Korea Electric Power Corporation Q2 FY2025 earnings call

• 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; full year 2025 sales projected to go down slightly due to economic growth rate adjustment and manufacturing downturn.
• In the first half of 2025, 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; system marginal price (SMP) was around KRW 118.9 per kilowatt hour.
• Generation mix: nuclear generation mix up due to new power plant and increased utilization rate; coal generation mix down from lower utilization; LNG generation mix partly down from decreased capacity and increased base load generation; expected utilization rate for 2025: nuclear mid-80% range, coal upper 40% range, LNG mid-20% range.
• RPS costs in the first half of 2025: KRW 1,958.9 trillion on consolidated basis and KRW 2,176 trillion on a separate basis.
• Funding status: borrowings stood at KRW 131.9 trillion on a consolidated basis and KRW 86.5 trillion on a separate basis in the first half of 2025.

The consolidated operating profit for the first half of 2025 was KRW 889.5 billion. Revenue was KRW 46,174.1 trillion, up by 5.5%. 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%. 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%. Depreciation expenses came to KRW 5.878 trillion, increased by 4.4%. Interest expense amounted to KRW 2,211.3 trillion, down by KRW 72.8 billion from the same period last year.

• Full year 2025 electricity sales projected to go down slightly due to economic growth rate adjustment and manufacturing downturn.
• Expected utilization rate for 2025: nuclear mid-80% range, coal upper 40% range, LNG mid-20% range.
• Plan to introduce regional differentiated retail tariff system: gather opinions of relevant stakeholders in the first half of 2026 and introduce within 2026.
• Government's long-term target for KEPCO's dividend payout ratio is 40%; will consider financial situation and grid investment needs to adjust dividend payout ratio.

Q: Jong Hwa Sung from LS Securities asked about companies directly purchasing power from the power exchange and its impact on KEPCO, and potential solutions for industrial power price issues.

A: Part of some customers directly purchasing power from the power exchange will affect sales and cost of sales; working with Korea Power Exchange to improve direct power purchasing system; need to raise tariffs additionally to ease accumulated deficit, but limited room to raise industrial tariffs, reviewing potential increase for other sectors and consulting with government on cash adjustment.

Q: Moon, Kyeong Won from Meritz Securities asked about KEPCO's preparations for entering the US nuclear power market and reasons for lower-than-expected SMP in August.

A: KEPCO is interested in potential entry into US market but not disclosing specific details; SMP in August was lower than expected because demand in August was less than anticipated by KPX due to summer vacations, weather situation, and KPX changing curtailment method to some extent.

Q: Jae-Hyun Ryu from Mirae Securities asked about second half utilization rate outlook, progressive tariff system difference, and potential tariff increases in other sectors.

A: Outlook for second half utilization rate: nuclear mid-80% level, coal upper 40% level; progressive tariff system introduced since 2019, no significant difference from last year; limited room to raise industrial tariffs, but reviewing potential increase in other sectors and designing regional differentiated tariff system to be introduced by 2026.

Q: Minho Hur from Daishin Securities asked about drivers of nuclear settlement unit price rise, adjusted coefficient for coal-fired power plant, and introduction of regional wholesale and retail tariff system.

A: Will get back on nuclear settlement unit price rise; adjusted coefficient for nuclear and coal-fired power plant not changed in first and second quarters, will reassess with government; regionally differentiated tariff system to be introduced is retail tariff system, wholesale system led by KPX and preparing to be introduced in 2025.

Q: Unidentified Analyst from Citi Group asked about fuel price outlook for second half of 2025.

A: [No specific answer provided in transcript].

Q: Sung Hyun Hwang from Eugene Investment & Securities asked about dividend policy and last year's dividend payout ratio.

A: Government's long-term target for dividend payout ratio is 40%; last year's 15% decided by Ministry of Economy and Finance, KEPCO requested to consider financial situation and future investments; no official review of KHNP's potential IPO.