SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K/A
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the Month of December, 2002
KOREA ELECTRIC POWER CORPORATION
(Translation of registrant's name into English)
167, Samsung-dong, Kangnam-ku, 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 [*] Form 40-F [ ]
(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 [*]
(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, including by reference in the Registration
Statement on Form F-3 (Registration No. 33-99550) and the Registration Statement
on Form F-3 (Registration No. 333-9180). In addition, this Report of Foreign
Private Issuer on Form 6-K shall be deemed to be incorporated by reference into
the registrant's Consent Solicitation Statement, dated November 14, 2002,
relating to its solicitation of consents and proxies from the holders of its
6-3/8% Notes due 2003, 8-1/4% Notes due 2005, 7-3/4% Debentures due 2013, 6%
Debentures due 2026, 7% Debentures due 2027, 6-3/4% Debentures due 2027, 7.40%
Amortizing Debentures due 2016 and 7.95% Zero-to-Full Debentures due 2096, and
to be a part thereof from the date on which this report is filed or furnished,
to the extent not superseded by documents or reports subsequently filed or
furnished.
KOREA ELECTRIC POWER CORPORATION
NON-CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2002 AND 2001
TOGETHER WITH INDEPENDENT ACCOUNTANTS'
REVIEW REPORT
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
English Translation of a Report Originally Issued in Korean
To the Shareholders and Board of Directors of
Korea Electric Power Corporation
We have reviewed the accompanying non-consolidated balance sheets of Korea
Electric Power Corporation (the "Company") as of September 30, 2002 and 2001 and
the related non-consolidated statements of income for the nine month periods
then ended, all expressed in Korean won. These financial statements are the
responsibility of the Company's management. Our responsibility is to issue a
report on these financial statements based on our reviews.
We conducted our reviews in accordance with standards for independent
accountants' review of semi-annual financial statements as established by the
Securities and Futures Commission of the Republic of Korea applicable to review
engagements. These standards require that we plan and perform the review to
obtain moderate assurance as to whether the financial statements are free of
material misstatement. A review is limited primarily to inquiries of company
personnel and analytical procedures applied to financial data and thus provide
less assurance than an audit. We have not performed an audit and, accordingly,
we do not express an audit opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements as of and for the nine month
periods ended September 30, 2002 and 2001, for them to be in conformity with
standards for preparing interim financial statements in the Republic of Korea.
The translated amounts in the accompanying financial statements have been
translated into U.S. dollars, solely for the convenience of the reader, on the
basis set forth in Note 2.
As we draw attention to Note 1, the operations of the Company may be directly or
indirectly affected by the general unstable economic conditions in the Republic
of Korea and the impact of the implementation of structural reforms.
As discussed in Note 19, the Company spun off its power generation division on
April 2, 2001, in accordance with the approval of the shareholders on March 16,
2001, which resulted in establishing six new power generation subsidiaries,
Korea Hydro & Nuclear Power Co., Ltd., Korea South-East Power Co., Ltd., Korea
Midland Power Co., Ltd., Korea Western Power Co., Ltd., Korea Southern Power
Co., Ltd., and Korea East-West Power Co., Ltd. As of April 2, 2001, their
combined assets and liabilities were won 35,131,773 million and won 17,646,157
million, respectively.
As discussed in Note 17, sales and purchases to and from related parties,
including the six power generation subsidiaries, amounted to won 255,132
million and won 9,988,924 million, respectively, for the nine month period
ended September 30, 2002 and won 204,009 million and won 7,352,761 million,
respectively, for the nine month period ended September 30, 2001. Related
receivables and payables amount to won 26,798 million and won 893,006 million,
respectively, as of September 30, 2002 and won 103,128 million and
won 1,140,493 million, respectively, as of September 30, 2001.
As discussed in Note 1, the Company will gradually privatize its power
generation subsidiaries and distribution business by 2009, which is in
accordance with the restructuring plan, dated January 21, 1999, of the
electricity industry in the Republic of Korea announced by the Ministry of
Commerce, Industry and Energy ("Restructuring Plan"). This Restructuring Plan,
which is intended to introduce a competitive system in the electricity industry,
is expected to affect the determination of utility rates, result in changes in
management structure, related laws and regulations, and affect electricity
supply and demand policy.
Accounting principles and review standards and their application in practice
vary among countries. The accompanying financial statements are not intended to
present the financial position, results of operations in accordance with
accounting principles and practices generally accepted in countries other than
the Republic of Korea. The Company's financial statements are prepared in
accordance with the Korea Electric Power Corporation Act, the Accounting
Regulations for Government Invested Enterprises as well as generally accepted
accounting principles in the Republic of Korea. In addition, the procedures and
practices utilized in the Republic of Korea to review such financial statements
may differ from those generally accepted and applied in other countries.
Accordingly, this report and the accompanying financial statements are for use
by those knowledgeable about Korean accounting procedures, review standards and
their application in practice as well as the Korea Electric Power Corporation
Act and the Accounting Regulations for Government Invested Enterprises.
By:/s/ Anjin & Co.
Anjin & Co.
(A former member firm of Andersen Worldwide.
Anjin & Co. became an associate member firm of
Deloitte Touche Tohmatsu effective July 2, 2002.)
Seoul, Korea
November 1, 2002
KOREA ELECTRIC POWER CORPORATION
NON-CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2002 AND 2001
(See Independent Accountants' Review Report)
Translation into
Korean Won U.S. Dollars (Note 2)
-------------------------------- ---------------------------------
ASSETS 2002 2001 2002 2001
--------------- --------------- --------------- ---------------
(In millions) (In thousands)
Property, Plant and Equipment
(Notes 2, 3, 4, 10 and 17):
Utility plant won 32,997,615 won 28,909,217 $ 26,925,838 $ 23,589,732
Non-utility plant - 36 - 30
--------------- --------------- --------------- ---------------
32,997,615 28,909,253 26,925,838 23,589,762
Less: accumulated depreciation (4,891,779) (4,157,835) (3,991,660) (3,392,766)
Less: construction grants (2,810,023) (1,709,301) (2,292,960) (1,394,779)
--------------- --------------- --------------- ---------------
25,295,813 23,042,117 20,641,218 18,802,217
Construction-in-progress 2,745,019 3,738,975 2,239,918 3,050,979
--------------- --------------- --------------- ---------------
28,040,832 26,781,092 22,881,136 21,853,196
--------------- --------------- --------------- ---------------
Investments and others:
Investment securities (Note 5) 22,216,369 20,520,698 18,128,412 16,744,756
Long-term loans (Note 6) 129,596 119,806 105,749 97,761
Currency and interest rate swaps (Note 12) 327,092 189,018 266,905 154,237
Intangibles (Note 15) 79,330 45,476 64,733 37,108
Other non-current assets (Note 11) 131,797 165,132 107,546 134,747
--------------- --------------- --------------- ---------------
22,884,184 21,040,130 18,673,345 17,168,609
--------------- --------------- --------------- ---------------
Current assets:
Cash and cash equivalents (Note 11) 697,040 174,043 568,780 142,018
Trade receivables, net of allowance for
doubtful accounts of won 21,464 million in
2002 and won 21,506 million in 2001
(Notes 11 and 17) 1,378,555 1,633,295 1,124,892 1,332,758
Other account receivables, net of allowance for
doubtful accounts of won 2,714 million in
2002 and won 2,675 million in 2001 (Note 11) 194,776 220,093 158,936 179,594
Short-term financial instruments 79,000 120,398 64,463 98,244
Short-term loans (Note 6) 8,074 5,695 6,588 4,647
Inventories (Note 7) 60,145 54,043 49,078 44,099
Prepayments 865 1,222 706 997
Other current assets 112,808 234,602 92,051 191,434
--------------- --------------- --------------- ---------------
2,531,263 2,443,391 2,065,494 1,993,791
--------------- --------------- --------------- ---------------
Total Assets won 53,456,279 won 50,264,613 $ 43,619,975 $ 41,015,596
=============== =============== =============== ===============
(continued)
KOREA ELECTRIC POWER CORPORATION
NON-CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF SEPTEMBER 30, 2002 AND 2001
(See Independent Accountants' Review Report)
Translation into
Korean Won U.S. Dollars (Note 2)
-------------------------------- ---------------------------------
2002 2001 2002 2001
--------------- -------------- --------------- --------------
(In millions) (In thousands)
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity (Notes 3, 5 and 8):
Common stock won 3,200,504 won 3,200,504 $ 2,611,590 $ 2,611,590
Capital surplus 14,311,357 14,300,265 11,677,974 11,668,923
Retained earnings
Appropriated 15,351,474 13,924,600 12,526,703 11,362,383
Unappropriated (Net income of won 2,600,553
million in 2002 and won 1,643,797 million
in 2001) 2,600,553 1,643,797 2,122,034 1,341,328
Capital adjustments: 44,328 172,686 36,172 140,910
--------------- -------------- --------------- --------------
Total Shareholders' Equity 35,508,216 33,241,852 28,974,473 27,125,134
--------------- -------------- --------------- --------------
Long-term liabilities:
Long-term debt (Note 9) 11,442,564 11,161,718 9,337,058 9,107,889
Accrued severance indemnities, net (Note 2) 210,449 107,048 171,725 87,350
Reserve for self-insurance 77,522 73,535 63,257 60,004
Currency and interest rate swaps (Note 12) 490,817 337,354 400,503 275,279
Financing lease liabilities (Note 10) 6,154 9,740 5,022 7,948
Deferred income tax liabilities (Note 16) 1,292,942 1,001,388 1,055,032 817,126
Other long-term liabilities 338,157 273,672 275,934 223,315
--------------- -------------- --------------- --------------
13,858,605 12,964,455 11,308,531 10,578,911
--------------- -------------- --------------- --------------
Current liabilities:
Trade payables (Note 17) 998,307 1,198,455 814,612 977,932
Other accounts payable 420,113 418,269 342,810 341,305
Short-term borrowings (Note 9) - 261,820 - 213,643
Current portion of long-term debt (Note 9) 1,210,580 1,051,618 987,825 858,113
Income tax payable 690,528 407,587 563,466 332,588
Accrued expenses 195,575 180,046 159,588 146,916
Dividends payable 2,149 1,745 1,754 1,424
Other current liabilities 572,206 538,766 466,916 439,630
--------------- -------------- --------------- --------------
4,089,458 4,058,306 3,336,971 3,311,551
--------------- -------------- --------------- --------------
Total Liabilities 17,948,063 17,022,761 14,645,502 13,890,462
--------------- -------------- --------------- --------------
Total Shareholders' Equity and Liabilities won 53,456,279 won 50,264,613 $ 43,619,975 $ 41,015,596
=============== ============== =============== ==============
See accompanying notes to non-consolidated financial statements.
KOREA ELECTRIC POWER CORPORATION
NON-CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
(See Independent Accountants' Review Report)
Translation into
Korean Won U.S. Dollars (Note 2)
--------------------------------- ---------------------------------
2002 2001 2002 2001
--------------- --------------- --------------- ---------------
(In millions, except (In thousands, except
per share amounts) per share amounts)
OPERATING REVENUES (Note 17):
Sale of electricity won 15,472,247 won 14,676,594 $ 12,625,253 $ 11,976,005
Other operating revenues 241,031 235,517 196,680 192,180
--------------- --------------- --------------- ---------------
15,713,278 14,912,111 12,821,933 12,168,185
--------------- --------------- --------------- ---------------
OPERATING EXPENSES
(Notes 13, 14, 15, 17 and 18):
Power generation, transmission and
distribution expenses 2,295,850 4,945,878 1,873,399 4,035,804
Purchased power 10,602,076 6,981,738 8,651,225 5,697,053
Other operating costs 237,479 194,288 193,781 158,537
Selling and administrative expenses 669,575 632,114 546,369 515,801
--------------- --------------- --------------- ---------------
13,804,980 12,754,018 11,264,774 10,407,195
--------------- --------------- --------------- ---------------
OPERATING INCOME 1,908,298 2,158,093 1,557,159 1,760,990
OTHER INCOME (EXPENSE)
Interest income 17,073 21,864 13,931 17,841
Interest expense (455,716) (671,988) (371,861) (548,338)
Gain (loss) on foreign currency transactions and
translation, net 338,469 (181,319) 276,188 (147,955)
Gain on valuation using the equity method of
accounting (Note 5) 1,755,873 912,745 1,432,781 744,794
Donations (65,889) (6,206) (53,765) (5,064)
Valuation gain (loss) on currency and interest
rate swaps, net (Note 12) 54,192 (31,033) 44,220 (25,323)
Gain on disposal of investment - 98,767 - 80,593
Other, net 139,423 72,732 113,769 59,349
--------------- --------------- --------------- ---------------
1,783,425 215,562 1,455,263 175,897
--------------- --------------- --------------- ---------------
ORDINARY INCOME/INCOME BEFORE
INCOME TAX EXPENSE 3,691,723 2,373,655 3,012,422 1,936,887
INCOME TAX EXPENSE (Note 16): 1,091,170 729,858 890,388 595,559
--------------- --------------- --------------- ---------------
NET INCOME won 2,600,553 won 1,643,797 $ 2,122,034 $ 1,341,328
=============== =============== =============== ===============
ORDINARY INCOME PER SHARE (Note 2) won 4,070 won 2,573 $ 3.32 $ 2.10
=============== =============== =============== ===============
EARNINGS PER SHARE (Note 2) won 4,070 won 2,573 $ 3.32 $ 2.10
=============== =============== =============== ===============
See accompanying notes to non-consolidated financial statements.
KOREA ELECTRIC POWER CORPORATION.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 AND 2001
(See Independent Accountant's Review Report)
1. THE COMPANY:
Korea Electric Power Corporation (the "Company") 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. The Company was given a government
investment status on December 31, 1983 following the enactment of
Government-Invested Enterprise Management Basic Act. The Company'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 September 30, 2002, the Government of the Republic of Korea and Korea
Development Bank hold 32.35 percent and 21.57 percent of the Company's shares,
respectively.
The Company spun off its power generation division on April 2, 2001, resulting
in the establishment of six new power generation subsidiaries. The Company will
gradually privatize its power generation subsidiaries and distribution business
by 2009, which is in accordance with the restructuring plan, dated January 21,
1999, of the electricity industry in the Republic of Korea announced by the
Ministry of Commerce, Industry and Energy ("Restructuring Plan"). This
Restructuring Plan, which is intended to introduce a competitive system in the
electricity industry, is expected to affect the determination of utility rates,
result in changes in management structure, related laws and regulations, and
affect electricity supply and demand policy.
In response to general unstable economic conditions, the Korean government and
the private sector have been implementing structural reforms to historical
business practices. Implementation of these reforms is progressing slowly,
particularly in the areas of restructuring private enterprises and reforming the
banking industry. The Korean government continues to apply pressure to Korean
companies to restructure into more efficient and profitable firms. The Company
may be either directly or indirectly affected by these general unstable economic
conditions and the reform program described above. The accompanying financial
statements reflect management's assessment of the impact to date of the economic
situation on the financial position of the Company. Actual results may differ
materially from management's current assessment.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Financial Statement Presentation
The Company maintains its official accounting records in Korean won and prepares
statutory non-consolidated financial statements in the Korean language (Hangul)
in conformity with the Accounting Regulations for Government Invested
Enterprises, which have been approved by the Korean Ministry of Finance and
Economy and, in the absence of specialized accounting regulations for utility
companies, the accounting principles generally accepted in the Republic of
Korea. Certain accounting principles applied by the Company that conform with
financial accounting standards and accounting principles in the Republic of
Korea may not conform with generally accepted accounting principles in other
countries. Accordingly, the accompanying financial statements are intended for
use by those who are informed about Korean accounting principles and
practices, Korea Electric Power Corporation Act and Accounting Regulations for
Government Invested Enterprises. The accompanying financial statements have been
condensed, restructured and translated into English (with certain expanded
descriptions) from the Korean language financial statements. Certain information
included in the Korean language financial statements, but not required for a
fair presentation of the Company's financial position and results of operations,
is not presented in the accompanying financial statements.
-2-
The US dollar amounts presented in these financial statements were computed by
translating the Korean won into US dollars based on the Bank of Korea Basic Rate
of won 1,225.50 to US $1.00 at September 30, 2002, solely for the convenience
of the reader. This convenience translation into US dollars should not be
construed as representations that the Korean won amounts have been, could have
been, or could in the future be, converted at this or any other rate of
exchange.
The significant accounting policies followed by the Company in the preparation
of its financial statements are summarized below.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, except for assets revalued
upward in accordance with the KEPCO Act and the Assets Revaluation Law of Korea,
net of depreciation. Expenditures that result in the enhancement of the value or
extension of the useful life of the utility plants involved are capitalized as
additions to property, plant and equipment. The Company capitalizes interest and
other borrowing costs on debt issued to finance capital expenditures as part of
the acquisition cost of major facilities and equipment. The amount of
capitalized interest was won 52,790 million and won 354,705 million for the
nine month periods ended September 30, 2002 and 2001, respectively, of which
foreign currency transactions and translation gains deducted from the
capitalized interest amounted to won 41,678 million and won 8,778 million, and
foreign currency transactions and translation losses added to the capitalized
interest amounted to won 2,931 million and won 100,524 million for the nine
month periods ended September 30, 2002 and 2001, respectively.
Depreciation is computed using the declining-balance method (straight-line
method for buildings and structures) based on the useful lives described in the
Korean Corporate Income Tax Law and as permitted under the Accounting
Regulations for Government Invested Enterprises as follows:
Years
---------------
Buildings 15, 30
Structures 15, 30
Machinery 16
Ships 9
Vehicles 4
Others 4
The Company records the following funds and materials, which relate to the
construction of transmission and distribution facilities as construction grants:
- Grants from the government or public institutions
- Funds, construction materials or other items contributed by customers
Construction grants are initially recorded and presented in the financial
statements as deductions from the assets acquired under such grants and are
offset against depreciation expenses during the useful lives of the related
assets. The Company received won 385,345 million and won 383,885 million of
construction grants, and offset won 140,562 million and won 124,825 million
against depreciation expenses for the nine month periods ended September 30,
2002 and 2001, respectively.
Accounting for Leases
Lease agreements that include a bargain purchase option, result in the transfer
of ownership by the end of the lease term, have a term equal to at least 75
percent of the estimated economic life of the leased property or where the
present value of the minimum lease payments at the beginning of the lease term
equals or exceeds 90 percent of the fair value of the leased property are
accounted for as financial or capital leases. All other leases are accounted for
as operating leases. Assets and liabilities related to financial leases are
recorded as property and equipment and long term debt, respectively, and the
related interest is calculated using the effective interest rate method. In
respect to operating leases, the future minimum lease payments are expensed
ratably over the lease term while contingent rentals are expensed as incurred.
-3-
Valuation of Marketable Securities and Investment Securities
Marketable securities are recorded at purchase price cost plus incidental costs.
However, if the fair value differs from the book value determined using the
weighted average method, the securities are stated at fair value and the
valuation gain or loss is reflected in current operations.
Investments in equity securities (excluding those accounted for using the equity
method discussed in the next paragraph) that are not actively traded (unlisted
security) are stated at acquisition cost, determined using the weighted average
method. Actively quoted (listed) securities, including those traded
over-the-counter, are stated at fair value, with valuation gain or loss reported
as a capital adjustment within stockholders' equity. If the fair value of a
listed equity security or the net equity value of an unlisted security held for
investment declines compared to acquisition cost and is not expected to recover
(impaired investment security), the carrying value of the equity security is
adjusted to fair value or net equity value, with the resulting valuation loss
charged to current operations. If the net equity value or fair value
subsequently recovers, in the case of an unlisted security, the increase in
value is recorded in current operations, up to the amount of the previously
recognized impairment loss, and in the case of a listed security, the increase
in value is accounted for as a valuation gain in capital adjustment within
stockholders' equity.
Investments in equity securities of companies in which the Company is able to
exercise significant influence over the operating and financial policies of the
investees are accounted for using the equity method. The change in the Company's
share of an investee's net equity resulting from a change in an investee's net
equity is reflected in current operations, retained earnings, and capital
adjustment in accordance with the causes of the change which consist of the
investee's net income (loss), changes in retained earnings and changes in
capital surplus and capital adjustments.
Investments in debt securities are classified as either held-to-maturity
investment debt securities or available for sale investment debt securities at
the time of purchase. Held-to-maturity investment debt securities are stated at
acquisition cost, as determined using the weighted average method. When the face
value of a held-to-maturity investment debt security differs from its
acquisition cost, the effective interest method is applied to amortize the
difference over the remaining term of the security. Available-for-sale
investment debt securities are stated at fair value, with the resulting
valuation gain or loss recorded as a capital adjustment. If the fair value of a
held-to-maturity or an available-for-sale investment debt security declines
compared to the acquisition cost and is not expected to recover (impaired
investment security), the carrying value of the debt security is adjusted to
fair value, with the resulting valuation gain or loss charged to current
operations. If the fair value of the security subsequently recovers, in the case
of a held-to maturity debt security, the increase in value is recorded in
current operations, up to the amount of the previously recognized impairment
loss, and in the case of an available-for-sale debt security, the increase in
value is accounted for as a valuation gain in capital adjustment within
stockholder' equity.
The lower of the acquisition cost of investments in the treasury stock funds and
the fair value of treasury stock included in a fund is recorded as treasury
stock in capital adjustment.
Intangibles
Intangible assets are stated at cost, net of accumulated amortization computed
using the straight-line method over the estimated useful lives, from 4 years to
50 years, of related assets.
Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts based on management's
estimate of the collectibility of individual accounts and prior year collection
experience.
Inventories
Inventories are stated at the lower of cost or net realizable value, cost being
determined using the weighted average method for raw materials, moving average
method for supplies and specific identification method for other inventories.
The Company maintains perpetual inventory records, which are adjusted through
physical counts.
-4-
Discount on Debentures
Discounts on debentures issued are amortized over the redemption period of
debentures using the effective interest rate method. Amortization of discounts
is recognized as interest expense.
Accrued Severance Indemnities
Employees and directors with more than one year of service are entitled to
receive a lump-sum payment upon termination of their service with the Company,
based on their length of service and rate of pay at the time of termination. The
accrued severance indemnities that would be payable assuming all eligible
employees were to resign are won 210,552 million and won 107,167 million as of
September 30, 2002 and 2001, respectively. Actual severance payments were
won 4,501 million and won 6,049 million for the nine month periods ended
September 30, 2002 and 2001, respectively.
Before April 1999, the Company and its employees paid 3 percent and 6 percent,
respectively, of monthly pay (as defined) to the National Pension Fund in
accordance with the National Pension Law of Korea. The Company paid half of the
employees' 6 percent portion and is paid back at the termination of service by
offsetting the receivable against the severance payments. Such receivables, with
a balance of won 103 million and won 119 million as of September 30, 2002 and
2001, respectively, are presented as a deduction from accrued severance
benefits. Starting April 1999, the Company and its employees each pay 4.5
percent of monthly pay to the Fund under the revised National Pension Law of
Korea.
During the first half of 2001, accrued severance indemnities of won 58,063
million for the directors and employees who were transferred to the power
generation subsidiaries were transferred to those subsidiaries.
Reserve for Self-Insurance
The Company provides a self-insurance reserve for liability to third parties
that may arise in connection with the Company's non-insured facilities. Payments
made to settle applicable claims are charged to this reserve.
Foreign Currency Transactions and Translation
The Company maintains its accounts in Korean won. Transactions in foreign
currencies are recorded in Korean won based on the prevailing rates of exchange
on the transaction date. Monetary assets and liabilities with balances
denominated in foreign currencies are recorded and reported in the accompanying
financial statements at the exchange rates prevailing at the balance sheet date.
The balances have been translated using the Bank of Korea Basic Rate, which was
won 1,225.50 and won 1,309.10 to US$ 1.00 at September 30, 2002 and 2001,
respectively. The translation gains or losses are reflected in current
operations.
Accounting for Derivative Instruments
All derivative instruments are accounted for at fair value with the valuation
gain or loss recorded as an asset or liability. If the derivative instrument is
not part of a transaction qualifying as a hedge, the adjustment to fair value is
reflected in current operations. The accounting for derivative transactions that
are part of a qualified hedge based both on the purpose of the transaction and
on meeting the specified criteria for hedge accounting, differs depending on
whether the transaction is a fair value hedge or a cash flow hedge. Fair value
hedge accounting is applied to a derivative instrument designated as hedging the
exposure to changes in the fair value of an asset or a liability or a firm
commitment (hedged item) that is attributable to a particular risk. The gain or
loss both on the hedging derivative instruments and on the hedged item
attributable to the hedged risk is reflected in current operations. Cash flow
hedge accounting is applied to a derivative instrument designated as hedging the
exposure to variability in expected future cash flows of an asset or a liability
or a forecasted transaction that is attributable to a particular risk. The
effective portion of gain or loss on a derivative instrument designated as a
cash flow hedge is recorded as a capital adjustment and the ineffective portion
is recorded in current operations. The effective portion of gain or loss
recorded as a capital adjustment is reclassified to current earnings in the same
period during which the hedged forecasted transaction affects earnings. If the
hedged transaction results in the acquisition of an asset or the incurrence of a
liability, the gain or loss in capital adjustment is added to or deducted from
the asset or the liability.
-5-
Revenue Recognition
The Company recognizes revenue from the sale of electric power based on meter
readings made on a monthly basis. The Company does not accrue revenue for power
sold after the meter readings but prior to the end of the accounting period. The
Company recognizes revenue on long-term contacts, which are related to the
construction of power plants in the Democratic Peoples Republic of Korea (North
Korea), based on the percentage-of-completion method.
Income Tax Expense
The Company recognizes deferred income taxes arising from temporary differences
between pretax accounting income and taxable income. Accordingly, the provision
for income tax expense consists of the corporate income tax and resident tax
surcharges currently payable, and the changes in deferred income assets and
liabilities during the period. However, deferred income tax assets are
recognized only if the future tax benefits on accumulated temporary differences
are realizable. The deferred income tax assets and liabilities will be charged
or credited to income tax expense in the period each temporary difference
reverses in the future. Deferred income taxes will be recalculated based on the
actual tax rate in effect at each balance sheet date.
Ordinary Income Per Share and Earnings Per Share
Ordinary income per share and earnings per share are computed by dividing
ordinary income and net income by the weighted average number of common shares
outstanding during the period. The number of shares used in computing earnings
and ordinary income per share is 639,011,053 shares and 638,980,151 shares for
the nine month periods ended September 30, 2002 and 2001, respectively.
Earnings per share of the Company for the twelve month period ended December 31,
2001 was won 2,783.
3. PROPERTY, PLANT AND EQUIPMENT:
(1) Asset revaluation
The Company has revalued its property, plant and equipment in accordance
with the KEPCO Act and the Asset Revaluation Law (the latest revaluation
date was January 1, 1999). The gain from the asset revaluation was
won 12,552,973 million.
(2) Publicly announced land prices
The published price of the Company's land as announced by the Korean
Government is as follows (won in millions):
Area
Purpose (Square meters) Book value Land prices
--------------------------------------- ----------------- ---------------- --------------
Transmission and distribution sites etc. 16,217,919 won 3,360,801 won 2,981,221
(3) Utility plant
Utility plant as of September 30, 2002 and 2001 is as follows (won in
millions):
2002 2001
--------------- ---------------
Land won 3,360,801 won 3,354,147
Buildings 1,982,619 1,779,071
Structures 21,655,543 19,134,995
Machinery 5,729,685 4,422,790
Ships 266 266
Vehicles 50,935 47,282
Others 217,766 170,666
--------------- ---------------
won 32,997,615 won 28,909,217
=============== ===============
-6-
4. INSURED ASSETS:
Insured assets as of September 30, 2002 are as follows (won in millions):
Insured assets Insurance type Insured value
----------------------------- -------------------------------- --------------
Buildings and machinery Fire insurance won 325,670
Buildings and machinery Assemble insurance 768,811
Buildings General insurance 147,187
Construction in progress Construction insurance 141,404
In addition, the Company carries damage insurance for its light water nuclear
reactor construction in North Korea, general insurance for vehicles, loading
insurance for inventories, casualty insurance for its employees and compensation
liability insurance for its directors.
5. INVESTMENT SECURITIES:
(1) Investment securities as of September 30, 2002 and 2001 are as follows
(won in millions):
2002 2001
----------------- -----------------
Listed securities won - won 94,531
Securities subject to equity method 22,118,691 20,365,284
Non-listed equity securities 88,763 60,525
Others 8,915 358
----------------- -----------------
won 22,216,369 won 20,520,698
================= =================
(2) Listed securities as of September 30, 2001 were shares in Doosan Heavy
Industries and Construction Co., Ltd. (Formerly Korea Heavy Industries
& Construction Co., Ltd.), all of which were sold in 2001. As of
September 30, 2001, the difference between book value and market value
of won 47,295 million was recorded as capital adjustment.
(3) Securities subject to the equity method as of September 30, 2002 and
2001 are as follows (won in millions):
2002 2001
---------------------------------------------- ---------------------------
Ownership Acquisition Value per Ownership Value per
Company name (%) cost equity method (%) equity method
------------------------------------- ---------- -------------- --------------- --------- --------------
Korea Hydro & Nuclear Power Co., Ltd. 100.0 won 9,364,799 won 10,475,676 100.0 won 9,753,048
Korea South-East Power Co., Ltd. 100.0 1,232,004 1,613,585 100.0 1,342,715
Korea Midland Power Co., Ltd. 100.0 1,325,891 1,683,253 100.0 1,425,212
Korea Western Power Co., Ltd. 100.0 1,442,638 1,718,133 100.0 1,540,536
Korea Southern Power Co., Ltd. 100.0 1,797,378 1,942,383 100.0 1,822,669
Korea East-West Power Co., Ltd. 100.0 2,322,905 2,367,458 100.0 2,292,143
Korea Power Engineering Co., Ltd. 97.9 4,991 43,208 97.9 43,678
Korea Plant Service & Engineering Co.,
Ltd. 100.0 6,000 228,729 100.0 215,463
KEPCO Nuclear Fuel Co., Ltd. 96.4 89,757 126,817 96.4 113,178
Korea Electric Data Network Co., Ltd. 100.0 64,000 113,195 100.0 105,598
Korea Electric Power Industrial
Development, Ltd. 100.0 16,300 41,390 100.0 36,267
Korea Gas Corporation 24.5 94,500 660,645 24.5 663,540
Korea District Heating Co. 26.1 5,660 144,113 26.1 132,761
Powercomm Corporation 89.5 671,215 742,091 89.5 698,204
KEPCO International Hong Kong Ltd. 100.0 15,102 114,037 100.0 81,268
KEPCO International Philippines Inc. 100.0 103,610 103,978 100.0 99,004
-------------- --------------- --------------
won 18,556,750 won 22,118,691 won 20,365,284
============== =============== ==============
-7-
If the difference between the cost of acquisition and the book value of
the subsidiary is a positive goodwill, the difference is amortized
using the straight-line method over five years from the year it was
acquired, and if it is a negative goodwill, the difference related to
the depreciable assets is amortized over the weighted average useful
life of related assets from the year it was acquired and the difference
related to the non-depreciable assets is amortized at the time assets
are disposed of. Unrealized income from intercompany transactions is
eliminated.
As KEPCO International Hong Kong Ltd. owns 100 percent of the shares of
KEPCO Philippines Corporation ("KEPHILCO") and KEPCO International
Philippines Inc. holds 51 percent of the shares of KEPCO Ilijan
Corporation ("KEILCO"), the Company applied the equity method for KEPCO
International Hong Kong Ltd. and KEPCO International Philippines Inc.,
reflecting the changes in the net equity of KEPHILCO and KEILCO.
The Company recorded won 1,755,873 million and won 912,745 million as
valuation gain using the equity method for the nine month periods ended
September 30, 2002 and 2001, respectively, and won 71,198 million and
won 166,745 million as capital adjustment as of September 30, 2002 and
2001, respectively.
(4) Non-listed equity securities as of September 30, 2002 and 2001 are as
follows (won in millions):
2002 2001
---------------------------------------- ------------------------
Ownership Acquisition Ownership Acquisition
Company name (%) cost Book value (%) cost
------------------------------------- --------- ----------- ----------- ---------- -----------
Securities Market Stabilization Fund 7.56 won 37,407 won 37,407 7.16 won 33,610
Energy Savings Investment Cooperative 40.6 5,000 5,000 40.6 5,000
Korea Power Exchange 50.0 46,356 46,356 50.0 21,915
----------- ----------- -----------
won 88,763 won 88,763 won 60,525
=========== =========== ===========
(5) Other investments as of September 30, 2002 and 2001 are as follows (won
in millions):
2002 2001
-------------------------------- ------------
Face value Book value Book value
Government and municipal bonds won 58 won 58 won 86
Investment securities in treasury stock fund - 8,857 272
------------ ------------ ------------
won 58 won 8,915 won 358
============ ============ ============
The Company entered into a treasury stock fund, composed of treasury stock
and other investment securities. Investment securities other than treasury
stock in the fund and its related losses on valuation of investment, which
are recorded in capital adjustment, amount to won 8,857 million and
won 5,567 million, respectively, as of September 30, 2002 and
won 272 million and won 277 million, respectively, as of September 30,
2001.
6. LOANS TO EMPLOYEES:
The Company has provided housing and tuition loans to employees as follows (won
in million):
2002 2001
------------------ -----------------
Short-term loans won 8,074 won 5,695
Long-term loans 129,596 119,806
------------------ -----------------
won 137,670 won 125,501
================== =================
-8-
7. INVENTORIES:
Inventories as of September 30, 2002 and 2001 consist of the following (won in
millions):
2002 2001
------------ -------------
Raw materials won 1,410 won 1,370
Supplies 52,762 40,611
Other 5,973 12,062
------------ ------------
won 60,145 won 54,043
============ ============
8. SHAREHOLDERS' EQUITY:
(1) Capital
The Company has 1,200,000,000 authorized shares of won 5,000 par value
common stock, of which 640,100,876 shares are issued as of September
30, 2001.
(2) Capital Surplus
Capital surplus as of September 30, 2002 and 2001 is as follows (won in
millions):
2002 2001
--------------- ---------------
Paid-in capital in excess of par value won 799,876 won 799,876
Reserves for asset revaluation 12,552,973 12,552,973
Other capital surplus 958,508 947,416
--------------- ---------------
won 14,311,357 won 14,300,265
=============== ===============
The Company revalued its property, plant and equipment in accordance
with the KEPCO Act and the Asset Revaluation Law, and recorded a
revaluation gain of won 12,552,973 million as a reserve for asset
revaluation. The reserve for asset revaluation may be credited to
paid-in capital or offset against any accumulated deficit by resolution
of the shareholders.
(3) Retained earnings
Appropriated retained earnings as of September 30, 2002 and 2001
consist of the following (won in millions):
2002 2001
--------------- ---------------
Legal reserve won 1,600,252 won 1,600,252
Reserve for business rationalization 31,900 30,900
Reserve for business expansion 8,556,873 7,390,999
Reserve for investment on social overhead capital 4,892,449 4,692,449
Reserve for research and human development 60,000 -
Voluntary reserve 210,000 210,000
--------------- ---------------
won 15,351,474 won 13,924,600
=============== ===============
The KEPCO Act requires the Company to appropriate a legal reserve equal
to at least 20 percent of net income for each accounting period until
the reserve equals 50 percent of the common stock. In accordance with
the Tax Incentive Control Law, the amount of tax benefit associated
with certain exemptions and tax credits must be appropriated as a
reserve for business rationalization.
Prior to 1990, according to the KEPCO Act, at least 20 percent of net
income in each fiscal year was required to be established as a reserve
for business expansion until such reserve equals the common stock.
Beginning in 1990, no percentage was specified in respect to this
reserve and appropriations became optional.
The legal reserve and the reserve for business rationalization are not
available for cash dividends; however, these reserves may be credited
to paid-in capital or accumulated deficit by the resolution of the
shareholders.
-9-
The reserve for the investment on social overhead capital and research
and human development is appropriated by the Company to avail itself of
qualified tax credits to reduce corporate tax liabilities. This reserve
is not available for cash dividends for a certain period defined in the
Tax Incentive Control Law.
(4) Capital adjustments
Capital adjustments as of September 30, 2002 and 2001 are as follows
(won in millions):
2002 2001
------------- -------------
Treasury stock won (21,303) won (24,088)
Valuation loss on currency and interest rate swaps - (16,989)
Gain on valuation of investments 65,631 213,763
------------- --------------
won 44,328 won 172,686
============= ==============
The Company has shares held as treasury stock amounting to won 21,303
million (1,034,155 shares) and won 24,088 million (1,147,053 shares) as
of September 30, 2002 and 2001, respectively, for the purpose of stock
price stabilization. This treasury stock is included in the treasury
stock fund.
9. BORROWINGS AND DEBENTURES:
(1) Short-term borrowings as of September 30, 2002 and 2001 are as follows
(won in millions):
Annual interest
Financial institution Type rate (%) 2002 2001
--------------------------- ----------------- ---------------- ----------------- -------------
Sumitomo Bank Bridge Loan 4.09 won - won 261,820
(2) Long-term borrowings as of September 30, 2002 and 2001 are as follows
(won in millions):
(a) Long-term borrowings denominated in Korean Won
Annual interest
Financial institution Type rate (%) 2002 2001
-------------------------- ----------- --------------- --------------- ---------------
Industrial
Korea Development Bank facility 5.10~9.00 won 2,576,709 won 1,386,745
Kookmin Bank General 6.48~6.84 96,190 138,095
Korea National Oil
Development Corporation " 9.00 375 2,875
Others " 5.50~6.00 38 39
--------------- ---------------
2,673,312 1,527,754
Less: Current portion (551,779) (104,537)
--------------- ---------------
won 2,121,533 won 1,423,217
=============== ===============
(b) Long-term borrowings denominated in foreign currency
Annual interest
Financial institution Type rate (%) 2002 2001
------------------------------------- ---------- --------------- --------------- ---------------
Japan Bank of International
Cooperation Commercial 2.27 won - won 1,008,184
Barclays International Financial
Services (Ireland) Ltd. " 6M Libor-1.00 384,013 409,093
Kredit Anstalt Fur Wieder Aufbau Facility 6.00 472 1,062
Asia Development Bank " 6.00 1,785 2,537
--------------- ---------------
386,270 1,420,876
Less: Current portion (93,014) (169,235)
--------------- ---------------
won 293,256 won 1,251,641
=============== ===============
-10-
(3) Debentures as of September 30, 2002 and 2001 are as follows (won in
millions):
Annual
Interest rate (%) 2002 2001
----------------- --------------- ---------------
Domestic debentures (Electricity bonds) 5.19~11.95 won 2,700,000 won 2,455,000
Foreign debentures 1.18~8.28 6,913,922 6,830,455
--------------- ---------------
9,613,922 9,285,455
Less: Current portion (565,787) (777,846)
Discount on debentures issued (20,360) (20,749)
--------------- ---------------
won 9,027,775 won 8,486,860
=============== ===============
(4) Foreign currency debts, by currency, as of September 30, 2002 and 2001
are as follows (won in millions):
2002 2001
--------------------------------------- ---------------------------------------
Foreign currency Won equivalent Foreign currency Won equivalent
------------------- --------------- ------------------- ----------------
Short-term borrowings
- won - US$ 200,000,000 won 261,820
--------------- ----------------
Long-term borrowings US$ 301,456,525 385,798 US$ 314,437,282 411,630
EUR 392,615 472 JPY 92,038,852,176 1,008,184
- DEM 1,743,887 1,062
--------------- ----------------
386,270 1,420,876
--------------- ----------------
Debentures US$ 3,881,207,010 4,763,759 US$ 3,562,492,790 4,663,659
JPY 205,060,000,000 2,047,258 JPY 180,060,000,000 1,972,359
EUR 46,657,259 56,098 DEM 42,000,000 25,581
GBP 24,467,000 46,807 EUR 25,183,000 29,998
ITL 148,995,000,000 91,662
GBP 24,467,000 47,196
--------------- ---------------
6,913,922 6,830,455
--------------- ---------------
won 7,300,192 won 8,513,151
=============== ===============
(5) Aggregate maturities of the Company's long-term debt as of September
30, 2002 are as follows (won in millions):
Local Foreign
Year ended currency currency Electricity Foreign
September 30 borrowings borrowings bonds debentures Total
-------------- --------------- -------------- --------------- -------------- ---------------
2003 won 551,779 won 93,014 won 55,000 won 510,787 won 1,210,580
2004 690,363 197,253 1,810,000 2,257,452 4,955,068
2005 670,231 96,003 550,000 1,392,764 2,708,998
2006 596,577 - 50,000 429,385 1,075,962
2007 146,518 - 235,000 48,411 429,929
Thereafter 17,844 - - 2,275,123 2,292,967
--------------- -------------- --------------- -------------- ---------------
won 2,673,312 won 386,270 won 2,700,000 won 6,913,922 won 12,673,504
=============== ============== =============== ============== ===============
10. LEASES:
(1) The Company entered into a financial lease agreement with Korea
Development Leasing Corporation for certain computer systems, of which
the acquisition cost is won 31,460 million and won 16,379 million as of
September 30, 2002 and 2001, respectively. Depreciation of the leased
assets amounted to won 8,739 million and won 3,209 million for the nine
month periods ended September 30, 2002 and 2001, respectively.
-11-
(2) Annual payments under these financial lease agreements as of September
30, 2002 are as follows (won in millions):
Year ending September 30 Amount
------------------------ --------------
2003 won 9,385
2004 5,523
2005 961
Thereafter 396
------------
16,265
Less: Interest (726)
Current portion (9,385)
------------
won 6,154
============
11. FOREIGN CURRENCY DENOMINATED ASSETS AND LIABILITIES:
There are no significant liabilities denominated in foreign currency other than
those mentioned in Note 9 and significant assets denominated in foreign currency
as of September 30, 2002 and 2001 are as follows (won in millions):
2002 2001
----------------------------- -----------------------------
Foreign Equivalent Foreign Equivalent
Account currencies Korean Won currencies Korean Won
------------------------------- -------------- ------------ -------------- -----------
Cash and cash equivalents US$ 8,599,422 won 10,539 US$ 79,162 won 104
Trade receivables US$ 16,112,256 19,746 US$ 20,923,974 27,391
Other account receivables US$ 572,436 702 US$ 3,266,097 4,276
Other non-current assets US$ 11,560 14 US$ 11,560 15
JPY 5,859,783 59 JPY 5,859,783 62
------------ -----------
won 31,060 won 31,848
============ ===========
12. SWAP TRANSACTIONS:
(1) Currency swap contracts as of September 30, 2002 are as follows
(foreign currency in millions):
Contract Contract
amounts in millions interest rate per annum
Contract Settlement ----------------------- --------------------------------
Year Year Pay Receive Pay (%) Receive (%)
--------- ---------- ---------- ---------- -------------- --------------
The Sumitomo Bank Ltd. 1995 2005 US$ 286 JPY 27,000 7.68 4.15
The Fuji Bank, Ltd. 1995 2005 US$ 149 JPY 14,425 Libor+0.155 3.40
Canadian Imperial Bank of
Commerce 1996 2006 US$ 97 JPY 9,865 Libor+0.13 3.80
J.P. Morgan Securities Ltd. 1996 2006 US$ 200 JPY 20,723 Libor+0.14 4.00
Union Bank of Switzerland 1997 2007 US$ 244 GBP 150 6.686 8.50
Max[Libor+0.4,
Union Bank of Switzerland 1997 2004 US$ 30 JPY 3,360 6.33] 2.75
Union Bank of Switzerland 1997 2002 JPY 10,244 DEM 150 2.00 3M Libor +0.80
Union Bank of Switzerland 1997 2007 JPY 9,895 GBP 50 2.00 8.50
Bankers Trust Co. 1998 2004 JPY 1,705 US$ 55 6.41 7.11
DEM 25
CHF 20
CAD 20
Bankers Trust Co. 1998 2004 JPY 2,945 US$ 95 6.36 7.05
DEM 43
CHF 35
CAD 34
Union Bank of Switzerland 1998 2003 JPY 12,150 US$ 100 4.00 6.375
J.P. Morgan Securities Ltd.
Deutsche 2002 2009 US$ 650 JPY 76,700 4.25 1.18
-12-
(2) Interest rate swap contracts as of September 30, 2001 are as follows:
Contract interest rate per annum
Notional amount --------------------------------------------
in millions Pay (%) Receive (%) Term
--------------- ------------------- ----------------- ---------
Lehman Brothers Special US$ 150 Libor+0.25 6.375 1993-2003
Financing, Inc.
J.P. Morgan Securities Ltd. US$ 149 6.91 Libor+0.155 1995-2005
Hanvit Bank US$ 150 6.10 Libor+0.25 1996-2003
Korea Development Bank US$ 97 Min(Libor+0.13,6.50) Libor+0.13 1997-2004
Union Bank of Switzerland US$ 70 Max(Libor+0.40,6.33) Libor+0.31 1997-2004
Barclays Bank PLC, London US$ 300 6M Libor-1 Libor+0.45 1997-2004
Shinhan Bank US$ 100 6.50 6.75 1997-2004
Shinhan Bank US$ 95 5.80 6M Libor+0.1 1998-2002
Shinhan Bank US$ 55 5.80 6M Libor+0.1 1998-2002
Bankers Trust Co. US$ 55 6.87 - 1998-2004
JPY 1,705 - 6.41
DEM 25 - 6.41
CHF 20 - 6.41
CAD 20 - 6.41
Bankers Trust Co. US$ 95 6.93 - 1998-2004
JPY 2,945 - 6.36
DEM 43 - 6.36
CHF 35 - 6.36
CAD 34 - 6.36
Bankers Trust Co. US$ 100 Max(6.074-Libor, 0) Max(Libor-6.074, 0) 1998-2007
Bankers Trust Co. US$ 100 Max(Libor-6.074, 0) Max(6.074-Libor, 0) 1998-2007
The Company entered into the above swap contracts to hedge the fluctuation risk
of exchange rate and interest rate of foreign currency debts.
(3) The gains and losses on swap transactions for the nine month periods
ended September 30, 2002 and 2001 are as follows (won in millions):
Other income (expense)
2002 2001
------------ -----------
Currency swap
Gains won 89,859 won 52,648
Losses (16,559) (71,179)
Interest rate swap
Gains 6,666 17,399
Losses (25,774) (29,901)
------------ ------------
won 54,192 won (31,033)
============ ============
-13-
13. POWER GENERATION, TRANSMISSION AND DISTRIBUTION EXPENSES:
Power generation, transmission and distribution expenses for the nine month
periods ended September 30, 2002 and 2001 are as follows (won in millions):
2002 2001
-------------- --------------
Material expenses:
Coal won - won 367,131
Oil 7,155 314,652
LNG - 569,010
Others - 143,913
-------------- --------------
7,155 1,394,706
Amortization of Nuclear fuel - 129,641
Labor expenses:
Salaries 342,769 393,134
Severance and retirement benefits 43,587 34,570
-------------- --------------
386,356 427,704
Overhead expenses:
Employee benefits 36,210 49,609
Taxes and dues 7,027 22,447
Rent 16,320 14,749
Depreciation 1,034,866 1,721,206
Maintenance 488,477 721,683
Commission and consultation fees 35,534 62,747
Compensation expense 40,982 61,080
Ordinary development expenses 63,392 95,630
Reserve for decommissioning costs - 140,574
Others 179,531 104,102
-------------- --------------
1,902,339 2,993,827
-------------- --------------
won 2,295,850 won 4,945,878
============== ==============
14. SELLING AND ADMINISTRATIVE EXPENSES:
Selling and administrative expenses for the nine month periods ended September
30, 2002 and 2001 are as follows (won in millions):
2002 2001
-------------- -------------
Labor won 253,428 won 196,305
Employee benefits 27,042 25,174
Taxes and dues 4,365 4,664
Rent 13,398 17,342
Depreciation 34,222 28,479
Maintenance 8,664 12,054
Commission and consultation fees 54,077 50,225
Ordinary development expenses 8,386 7,965
Collection expense 179,706 175,469
Promotion 13,325 42,877
Bad debts 12,039 3,587
Others 60,923 67,973
-------------- -------------
won 669,575 won 632,114
============== =============
-14-
15. RESEARCH AND DEVELOPMENT EXPENDITURES:
Research and development expenditures of the Company for the nine month periods
ended September 30, 2002 and 2001 are as follows (won in millions):
2002 2001
---------- ----------
Intangibles won 2,243 won 15,402
Ordinary development expenses 71,778 103,595
---------- -----------
won 74,021 won 118,997
========== ===========
16. INCOME TAX EXPENSE:
(1) Income tax expense as of September 30, 2002 and 2001 is as follows (won
in millions):
2002 2001
-------------- -----------
Income tax currently payable won 812,722 won 535,288
Changes in deferred income taxes 278,448 194,570
-------------- -----------
Income tax expense won 1,091,170 won 729,858
============== ===========
(2) Deferred income tax liabilities as of September 30, 2002 and 2001 are
as follows (won in millions).
Accumulated Deferred income
Year temporary differences Tax rate (%) tax liabilities
---- --------------------- ------------ ---------------
2002 won (4,353,340) 29.7 won (1,292,942)
2001 won (3,251,259) 30.8 won (1,001,388)
17. RELATED PARTY TRANSACTIONS:
(1) Transactions with related parties for the nine month periods ended
September 30, 2002 and 2001 are as follows (won in millions):
Related party Transaction 2002 2001
-------------------------------------------- -------------------------------- ------------- -------------
Sales and other income:
Korea Hydro & Nuclear Power Co., Ltd. Sales of electricity and others won 91,984 won 22,490
Korea South-East Power Co., Ltd. " 30,558 19,530
Korea Midland Power Co., Ltd. " 15,341 12,752
Korea Western Power Co., Ltd. " 20,131 21,998
Korea Southern Power Co., Ltd. " 13,457 11,113
Korea East-West Power Co., Ltd. " 29,415 11,301
Others " 54,246 104,825
------------- -------------
won 255,132 won 204,009
============= =============
Purchases and others:
Korea Hydro & Nuclear Power Co., Ltd. Purchase of electricity and others won 3,459,593 won 2,158,068
Korea South-East Power Co., Ltd. " 1,050,386 711,941
Korea Midland Power Co., Ltd. " 1,084,478 679,322
Korea Western Power Co., Ltd. " 1,433,788 967,715
Korea Southern Power Co., Ltd. " 1,351,965 828,133
Korea East-West Power Co., Ltd. " 1,359,764 825,635
Korea Power Engineering Co., Inc. Designing of the power plant 29,359 69,605
Korea Nuclear Fuel Co., Ltd. Purchase of nuclear fuel 355 36,376
Korea Plant Service & Engineering Co., Ltd. Utility plant maintenance 28,764 291,686
Korea Gas Corporation Purchase of LNG -- 566,063
Korea Electric Data Network Co., Ltd. Maintenance of computer system 84,791 98,016
Others 105,681 120,201
------------- -------------
Total won 9,988,924 won 7,352,761
============= =============
-15-
(2) Receivables arising from related parties transactions as of September
30, 2002 and 2001 are as follows (won in millions):
2002 2001
---------------------------------------- -----------
Trade
Related party receivables Others Total Total
---------------------------------------- ----------- ----------- ----------- -----------
Korea Hydro & Nuclear Power Co., Ltd. won 7,997 won - won 7,997 won 20,082
Korea South-East Power Co., Ltd. 2,178 452 2,630 2,911
Korea Midland Power Co., Ltd. - 484 484 10,341
Korea Western Power Co., Ltd. 1,196 492 1,688 6,734
Korea Southern Power Co., Ltd. 693 1,046 1,739 5,911
Korea East-West Power Co., Ltd. 2,333 845 3,178 20,975
Others - 9,082 9,082 36,174
----------- ----------- ----------- -----------
Total won 14,397 won 12,401 won 26,978 won 103,128
=========== =========== =========== ===========
(3) Payables arising from related parties transactions as of September 30,
2002 and 2001 are as follows (won in millions):
2002 2001
--------------------------------------- -------------
Trade
Related party receivables Others Total Total
---------------------------------------- ----------- ---------- ----------- -------------
Korea Hydro & Nuclear Power Co., Ltd. won 294,884 won 1,515 won 296,399 won 349,444
Korea South-East Power Co., Ltd. 84,203 93 84,296 117,734
Korea Midland Power Co., Ltd. 124,786 94 124,880 108,257
Korea Western Power Co., Ltd. 130,120 9 130,129 150,274
Korea Southern Power Co., Ltd. 102,652 82 102,734 160,805
Korea East-West Power Co., Ltd. 119,783 333 120,116 152,909
Korea Power Engineering Co., Inc. - 7,361 7,361 13,589
Korea Plant Service & Engineering Co., Ltd. - 6,197 6,197 69,255
Others 295 20,599 20,984 18,226
----------- ----------- ----------- -------------
Total won 856,723 won 36,283 won 893,006 won 1,140,493
=========== =========== =========== =============
18. CONTINGENT LIABILITIES:
(1) The Company is engaged in 252 lawsuits as a defendant and 38 lawsuits
as a plaintiff. The total amount claimed from the Company is won
100,985 million and the total amount claimed by the Company is won
104,393 million as of September 30, 2002. The outcome of these lawsuits
cannot presently be determined. However, management believes that the
ultimate disposition of those litigations will not have a materially
adverse effect on the operations or financial position of the Company.
(2) The Company's debts of won 17,646,157 million, including borrowings of
won 13,825,884 million, were transferred to the power generation
subsidiaries at the time of spin-off. The Company has the collective
responsibility together with the subsidiaries to repay those debts,
which were transferred and outstanding, under the Commercial Code of
the Republic of Korea. Balance of debts among transferred total
liabilities as of September 30, 2002 is won 7,512,625 million.
(3) Debt repayment guarantees the Company has provided for its related
parties in connection with the related parties' borrowings as of
September 30, 2002 are as follows:
Loan type Guaranteed company Financial institutions Amount
------------ ---------------------------------- ---------------------- ---------------
KEPCO International Hong Kong Ltd. Nippon Life Insurance US$ 82,006,000
Foreign " Norinchukin Bank 35,000,000
currency loan " Korea Development Bank 13,908,000
KEPCO International Philippines Inc. Korea Development Bank 72,696,000
---------------
US$ 203,610,000
===============
-16-
(4) KEPCO Ilijan Corporation, which is the subsidiary of KEPCO
International Philippines Inc., is engaged in the power generation
business in the Philippines and borrowed US$ 449,672,139 from Japan
Bank of International Cooperation and others for that business. The
Company provided Japan Bank of International Cooperation and others
with the guarantees for performance of the power generation business of
KEPCO Ilijan Corporation.
(5) The Company has provided 1 blank note to Korea Development Bank as
collateral for the borrowings.
(6) The Company was provided a credit (overdraft) line amounting to
won 245,000 million by five banks including the National Agricultural
Cooperative Federation as of September 30, 2002.
(7) The Company entered into a turnkey contract with the Korea Peninsula
Energy Development Organization (KEDO) on December 15, 1999, to
construct two 1,000,000KW-class pressurized light-water reactor units
in North Korea. The contract amount is US$ 4,182 million and subject to
adjustment to cover any changes in the price level.
(8) The Company entered into the Power Purchase Agreement with LG Energy
Co., Ltd. and other independent power producers for power purchases in
accordance with the Electricity Business Act and power purchased from
those companies amounted to won 862,102 million for the nine month
period ended September 30, 2002.
19. SPIN-OFF:
The Company spun off its power generation division during the first half of 2001
in accordance with the restructuring plan of the electricity industry in the
Republic of Korea announced by the Ministry of Commerce, Industry and Energy on
January 21, 1999.
(1) The newly established power generation subsidiaries are primarily
engaged in the sale of electricity to the Company through the Korea
Power Exchange. Details of those subsidiaries are as follows:
Name of the subsidiaries Major power plant
--------------------------------------------------------------------------------------------------------
Korea Hydro & Nuclear Power Co., Ltd. (KHNP) Hydroelectric power plant and nuclear power plant
in Gori and others
Korea South-East Power Co., Ltd. (KOSEPCO) Thermoelectric power plant in Samchonpo and others
Korea Midland Power Co., Ltd. (KOMIPO) Thermoelectric power plant in Boryung and others
Korea Western Power Co., Ltd. (KOWEPCO) Thermoelectric power plant in Tae-an and others
Korea Southern Power Co., Ltd. (KOSPO) Thermoelectric power plant in Hadong and others
Korea East-West Power Co., Ltd. (KEWESPO) Thermoelectric power plant in Dangjin and others
(2) Details of the spin-off
a) The Company spun off its power generation business as
stipulated by the Commercial Code of the Republic of Korea.
b) Registration date of spin off: April 2, 2001
c) Date of resolution of shareholders: March 16, 2001
d) Date of resolution of Board of Directors: February 24, 2001
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(3) Assets and liabilities of the spun off division
a) Assets and liabilities of the spun off division as of date of
spin off (won in million)
KHNP KOSEPCO KOMIPO KOWEPCO KOSPO KEWESPO Total
-------------- ------------- ------------- ------------- ------------- ------------- --------------
Assets won 18,791,413 won 2,490,720 won 2,662,209 won 2,904,046 won 3,627,985 won 4,655,400 won 35,131,773
Liabilities 9,426,614 1,258,716 1,336,317 1,461,408 1,830,607 2,332,495 17,646,157
-------------- ------------- ------------- ------------- ------------- ------------- --------------
Net assets won 9,364,799 won 1,232,004 won 1,325,892 won 1,442,638 won 1,797,378 won 2,322,905 won 17,485,616
============== ============= ============= ============= ============= ============= ==============
b) Assets and liabilities of the spun off division as of December
31, 2000 (won in million)
KHNP KOSEPCO KOMIPO KOWEPCO KOSPO KEWESPO Total
-------------- ------------- ------------- ------------- ------------- ------------- --------------
Assets won 17,433,479 won 2,688,953 won 2,209,503 won 2,943,194 won 3,507,340 won 4,696,226 won 33,478,695
Liabilities 9,231,779 1,469,853 1,234,789 1,542,594 1,819,240 2,463,526 17,761,781
-------------- ------------- ------------- ------------- ------------- ------------- --------------
Net assets won 8,201,700 won 1,219,100 won 974,714 won 1,400,600 won 1,688,100 won 2,232,700 won 15,716,914
============== ============= ============= ============= ============= ============= ==============
c) Result of operations of the spun off division (From January 1,
2001 to April 1, 2001) (won in million)
KHNP KOSEPCO KOMIPO KOWEPCO KOSPO KEWESPO Total
-------------- ------------- ------------- ------------- ------------- ------------- --------------
Net sales won 1,097,586 won 410,195 won 345,771 won 406,931 won 413,058 won 481,710 won 3,155,251
Cost of
goods sold 875,074 360,346 280,101 380,139 401,384 460,825 2,757,869
-------------- ------------- ------------- ------------- ------------- ------------- --------------
Gross profit won 222,512 won 49,849 won 65,670 won 26,792 won 11,674 won 20,885 won 397,382
============== ============= ============= ============= ============= ============= ==============
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.
KOREA ELECTRIC POWER CORPORATION
By: /s/ Chung, Soo Eun
------------------------------
Name: Chung, Soo Eun
Title: Chief Financial Officer
Date: December 10, 2002