Now let me begin with an overview of our earnings results, first in Korean and repeated in English.
[Foreign Language – Korean]
Now we will provide the overview in English starting with the operating income. In the second quarter of 2012, KEPCO reported a net operating loss of KRW1.96 trillion, the amount of loss of which increased KRW1.76 trillion compared to operating loss of KRW798 billion in 2011.
Deterioration in operating gloss was mainly due to increases in operating expenses, such as fuel cost and power purchase cost, which were not fully offset by increases in operating revenues from increase in power sales revenues due to tariff hikes, and increases in power sales volume.
Taking a closer look, operating revenues increase 16.4% to KRW10.6 trillion, power sales revenue increased 16.7% totaling in KRW9.9 trillion. This increase was attributable mainly to 10.5% increase in unit tariff, 2.6% growth in power sales, driven by increase in demand from the industrial sector, as well as recognition of account receivables related to the fuel cost adjustment system.
Moving on to main operating costs, COGS, selling and administrative expenses went up 25.9% to KRW12.7 trillion. Fuel costs accounted for the major reason of the jump which went up 30.1% to KRW6.3 trillion, primarily due to 2.3% increase in power generation volume, affected by increased power demand and 2.1% and 29.3% hike in unit cost of fuel costs such as coal and LNG respectively. Meanwhile, purchased power cost surged 95.5% to KRW2.9 trillion. Such rise is attributable to 35.6% increase in unit cost of purchased power and 17.7% hike in purchased power volume due to rising power demand.
Now let me explain KEPCO’s financial income and expenses in the non-operating segment. Our net financial loss stood at KRW492 billion in the second quarter of 2012, which slightly improved compared to KRW511 billion loss in 2011. This was mainly a result of increases in net FX related gain including translation and transaction related gain and increases in financial derivate gain. The interest expense was up 3.8% to KRW575 billion. Due to increased amount of pretax loss in 2012, income tax expense increased minus KRW374 billion from minus KRW223 billion in 2011 to minus KRW597 billion in 2012.