Edgar Filing: KOREA ELECTRIC POWER CORP

Form 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the Month of June 2014

Commission File Number: 001-13372

KOREA ELECTRIC POWER CORPORATION

(Translation of registrant’s name into English)

512 Yeongdongdaero, Gangnam-gu, Seoul 135-791, Korea

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F x Form 40-F ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

Indicate by check mark whether the registrant by furnishing the

information contained in this form is also thereby furnishing the

information to the Commission pursuant to Rule 12g3-2(b) under the

Securities Exchange Act of 1934.

Yes ¨ No x

If “Yes” is marked, indicate below the file number assigned to the

registrant in connection with Rule 12g3-2(b): 82- .

This Report of Foreign Private Issuer on Form 6-K is deemed filed for all purposes under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.

QUARTERLY BUSINESS REPORT

(For the period from January 1, 2014 to March 31, 2014)

THIS IS A SUMMARY IN ENGLISH OF THE QUARTERLY BUSINESS REPORT ORIGINALLY PREPARED IN KOREAN AND IS IN SUCH FORM AS REQUIRED BY THE FINANCIAL SERVICES COMMISSION OF KOREA.

IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED FOR THE CONVENIENCE OF READERS. NON-MATERIAL OR PREVIOUSLY DISCLOSED INFORMATION IS OMITTED OR ABRIDGED.

UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON A CONSOLIDATED BASIS IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTED FOR USE IN KOREA, OR K-IFRS, WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.

I. Company Overview

1. Name of the company: Korea Electric Power Corporation (KEPCO)

2. Information of the company

(Address) 512 Yeongdongdaero, Gangnam-Gu, Seoul 135-791, Korea

(Phone number) 82-2-3456-4217

(Website) http://www.kepco.co.kr

3. Major businesses

KEPCO, as the parent company, is engaged in the following activities:

•

development of electric power resources;

•

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

•

research and development of technology related to the businesses mentioned above;

•

overseas business related to the businesses mentioned above;

•

investment or contributions related to the businesses mentioned above;

•

development and operation of certain real estate holdings; and

•

other businesses entrusted by the government.

Businesses operated by KEPCO’s major subsidiaries are as follows: nuclear power generation by Korea Hydro & Nuclear Power (KHNP), thermal power generation by Korea South-East Power (KOSEP), Korea Midland Power (KOMIPO), Korea Western Power (KOWEPO), Korea Southern Power (KOSPO) and Korea East-West Power (EWP), other businesses including engineering service by KEPCO Engineering & Construction (KEPCO E&C), maintenance and repair of power plants by KEPCO Plant Service & Engineering (KEPCO KPS), nuclear fuel processing by KEPCO Nuclear Fuel (KEPCO NF), IT service by KEPCO KDN, and other overseas businesses and related investments.

4. Subsidiaries and affiliates of KEPCO

(As of March 31, 2014)



Classification	Subsidiaries		Associates and joint ventures		Total
Domestic		17		56		73
Overseas		62		38		100
Total		79		94		173

5. Major changes in management

At the extraordinary general meeting of shareholders held on March 14, 2014, Mr. Koo, Bon-Woo was re-elected as a standing director of KEPCO, and Mr. Cho, Jeon-Hyeok and Mr. Choi, Gyo-Il, non-standing directors of KEPCO, were elected as members of the Audit Committee of KEPCO.

6. Changes in major shareholders

No changes in major shareholders for the past three years.

7. Information regarding KEPCO shares

A. Issued share capital: Won 3.2 trillion (Authorized capital: Won 6 trillion)

B. Total number of issued shares: 641,964,077

(Total number of shares authorized for issuance: 1,200,000,000)

C. Dividends: Dividend payment of Won 90 per share for fiscal year 2013 (Won 56 billion in aggregate). No dividend payments for fiscal years 2012 and 2011.

II. Business Overview

1. Segment results

(In billions of Won)


	Jan. - Mar. 2014				Jan. - Mar. 2013
	Sales		Operating income(loss)		Sales		Operating income(loss)
Electricity sales		14,681		-267		13,633		-479
Nuclear generation		2,448		949		2,012		554
Thermal generation		7,429		514		7,630		593
Others*		677		89		583		67
Subtotal		25,235		1,285		23,858		735
Adjustment of related-party transactions		-10,462		-58		-10,059		-77
Total		14,773		1,227		13,799		658

*	Others relate to 75 subsidiaries including KEPCO E&C, KEPCO KPS, KEPCO NF and KEPCO KDN.

•

Sales and operating income (loss) reflects amendments to Korean IFRS 1001 “Presentation of Financial Statements.”

2. Changes in unit prices of major products

(In Won per kWh)


Business sector		Company	2014 Jan. - Mar.	2013 Jan. - Dec.
Electricity sold	Residential	KEPCO	130.20	127.02
	Commercial		129.34	121.98
	Educational		110.52	115.99
	Industrial		108.36	100.70
	Agricultural		47.17	45.51
	Street lighting		109.11	107.33
	Overnight usage		72.96	63.52
Electricity from nuclear generation	Nuclear generation	KHNP	64.03	45.32
Electricity from thermal generation	Thermal generation	KOSEP	75.66	67.50
		KOMIPO	108.83	101.40
		KOWEPO	108.40	103.06
		KOSPO	114.40	107.97
		EWP	98.11	97.39

3. Major contracts in 2014

(In billions of Won)


Party	Date of contract	Nature of contract	Contract amount		Counterparty
KEPCO	2014.02.21	Inspection of transmission lines in 2014		62	KEPCO KPS Co., Ltd.
KHNP	2014.03.27	Re-wiring of the main generators for Hanbit units 3, 4		24	Doosan Heavy Industries & Construction Co., Ltd.
KOMIPO	2014.02.06	Procurement of water treatment facilities for Shin-Boryeong units 1, 2		25	POSCO Engineering Co., Ltd.
KOWEP	2014.01.31	Procurement of desulfurization facilities for Taean units 9, 10		90	STX Heavy Industries Co., Ltd.

4. Intellectual property as of March 31, 2014

Patents

Utility
models

Designs

Trademarks

Domestic

Overseas

Domestic

Overseas

Number of registrations

4,627

507

799

146

367

III. Financial Information

1. Condensed consolidated financial results for the first three months ended March 31, 2014


								(In billions of Won)

Consolidated statements of comprehensive income							Consolidated statements of financial position
	Jan.-Mar. 2013		Jan.-Mar. 2014		Change (%)			As of Dec. 31, 2013		As of Mar. 31, 2014		Change (%)
Sales		13,799		14,773		7.1	Total assets		155,527		157,040		1.0
Operating income		658		1,227		86.5	Total liabilities		104,076		105,146		1.0
Net income		160		561		249.9	Total equity		51,451		51,894		0.9

2. Condensed separate financial results for the first three months ended March 31, 2014


								(In billions of Won)

Separate statements of comprehensive income							Separate statements of financial position
	Jan.-Mar. 2013		Jan.-Mar. 2014		Change (%)			As of Dec. 31, 2013		As of Mar. 31, 2014		Change (%)
Sales		13,633		14,681		7.7	Assets		98,250		98,081		-0.2
Operating income		-479		-267		44.2	Liabilities		56,590		56,726		0.2
Net income		-17		-204		-1,102.4	Equity		41,660		41,355		-0.7

IV. Independent Auditor’s Opinion

1. Independent auditor’s opinion on consolidated financial statements for the first three months ended March 31, 2014: Unqualified

•

KPMG Samjong Accounting Corp. has been engaged as KEPCO’s independent auditor from 2013 for a term of three years until 2015.


Jan. 1, 2014 – Mar. 31, 2014	Jan. 1, 2013 – Dec. 31, 2013	Jan. 1, 2012 – Dec. 31, 2012
KPMG Samjong Accounting Corp.	KPMG Samjong Accounting Corp.	Deloitte Anjin LLC

V. Board of Directors

1. Composition of the Board of Directors: not more than 15 directors (with standing directors comprising less than the majority of the directors)

•

The Audit Committee consists of one standing director and two non-standing directors

2. Board meetings and agendas


Number of meetings	Number of agendas	Classification
Number of meetings	Number of agendas	Resolutions	Status	Reports	Status
3	12	8	Approved as proposed	4	Accepted as reported

•

Audit Committee: 2 meetings held where 12 agendas were discussed (of which, 6 were resolved as proposed and 6 were approved as reported).

3. Major activities of the Board of Directors


Date	Agenda	Status	Type
2014. 1. 14	Approval to close the shareholders’ registry	Approved as proposed	Resolution
2014. 1. 14	Research and development plans for 2014	Accepted as reported	Report
2014. 2. 20	Recommendation of candidates to become new members of the Audit Committee	Approved as proposed	Resolution
	Approval to call for the 54th extraordinary general meeting of shareholders	Approved as proposed	Resolution
	Approval of consolidated and separate financial statements for fiscal year 2013	Approved as proposed	Resolution
	Approval of aggregate ceiling on remuneration for directors in 2014	Approved as proposed	Resolution
	Approval to call for the 53rd annual general meeting of shareholders	Approved as proposed	Resolution
	Development plans for the next-generation Electricity Sales Information System	Approved as proposed	Resolution
	Auditor’s report to the Board of Directors for fiscal year 2013	Accepted as reported	Report
2014. 3. 20	Approval of ceilings on the issue amounts of commercial papers and electronic short-term bonds in 2014	Approved as proposed	Resolution
	Annual report on internal control over financial reporting for fiscal year 2013	Accepted as reported	Report
	Annual evaluation report on internal control over financial reporting for fiscal year 2013	Accepted as reported	Report

4. Major activities of the Audit Committee


Date	Agenda	Status	Type
2014. 1. 29	Auditor’s report on the agendas for the extraordinary meeting of shareholders	Approved as proposed	Resolution
	Audit plans for fiscal year 2014	Approved as proposed	Resolution
	Approval of selection of independent auditors of subsidiaries (KOSEP Material Co., Ltd. and KEPCO KPS Philippines Corp.)	Approved as proposed	Resolution
	Independent auditor’s report on audit plans for fiscal year 2013	Accepted as reported	Report
	Education plans for auditors for 2014	Accepted as reported	Report
	Auditor’s report for fiscal year 2013	Accepted as reported	Report
2014. 3. 20	Election of the chairman of the Audit Committee	Approved as proposed	Resolution
	Auditor’s report on the agendas for the annual general meeting of shareholders	Approved as proposed	Resolution
	Approval of selection of independent auditors of subsidiaries	Approved as proposed	Resolution
	Independent auditor’s report on the auditing results for the consolidated and separate financial statements for fiscal year 2013	Accepted as reported	Report
	Annual report on internal control over financial reporting for fiscal year 2013	Accepted as reported	Report
	Annual evaluation report on internal control over financial reporting for fiscal year 2013	Accepted as reported	Report

•

An audit team, organized under the supervision of the Audit Committee, conducts internal audit with respect to the entire company and takes administrative measures as appropriate in accordance with relevant internal regulations. KEPCO’s District Divisions and Branch Offices also have separate audit teams which conduct internal inspection with respect to the relevant division or office.

VI. Shareholders

1. List of shareholders as of March 31, 2014


		Number of shareholders		Shares owned		Percentage (%)
Korean Government			1		135,917,118		21.17
Korea Finance Corporation			1		192,159,940		29.94
National Pension Service			1		41,775,649		6.51
KEPCO (held in the form of treasury stock)*			1		18,929,995		2.95
Public (non-Koreans)	Common shares		1,086		118,634,815		18.48
Public (non-Koreans)	American depositary shares		1		31,977,417		4.98
Public (Koreans)	Corporate		1,552		68,468,358		10.66
Public (Koreans)	Individual		383,104		34,100,785		5.31
Total			385,747		641,964,077		100.0

*	Treasury stocks do not have voting rights. Number of shares with voting rights: 623,034,082

VII. Directors and Employees

1. Remuneration for directors

A.	Aggregate ceiling on remuneration for directors approved by shareholders:

Won 1.9 billion

B.	Actual amount paid to directors

Type

Number of directors

Total remuneration

(Jan. 1, 2014 – Mar. 31, 2014)

Total

Won 250 million

C.	Stock option: None

2. Employees as of March 31, 2014


Employees			Average years of employment	Total remuneration (Jan. 1, 2014 – Mar. 31, 2014)
Regular	Contract	Total	Average years of employment	Total remuneration (Jan. 1, 2014 – Mar. 31, 2014)
19,499	369	19,868	18.5	Won 364 billion

VIII. Other Information Relating to the Protection of Investors

1. Number of shareholders’ meetings held in 2014: twice

(One annual general meeting of shareholders held on March 28, 2014 / one extraordinary general meeting of shareholders held on March 14, 2014)

2. Pending legal proceedings


Type	Number of lawsuits	Litigation value
Lawsuits where KEPCO and its subsidiaries and affiliates are engaged as the defendant	642	Won 464 billion
Lawsuits where KEPCO and its subsidiaries and affiliates are engaged as the plaintiff	137	Won 270 billion

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


By:		/s/ Ko, Weon-Gun
Name:		Ko, Weon-Gun
Title:		Vice President

Date: June 03, 2014

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Interim Financial Statements

March 31, 2014

(Unaudited)

(With Independent Auditors’ Review Report Thereon)

INDEX TO FINANCIAL STATEMENTS


	Page

Independent Auditors’ Review Report		1

Consolidated Interim Statements of Financial Position		3

Consolidated Interim Statements of Comprehensive Income		5

Consolidated Interim Statements of Changes in Equity		7

Consolidated Interim Statements of Cash Flows		9

Notes to the Consolidated Interim Financial Statements		11

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

Korea Electric Power Corporation

Reviewed financial statements

We have reviewed the accompanying consolidated interim financial statements of Korea Electric Power Corporation and its subsidiaries (the “Company”), which comprise the consolidated interim statement of financial position as of March 31, 2014, the consolidated interim statements of comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2014 and 2013 and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these consolidated interim financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No. 1034 ‘Interim Financial Reporting’, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ review responsibility

Our responsibility is to issue a report on these consolidated interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS 1034, ‘Interim Financial Reporting’.

Other matters

The procedures and practices utilized in the Republic of Korea to review such consolidated interim financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying consolidated interim financial statements are for use by those knowledgeable about Korean review standards and their application in practice.

The consolidated statement of financial position of the Company as of December 31, 2013, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us and our report thereon, dated March 20, 2014, expressed an unqualified opinion. The accompanying consolidated statement of financial position of the Company as of December 31, 2013, presented for comparative purposes, is not different from that audited by us in all material respects.

LOGO

KPMG Samjong Accounting Corp.

Seoul, Korea

May 14, 2014

This report is effective as of May 14, 2014, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Interim Statements of Financial Position

As of March 31, 2014 and December 31, 2013

(Unaudited)


In millions of won	*Note*		March 31, 2014		December 31, 2013
Assets

Current assets
Cash and cash equivalents		5,6,7,43	￦	2,728,775		2,232,313
Current financial assets, net		5,10,11,12,43		316,390		436,213
Trade and other receivables, net		5,8,14,20,43,45		6,759,519		7,526,311
Inventories, net		13		4,359,764		4,279,593
Income tax receivables		40		81,970		223,803
Current non-financial assets		15		627,834		570,845

Total current assets				14,874,252		15,269,078

Non-current assets
Non-current financial assets, net		5,6,9,10,11,12,43		1,917,721		1,902,953
Non-current trade and other receivables, net		5,8,14,43,45		1,665,489		1,644,333
Property, plant and equipment, net		18,27,47		131,411,165		129,637,596
Investment properties, net		19,27		549,414		538,327
Goodwill		16		2,582		2,582
Intangible assets other than goodwill, net		21,27		836,539		810,664
Investments in associates		4,17		4,206,836		4,124,574
Investments in joint ventures		4,17		1,192,064		1,106,181
Deferred tax assets		40		255,724		359,535
Non-current non-financial assets		15		128,547		131,511

Total non-current assets				142,166,081		140,258,256


Total Assets		4	￦	157,040,333		155,527,334


Liabilities

Current liabilities
Trade and other payables, net		5,22,24,43,45	￦	5,502,731		5,892,763
Current financial liabilities, net		5,11,23,43,45		8,446,504		8,425,231
Income tax payables		40		117,784		51,407
Current non-financial liabilities		20,28,29		5,270,714		4,730,631
Current provisions		26,43		1,233,152		1,113,817

Total current liabilities				20,570,885		20,213,849


Non-current liabilities
Non-current trade and other payables, net		5,22,24,43,45		3,977,897		3,971,519
Non-current financial liabilities, net		5,11,23,43,45		53,652,247		53,163,394
Non-current non-financial liabilities		28,29		7,004,728		6,985,641
Employee benefits obligations, net		25,43		2,194,527		2,137,296
Deferred tax liabilities		40		5,019,215		5,002,585
Non-current provisions		26,43		12,726,934		12,602,314

Total non-current liabilities				84,575,548		83,862,749


Total Liabilities		4	￦	105,146,433		104,076,598

(Continued)

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Position, Continued

As of March 31, 2014 and December 31, 2013

(Unaudited)


In millions of won	*Note*		March 31, 2014			December 31, 2013
Equity

Contributed capital		1,30,43
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			1,603,919
Voluntary reserves				22,999,359			22,753,160
Retained earnings before appropriations				8,623,100			8,409,007

				33,227,369			32,766,086


Other components of equity		33
Other capital surpluses				828,121			830,982
Accumulated other comprehensive income				34,185			55,538
Treasury stock				(741,489	)		(741,489	)
Other equity				13,294,973			13,294,973

				13,415,790			13,440,004


Equity attributable to owners of the Company				50,696,737			50,259,668


Non-controlling interests		16		1,197,163			1,191,068


Total Equity			￦	51,893,900			51,450,736


Total Liabilities and Equity			￦	157,040,333			155,527,334

See accompanying notes to the consolidated financial statements.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the three-month periods ended March 31, 2014 and 2013

(Unaudited)


In millions of won, except per share information	*Note*		March 31, 2014			March 31, 2013
Sales		4,34,43,45
Sales of goods			￦	14,073,576			13,234,359
Sales of services				64,578			80,372
Sales of construction services		20		548,748			405,780
Revenue related to transfer of assets from customers				85,745			78,587

				14,772,647			13,799,098

Cost of sales		13,25,41,45
Cost of sales of goods				(12,518,259	)		(12,264,769	)
Cost of sales of services				(88,080	)		(71,302	)
Cost of sales of construction services				(503,382	)		(363,614	)

				(13,109,721	)		(12,699,685	)


Gross profit				1,662,926			1,099,413


Selling and administrative expenses		25,35,41,45		(435,849	)		(441,644	)


Operating income		4,50		1,227,077			657,769

Other non-operating income		36		70,723			88,059

Other non-operating expenses		36		(23,059	)		(17,213	)

Other gains, net		37		41,082			31,004

Finance income		5,11,38		278,058			436,728

Finance expenses		5,11,39		(802,121	)		(1,059,543	)

Equity method income (loss) of associates and joint ventures		4,17
Share in income of associates and joint ventures				134,983			99,760
Share in loss of associates and joint ventures				(23,258	)		(28,519	)
Impairment losses on investments in associates and joint ventures				(1,558	)		—

				110,167			71,241


Profit before income taxes				901,927			208,045


Income tax expense		40		(340,656	)		(47,620	)


Profit for the period			￦	561,271			160,425

(Continued)

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income, Continued

For the three-month periods ended March 31, 2014 and 2013

(Unaudited)


In millions of won, except per share information	*Note*		March 31, 2014			March 31, 2013
Other comprehensive income		5,11,25,31,33
Items that will not be reclassified subsequently to profit or loss:
Defined benefit plan actuarial losses, net of tax		25,31	￦	(15,345	)		(98,217	)
Share in other comprehensive income (loss) of associates and joint ventures, net of tax		31		(206	)		585
Items that may be reclassified subsequently to profit or loss:
Net change in the unrealized fair value of available-for-sale financial assets, net of tax		33		(16,547	)		28,620
Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax		5,11,33		3,325			(1,369	)
Foreign currency translation of foreign operations, net of tax		33		58,805			59,673
Share in other comprehensive income (loss) of associates and joint ventures, net of tax		33		(53,794	)		57,203


Other comprehensive income (loss), net of tax				(23,762	)		46,495

Total comprehensive income for the period			￦	537,509			206,920


Profit attributable to:
Owners of the Company		42	￦	532,262			133,300
Non-controlling interests				29,009			27,125

			￦	561,271			160,425


Total comprehensive income attributable to:
Owners of the Company			￦	496,003			167,998
Non-controlling interests				41,506			38,922

			￦	537,509			206,920


Earnings per share		42
Basic and diluted earnings per share			￦	854			214

See accompanying notes to the consolidated financial statements.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Interim Statements of Changes in Equity

For the three-month periods ended March 31, 2014 and 2013

(Unaudited)


In millions of won	Equity attributable to owners of the Company											Non- controlling interests			Total equity
	Contributed capital		Retained earnings			Other components of equity			Subtotal			Non- controlling interests			Total equity

Balance at January 1, 2013	￦	4,053,578		32,564,283			13,270,906			49,888,767			1,175,435			51,064,202

Total comprehensive income for the period
Profit for the period		—		133,300			—			133,300			27,125			160,425
Items that will not be reclassified subsequently to profit or loss:
Defined benefit plan actuarial losses, net of tax		—		(95,415	)		—			(95,415	)		(2,802	)		(98,217	)
Share in other comprehensive income of associates and joint ventures, net of tax		—		585			—			585			—			585
Items that may be reclassified subsequently to profit or loss:
Net changes in the unrealized fair value of available-for-sale financial assets, net of tax		—		—			28,694			28,694			(74	)		28,620
Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax		—		—			(1,467	)		(1,467	)		98			(1,369	)
Foreign currency translation of foreign operations, net of tax		—		—			45,236			45,236			14,437			59,673
Share in other comprehensive income of associates and joint ventures, net of tax		—		—			57,065			57,065			138			57,203
Transactions with owners of the Company, recognized directly in equity
Dividends paid		—		—			—			—			(39,936	)		(39,936	)
Issuance of share capital		—		—			—			—			7,920			7,920
Changes in consolidation scope		—		—			—			—			(4,558	)		(4,558	)


Balance at March 31, 2013	￦	4,053,578		32,602,753			13,400,434			50,056,765			1,177,783			51,234,548

(Continued)

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Interim Statements of Changes in Equity, Continued

For the three-month periods ended March 31, 2014 and 2013

(Unaudited)


In millions of won	Equity attributable to owners of the Company											Non- controlling Interests			Total equity
	Contributed capital		Retained earnings			Other components of equity			Subtotal			Non- controlling Interests			Total equity

Balance at January 1, 2014	￦	4,053,578		32,766,086			13,440,004			50,259,668			1,191,068			51,450,736

Total comprehensive income for the period
Profit for the period		—		532,262			—			532,262			29,009			561,271
Items that will not be reclassified subsequently to profit or loss:
Defined benefit plan actuarial losses, net of tax		—		(14,700	)		—			(14,700	)		(645	)		(15,345	)
Share in other comprehensive loss of associates and joint ventures, net of tax		—		(206	)		—			(206	)		—			(206	)
Items that may be reclassified subsequently to profit or loss:
Net changes in the unrealized fair value of available-for-sale financial assets, net of tax		—		—			(16,545	)		(16,545	)		(2	)		(16,547	)
Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax		—		—			456			456			2,869			3,325
Foreign currency translation of foreign operations, net of tax		—		—			48,417			48,417			10,388			58,805
Share in other comprehensive loss of associates and joint ventures, net of tax		—		—			(53,681	)		(53,681	)		(113	)		(53,794	)
Transactions with owners of the Company, recognized directly in equity
Dividends paid		—		(56,073	)		—			(56,073	)		(37,753	)		(93,826	)
Issuance of share capital		—		—			(155	)		(155	)		3,440			3,285
Changes in consolidation scope		—		—			(2,706	)		(2,706	)		(1,088	)		(3,794	)
Others		—		—			—			—			(10	)		(10	)


Balance at March 31, 2014	￦	4,053,578		33,227,369			13,415,790			50,696,737			1,197,163			51,893,900

See accompanying notes to the consolidated financial statements.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Interim Statements of Cash Flows

For the three-month periods ended March 31, 2014 and 2013

(Unaudited)


In millions of won	March 31, 2014			March 31, 2013

Cash flows from operating activities
Profit for the period	￦	561,271			160,425


Adjustments for:
Income tax expense		340,656			47,620
Depreciation		1,888,262			1,812,745
Amortization		19,862			22,082
Employee benefit expense		87,045			93,484
Bad debt expense		12,371			3,492
Interest expense		597,046			595,282
Loss on sale of financial assets		2			—
Loss on disposal of property, plant and equipment		2,944			11,222
Loss on abandonment of property, plant, and equipment		74,729			66,300
Impairment loss on property, plant and equipment		—			1,161
Impairment loss on intangible assets		—			2
Accretion expense to provisions, net		289,543			119,879
Loss on foreign currency translation, net		144,676			386,022
Valuation and transaction gain on derivative instruments, net		(155,782	)		(303,796	)
Share in income of associates and joint ventures, net		(111,724	)		(71,241	)
Impairment loss on investments in associates and joint ventures		1,558			—
Gain on sale of property, plant and equipment		(1,619	)		(12,746	)
Interest income		(48,195	)		(50,662	)
Dividends income		(12,525	)		(11,239	)
Others, net		(665	)		19,822

		3,128,184			2,729,429

Changes in:
Decrease in trade receivables		839,907			862,995
Decrease in non-trade receivables		220,792			229,816
Decrease (increase) in accrued income		(63,485	)		64,196
Decrease in other receivables		1,411			1,091
Decrease (increase) in other current assets		(103,743	)		61,363
Increase in inventories		(284,922	)		(341,324	)
Decrease (increase) in other non-current assets		(2,284	)		15,266
Decrease in trade payables		(202,389	)		(236,141	)
Increase (decrease) in non-trade payables		20,006			(98,465	)
Decrease in accrued expenses		(97,095	)		(77,971	)
Decrease in other payables		(171,938	)		—
Increase in other current liabilities		327,098			6,714
Increase in other non-current liabilities		241,112			264,591
Decrease in investments in associates and joint ventures		14,201			—
Decrease in provisions		(113,316	)		(21,841	)
Payments of employee benefit obligations		(64,805	)		(8,052	)
Increase in plan assets		(112	)		(105	)

		560,438			722,133

(Continued)

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Interim Statements of Cash Flows

For the three-month periods ended March 31, 2014 and 2013

(Unaudited)


In millions of won	March 31, 2014			March 31, 2013

Cash generated from operating activities
Dividends received	￦	644			6,651
Interest paid		(615,071	)		(610,364	)
Interest received		41,016			35,046
Income taxes paid		(19,353	)		(35,654	)

Net cash from operating activities		3,657,129			3,007,666


Cash flows investing activities
Proceeds from disposals of subsidiaries, associates and joint ventures		491			—
Acquisition of subsidiaries, associates and joint ventures		(108,576	)		(59,994	)
Proceeds from disposals of property, plant and equipment		7,169			28,088
Acquisition of property, plant and equipment		(3,580,706	)		(3,280,447	)
Acquisition of intangible assets		(12,028	)		(19,410	)
Proceeds from disposals of financial assets		242,764			79,592
Acquisition of financial assets		(120,351	)		(137,781	)
Increase in loans		(36,622	)		(130,050	)
Decrease in loans		23,578			17,765
Increase in deposits		(107,938	)		(8,473	)
Decrease in deposits		97,689			2,658
Receipt of government grants		23,852			5,454
Usage of government grants		(1,597	)		(61	)
Other cash outflow from investing activities, net		(4,317	)		(3,424	)

Net cash used in investing activities		(3,576,592	)		(3,506,083	)


Cash flows from financing activities
Increase (decrease) in short-term borrowings, net		346,444			420,504
Proceeds from long-term borrowings and debt securities		1,952,121			3,303,949
Repayment of long-term borrowings and debt securities		(1,804,376	)		(1,538,034	)
Payment of finance lease liabilities		(30,128	)		(30,244	)
Settlement of derivative instruments, net		(48,360	)		24,808
Change in non-controlling interest		(367	)		7,854
Dividends paid (hybrid bond)		(5,405	)		(5,427	)
Dividends paid		(1,442	)		(1	)
Other cash inflow (outflow) from financing activities, net		6,367			8,354

Net cash from financing activities		414,854			2,191,763


Net increase in cash and cash equivalents before effect of exchange rate fluctuations		495,391			1,693,346

Effect of exchange rate fluctuations on cash held		1,071			(9,327	)


Net increase in cash and cash equivalents		496,462			1,684,019

Cash and cash equivalents at January 1		2,232,313			1,954,949


Cash and cash equivalents at March 31, 2014	￦	2,728,775			3,638,968

See accompanying notes to the consolidated financial statements.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Interim Consolidated Financial Statements

March 31, 2014

(Unaudited)

1.	Reporting Entity (Description of the controlling company)

Korea Electric Power Corporation (the “KEPCO”), controlling company as defined in Korean International Financial Reporting Standards (“K-IFRS”) 1110 ‘Consolidated Financial Statements’, 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. The KEPCO also provides power plant construction services. The KEPCO’s stock was listed on the Korea Stock Exchange on August 10, 1989 and the Company listed its Depository Receipts (DR) on the New York Stock Exchange on October 27, 1994.

As of March 31, 2014, the KEPCO’s share capital amounts to ￦3,209,820 million and the KEPCO’s shareholders are as follows:


	Number of shares		Percentage of ownership
Government of the Republic of Korea		135,917,118		21.17	%
Korea Finance Corporation		192,159,940		29.93	%
Foreign investors		150,612,232		23.46	%
Other		163,274,787		25.44	%


		641,964,077		100.00	%

In accordance with the Restructuring Plan enacted on January 21, 1999 by the Ministry of Trade, Industry and Energy (the “MTIE”, formerly the Ministry of Knowledge Economy), KEPCO spun off its power generation divisions on April 2, 2001, resulting in the establishment of six power generation subsidiaries.

2.	Basis of Preparation

(1)

Statement of compliance

The consolidated interim financial statements have been prepared in accordance with K-IFRS, as prescribed in the Act on External Audits of Corporations in the Republic of Korea.

These consolidated interim financial statements were prepared in accordance with K-IFRS 1034, ‘Interim Financial Reporting’ as part of the period covered by the Group’s K-IFRS annual financial statements. The notes are included to explain events and transactions to give the changes in financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended December 31, 2013.

(2)

Basis of measurement

The consolidated interim financial statements have been prepared on the historical cost basis, except for the following material items in the consolidated statements of financial position:

•

derivative financial instruments are measured at fair value

•

available-for-sale financial assets 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”), which are the KEPCO’s functional currency and the currency of the primary economic environment in which the Company operates.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

2.	Basis of Preparation, Continued

(4)

Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with K-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 following are the key assumptions concerning the future, 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)

Continued operation of Wolseong #1 nuclear power plant

The Company owns Wolseong #1 nuclear power plant, which started its operation on November 21, 1982, and completed its operation on November 20, 2012, completing the permitted operation period of 30 years. As of March 31, 2014, the Company is in the process of obtaining safety assessments to obtain an approval from the Nuclear Safety and Security Commission to resume the plant’s operation for another term. The Company has prepared the consolidated financial statements assuming that the plant will operate for the next 10 years.

(ii)

Useful lives of property, plant and equipment, 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.

(iii)

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 different if the Company does not realize estimated future taxable income during the carry forward periods.

(iv)

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 an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the financial officer.

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 K-IFRS including the level in the fair value hierarchy in which such valuation techniques should be classified.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

2.	Basis of Preparation, Continued

(4)

Use of estimates and judgments, continued

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 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.

(v)

Defined employee 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.

(vi)

Unbilled revenue

Energy delivered but not yet metered, and the quantities of energy delivered but not yet measured and not billed are calculated at the reporting date based on consumption statistics and selling price estimates. Determination of the unbilled revenues at the end of the reporting period is sensitive to the estimated assumptions and prices based on statistics. Unbilled revenue recognized as of March 31, 2014 and 2013 is ￦1,499,049 million and ￦1,226,542 million, respectively.

(5)

Changes in accounting policies

(i)

Amendments to K-IFRS 1032, ‘Financial Instruments: Disclosures’

The Company adopted the amendments of K-IFRS 1032, ‘Financial Instruments: Disclosures’ since January 1, 2014. K-IFRS 1032 requires that a financial asset and a financial liability shall be offset and the net amount presented in the statement of financial position when, and only when, an entity: (i) currently has a legally enforceable right to set off the recognized amounts; and (ii) intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

A legally enforceable right of set-off must not be contingent on a future event; and must be legally enforceable in all of the following circumstances: (i) the normal course of business; (ii) the event of default; and (iii) the event of insolvency or bankruptcy of the entity and all of the counterparties.

If the Company can settle amounts in a manner such that the outcome is, in effect, equivalent to net settlement, the Company will meet the net settlement criterion in K-IFRS 1032. This will occur if, and only if, the gross settlement mechanism has features that eliminate or result in insignificant credit and liquidity risk, and that will process receivables and payables in a single settlement process or cycle.

The Company has not applied the amendment retrospectively since management believes the impact of the amendments on the Company’s consolidated financial statements is clearly immaterial.

(ii)

K-IFRS 2121, ‘Levies’

The Company adopted K-IFRS 2121, ‘Levies’ since January 1, 2014. K-IFRS 2121 defines the obligating event that gives rise to a liability to pay a levy as the activity that triggers the payment of the levy, as identified by the legislation.

The liability to pay a levy is recognized progressively if the obligating event occurs over a period of time and if the obligating event is the reaching of a minimum activity threshold, the corresponding liability is recognised when that minimum activity threshold is reached. Meanwhile, an entity shall recognise an asset if it has prepaid a levy but does not yet have a present obligation to pay that levy.

The Company has not applied the amendment retrospectively since management believes the impact of the amendments on the Company’s consolidated financial statements is clearly immaterial.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies

(1)

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (or one of its subsidiaries).

Income and expense of a subsidiary acquired or disposed of during the year are included in the consolidated statement of comprehensive income (loss) 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 between the Company and its subsidiaries 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 losses control of a subsidiary, the income 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 income 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 K-IFRS 1039, ‘Financial Instruments’: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

(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 income 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 K-IFRS 1012, ‘ Income Taxes’ and K-IFRS 1019, ‘ Employee Benefits’ respectively;

•

Assets (or disposal Companys) that are classified as held for sale in accordance with K-IFRS 1105, ‘Non-current Assets Held for Sale’ are measured in accordance with that standard.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(2)

Business combinations, continued

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 income 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 K-IFRS.

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 K-IFRS 1039, ‘Financial Instruments: Recognition and Measurement’, or with K-IFRS 1037, ‘Provisions’, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognized in income 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 control) and the resulting gain or loss, if any, is recognized in income 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 income 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.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(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 have control or joint control over those policies.

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 K-IFRS 1105, ‘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. If the Company holds 20% ~ 50% of the voting power of the investee, it is presumed that the Company has significant influence.

After the disposal takes place, the Company shall account for any retained interest in associates in accordance with K-IFRS 1039, ‘Financial Instruments: Recognition and Measurement’ unless the retained interest continues to be an associates, 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 income 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 income or loss. The requirements of K-IFRS 1039, ’Financial Instruments: Recognition and Measurement’, 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 K-IFRS 1036, ‘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 K-IFRS 1036 to the extent that the recoverable amount of the investment subsequently increases.

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 K-IFRS 1036. 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 income or loss on the disposal of the related assets or liabilities, the Company reclassifies the gain or loss from equity to income or loss (as a reclassification adjustment) when it loses significant influence over that associate.

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.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(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 venturers) 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 K-IFRS 1028, ‘Investment in Associates and Joint Ventures’ (see note 3 (3)), except when the Company is applicable to the K-IFRS 1105, ‘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 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 CGU that is expected to benefit from the synergies arising from the goodwill acquired.

The Company assesses at the end of each reporting period whether there is any indication that an 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.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(7)

Revenue recognition

Revenue from the sale of goods, rendering of services or use of the Company assets is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates, and are recognized as a reduction of revenue. Revenue is recognized when the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the Company.

(i)

Sales of goods

The Korean government approves the rates charged to customers by the Company’s power transmission and distribution division. The Company’s utility rates are designed to recover the Company’s reasonable costs plus a fair investment return. The Company’s power generation rates are determined in the market.

The Company recognizes electricity sales revenue based on power sold (transferred to the customer) up to the reporting date. To determine the amount of power sold, the Company estimates daily power volumes of electricity for residential, commercial, general and etc. The differences between the current month’s estimated amount and actual (meter-read) amount, is adjusted for (trued-up) during the next month period.

(ii)

Sales of services

Revenue from services rendered is recognized in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed or services performed to date as a percentage of total services to be performed or the proportion that costs incurred to date bear to the estimated total costs of the transaction or other methods that reliably measures the services performed.

(iii)

Dividend income and interest income

Dividend income is recognized in profit or loss on the date that the Company’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

Interest income is recognized as it accrues in profit or loss, using the effective interest method. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

(iv)

Rental income

The Company’s policy for recognition of revenue from operating leases is described in note 3 (9) below.

(v)

Deferral of revenue – Transfer of Assets from Customers

The Company recovers a substantial amount of the cost related to its electric power distribution facilities from customers through the transfer of assets, while the remaining portion is recovered through electricity sales from such customers in the future. As such, the Company believes there exists a continued service obligation to the customers in accordance with K-IFRS 2118, ‘Transfer of Assets from Customers’ when the Company receives an item of property, equipment, or cash for constructing or acquiring an item of property or equipment, in exchange for supplying electricity to customers. The Company defers the amounts received, which are then recognized as revenue over the estimated service period which does not exceed the transferred asset’s useful life.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(8)

Construction services revenue

The Company provides services related to the construction of power plants related to facilities of its customers, mostly in foreign countries.

When the outcome of a construction contract can be estimated reliably, revenue and costs are recognized based on the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized to the extent of contract costs incurred when it is probable the revenue will be realized. Contract costs are recognized as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately.

When contract costs incurred to date plus recognized income less recognized losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognized income less recognized losses, the surplus is shown as the amounts due to customers for contract work. Amounts received before the related work is performed are included in the consolidated statements of financial position, as a liability, as advances received. Amounts billed for work performed but not yet paid by the customer are included in the consolidated statements of financial position as accounts and other receivables.

(9)

Leases

The Company classifies and accounts for leases as either a finance or operating lease, depending on the terms. Leases where the Company assumes substantially all of the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases.

(i)

The Company as lessor

Amounts due from lessees under finance leases are recognized as receivables at the amount of the Company’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Company’s net investment outstanding in respect of the leases.

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term.

(ii)

The Company as lessee

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are initially recognized as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in income or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Company’s general policy on borrowing costs. Contingent rentals are recognized as expenses in the periods in which they are incurred.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(9)

Leases, Continued

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(iii)

Determining whether an arrangement contains a lease

Determining whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether fulfillment of the arrangement is dependent on the use of a specific asset or assets (the asset) and the arrangement conveys a right to use the asset.

At inception or reassessment of the arrangement, management of the Company separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If management of the Company concludes for a financial lease that it is impracticable to separate the payments reliably, the Company recognizes an asset and a liability at an amount equal to the fair value of the underlying asset that was identified as the subject of the lease. Subsequently, the liability shall be reduced as payments are made and an imputed finance charge on the liability recognized using the purchaser’s incremental borrowing rate of interest.

(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;

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(10)

Foreign currencies, continued

•

Exchange differences on transactions entered into in order to hedge certain foreign currency risks; 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 income 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.

When a foreign operation is disposed of, the relevant amount in the translation is transferred to profit or loss as part of the profit 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 income 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.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(13)

Employee benefits

(i)

Retirement benefits: defined contribution plans

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), after deducting any contribution already paid.

(ii)

Retirement benefits: defined benefit plans

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 asset or liability recognized in the statement of financial position is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognized past service costs. 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.

All actuarial gains and losses that arise in calculating the present value of the defined benefit obligation and the fair value of plan assets are recognized immediately in retained earnings and included in the statement of comprehensive income.

For the purpose of calculating the expected return on plan assets, the assets are valued at fair value. Actual results will differ from results which are estimated based on assumptions. Past service cost is recognized as an expense at the earlier of the following dates: (a) when the plan amendment or curtailment occurs; (b) when the company recognizes related restructuring costs or termination benefits.

The retirement benefit obligation recognized in the consolidated 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.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(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.

(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.

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.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(14)

Income taxes, continued

(iii)

Current and deferred tax for the year

Current and deferred tax are recognized in income 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

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.

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 production method to measure and recognizes as expense the economic benefits of the assets.

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		6 ~ 32
Vehicles		4
Loaded heavy water		30
Asset retirement costs		18, 30, 40
Finance lease assets		20
Ships		9
Others		4 ~ 9

A component that is significant compared to the total cost of property, plant and equipment is depreciated over its separate useful life. Depreciation methods, useful lives and residual values are reviewed at the end of each reporting date and adjusted, if appropriate.

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 income or loss when the asset is derecognized.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(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.

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 income 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 income 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.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(17)

Intangible assets, continued

The estimated useful lives and amortization methods of the Company’s intangible assets with finite useful lives are as follows:


	Useful lives (years)	Amortization methods
Usage rights for donated assets	4 ~ 30	Straight
Software	4, 5	Straight
Industrial rights	5, 10	Straight
Development expenses	5	Straight
Dam usage right	50	Straight
Mining right	—	Unit of production
Others	4 ~ 20, 50	Straight

(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 (which is regarded as their cost).

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, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognized in income or loss when the asset is derecognized.

(v)

Subsequent expenditures

Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as incurred.

(18)

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 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, 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.

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 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.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(18)

Impairment of non-financial assets other than goodwill, continued

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 income or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

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, but so that 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 income or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

(19)

Inventories

Inventories are measured at the lower of cost and net realizable value. 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.

(20)

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 Polychlorinated Biphenyls (“PCB”)

Under the regulation of Persistent Organic Pollutants Management Act, enacted in 2007, the Company is required to remove polychlorinated biphenyls (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.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(20)

Provisions, continued

(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)

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.

(vi)

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.

(21)

Non-derivative financial assets

The Company recognizes and measures non-derivative financial assets by the following four categories: financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. The Company recognizes financial assets in the statement of financial position when the Company becomes a party to the contractual provisions of the instrument. Upon initial recognition, non-derivative financial assets are measured at their fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the asset’s acquisition or issuance.

A regular way purchase or sale of financial assets shall be recognized and derecognized, as applicable, using trade date accounting or settlement date accounting. A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

(i)

Effective interest method

The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as financial assets at fair value through profit or loss.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(21)

Non-derivative financial assets, continued

(ii)

Financial assets at fair value through profit or loss (FVTPL)

A financial asset is classified as financial assets are classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Upon initial recognition, transaction costs are recognized in profit or loss when incurred. A financial assets its acquired principally for the purpose of selling it in the near term are classified as a short-term financial assets held for trading and also all the derivatives including an embedded derivate that is not designated and effective as a hedging instrument are classified at the short-term trading financial asset as well. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.

A financial asset is classified as held for trading if:

•

It has been acquired principally for the purpose of selling it in the near term; or

•

On initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short term profit taking; or

•

It is derivative, including an embedded derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at financial assets at fair value through profit or loss upon initial recognition if:

•

Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

•

The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its’ performance is evaluated on a fair value basis in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

•

It forms a part of a contract containing one or more embedded derivatives, and with K-IFRS 1039, Financial Instruments; Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at financial assets at fair value through profit or loss.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on re-measurement recognized in income or loss. The net gain or loss recognized in income or loss incorporates any dividend or interest earned on the financial asset and is included in the ‘finance income and finance expenses’ line item in the consolidated statement of comprehensive income.

(iii)

Held-to-maturity investments

A non-derivative financial asset with a fixed or determinable payment and fixed maturity, for which the Company has the positive intention and ability to hold to maturity, are classified as held-to-maturity investments. Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(21)

Non-derivative financial assets, continued

(iv)

Available-for-sale financial assets

Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as financial assets at fair value through profit or loss, held-to-maturity investments or loans and receivables.

Gains and losses arising from changes in fair value are recognized in other comprehensive income and accumulated in the valuation reserve. However, impairment losses, interest calculated using the effective interest method, and foreign exchange gains and losses on monetary assets are recognized in income or loss. Unquoted equity investments which are not traded in an active market, whose fair value cannot be measured reliably are carried at cost.

When a financial asset is derecognized or impairment losses are recognized, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Dividends on an available-for-sale equity instrument are recognized in profit or loss when the Company’s right to receive payment is established.

The fair value of available-for-sale monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. The foreign exchange gains and losses that are recognized in income or loss are determined based on the amortized cost of the monetary asset. Other foreign exchange gains and losses are recognized in other comprehensive income.

(v)

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method except for loans and receivables of which the effect of discounting is immaterial.

(vi)

Impairment of financial assets

Financial assets, other than those at financial assets at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For listed and unlisted equity investments classified as available-for-sale financial asset, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment in addition to the criteria mentioned below .

For all other financial assets, objective evidence of impairment could include:

•

Significant financial difficulty of the issuer or counterparty; or

•

Breach of contract, such as a default or delinquency in interest or principal payments, or

•

It becoming probable that the borrower will enter bankruptcy or financial re-organization; or

•

The disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and, as well as observable changes in national or local economic conditions that correlate with default on receivables.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(21)

Non-derivative financial assets, continued

For financial assets recorded at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in income or loss.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to income or loss in the period.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through income or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

In respect of available-for-sale equity securities, impairment losses previously recognized in income or loss are not reversed through income or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. In respect of available-for-sale debt securities, impairment losses are subsequently reversed through income or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

(vii)

De-recognition of financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognized as a separate asset or liability. If the Company retains substantially all the risks and rewards of ownership of the transferred financial assets, the Company continues to recognize the transferred financial assets and recognizes financial liabilities for the consideration received.

On de-recognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in income or loss.

On de-recognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in income or loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(22)

Non-derivative financial liabilities and equity instruments issued by the Company

(i)

Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

(ii)

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in income or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

(iii)

Financial liabilities

Financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments. Financial liabilities are initially measured at fair value. Transaction cost that are directly attributable to the issue of financial liabilities are added to or deducted from the fair value of the financial liabilities, as appropriate, on initial recognition. Transaction cost directly attributable to acquisition of financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.

(iv)

Financial liabilities at fair value through profit or loss (FVTPL)

Financial liabilities are classified as at financial liabilities at fair value through profit or loss when the financial liability is either held for trading or it is designated as financial liabilities at fair value through profit or loss.

A financial liability is classified as held for trading if:

•

It has been acquired principally for the purpose of repurchasing it in the near term; or

•

On initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or

•

It is a derivative that is not designated and effective as a hedging instrument.

A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:

•

Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

•

The financial liability forms part of a Company of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

•

It forms part of a contract containing one or more embedded derivatives, and K-IFRS 1039, ‘Financial Instruments: Recognition and Measurement’, permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or losses arising on re-measurement recognized in income or loss. The net gain or loss recognized in income or loss incorporates any interest paid on the financial liability and is included in ‘finance income and finance expenses’.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(22)

Non-derivative financial liabilities and equity instruments issued by the Company, continued

(v)

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

(vi)

Financial guarantee contract liabilities

Financial guarantee contract liabilities are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of: (a) the amount of the obligation under the contract, as determined in accordance with K-IFRS 1037, ‘ Provisions’, Contingent Liabilities and Contingent Assets; or (b) the amount initially recognized less, cumulative amortization recognized in accordance with K-IFRS 1018, ‘ Revenue’.

(vii)

De-recognition of financial liabilities

The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in income or loss.

(23)

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 income or loss immediately unless the derivative is designated and effective as a hedging instrument, in such case the timing of the recognition in income or loss depends on the nature of the hedge relationship.

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.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(23)

Derivative financial instruments, including hedge accounting, continued

(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 income 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 as income or loss as of 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 and accumulated under the heading of reverse for gains (loss) on valuation of derivatives. The gain or loss relating to the ineffective portion is recognized immediately in income 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 income or loss in the periods when the hedged item is recognized in income or loss, in the 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 and 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 income or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in income or loss.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

4.	Segment, Geographic and Other Information

(1)

Segment determination and explanation of the measurements

The Company’s operating segments are its business components that generates discrete financial information that is reported to and regularly revised 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, in accordance with K-IFRS 1108, 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 income (loss) is determined the same way that consolidated operating income is determined under K-IFRS 1108 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 arms-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 an equity method basis in the consolidated financial statements.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

4.	Segment, Geographic and Other Information, Continued

(2)

Financial information of the segments for the three-month periods ended March 31, 2014 and 2013 respectively are as follows:


In millions of won
March 31, 2014
Segment	Total segment revenue		Intersegment revenue			Revenue from external customers		Depreciation and amortization			Interest income			Interest expense			Income(loss) of assoiates and joint ventures			Operating income (loss)

Transmission and distribution	￦	14,681,061		285,952			14,395,109		671,919			6,965			359,889			107,056			(266,967	)
Electric power generation (Nuclear)		2,448,121		2,445,463			2,658		703,211			3,952			145,797			740			948,969
Electric power generation (Non-nuclear)		7,428,668		7,301,758			126,910		517,069			8,150			74,913			3,572			514,372
Plant maintenance & engineering service		554,479		403,044			151,435		17,766			5,002			143			(1,201	)		57,658

Others		122,200		25,665			96,535		6,657			26,896			18,568			—			31,107

Consolidation adjustments		(10,461,882)		(10,461,882	)		—		(8,498	)		(2,770	)		(2,264	)		—			(58,062	)

	￦	14,772,647		—			14,772,647		1,908,124			48,195			597,046			110,167			1,227,077


Other income																					70,723

Other expenses																					(23,059	)

Other gains (losses), net																					41,082

Finance income																					278,058

Finance costs																					(802,121	)


Equity method Income of associates joint ventures																					110,167


Profit before income tax																					901,927

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

4.	Segment, Geographic and Other Information, Continued

(2)

Financial information of the segments for the three-month periods ended March 31, 2014 and 2013, respectively are as follows, continued:


In millions of won
March 31, 2013
Segment	Total segment revenue			Intersegment revenue			Revenue from external customers		Depreciation and amortization			Interest income			Interest expense			Income(loss) of assoiates and joint ventures			Operating income (loss)

Transmission and distribution	￦	13,632,974			207,370			13,425,604		653,948			7,984			386,448			80,665			(478,941	)
Electric power generation (Nuclear)		2,011,717			1,983,604			28,113		694,463			5,512			139,491			—			553,932
Electric power generation (Non-nuclear)		7,630,708			7,474,032			156,676		472,950			11,956			61,376			(8,597	)		593,417
Plant maintenance & engineering service		513,456			392,560			120,896		18,867			8,390			36			(827	)		44,822

Others		69,316			1,507			67,809		2,024			19,500			11,353			—			21,905

Consolidation adjustments		(10,059,073	)		(10,059,073	)		—		(7,425	)		(2,680	)		(3,422	)		—			(77,366	)

	￦	13,799,098			—			13,799,098		1,834,827			50,662			595,282			71,241			657,769


Other income																						88,059

Other expenses																						(17,213	)

Other gains (losses), net																						31,004

Finance income																						436,728

Finance costs																						(1,059,543	)


Equity method Income of associates joint ventures																						71,241


Profit before income tax																						208,045

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

4.	Segment, Geographic and Other Information, Continued

(3)

Total assets and liabilities of the segments as of March 31, 2014 and December 31, 2013 are as follows:


In millions of won
March 31, 2014
Segment	Segment assets			Investments in associates and joint ventures		Acquisition of non-current assets		Segment liabilities

Transmission and distribution	￦	98,081,007			4,013,949		1,376,818		56,726,361
Electric power generation (Nuclear)		47,574,590			1,672		372,054		26,739,548
Electric power generation (Non-nuclear)		38,070,404			1,326,813		1,638,636		21,209,516
Plant maintenance & engineering service		2,488,282			56,466		39,540		1,007,671

Others		5,959,556			—		80,191		2,062,017

Consolidation adjustments		(35,133,506	)		—		85,495		(2,598,680	)


Consolidated totals	￦	157,040,333			5,398,900		3,592,734		105,146,433


In millions of won
December 31, 2013
Segment	Segment assets			Investments in associates and joint ventures		Acquisition of non-current assets			Segment liabilities

Transmission and distribution	￦	98,249,927			3,895,266		4,458,291			56,590,381
Electric power generation (Nuclear)		46,717,706			908		2,412,782			26,482,646
Electric power generation (Non-nuclear)		36,455,090			1,275,330		6,882,630			19,832,122
Plant maintenance & engineering service		2,463,204			59,251		222,547			932,485

Others		5,617,304			—		429,626			2,008,541

Consolidation adjustments		(33,975,897	)		—		(75,237	)		(1,769,577	)


Consolidated totals	￦	155,527,334			5,230,755		14,330,639			104,076,598

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

4.	Segment, Geographic and Other Information, Continued

(4)

Geographic information

The following information on revenue from external customers and non-current assets is determined by the location of the customers and of the assets:


In millions of won
	Revenue from external customers				*Non-current assets (2)**
	March 31, 2014		March 31, 2013		March 31, 2014		March 31, 2013

Domestic	￦	14,164,630		13,329,168		133,587,578		131,876,535

Overseas (*1)		608,017		469,930		4,739,569		4,474,900


	￦	14,772,647		13,799,098		138,327,147		136,351,435

(*1)	Middle East and Asia make up the majority of overseas revenue and non-current assets.

(*2)	Amount excludes financial assets and deferred tax assets

(5)

Information on significant customers

There is no individual customer comprising more than 10% of the Company’s revenue for the three-month periods ended March 31, 2014 and 2013.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

5.	Classification of Financial Instruments

(1)

Classification of financial assets as of March 31, 2014 and December 31, 2013 are as follows:


In millions of won	March 31, 2014
	Financial assets at fair value through profit or loss		Loans and receivables		Available- for-sale financial assets		Held-to- maturity investments		Derivative assets (using hedge accounting)		Total
Current assets

Cash and cash equivalents	￦	—		2,728,775		—		—		—		2,728,775
Current financial assets

Held-to-maturity investments		—		—		—		133		—		133
Derivative assets		3,088		—		—		—		—		3,088
Other financial assets		—		313,169		—		—		—		313,169

Trade and other receivables		—		6,759,519		—		—		—		6,759,519


		3,088		9,801,463		—		133		—		9,804,684

Non-current assets

Non- current financial assets

Available-for-sale financial assets		—		—		1,232,732		—		—		1,232,732

Held-to-maturity investments		—		—		—		2,072		—		2,072
Derivative assets		13,104		—		—		—		96,242		109,346
Other financial assets		—		573,571		—		—		—		573,571

Trade and other receivables		—		1,665,489		—		—		—		1,665,489


		13,104		2,239,060		1,232,732		2,072		96,242		3,583,210


	￦	16,192		12,040,523		1,232,732		2,205		96,242		13,387,894

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

5.	Classification of Financial Instruments, Continued

(1)

Classification of financial assets as of March 31, 2014 and December 31, 2013 are as follows, continued:


In millions of won	December 31, 2013
	Financial assets at fair value through profit or loss		Loans and receivables		Available- for-sale financial assets		Held-to- maturity investments		Derivative assets (using hedge accounting)		Total
Current assets

Cash and cash equivalents	￦	—		2,232,313		—		—		—		2,232,313
Current financial assets

Held-to-maturity investments		—		—		—		168		—		168
Derivative assets		1,437		—		—		—		—		1,437
Other financial assets		—		434,608		—		—		—		434,608

Trade and other receivables		—		7,526,311		—		—		—		7,526,311


		1,437		10,193,232		—		168		—		10,194,837

Non-current assets

Non- current financial assets

Available-for-sale financial assets		—		—		1,256,765		—		—		1,256,765

Held-to-maturity investments		—		—		—		2,117		—		2,117
Derivative assets		2,681		—		—		—		82,376		85,057
Other financial assets		—		559,013		—		—		—		559,013

Trade and other receivables		—		1,644,333		—		—		—		1,644,333


		2,681		2,203,346		1,256,765		2,117		82,376		3,547,285


	￦	4,118		12,396,578		1,256,765		2,285		82,376		13,742,122

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

5.	Classification of Financial Instruments, Continued

(2)

Classification of financial liabilities as of March 31, 2014 and December 31, 2013 are as follows:


In millions of won	March 31, 2014
	Financial liabilities at fair value through profit or loss		Financial liabilities recognized at amortized cost		Derivative liabilities (using hedge accounting)		Total
Current liabilities

Borrowings	￦	—		1,730,223		—		1,730,223

Debt securities		—		6,445,966		—		6,445,966

Derivative liabilities		241,493		—		28,822		270,315

Trade and other payables		—		5,502,731		—		5,502,731


		241,493		13,678,920		28,822		13,949,235

Non-current liabilities

Borrowings		—		4,473,227		—		4,473,227

Debt securities		—		48,922,710		—		48,922,710

Derivative liabilities		125,046		—		131,264		256,310

Trade and other payables		—		3,977,897		—		3,977,897


		125,046		57,373,834		131,264		57,630,144


	￦	366,539		71,052,754		160,086		71,579,379


In millions of won	December 31, 2013
	Financial liabilities at fair value through profit or loss		Financial liabilities recognized at amortized cost		Derivative liabilities (using hedge accounting)		Total
Current liabilities

Borrowings	￦	—		1,470,862		—		1,470,862

Debt securities		—		6,616,636		—		6,616,636

Derivative liabilities		304,699		—		33,034		337,733

Trade and other payables		—		5,892,763		—		5,892,763


		304,699		13,980,261		33,034		14,317,994

Non-current liabilities

Borrowings		—		4,538,390		—		4,538,390

Debt securities		—		48,262,262		—		48,262,262

Derivative liabilities		186,336		—		176,406		362,742

Trade and other payables		—		3,971,519		—		3,971,519


		186,336		56,772,171		176,406		57,134,913


	￦	491,035		70,752,432		209,440		71,452,907

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

5.	Classification of Financial Instruments, Continued

(3)

Classification of comprehensive income (loss) from financial instruments for the three-month periods ended March 31, 2014 and 2013 are as follows:


In millions of won		March 31, 2014			March 31, 2013

Cash and cash equivalents	Interest income	￦	12,242			15,889
Available-for-sale financial assets	Dividends income		12,525			11,239
	Interest income		108			527
	Loss on disposal of financial assets		(2	)		—
Held-to-maturity investments	Interest income		17			16
Loans and receivables	Interest income		6,020			12,691
Trade and other receivables	Interest income		25,466			15,412
Other financial assets	Interest income		305			7
Short-term financial instruments	Interest income		3,927			6,115
Long-term financial instruments	Interest income		110			5
Financial assets at fair value through profit or loss	Gain on valuation of derivatives		9,379			43,233
	Gain (loss) on transaction of derivatives		(9,563	)		7,431
Derivative assets (using hedge accounting)	Gain on valuation of derivatives		35,908			79,722
	Loss on valuation of derivatives (equity, before tax)*		(5,732	)		(6,407	)
	Gain (loss) on transaction of derivatives		(1,585	)		5,220
Financial liabilities carried at amortized cost	Interest expense of borrowings and debt securities		(427,547	)		(428,335	)
	Interest expense of trade and other payables		(22,376	)		(26,222	)
	Interest expense of others		(147,123	)		(140,725	)
	Loss on foreign currency transactions and translations		(145,391	)		(408,665	)
Financial liabilities at fair value through profit or loss	Gain on valuation of derivatives		68,839			116,063
	Gain on transaction of derivatives		28,595			132
Derivative liabilities (using hedge accounting)	Gain on valuation of derivatives		29,520			49,980
	Gain on valuation of derivatives (equity, before tax)*		6,690			3,662
	Gain (loss) on transaction of derivatives		(5,311	)		2,015

Items are included in other comprehensive income. All other income and gain amounts listed above are included in finance income, and all expense and loss amounts listed above are included in finance expenses in the accompanying consolidated statements of comprehensive income.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

6.	Restricted Deposits

Restricted deposits as of March 31, 2014 and December 31, 2013 are as follows:


In millions of won		March 31, 2014		December 31, 2013

Cash and cash equivalents	Escrow accounts	￦	76,541		61,873
	Deposits for government project		16,652		17,807
	Collateral provided for lawsuit		189		—
	Collateral for borrowings		10,306		—
Short-term financial instruments	Restriction on withdrawl related to win-win growth program for small and medium enterprises		5,000		—
Long-term financial instruments	Guarantee deposits for checking account		5		5
	Guarantee deposits for banking accounts at oversea branches		304		300
	Collateral provided for lawsuit		330		330

		￦	109,327		80,315

7.	Cash and Cash Equivalents

Cash and cash equivalents as of March 31, 2014 and December 31, 2013 are as follows:


In millions of won	March 31, 2014		December 31, 2013

Cash	￦	103		56
Cash equivalents		1,147,795		1,141,202
Short-term deposits classified as cash equivalents		1,236,497		1,073,789
Short-term investments classified as cash equivalents		344,380		17,266


	￦	2,728,775		2,232,313

8.	Trade and Other Receivables

(1)

Trade and other receivables as of March 31, 2014 and December 31, 2013 are as follows:


In millions of won	March 31, 2014
	Gross amount		Allowance for doubtful accounts			Present value discount			Book value
Current assets
Trade receivables	￦	6,251,671		(63,179	)		(91	)		6,188,401
Other receivables		616,916		(43,697	)		(2,101	)		571,118

		6,868,587		(106,876	)		(2,192	)		6,759,519

Non-current assets
Trade receivables		420,868		—			—			420,868
Other receivables		1,288,979		(37,472	)		(6,886	)		1,244,621

		1,709,847		(37,472	)		(6,886	)		1,665,489


	￦	8,578,434		(144,348	)		(9,078	)		8,425,008

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

8.	Trade and Other Receivables, Continued

1)	Trade and other receivables as of March 31, 2014 and December 31, 2013 are as follows, continued:


In millions of won	December 31, 2013
	Gross amount		Allowance for doubtful accounts			Present value discount			Book value
Current assets
Trade receivables	￦	7,076,303		(65,024	)		(136	)		7,011,143
Other receivables		559,958		(42,729	)		(2,061	)		515,168

		7,636,261		(107,753	)		(2,197	)		7,526,311

Non-current assets
Trade receivables		421,949		—			(8	)		421,941
Other receivables		1,255,724		(27,158	)		(6,174	)		1,222,392

		1,677,673		(27,158	)		(6,182	)		1,644,333


	￦	9,313,934		(134,911	)		(8,379	)		9,170,644

(2)

Other receivables as of March 31, 2014 and December 31, 2013 are as follows:


In millions of won	March 31, 2014
	Gross amount		Allowance for doubtful accounts			Present value discount			Book value
Current assets

Non-trade receivables	￦	297,097		(43,697	)		—			253,400

Accrued income		38,198		—			—			38,198

Deposits		166,431		—			(2,101	)		164,330
Finance lease receivables		5,356		—			—			5,356

Others		109,834		—			—			109,834

		616,916		(43,697	)		(2,101	)		571,118

Non-current assets

Non-trade receivables		100,091		(17,829	)		—			82,262

Accrued income		7,910		—			—			7,910

Deposits		239,212		—			(6,886	)		232,326
Finance lease receivables		853,594		—			—			853,594

Others		88,172		(19,643	)		—			68,529

		1,288,979		(37,472	)		(6,886	)		1,244,621


	￦	1,905,895		(81,169	)		(8,987	)		1,815,739

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

8.	Trade and Other Receivables, Continued

(2)

Other receivables as of March 31, 2014 and December 31, 2013 are as follows, continued:


In millions of won	December 31, 2013
	Gross amount		Allowance for doubtful accounts			Present value discount			Book value
Current assets
Non-trade receivables	￦	233,714		(42,729	)		—			190,985

Accrued income		47,310		—			—			47,310

Deposits		162,730		—			(2,061	)		160,669
Finance lease receivables		4,569		—			—			4,569

Others		111,635		—			—			111,635

		559,958		(42,729	)		(2,061	)		515,168

Non-current assets

Non-trade receivables		102,254		(8,608	)		—			93,646

Deposits		230,083		—			(6,174	)		223,909
Finance lease receivables		845,712		—			—			845,712

Accrued income		7,052		—			—			7,052

Others		70,623		(18,550	)		—			52,073

		1,255,724		(27,158	)		(6,174	)		1,222,392


	￦	1,815,682		(69,887	)		(8,235	)		1,737,560

Trade and other receivables are classified as loans and receivables, and are measured using the effective interest method. No interest is accrued for trade receivables for the duration between the billing date and the payment due dates. Once trade receivables are overdue, the Company imposes a 2.0% interest rate on the overdue trade receivables. The Company holds deposits of three-months’ expected electricity usage for customers requesting temporary usage and customers with past defaulted payments.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

8.	Trade and Other Receivables, Continued

(3)

Aging analysis of trade receivables as of March 31, 2014 and December 31, 2013 are as follows:


In millions of won	March 31, 2014			December 31, 2013

Trade receivables: (not overdue, not impaired)	￦	6,476,872			7,350,705

Trade receivables: (overdue, not impaired)		972			292

Less than 60 days		972			292

Trade receivables: (impairment reviewed)		194,695			147,255
60 ~ 90 days		69,137			36,707
90 ~ 120 days		11,639			18,214
120 days ~ 1year		60,799			38,066
Over 1 year		53,120			54,268

		6,672,539			7,498,252


Less allowance for doubtful accounts		(63,179	)		(65,024	)
Less present value discount		(91	)		(144	)


	￦	6,609,269			7,433,084

The Company assesses at the end of each reporting period whether there is any objective evidence that trade receivables are impaired, and provides allowances for doubtful accounts which includes impairment for trade receivables that are individually significant.

The Company considers receivables as overdue if the receivables are outstanding 60 days after the maturity and sets allowance based on past experience of collection.

(4)

Aging analysis of other receivables as of March 31, 2014 and December 31, 2013 are as follows:


In millions of won	March 31, 2014			December 31, 2013

Other receivables: (not overdue, not impaired)	￦	1,701,581			1,667,837

Other receivables: (overdue, not impaired)		60,009			24,878

Less than 60 days		60,009			24,878

Other receivables: (impairment reviewed)		144,305			122,967
60 ~ 90 days		11,610			17,507
90 ~ 120 days		2,745			1,880
120 days ~ 1year		42,678			23,996
Over 1 year		87,272			79,584

		1,905,895			1,815,682


Less allowance for doubtful accounts		(81,169	)		(69,887	)
Less present value discount		(8,987	)		(8,235	)


	￦	1,815,739			1,737,560

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

8.	Trade and Other Receivables, Continued

(5)

Changes in the allowance for doubtful accounts for the three-month period ended March 31, 2014 and for the year ended December 31, 2013 are as follows:


In millions of won	March 31, 2014						December 31, 2013
	Trade receivables			Other receivables			Trade receivables			Other receivables

Beginning balance	￦	65,024			69,887			47,312			225,078
Bad debt expense		501			11,870			40,446			8,665
Write-offs		(2,346	)		(2,091	)		(22,734	)		(4,227	)
Reversals		—			—			—			—
Others (*)		—			1,503			—			(159,629	)


Ending balance	￦	63,179			81,169			65,024			69,887

(*)	The allowance against loans to equity method investments which were reversed when the loans were converted to investment in associates.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

9.	Available-for-sale Financial Assets

Available-for-sale financial assets as of March 31, 2014 and December 31, 2013 are as follows:


In millions of won	Ownership			March 31, 2014		December 31, 2013
Equity securities

Listed

Kwanglim Co., Ltd.(*1)		0.44	%	￦	159		150
Sungjee Construction Co., Ltd.(*1)		0.01	%		8		7
Korea District Heating Corp.		19.55	%		154,183		194,710
Ssangyong Motor Co., Ltd.(*1)		0.03	%		337		291
LG Uplus Corporation		8.80	%		401,377		412,901
Fission Uranium Corp.(formerly named Fission)		0.52	%		1,300		848
Denison Mines Corp.		12.62	%		91,866		74,498
Energy Fuels INC		9.06	%		17,054		10,307
PT Adaro Energy Tbk		1.50	%		44,406		45,204
Cockatoo Coal Limited (*2)		1.20	%		1,825		1,875
Namkwang Engineering & Construction Co., Ltd		0.01	%		5		5

Byucksan Engineering & Construction Co., Ltd		0.00	%		1		1

Dongyang Engineering & Construction Corp.		0.01	%		4		5

Pumyang Construction Co., Ltd.		0.00	%		2		3

Korea Line Corp.		0.00	%		—		—

					712,527		740,805

Unlisted
Construction Guarantee		0.02	%		781		790
Global Dynasty Overseas Resource Development Private Equity Firm		7.46	%		1,681		1,517
Plant & Mechanical Contractors Financial Cooperative of Korea		0.01	%		36		36
Dongnam Co., Ltd.		0.46	%		72		72
Mobo Co., Ltd.		0.00	%		14		14
Fire Guarantee		0.02	%		20		20
Korea Software Financial Cooperative		0.18	%		301		301
Woobang ENC Co., Ltd.		0.00	%		22		22
Women’s Venture Fund		10.00	%		780		780
Engineering Financial Cooperative		0.11	%		60		60
Intellectual Discovery, Ltd.		9.13	%		5,000		5,000
Electric Contractors Financial Cooperative		0.03	%		152		152
Korea Specialty Contractor Financial Cooperative		0.01	%		417		417
Information & Communication Financial Cooperative		0.03	%		10		10
Troika Overseas Resource Development Private Equity Firm		3.66	%		11,104		10,664
Poonglim Industrial Co., Ltd.		0.01	%		78		78
Woori Ascon Co., Ltd.		0.34	%		10		10
HANKOOK Silicon Co., Ltd.		11.82	%		7,513		7,513
LIG E&C Co., Ltd.		0.00	%		5		5
Miju Steel Mfg Co., Ltd.		0.23	%		51		51

Ginseng K Co., Ltd.		0.08	%		8		8

Dae Kwang Semiconductor Co., Ltd.		0.07	%		6		6

Sanbon Department Store		0.01	%		124		124

SAMBO AUTO. Co., Ltd.		0.02	%		38		38

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

9.	Available-for-sale Financial Assets, Continued

Available-for-sale financial assets as of March 31, 2014 and December 31, 2013 are as follows, continued:


In millions of won	Ownership			March 31, 2014		December 31, 2013

Korea Bio Fuel Co., Ltd.		15.00	%	￦	1,500		1,500
Korea Electric Engineers Association		0.26	%		61		61
Korea Investment—Korea EXIM Bank CERs Private Special Asset Investment Trust		14.18	%		6,803		6,803

Hanwha Electric Power Venture Fund		16.40	%		1,804		1,804

Hwan Young Steel Co., Ltd.		0.14	%		97		97

IBK-AUCTUS Green Growth Private Equity Firm		6.30	%		6,054		6,054
K&C- Gyeongnam Youth Job Creation Investment Fund		10.00	%		1,340		1,340

Areva Nc Expansion		13.49	%		250,528		248,292

Green & Sustainable Energy Investment Corp.		19.58	%		13		13

Kanan Hydroelectric Power Corp.		19.58	%		18		17

Set Holding		2.50	%		170,514		170,514

Siam Solar Power		10.00	%		945		933

3i Powergen Inc.		15.00	%		1,492		1,486

PT. Kedap Saayq		10.00	%		18,540		18,540

Navanakorn Electric Co., Ltd. (*3)		29.00	%		16,370		16,163
Pumyang Assetmanagement Co. Ltd.		0.00	%		3		—
BnB Sungwon Co., Ltd		0.01	%		15		—
Hana		0.00	%		1		—

					504,381		501,305

Debt securities
Ambre Energy Limited					15,824		14,655


				￦	1,232,732		1,256,765

(*1)

It has been determined that available-for-sale financial assets were impaired because the fair values of the securities of Kwanglim Co., Ltd., Ssangyong Motor Co., Ltd. and Sungjee Construction Co., Ltd. declined below their respective acquisition costs during the prior year. As such, cumulative losses of ￦415 million previously recognized in other comprehensive loss were reclassified to impairment losses on available-for-sale financial assets for the year ended March 31, 2014.

(*2)

The fair value of Cockatoo Coal Limited securities declined significantly below the acquisition cost and the cumulative losses of ￦12,177 million previously recognized in other comprehensive loss were reclassified to impairment loss on available-for-sale financial assets for the the year ended March 31, 2014.

(*3)	Although the Company holds more than 20% of the equity shares of these investments, the Company cannot exercise significant influence.

Book values of unlisted equity securities held by the Company that were measured at cost as of March 31, 2014 and December 31, 2013 are ￦333,086 million and ￦330,001 million, respectively, as a quoted market price does not exist in an active market and its fair value cannot be measured reliably.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

10.

Held-to-maturity Investments

Held-to-maturity investments as of March 31, 2014 and December 31, 2013 are as follows:

In millions of won

March 31, 2014

December 31, 2013

Current

Non-current

Current

Non-current

Government and municipal bonds and others

￦

133

2,072

168

2,117

11.

Derivatives

(1)

Derivatives as of March 31, 2014 and December 31, 2013 are as follows:


In millions of won	March 31, 2014				December 31, 2013
	Current		Non-current		Current		Non-current
Derivative assets
Currency option	￦	2,402		—		963		—
Currency forward		686		30		474		206
Currency swap		—		108,096		—		83,003
Interest rate swap		—		1,220		—		1,848

	￦	3,088		109,346		1,437		85,057

Derivative liabilities
Currency option	￦	3,341		—		42,144		—
Currency forward		244		1		2,166		—
Currency swap		265,076		196,316		291,476		289,819
Interest rate swap		1,654		59,993		1,947		72,923

	￦	270,315		256,310		337,733		362,742

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

11.

Derivatives, Continued

(2)

Currency option contracts which are not designated as hedge instruments as of March 31, 2014 are as follows:

(i) Target Redemption Forward

In won and thousands of U.S. dollars

Financial institution

Contract year

Position

Contract amount

Contract
exchange rate

Target
profit

Standard Chartered

2014.01.09 ~ 2015.01.02

SELL

USD 6,000

￦

1,087.10

￦ 250

Barclays Bank PLC

2014.01.10 ~ 2015.01.02

SELL

USD 3,000

1,086.40

250

Credit Suisse

2014.01.08 ~ 2014.12.31

SELL

USD 5,000

1,086.70

250

Morgan Stanley

2013.09.11 ~ 2014.05.07

BUY

USD 10,000

1,072.90

Morgan Stanley

2013.10.21 ~ 2014.12.29

BUY

USD 3,000

1,047.00

Morgan Stanley

2013.08.19 ~ 2014.08.18

BUY

USD 3,000

1,089.40

200

The Company enters into currency option contracts to buy or sell currency at a specified exchange rate during a specified period of time to hedge currency exchange risk from flaming coal purchase payments. Every week, the Company compares the target profit to the accumulated total profit or loss from the difference between the contract exchange rate and average exchange rate. When the target profits are achieved, the contracts will be automatically terminated.

(ii) European Knock-Out


In millions of won and thousands of U.S. dollars
Financial institution	Contract year		Contract amount				Contract exchange rate		Barrier
Financial institution	Contract year		Pay		Receive		Contract exchange rate		Barrier
Barclays Bank PLC		2013.10.11 ~ 2014.04.07		9,884		USD 9,317	￦	1,060.90	￦	1,130.00
Barclays Bank PLC		2013.10.29 ~ 2014.04.24		11,250		USD 10,689		1,052.50		1,100.00
Barclays Bank PLC		2013.12.13 ~ 2014.05.08		8,472		USD 8,121		1,043.20		1,100.00
Barclays Bank PLC		2014.01.14 ~ 2014.06.11		4,309		USD 4,094		1,052.70		1,110.00
Barclays Bank PLC		2014.01.20 ~ 2014.07.02		12,780		USD 12,048		1,060.80		1,120.00
Barclays Bank PLC		2014.01.20 ~ 2014.06.12		11,180		USD 10,561		1,058.60		1,120.00
Barclays Bank PLC		2014.01.20 ~ 2014.04.15		13,129		USD 12,344		1,063.60		1,120.00
Barclays Bank PLC		2014.01.20 ~ 2014.07.02		4,644		USD 4,395		1,056.60		1,120.00
Korea Exchange Bank		2013.10.22 ~ 2014.04.17		5,816		USD 5,516		1,054.40		1,110.00
Korea Exchange Bank		2013.12.16 ~ 2014.06.11		18,335		USD 17,664		1,038.00		1,100.00
Korea Exchange Bank		2014.01.14 ~ 2014.07.10		11,661		USD 11,121		1,048.60		1,110.00
Korea Exchange Bank		2014.01.15 ~ 2014.06.11		10,906		USD 10,343		1,054.40		1,110.00
Korea Exchange Bank		2014.01.20 ~ 2014.07.16		17,392		USD 16,488		1,054.80		1,110.00
Credit Suisse		2013.10.28 ~ 2014.04.24		10,142		USD 9,619		1,054.40		1,110.00
RBS		2013.11.23 ~ 2014.04.21		5,853		USD 5,546		1,055.20		1,110.00
RBS		2014.01.21 ~ 2014.06.18		14,414		USD 13,596		1,060.20		1,120.00

Contracts are entered to hedge the currency risk arising from foreign short-term borrowings. The contracts will be automatically cancelled if the market average exchange rate at maturity date is above the barrier.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

March 31, 2014

(Unaudited)

11.

Derivatives, Continued

(3)

Currency forward contracts which are not designated as hedge instruments, as of March 31, 2014 are as follows:


In millions of won and thousands of foreign currencies
Counterparty	Contract Date	Maturity date	Contract amounts				Contract exchange rate
Counterparty	Contract Date	Maturity date	Pay		Receive		Contract exchange rate

Korea Exchange Bank	2014.03.13	2014.04.17		13,771		12,879		1,069.27
Korea Exchange Bank	2014.03.06	2014.04.10		4,059		3,803		1,067.35
The Bank of Nova Scotia	2014.03.27	2014.04.30		5,369		5,000		1,073.70
The Bank of Nova Scotia	2014.03.27	2014.04.21		10,748		10,000		1,074.75
The Bank of Nova Scotia	2014.03.31	2014.04.03		3,218,710		3,022		1,064.95
Standard Chartered	2014.03.27	2014.04.21		USD 10,000		10,747		1,074.65
RBS	2014.03.27	2014.04.21		USD 10,000		10,747		1,074.65
Barclays Bank PLC	2014.03.27	2014.04.21		USD 8,000		8,582		1,072.80
Barclays Bank PLC	2014.03.31	2014.04.01		USD 2,175		2,319		1,066.05
Citibank	2014.03.31	2014.04.21		USD 5,000		5,333		1,066.69
RBS	2014.03.28	2014.04.03		5,341		USD 5,000		1,068.21
RBS	2014.03.31	2014.04.10		5,331		USD 5,000		1,066.26