Korea Electric Power Corporation ( KEP) Q3 2011 Earnings Call November 16, 2011 3:00 AM ET Executives Chang-Keun Shin – VP, Treasury Department Changyoung Ji – Senior Manager, IR Analysts Geoffrey Boyd – CLSA Presentation Operator
Taking a closer look, operating revenues rose 9.6% to KRW31.6 trillion. Power sales revenue, the principal component of our operating revenues, went up by 8.2% totaling KRW29.9 trillion. This increase is attributed mainly to the overall average tariff increase of 3.5% in August 2010, and 4.9% in August 2011 as well as 5.6% growth in power sales volume, which was caused by increased demand (inaudible). Operating expenses witnessed a 15.3% rise in the third quarter of 2011 compared to the same period last year, recording KRW21.9 trillion.KEPCO’s total operating expenses, fuels costs increased 14.8% year-on-year to KRW15.8 trillion in the third quarter of 2011. The rise in fuel costs can be attributed to a 1.2% increase in power generation due to rising power demand and a 13.6% jump in unit cost of fuel such as coal and LNG. At this time, I will explain KEPCO’s financial income and expenses. The company’s net financial loss for the third quarter of 2011 was KRW1.7 trillion, an increase of 23.4% compared to the KRW1.4 trillion net loss in the third quarter of 2010. This is attributable to increase in interest payments and increase in FX related loss. [Foreign Language – Korean] Equity net income of KEPCO affiliates totaled KRW118 billion, an increase of KRW52 billion over the KRW66 billion recorded in the third quarter of 2010. This is primarily attributable to a significant rise in net income from our overseas affiliates which recovered from a KRW17 billion net loss in the third quarter of 2010, to a KRW70 billion net income in the third quarter of 2011. As a result of the above factors, we recorded a net loss of KRW1.37 trillion for the third quarter of 2011 as compared to a net loss of KRW185 billion for the third quarter of last year. This concludes my overview of KEPCO’s earnings results for the third quarter of 2011.
Today’s Q&A session will be held by Mr. Chang-Keun Shin, Vice President of KEPCO’s Treasury Department.Chang-Keun Shin This is Chang-Keun Shin again. Today I am joined by KEPCO’s IR members in-charge of finance, tariffs and overseas businesses. At this time we are prepared to take any questions you may have. Question-and-Answer Session Operator Now Q&A session will begin. (Operator Instructions) The first question will be given by Geoff from CLSA. Please go ahead sir. Geoffrey Boyd – CLSA Yes, thank you for taking the time to do this call. Thank you very much. Just a quick question on the interest expense, I wasn’t clear on the Excel file you sent around, but how much are you capitalizing of the interest, like in the past I think it was around 19% last year, but do you know what percentage is being capitalized this year? Unidentified Company Representative [Foreign Language – Korean] Unidentified Company Representative [Interpreted] Unfortunately we don’t have the exact numbers with us, so please let us go back and check and get back to you at a later time. Geoffrey Boyd – CLSA Okay, thanks. And are you able to give us the updated view on 2011 in terms of your expectations for the full-year in terms of fuel expense and power purchased expense? Unidentified Company Representative [Foreign Language – Korean] Unidentified Company Representative [Interpreted] Talking about the first fuel cost by the end of this year, the total cost we forecast to be KRW21.780 billion. This is a 14.7% year-over-year increase. Read the rest of this transcript for free on seekingalpha.com