Operator: 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 2024 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 2024 third quarter earnings results by KEPCO.

Unidentified Company Representative: [Foreign Language] [interpreted] Good afternoon. My name is [Jang Nam Yong] (ph). I am the Head of Finance and Accounting Department of Korea Power Corporation. I would like to thank you for taking time out of your busy schedules to attend the IR conference call of the third quarter of 2024 of KEPCO. Today's conference call is going to be provided in both Korean and English. I am going to report to you the financial results and then take your questions. The financial results that we will present today are consolidated estimates based on IFRS and all comparisons are based on year-on-year basis unless otherwise mentioned. Also, the business plan and targets and estimates that we may mention during this conference call are the estimates at current point, so please understand there is uncertainty and risk in investment. Now I'm going to present to you the accumulated profit and loss of the third quarter 2024 in Korean and in English afterwards.

Yang Si-young: [Foreign Language] [interpreted] Good afternoon. I am Yang Si-young. I am the Head of IR. Let us now look at the operating profit. The accumulated consolidated operating profit in the third quarter 2024 recorded KRW5,945.7 billion. Let's look at the details. Our sales recorded KRW69,869.8 billion, up 6.4%. Among this, income from electricity sales, KRW66,727.9 billion, up 8.0%. And other income including income from overseas business, KRW3,141.9 billion, down 19.5%. Cost of sales and selling and administrative expenses recorded KRW63,924.1 billion, down 11.4%. Among this, fuel costs and power purchase costs respectively recorded KRW17,641.1 billion and KRW26,819.3 billion, which are down 18.6% and 11.6% respectively due to fuel cost decrease. Depreciation recorded KRW8,534.8 billion, down 0.2%. Among a major non-operating profit and loss, interest expense recorded KRW3,422.9 billion, which is a Y-o-Y increase of KRW112.5 billion due to an increase in average balance of our borrowings. Due to the reasons that I mentioned so far, the accumulated consolidated operating profit in the 2024 third quarter recorded KRW5,945.7 billion. Net income recorded KRW2,590 billion.

Unidentified Company Representative: [Foreign Language] [interpreted] Good afternoon. I am, [indiscernible] in charge of IR. Now, I like to report to you the major concerns. Now let me first start by the power sales performance and the outlook. Our power sales accumulated in the third quarter increased Y-o-Y by 1.7% to 421 terawatt hour, thanks to better export of semiconductors and higher demand for summer cooling. And in the annual basis, we believe that the power sales will slightly increase due to an increase in demand for heating and cooling. Now let me report to you the fuel costs fu fuel source. In the third quarter 2024 the quarterly fuel cost was KRW1,990 per ton for coal, KRW1.90 million per ton for LNG, and KRW974 per liter of oil. In the 2024 annual fuel cost other than older unloading cost. The coal cost is about KRW180,000 per ton, LNG KRW1.1 million per ton, and the oil about KRW907 per liter. Please understand that this outlook may differ according to global fuel price trends. Now, we'll look at the power generation mix of our power generation companies. If you look at the power generation mix of accumulated third quarter, the nuclear power plant share increased, thanks to the operation of newly built reactors. Coal share slightly decreased because of a decrease in coal utilization rate. LNG's capacity slightly increased, but their mix was maintained due to an increase in baseload. In 2024 as a whole, we believe that the nuclear power plants share will increase due to the outlook of increase in utilization rate and the operation of newly built reactors, such as Shinhanu Unit 2, which started commercial operation in April. The coal's share will remain similarly and LNG's share will decrease. The utilization rate outlook of 2024 annually by power source is for nuclear power plants early to mid-80%, coal early to mid-50%, and LNG later 20% range. Now let me report to you the cost related to RPS and ETS. The RPS related cost accumulated to the third quarter of 2024 was KRW2,763.8 billion on a consolidated basis and KRW3.269 billion on non-consolidated basis. ETS-related costs, minus KRW30.2 billion consolidated or KRW0 million non-consolidated. And lastly, let me report to you on our capital finance. The consolidated borrowing accumulated to the third quarter 2024 was KRW132 trillion and the borrowing of non-consolidated was KRW88 trillion. Now we are going to have a question-and-answer session. Since the Q&A session will be conducted through consecutive interpretation between Korean and English. So please make your questions concise and clear. We are ready to entertain your questions.

Operator: [Foreign Language] [interpreted] Now Q&A session will begin. [Operator Instructions] The first question will be given by Mr. Pierre Lau of Citigroup. Please go ahead.

Pierre Lau: Hello. Good morning, Capital Management. Thanks for your time. I have three questions. The first one is, what was the key reason for the finance expense drop by 80% year-on-year in the third quarter. The second question is, do you expect more tariff hike in the next six months? And the third question is, what is your guidance for your fuel cost in fourth quarters this year and 2025? Thank you.

Unidentified Company Representative: Your second question, please.

Pierre Lau: Second question, what is your expectation regarding more tariff rise in fourth quarter this year or first quarter next year?

Unidentified Company Representative: [Foreign Language] [interpreted] Let me now try to answer your first question about interest expense. Our borrowings did decrease on a consolidated basis. However, the average balance of borrowing increased year-on-year basis. So on an accumulated basis to third quarter, the interest expense was KRW3.4 trillion, which is up by KRW110 billion from the same quarter last year.

Pierre Lau: I'm asking about the finance expense in the third quarter. The number was KRW334 and dropped 80% year-on-year. On last year KRW1,674 billion. So I’m asking about your finance expense. Why it is dropped 80% year-on-year in the third quarter. Thank you.

Unidentified Company Representative: [Foreign Language] [interpreted] The financial expenses is not only influenced by the interest rate, it is also influenced by the loss derived from foreign exchange. Because the range of increase of foreign exchange decreased from the last year, our loss of derived from foreign exchange also decreased. That is why we are down from the last year KRW1.3 trillion. For your question on the guidance of tariffs into the fourth quarter and next year. We increased the tariff of industrial service power by KRW16.1 on October 24th. And the effect of this tariff increase on average is equivalent to an increase of KRW8.5. It has not been a month since the last increase in October, so we do not foresee any more increase in the near future. We are going to closely monitor the financial impact of this increase in energy prices in foreign exchange market. About your questions on the fuel cost outlook, the KEPCO does not present any official outlook on fuel cost. If that answers your question, we would like to take the next question.

Operator: [Foreign Language]The following question is by [indiscernible] of LS Securities. Please go ahead.

Unidentified Analyst: [Foreign Language] Thank you for the opportunity to ask a question. My question is about dividend. We understand that still you have sizable accumulated operating loss, but this year net income was positive. So we want to know whether KEPCO is planning to resume paying out dividend. If so, the guideline -- will the guideline be same as the past, about 10% dividend of the net income or because still you have accumulated operating loss, are you going to pay out less than previous guidelines and pay out more dividend as time goes by?

Unidentified Company Representative: [Foreign Language] [interpreted] In answering your question, we will consider the plan to pay our dividends if there is the funds to pay out dividends depending on our annual performance and we do not have any set plan or policy on how much dividends to pay out. So the volume was low from the Korean speaker's side, so we would like to ask the Korean speaker to repeat your answer, please.

Unidentified Company Representative: [Foreign Language]

Unidentified Company Representative: Next question, please.

Operator: [Foreign Language] The next question is from Mr. [Yoo Jaehyun] (ph) of Media Asset Security. Please go ahead.

Unidentified Analyst: [Foreign Language] [interpreted] I'd like to ask a question about your financial income being minus KRW460 billion. Could you tell us why? And my second question is about the completion plan of nuclear power plants. You announced that the Shinhanu Unit 3 is planned to be completed in the fourth quarter, is it still the case, or is there any possibility of postponing this? And when this is completed, when will it start operation?

Unidentified Company Representative: [Foreign Language] [interpreted] And your questions about the plan for Shinhanu Unit 3, the completion plan for Shinhanu Unit 3. We have not been officially notified by either KHMP or KPX that this plan will be postponed, but we understand they are considering postponing this process because of a delayed construction process. Next question, please.

Operator: [Foreign Language] [interpreted] The next questioner is Mr. [indiscernible] Securities. Please go ahead.

Unidentified Analyst: [Foreign Language] [interpreted] I have two questions. Although your consolidated operating profit improved a lot, we see an enlarged deficit on a non-consolidated basis. Can you tell us why the gap is getting bigger between consolidated operating profit and non-consolidated operating profit and loss? Is it because you increased the adjusted coefficient? And if you did so, how much did you mark up the adjusted coefficient? My second question. The other operating expenses is down by KRW300 billion. Can you tell us why?

Unidentified Company Representative: [Foreign Language] [interpreted] Our non-consolidated operating profit is smaller because the S&P relatively increased in the third quarter. It led to a less profit on both consolidated and non-consolidated basis. The consolidated operating profit increased because it includes not only KEPCO’s operating profit but also the operating profit of our GENCOs and other subsidiaries. Other operating expenses is smaller because of the decrease in the fuel supply cost in Southeast power. To give you the number of adjusted coalitions, The first determination of the adjusted coefficient in 2024 was applied to months from January to March. They were determined as 0.4 for nuclear power and 0.5 for coal. And the coefficient got adjusted for April through September 1 for coal and 0.5 for nuclear power. They got readjusted again for the fourth quarter to 0.5 for coal and 0.4 for nuclear power. And to add a little more point on the adjusted coefficient, the current coefficient, which is determined for the fourth quarter, maybe update one more, maybe adjusted one more after updating our performance derived from the last adjusted coefficient. Next question, please.

Operator: [Foreign Language] [interpreted] Currently, there is no participant with questions. [Operator Instructions] The next question is from Mr. [Hamino] (ph) of [Daeshin] (ph) Security. Please go ahead.

Unidentified Analyst: [Foreign Language] [interpreted] I have three questions. My first question is about the fuel cost for nuclear power plants. In the first quarter, there was a consensus, and you also let us know that there will be an increase of the fuel cost for nuclear power plants for about KRW300 billion, but actually they decreased by KRW220 billion in the second quarter, Y-o-Y, and again by KRW75 billion. Could you tell us why they are going down after you said that they may go up in the first quarter? And again, other operating expenses are going down by KRW500 billion in the second quarter and KRW300 billion in the third quarter. Do you believe that they will continue to go down in the fourth quarter? And the last question, the S&P dropped a lot more than the drop of the fuel cost in October. Can you tell us why?

Unidentified Company Representative: [Foreign Language] [interpreted] And my answer to your question, the second question is about other operating expenses. As I already answered to other questions, the fuel supply business cost for Southeast Power Generation Company is going down because this is influenced by the decrease of the fuel cost, and that is why the other operating expenses are going down.

Unidentified Analyst: [Foreign Language] [interpreted] My question is related to other operating expenses. Does that have much to do with the fuel cost of Southeast Power Generation Company?

Unidentified Company Representative: [Foreign Language] [interpreted] Yes, try to answer the question. In the conference call, IR conference call, when we refer to fuel costs by KEPCO, this refers to the pure fuel cost that goes into our power generation business, whereas the fuel expenses and other operating expenses refer to the fuel cost of our power generation facilities overseas and GENCO [indiscernible]. To give you the RPS related cost, on a consolidated basis, the RPS cost was KRW2,763.8 billion, and on a non-consolidated basis, KRW3,269 billion. The ETS related expenses, minus KRW30.2 billion consolidated and KRW0 non-consolidated. And your last question is about why the S&P dropped much larger than the fuel cost drop. S&P, of course, is influenced by the trend of fuel cost, but it is also influenced by the demand and supply. The October S&P dropped a lot because the demand for power decreased a lot after the hot season. Any other questions, please?

Operator: [Foreign Language] [interpreted] The next questioner is Mr. [indiscernible] of BlackRock. Please go ahead.

Unidentified Analyst: Hi, can you hear me?

Unidentified Company Representative: Yes, we hear you.

Unidentified Analyst: Yes, thank you for taking the question. I have two. One is, again, on S&P price down a lot. Does that mean the cost, your procurement cost in fourth quarter would also drop proportionately due to this S&P decline. And the second question is regarding dividend. What's the current dividend payout policy? And given you are profitable this year, can we expect at least some dividend pay to shareholders?

Unidentified Company Representative: [Foreign Language] [interpreted] In your S&P related question, what do you exactly mean by procurement cost?

Unidentified Analyst: The cost when you purchase power from third party power plant.

Unidentified Company Representative: [Foreign Language] [interpreted] S&P sets the standards of settlement in the power market. So when the S&P goes down, then it is natural that our procurement cost, which is the power purchase cost, also goes down.

Unidentified Company Representative: [Foreign Language] [interpreted] And once again, about our policy for dividend payout, at the point of announcing the annual closing of our finances we will check whether we have profits that are payable as dividends and to make a decision for dividend payout. At the moment we do not have any official consideration for dividend policy.

Unidentified Analyst: Oh, sorry. Do you mind if I follow up on this? How do you define profit payable? Any different [indiscernible] reported in that profit?

Unidentified Company Representative: [Foreign Language] [interpreted] This payable -- dividend payable profit is calculated as on a non-consolidated net income, we subtract the deferred loss and the reserve.

Unidentified Analyst: Okay. Thank you very much.

Operator: [Foreign Language] [interpreted] Currently there is no participant with questions. [Operator Instructions] The next question is from Mr. [Hermino] (ph) of [indiscernible] securities. Please go ahead.

Unidentified Analyst: [Foreign Language] [interpreted] How much power did you purchase?

Unidentified Company Representative: [Foreign Language] [interpreted] In the third quarter, we purchased about 156 terawatt hour. Among this, we purchased 104 terawatt hour from our GENCOs. Next question please.

Operator: [Foreign Language] [interpreted] Currently there is no participant waiting with questions. [Operator Instructions] The next question is from [Park Yu Shin] (ph) of HSBC. Please go ahead.

Unidentified Analyst: [Foreign Language] [interpreted] I have two questions. I understand that KEPCO is making many efforts including tariffs increase to improve the financial structure. Other than tariffs increase, what other measures is the company taking? And secondly, in the market currently the won is depreciating. Can you please tell us the impact of the value of won in the foreign exchange market.

Unidentified Company Representative: [Foreign Language] [interpreted] KEPCO is implementing a KRW30 trillion of financial stabilization plan for five years from 2022 to 2026. In this plan, we are taking a lot of measures such as filling our assets and reducing our cost of investment and trying to increase the income other than from power sales and we are beating this target by 110%. And to answer your questions about foreign exchange fluctuations impact on us. Foreign exchange fluctuations can impact our business in two ways. The first on the borrowing and the second on the fuel cost. However, our borrowings are hedged so we are hedged from risk somewhat. And secondly, the impact on the fuel cost. We are exposed to some foreign exchange fluctuation risk when we buy LNG or other fuel, but the details of this impact varies from the fluctuation range and the cost of global fuel.

Operator: [Foreign Language] [interpreted] Currently, there is no participant waiting with questions. [Operator Instructions] The next question is from [Jo Yoon Heng] (ph) of UBS. Please go ahead.

Unidentified Analyst: [Foreign Language] [interpreted] For the information, if you look at our report of national investigation, we understand that KEPCO is planning asset revaluation to improve its financial standing. And if it's planning so, when will this asset revaluation have an impact on your financial position?

Unidentified Company Representative: [Foreign Language] [interpreted] We have a plan to re-evaluate our land as part of our financial stabilization plan and we are considering by looking at the possible impact of this land re-evaluation. Next question please.

Operator: [Foreign Language] [interpreted] Currently there is no participant with questions. [Operator Instructions]

Yang Si-young: Since there's no further question, we would like to conclude our IR conference call for the third quarter 2024. If you have further questions, please do not hesitate to contact the IR team. Thank you for your attention.

Operator: [Foreign Language] [interpreted] This concludes the fiscal year 2024 third quarter earnings result by Capco. Thank you for your participation.