S&P Annual Review Presentation Korea Western Power October 2011

2 Table of Contents Regulatory Environment Operation Overview Financial Management Financial Forecast Company Overview

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4 Introduction to KOWEPO Note : Applied FX rate : KRW /USD (Bloomberg as of June 30, 2011) InceptionInception Spun off from KEPCO in April 2, 2001 OwnershipOwnership 100% owned by KEPCO (51% owned by Korean Government) Generation Capacity 8,404 MW Total Assets 1H 2011: KRW 4,857 bn (USD 4,505mn) FY2010: KRW 4,499 bn (USD 4,173mn) 1H 2011: KRW 4,857 bn (USD 4,505mn) FY2010: KRW 4,499 bn (USD 4,173mn) Total Revenue 1H 2011: KRW 2,620 bn (USD 2,430mn) FY2010: KRW 4,767 bn (USD 4,422mn) 1H 2011: KRW 2,620 bn (USD 2,430mn) FY2010: KRW 4,767 bn (USD 4,422mn) Net Income 1H 2011: KRW 52 bn (USD 48mn) FY2010: KRW 246 bn (USD 228mn) 1H 2011: KRW 52 bn (USD 48mn) FY2010: KRW 246 bn (USD 228mn)

5 Power Plants Portfolio Base load, intermediate load, and peak load account for 48%, 17% and 35% respectively in terms of generation capacity in operation Over 91% of capacity is located in or near the Seoul and Gyeonggi metropolitan areas ―Seoul and Gyeonggi metropolitan areas comprise approximately 40% of total national demand Note: T/P denotes “Thermal Power Plant”, C/C denotes “Combined Cycle”, S “Solar”, S/H “Small Hydro” Taean T/P (4,000 MW) Pyeongtaek T/P (1,400 MW) 4,000MW Seoincheon C/C (1,800 MW) Pyeongtaek C/C (480 MW) Gunsan C/C (718 MW) 3,004MW Coal LNG BC Oil Hydro Solar 1,400MW Generation Capacity by Type of PlantLocation of Plant Complex Taean Pyeongtaek Gunsan Seoincheon Seoul and Gyeonggi Metropolitan Area Samrangjin Source: company data (as of June 2011) Taean, Gunsan, Samrangjin S; Taean S/H (6 MW)

6 KOWEPO’s Market Position - 1H 2011 Generation Capacity Market ShareSales Volume Market Share (MW) (GWh) Total Generation Capacity 78,810 MW Total Electricity Sales 228,961 GWh

7 Regulatory Environment

8 Latest Power Industry Operating Environment Introduction of vesting contracts for Gencos deferred Wholesale competition was put on a hold MOCIE announced restructuring plan for power industry Incorporation of generation companies Cost-based pool bidding (“CBP”) mechanism Initiation of KOSEP privatization Plan to separate KEPCO’s distribution sector was halted due to substantial risk and uncertain benefits from the separation plan 2010 Gencos were designated as market-oriented public firms IPO of KOSEP was delayed Implementation of TWBP was suspended Privatization plan for Gencos cancelled The Power Industry Restructuring Plan Delayed and the Former Privatization Plan for Gencos Cancelled Update on Gencos Privatization and Consolidation Plan  Privatization plan for KEPCO and its Gencos was cancelled in July 2008  Gencos have been designated as market oriented public firms by government to create a more efficient management structure and enhance their competitiveness in

9 Latest Power Industry Operating Environment (Cont’d) As a result of the transfer of water pump generator, we expect approximately 10% decrease in asset size, but given profit and generation consists of only 2-4%, the decrease relative to asset size is small Note: Unit in KRW100mm Transfer of water pump generators to Korea Hydro Nuclear Power GencoGeneratorPower Capacity (kW) KOSEPMooju600,000 KOMIPOYangyang1,000,000 KOWEPO Samrangjin Chungsong 600,000 KOSPOChungpyung400,000 EWPSanchung700,000 Total6 Generators3,900,000 Electric Power Industry Reorganization - Transfer of Water Pump Generators to KHNP  Purpose: Exclude water pump generator from competition and seek stability in electricity system network at the same time achieving synergy from integration of the water pump generation and water generation  Timeline: all assets have been transferred before 2011  Effect on governance: No change in corporate governance – KEPCO will continue to hold 100% of respective GENCOs Implication for Korea Western Power SiteAssetRev (% M/S)Generation (% M/S) Samrangjin1, (1.37%)298GWh (0.58%) Chungsong3,8431,265 (2.65%)607GWh (1.18%)

10 Nationwide Power Consumption Power consumption has continued to rise on the back of strong economic growth at an average rate of 5.7% per annum from 1998 to 2010 Continuous increase in power consumption expected * Source: “Statistics of Electric Power in Korea”, KEPCO / The Bank of Korea (Jan 2011) “Electricity Supply and Demand Basic Plan #5, MKE (Dec 2010) Power consumption (TWh)(Growth rate)

11 Electricity Demand Forecast Korea’s electricity sector is expected to enjoy robust demand growth – Continuous economic growth will be the primary driver of power demand growth Power demand is expected to grow at a rate of 3.1% per annum from 2010 to 2024 (TWh) * Source: MKE (Electricity Supply and Demand Basic Plan #5 – Published in Dec 2010)

12 Expansion on cost effective base load infrastructure in addition to promotion of environmental friendly energy sources such as renewable energies, following the Government’s Green Growth Plan By year 2024, the installed capacity for Nuclear Power : 24.8% (’10)  31.9% (’24) Coal : 32.1% (’10)  27.9% (’24) LNG : 25.8% (’10)  20.9% (’24) Renewable : 2.2% (’10)  4.3% (’24) Installed Capacity Forecast by different energy sources Government’s Mid-to-Long Term Energy Strategy Govt’s Mid-to-Long Term Energy Supply Scheme * Source: MKE (Electricity Supply and Demand Basic Plan #5 – Published in Dec 2010) 4.6%

13 Update on Electricity Pricing Mechanism Introduction of “The Adjusted Coefficient of SMP” will lead to fair competition among Gencos. It will increase the efficiency of the power market by stimulating cost reduction Application of The Adjusted Coefficient of SMP Abolition of Regulated Market Price (RMP) system KOWEPO can pass through 100% of its fuel cost through the energy price Electricity Generation Cost Evaluation Committee annually determines The Adjusted Coefficient Power Price Comparison Because the Adjusted Coefficient of Coal decreased and Others/General Increased, Newly lowered Adjusted Coefficient will have not great impact on KOWEPO’s operating income for 6 months (Jul ~ Dec 2011) ※ RMP : Regulated Market Price, SMP : System Marginal Price Price typePriceRemarks Capacity Payment (CP) Base Load KRW 7.46/kWh KRW 7.46/kWh as a base price, CP is differentiated by regions, by seasons and by hours Non Base Load Energy Price Base Load [Max {(SMP-Fuel Cost), 0} x The Adjusted Coefficient + Fuel Cost] The Adjusted Coefficient (Lowerd in July 2011) Nuclear : (← ) Coal : (← ) Anthracite : (← ) Others/General : (← ) Non Base Load

14 Operation Overview

Note : Taean IGCC (300MW) will be added in Dec 2015 Power Plant Facilities in Operation * Source: Company. As of June 30, 2011 KOWEPO Operates 44 Generation Units with Total Generation Capacity of 8,404MW. TypeFuel TypeNumber of UnitsTotal CapacitySalesUtilization Rate (%) TaeanThermalBituminous84,00015, TaeanSmall Hydro TaeanSolar PyeongtaekThermal PlantOil41,4001, PyeongtaekCombined CycleLNG GT : 4 ST : SeoincheonCombined CycleLNG GT : 8 ST : 8 1, , SamrangjinSolar GunsanCombined CycleLNG GT : 2 ST : , GunsanSolar TOTAL ,

16 New Business(1) KOWEPO plans to maintain its leading market position and superior operating performance promoting growth with new plant constructions and new business Domestic Power PlantTypeGeneration CapacityCompletionRemarks New Plant TaeanIGCC300MWNov Integrated Gasification Combined Cycle R&D project supported by Government Taean #9, 10Thermal Plant2000MWDec. 2016Largest unit capacity in Korea PyeongtaekCombined Cycle920MWOct. 2014GT 320 MW * 2 ; ST 280 MW * 1 Equity Investment GarorimTidal520MWDec Consortium With Posco E&C, Daewoo E&C, Lotte E&C Project Financing KOWEPO to be in charge of operation and maintenance DongducheonCombined Cycle1500MWDec Consortium with Samsung E&C Project Financing KOWEPO to be in charge of operation and maintenance

17 New Business(2) KOWEPO plans to diversify its revenue sources through overseas expansion by leveraging its proven experiences and track records in operating and maintaining power plants Project financing as a key funding source to minimize the financial risks Overseas Power PlantTypeGeneration CapacityRemarks Equity Investment Philippines KananHydro150MW Consortium with SK E&C (Korea) Build, Own, Operate Project Financing KOWEPO to be in charge of operation and maintenance Indonesia TakalarThermal (Coal)200MW Consortium with SAMBU, Yooho and MSC (Indonesia) Build, Own, Operate Project Financing KOWEPO to be in charge of operation and maintenance Laos Xe-NamnoiHydro390MW Consortium with SK E&C (Korea), Ratchaburi (Thai) and LHSE (Laos) Build, Own, Operate, Transfer Project Financing KOWEPO to be in charge of operation and maintenance Saudi Arabia RabighThermal (Heavy Oil)1,204MW Consortium between KEPCO and ACWA received order for Build, Own, Operate Consortium between KOWEPO and NOMAC (Saudi) received mandate for O&M from KEPCO–ACWA consortium

Global Fuel Market Trend Recent Fuel Market Trends & Forecasts COALOIL (US$) After the 2008 global economic crisis, the price of raw material plummeted as the economy stagnated; however, since 2010, due to growing expectation of economic recovery, the price of coal and oil has been continuously increasing. If the demand from India and China continuously grows, then the increase in fuel price will continue in The price of LNG is directly related to the international oil price; therefore, its outlook will be in line with that of international oil price * Source: Bloomberg; Factset

19 Fuel Procurement Strategy & Long – Term Supply Contracts KOWEPO enters into long-term supply contracts ―To assure an adequate supply of the raw materials for a streamlined operation ―KOWEPO will adjust the portion of long-term supply contracts according to the market price volatility Bituminous CoalLNG Oil Stable supply of favorable quality fuel ―Long term contract with producer ―Diversification of supply source by country & ports ―Investment & development in overseas coal mine Economic purchase ―Utilization of spot market ―Open bidding

20 Insurance Coverage -1H 2011 KOWEPO is fully insured on its facilities under operation or construction and shipment/transportation of fuels and raw materials to refrain from any unexpected accident and subsequent losses. Asset Comprehensive Insurance Details Insurance Type 2011 Asset Comprehensive Insurance InsurerDong-bu Fire & Marine Insured AmountKRW 6,364,329mn Insured TargetGeneration Facilities Assembly Insurance Details Insurance Type Construction works for Taean Site InsurerSamsung fire & Marine Insured AmountKRW 162,721mn Insured Target Fuel Unloading dock and Equipments Insurance on Cargo Details Insurance Type Fuel and Equipment Facilities Comprehensive Insurance on Cargo InsurerSamsung Fire & Marine Insured AmountKRW 1,654,969mn Insured TargetFuel and Equipments

21 View on KRW/USD and its Impact Management’s View on USD/KRW Impact of change in FX rate on KOWEPO Current4Q USD/KRW1,1791,1001,0801,0601,040 USD/KRW rate is expected to be gradually stabilized with downward tendency The precise estimation of USD/KRW rate is difficult given the volatile nature of world’s macro economies Under the CBP (Cost-Based Pool) system, the fuel price hikes as a result of depreciation of KRW (or appreciation of USD) shall be 100% compensated. In that reason, KEPCO’s financial condition could be impacted by the FX fluctuation. The company enters into the cross-currency swaps for all its long-term foreign currency denominated debt, thus neutrally positioned against FX fluctuation. KOWEPO is putting enormous effort on currency rate risk management through increasing credit line of the company and reviewing to set dollar reserves

22 Financial Management

23 Capital Structure - 1H 2011 Assets KRW 4,857 bn – Non-Current Assets/Total Assets Ratio : 83.1% Liability Shareholders Equity Revenue EBITDA KRW 1,930 bn – Debt/Capital Ratio : 28.0% KRW 2,927 bn – Stake is wholly owned by KEPCO KRW 2,620 bn KRW 251 bn – Net Income : 52 bn Capital Structure (KRW billion)

24 Financial Performance Sales revenue has shown a continuous growth rate EBITDA has been stable but we have seen a decline in 2008 resulting from the surge in raw material costs Coverage ratio was deteriorated in 2008 and 1H 2009 due to the sharp increase in raw material costs, but has recovered in 1H 2010 Leverage ratio has been deteriorated due to increased debt, but still maintains a stable level RevenueEBITDA (KRW billion) CoverageLeverage (Times) (%)

25 Financial Highlights(1) Income Statement (Unit : KRW bn) H 20101H 2011 Sales3,0693,7003,8174,7672,3342,620 Cost of Sales2,7693,7363, ,0742,524 Gross Profit300(35) SG&A Operating Income264(73) Non-Operating Income Non-Operating Expense Income before Tax236(125) Tax Expense61(22) Net Income175(104) Cash & Equivalents Other Current Asset Investment Assets Tangible Assets3,0512,9993,2753,3733,4413,882 Intangible Asset Other Asset Total Asset3,8854,1994,4824,4994,7254,857 Current Liabilities Debenture, net of discount Long-term Debt Other L/T Liabilities Total Liabilities1,4591,9262,1271,9322,2241,930 Total Stockholder's Equities2,4262,2722,3542,5672,5012,927 Balance Sheet

26 Financial Highlights(2) Cash flow Statement (Unit : KRW bn) H 20101H 2011 Cash Flows from Operating Activities Net Income174.8(103.5) Non-cash Expense and Income Depreciation Changes in Assets and Liabilities(66.8)(190.3)97.8(38)(5.4)(72.6) Net cash flows provided by operating activities Cash Flows from Investing Activities Capex / Purchase of Fixed Assets(282.5)(294.1)(593.1)(380.6)(245.9)(196.8) Other(1.7)(17.1)(34.3)(125.2)(65.0)13.1 Net cash flows used in investing activities(284.2)(311.3)(627.4)(505.9)(310.9)(183.7) Cash flows from Financing Activities Cash inflows880.91,028.91, Cash outflows(1,069.5)(923.7)(1,013.5)(1,062.5)(284.4)(62.0) Dividends(51.3)(69.9)(26.4)--- Net cash flows used in financing activities(188.7) (93.8)153.8(46.9) NET INCREASE(DECREASE) IN CASH8.6(128.7) (68.7) CASH, BEGINNING OF THE YEAR CASH, END OF THE YEAR

27 Sales Breakdown In 2010, sales increased due to the completion of Gunsan Combined Cycle Note : Sales unit price includes other revenues associated with power generation Sales (GWh)46,98745,26643,53951,20727,114 Unit Price (KRW/kWh) Revenue Source KRW billion H 2011 LNG1,223.21, ,056.02,020.91,272.6 Coal1,133.31, ,149.62,040.51,039.9 Oil Pumped Storage Others TOTAL2,991.63, ,764.44,777.02,612.7

28 Details on Credit Line Facilities -1H 2011 Bank Overdraft Facilities BankAmountUsed NACFKRW 100 billion- Bill Acceptance Facilities BankAmountUsed Amount KEBKRW 284 billionKRW 200 billion WooriKRW 30 billionKRW 10 billion ShinhanKRW 100 billion- Short-term FCY Credit Facilities BankAmountUsed Amount KEBUSD 18 million- RBSUSD 80 millionUSD 12 million BNP ParibasUSD 60 millionUSD 22 million SC First BankUSD 50 million- ShinhanUSD 30 million-

29 Debt Profile(1) –1H 2011 KOWEPO prefers long-term funding of at least 5 year as the plant construction usually takes mid to long term period to complete The company prefers to borrow 80% to 90% of it total debt in KRW and the remaining in foreign currencies 90.3% of KOWEPO’s debt carries fixed interest rate, while 9.7% is in floating rate All of total debt is unsecured. Local Bond 67.4% (KRW 720bn) Eurobond 13.5% (KRW 144bn) Long Term Borrowing 19.1% (KRW 204bn) Total Debt Profile: 1,068 billion Currency Distribution Type of Instrument KRW 86.5% (KRW 924bn) USD 13.5% (KRW 144bn) Note:1. Total debt in 2011 represents the remaining outstanding debt as of June 30, Total amount of debt is reflected currency swap in case of foreign currency bond. Debt Repayment Schedule (KRW in billions)

30 Debt Profile(2) -1H 2011 Rating Triggers / Financial Covenants Bond # 5~ 6(KRW) Bond # 9~15 (KRW) Rating Trigger - Financial Covenants Liability/Equity ratio500% or less CollateralNot permitted Sales of assets Sales more than 5 trillion KRW are not permitted in the same fiscal year Maturity Currency Swap Eurobond IssueUSD 150mn / 5.95% Currency SwapKRW 143.8bn / 4.95% Counter PartyBarclays / Deutsche Bank

31 Capital Expenditure Plan Capital Expenditure Schedule (KRW bn) Taean #9,10: 30 Taean IGCC: 44 Shin Pyungtaek: 0 Taean #9,10: 103 Taean IGCC: 211 Shin Pyungtaek: 214 Taean #9,10: 441 Taean IGCC: 393 Shin Pyungtaek: 402 Taean #9,10: 1,175 Taean IGCC: 366 Shin Pyungtaek: 290

32 Financial Forecast

33 Key Assumption Capital Expenditure Schedule (Unit : KRW bn) Inflation Domestic3.00% FX rate (KRW/USD)1,100 Oil Price (US$/barrel) Gross Generation (GWh)50,16151,32850,018

34 Financial Statements(1) Balance Sheet (Unit : KRW bn) Assets Current Assets Non-Current Assets4,338.55,969.88,252.5 Total Assets5,140.66,786.69,071.8 Liabilities Current Liabilities Non-Current Liabilities1,050.02,122.04,211.0 Total Liabilities1,992.23,006.65,106.4 Stockholder’s Equity Capital Stock Capital Surplus988.3 Retained Earnings1,943.42,193.22,378.6 Total Stockholders’ Equity3,148.33,780.03,965.5 Total Liabilities and Stockholders’ Equity5,140.66,786.69,071.8 Note : Forecast subject to change by year-end

35 Financial Statements(2) Income Statement (Unit : KRW bn) Sales5,016.15,132.85,001.8 Sales of Electric Power5,007.85,124.24,993.5 Others Cost of Sales & SGA4,802.54,737.64,603.3 Operating Income Non-Operating Income Non-Operating Expense Income before Tax Income Tax Net Income Dividend Note : Forecast subject to change by year-end Plans to declare annual dividend at the level of 30% of net income

36 Financial Statements(3) Cash Flow Forecasts (Unit : KRW bn) Operating Activities Net Income Non-cash Expenses &Incomes Depreciation Changes in Assets and Liabilities (30.4) Investing Activities(185.5)(2,012.3)(2,663.7) Plant Construction &Facility Improvement16.7(1,820.5)(2,477.8) Others(202.2)(191.8)(185.8) Financing Activities(539.4)1,279.81,993.4 Cash Balance, Beginning of Year Net Cash(115.6)1.2(1.3) Cash Balance, End of Year

37 Thank You