Korea Electric Power Corporation Sponsored ADR Aktie

Good morning, and good evening. First of all, thank you all for joining this conference. And now we will begin the conference of the fiscal year 2025 fourth quarter earnings resulted by KEPCO. This conference will start with a presentation followed by a divisional Q&A session. [Operator Instructions]

Now we shall commence the presentation on the fiscal year 2025 fourth quarter earnings resulted by KEPCO.

[Interpreted] Good afternoon. This is Siyung Yang, Head of Finance Department of KEPCO. I'd like to thank you all for participating in today's conference call for the business results of the fourth quarter of 2025 despite your busy schedule. Today's call will be conducted in both Korean and English. We will begin with a brief presentation of the earnings results, which will be followed by a Q&A session.

Please note that the financial information to be disclosed today is preliminary consolidated IFRS figures and all comparison is on a year-over-year basis unless stated otherwise. Also, business plans, targets, financial estimates and other forward-looking statements mentioned today are based on our current targets and forecasts.

Please be noted that such statements may involve investment risks and uncertainties. Now we will begin with an overview of the earnings results for the fourth quarter of 2025 in Korean, which will be then consecutively translated into English.

[Interpreted] I will first go over the operating items. The consolidated operating income in 2025 stood at KRW 13,524.8 billion. Revenue increased by 4.3% to KRW 97,434.5 billion. Power sales increased by 4.6% to KRW [indiscernible] billion. Overseas business and other revenue decreased by 1.8% to KRW 4,429.9 billion. Cost of goods sold and SG&A decreased by 1.3% to KRW 83,909.7 billion. Fuel costs decreased by 13.8% to KRW 19,036.4 billion and purchase power costs decreased by 1.8% to KRW 34,052.7 billion. Depreciation expense increased by 2.3% to KRW 11,667.8 billion.

Next, I will go over the nonoperating items. Interest expense decreased by KRW 325.6 billion Y-o-Y to KRW 4,339.5 billion. As a result of the foregoing, the 2025 consolidated annual operating income stood at KRW 13,524.8 billion, and net income was KRW 8,007.2 billion.

[Interpreted] Good afternoon. I am Taeseop Eom, Head of IR team. Now I will go over the matters of interest. First, I will talk about the performance of power sales and its outlook for the remainder of the year. Annual power sales volume due to economic downturn and as a result of that, given the industrial demand has decreased. The total sales volume was 549.4 terawatt hour, which is a 0.1% decrease Y-o-Y. In 2026, the economic growth rate and number of operating days increase should lead to a slight increase in the total sales volume.

[Interpreted] Next, I will go over the fuel price by fuel source and S&P trends. In 2025, if you look at the annual trend of the fuel prices for bituminous coal Australia, the price was around $105.7 per ton. For LNG, JKM was KRW 980,000 per ton and the S&P was around KRW 112.7 per kilowatt hour.

[Interpreted] Next, I will go over the [indiscernible] company. If you look at the annual 2025 generation mix, the capacity factor of nuclear power increased and thus, its contribution to the mix increased as well. For coal, the capacity factor increased and thus, the contribution in the generation mix increased. For LNG, the installed capacity decreased. And due to the increase of baseload power generation, the contribution to the mix decreased.

For 2026 on annual basis, we expect the contribution of nuclear power to increase, coal to decrease and LNG should largely remain flat. In 2026, the capacity factor for each fuel source should be as follows: nuclear power around mid- to high 80%, coal around mid-40% and LNG should be around early to mid-20%.

[Interpreted] Next, I will go over the RPS cost. In 2025, annual RPS expense on a consolidated basis was KRW 3,989.7 billion. And on a stand-alone basis, it was KRW 4,818.8 billion. Last, I will go over the funding situation. As of 2025 Q4, consolidated total borrowings was KRW 129.8 trillion. And on a stand-alone basis, it was KRW 84.9 billion.

[Interpreted] Now we will move on to the Q&A session. Since we will be conducting the Q&A session in both Korean and English, please make your questions and answers clear and brief.

[Interpreted] [Operator Instructions] The first question will be given by Jong Hwa Sung from Securities.

[Interpreted] I am from LS Securities and my name is Jong Hwa Sung. Please understand my sore throat today. I have 2 questions. Number one, it's about the contribution of the nuclear power generation in the generation mix. So I think largely fuel cost and power purchase cost was in line with expectations. But nevertheless, the operating income was underperforming expectations by around KRW 1 trillion. I think this is largely because of other costs.

I think other cost was around KRW 1.2 trillion higher than what we expected. I believe this is mainly coming from the recovery of nuclear power generation sites and costs associated to carbon and greenhouse gases. it seems that these cost items were concentrated in Q4 in 2025. However, if you look at other years, sometimes it's booked in Q2, sometimes it's booked in Q4. And so the seasonality is not stable. So on an annual basis, how much do you expect these other cost items to be generated or incurred every year?

And then second is about the contribution of the nuclear power generation. So in Q4 2025, on a Y-o-Y basis, I think the nuclear power generation contribution went down by around 6%, which is unusual given that for the first 3 quarters of 2025, nuclear power generation contribution was higher than that. So when you say -- or you said in your keynote that the contribution of nuclear power will probably increase in 2026. Is it compared to Q4 2025? Or is it compared to the first 3 quarters of 2025? In other words, in Q4 2026, will nuclear power generation contribution be slightly higher or significantly higher than 2025 Q4?

[Interpreted] Yes. So I will first address your first question regarding the other cost. So the provisions related to greenhouse gas emissions went up by around KRW 120.6 billion to KRW 340.6 billion. As for the provisions regarding the nuclear -- provisions regarding the recovery of the nuclear power generation sites, it went up by KRW 411.2 billion, resulting in a negative KRW 4.6 billion. So there was actually write-backs. As to the exact timing of when we book these type of provisions and costs, I think we will discuss internally, and I'll get back to you later on.

[Interpreted] Yes. Regarding your second question, we mentioned that the capacity factor for nuclear power should be around mid- high 80% on an annual basis. So maybe towards the end or early part of the year, the capacity factor may seem lower than that. But on an annual basis, I believe that it will be higher, especially given that we have nuclear power plants who are going through and completing its preventive maintenance process, which should come back online. And also the addition of new power plants should add to the higher capacity factor of nuclear power in 2026.

[Interpreted] The following question is by Kyeong Won Moon from Meritz Securities.

[Interpreted] My name is Kyeong Won Moon from Meritz Securities, and I have 3 questions today. One, if you compare the consolidated operating income of Q3 and Q4 and the stand-alone operating of the 2 quarters, I believe that the stand-alone operating income is relatively higher numbers or relatively better -- showed better performance. I believe this is largely driven by the adjustment coefficient. So is that the main reason? What is the main reason behind this? And what would be your expected adjustment coefficient for Q1 2026?

My second question is regarding the before tax profit. So compared to the operating income, the before tax profit seemed to have performed quite strongly, both for consolidated and stand-alone numbers. What would be the reason behind this? Were there any one-off P&L items in other categories like the finance and other businesses?

My third question is related to the dividends. So I believe that -- so the dividend was just announced. And if you look at the dividend payout on the stand-alone net income basis, it seems that it actually decreased compared to last year. So how did you come to this DPS number? What is the logic behind that? And what would be your expectation or outlook for the dividend payout of 2026? Do you think it will be higher than 2024 and 2025?

[Interpreted] Yes. So regarding your first question, it may seem that the stand-alone profits are stronger than the consolidated numbers because there are some costs associated with our subsidiaries, which is booked under consolidated financial statements, but not on our stand-alone numbers.

[Interpreted] Regarding the adjustment coefficient, in Q4 last year, the numbers were slightly higher than previous average quarters.

[Interpreted] And the coefficient for 2026, we expect to be slightly higher than 2025.

[Interpreted] And regarding your question comparing the operating income and the before tax income. So for our subsidiaries, there were some lease liabilities that could not be hedged due to the decrease in the FX rates. And so because of the FX -- in the process of the FX conversion, there were some valuation losses and gains that needed to be booked that impacted the numbers.

[Interpreted] And regarding your question on dividends. So last year, the payout was 16.5%. And this year, it was 13.65%. So like you mentioned, it did decrease. However, I'd like to note that the size of the net income on a stand-alone basis increased significantly. So the absolute amount of dividends that were paid out will increase. And DPS also increased to around KRW 1,541 per share. As for 2026, as you know, we are subject -- we are a public corporation and subject to the relevant legislations, we need to discuss the dividend strategy with government departments. So at this point, unfortunately, we are not able to comment on the direction of 2026 dividends.

[Interpreted] The following question is by Jaeseon Yoo from Hana Securities.

[Interpreted] I am Jaeseon Yoo from Hana Securities, and I have 4 questions. My first question is provisional liabilities related to used fuel -- used nuclear fuel. So in January, I read news that the unit price has gone up. And so maybe can you give us a little bit more color on this topic? And my second question is also related to this as well. What was the total amount of the used nuclear fuel-related provisional liabilities booked by KHNP in Q4 2025?

And third, there was a 15% decrease -- price decrease that was subject to a grace period, and that grace period is coming to an end. I believe, therefore, the bituminous coal price can go up. So what would be the associated cost that you are expecting in regards to the end of the grace period? And fourth is related to the bond issuance limit. So what would be the outstanding amount of bonds issued? And how much room do you have in comparison to the cap?

[Interpreted] I'll try to address your first 2 questions at once. So the provisional liabilities that were booked for the recovery of nuclear power sites was KRW 904.5 billion -- increased by KRW 904.5 billion to KRW 24,769 billion. As for the used nuclear fuel, it decreased by KRW 178.4 billion to KRW 2,745.3 billion. And as for the mid- and low level nuclear waste associated provisions and liabilities, it went up by KRW 10.2 billion to KRW 1,077.2 billion.

[Interpreted] As for your third question regarding the grace period of the individual consumption tax coming to an end and how that would impact our cost. So we do have an internal estimate, but unfortunately, we are not able to disclose those numbers to the public in the market. So we ask for your understanding.

[Interpreted] Yes. And regarding your final question on the bond issuance cap. So that can -- the final exact number can be calculated after the dividend is finalized at the Board and shareholders' meeting. But we believe that it will be something around just over 3x once all of those dividend-related activities are finalized.

[Interpreted] Currently, there are no participants with questions. [Operator Instructions] The following question is by Jong Hwa Sung from LS Securities.

[Interpreted] I have 2 questions. First is regarding the nuclear power generation export strategy. So I believe that there is a process currently ongoing to streamline the Korean nuclear power generation export strategy. So maybe can you elaborate a little bit on how that is moving forward?

And second, I believe that there is some court case in the international mediation courts by KHNP regarding the additional KRW 1.4 trillion construction cost that was incurred during the BNPP construction project. Has that been already reflected in the financial statement? And if so, if KHNP is able to recover the cost from the UAE government, will that have impact on the financial statements?

[Interpreted] Yes. I will address your first question regarding the export of nuclear power plants of Korea. And so we are -- I believe that the research project has been outsourced by the Ministry of Industry, and they are currently waiting for the results. KEPCO, of course, will be closely cooperating with the government to ensure that high-quality nuclear power plant export strategy can be developed to maximize and satisfy the global customers.

[Interpreted] Yes. And your second question regarding the dispute between KEPCO and KHNP. So we are currently in conversation and negotiation with them. And I think both parties are making utmost effort to resolve this conflict in a stable manner. However, please understand that we are not able to disclose any specific numbers.

[Interpreted] The following question is by Yoon Cho from UBS.

[Interpreted] I have 3 questions. One is regarding the tariff. So the press recently has reported that there may be some differentiated price scheme applied to industrial power. And currently, you are thinking of, for example, different pricing per time or offering weekend discounts for the industrial use. There are also talks about regional pricing schemes for the industrial power. And these elements have been mentioned by the Minister of Climate, Energy and Environment. So can you elaborate or give us a little bit more color on these schemes? How do you think it will impact the average unit price of power, overall? And when do you think that these new schemes can be introduced?

My second question is regarding to your comments earlier today. You mentioned that in Q4, there were some cost associated subsidiaries that were booked. Were there any unusual one-offs that we should be aware of? And my third question is about the SG&A cost. What was the exact amount consolidated basis for Q4?

[Interpreted] Regarding your first question, with the increase of the solar PV power generation, the overall load patterns are changing. And to reflect this change, we are currently developing seasonal and -- seasonal pricing schemes and also different pricing schemes for time period. We are also considering the balanced growth of the overall national economy and regions and also working to distribute or disperse the power demand nationwide. And these are the reasons why we are also developing a new pricing scheme that can better reflect the regional situations and regional demand.

We are working closely with the central government to develop a reasonable and rationable new pricing scheme, reflecting all of these elements. However, as to its impact on unit price and the exact time line, I believe it's a little bit early. We are also listening to the opinion of the corporates and overall business and industry community as well. So once we have a better idea on the specifics of this matter, then I think we can disclose some other information. But currently, we are under close negotiation and discussion with the government.

[Interpreted] And regarding your second question, I think all we can say at this point about the cost booked by subsidiary is that it is related to overseas businesses.

And as for your final question regarding consolidated SG&A cost. So currently, we are in the process of closing the books. And so we do not have the final exact numbers right now. But once the audit report is released, the number will be included in the financial statements.

[Interpreted] The following question is by [indiscernible] from JPMorgan.

[Interpreted] I only have one question. I believe that in the past, there were some discussions on reflecting the individual elements in the fuel cost of the ASP. So have you continued those discussions? Do you have any updates that you can share with us?

[Interpreted] Can you please elaborate on that question, please?

[Interpreted] Yes, I believe currently, when the tariffs are determined, KEPCO would make a proposal to the government, maybe around plus/minus 51. And ultimately, the government would make the decision. However, I believe that there were some discussions on finding the legal mechanism to ensure that the cost pass-through system can work like other utility companies outside of Korea. And so if the fuel cost would go up, this would naturally be reflected in the tariffs through the cost pass-through mechanism. So I was wondering if there were any progress in those discussions with the government.

[Interpreted] Yes. So currently, we have implemented -- we have in place the cost pass-through system. So on a quarterly basis, the fuel prices are reflected in the tariffs. But we are also working to improve how it is being implemented. We are discussing with the government and listening to the voices of the related parties and industries to find ways to further improve the cost pass-through system going forward.

[Interpreted] Currently, there are no participants with questions. [Operator Instructions] [Interpreted] As there are no further questions, we will now end the Q&A session. If you have any questions -- additional inquiries, please contact our IR department. This concludes the fiscal year 2025 fourth quarter earnings resulted by KEPCO. Thanks for the participation.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

[Interpreted] Good morning, and good evening. First of all, thank you all for joining this conference call. And now we'll begin the conference of the fiscal year 2025 third quarter earnings results by KEPCO. [Operator Instructions].

Now we shall commence the presentation on the fiscal year 2025 third quarter earnings results by KEPCO.

[Interpreted] Good afternoon. I am Jong Taek Lee, Head of the Finance team at Korea Electric Power Corporation. We sincerely thank you all for joining us for KEPCO's Q3 2025 earnings conference call despite your busy schedule. Today's conference call will be conducted in both Korean and English. And after a brief earnings presentation, we will proceed to a Q&A session.

The figures presented today are preliminary based on IFRS consolidated standard, and all comparisons are made year-over-year unless otherwise stated. Please also note that any management plans, targets and estimated financial figures mentioned during the call reflect our current outlook and are subject to uncertainty and investment risk.

We now present the Q3 2025 profit and loss details in Korean and then provide the same content in English.

[Interpreted] Good afternoon. This is Siyung Yang, Head of the IR team. Let us begin by reviewing the operating profit. The consolidated operating profit for Q3 of 2025 is KRW 11,541.4 billion. If you look into the details, sales revenue was KRW 73,746.5 billion, up by 5.5%. Of this, electricity sales revenue posted KRW 70,631.6 billion, accounting for 5.9%. And other revenue, including overseas business income recorded KRW 3,114.9 billion, down by 0.9%.

Cost of sales and SG&A expenses totaled [ KRW 52,205.1 billion ], down by 2.7%. Among these, the fuel cost is KRW 14,826 billion, down by 16%. And power purchase cost is KRW 26,606.3 billion, down by 0.8% affected by fuel price changes. Depreciation expenses came to KRW 834.4 billion, increasing by 3.5%. Among the nonoperating items, interest expense is down Y-o-Y by KRW 143.5 billion to post KRW 3,279.4 billion. Based on the factors mentioned, Q3 2025 consolidated operating profit was KRW 11,541.4 billion, and net profit for the period was KRW 7,328.1 billion.

[Interpreted] Good afternoon. This is Taeseop Eom, Senior IR Manager of the IR team. I will now go over the key points of interest. First, on electricity sales, performance and outlook. Electricity sales volume in Q3 reached 419.9 terawatt hours, up 0.4% Y-o-Y due to mostly the summer heat wave, among other factors. For the full year of 2025, we project sales to go down slightly due to the impact of lower economic growth rate and also the impact of the downturn in the manufacturing sector.

Next, let me cover the fuel price by type and the SMP trend. In Q3 of 2025, the bituminous coal price based on Australian coal was around $105.0 per ton, while LNG based on JKN was approximately KRW 1.01 million per ton. Additionally, the SMP was around KRW 118.2 per kilowatt hour.

Looking at the generation mix of KEPCO's GENCOs, our generation mix for nuclear went up due to the entry into operation of new nuclear power plants. As for coal, generation mix is maintained with no major changes in generation capacity and utilization rate, while LNG decreased slightly from decreased generation capacity and increased baseload generation. For the full year of 2025, we expect that the nuclear generation will increase and coal is expected to decrease, while the LNG mix is expected to be maintained. Expected utilization rate by generation source for 2025 for nuclear is at the mid- to high 80% range; coal, mid-40% range; and LNG, mid- to high 20% range.

Now let me touch upon the RPS-related costs. In Q3 of 2025, the RPS costs were KRW 2,876.1 billion on a consolidated basis and KRW 3,469.4 billion on a separate basis.

Finally, to go over the funding status, as of Q3 of 2025, borrowings stood at KRW 130.5 trillion on a consolidated basis and KRW 86.1 trillion on a separate basis.

We now move on to the Q&A session. Since we're providing consecutive interpretation, we would appreciate it if you can keep your questions and answers brief. We now begin Q&A session.

[Interpreted] [Operator Instructions] The first question will be given by Hyun Sung Hwang from Eugene Investment & Securities.

[Interpreted] Yes. My name is Hyun Sung Hwang from Eugene Securities. Congratulations on your good results. I have brief four questions. The first has to do with your short-term corporate bonds. When rolling over these securities, is there any impact because of the volatility in the interest rate? And my second question has to do with the localized marginal pricing. So can you explain further about whether the wholesale and the retail pricing will be introduced simultaneously, and the point in time in which this new system will be introduced?

My third question has to do with the direct purchase transaction system. So it is expected that this will go up to 50% by 2030. And what would be your responses with regards to the GENCOs' settlement? And with regards to my fourth question, this has to do with the energy highway. It is expected that greater room will be given to the private sector players to increase their investment, and this will be advised to issue the settlement as well as others. So can you provide more details about this matter?

[Interpreted] With regards to your first question about any impact or issues regarding the rollover of our short-term corporate debt, with regards to the volatility and the interest rates related to the sovereign bonds or the treasury bonds, we have read news reports that there is very close monitoring undertaken by the government part, and we are also closely monitoring the situation as well. As of yet, no such signs are being detected, but we will be working closely with the relevant government authorities as well as looking closely into the market development and ensure that proactive responses are made when it comes to this [indiscernible].

[Interpreted] With regards to the second question about the localized marginal pricing. So by -- in the May of 2024, it has been decided that within the year 2025, the wholesale system will be introduced. And by 2026, the retail system will be introduced. After that announcement, there has been -- no further announcement that has been made. And we will be completing the research that has been commissioned to outside organizations regarding this issue by the month of February of next year, and a more detailed plan will be designed by next year.

Thirdly, with regards to your question on the emission trading scheme. So on the 10th of November, the fourth plan period ETS has been announced and finalized. And it is expected that for the GENCOs, they will be subjected to 10% to 50% of the paid allocation. With regards to this, we will make sure that these charges are fully reflected in our environmental charges, and we will continue to maintain close consultations with the government authorities.

With regard to your last question about the possible private sector investment into the energy highway, what has been finalized as of present is that for the West Coast Energy Highway, private sector investment will be allowed. However, that is something that has already been included and reflected in the 10th Basic Plan for Electricity Supply and Demand. And there has been no further official announcements made about any additional private sector investment since then. But once discussions become initiated about the 12th Basic Plan for Electricity Supply and Demand, it may be reviewed. However, as of yet, no official discussion is underway.

[Interpreted] The following question is by Moon Kyeong Won from Meritz Securities.

[Interpreted] I'm Moon Kyeong Won from Meritz Securities. So I have two questions. My first question is, I would presume that you are having discussions with the relevant government authorities about the additional increases in the electricity tariffs. So there may -- I do presume that there are many factors and many grounds for raising the tariffs. What in your view will be the strongest basis for further increases in the tariffs? Would it be your debt levels? Or would it be the need to invest further in grid expansion. [ So you can answer that question. ]

And my second question has to do with the adjusted coefficient. So has there ever been a case where in the second quarter or the third quarter, you have actually raised the adjusted coefficient. And do you have any plans of changing the adjusted coefficient until the end of this year?

[Interpreted] With regards to the electricity tariff with expansion of the use of renewable energy and also to supply stable electricity for the advanced industries in this country, there is a need to make further investments into our power grid. And so yes, it is necessary to raise the tariffs in order to raise the funds to finance these investments. In addition, in order to achieve the greenhouse reduction target that is set by the government, this will lead to additional costs, and this is also expected to further reinforce the need to raise our tariff. So in principle, there is a need to adjust the tariffs so that it reasonably or adequately reflects all the cost involved.

[Interpreted] Let me take your second question. With regards to the adjusted coefficient, there has been already one change to the adjusted coefficient range in the third quarter and whether we will engage in an additional change to the adjusted coefficient is something that we will need to determine through consultations with the relevant authorities.

[Interpreted] Currently, there are no participants with questions. [Operator Instructions] The following question is by Hur Minho from Daishin Securities.

[Interpreted] This is Hur Minho from Daishin Securities. So if you look at the news, in the year 2026, a lot of the nuclear power plants are expected to go through scheduled maintenance, and that it is possible to make up for the gap through renewable energy. So can you give us an outlook for the utilization rate for the nuclear power generation for 2026?

And also my second question has to do with the HVDC. When do you expect that the preliminary or first round of construction -- first phase construction completion and the operation of this HVDC project to be? And if that happens, do you expect an increase in the utilization rate of the coal-fired power plant and the nuclear power generation?

And also, another question has to do with your entry into the United States nuclear power market. Is there any update that you can provide to the analysts and investors?

[Interpreted] So let me answer your question about the scheduled maintenance for nuclear power for 2026. Let us verify the actual schedule and get back to you at a later date.

[Interpreted] So let me take your second question about the transmission capacity constraints that are occurring in the East Coast area. At present, the construction is underway for the HVDC project. And the first phase of the project is expected to be completed by October of 2026, and the second phase of the construction is expected to be completed by December of 2027.

Once the HVDC project is completed, then it will be providing additional 4 gigawatt of transmission capacity, which is, we do believe, sufficient to address the 7.8 gigawatt of constraint that we are currently experiencing.

[Interpreted] So let me answer your third question. So as you are well aware, the Trump administration in the United States has announced a policy to increase the nuclear power generation within the United States, and they are looking forward to cooperating with KEPCO and team Korea in this area. So we are looking into various options in how we can participate in the U.S. nuclear market, and we'll be looking at the various risk factors that are involved and continue the review of this matter.

[Interpreted] The following question is by from Yoo Jaeseon from Hana Securities.

[Interpreted] I'm Yoo Jaeseon from Hana Securities. I have three questions. So I have a very good disclosure about the delay in the HVDC project. What about the substation issue? Has that been resolved? That's my first question. And my second question has to do with the exchange rate volatility. So how much of exchange rate hedging is incorporated into your fuel cost? That is my second question.

And you said that the utilization rate for the nuclear power generation is in the mid-80% range. When was that established? But when we look at the website of KHNP, the plant overhaul is set at 79% or so. So I'd like to know when these plans were established. And so do these numbers perhaps include a possibility that those reactor units that have been suspended operation like Kori-2 units that they will be back into operation perhaps. Is that possibility included in those numbers that you have established?

[Interpreted] With regard to your first question about the HVDC project in the East Coast, with regards to the licensing and permit issue of the substation that you have mentioned, as of yet, the licensing process has not been completed. It is based on the assumption that all the licensing and permit will come through, that the first phase of the construction will be completed on October 2026.

[Interpreted] So let me touch upon the exchange rate issue that you have raised in your second question. With regards to the LNG that we procure from KOGAS, on a monthly basis, we settle on an average -- settled the price based on the average exchange rate.

[Interpreted] As we have mentioned during our presentation for the full year nuclear power utilization rate, we expect that it will be around mid- to high 80% range.

[Interpreted] The following question is by Yoo Sean-han from NH Investment & Securities.

[Interpreted] Okay. I'm Yoo Sean-han from NH Securities.

[Interpreted] So let me answer your questions.

[Interpreted] So based on the agreement between Korea and United States, we now have to -- now to go ahead with the enrichment and reprocessing of uranium. So would there be any role to be played by KEPCO or KHNP in this? Or if not, who will be involved in this path? And my second question has to do with the securing of the uranium in which countries and during which period? And what share would be procured? That is my second question.

[Interpreted] First, let me take your question about the nuclear agreement between Korea and United States. Up until now, it has not been allowed for Korea to engage in uranium enrichment within Korea. However, we are looking forward to the situation being resolved based on the recent agreement. However, going forward, the exact details of how this will be brought about is something that has not yet been finally determined.

Next question about the procurement of the uranium. So in the case of KHNP, uranium is being procured through various long-term agreements spanning from anywhere from 5 years to 10 years. And also, these agreements include the option to adjust the volume that is procured depending on the uranium price trend. They can adjust the timing of the purchase. And this is how they are actually managing or controlling for the fuel cost. However, the percentage taken up by uranium and the overall fuel cost of KHNP is not that high, and they do have sufficient inventory built up.

[Interpreted] So can I ask a further question?

[Interpreted] Yes, you may go ahead.

[Interpreted] The question is, if we are allowed to have a role in the reprocessing or enrichment of uranium, do you have any candidates or companies that you have in mind for this role?

[Interpreted] So as of now, the uranium is being imported by KHNP and the fuel or rod is the responsibility of KEPCO NF. But going forward, we're as of yet, not in the know of the exact detail.

[Interpreted] The following question is by Hur Minho from Daishin Securities.

[Interpreted] So this is Hur Minho from Daishin Securities. I have two additional questions. First, with regards to East Coast HVDC project. You said that the provisional phase of the construction [indiscernible] cover of 2026. So when the first phase of [indiscernible] is completed, would it be possible [indiscernible] link up or connect to the transmission system and resolve the transmission [indiscernible] through the 4 gigawatt that is provided? Or because HVDC requires commissioning, would it take several months more from that point on until commercial operation is possible?

And also, I have another question. You mentioned during one of your answers that you have once adjusted the -- adjusted coefficient in the third quarter. So did it go up or down? And what was the magnitude of the adjustment? That is my second question.

[Interpreted] First, let me take your question about the HVDC project. So the first phase of the project and the second phase of the project will each provide 4 gigawatts in additional capacity for transmission. So once the first phase of the project is completed, then from [ Sinan-gun to Shingyeongju ], there will be -- our understanding is that -- immediately once the project is completed, 4 gigawatt of additional capacity will be provided into [indiscernible].

[Interpreted] So let me take your question about the change in the adjusted coefficient, the magnitude of the change. In the case of the coal, there were no changes. And for the nuclear power generation, there was a slight decline.

[Interpreted] The following question is by [ Lee Sun-Woo ] from JPMorgan.

[Interpreted] So this is [ Lee Sun-Woo ] from JPMorgan. I have two questions. You said that there was a monthly settlement with KOGAS based on the average exchange rate. Does that mean that you have an open position, or that you are hedging for foreign exchange rate to some degree? That's my first question. And my second question is that you said that the utilization rate of the coal-fired has gone up. Do you think that this generation mix will continue? Or is there any possibility of the coal-fired utilization rate coming down going forward?

[Interpreted] Let me take your question about the foreign exchange rate. In the case of KEPCO, for the most part, yes, we are exposed. We have an open position to the foreign exchange rate.

[Interpreted] Let me take your second question about the coal-fired generation utilization rate. So this is related not only to the temperature conditions, but also the policies of the government. So we will continue to ensure that a reasonable generation mix is maintained through consultations with the relevant government authorities.

[Interpreted] The following question is by Park Yushin from HSBC.

[Interpreted] So this is Park Yushin from HSBC. I have two questions. With regards to the nuclear power, aside from the United States and Europe, you also have bidding projects in Asia as well as Middle East. Can you provide an update on those projects? And my second question has to do with the shareholder return. Can you communicate to the extent that is possible about the future directions for the shareholder return policy of KEPCO?

[Interpreted] Let me take your first question about the overseas nuclear power projects. For the Asian market, we are carrying out activities to win nuclear power plant orders in Vietnam. And in the case of Middle East, we have participated in the bidding process of a nuclear power plant project in Saudi Arabia. However, the bidding is in process. So we're not in a position to disclose any further details. We ask for your understanding.

[Interpreted] Let me take your second question about the shareholder return. So the more important aspect of shareholder return would be, of course, the dividend policy. And the dividend policy would take into consideration the net profit of the year. And also, it is determined through the dividend consultative body in [ MOEF ]. So we're not in a position at present to disclose any size of the dividend.

[Interpreted] Currently, there are no participants questions. [Operator Instructions].

As there are no further questions, we'll now end the Q&A session. For any additional inquiries, please contact our IR department. This concludes the fiscal year 2025 third quarter earnings results by KEPCO. Thank you for your participation.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good morning, and good evening. First of all, thank you all for joining this conference call. And now we'll begin the conference of the fiscal year 2025 second quarter earnings results by KEPCO. This conference will start with a presentation followed by a divisional Q&A session. [Operator Instructions]

Now we shall commence the presentation on the fiscal year 2025 second quarter earning results by KEPCO.

[Interpreted] Good afternoon. I am [indiscernible], Head of Finance and IR team at Korea Electric Power Corporation. We sincerely thank you all for joining us for KEPCO's Q2 2025 earnings conference call despite your busy schedule. Today's conference call will be conducted in both Korean and English, and after a brief earnings presentation, we will proceed to a Q&A session.

The figures presented today are based on IFRS consolidated preliminary figures, and all comparisons are made year-over-year, unless otherwise stated. Please also note that any business plans, targets and estimated financial data mentioned during the call reflect on current outlook and are subject to uncertainties investment risk.

We will now present the Q2 2025 profit and loss details first in Korean and then provide the same content in English.

[Interpreted] Good afternoon. This is Siyung Yang, General Manager of the IR team. Let us begin by reviewing the operating profit. The consolidated operating profit for the first half of 2025 was KRW 5, 889.5 trillion. If you look into the details, revenue was KRW 46, 174.1 trillion, up by 5.5%. Of this, electricity sales revenue accounted for KRW 4.157 trillion, up by 5.9%, and other revenue, including publicly listed business income posted KRW 2.016 trillion, down by 2.1%.

Cost of sales and SG&A expenses totaled KRW 40,284.6 trillion, down by 2.3%. Of this, fuel cost is KRW 9.252 trillion, down by 14.6%, and power purchase cost is KRW 17,357.8 trillion, up by 1.1%, affected by fuel price changes. Depreciation expenses came to KRW 5.878 trillion, increased by 4.4%.

Among nonoperating items, interest expense amounted to KRW 2,211.3 trillion, down by KRW 72.8 billion from the same period last year.

Based on the factors mentioned, the first half 2025 consolidated operating profit was KRW 889.5 billion and net cost for the period was KRW 3,538.1 trillion.

[Interpreted] Good afternoon. This is Taeseop Eom, Senior IR Manager of the IR team. I will now go over the key points of interest, first on electricity sales performance and outlook.

Electricity sales volume in the first half reached 28.4 terawatt hours, down 0.05% Y-o-Y due to reduced industrial sales on the back of sluggish exports. For the full year 2025, we project sales to go down slightly due to the impact of downward adjustment of the economic growth rate and downturn in the manufacturing sector.

Next, let me cover the fuel price by type and the SMP trend. In the first half of 2025, the bituminous coal price based on Australian oil was around $103.1 per ton, while LNG based on JKN was approximately KRW 1.05 million per tonne. Additionally, the system marginal price, or SMP, was around KRW 118.9 per kilowatt hour.

[Interpreted] Looking at the generation mix of KEPCO subsidiaries, the generation mix for nuclear went up due to the introduction of a new power plant and the increase of utilization rate. As for coil, generation mix is down from lower utilization, while LNG also is partly down from decreased capacity and increase of base load generation.

For the full year of 2025, we expect that the nuclear generation will go down and coal is expected to be maintained, while LNG mix is expected to go down slightly.

Expected utilization rate by generation source for 2025 are for nuclear is at the mid-80% range, coil in the upper 40% range and LNG at the mid-20% range.

And for -- I will now touch upon the RPS related cost. In the first half of 2025. RPS costs were KRW 1,958.9 trillion on consolidated basis and KRW 2,176 trillion on a separate basis.

Finally, to go over the funding status, as for the first half of 2025, borrowings stood at KRW 131.9 trillion on a consolidated basis and KRW 86.5 trillion on a separate basis.

[Interpreted] And now we will proceed to a Q&A session. Since we will conduct the session with consecutive interpretation into English as well as Korean, we would like to ask all the participants to take your questions and answers complete and clearly. We'll now receive questions.

[Interpreted] [Operator Instructions] The first question will be given by Jong Hwa Sung from LS Securities.

[Interpreted] I am Sung, Jong Hwa from LS Securities. I would like to ask just one question. This is true for LG Chemical, starting from this June, they have announced that it will be purchasing directly from KPX and also this is also true for SK as well that they're going to get repurchase power from the power exchange.

So there seems to be the trend that the companies are going to directly purchase the power from the power exchange. Recently, the industrial tariff has come up and starting from the fourth quarter of last year, the sales unit price of the industrial power has actually exceeded that of the commercial power. In this situation, what is your view on the future direction? And what kind of impact would this have on your company?

And going forward, in order to free or lower the industrial power prices, would -- is it possible for you to actually raise the unit price of the commercial power prices? So what kind of basic directions do you have about the situation and potential solutions for this issue?

[Interpreted] So let me first take the question about the direct power purchase from the power exchange. As you have already mentioned, LG Chemicals Yeosu plant have announced that they will be directly purchasing the power from the power exchange, and this announcement came in June. And therefore, in the case of this customer, they will now be excluded from our sales as well as from a cost of sales as well. And the exchange will be during the settlement.

And so this will happen in fact to our sales volume as well as on our cost of sales. And we do understand there is a couple more companies that have applied for this direct purchase from the power exchange, but we're not in a position to disclose who those companies are at this point.

And in order to stabilize the corporate power market in order to prevent any abuse of the current system by the direct purchasers, we have actually agreed with the Korea Power Exchange to improve upon the direct power purchasing system. And the key to this agreement is that the mandatory transaction period of the direct purchasers will be extended from 1 year to 3 years. And the sales operator currently bears the burden for the other welfare costs and the DR settlement. And this will be actually imposed in this manner. The system will be improved.

[Interpreted] In order to ease the burden of the accumulated deficit as well as improve the financial soundness of the company, yes, we are in a situation where we do need to raise the tariffs additionally. However, the tariff increases until now has been more concentrated on the industrial tariff. And so at this point, there is limited room to engage in additional tariff adjustment for the industrial power.

For the other non-industrial sectors, we are reviewing the potential increase of tariffs. And in order to ease the burden on the industrial sector as well as in consideration of the various external factors, we will be engaging in close consultation with the government on ways in which to undertake these cash adjustment.

[Interpreted] The following question is by Moon, Kyeong Won from Meritz Securities.

[Interpreted] So I have 2 questions. My first question has to do with some of the media reports that came out recently. According to these media reports, it is stated that KEPCO is preparing to enter into the nuclear power market of United States. And if we assume that KEPCO is indeed going to enter into this U.S. market, regardless of whether this is true or not at this point, I would like to ask what kind of preparations have been made by KEPCO in order to do so.

So for instance, you need to set up your organization in order to prepare to enter into the overseas nuclear power market or you need to perhaps prepare for the possible licensing related issues. Or is it the case that you don't need to make any further preparation and you can immediately enter into the U.S. market? Which of the two is your situation? That is my first question.

And my second question has to do with the SMP. Especially starting from July as well into the month of August, SMP is being maintained at a lower level than have initially been expected, despite the fact that we're now in the high season. Compared to previous quarter, SMP is maintained at a lower level, and what is KEPCO's views of the causes of this more than expected SMP? And what is your SMP-related outlook till the year-end?

[Interpreted] First, let me take your question about our possible entry into the U.S. nuclear power market. Recently, United States has announced that by 2050, they will increase the nuclear power capacity from the current 100 gigawatts to 400 gigawatts, in short a fourfold increase from the current capacity. Now this policy by United States to expand their nuclear power generation from the point of view of global nuclear power expansion is indeed positive news.

And as such, KEPCO has taken an interest in the potential entry into the U.S. market. And we are taking a positive view and engaging in a review of the overall circumstances, but we're not in a situation to disclose any specific details, so we'd like to ask for your understanding on this.

[Interpreted] Let me take your second question about why the SMP levels in the month of August was lower than expected. This was because in the month of July due to unexpected cheap rates, there was much higher demand than had been initially expected. SMP is actually conducted by the power exchange. They predict the demand, and they calculate the SMP. And due to the impact of the summer vacations and the weather situation, what the power exchange has initially anticipated about the demand in August was actually different from the actual numbers. In short, there was less demand in the month of August than had been anticipated by the KPX.

And also added to that, we do believe that the KPX had changed, to a certain extent, the curtailment method, and this also served as another factor.

[Interpreted] The following question is Ryu, Jae-Hyun from Mirae Securities.

[Interpreted] So I have 4 questions. First, you talked about the generation mix a while ago, but can you also give us your outlook for the utilization rate for the second half of this year? And actually, the next question has to do with the progressive tariff system. Compared to last year, is there any significant difference? If there is, can you elaborate on that?

And finally, during one of your comments, you said that there was little room to raise the industrial tariffs. If that is the case, then is there any possibility of raising the tariff for the residential area or other sectors? So -- and also, is there any possibility of introducing a differentiated tariff system as well?

[Interpreted] So let's say, an outlook for the utilization rate, in the case of nuclear, our outlook is mid-80% level and for coal is the upper 40% level. And utilization for LNG is the mid-20% range.

[Interpreted] Yes. So let me take your question about the progressive tariff system. So introducing this current system is something that we have done since 2019. So for the month of July up until the month August, we have actually expanded the progressive tariff intervals in order to ease the public burden on the tariff payment. And this system has been in place since 2019, and we do not believe that the impact has grown any larger since last year.

[Interpreted] And your next question was about the industrial tariffs, the fact that we have mentioned that there was little room to engage in additional hikes of the industrial tariffs and whether we had any plans for raising the tariffs and other sectors. Well, it is true that because the tariff increases up until now has been concentrated largely in the industrial segment that there's little room to engage in additional tariff increases there.

But we also recognize the fact that we need to raise the tariffs in other segments. However, in terms of specifically which sector will be targeted for tariff increase, the level of the tariff increases and the timing is something that has not been specifically decided as of yet. We will be continuously persuading the government on the need to do so, and we will closely work with the government in order to make sure that tariff adjustments can come through.

[Interpreted] Next, about the possibility of introducing a regional-based tariff system, currently, in keeping with the government plan to introduce a tariff system that is differentiated by the region, so we are currently engaging in research and study And through further consultations with the government, we are designing the possible introduction of a regionally differentiated tariff system.

So our target is to introduce this system by early 2026, and we will be working to come up with a detailed plan for the implementation. And by the first half of next year, while we intend to gather the opinions of relevant stakeholders, and we're targeting introducing the system within the year 2026.

[Interpreted] [Operator Instructions] The following question is by Hur, Minho from Daishin Securities.

[Interpreted] So I have 3 questions. it seems as if in the first quarter, the settlement unit price related to the nuclear is on a rising trend. So I'd like to ask what was the drivers behind this rise in the settlement unit prices of nuclear. And also can you elaborate on what the adjusted coefficient for the coal-fired power plant and other segments in first half of the year?

And then moving on to the regional wholesale and retail tariff system that you have mentioned, you said earlier that you plan on introducing the system starting from 2026. Is this going to be a simultaneous introduction of both wholesale and retail tariff system? Or is it going to be only wholesale tariff system that will be introduced first? Because they seem to be different in your report related to this.

And my final question has to do with the RPS cost. What was the reference unit price on a consolidated basis as well as on a separate basis? And also can you elaborate what the cost was related to the EPS as well?

[Interpreted] Let me take your question about the rise of the segment -- unit price of the nuclear power segment. So this is something that we will be actually getting back to later on. And moving on to the next question is about the adjusted coefficient. For the nuclear and the coal-fired power plant, the thermal power generation, the adjusted coefficient has not been changed in the first quarter and the second quarter.

With regards to the future outlook, we will be reassessing it at a level that allows us to maintain financial health and balance. We will be consulting with the government in order to come up with an appropriate coefficient.

[Interpreted] Yes. Let me take your question about the regionally differentiated tariff system. So this tariff system that we are aiming to introduce by 2026 is actually the retail tariff system. And as for the wholesale system, this is something that is led by KPX, and we understand that they're making preparations to introduce this system within 2025..

[Interpreted] Let me get your question about the RPS. So in the case of the consolidated financial statement, the RPS related costs come to KRW 1, 168.3 trillion and on a separate basis, the number is KRW 1,191.7 trillion.

And also regarding the costs related to greenhouse gas emissions, this is already something that is reflected in the power purchase cost and it is already settled. So there is nothing that is reflected in our financial statements related to this item.

[Interpreted] The following question is [indiscernible] from Citi Group.

So I just have one questions about the fuel price outlook for the full year 2025. Can you please give some color about the coal and LNG oil price in the second half of the year?

[Foreign Language]

[Interpreted] [Operator Instructions] The following question is by Hwang, Sung Hyun from Eugene Investment & Securities.

[Interpreted] Yes. I have a question on your dividend policy. Of course, given your current performance, I don't think you're in a very good position to pay out dividends. However, from your positioning, do you sense any change in the government stand about KEPCO possibly paying out dividends going into the future?

[Interpreted] Let me get your question about the dividends. As you are probably well aware, in the mid- to long term, the government's target for the dividend related to KEPCO is a 40% payout -- the dividend payout ratio. When the new administration took office, we have not been separately notified either by the MOE, Ministry of Economy and Finance, or the government's side about any possible changes to the KEPCO's dividend payout ratio.

However, going forward, in consideration of our financial situation as well as our need to make investments in order to expand our power grid, we will be considering our dividend payout ratio in the direction that will allow for the enhancement of shareholder value.

[Interpreted] [Operator Instructions] The following question is by Hwang, Sung Hyun from Eugene Investment & Securities.

[Interpreted] I have a question about last year's dividend payout ratio. Last year, the dividend payout ratio was 15%. I'd like to know how that figure has been decided.

And my second question has to do with KHNP's role. It seems that, recently, the role of KHNP is expanding, and we want to know what KEPCO's views or position on the potential role of KHNP is.

[Interpreted] Yes. With regards to last year's dividend payout ratio of 15%, actually, it is the Ministry of Economy and Finance, that is the lead ministry in deciding the dividend payout ratio of KEPCO. And so we do not actually have -- we're not in the know of how exactly that figure came about. But during the consultations with that ministry, we did put in a request that our financial situation as well as our future investments needs to be taken into consideration in setting the dividend payout ratio.

[Interpreted] And as relating to your second question about potential IPO of KHNP, we have not officially engaged in any review of this possibility.

[Interpreted] [Operator Instructions] The following question is by Sung, Jong Hwan from LS Securities.

[Interpreted] I have further questions about the dividend. So maybe this is a question that is difficult to answer, but I'll ask this question anyway. In the case of last year, your -- compared to your consolidated net income, your separate base net income share was exceptionally low. Despite that being so, the dividend payout ratio that was determined was only 15%.

So although we are seeing in recent days a meaningful profit that is coming out of KEPCO, but on the other hand, if we take into consideration your accumulated losses, it is, I believe, challenging for the company to pay out the dividend that you have paid out in the past. And so if that's the case, is it possible for you to adjust the settlement coefficient, so that the ratio between the consolidated basis, net profit and the separate net profit can be adjusted and dividends possibly be paid out in that manner? What is your view on this?

[Interpreted] Let me answer your question. So in the case of the adjusted coefficient, it is based on cost assessment and also based on our regulations and policy. So is it unrelated to dividend payout ratio.

[Interpreted] So let me add to that. In the Cost Assessment Committee, they take into consideration the fuel costs as well as the fixed cost in coming up with these calculations. So this is something that is determined unrelated to dividend policy.

[Interpreted] [Operator Instructions] As there are no further questions, we'll now end the Q&A session. For any additional inquiries, please contact our IR department. This concludes the fiscal year 2025 second quarter earning results by KEPCO. Thank you for your participation.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]