Korea Electric Power Management Discusses Q1 2012 Results - Earnings Call Transcript

Korea Electric Power Corporation (KEP)

Q1 2012 Earnings Call

May 17, 2012 3:30 AM ET

Executives

Chang-Keun Shin – VP, Treasury Department

Cecilia Oh – Senior Manager, IR

Presentation

Operator

[Foreign Language – Korean]

[Interpreted]

Good morning and good evening. First of all, thank you all for joining this conference call, and now we will begin the conference of the fiscal year 2012 first quarter earnings results by KEPCO. This conference will start with a presentation, followed by a brief Q&A session. (Operator instructions)

Now we shall commence the presentation on the fiscal year 2012 first quarter earnings results by KEPCO.

Cecilia Oh

[Foreign Language – Korean]

[Interpreted]

Good afternoon. This is the Cecilia Oh, senior manager of KEPCO’s IR team. On behalf of KEPCO, I would like to thank you all for participating in today’s conference call.

[Foreign Language – Korean]

[Interpreted] I will begin with a brief presentation on our earnings results, which will be followed by a Q&A session. Today’s call will be proceeded in both Korean and English. Please note that the financial information that we show today is a preliminary, unaudited, unconsolidated basis in accordance with IFRS. Any comparison will be on a year-on-year basis between the first quarter of 2011 and 2012.

Business, strategies, plans, financial estimates, and other forward-looking statements included in today’s call will be made based on our current expectations and plans. Please be noted that such statements may involve certain risks and uncertainties.

[Foreign Language – Korean]

[Interpreted] Now let me begin with an overview of our earnings results, first in Korean and repeated in English.

[Foreign Language – Korean]

[Interpreted] Now we will provide the overview in English starting with operating income. In the first quarter of 2012, KEPCO reported a net operating loss of KRW 105 billion, which improved KRW 370 billion compared to operating loss of KRW 476 billion in 2011.

Our continued operating loss 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 related to increases in power sales revenues from tariff hikes, and increases in power sales volume.

Taking a closer look, operating revenue rose 23.2% to KRW 13.3 trillion, power sales revenue increased 20.9% totaling in KRW 12.5 trillion. This increase was attributable mainly to 12.2% increase in unit tariff, 2.5% power sales volume growth, driven by increase in demand from the industrial sector, as well as recognition of account receivables related to the fuel cost adjustment announced.

Moving on to main operating costs, COGS, selling and administrative expenses went up 18.8% to KRW 13.6 trillion, of which fuel costs jumped 16.6% to KRW 6.9 trillion, primarily due to 0.6% increase in power generation, affected by increased power demand or a 15.9% hike in unit cost of fuel such as coal and LNG. Meanwhile, purchased power cost surged 41% to KRW 2.9 trillion. Such rise is attributable to 21.7% increase in unit cost of purchased power and 15.9% 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 non-financial loss stood at KRW 428 billion in the first quarter of 2012, which is KRW 151 billion up, compared to KRW 277 billion in 2011. This was mainly due to the income expense, which went up 9.8% to KRW 551 billion in [inaudible], and increase in interest bearing debt, and a decrease in FX gain [ph] and pacified the present decline in FX rate in 2012.

We had KRW 66 billion income tax expense, which was KRW 131 billion rise compared to the year before, mainly due to a raise in corporate tax rate and improved net income of our subsidiary. As a result of the foregoing, we recorded consolidated net loss of KRW 538 billion in 2012, with slightly improved by KRW 12 billion, from net loss of KRW 550 billion in 2011.

This concludes the overview of KEPCO’s earnings results for the first quarter of 2012.

[Foreign Language – Korean]

[Interpreted] Now, let me move on to the Q&A session.

[Foreign Language – Korean]

[Interpreted] I am joined with the IR committee members, in charge of finance, tariff, overseas business et cetera. We are prepared to take any questions.

[Foreign Language – Korean]

[Interpreted] Since we will proceed in both Korean and English, all the Q&As will be interpreted. Please ensure your questions and answers are brief and clear.

[Foreign Language – Korean]

[Interpreted] Please begin with your questions.

Question-and-Answer Session

Operator

[Foreign Language – Korean]

[Interpreted]

Now Q&A session will begin. (Operator instructions)

Operator

[Foreign Language – Korean]

[Interpreted]

The first question will be given by [inaudible]. Please go ahead sir.

Unidentified Analyst

[Foreign Language – Korean]

[Interpreted]

Yes, I have 4 questions. The first one is in the operating losses, the accounts receivables were reflected, or will we have to add-on additionally the accounts receivable to come up with the total operating loss. The second question is can you give us the figures segregated by month from the month of January to March. Third question is specifically for the month of March we see that the S&P prices have been increased, is this possibly due to the interrupted operations of Kori-1 unit and the [inaudible] nuclear power plant unit IV, and that caused the power purchase to be increased in volume, and therefore costing up the price. The fourth question is in terms of sales related costs, could you give us a segregated figure for the sales and administrative costs, SG&A costs?

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