Investor Presentation

Presentation on theme: "Investor Presentation"— Presentation transcript:

1 Investor Presentation
11/18/ :11 AM Good afternoon, my name is [Sun A, KIM], Team Head of Treasury Department at Korea Western Power. [안녕하십니까, 저는 한국서부발전의 자금팀의 팀장을 맡고 있는 김선아 팀장입니다] Thank you for your time to visit us and I hope, by this presentation, you will have a better understanding of our credit profile. [오늘 저희와 미팅을 가져주셔서 감사드리고 이 프레젠테이션을 통해 저희 회사의 크레딧에 더 자세히 알 수 있는 시간이 되기를 바랍니다] Before we get started, let me briefly introduce our participants. [먼저 시작에 앞서 저희 회사 인원들을 소개하겠습니다] [Introduce other participants] [사측 인원 소개] Now, let’s begin the presentation. [그럼 시작하도록 하겠습니다] Korea Western Power Investor Presentation May 2018

2 11/18/ :11 AM Disclaimer This presentation has been prepared by Korea Western Power Co., Ltd. (“KOWEPO”) solely for information purposes. No representation or warranty express or implied is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or any opinion contained herein. The information contained in this presentation should be considered in the context of the circumstances prevailing at the time and will not be updated to reflect material developments that may occur after the date of the presentation. Neither KOWEPO nor any of its affiliates, officers, directors or advisers shall have any liability whatsoever (in negligence or otherwise) for any loss arising from any use of this presentation or its contents or otherwise arising in connection with this presentation. This presentation is being communicated only to persons who have professional experience in matters relating to investments and to persons to whom it may be lawful to communicate it. By reviewing this presentation, you represent and agree that you and any customers you represent are not a U.S. person and are outside the United States and not acting for the account or benefit of a U.S. person (as defined in Regulation S under the U.S. Securities Act of 1933, as amended). This presentation does not constitute or form part of an offer, invitation or recommendation to purchase or subscribe for any securities and no part of it shall form the basis of or be relied upon in connection with any contract, commitment or investment decision in relation to any securities. No money, securities or other consideration is being solicited, and, if sent in response to this presentation or the information contained herein, will not be accepted. The presentation may contain statements that reflect KOWEPO’s beliefs and expectations about the future. These forward-looking statements are based on a number of assumptions about the future, some of which are beyond KOWEPO’s control. Such forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. KOWEPO does not undertake any obligation to update any forward-looking statements to reflect events that occur or circumstances that arise after the date of this presentation. Certain data in this presentation was obtained from various external data sources, and KOWEPO has not verified such data with independent sources. Accordingly, KOWEPO makes no representations as to the accuracy or completeness of that data, and such data involves risks and uncertainties and is subject to change based on various factors. You agree to keep the contents of this presentation strictly confidential. All or any part of this presentation may not be taken away, reproduced, redistributed or retransmitted in any manner. By attending this presentation, you are agreeing to be bound by the foregoing limitations.

3 Table of Contents Company & Industry Overview Business & Operation
11/18/ :11 AM Table of Contents Company & Industry Overview Business & Operation Financial Performance Appendix Our presentation today will cover three sections, starting with the overview of KOWEPO and the electricity industry. [오늘 프레젠테이션은 크게 세 단락으로 구성되어 있으며, 처음은 저희 회사와 한국전력산업에 대한 소개입니다] This will be followed by the update of our business and operations and finish with our financial performance. [그 다음으로는 서부발전의 사업 및 재무실적을 업데이트 드릴 것입니다]

4 Company & Industry Overview
11/18/ :11 AM Let me start with an overview of our company and the industry. [서부발전과 한국전력산업에 대한 소개를 하도록 하겠습니다] Company & Industry Overview

5 KOWEPO Overview Market Share by Generation Capacity
11/18/ :11 AM KOWEPO Overview Company Name Korea Western Power Co., Ltd. (“KOWEPO”) Establishment Date April 2, 2001 (Spun off from Korea Electric Power Corp (“KEPCO”)) Ownership 100% owned by KEPCO (KEPCO 51% owned by the Korean government) Assets KRW 9,935 billion (1Q 2018) Revenue KRW 1,395 billion (1Q 2018) Equipment of Capacity 11,311MW, 17 power plants with 70 units Electricity Sales 13,025 GWh (1Q2018) Market Share by Generation Capacity Thermal Total Generation Capacity: 116,747 MW 100% KOWEPO Market Share by Sales Volume Korea Western Power, is a state run power generation company which spun off from Korea Electric Power Corporation, in April 2nd, 2001. [한국서부발전은 2001년 4월 2일, 한국전력의 자회사인 발전회사입니다] As a public enterprise 100% owned by KEPCO, which in turn is owned by the government, we enjoy strong operational and strategic ties with the Korean government. [서부발전은 100% 한국전력 자회사로서 정부와도 긴밀한 관계를 맺고 있습니다] The Korean government supports power industry with favorable regulatory frameworks and through its majority ownership in KEPCO. [정부는 한국전력과의 관계 및 우호적인 규제 등으로 국내발전산업을 지원하고 있습니다] Transmission and distribution of electricity in Korea is solely run by KEPCO, which is 51% owned by the Government, while around 70% of total domestic generation capacity is operated by 6 generation companies under KEPCO. [국내 전력의 송전 및 배전은 51% 정부 소유의 한전이 추진하고 있으며, 국내 발전 용량의 약 70%는 한전의 산하 6개의 발전자회사들이 운영하고 있습니다] Private power producers so called IPP run the rest 30% of generational capacity. [IPP라고 불리는 민간발전사들은 나머지 30%의 발전용량을 운영하고 있습니다] As of the first quarter of 2018, our assets stood at 9.9 trillion Korean Won with total revenue of 1.4 trillion Korean Won. [2018년 1분기 기준으로 당사의 총자산은 9.9조원이며 1.4조원의 매출액을 실현하였습니다] We currently have 11,311 MW (Megawatts) of generation capacity, which accounts for 9.7% of the nation’s total. [당사는 1분기 기준으로 총 11,311MW의 발전용량을 보유하고 있으며, 이는 국내 총 발전용량의 9.7%를 차지하고 있습니다] 100% EWP 100% KOSEP 100% (Aa2 / AA / AA-) KOSPO 100% KOMIPO Nuclear and Hydro 100% KHNP Total Electricity Sales: 138,839 GWh Source: Company data as of 1Q 2018

6 Ratings Equal to Sovereign
11/18/ :11 AM Ratings Equal to Sovereign Aa2 (Stable) Aa2 (Stable) KOWEPO’s standalone credit profile reflects the company's (1) strong market position as one of the major power generators in Korea; (2) diversified fuel sources, including coal, liquefied natural gas (LNG) and oil; and (3) expected financial-metric improvement. KOWEPO’s high operational and financial integration with KEPCO is illustrated by KEPCO’s heavy reliance on its six power generation companies (gencos), including KOWEPO, for the supply of electricity to Korea. The integration is also illustrated by a profit-sharing program that balances profits between KEPCO, on a standalone basis, and the gencos. In addition, we expect the government to maintain its tight control and supervision over all six gencos through KEPCO’s majority ownership in them because of the importance of the power sector and the gencos to the economy. As such, both the government and KEPCO will take strong measures to contain any material widespread disruptions to KOWEPO's operations, if and when needed. AA (Stable) AA (Stable) On the back of strong market position and high operational and financial integration with KEPCO and the government, KOWEPO is rated on a par with the Korea sovereign at Aa2 by Moody’s and AA by S&P. [당사는 한국전력 및 정부와의 깊은 재무적 및 운영적 관계 및 국내 전력시장에서의 견고한 시장지위로 한국 정부의 신용등급과 동일한 Aa2 (무디스)와 AA(S&P) 등급을 보유하고 있습니다] The rating on KOWEPO primarily reflects our view of the company as a core subsidiary of Korea Electric Power Corp. KOWEPO's power generation is integral to KEPCO's role of providing a stable supply of electricity in Korea. KEPCO's six power generation subsidiaries (gencos; including KOWEPO) account for a key portion of its 80% share of the national electricity generation market. Reflecting these factors, we equalize the rating on KOWEPO with that on its parent, KEPCO. We expect KOWEPO to maintain its good position in Korea's power generation market, contributing nearly 10% of the country's total supply. Also supporting the company's market position is an improved generation mix. The stable outlook reflects our expectation that KOWEPO will continue to play an integral role in KEPCO's strategy of providing a stable supply of electricity. Source: Moody’s credit rating report dated as of June 2017; S&P credit rating report dated as of April 2018

7 Key Industry Milestone
11/18/ :11 AM Key Industry Milestone 2001 1 Industry Restructuring 2002 KEPCO’s generation assets divided into six Gencos on April 2, 2001 KEPCO remains the sole transmission and distribution company KOSEP selected as the first for privatization in 2002 2008 2 Privatization of Gencos Suspended Privatization plan for KEPCO and its Gencos was effectively suspended in July 2008 2011 3 Market Oriented Public Enterprise In 2011, the Gencos have been designated as market oriented public enterprises by the government to create a more efficient management structure and enhance their competitiveness Now, I would like to briefly go over key milestones in Korea’s power industry for KEPCO owned generation companies. [이제 한전 소유의 발전회사들에 대한 한국전력산업의 핵심 이정표를 간단히 살펴보고자 합니다] The generation companies were spun off from KEPCO into 6 wholly- owned subsidiaries in 2001 to bring more efficiency in nation’s power industry. [발전회사들은 전력산업의 효율성을 제고하기 위해 2001년 한전에서 전액 출자한 6개 자회사로 분사했습니다] More recently in June 2016, the government announced that it would privatize 20~30% shares of selected public enterprises in Korea’s energy sector to improve their financial soundness. [2016년 6월, 정부는 한국의 에너지 공기업들의 재무 건전성을 개선하기 위해 이들 중 20-30% 정도의 기업들을 대상으로 민영화를 진행하겠다고 발표했습니다] Korea South-East Power and Korea East West Power have been selected as the first Gencos to complete public listing by 2017 in accordance with the government IPO roadmap. [정부의 IPO 로드맵에 따르면 한국남동발전과 한국동서발전이 2017년 상장을 할 첫번째 발전회사들로 선택되었습니다] However, after the new administration came in 2017, the government made a public announcement on October 2017, that it has abandoned Gencos’ IPO plan. [그러나 2017년 신 정부 출범 이후, 정부는 10월 발표를 통해 기존의 발전회사들에 대한 IPO 계획을 철회하겠다고 밝혔습니다] 2016 4 Government’s Plan for IPO Ministry of Strategy and Finance (“MoSF”) announced on June 14, 2016, that a total of 20~30% of shares in eight energy public enterprises to be listed starting in the first half of 2017, which will put those companies under market watch and eventually improve their financial soundness (“June Government Plan”) On December 8, 2016, MoSF announced more detailed IPO roadmap, selecting KOSEP and EWP to be the first to complete listing by 2017 (“IPO Roadmap”) However, after the new administration came in, the government publically announced on October 2017, that it has practically abandoned its plan to list public power generators due to unfavorable market conditions 2017

8 Industry Framework Regulatory Structure
Basic Energy Plan #2 Electricity Supply and Demand Basic Plan #8 Demand management centric energy plan Establishment of decentralized power generation system Seeking balance between environment and safety Stable energy supply and enforcement in energy security Establishment of system for stable energy supply by sources Energy policy in line with people’s need Maintain stable electricity supply through accurate demand forecast Secure stable reserve ratio of 22% by 2030 Produce more power from renewable energy sources and natural gas, while gradually reducing its reliance on coal and nuclear power Natural gas and renewable energy sources will have a greater share in the generation mix in terms of installed capacity Aims to generate 20% of electricity from renewable energy sources by 2030 Further reduction in the expected peak demand through utilizing technologies of the 4th Industrial Revolution and introducing new regulations that promote energy efficiency Electricity Pricing Mechanism for Gencos Installed Capacity Forecast by Different Energy Sources According to the "2nd Basic Energy Plan", the government aims to seek a balance between environment and safety and establish a system for stable energy supply by sources. [“제 2차 에너지 기본계획”에 따르면, 정부는 에너지와 안전의 균형을 추구하고, 전원별 안정적인 에너지 공급 체계를 수립하는 것을 목표로 하고 있습니다] Furthermore, according to the “the 8th Basic Plan of Electricity Supply and Demand” in December 2017, the government aims to maintain stable electricity supply, targeting a reserve rate of 22% by year 2030. [더불어, 2017년 12월에 발표된 “제 8차 전력수급기본계획”에 따르면, 정부는 안정적인 전력수급을 유지하는 것을 전제로 2030년까지 22%의 예비율 달성을 목표로 하고 있습니다] Another key drive is producing more power from renewable energy sources and natural gas, while gradually reducing the reliance on coal and nuclear power. [또 다른 핵심 과제는 신재생에너지원과 천연가스로부터 더 많은 발전량을 생산하는 것과 동시에 점차적으로 석탄과 원자력에 대한 의존도를 줄이는 것입니다] According to the plan, the government aims to generate 20% of electricity from renewable energy sources by 2030. [“제 8차 전력수급기본계획”에 따르면, 정부는 2030년까지 국내 총 전력량의 20%를 신재생에너지에서 수급하는 것을 목표로 하고 있습니다] [Now I will talk about the electricity pricing mechanism.] [The electricity pricing mechanism in Korea is basically a cost based pool system. Electricity price is determined by two components, Marginal Price and Capacity Price.] [Marginal Price is designed to compensate the variable cost such as fuel costs with a set rate of return. To calculate Marginal Price, SMP, which is System Marginal Price, is used. SMP represents the most expensive fuel price hourly where power demand and supply meet. For the Gencos, adjusted coefficient is applied to SMP to balance out the earnings between KEPCO and Gencos unlike other private generators.] [Lastly, CP is the other payment, to compensate the Gencos for fixed costs related to the construction of generation facilities.] Electricity Price Fuel Cost + (SMP-Fuel Cost) x SMP Adjusted Coefficient Marginal Price (MP) Capacity Payment (CP) To compensate for the amount of generation ready capacity Varies by each plant depending on the year of commission, location and fuel type Source: The 8th Basic Plan of Long-term Electricity Supply and Demand, December 2017 by MOTIE Note: 1. Regional Co-generation System

9 Korea’s Electricity Consumption Trend
11/18/ :11 AM Korea’s Electricity Consumption Trend Electricity Consumption & GDP Growth(1) Power Sold by Segment (1Q 2018)(2) Electricity Consumption Forecast(1) (Unit: Thousand MW) (Unit: Thousand GWh) Now let's take a look into Korea’s electricity consumption growth trend. [이제 국내 전력 소비 증가 추세를 살펴보겠습니다] Growth of electricity consumption has been in line with Korea’s GDP growth with more than half of the demand coming from the industrial sector. [전력소비 증가율은 한국의 GDP 성장률과 비슷하게 따라가는 양상을 보이고 있으며, 전력수요의 절반이상이 산업 부문에서 나오고 있습니다] According to “the 8th Basic Plan of Long-term Electricity Supply and Demand” announced by the government in 2017, the demand will continue to grow at an average rate 2.1% per year until 2031. [정부에서 2017년 발표한 “제 8차 전력수급기본계획”에 따르면, 전력수요는 2031년까지 평균 2.1%의 성장률을 보일 것으로 예측하고 있습니다] Avg. Expected Consumption Growth Rate: 2.1% Source: The 8th Basic Plan of Long-term Electricity Supply and Demand, December 2017 by Ministry of Trade, Industry and Energy (MOTIE) KEPCO, The Monthly Report on Major Electric Power Statistics, as of March 2018

10 Key Credit Highlights 1 2 3 4 Strong Linkage with the Government
11/18/ :11 AM Key Credit Highlights 1 Credit ratings equalized with the Sovereign Government’s control and oversight through key industry policies and financial oversight Designated as “Market-oriented Public Enterprise” – Government will maintain majority control and ownership Strong Linkage with the Government 2 Supportive Industry Dynamics KEPCO as the sole off-taker reduces any offtake risk Power consumption under constant growth with electricity tariffs still with room for growth 3 Effective Operations Significant market share in the domestic power supply market in terms of capacity Operational excellency evidenced by healthy utilization rate and low stoppage rate Diversified fuel sources, including coal, liquefied natural gas, and IGCC Let us summarize our key credit highlights. [이 페이지에서는 서부발전의 주요 크레딧 강점에 대해 강조하고자 합니다] First of all, KOWEPO is rated par with the Korean government by the international rating agencies. And as a “Market-oriented public enterprise”, the government controls and oversees overall industry policies and KOWEPO’s financial stability. [우선 서부발전은 국제신용평가사로부터 한국정부와 동일한 신용등급을 받고 있으며, 시장형 공기업으로서 정부가 전반적인 산업 정책과 서부발전의 재무안정성을 관리 및 감독하고 있습니다] Second, we enjoy supportive regulatory and industry dynamics. Our nation’s power consumption is under constant growth with electricity tariffs still with room for growth. [두번째로, 국내 산업의 역동성과 우호적인 규제입니다. 우리나라의 국내전력소비는 지속적인 성장률을 보이고 있으며, 전기요금 역시 성장의 여지가 있습니다] Third, we have been maintaining a strong market share in the domestic electricity market compared to our peers. Our efficient operation is attributable to healthy utilization rate and diversified fuel sources. [세번째로, 타 발전자회사들에 비해 서부발전은 국내 발전용량에서 높은 시장점유율을 보이고 있으며, 다변화된 발전원과 견고한 이용률로 사업을 효율적으로 운영하고 있습니다] Last but not least, KOWEPO has a solid credit and financial profile, generating continuous cash flows from operations and maintaining competitive financials. [마지막으로, 서부발전은 지속적인 현금흐름 창출과 경쟁력 있는 재무구조를 유지함으로서 견조한 재무 및 신용 프로파일을 보유하고 있습니다] 4 Solid Credit and Financial Profile Continuous cash flows from operations (EBITDA Margin as of 1Q 2018: 24.9%) Maintain solid financial stability given its strong access to debt markets and KOWEPO’s strategic importance to power generation sector

11 11/18/ :11 AM In this section, I will go over our business and operation. [본 섹션에서는 당사의 사업에 대해 알아보겠습니다] Business & Operation

12 Total 11,311 MW (9.7% of market share)
11/18/ :11 AM Operation Overview Generation Capacity Portfolio Total 11,311 MW (9.7% of market share) Seoincheon C/C Pyeongtaek Thermal Fuel Type: BC Oil Capacity: 1,400 MW Constructed: ’80-’83 Fuel Type: LNG Capacity: 1,800 MW Constructed: ’92 Pyeongtaek 2 C/C Taean #1-10 Fuel Type: LNG Capacity: MW Constructed: ’13-’14 Fuel Type: Coal Capacity: 6,100 MW Constructed: ’95-’17 This slide outlines our power plant facilities currently in operation. [이 페이지에서는 현재 운영중인 발전소 시설에 대한 개요를 설명하고자 합니다] We are currently operating 70 units via 17 power plants at 9 different sites and have power generation capacity of 11,311 MW in total as of the first quarter of 2018. [당사는 현재 9곳의 지역에서 17개의 발전소를 통해 70개의 발전기를 운영하고 있습니다. 2018년 1분기 기준 당사의 총 발전용량은 11,311MW 입니다] The bulk of our generation capacity is at our Taean facility which has a generation capacity of 6,100MW. [당사의 발전용량 중 큰 부분이 6,100MW를 생산하는 태안 발전소에서 나옵니다] We are also generating various renewable energy resources at sites where our major plants are located. [당사는 또 주요 발전소가 위치한 지역에서 다양한 신재생에너지를 생산하고 있습니다] Gunsan C/C Renewable Energy Fuel Type: IGCC/Solar Panel, Fuel Cell, Hydro, Wind Power Location: Taean, Youngam, Samrangjin, Sejong City, etc Capacity: MW Constructed: ’05-’17 Fuel Type: LNG Capacity: MW Constructed: ‘10 Source: Company data, as of 1Q 2018

13 Operational and Environmental Management
11/18/ :11 AM Operational and Environmental Management Utilization Capacity and Stoppage Rate GHG Emission Requirements Emission Trading Implementation Rate Availability Rate Period of time the equipment was available for operation per calendar year Utilization Capacity Utilized generation capacity per maximum generation capacity Stoppage Rate Period of time the equipment was stopped during operation per calendar year Meeting Renewable Requirements KOWEPO has demonstrated high operational performance and this can be seen through our high capacity utilization and low stoppage rates. [서부발전은 높은 이용률과 낮은 정지율을 통해 견고한 운영실적을 보여왔습니다] Furthermore, KOWEPO in the first quarter of 2018 saw 15% increase in generation volume compare to the same quarter from the last year. [더 나아가 당사의 발전량은 전년동기 대비 15% 증가하였습니다] KOWEPO has also been very active to meet the green house gas emission requirement. Under the Government’s green house gas emission trading system that was implemented in 2015, the Government allocates emission allowance units and evaluates carbon emission levels. In 2017, KOWEPO was fully compliant with the government’s requirement and we will make greater efforts to reduce green house gas emission. [또한 서부발전은 온실가스배출 요구조건을 충족시키위해 매우 적극적으로 임하였습니다. 2015년 시행된 정부의 온실가스 배출권 거래 시스템에 따라 정부는 배춸총량 단위를 할당하고 탄소 배출량을 평가했습니다. 2017년에 서부발전은 정부의 요건을 충실하게 이행하였으며, 향후에도 온실가스 배출 감소를 위해 더 많은 노력을 할 것입니다] The Government has also introduced the Renewable Portfolio Standard, whereby gencos should produce a certain amount electricity via renewable energy. For the past four years, KOWEPO has successfully met the Government’s target and will continue to do so going forward. [정부는 또한 신재생에너지를 통해 일정량의 전력을 생산해야하는 신재생에너지 공급의무화 제도 (RPS) 도입했습니다. 서부발전은 지난 4년간 정부의 목표를 100% 달성했으며, 앞으로도 지속적으로 이행을 할 것입니다] RPS Implementation Rate Generation Volume (GWh) * RPS (Renewable Portfolio Standard): The government requires generation companies with more than 500MW in generation capacity to supply a certain percentage of power from renewable energy generation Source: Company data, as of 1Q 2018

14 Fuel Procurement and Cost Management
11/18/ :11 AM Fuel Procurement and Cost Management Fuel Procurement Strategy Coal LNG Diversified Fuel Source 5 Overseas countries (Australia, Indonesia, South Africa, Russia, USA) Long-term Supply Contract LNG: 100% Coal: 67% Procurement Strategy Formulate strategy and direction by utilizing a real-time monitoring system and analysis of daily supply status and stock forecast Achieve economic efficiency and stability by minimizing price fluctuation risk through smart distribution purchase system Increase portion of low-sulfur coal in KOWEPO’s fuel portfolio Establish a master plan for LNG direct import in economical way such as securing LNG storage facility Making long-term supply contracts assure adequate supply of the raw materials Hedging risks by adjusting proportion of long-term contracts with market volatility Fuel Cost Composition(1) Major Suppliers of Coal On this slide, I would like to highlight KOWEPO’s fuel sourcing and cost management capabilities. [본 장에서는 서부발전의 연료 조달 및 비용 관리 능력을 다루고 있습니다] As procurement strategy, we have diversified the geographic distribution of our fuel sources with 5 overseas countries. [당사의 연료 조달 전략은 5개의 해외국가를 통한 연료조달의 다변화입니다] As coal and LNG take up around 64% and 28% of our fuel cost composition, respectively, we try to secure a stable supply by diversifying fuel source in long term supply contract. Currently, 67% of coal and 100% of LNG are supplied through long-term contracts. [당사의 연료 비용중 석탄이 64%, LNG가 28%를 차지함에 따라 우리는 장기공급계약을 통해 연료원을 다변화하여 안정적인 공급을 확보하고자 합니다. 현재 석탄의 67%와 LNG의 100%를 장기계약을 통해 공급받고 있습니다] Total 4,133 kilotons Source: Company data as of 1Q 2018 Represents fuel costs other than that required to generate electricity, such as fuel required to start up the generating units

15 Generation Capacity Addition
11/18/ :11 AM Generation Capacity Addition Recent Capacity Addition CapEx Breakdown Renewable Energy Fuel Type Coal Solar Panel IGCC Fuel Cell Wind Power Date of Commercial Operation June 2017 December 2017 August 2016 April 2016 December 2015 Capacity 2,100MW 18.131MW 346.33MW 16.2MW 16MW Total 2,496.66MW (Unit: KRW billions) 19,730 14,724 Generation Capacity of Thermal Gencos (Unit: MW) 8,045 From 2015 to now, KOWEPO has added total 2,497MW of additional capacity including both coal and renewable energy. [당사는 2015년부터 지금까지 석탄 및 신재생에너지를 포함해 총 2,497MW의 용량을 추가했습니다] Among thermal gencos, KOWEPO has the largest generation capacity. [화력발전사들 중 서부발전이 가장 많은 발전용량을 차지하고 있습니다] With addition of our major facilities including Taean #9-10 thermal and IGCC plants completed, the level of CAPEX spending has decreased constantly. Though it may vary, we expect around 1 trillion Korean Won of CAPEX spending annually for the next 2-3 years as we plan to expand and improve our environmental and renewable energy facilities. [태안 9/10호기 화력, IGCC 등 주요 설비가 준공됨에 따라 투자지출이 점차 감소하였습니다. 향후 2~3년간 신재생 용량 확대 및 환경 설비 개선 등으로 매년 1조원 이상의 투자비 계획이 있으나, 이는 상황에 따라 유동적입니다] 7,282 1,159 Source: Company data, as of 1Q 2018

16 Major Overseas Business Overview
11/18/ :11 AM Major Overseas Business Overview Yangon, Myanmar Phu Noi, Laos Rabigh, Saudi Arabia Type: C/C Capacity: 500MW KOWEPO Stake: 7% Build, Operate, Transfer Type: Hydro Capacity: 728MW KOWEPO Stake: 29% Build, Operate, Transfer Type: B.C Oil Capacity: 1,204MW KOWEPO Stake: 40% Operation & Management Xe-Pian Xe-Namnoy, Laos Type: Hydro Capacity: 410MW KOWEPO Stake: 25% Build, Operate, Transfer Colon, Panama This is an outline of our major overseas businesses. [이 장에서는 당사의 주요 해외사업을 소개합니다] We currently have total of 15 overseas projects in developing or under operation, and we try to minimize any risk arising from overseas activities by thorough risk management. [서부발전은 현재 15개의 해외사업을 운영하고 있으며, 철저한 리스크 관리를 통해 해외사업으로 인한 리스크를 최소화 하고자 합니다] Maharashtra, India Type: Gas Test-run business Type: C/C Capacity: 388MW KOWEPO Stake: 38.5% Build, Own, Operate Moolarben, Australia Sumatra, Indonesia Type: Mine Development business Type: Coal Capacity: 300MW KOWEPO Stake: 95% Operation & Management Bylong, Australia Type: Mine Development business Kalimantan, Indonesia Under Operation Bannerton, Australia Type: Floating Terminal Capacity: 8 Million Ton/Y KOWEPO Stake: 29% Operation & Management Developing Type: Solar Panel Build, Own, Operate Source: Company data as of 1Q 2018

17 Financial Performance
11/18/ :11 AM Now, let me lead you to our recent financial performance. [다음 섹션에서는 서부발전의 재무실적에 대해 다루도록 하겠습니다] Financial Performance

18 Profitability Metrics
11/18/ :11 AM Profitability Metrics Operating Income Profit for the Period (KRW bn) (KRW bn) EBITDA EBITDA Margin (KRW bn) This slide shows KOWEPO’s profitability trend. [본 장은 당사의 수익성 추이를 보여주고 있습니다] Our revenue increased in 2017, but increase in coal usage and fuel costs raised cost of goods sold, thereby reduced both operating income and net income. [2017년 매출액은 증가하였으나, 2016년 대비 석탄 사용물량 증가 및 연료단가 상승 등으로 인한 매출원가 증가로 영업이익이 감소. 이에 따라 당기순이익도 감소했습니다] Despite decrease in operating income and net income, we are still maintaining over 20% of EBITDA margin. [영업이익과 당기순이익의 감소에도 불구하고 당사는 20% 이상 수준의 EBITDA margin을 유지하고 있습니다] (%) Source: Company’s financial statements (financials based on K-IFRS) Note: EBITDA is defined as earnings before interest expense, income taxes and depreciation and amortization

19 Strong Credit Metrics EBITDA to Interest Expense(1) Debt(2) to EBITDA
11/18/ :11 AM Strong Credit Metrics EBITDA to Interest Expense(1) Debt(2) to EBITDA Debt to Capitalization(3) FFO(4) to Debt (%) This shows KOWEPO’s solid credit profile. [본 장은 당사의 우수한 신용 프로파일을 소개합니다] On the back of continuous cash flow generation ability and reduction in debt, credit metrics remain very healthy. [지속적인 현금흐름창출 능력과 부채 감축으로 여전히 건전한 신용 지표를 보여주고 있습니다] We maintain debt to EBITDA ratio at low level around 5.0x for the past 3 years and our debt to capitalization is at 55.9% as of the 1st quarter of 2018. [지난 3년간 EBITDA 대비 부채 비율은 5.0배 수준으로 낮게 유지하고 있으며, 2018년 1분기 기준으로 당사의 현재 부채비율은 55.9% 수준입니다] (%) Source: Company’s financial statements (financials based on K-IFRS) Interest Expense includes capitalized interest expense Debt = Borrowings + Debentures (Short Term & Long Term) Capitalization = Debt + Total Equity FFO = Funds From Operations

20 Debt Profile Debt Maturity Profile(1) Breakdown by Maturity
11/18/ :11 AM Debt Profile Debt Maturity Profile(1) Breakdown by Maturity (KRW bn) Breakdown by Currency Breakdown by Interest Rate Type This slide shows our debt profile. [본 페이지는 서부발전의 사채 프로파일에 관련한 내용입니다] We have approximately 5 Trillion Won in total debt, with very well spread out debt maturity profile. [서부발전의 총사채는 현재 약 5조원 가량이며, 만기별로 고르게 분산되어 있습니다] In particular, KOWEPO makes an effort to maintain financial soundness by successfully issuing 30-year bond, which was the first of its kind issued by a generation company, on the back of our solid credit and financial profile. [특히 작년에는 우수한 신용도 및 견고한 재무구조를 바탕으로 발전 5사 중 최초 초장기물인 30년채를 발행함으로서 재무건전성 확보에 최선을 다하고 있습니다] While 78% of our funding is done in local, we expect to expand the portion of our funding in foreign currency by diversifying the funding currency going forward. [78%의 자금조달이 국내시장에서 이뤄지고 있지만 당사는 향후 자금조달 다변화의 일환으로 외화자금 조달의 비중도 늘릴 것입니다] Almost 100% of our debt are in fixed rate, which is a strategic decision for KOWEPO in order to avoid interest rate risk. [당사의 사채는 거의 100% 고정금리로 이루어져 있으며 이는 금리 리스크를 피하기 위한 서부발전의 전략적 결정입니다] Source: Company data, as of 1Q 2018 Note: Debt consists of the sum of debentures (excluding amortization of discount) and long-term borrowings (including current position)

21 Appendix This concludes our presentation. [이로서 당사의 프레젠테이션을 마치고자 합니다]
11/18/ :11 AM This concludes our presentation. [이로서 당사의 프레젠테이션을 마치고자 합니다] On behalf of KOWEPO, I would like to thank you for listening to our presentation today. [서부발전을 대표하여 오늘 프레젠테이션을 들어주셔서 감사합니다] Please let us know if you have any further question. [추가 질문이 있으시면 저희에게 알려주시기 바랍니다] Thank you. [감사합니다] Appendix

22 Electricity Pricing Trend
11/18/ :11 AM Electricity Pricing Trend SMP Trend (Yearly Average)(1) Coefficient Adjustment Trend Bituminous Coal Others (LNG, Oil) 2008 0.1157 0.2060 2009 0.1301 0.1890 2010 0.1634 0.3241 2011 0.1526 0.4832 2012 0.0705 0.2959 2013 0.0892 0.2776 2014 0.1568 0.5931 2015 0.3690 1.0000 2016 0.7695 2017 0.5880 2018 0.5485 (KRW) Change in Capacity Payment (CP) New Calculation Method New CP calculation effective as of November 1, 2016 CP continue to function as fixed fee received to compensate for cost not covered by variable cost; CP is paid to each generation company for the amount of available generation capacity The recent change in CP calculation is to rationalize the level of compensation to power generators and provide more incentive to operate environmentally friendly power plants As result of the change, KOWEPO expects an increase in CP revenue for LNG- fired plants and a reduction in CP revenue for coal-fired plants 정산조정계수는 전력도매요금의 안정화를 위해 2008년 5월 처음 도입되었음. 그 이후 점차 상향 조정 하여 현재 석탄 조정계수는 , 그 외 전원의 조정계수는 1임. 계통한계가격 2018년 1분기 기준으로 94원이며, 단기적으로는 현재와 비슷한 수준에서 형성될 것으로 전망. 다만 장기적으로는 신정부의 신재생 및 탈원전 정책 등 정책변수가 높아져 정확한 전망 예측은 현재로서는 어려움. 2016년 11월, 용량요금 산정기준이 발전사에 대한 고정비용 보상 수준을 보다 현실화하고 온실가스 배출이 적은 발전기에 대해 인센티브를 주는 방향으로 개편되었음. 용량요금 산정은 기존의 RCP (기준발전기 고정비+수전기본요금+송전접속비용) x RCF (용량가격계수) x TCF (시간대별용량계수) 에서 추가로 FSF (연료전환성과계수)를 추가로 곱하여 산정. CP = RCP x RCF x TCF x FSF Factors Changes Before After Capacity Payment (RCP) Differentiate by the year that power plant came on line 7.6/kwh 9.15~10.07 Reserve Capacity Factor (RCF) Adjusted annually and reflect transmission loss 0.9279 x TCF (0.98~1.02) Fuel Switching Factor (FSF) Factor newly introduced to reflect generation utilization and carbon emission - 0.939~1.0311 Source: Korea Power Exchange

23 Financial Statements – Income Statement
11/18/ :11 AM Financial Statements – Income Statement Income Statement (Unit : KRW bn) 2015 2016 2017 1Q 2018 Sales 4,224 4,180 4,222 1,395 Cost of Sales 3,653 3,487 3,748 1,182 Gross Profit 571 693 474 213 SG&A 82 104 112 23 Operating Profit 489 589 362 190 Other Operating Income 3 4 1 Other Operating Expense (0) (1) (6) Other Income 5 (9) Financial Income 125 62 172 12 Financial Expense (193) (135) (311) (44) Share in Loss of Joint Ventures and Associates (13) (63) (12) Income From Continuing Operations Before Income Tax 412 511 149 151 Income Tax Expense From Continuing Operations 118 46 58 Net Income (Loss) 300 393 103 93 Source: Company’s financial statements, as of 1Q 2018 Note: Consolidated K-IFRS accounting standard

24 Financial Statements – Balance Sheet
11/18/ :11 AM Financial Statements – Balance Sheet Balance Sheet (Unit : KRW bn) 2015 2016 2017 1Q 2018 Assets Current Assets 985 1,175 1,066 1,430 Non-Current Assets 8,223 8,618 8,563 8,505 Total Assets 9,208 9,793 9,629 9,935 Liabilities Current Liabilities 1,370 1,651 1,297 1,774 Non-Current Liabilities 4,352 4,219 4,449 Total Liabilities 5,722 5,870 5,746 5,993 Stockholder’s Equity Capital Stock 1,192 1,273 Capital Surplus 49 57 (29) (36) Retained Earning 2,245 2,593 2,639 2,705 Total Stockholders’ Equity 3,486 3,923 3,883 3,942 Total Liabilities and Stockholders’ Equity Source: Company’s financial statements, as of 1Q 2018 Note: Consolidated K-IFRS accounting standard

25 Financial Statements – Cash Flow Statement
11/18/ :11 AM Financial Statements – Cash Flow Statement Cash Flow Statement (Unit : KRW bn) 2015 2016 2017 1Q 2018 Cash Flows From Operating Activities Net Income 300 393 103 93 Non-cash Income & Expenses 690 765 964 294 Changes in Assets and Liabilities (220) (125) (269) 91 Other (100) (166) (215) (41) Net Cash Provided by Operating Activities 670 867 583 437 Cash Flows from Investing Activities Purchase of Fixed Assets (1,582) (656) (642) (91) Others, Net 25 (55) (108) (328) Net Cash Provided by Investing Activities (1,557) (711) (750) (419) Cash Flows from Financing Activities Cash Inflows 2,983 1,884 2,894 -- Cash Outflows (2,066) (1,899) (2,938) (0.09) Net Cash Provided by Financing Activities 917 (15) (44) Cash and Cash Equivalent at End of Period 106 247 35 33 Source: Company’s financial statements, as of 1Q 2018 Note: Consolidated K-IFRS accounting standard