different from the second quarter and third quarter? Could you clarify that? And the second question is regarding the T&D line, and the work related to those lines. It seems that that is adding some more additional delay. Do you expect that after Shin-Kori 3 and 4, go online that T&D issues will not be existing?

(Interpreted). Regarding the coal costs, for 2014 we already have acquired 96% of the annual required volume for coal. So that is already more or less acquired. And for the second half of this year, the question that you mentioned about whether that tax rate has been included in the purchasing cost or that will be reflected from September onwards. So we can assume that it is already reflected in the second half figures.

(Interpreted). Yes, if I may elaborate further on the answer to that question, the consumption tax portion has already been included by the GENCOs in their price from July. Therefore, on a consolidated basis, it is true that they have been reflected from July. However, in terms of fixing the S&P that last timeline was September that was mentioned earlier. Regarding your question about the T&D line, for Shin-Kori 3 and 4, we expect the medium construction on ahead and therefore we do not foresee any specific problems to Shin-Kori 3 and 4. However for lines related to the metropolitan area, I think there will be possible resolutions in terms of how we operate those lines. And currently, KPS as well as some other related institutions are researching those avenues.

(Interpreted). All right. We will conclude this conference call. Once again thank you for joining us today. Thank you and bye.

(Interpreted). This concludes fiscal year 2014 second quarter earnings results by KEPCO. Thank you for the participation.