Edgar Filing: KOREA ELECTRIC POWER CORP

Amendment No.1 to Form 20-F

As filed with the Securities and Exchange Commission on November 19, 2010

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F/A

(Amendment No. 1)

(Mark One)

¨	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

¨	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from to

Commission File Number: 001-13372

KOREA ELECTRIC POWER CORPORATION

(Exact name of registrant as specified in its charter)


N/A		The Republic of Korea
*(Translation of registrant’s name into English)*		*(Jurisdiction of incorporation or organization)*

411 YOUNGDONG-DAERO, GANGNAM-GU, SEOUL 135-791, KOREA

(Address of principal executive offices)

Seung Bum Kim, +822 3456 4264, sbkim96@kepco.co.kr, +822 556 3694

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of each class:		Name of each exchange on which registered:
Common stock, par value Won 5,000 per share*		New York Stock Exchange
American depositary shares, each representing one-half of share of common stock		New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

7³/4% Debentures due April 1, 2013

Twenty Year 7.40% Amortizing Debentures, due April 1, 2016

One Hundred Year 7.95% Zero-to-Full Debentures, due April 1, 2096

6% Debentures due December 1, 2026

7% Debentures due February 1, 2027

6³/4% Debentures due August 1, 2027

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the last full fiscal year covered by the annual report:

641,567,712 shares of common stock, par value of Won 5,000 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No þ

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files): Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board ¨ Other þ

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ¨ Item 18 þ

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨

TABLE OF CONTENTS

EXPLANATORY NOTE

PART III

ITEM 17. FINANCIAL STATEMENTS

ITEM 18. FINANCIAL STATEMENTS

ITEM 19. EXHIBITS

SIGNATURES

INDEX TO FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM DELOITTE ANJIN LLC, A MEMBER FIRM OF DELOITTE TOUCHE TOHMATSU ON CONSOLIDATED FINANCIAL STATEMENTS (KOREA ELECTRIC POWER CORPORATION)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM DELOITTE ANJIN LLC, A MEMBER FIRM OF DELOITTE TOUCHE TOHMATSU ON INTERNAL CONTROL OVER FINANCIAL REPORTING (KOREA ELECTRIC POWER CORPORATION)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG SAMJONG ACCOUNTING CORP. (KOREA SOUTH-EAST POWER CO., LTD.)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG SAMJONG ACCOUNTING CORP. (KOREA SOUTHERN POWER CO., LTD.)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG SAMJONG ACCOUNTING CORP. ON INTERNAL CONTROL OVER FINANCIAL REPORTING (KOREA SOUTHERN POWER CO., LTD.)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG SAMJONG ACCOUNTING CORP. (KOREA MIDLAND POWER CO., LTD.)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG SAMJONG ACCOUNTING CORP. ON INTERNAL CONTROL OVER FINANCIAL REPORTING (KOREA MIDLAND POWER CO., LTD.)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM SAMIL PRICEWATERHOUSECOOPERS, A MEMBER FIRM OF PRICEWATERHOUSECOOPERS (KOREA WESTERN POWER CO., LTD.)

CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONS AS OF DECEMBER 31, 2008 AND 2009

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

INDEX OF EXHIBITS

EX- 12.1 CERTIFICATIONS

EX- 12.2 CERTIFICATIONS

EX- 13.1 CHIEF EXECUTIVE OFFICER CERTIFICATION

EX- 13.2 CHIEF FINANCIAL OFFICER CERTIFICATION

EXPLANATORY NOTE

This Amendment No. 1 to the registrant’s annual report on Form 20-F, which was originally filed on June 29, 2010 (the “Original Annual Report”), is being filed solely for the purpose of correcting a typographical error in each of the following reports of independent registered public accounting firm attached to the registrant’s financial statements included in the Original Annual Report:

•

Report of Independent Registered Public Accounting Firm KPMG Samjong Accounting Corp. (Korea South-East Power Co., Ltd.) on page F-5 of the Original Annual Report;

•

Report of Independent Registered Public Accounting Firm KPMG Samjong Accounting Corp. (Korea Southern Power Co., Ltd.) on page F-6 of the Original Annual Report; and

•

Report of Independent Registered Public Accounting Firm KPMG Samjong Accounting Corp. (Korea Midland Power Co., Ltd.) on page F-8 of the Original Annual Report,

to the effect that all references to “the auditing standards of the Public Company Accounting Oversight Board (United States)” in such reports shall be replaced with “the standards of the Public Company Accounting Oversight Board (United States)”.

This Amendment No. 1 does not reflect events occurring after the filing of the Original Report and does not modify, update or restate the disclosure therein in any way other than to reflect the amendments described above. No other changes have been made in the Original Annual Report. The filing of this Amendment No. 1 should not be understood to mean that any statements contained herein are true or complete as of any date subsequent to the date of the filing of the Original Annual Report.

PART III

ITEM 17. FINANCIAL STATEMENTS

We have responded to Item 18 in lieu of responding to this item.

ITEM 18. FINANCIAL STATEMENTS

Reference is made to Item 19 “Exhibits” for a list of all financial statements and schedules filed as part of this report.

ITEM 19. EXHIBITS

(a) Financial Statements filed as part of this Annual Report

See Index to Financial Statements on page F-1 of this report.

(b) Exhibits filed as part of this Annual Report

See Index of Exhibits beginning on page E-1 of the Original Annual Report.

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.


KOREA ELECTRIC POWER CORPORATION

By:		/s/ Kim, Ssang-Su
Name:		Kim, Ssang-Su
Title:		President and Chief Executive Officer

Date: November 19, 2010

INDEX TO FINANCIAL STATEMENTS


		Page

Index to Financial Statements		F-1

Report of Independent Registered Public Accounting Firm Deloitte Anjin LLC, a member firm of Deloitte Touche Tohmatsu on Consolidated Financial Statements (Korea Electric Power Corporation)		F-2

Report of Independent Registered Public Accounting Firm Deloitte Anjin LLC, a member firm of Deloitte Touche Tohmatsu on Internal Control Over Financial Reporting (Korea Electric Power Corporation)		F-3

Report of Independent Registered Public Accounting Firm KPMG Samjong Accounting Corp. (Korea South-East Power Co., Ltd.)		F-5

Report of Independent Registered Public Accounting Firm KPMG Samjong Accounting Corp. (Korea Southern Power Co., Ltd.)		F-6

Report of Independent Registered Public Accounting Firm KPMG Samjong Accounting Corp. on Internal Control Over Financial Reporting (Korea Southern Power Co., Ltd.)		F-7

Report of Independent Registered Public Accounting Firm KPMG Samjong Accounting Corp. (Korea Midland Power Co., Ltd.)		F-8

Report of Independent Registered Public Accounting Firm KPMG Samjong Accounting Corp. on Internal Control Over Financial Reporting (Korea Midland Power Co., Ltd.)		F-9

Report of Independent Registered Public Accounting Firm Samil PricewaterhouseCoopers, a member firm of PricewaterhouseCoopers (Korea Western Power Co., Ltd.)		F-10

Consolidated statements of financial positions as of December 31, 2008 and 2009		F-11

Consolidated statements of operations for the years ended December 31, 2007, 2008 and 2009		F-13

Consolidated statements of changes in shareholders’ equity for the years ended December 31, 2007, 2008 and 2009		F-14

Consolidated statements of cash flows for the years ended December 31, 2007, 2008 and 2009		F-16

Notes to the consolidated financial statements		F-18

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM ON CONSOLIDATED FINANCIAL STATEMENTS

To the Shareholders and Board of Directors of

Korea Electric Power Corporation:

We have audited the accompanying consolidated statements of financial position of Korea Electric Power Corporation and subsidiaries (collectively referred to as the “Company”) as of December 31, 2008 and 2009, and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for, each of the three years in the period ended December 31, 2009, all expressed in Korean Won. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of certain consolidated subsidiaries whose financial statements reflect 10.5 and 9.9 percent of consolidated total assets as of December 31, 2008 and 2009, and 40.7, 26.0 and 24.4 percent of consolidated total revenue for the years ended December 31, 2007, 2008 and 2009. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for those companies, is based solely on the reports of the other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditor provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Korea Electric Power Corporation and subsidiaries as of December 31, 2007, 2008 and 2009, and the results of their operations, changes in their shareholders’ equity and their cash flows for the years then ended, in conformity with the Korea Electric Power Corporation Act, Accounting Regulations for Public Enterprise·Associate Government Agency and accounting principles generally accepted in the Republic of Korea.

Our audit also comprehended the translation of Korean Won amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis in Note 2 to the consolidated financial statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside of the Republic Korea.

Accounting principles generally accepted in the Republic of Korea vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 38 of the consolidated financial statements.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 28, 2010 expressed an unqualified opinion on the Company’s internal control over financial reporting based on our audits and the reports of the other auditors.

/s/ Deloitte Anjin LLC

Seoul, Korea

June 28, 2010

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON

INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Shareholders and Board of Directors of

Korea Electric Power Corporation:

We have audited Korea Electric Power Corporation and subsidiaries’ (collectively referred to as the “Company”) internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We did not examine the effectiveness of internal control over financial reporting of certain subsidiaries whose financial statements reflect total assets and revenues constituting 9.9 percent and 24.4 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2009. The effectiveness of certain consolidated subsidiaries’ internal control over financial reporting was audited by other auditor whose reports have been furnished to us, and our opinion, insofar as it relates to the effectiveness of certain consolidated subsidiaries’ internal control over financial reporting, is based solely on the reports of the other auditor.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, based on our audit and the reports of the other auditor, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

F-3

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial position of the Company as of December 31, 2009, and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for the year then ended, our report dated June 28, 2010, expressed an unqualified opinion on those financial statements with explanatory paragraphs relating to our audits comprehending the translation of Korean won amounts to U.S. dollar amounts and information relating to the nature and effect of differences between accounting principles generally accepted in the Republic of Korea and accounting principles generally accepted in the United States of America.

/s/ Deloitte Anjin LLC

Seoul, Korea

June 28, 2010

F-4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholder

Korea South-East Power Co., Ltd.:

We have audited the accompanying statements of operations, disposition of deficit, changes in shareholder’s equity and cash flows of Korea South-East Power Co., Ltd. (the “Company”) for the year ended December 31, 2007, all expressed in Korea Won. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the results of its operations of Korea South-East Power Co. Ltd. and its cash flows for the year ended December 31, 2007, in conformity with accounting principles generally accepted in the Republic of Korea.

/s/ KPMG Samjong Accounting Corp.

Seoul, Korea

June 28, 2008

F-5

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholder

Korea Southern Power Co., Ltd.:

We have audited the accompanying consolidated statements of financial position of Korea Southern Power Co., Ltd. (a wholly owned subsidiary of Korea Electric Power Corporation (“KEPCO”)) and subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in stockholder’s equity and cash flows for each of the years in the three-year period ended December 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Korea Southern Power Co., Ltd. and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2009, in conformity with accounting principles generally accepted in the Republic of Korea.

As further described in Note 7 to the consolidated financial statements, the Company derives substantially all of its operating revenue from KEPCO and engages in other significant transactions with related parties.

The accompanying consolidated financial statements as of and for the year ended December 31, 2009 have been translated into United States dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, the consolidated financial statements expressed in Korean Won have been translated into dollars on the basis set forth in the note 3 to the consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated June 25, 2010 expressed an unqualified opinion on the effective operation of internal control over financial reporting.

/s/ KPMG Samjong Accounting Corp.

Seoul, Korea

June 25, 2010

F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON

INTERNAL CONTROL OVER FINANCIAL REPORTING

The Board of Directors and Stockholder

Korea Southern Power Co., Ltd.:

We have audited Korea Southern Power Co., Ltd.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Korea Southern Power Co., Ltd. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial position of the Company as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in stockholder’s equity and cash flows for each of the years in the three-year period ended December 31, 2009, and our report dated June 25, 2010 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG Samjong Accounting Corp.

Seoul, Korea

June 25, 2010

F-7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholder

Korea Midland Power Co., Ltd.:

We have audited the accompanying consolidated statements of financial position of Korea Midland Power Co., Ltd. (a wholly owned subsidiary of Korea Electric Power Corporation (“KEPCO”)) and subsidiaries (“the Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in stockholder’s equity and cash flows for each of the years in the three-year period ended December 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Korea Midland Power Co., Ltd. as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2009 in conformity with accounting principles generally accepted in the Republic of Korea.

The accompanying consolidated financial statements as of and for the year ended December 31, 2009 have been translated into United States dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, the consolidated financial statements expressed in Korean Won have been translated into dollars on the basis set forth in note 2(t) to the consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated June 28, 2010 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG Samjong Accounting Corp.

Seoul, Korea

June 28, 2010

F-8

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON

INTERNAL CONTROL OVER FINANCIAL REPORTING

The Board of Directors and Stockholder

Korea Midland Power Co., Ltd.:

We have audited Korea Midland Power Co., Ltd.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, Korea Midland Power Co. Ltd. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements financial position of the Company as of December 31, 2009 and 2008, and related consolidated statements of operations, changes in stockholder’s equity and cash flows for each of the years in the three-year period ended December 31, 2009, and our report dated June 28, 2010 expressed an unqualified opinion on those financial statements.

/s/ KPMG Samjong Accounting Corp.

Seoul, Korea

June 28, 2010

F-9

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Korea Western Power Co., Ltd.

In our opinion, statements of income, changes in shareholders’ equity, and cash flows for the year ended December 31, 2007 present fairly, in all material respects, the results of operations and cash flows of Korea Western Power Co., Ltd. for the year ended December 31, 2007, in conformity with accounting principles generally accepted in the Republic of Korea. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/ Samil PricewaterhouseCoopers

Seoul, Korea

June 24, 2008

F-10

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF DECEMBER 31, 2008 AND 2009


	Won						U.S. dollars (Note 2)
	2008			2009			2009
	(In millions)						(In thousands)
Assets
Property, plant and equipment (Notes 3 and 4):	(Won)	109,305,083		(Won)	115,483,190		$	99,242,203
Less: accumulated depreciation		(44,351,255	)		(50,183,508	)		(43,125,947	)
Less: accumulated impairment losses		—			(22,935	)		(19,710	)
Less: construction grants		(5,336,110	)		(6,152,485	)		(5,287,230	)

		59,617,718			59,124,262			50,809,316
Construction in-progress		10,177,567			14,909,169			12,812,417

Net property, plant and equipment		69,795,285			74,033,431			63,621,733


Investments and other assets:
Long-term investment securities (Note 6)		2,717,195			3,542,283			3,044,114
Long-term loans (Note 7)		605,585			584,327			502,150
Financial derivatives (Note 25)		1,326,546			756,034			649,709
Intangible assets (Notes 5 and 32)		946,847			682,345			586,383
Deferred income tax assets (Note 28)		1,963,520			1,689,851			1,452,199
Other non-current assets (Notes 8, 9, 20 and 33)		504,408			890,860			765,574

Total non-current assets		77,859,386			82,179,131			70,621,862


Current assets:
Cash and cash equivalents (Notes 9 and 20)		1,452,286			1,489,390			1,279,930
Trade receivables, less allowance for doubtful accounts of (Won)48,161 million in 2008 and (Won)61,094 million in 2009 (Notes 20, 31 and 32)		2,806,974			3,189,923			2,741,307
Other accounts receivable, less allowance for doubtful accounts of (Won)19,509 million in 2008 and (Won)28,380 million in 2009 (Notes 5, 20, 31 and 32)		725,578			1,341,520			1,152,855
Short-term investment securities (Note 6)		14,502			10,420			8,955
Short-term financial instruments (Notes 9 and 20)		316,442			356,115			306,033
Financial derivatives (Note 25)		3			144,449			124,134
Inventories (Notes 4 and 10)		4,272,098			3,894,878			3,347,122
Deferred income tax assets (Note 28)		563,163			353,103			303,444
Other current assets (Notes 7, 11 and 20)		188,178			249,102			214,071

Total current assets		10,339,224			11,028,900			9,477,851


Total assets	(Won)	88,198,610		(Won)	93,208,031		$	80,099,713

F-11

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION—(CONTINUED)

AS OF DECEMBER 31, 2008 AND 2009


	Won						U.S. dollars (Note 2)
	2008			2009			2009
	(In millions)						(In thousands)
Liabilities and Shareholders’ Equity
Shareholders’ equity:
Common stock of (Won)5,000 par value authorized 1,200,000,000 shares—Issued and outstanding 641,567,712 shares in 2008 and 2009 (Note 12)	(Won)	3,207,839		(Won)	3,207,839		$	2,756,704
Capital surplus (Notes 3 and 12)		14,558,531			14,668,563			12,605,649
Capital adjustments (Note 13)		(741,489	)		(741,587	)		(637,294	)
Accumulated other comprehensive income (Notes 14)		435,064			487,211			418,692
Retained earnings:
Appropriated (Note 15)		26,462,200			23,509,731			20,203,438
Before appropriations		(2,960,276	)		(104,523	)		(89,823	)
Noncontrolling interest in consolidated subsidiaries		312,945			376,573			323,614

Total shareholders’ equity		41,274,814			41,403,807			35,580,980

Long-term liabilities:
Long-term debt, net (Notes 18 and 31)		23,304,173			27,840,626			23,925,258
Borrowings under conditional agreements (Note 19)		14,638			15,317			13,163
Long-term other account payable (Note 22)		3,576,369			3,576,369			3,073,406
Accrual for retirement and severance benefits, net (Note 21)		1,735,457			1,772,680			1,523,379
Liability for decommissioning costs (Note 22)		5,470,764			5,695,224			4,894,276
Provision for decontamination of transformer (Note 23)		249,947			231,470			198,917
Reserve for self insurance		115,268			121,416			104,341
Financial derivatives (Note 25)		21,297			34,983			30,063
Deferred income tax liabilities (Note 28)		1,193,709			972,077			835,369
Other long-term liabilities		706,311			796,359			684,363

Total long-term liabilities		36,387,933			41,056,521			35,282,535

Current liabilities:
Trade payables (Notes 20, 31 and 32)		2,304,934			1,928,442			1,657,235
Other accounts payable (Notes 20, 31 and 32)		794,155			835,067			717,627
Short-term borrowings (Note 17)		1,357,710			684,480			588,218
Current portion of long-term debt, net (Note 18)		4,444,783			5,778,813			4,966,109
Income tax payable		461,707			82,844			71,193
Accrued expense		386,061			531,167			456,466
Financial derivatives (Note 25)		56			3,023			2,598
Deferred income tax liabilities (Note 28)		14,125			18,023			15,488
Other current liabilities (Notes 20 and 24)		772,332			885,844			761,264

Total current liabilities		10,535,863			10,747,703			9,236,198

Total liabilities		46,923,796			51,804,224			44,518,733

Commitments and contingencies (Note 33)
Total shareholders’ equity and liabilities	(Won)	88,198,610		(Won)	93,208,031		$	80,099,713

See accompanying notes to the consolidated financial statements.

F-12

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009


	Won									U.S. dollars (Note 2)
	2007			2008			2009			2009
	(In millions, except per share amounts)									(In thousands, except per share amounts)

OPERATING REVENUES: (Notes 31 and 32)
Sale of electricity	(Won)	28,501,480		(Won)	30,708,544		(Won)	33,091,577		$	28,437,741
Other operating revenues		635,740			851,556			902,275			775,383

		29,137,220			31,560,100			33,993,852			29,213,124

OPERATING EXPENSES (Notes 26, 27, 31 and 32):
Power generation, transmission and distribution costs		21,859,590			27,101,532			25,829,287			22,196,783
Purchased power		2,584,097			4,433,889			3,666,468			3,150,834
Other operating costs		261,679			1,083,050			1,238,619			1,064,426
Selling and administrative expenses		1,610,179			1,739,702			1,544,656			1,327,423

		26,315,545			34,358,173			32,279,030			27,739,466

OPERATING INCOME (LOSS)		2,821,675			(2,798,073	)		1,714,822			1,473,658

OTHER INCOME (EXPENSES):
Interest income		186,315			170,951			113,865			97,852
Interest expenses		(737,121	)		(1,000,773	)		(1,583,863	)		(1,361,116	)
Gain (loss) on foreign currency transactions and translation, net		(144,948	)		(1,845,392	)		662,812			569,597
Donations		(155,437	)		(40,112	)		(21,109	)		(18,140	)
Equity income of affiliates, net (Note 6)		119,564			98,611			22,473			19,313
Gain on disposal of investments, net		13,021			4,241			310			266
Impairment loss on investment securities (Note 6)		—			—			(60,636	)		(52,108	)
Gain (loss) on disposal of property, plant and equipment, net		(2,325	)		14,305			38,896			33,426
Valuation gain (loss) on financial derivatives, net (Note 25)		24,230			1,341,887			(357,004	)		(306,797	)
Loss on early repayment of exchangeable bond (Note 18)		—			—			(540,593	)		(464,567	)
Other, net		268,359			210,752			332,440			285,688

		(428,342	)		(1,045,530	)		(1,392,409	)		(1,196,586	)

INCOME (LOSS) BEFORE INCOME TAX		2,393,333			(3,843,603	)		322,413			277,072
INCOME TAX EXPENSES (BENEFITS) (Note 28)		926,165			(929,564	)		370,145			318,090

NET INCOME (LOSS)		1,467,168			(2,914,039	)		(47,732	)		(41,018	)


Controlling interest	(Won)	1,426,457		(Won)	(2,955,339	)	(Won)	(96,716	)	$	(83,114	)
Noncontrolling interest		40,711			41,300			48,984			42,096

	(Won)	1,467,168		(Won)	(2,914,039	)	(Won)	(47,732	)	$	(41,018	)


BASIC EARNINGS (LOSS) PER SHARE (Note 29)	(Won)	2,294		(Won)	(4,746	)	(Won)	(155	)	$	(0.13	)

DILUTED EARNINGS (LOSS) PER SHARE (Note 29)	(Won)	2,258		(Won)	(4,746	)	(Won)	(155	)	$	(0.13	)

See accompanying notes to the consolidated financial statements.

F-13

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009


	Common stock		Capital surplus			Capital adjustments			Accumulated other comprehensive income			Retained earnings			Minority interests		Total
Balances at January 1, 2007	(Won)	3,207,839	(Won)	14,517,143		(Won)	(796,980	)	(Won)	37,895		(Won)	26,118,850		(Won)	150,740	(Won)	43,235,487
Net income		—		—			—			—			1,426,457			40,711		1,467,168
Dividends declared		—		—			—			—			(621,080	)		—		(621,080	)
Exercise of conversion right		—		(9,487	)		—						—			—		(9,487	)
Gain on disposal of subsidiary’s securities		—		46,945			—						—			—		46,945
Changes in treasury stock		—		3,655			55,155			—			—			—		58,810
Changes in unrealized losses on available-for-sale securities, net		—		—			—			(1,309	)		—			—		(1,309	)
Equity in other comprehensive income of affiliates		—		—			—			7,734			—			—		7,734
Changes in translation adjustments of foreign subsidiaries		—		—			—			28,859			—			—		28,859
Changes in valuation of derivatives		—		—			—			10,736			—			—		10,736
Changes in minority interests		—		—			—			—			—			42,990		42,990

Balances at December 31, 2007		3,207,839		14,558,256			(741,825	)		83,915			26,924,227			234,441		44,266,853

Net income (loss)		—		—			—			—			(2,955,339	)		41,300		(2,914,039	)
Dividends declared (Note 16)		—		—			—			—			(466,964	)		—		(466,964	)
Exercise of conversion right		—		(61	)		—			—			—			—		(61	)
Gain on disposal of subsidiary’s securities		—		148			—			—			—			—		148
Gain on disposal of treasury stock, net of tax		—		188			—			—			—			—		188
Changes in treasury stock		—		—			336			—			—			—		336
Changes in unrealized losses on available-for-sale securities		—		—			—			(8,274	)		—			—		(8,274	)
Equity in other comprehensive income of affiliates		—		—			—			205,359			—			—		205,359
Changes in translation adjustments of foreign subsidiaries		—		—			—			45,266			—			—		45,266
Changes in valuation of derivatives		—		—			—			108,798			—			—		108,798
Changes in minority interests		—		—			—			—			—			37,204		37,204

Balance at December 31, 2008		3,207,839		14,558,531			(741,489	)		435,064			23,501,924			312,945		41,274,814

See accompanying notes to the consolidated financial statements.

F-14

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY—(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009


	Common stock		Capital surplus		Capital adjustments			Accumulated other comprehensive income			Retained earnings			Minority interests		Total

Net income (loss)		—		—		—			—			(96,716	)		48,984		(47,732	)
Changes in discount on stock issuance		—		—		(98	)		—			—			—		(98	)
Changes in other capital surplus		—		110,032		—			—			—			—		110,032
Changes in unrealized losses on available-for-sale securities		—		—		—			18,086			—			—		18,086
Equity in other comprehensive income of affiliates		—		—		—			107,968			—			—		107,968
Changes in translation adjustments of foreign subsidiaries		—		—		—			(31,303	)		—			—		(31,303	)
Changes in valuation of derivatives		—		—		—			(42,604	)		—			—		(42,604	)
Changes in minority interests		—		—		—			—			—			14,644		14,644

Balances at December 31, 2009	(Won)	3,207,839	(Won)	14,668,563	(Won)	(741,587	)	(Won)	487,211		(Won)	23,405,208		(Won)	376,573	(Won)	41,403,807

U.S. dollars (In thousands) (Note 2)	$	2,756,704	$	12,605,649	$	(637,294	)	$	418,692		$	20,113,615		$	323,614	$	35,580,980

See accompanying notes to the consolidated financial statements.

F-15

KOREA ELECTRIC POWER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009


	Won									U.S. dollars (Note 2)
	2007			2008			2009			2009
	(In millions)									(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	(Won)	1,467,168		(Won)	(2,914,039	)	(Won)	(47,732	)	$	(41,018	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,829,915			6,233,033			6,318,534			5,429,927
Property, plant and equipment removal loss		295,589			302,288			276,724			237,807
Provision for severance and retirement benefits		329,771			483,909			238,001			204,530
Provision for decommissioning costs, net		339,749			379,281			223,387			191,971
Provision for decontamination of Transformer, net		21,938			13,016			16,222			13,941
Bad debt expense		22,966			20,616			28,397			24,403
Amortization of discount on debentures Issued and long-term loans, net		37,231			38,735			197,217			169,481
Loss (gain) on foreign currency translation, net		105,009			1,586,241			(659,151	)		(566,451	)
Equity income of affiliates, net		(119,564	)		(98,611	)		(22,473	)		(19,313	)
Impairment loss on investment securities		—			—			60,636			52,108
Gain on disposal of property, plant and equipment, net		(1,151	)		(14,305	)		(38,896	)		(33,426	)
Deferred income tax expense, net		(87,811	)		(1,540,780	)		282,931			243,141
Valuation loss (gain) on financial derivatives		(24,230	)		(1,341,887	)		357,004			306,797
Transaction loss on financial derivatives		5,430			154,114			(42,856	)		(36,829	)
Loss on early repayment of exchangeable bond		—			—			540,593			464,567
Other losses (gains), net		48,391			(135,364	)		38,859			33,394
Changes in assets and liabilities:
Trade receivables		(68,161	)		(216,627	)		(452,910	)		(389,215	)
Other accounts receivable		196,154			(176,891	)		229,266			197,023
Inventories		(761,930	)		(1,779,959	)		(672,328	)		(577,775	)
Investments under the equity method		49,432			33,102			28,973			24,898
Other current assets		(69,909	)		55,700			6,610			5,680
Trade payables		399,582			773,558			(315,952	)		(271,518	)
Other accounts payable		(443,698	)		69,415			(33,951	)		(29,176	)
Income tax payable		(421,964	)		(14,157	)		(387,739	)		(333,209	)
Accrued expense		40,627			41,973			(9,150	)		(7,863	)
Other current liabilities		(8,107	)		83,130			58,274			50,079
Payment of severance and retirement benefits, net		(84,080	)		(78,204	)		(173,430	)		(149,040	)
Payment of decommissioning costs		(7,324	)		(8,791	)		(254,287	)		(218,525	)
Payment of other provision		(31,108	)		(54,238	)		(114,793	)		(98,649	)
Other, net		(76,255	)		67,032			62,511			53,719

Net cash provided by operating activities		6,983,660			1,961,290			5,738,491			4,931,459

F-16

KOREA ELECTRIC POWER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS—(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009


	Won									U.S. dollars (Note 2)
	2007			2008			2009			2009
	(In millions)									(In thousands)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of property, plant and equipment	(Won)	38,953		(Won)	47,669		(Won)	232,274		$	199,608
Additions to property, plant and equipment		(8,544,771	)		(8,924,622	)		(11,243,965	)		(9,662,669	)
Receipt of construction grants		1,055,465			1,141,724			1,197,173			1,028,808
Proceeds from disposal of investment securities		48,369			71,308			119			102
Acquisition of investment securities		(550,341	)		(164,014	)		(752,164	)		(646,383	)
Increase in long-term loans, net		(10,627	)		(177,278	)		(2,628	)		(2,258	)
Acquisition of intangible assets		(170,822	)		(360,604	)		(249,677	)		(214,564	)
Increase in other non-current assets		(39,490	)		(157,363	)		(330,207	)		(283,768	)
Increase in short-term financial instruments, net		(419,629	)		1,357,132			97,787			84,035
Decrease in current portion of long-term loans, net		41,318			23,095			39,616			34,045

Net cash used in investing activities		(8,551,575	)		(7,142,953	)		(11,011,672	)		(9,463,044	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt		5,197,868			9,887,176			11,821,305			10,158,815
Proceeds from borrowings under conditional agreements		560			3,032			3,447			2,962
Repayment of long-term debt		(4,247,010	)		(4,681,712	)		(5,964,054	)		(5,125,299	)
Proceed from short-term borrowings, net		317,160			509,670			(594,340	)		(510,755	)
Proceeds from treasury stock, net		58,988			—			—			—
Dividends paid		(641,638	)		(492,286	)		(45,920	)		(39,462	)
Settlement of financial derivatives		461,147			(211,688	)		37,056			31,845
Other, net		121,016			11,023			35,772			30,741

Net cash provided by financing activities		1,268,091			5,025,215			5,293,266			4,548,847

INCREASE (DECREASE) FROM CHANGES IN CONSOLIDATED SUBSIDIARIES		—			(4,689	)		661			568
CHANGE IN CASH AND CASH EQUIVALENTS FROM THE TRANSLATION OF FOREIGN SUBSIDIARIES		28,261			39,094			16,358			14,057
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(271,563	)		(122,043	)		37,104			31,887
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		1,845,892			1,574,329			1,452,286			1,248,043

CASH AND CASH EQUIVALENTS, END OF YEAR	(Won)	1,574,329		(Won)	1,452,286		(Won)	1,489,390		$	1,279,930

See accompanying notes to the consolidated financial statements.

F-17

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS DECEMBER 31, 2008 AND 2009

(1) Summary of Significant Accounting Policies and Basis of Presenting Consolidated Financial Statements

(a)	Organization and Description of Business

Korea Electric Power Corporation (the “KEPCO”) 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 in the Republic of Korea. The Company was given the status of a government-invested enterprise on December 31, 1983 following the enactment of the 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. On April 1, 2007 KEPCO was designated as a market orientated enterprise by the Government of the Republic of Korea.

On October 28, 2009, Korea Development Bank (the “KDB”) transferred its 29.95% shares of the Company to Korea Finance Corporation (the “KoFC”); both are wholly owned companies by the Korean Government. As of December 31, 2009, the Korean Government, KoFC, and foreign investors held 21.12%, 29.95% and 24.85%, respectively of the Company’s shares.

In accordance with the restructuring plan by the Ministry of Knowledge Economy (the “MKE”) on January 21, 1999 (the “Restructuring Plan”), the Company spun off its power generation division on April 2, 2001, resulting in the establishment of six power generation subsidiaries. In addition, KEPCO has been contemplating the gradual privatization of KEPCO’s power generation subsidiaries and distribution business. In 2002, the Company commenced the sale of one of its generation subsidiaries. However, this sale was delayed due to unfavorable stock market conditions at the time. The Company intends to resume its stock-listing process in due course, after taking into consideration the overall stock market and other pertinent matters. The privatization of the power generation subsidiaries may result in a change in pricing of electric power, operational organization, related regulations and general policies for supply and demand of energy. The privatization of KEPCO’s distribution business was discontinued according to the recommendation of the Korea Tripartite Commission on June 30, 2004. In lieu of privatization, the Korea Tripartite Commission recommended the creation of independent business divisions, namely, the “strategic business units,” to create internal competition among the business divisions and ultimately to improve efficiency. On September 25, 2006, KEPCO established nine strategy business units with a separate management structure with limited autonomy, separate financial accounting and performance evaluation criteria, which, together with certain other business units of KEPCO, were restructured into 13 integrated business units with a focus on profit maximization in December 2008, following a two-year evaluation period.

(b)	Basis of Presenting Consolidated Financial Statements

KEPCO maintains its accounting records in Korean Won and prepares the consolidated financial statements in the Korean language (Hangul) in conformity with the KEPCO Act, Accounting Regulations for Public Enterprise-Associate Government Agency, which have been approved by the Korean Ministry of Strategy and Finance and, in the absence of specialized accounting regulations for utility companies, the accounting principles generally accepted in the Republic of Korea (collectively “Korean GAAP”). 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, these consolidated financial statements are intended solely for use by those who are informed about Korean accounting principles and practices, the KEPCO Act and Accounting Regulations for Public Enterprise-Associate Government Agency. The accompanying consolidated financial statements

F-18

have been condensed, restructured and translated into English (with certain expanded descriptions) from the Korean language consolidated financial statements. Certain information included in the Korean language consolidated financial statements, but not required for a fair presentation of the Company’s financial position, results of operations, changes in shareholders’ equity or cash flows, is not presented in the accompanying consolidated financial statements.

The Korea Accounting Standards Board (the “KASB”) has published a series of Statements of Korea Accounting Standards (“SKAS”), which replace the existing financial accounting standards, established by the Korean Financial and Supervisory Board. The Company prepared its financial statements as of December 31, 2009 in accordance with Financial Accounting Standards and SKAS in the Republic of Korea.

In 2007, the Company adopted SKAS No. 21—“Preparation and Presentation of Financial Statements,” SKAS No. 23—“Earning per Share” and SKAS No. 25—“Consolidation Financial Statements”, effective from January 1, 2007. Pursuant to adoption of SKAS No. 25, income before minority interest is reclassified as net income. Besides, controlling interest in net income and minority interest in net income are separately presented in the consolidated statements of income.

In 2007, the Company also adopted amended SKAS No. 16—“Income Taxes” which are amended such that additional payment of income taxes and income tax refunds, formerly classified as other income (expenses), are reclassified as income taxes. Moreover, consolidated subsidiaries’ deferred income tax assets and liabilities, formerly recorded at net amount, are separately recorded in the consolidated statements of financial position.

In 2008, according to the revision of Clause 2, Article 1 of the Act on External Audit for Stock Companies, the Company renamed the “balance sheet” to “statement of financial position” effective for financial statement issued for fiscal years beginning after January 1, 2009. In addition, “balance sheet date” changed to “end of the reporting period.”

(c)	Principles of Consolidation

The consolidated financial statements include the accounts of KEPCO and its controlled subsidiaries (collectively referred to as the “Company”). Controlled subsidiaries include majority-owned entities by either the Company or controlled subsidiaries and other entities where the Company or its controlled subsidiary owns more than 30% of total outstanding common stock and is the largest shareholder.

For investments in companies, whether or not publicly held, that are not controlled, but under the Company’s significant influence, the Company utilizes the equity method of accounting. Significant influence is generally deemed to exist if the Company can exercise influence over the operating and financial policies of an investee. The ability to exercise that influence may be indicated in several ways, such as the Company’s representation on its board of directors, the Company’s participation in its policy making processes, material transactions with the investee, interchange of managerial personnel, or technological dependency. Also, if the Company owns directly or indirectly 20% or more of the voting stock of an investee and the investee is not required to be consolidated, the Company generally presumes that the investee is under significant influence.

When a controlling company still has control over its subsidiaries even after the controlling company sold a portion of its investment in the subsidiaries, the disposal gain or loss realized in connection with the sale of a subsidiary’s common stock should be presented as additions or deductions of consolidated capital surplus in the consolidated financial statements.

F-19

All intercompany balances including trade receivables and trade payables are eliminated in consolidation. Profits and losses on intercompany sales of products, property or other assets are eliminated in the consolidated financial statements based on the gross profit or loss recognized. For downstream sales, the full amount of intercompany profit is eliminated in the consolidated statements of income. For upstream sales, the elimination is allocated proportionately to consolidated income and minority interests. Details of unrealized income eliminated as of December 31, 2008 and 2009 are summarized as follows:


	Won (millions)
	2008
Account	Controlling interest		Minority interest	Total
Property, plant and equipment	(Won)	233,627	5,070	238,697
Intangible assets		9,367	2	9,369

	(Won)	242,994	5,072	248,066


	Won (millions)
	2009
Account	Controlling interest		Minority interest	Total
Property, plant and equipment	(Won)	251,903	55,359	307,262
Intangible assets		3,515	43	3,558

	(Won)	255,418	55,402	310,820

(d)	Consolidated Subsidiaries


Subsidiaries	Year of establishment	Ownership percentage (%)		Primary business
Subsidiaries	Year of establishment	2008	2009	Primary business
Korea Hydro & Nuclear Power Co., Ltd.(*1)	2001	100.0	100.0	Power generation

Korea South-East Power Co., Ltd.(*1)	2001	100.0	100.0	Power generation

Korea Midland Power Co., Ltd.(*1)	2001	100.0	100.0	Power generation

Korea Western Power Co., Ltd.(*1)	2001	100.0	100.0	Power generation

Korea Southern Power Co., Ltd.(*1)	2001	100.0	100.0	Power generation

Korea East-West Power Co., Ltd.(*1)	2001	100.0	100.0	Power generation

Korea Power Engineering Co., Inc.	1977	97.9	77.9	Engineering for utility plant

KPS Co., Ltd.	1984	80.0	80.0	Utility plant maintenance

KEPCO Nuclear Fuel Co., Ltd.	1982	96.4	96.4	Nuclear fuel

Korea Electric Power Data Network Co., Ltd.	1992	100.0	100.0	Information services

Garolim Tidal Power Plant Co., Ltd.(*3,4)	2007	—	49.0	Power generation

KEPCO International Hong Kong Ltd.	1995	100.0	100.0	Holding Company

KEPCO International Philippines Inc.	2000	100.0	100.0	Holding Company

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Subsidiaries	Year of establishment	Ownership percentage (%)		Primary business
Subsidiaries	Year of establishment	2008	2009	Primary business
KEPCO Gansu International Ltd.	2005	100.0	100.0	Holding Company

KEPCO Philippines Holdings Inc.	2005	100.0	100.0	Holding Company

KEPCO Asia International Ltd.	2005	85.0	85.0	Holding Company

KEPCO Philippines Corporation(*2)	1995	100.0	100.0	Utility plant rehabilitation and operation

KEPCO Ilijan Corporation(*2)	1997	51.0	51.0	Construction and operation of utility plant

KEPCO SPC Power Corporation	2005	60.0	60.0	Construction and operation of utility plant

KEPCO Lebanon SARL	2006	100.0	100.0	Operation of utility plant

KEPCO Neimenggu International Ltd.	2006	100.0	100.0	Holding Company

KEPCO Shanxi international Ltd.	2007	100.0	100.0	Holding Company

KOMIPO Global Pte Ltd.	2007	100.0	100.0	Construction and operation of utility plant

KEPCO Canada Energy Inc.(*3)	2008	—	100.0	Holding Company

KEPCO Netherlands B.V.(*3)	2009	—	100.0	Holding Company

KEPCO Imouraren Uranium Investment Ltd.(*3)	2009	—	100.0	Uranium mine development

KEPCO Australia Pty. Ltd.(*3)	2005	—	100.0	Resources development

KOSEP Australia Pty. Ltd.(*3)	2007	—	100.0	Resources development

KOMIPO Australia Pty. Ltd.(*3)	2007	—	100.0	Resources development

KOWEPO Australia Pty. Ltd.(*3)	2007	—	100.0	Resources development

KOSPO Australia Pty. Ltd.(*3)	2007	—	100.0	Resources development

(*1)

Six new power generation subsidiaries were established on April 2, 2001 through the spin-off of KEPCO’s power generation division in accordance with the Restructuring Plan.

(*2)

Under the project agreement between the National Power Corporation of Philippines and KEPCO, the cooperation period of KEPCO Philippines Co. and KEPCO Ilijan Co. is for 15 years commencing September 15, 1995 and 20 years commencing June 5, 2002, respectively. At the end of the cooperation period, the power plant facilities will be transferred to the National Power Corporation of Philippines free of any liens or encumbrances and without any payment of compensation.

(*3)

As of December 31, 2009, Garolim Tidal Power Plant Co., Ltd, KEPCO Canada Energy Inc., KEPCO Netherlands B.V., KEPCO Imouraren Uranium Investment Ltd., KEPCO Australia Pty., Ltd., KOSEP Australia Pty., Ltd., KOMIPO Australia Pty., Ltd., KOWEPO Australia Pty., Ltd. and KOSPO Australia Pty Ltd. was newly included in consolidation.

(*4)

The Company owns less than 50% of the shares of Garolim Tidal Power Plant Co., Ltd. However, Garolim Tidal Power Plant Co., Ltd. was included in consolidation as the Company holds power to appoint or remove the majority of the members of the board of directors or equivalent governing body.

F-21

The power generation subsidiaries are primarily engaged in the sale of electricity to KEPCO 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
Korea South-East Power Co., Ltd. (KOSEP)		Thermoelectric power plant in Samchonpo
Korea Midland Power Co., Ltd. (KOMIPO)		Thermoelectric power plant in Boryung
Korea Western Power Co., Ltd. (KOWEPO)		Thermoelectric power plant in Tae-an
Korea Southern Power Co., Ltd. (KOSPO)		Thermoelectric power plant in Hadong
Korea East-West Power Co., Ltd. (EWP)		Thermoelectric power plant in Dangjin

(e)	Affiliates Accounted for Using the Equity Method


Affiliate	Year of establishment	Ownership percentage (%)		Primary business
Affiliate	Year of establishment	2008	2009	Primary business
Korea Gas Corporation	1983	24.5	24.5	Importing and wholesaling LNG
Korea District Heating Co., Ltd.	1985	26.1	26.1	Generating and distributing electricity and heat
LG Powercom Corporation	2000	38.8	38.8	Leasing telecommunication lines and providing internet access
Korea Electric Power Industrial Development Co., Ltd.	1990	49.0	49.0	Electricity metering
YTN	1993	21.4	21.4	Broadcasting
Gansu Datang Yumen Wind Power Co., Ltd.	2005	40.0	40.0	Construction and operation of utility plant
SPC Power Corporation	2006	40.0	40.0	Operation of utility plant
Datang Chifang Renewable Power Co., Ltd.	2006	40.0	40.0	Construction and operation of utility plant
Gemeng International Energy Group Co., Ltd.	2007	34.0	34.0	Construction and operation of utility plant
KEPCO Energy Resource Nigeria Ltd.	2007	30.0	30.0	Construction and operation of utility plant
Gangwon Wind Power Co., Ltd	2001	15.0	15.0	Wind power generating
Hyundai Green Power Co., Ltd.	2007	29.0	29.0	Generating electricity
Cheongna Energy Co., Ltd.	2005	27.0	27.0	Generating and distributing vapor and hot/cold water
PT. Cirebon Electric Power	2007	27.5	27.5	Construction and operation of utility plant
Eco Biomass Energy Sdn. Bhd.	2009	—	40.0	combined heat and power generation and CDM business
Denison Mines Corporation	2003	—	17.1	Uranium exploration and development
Rabigh Electricity Company	2009	—	40.0	Construction and operation of utility plant
KNOC Nigerian East Oil Co., Ltd.	2005	—	14.6	Oil and gas exploration in Nigeria
KNOC Nigerian West Oil Co., Ltd.	2005	—	14.6	Oil and gas exploration in Nigeria
SET Holdings	2008	—	2.5	Construction and operation of uranium enrichment plant
Areva NC Expansion	2007	—	15.0	Imouraren uranium mine development in Niger.

F-22

(f)	Property, Plant and Equipment

Property, plant and equipment are stated at cost, except in the case of revaluation made in accordance with the KEPCO Act and the Assets Revaluation Law of Korea. Significant additions or improvements extending useful lives of assets are capitalized. However, normal maintenance and repairs are charged to expense as incurred.

The Company capitalizes interest cost and other financial charges on borrowing associated with the manufacture, purchase, or construction of property, plant and equipment, incurred prior to completing the acquisition, as part of the cost of such assets. The calculation of capitalized interest includes exchange differences arising from foreign borrowings to the extent that they are regarded as an adjustment to interest costs, which is limited to the extent of interest cost calculated by the weighted average interest rate of local currency borrowings. For the years ended December 31, 2007, 2008 and 2009, the amounts of capitalized interest were (Won)240,165 million, (Won)309,971 million and (Won)293,999, respectively.

Depreciation is computed by the declining-balance method (straight-line method for buildings, structures, loaded heavy water and capitalized asset retirement cost of nuclear power plants and waste electric transformer, unit-of-production method for loaded nuclear fuel (PWR) and capitalized asset retirement cost of loaded nuclear fuel) using rates based on the estimated useful lives as follows:


		Estimated useful life
Buildings		8 ~ 40
Structures		8 ~ 30
Machinery		5 ~ 16
Vehicles		4 ~ 5
Loaded heavy water (inclued in loaded nuclear fuel)		30
Loaded nuclear fuel		—
Capitalized asset retirement cost of nuclear power plants		30 ~ 40
Capitalized asset retirement cost of waste electric transformer		8
Capitalized asset retirement cost of loaded nuclear fuel		—
Others		4 ~ 9

As described in Note 1(v), in 2004, the Company adopted SKAS No. 17, “Provisions, Contingent Liabilities and Contingent Assets”, and retrospectively adjusted the liability for decommissioning costs at the estimated fair value using discounted cash flows to settle the asset retirement obligations of dismantlement of the nuclear power plants, spent fuel and low & intermediate radioactive waste. In addition, the corresponding asset (calculated at the net book value amount as of January 1, 2004) related to all existing plants was recognized as a utility asset. The Company subsequently depreciates the capitalized asset retirement costs using the straight-line for dismantling costs and units-of-production depreciation method for spent fuel.

As described in Note 22, under the new regulation of Persistent Organic Pollutants Management Act, enacted in 2007, the Company is required to remove polychlorinated biphenyls (“PCBs”), a toxin, from the insulating oil of its transformers by 2015. According to the enactments, the Company is required to inspect the PCBs contents of transformers and dispose of PCBs in excess of safety standards under the legally settled procedures. The Company recognized related costs as a liability and capitalized the amount related to all existing utility plants.

When the Company receives grants which relate to the construction of transmission and distribution facilities, such amounts are initially recorded and presented in the accompanying consolidated financial statements as deductions from the assets acquired under such grants and are offset against depreciation expense during the estimated useful lives of the related assets.

F-23

(g)	Asset Impairment

When the book value exceeds the estimated recoverable value of an asset due to obsolescence, physical damage or decline in market value, and the amount is material, the impaired asset is recorded at the recoverable value with the resulting impairment loss charged to current operations. If the recoverable value exceeds the adjusted book value of the asset in a subsequent period, the recoveries of previously recognized losses are recognized as gain in subsequent periods to the extent the net realizable value equals the book value of the assets before the loss is recognized after consideration of accumulated depreciation.

The Company evaluates long-lived assets for impairment when events or changes in circumstances indicate, in management’s judgment, that the carrying value of such assets may not be recoverable. These computations utilize judgments and assumptions inherent in management’s estimate of undiscounted future cash flows to determine recoverability of an asset. Management uses its best estimate in making these evaluations and considers various factors, including the future prices of energy, fuel costs and operating costs. However, actual market prices and operating costs could vary from those used in the impairment evaluations, and the impact of such variations could be material. If management believes the assets may have declined in value based on these assumptions, the Company records impairment charges to reflect the estimated recoverable value.

(h)	Investment Securities

Classification of Securities

At acquisition, the Company classifies securities into one of the three categories: trading, held-to-maturity or available-for-sale. Trading securities are those that were acquired principally to generate profits from short-term fluctuations in prices. Held-to-maturity securities are those with fixed and determinable payments and fixed maturity that an enterprise has the positive intent and ability to hold to maturity. Available-for-sale securities are those not classified either as held-to-maturity or trading securities. Trading securities are classified as short-term investment securities, whereas held-to-maturity and available-for-sale securities are classified as long-term investment securities, except for those whose maturity dates or whose likelihood of being disposed of are within one year from the end of the reporting period, which are classified as short-term investment securities.

Valuation of Securities

Securities are recognized initially at cost (determined by the moving average method for equity securities and by the specific identification for debt securities), which includes the market value of the consideration given and incidental expenses. If the market price of the consideration given is not available, the market prices of the securities purchased are used as the basis for measurement. If neither the market prices of the consideration given nor those of the acquired securities are available, the acquisition cost is measured at the best estimates of its fair value.

After initial recognition, held-to-maturity securities are valued at amortized cost. The difference between their acquisition costs and face vales (commonly referred to as “discounts” or “premiums” on debt securities) is amortized over the remaining term of the securities by applying the effective interest method and added to or subtracted from the acquisition costs and interest income of the remaining period.

Trading securities are valued at fair value, with unrealized gains or losses included in current operations. Available-for-sale securities are also valued at fair value, with unrealized gains or losses included in accumulated other comprehensive income (loss), until the securities are sold or if the securities are determined to be impaired and the lump-sum cumulative amount of accumulated other comprehensive income (loss) is reflected in current operations. For those securities that are traded in an active market (marketable securities), fair values refer to the quoted market prices, which are measured as the closing price at the end of the reporting period. The fair values of non-marketable debt securities are measured at

F-24

the discounted future cash flows by using the discount rate that appropriately reflects the credit rating of the issuing entity assessed by a publicly reliable independent credit rating agency. If application of such measurement method is not feasible, estimates of the fair values may be made using a reasonable valuation model or quoted market prices of similar debt securities issued by entities conducting similar business in similar industries.

Securities are evaluated at each end of the reporting period to determine whether there is any objective evidence of impairment loss. When any such evidence exists, unless there is a clear counter-evidence that recognition of impairment is unnecessary, the Company estimates the recoverable amount of the impaired security and recognizes any impairment loss in current operations. The amount of impairment loss of the held-to-maturity security or non-marketable equity security is measured as the difference between the recoverable amount and the carrying amount.

The recoverable amount of held-to maturity security is the present value of expected future cash flows discounted at the securities’ original effective interest rate. For available-for-sale debt or equity security stated at fair value, the amount of impairment loss to be recognized in the current period is determined by subtracting the amount of impairment loss of debt or equity security already recognized in prior period from the amount of amortized cost in excess of the recoverable amount for debt security or the amount of the acquisition cost in excess of the fair value for equity security. For non-marketable equity securities accounted for at acquisition costs, the impairment loss is equal to the difference between the recoverable amount and the carrying amount.

If the realizable value subsequently recovers, in case of a security stated at fair value, the increase in value is recorded in current operations, up to the amount of the previously recognized impairment loss, while for the security stated at amortized cost or acquisition cost, the increase in value is recorded in current operation, so that its recovered value does not exceed what its amortized cost would be as of the recovery date if there had been no impairment loss.

Reclassification of Securities

When transfers of securities between categories are needed because of changes in an entity’s intention and ability to hold those securities, such transfer is accounted for as follows:

Trading securities should not be reclassified as other categories of securities. However, when those securities can no longer be held for sale in the near-term to generate profits from short-term price differences, the trading securities can be reclassified as available-for-sale or held-to-maturity securities. When those securities are no longer traded in an active market, such securities are reclassified as available-for-sale securities. When trading securities are reclassified to other categories, the fair value (latest market value) as of the date of the reclassification becomes new acquisition cost of the security and the security’s unrealized holding gain or loss through the date of the reclassification should be recorded in the non-operating income or expenses.

Available-for-sale securities and held-to-maturity securities can be reclassified into each other after fair value recognition. When a held-to-maturity security is reclassified into as a available-for-sale security, the difference between the book value and fair value is reported in accumulated other comprehensive income (loss). Whereas, in case of an available-for-sale security being reclassified into a held-to-maturity security, the difference is reported in accumulated other comprehensive income (loss) and amortized over the remaining term of the securities using the effective interest method.

(i)	Investment Securities under the Equity Method of Accounting

For investments in companies, whether or not publicly held, if the Company has significant influence over its investment, the Company utilizes the equity method of accounting. Significant influence is generally deemed to exist if the Company can exercise influence over the operating and financial policies of an investee. The ability to exercise that influence may be indicated in several ways, such as the Company’s representation on its board of directors, the Company’s participation in its policy making processes, material

F-25

transactions with the investee, interchange of managerial personnel, or technological dependency. Also, if the Company owns directly or indirectly 20% or more of the voting stock of an investee, the Company generally presumes that the investee is under significant influence. 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 accumulated other comprehensive income 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 accumulated other comprehensive income (loss).

Under the equity method of accounting, the Company’s initial investment is recorded at cost and is subsequently increased to reflect the Company’s share of the investee income and reduced to reflect the Company’s share of the investee losses or dividends received. The Company does not record its share of losses of an affiliate when such losses would make the Company’s investment in such entity less than zero unless the Company has guaranteed obligations of the investee or is otherwise committed to provide additional financial support.

Any excess in the Company’s acquisition cost over the Company’s share of the net fair value of the investee’s identifiable net assets is considered as goodwill and amortized by the straight-line method over the estimated useful life. The amortization of such goodwill is recorded against the equity income (losses) of affiliates. When events or circumstances indicate that carrying amount may not be recoverable, the Company reviews goodwill for any impairment.

Under the equity method of accounting, unrealized gains and losses on transactions with an investee are eliminated to the extent of the Company’s interest in the investee. However, unrealized gains and losses from a down-stream transaction with a subsidiary is eliminated in its entirety.

Assets and liabilities of foreign-based companies accounted for using the equity method are translated at the current rate of exchange at the end of the reporting period while profit and loss items in the statement of income are translated at the average rate and the capital account at the historical rate. The translation gains and losses arising from collective translation of the foreign currency financial statements of foreign-based companies are netted and recognized as part of accumulated other comprehensive income (loss).

(j)	Intangible Assets

Intangible assets are stated at cost less accumulated amortization, as described below.

(i)

Research and Development Costs

All costs incurred during the research phase are expensed as incurred. Costs incurred during the development phase are recognized as an asset only if all of the following criteria for recognition are satisfied; (1) it is probable that future economic benefits that are attributable to the asset will flow into the entity; and (2) the cost of the asset can be reliably measured. If the costs incurred fail to satisfy all of these criteria, they are recorded as periodic expenses as incurred. The capitalized expenditure includes the cost of materials, direct labor and an appropriate proportion of overheads. Capitalized costs are amortized on a straight-line basis over 5 years.

(ii)

Other Intangible Assets

Other intangible assets, which consist of industrial rights, land rights, computer software and others, are stated at cost less accumulated amortization and impairment losses, if any. Such intangible assets are amortized using the straight-line method over a reasonable period, from 4 years to 50 years, based on the nature of the asset.

The Company assesses its intangible assets for impairment, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

F-26

(k)	Cash Equivalents

The Company considers short-term financial instruments with maturities of three months or less at the acquisition date to be cash equivalents.

(l)	Financial Instruments

Short-term financial instruments are financial instruments handled by financial institutions which are held for short-term cash management purposes or will mature within one year, including time deposits, installment savings deposits and restricted bank deposits.

(m)	Allowance for Doubtful Accounts

The allowance for doubtful accounts is estimated based on an analysis of individual accounts and past experience of collection. Smaller-balance homogeneous receivables are evaluated considering current economic conditions and trends, prior charge-off experience and delinquencies.

A rollforward of the allowance for doubtful accounts of trade receivables is as follows:


	Won (millions)
	2007			2008		2009

Balance at beginning of the year	(Won)	50,173		53,924		48,161
Provision for bad debts		22,163		20,616		28,397
Reversal of allowance for doubtful accounts		(393	)	(2,173	)	(726	)
Write off		(18,019	)	(24,206	)	(14,738	)

Balance at end of the year	(Won)	53,924		48,161		61,094

(n)	Inventories

Inventories are stated at the lower of cost or net realizable value, cost being determined using the weighted-average method for raw materials, the specific identification method for materials in transit, moving-average method for supplies and specific-identification method for other inventories. The Company maintains perpetual inventory records, which are adjusted through physical counts at the end of each year.

(o)	Valuation of Receivables and Payables at Present Value

Receivables and payables arising from long-term cash loans/borrowings and other similar loan/borrowing transactions are stated at present value. The difference between the nominal value and present value is deducted directly from the nominal value of related receivables or payables and is amortized using the effective interest rate method. The amount amortized is included in interest expense or interest income.

(p)	Convertible Bonds

When issuing convertible bonds, the value of the conversion rights is recognized separately as a component of capital surplus. Consideration for conversion rights is measured by deducting the present value of ordinary or straight debt securities from the gross proceeds of the convertible bonds received at the date of issuance. The amortization of conversion right adjustment is recorded as a component of interest expense.

Convertible bonds are not subject to foreign currency translation because convertible bonds are regarded as non-monetary foreign currency liabilities in accordance with Korean GAAP.

(q)	Discount (Premium) on Debentures and Debt Issuance Costs

Discount (premium) on debentures issued, which represents the difference between the face value and issuance price of debentures, is amortized using the effective interest rate method over the life of the debentures. The amount amortized is included in interest expense.

F-27

Unamortized debt issuance costs are accounted for as a reduction of the related bond liability and amortized over the life of the bond. Upon early redemption, the amount of debt issuance costs is written off proportionally.

(r)	Retirement and Severance Benefits

Employees and directors who have been with the Company for more than one year are entitled to lump-sum payments based on current salary rates and length of service when they leave the Company. The Company’s estimated liability under the plan which would be payable if all employees left on the end of the reporting period is accrued in the accompanying consolidated statements of financial position.

Funding of the retirement and severance benefits are not required, however, tax deductions are limited if the liability is not funded. The Company purchased individual severance insurance deposits, which meet the funding requirement for tax deduction purposes, in which the beneficiary is the respective employee, with a balance of (Won)455,223 million and (Won)490,061 million as of December 31, 2008 and 2009, respectively, and are presented as a deduction from the accrual of retirement and severance benefits.

Through March 1999, under the National Pension Scheme of Korea, the Company transferred a certain portion of retirement allowances to the National Pension Fund. The amount transferred reduces the retirement and severance benefit amount payable to the employees when they leave the Company and is accordingly reflected in the accompanying consolidated statements of financial position as a reduction of the retirement and severance benefit liability. However, since April 1999, due to change in regulation such transfers to the National Pension Fund are no longer required.

(s)	Reserve for Self-Insurance

In accordance with the Accounting Regulations for Public Enterprise—Associate Government Agency, the Company provides a self-insurance reserve for loss from accidents and liabilities to third parties that may arise in connection with the Company’s non-insured facilities. The self-insurance reserve is recorded until the amount meets 15.8 percent of all the non-insured buildings and machinery’s value. Payments made to settle applicable claims are charged to this reserve.

(t)	Foreign Currency Translation

KEPCO and its domestic subsidiaries maintain their 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 denominated in foreign currencies are translated into Korean Won at the end of the reporting period, with the resulting gains and losses recognized in current results of operations. Monetary assets and liabilities denominated in foreign currencies are translated into Korean Won at (Won)1,257.5 and (Won)1,167.6 to US$1, the rate of exchange on December 31, 2008 and 2009, respectively. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated into Korean Won at the foreign exchange rate ruling at the date of the transaction.

Foreign currency assets and liabilities of foreign-based operations and the Company’s overseas subsidiaries are translated at the current rate of exchange at the end of the reporting period while profit and loss items in the statement of income are translated at the average rate and capital account at the historical rate. The translation gains and losses arising from collective translation of the foreign currency financial statements of foreign-based operations and the Company’s overseas subsidiaries are offset and the balance is accumulated as an accumulated other comprehensive income.

(u)	Derivatives

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

F-28

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 an accumulated other comprehensive income and the ineffective portion is recorded in current operations. Accumulated gain or loss in shareholder’s equity is recorded in the income statement in the periods in which the hedged item will affect profit or loss.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecasted transaction is ultimately recognized in the consolidated statement of income. When a forecasted transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the consolidated statement of income.

(v)	Liability for Decommissioning Costs

In October 2004, Korea Accounting Standard Board issued SKAS No. 17, “Provision and Contingent Liability & Asset.” In January 2005, the Company decided to early adopt SKAS No. 17. Under this standard, the Company retrospectively adjusted the liability for decommissioning costs at the estimated fair value using discounted cash flows (based on engineering studies and the expected decommissioning dates) to settle the liabilities for decommissioning costs and the same amount was recognized as an utility asset included in property, plant and equipment. The liability for decommissioning costs is adjusted based on management’s best estimates on each end of the reporting period. Under SKAS No. 17, the discount rate was set at the date of adoption (January 1, 2004) and should be applied in all future periods. In addition, any new obligation arising from new plant would use the discount rate in effect at the time plant commences operations. Accretion expense consists of period-to-period changes in the liability for decommissioning costs resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows. The Company subsequently depreciates the asset retirement costs of nuclear power plants and the asset retirement costs of loaded nuclear fuel using the straight-line and units-of-production depreciation method, respectively.

(w)	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. Revenue other than sale of electric power and revenue on long-term contracts is recognized when the Company’s revenue-earning activities have been substantially completed, the amount of revenue can be reliably measured, and it is probable that the Company will receive the economic benefits associated with the transaction.

(x)	Income Taxes

Income tax expense is determined by adding or deducting the total income tax and surtaxes to be paid for the current period and the changes in deferred income tax assets and liabilities.

Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profits.

F-29

Deferred tax liabilities are generally recognized for all taxable temporary differences with some exceptions and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. Deferred income tax assets and liabilities are classified into current and non-current based on the classification of related assets or liabilities for financial reporting purposes.

Prior to January 1, 2007, the Company recognized prior year income tax adjustments (additional payment of income tax or income tax refunds) as other income (expenses), offset current tax assets against current tax liabilities, and offset deferred tax assets against deferred tax liabilities in consolidated financial statements. However, in accordance with amendment of SKAS No. 16, “Income Taxes”, effective January 1, 2007, the Company recognized additional payment of income tax or income tax refunds as income taxes in 2007.

(y)	Dividends payable

Dividends are recorded when approved by the shareholders’ meeting.

(z)	Earnings Per Share

Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income, after addition for the effect of expenses related to dilutive securities on net income, by the weighted average number of common shares plus the dilutive potential common shares.

(aa)	Minority Interest in Consolidated Subsidiaries

Minority interest in consolidated subsidiaries is presented as a separate component of shareholders’ equity in the consolidated statements of financial position.

(ab)	Use of Estimates

The preparation of consolidated financial statements in accordance with Korean GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to financial statements. Actual results could differ from those estimates.

(ac)	Accounting Principles

Certain subsidiaries apply different accounting methods for cost of inventory and the depreciation of fixed assets and intangible assets than those of KEPCO. The effect of the different accounting is not considered material.

F-30

(i)

Cost of Inventory


Company	*Raw material()**	Supplies	Others
KEPCO	Weighted-average	Moving-average	Specific identification
Korea Hydro & Nuclear Power Co., Ltd.	Moving-average	—	Moving average
Korea Western Power Co., Ltd.	—	Weighted-average	Weighted-average
Korea Power Engineering Co., Inc.	—	FIFO	FIFO
Korea Plant Service & Engineering Co., Ltd.	—	FIFO	—
KEPCO Nuclear Fuel Co., Ltd.	—	Weighted-average	—
Korea Electric Power Data Network Co., Ltd.	Moving-average	—	Moving-average
KEPCO Philippines Corporation	—	Weighted-average	Weighted-average
KEPCO Ilijan Corporation	—	Weighted-average	Weighted-average

(*)	Specific identification method is applied to materials in transit.

(ii)

Depreciation Methods


Company	Machinery	Vehicles	Others	Computer software
KEPCO	Declining-balance	Declining-balance	Declining-balance	Straight-line
Korea Hydro & Nuclear Power Co., Ltd.	—	—	—	Declining-balance
Korea Plant Service & Engineering Co., Ltd.	—	—	—	Declining-balance
KEPCO Nuclear Fuel Co., Ltd.	Straight-line	Straight-line	Straight-line	—
Korea Electric Power Data Network Co., Ltd.	Straight-line	Straight-line	Straight-line	—
KEPCO Philippines Corporation	Straight-line	Straight-line	Straight-line	—
KEPCO Ilijan Corporation	Straight-line	Straight-line	Straight-line	—

(ad)	Elimination of Investments and Shareholders’ Equity

For consolidated subsidiaries and investments accounted for under the equity method, if the acquisition date is not as of the fiscal year end of the investee, the nearest fiscal year end of such investee is considered as the acquisition date in determining the amount of goodwill or negative goodwill.

F-31

The elimination entries of the KEPCO’s investments against the related investees’ shareholders’ equity at December 31, 2009 are summarized as follows:


Won (millions)				Won (millions)
Accounts	Amount			Accounts	Amount

Common stock	(Won)	3,592,314		Investments in affiliates	(Won)	19,227,493
Capital surplus		15,835,900		Consolidated capital surplus		2,060
Capital adjustments		(199	)	Consolidated capital adjustments		(98	)
Retained earnings		8,873,464		Consolidated retained earnings		8,698,373
Accumulated other comprehensive income		26,188		Accumulated other comprehensive income		22,694
				Minority interests		376,578
				Other		567

	(Won)	28,327,667			(Won)	28,327,667

(2) Basis of Translating Consolidated Financial Statements

The consolidated financial statements are expressed in Korean Won and, solely for the convenience of the reader, the consolidated financial statements as of and for the year ended December 31, 2009, have been translated into United States dollars at the rate of (Won)1,163.65 to US$1, the noon buying rate in the City of New York for cable transfers in Won as certified for customs purposes by the Federal Reserve Bank of New York as of December 31, 2009. The translation should not be construed as a representation that any or all of the amounts shown could be converted into U.S. dollars at this or any other rate.

(3) Property, Plant and Equipment

(a)	Asset Revaluation

The Company 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). As of December 31, 2008 and 2009, the Company has a revaluation gain of (Won)12,552,973 million as a reserve for asset revaluation, a component of capital surplus.

(b)	Officially Declared Value of Land

The officially declared value of land at December 31, 2009, as announced by the Minister of Land and Transportation and Maritime Affairs is as follows:


	Won (millions)
Purpose	Book value		Declared value

Land—utility plant, transmission and distribution sites and other	(Won)	6,370,868	10,338,688

The officially declared value of land, which is used for government purposes, is not intended to represent fair value.

F-32

(c)	Changes in Property, Plant and Equipment

Changes in property, plant and equipment and construction grants for the years ended December 31, 2008 and 2009 are as follows:


	Won (millions)
	2008
	Book value as of January 1, 2008			Acquisitions		Disposals		Depreciation		*Others()**		Book value as of December 31, 2008
Land	(Won)	6,126,074		21,750		(22,096	)	—		170,880		6,296,608
Buildings		7,291,784		761		(7,302	)	(661,901	)	643,924		7,267,266
Structures		28,405,415		1,002		(514	)	(1,302,703	)	2,718,515		29,821,715
Machinery		17,049,211		71,450		(3,372	)	(3,168,570	)	3,970,688		17,919,407
Vehicles		31,661		6,845		(26	)	(19,459	)	12,190		31,211
Loaded nuclear fuel		933,263		—		—		(416,977	)	544,665		1,060,951
Capitalized asset retirement cost		1,859,958		—		—		(257,934	)	205,770		1,807,794
Others		661,541		82,081		(54	)	(172,227	)	177,535		748,876
Construction in-progress		9,824,129		8,740,733		—		—		(8,387,295	)	10,177,567
Construction grants		(4,619,883	)	(1,141,724	)	—		300,128		125,369		(5,336,110	)

	(Won)	67,563,153		7,782,898		(33,364	)	(5,699,643	)	182,241		69,795,285


	Won (millions)
	2009
	Book value as of January 1, 2009			Acquisitions		Disposals		Depreciation		*Others()**		Book value as of December 31, 2009
Land	(Won)	6,296,608		26,527		(160,315	)	—		208,048		6,370,868
Buildings		7,267,266		15,087		(21,090	)	(684,783	)	329,857		6,906,337
Structures		29,821,715		288		(8,678	)	(1,387,818	)	2,302,908		30,728,415
Machinery		17,919,407		53,286		(52,348	)	(3,396,540	)	3,155,796		17,679,601
Vehicles		31,211		7,875		(787	)	(18,552	)	6,706		26,453
Loaded nuclear fuel		1,060,951		—		—		(447,294	)	536,151		1,149,808
Capitalized asset retirement cost		1,807,794		—		—		(269,711	)	167,792		1,705,875
Others		748,876		105,547		(3,008	)	(203,477	)	61,452		709,390
Construction in-progress		10,177,567		11,035,355		—		—		(6,303,753	)	14,909,169
Construction grants		(5,336,110	)	(1,197,173	)	—		393,490		(12,692	)	(6,152,485	)

	(Won)	69,795,285		10,046,792		(246,226	)	(6,014,685	)	452,265		74,033,431

(*)

Others include transfers between asset categories, acquisition of capitalized asset retirement cost, and other non-cash items.

F-33

(4) Insured Assets

Insured assets as of December 31, 2009 are as follows:


		Won (millions)
Insured assets	Insurance type	Insured value
Buildings and machinery	Fire insurance	(Won)	1,032,097
Buildings and machinery	Nuclear property insurance		1,763,968
Buildings, machinery and construction in progress	Construction and shipping insurance		14,198,991
Buildings	General insurance		23,693,482
Construction in progress	Construction insurance		140,862
Inventories and machinery	Shipping insurance		2,302,076
Buildings	Others		13,334,388

In addition, as of December 31, 2009, the Company carries compensation and responsibility insurance in relation to the operation of the nuclear power plants and gas accidents, construction and other general insurance for its utility plants and inventories and general insurance for vehicles.

(5) Intangible Assets

Changes in intangible assets for the years ended December 31, 2008 and 2009 are as follows:


	Won (millions)
	2008
	Book value as of January 1, 2008		Acquisitions	Amortization		*Others(1)**		Book value as of December 31, 2008
Port facility usage right	(Won)	146,311	—	(8,128	)	(56,940	)	81,243
Water usage right		57,397	—	(16,952	)	(131	)	40,314
Dam usage right		2,017	—	(145	)	4,237		6,109
Electricity usage right		50,935	47,907	(96,007	)	36,100		38,935
Future radioactive wastes repository sites usage rights(*2)		300,000	—	—		—		300,000
Computer software and capitalized research and development costs		208,989	36,156	(85,034	)	28,406		188,517
Others(*3)		75,678	276,541	(36,538	)	(23,952	)	291,729

	(Won)	841,327	360,604	(242,804	)	(12,280	)	946,847

F-34


	Won (millions)
	2009
	Book value as of January 1, 2009		Acquisitions	Amortization		*Others(1)**		Book value as of December 31, 2009
Port facility usage right	(Won)	81,243	—	(6,601	)	—		74,642
Water usage right		40,314	—	(16,952	)	(293	)	23,069
Dam usage right		6,109	—	(145	)	—		5,964
Electricity usage right		38,935	5,498	(97,495	)	66,610		13,548
Future radioactive wastes repository sites usage rights(*2)		300,000	—	—		(300,000	)	—
Computer software and capitalized research and development costs		188,517	19,081	(71,315	)	14,603		150,886
Others(*3)		291,729	225,098	(35,681	)	(66,910	)	414,236

	(Won)	946,847	249,677	(228,189	)	(285,990	)	682,345

(*1)

Others include transfers between asset categories and other non-cash items.

(*2)

In November 2005, Gyeongju City was selected as the repository site for Low and Intermediate-Level Radioactive Waste (LILRW). In relation to this future repository site, the Korean government enacted the ‘Special Act for the Region Hosting a Low and Intermediate Radioactive Waste Repository Site’ (the “Act”) to support the area. In compliance with the Act, the Company was obligated to pay (Won)300,000 million to the region to build the repository site. As a result, the Company recognized this obligation as an intangible asset and other long-term liabilities at December 31, 2005. The Company paid the entire amount in 2006.

In 2009, the Company reclassified (Won)300,000 million from intangible asset to other accounts receivable related to the disposal of its radio-asset waste facilities to Korea Radio-active Waste Management Corporation (KRMC). (Refer to note 22 and 38(j) for further information)

(*3)

In 2007, the useful life of Kori-1 nuclear generation unit is extended by 10 years under the permission of the Ministry of Education, Science and Technology (the “MEST”, formerly the Ministry of Science and Technology). The Company promised to pay (Won)196,000 million to local community where the Kori-1 nuclear power plant is located to get the agreement on the above extension of its operation period. The Company recorded the amount as other intangible assets.

In addition, the Company expensed research and development cost amounting to (Won)602,753 million, (Won)618,008 million and (Won)575,473 million for the years ended December 31, 2007, 2008 and 2009, respectively.

(6) Investment Securities

(a)

Short-term Investment securities as of December 31, 2008 and 2009 are summarized as follows:


	Won (millions)
	2008		2009
Trading Securities	(Won)	13,960	9,980
Held-to-maturity securities		542	440

	(Won)	14,502	10,420

Held-to-maturity securities consist of debt securities including government and municipal bonds.

F-35

(b)

Long-term investments other than those under the equity method as of December 31, 2008 and 2009 are summarized as follows:


	Won (millions)
	2008
	Ownership %	Acquisition cost		Book value
Available-for-sale:
Equity securities(*1) :
Energy Savings Investment Cooperatives(*2)	48.0	(Won)	1,680	1,680
Korea Power Exchange(*3)	100.0		127,839	121,573
Hwan Young Steel Co., Ltd.	0.14		97	97
KNOC Nigerian East Oil Co., Ltd.	15.0		12	12
KNOC Nigerian West Oil Co., Ltd.	15.0		12	12
Dolphin Property Limited.	15.0		12	12
KEPCO Australia Pty Ltd.(*2)	100.0		15,588	15,588
KEPCO Canada Energy Ltd.(*2)	100.0		1,215	1,215
Korea Electric Power Nigeria Ltd.(*2)	100.0		76	76
Cockatoo Coal Ltd.(*4)	4.77		6,793	8,646
Other equity securities	—		58,728	58,599

			212,052	207,510

Held-to-maturity:
Government and municipal bonds			2,419	2,419

Total		(Won)	214,471	209,929


	Won (millions)
	2009
	Ownership %	Acquisition cost		Book value
Available-for-sale:
Equity securities(*1) :
Energy Savings Investment Cooperatives(*2)	48.0	(Won)	1,680	1,680
Korea Power Exchange(*3)	100.0		127,839	116,966
Hwan Young Steel Co., Ltd.	0.14		97	97
Dolphin Property Limited.	15.0		12	12
Korea Electric Power Nigeria Ltd.(*2)	100.0		76	76
Cockatoo Coal Ltd.(*4)	4.77		20,290	20,176
PT Adaro Energy Tbk(*5)	1.5		71,554	102,803
Other equity securities	—		34,741	34,277

			256,289	276,087

Held-to-maturity:
Government and municipal bonds			2,330	2,330

Total		(Won)	258,619	278,417

(*1)

The equity securities other than securities in Korea Power Exchange, Cockatoo Coal Ltd. and PT Adaro Energy Tbk are non-marketable securities and stated at cost due to the lack of information to determine fair value.

F-36

(*2)

As described in Note 1(i), investment in affiliates in which the Company owns 20% or more of the voting stock should be stated at an amount as determined using equity method of accounting. However, as allowed per SKAS No. 8 “Investments in Securities”, as the difference between the equity method and cost is considered to be immaterial, the Company recorded the investment within available-for-sale securities at cost.

(*3)

Korea Power Exchange operates under the regulations for government affiliated organization, electric power market managerial regulations, and the Electricity Enterprises Act. Moreover, considering the purpose of establishment and articles of incorporation of Korea Power Exchange, the Company does not appear to have significant management control. Therefore, the investment is accounted for as available-for-sale at fair value. Based on the valuation report by the third party, the Company recorded valuation loss of (Won)10,873 million for its investment in Korea Power Exchange, which have been accounted for as accumulated other comprehensive income in 2009.

(*4)

The investment of Cockatoo Coal Ltd. was listed on the Australian Securities Exchange and those securities are evaluated at quoted market value (closing price as of the reporting period). The Company recorded loss on valuation of (Won)114 million, which have been accounted for as accumulated other comprehensive income in 2009.

(*5)

The investment of PT Adaro Energy Tbk. which is Indonesia-based coal mining company was listed on the Jakarta Stock Exchange and those securities are evaluated at quoted market value (closing price as of the reporting period). The Company recorded gain on valuation of (Won)31,249 million, which have been accounted for as accumulated other comprehensive income in 2009.

(c)

Investments in affiliated companies accounted for using the equity method as of December 31, 2008 and 2009 are as follows:


	Won (millions)
	2008
	Ownership %	Acquisition cost		Net asset value	Book value
Korea Gas Corporation	24.5	(Won)	94,500	1,022,928	1,022,928
Korea District Heating Co., Ltd.	26.1		5,660	186,445	186,445
LG Powercom Corporation	38.8		323,470	384,901	384,901
Korea Electric Power Industrial Development Co., Ltd.	49.0		7,987	28,717	28,717
YTN	21.4		59,000	29,991	29,991
Gansu Datang Yumen Wind Power Co., Ltd.	40.0		11,342	14,256	14,256
SPC Power Corporation	40.0		20,635	30,507	30,507
Datang Chifang Renewable Co., Ltd.	40.0		71,856	105,734	105,734
Gemeng International Energy Group Co. Ltd.	34.0		413,153	591,911	591,911
KEPCO Energy Resource Nigeria Limited.	30.0		8,463	8,646	8,646
Gangwon Wind Power Co., Ltd.	15.0		5,725	6,994	7,093
Hyundai Green Power Co. Ltd.	29.0		38,135	37,218	37,218
Cheongna Energy Co., Ltd.	27.0		1,800	4,823	4,823
PT. Cirebon Electric Power	27.5		48,679	54,096	54,096

		(Won)	1,110,405	2,507,167	2,507,266

F-37


	Won (millions)
	2009
	Ownership %	Acquisition cost		Net asset value		Book value
Korea Gas Corporation(*1)	24.5	(Won)	94,500	1,256,891		1,256,891
Korea District Heating Co., Ltd.	26.1		5,660	226,596		226,596
LG Powercom Corporation(1,3)	38.8		323,470	351,349		326,096
Korea Electric Power Industrial Development Co., Ltd.	49.0		7,987	26,553		26,553
YTN(*1)	21.4		59,000	35,074		35,076
Gansu Datang Yumen Wind Power Co., Ltd.	40.0		16,500	18,131		18,131
SPC Power Corporation	40.0		20,635	28,691		28,580
Datang Chifang Renewable Co., Ltd.	40.0		78,574	108,998		108,997
Gemeng International Energy Group Co. Ltd.	34.0		413,153	546,300		546,300
KEPCO Energy Resource Nigeria Limited.	30.0		8,463	7,267		7,267
Gangwon Wind Power Co., Ltd.(*2)	15.0		5,725	7,360		7,412
Hyundai Green Power Co. Ltd.	29.0		38,135	36,253		36,253
Cheongna Energy Co., Ltd.	27.0		18,200	16,870		16,946
PT. Cirebon Electric Power	27.5		35,999	37,343		37,343
Eco Biomass Energy Sdn. Bhd.	40.0		6,529	6,529		6,529
Denison Mines Corporation(1,2)	17.1		84,134	152,479		64,176
Rabigh Electricity Company	40.0		1,357	(2,069	)	—
KNOC Nigerian East Oil Co., Ltd.(2,4)	14.6		12	(4,048	)	—
KNOC Nigerian West Oil Co., Ltd.(2,4)	14.6		12	(3,644	)	—
SET Holdings(*2)	2.5		229,255	229,255		229,255
Areva NC Expansion(*2)	15.0		285,465	285,465		285,465

		(Won)	1,732,765	3,367,643		3,263,866

(*1)

The quoted market value (based on closing price at the Korea Stock Exchange as of December 31, 2009) of Korea Gas Corporation, LG Powercom and YTN as of December 31, 2009 was (Won)918,540 million, (Won)315,189 million and (Won)40,770 million respectively.

Denison Mines Corporation is listed on the Toronto Stock Exchange and New York Stock Exchange, and as of December 31, 2009, the quoted market value based on the Toronto Stock Exchange was (Won)84,751 million ((Won)86,005 million based on the New York Stock Exchange).

(*2)

Despite of holding less than 20% of the total number of voting stock of Gangwon Wind Power Co., Ltd., Denison Mines Corporation, KNOC Nigerian East Oil Co., Ltd., KNOC Nigerian West Oil Co., Ltd., SET Holdings and Areva NC Expansion, the Company utilizes the equity method of accounting to the investment, as the Company has significant influence over the operating and financial policies of those entities.

(*3)

As LG Telecom will merge LG Powercom on January 5, 2010, shares of LG Powercom which the Company owns will be exchanged for shares of LG Telecom. As a result of the merger, the recoverable amount is estimated as (Won)326,096 million, and (Won)60,636 million arising from difference between the recoverable amount and the book value is recognized as impairment loss on investments.

(*4)

In 2009, the Company discontinued applying the equity method in KNOC Nigerian East Oil Co., Ltd. and KNOC Nigerian West Oil Co., Ltd., as the accumulated deficit carried over from prior years in the equity loss of affiliates exceeded the balance in investment, resulting in a net nil investment balance and additional losses of (Won)3,493 million and (Won)3,149 million for other investments. The Company had unrealized equity loss of affiliates (Won)555 million and (Won)495 million, respectively, as of December 31, 2009.

F-38

(d)

Changes in investments in affiliated companies under the equity method for the years ended December 31, 2008 and 2009 are as follows:


	Won (millions)
	2008
	Book value as of January 1, 2008		Equity income (loss) of affiliates		*Others(1)**		Book value as of December 31, 2008
Korea Gas Corporation	(Won)	938,137	108,192		(23,401	)	1,022,928
Korea District Heating Co.		187,502	2,366		(3,423	)	186,445
LG Powercom Corporation		389,326	6,041		(10,466	)	384,901
Korea Electric Power Industrial Development, Ltd.		29,379	4,728		(5,390	)	28,717
YTN		28,493	1,823		(325	)	29,991
Gansu Datang Yumen Wind Power Co., Ltd.		7,543	(275	)	6,988		14,256
SPC Power Corporation		22,580	493		7,434		30,507
Datang Chifang Renewable Co., Ltd.		64,159	4,883		36,692		105,734
Gemeng International Energy Group Co. Ltd.		413,153	(29,321	)	208,079		591,911
KEPCO Energy Resource Nigeria Limited.		7,625	22		999		8,646
Gangwon Wind Power Co., Ltd		7,307	628		(842	)	7,093
Hyundai Green Power Co. Ltd.		16,364	(372	)	21,226		37,218
Cheongna Energy Co., Ltd.		1,499	(400	)	3,724		4,823
KOMIPO Global Pte Ltd.		13,540	—		(13,540	)	—
PT. Cirebon Electric Power		—	(197	)	54,293		54,096

	(Won)	2,126,607	98,611		282,048		2,507,266


	Won (millions)
	2009
	Book value as of January 1, 2009		Equity income (loss) of affiliates		*Others(1)**		Book value as of December 31, 2009
Korea Gas Corporation	(Won)	1,022,928	27,164		206,799		1,256,891
Korea District Heating Co.		186,445	39,110		1,041		226,596
LG Powercom Corporation		384,901	1,831		(60,636	)	326,096
Korea Electric Power Industrial Development, Ltd.		28,717	3,607		(5,771	)	26,553
YTN		29,991	5,283		(198	)	35,076
Gansu Datang Yumen Wind Power Co., Ltd.		14,256	76		3,799		18,131
SPC Power Corporation		30,507	3,661		(5,588	)	28,580
Datang Chifang Renewable Co., Ltd.		105,734	10,979		(7,716	)	108,997
Gemeng International Energy Group Co. Ltd.		591,911	816		(46,427	)	546,300
KEPCO Energy Resource Nigeria Limited.		8,646	(666	)	(713	)	7,267
Gangwon Wind Power Co., Ltd(*3)		7,093	1,170		(851	)	7,412
Hyundai Green Power Co. Ltd.		37,218	(892	)	(73	)	36,253
Cheongna Energy Co., Ltd.(*3)		4,823	(320	)	12,443		16,946
PT. Cirebon Electric Power		54,096	—		(16,753	)	37,343
Eco Biomass Energy Sdn. Bhd.		—	—		6,529		6,529
Denison Mines Corporation(*3)		—	(17,788	)	81,964		64,176
Rabigh Electricity Company(*2)		—	(44,889	)	44,889		—
KNOC Nigerian East Oil Co., Ltd.		—	(3,506	)	3,506		—
KNOC Nigerian West Oil Co., Ltd.		—	(3,163	)	3,163		—
SET Holdings		—	—		229,255		229,255
Areva NC Expansion		—	—		285,465		285,465

	(Won)	2,507,266	22,473		734,127		3,263,866

F-39

(*1)

Others are composed of acquisition (disposal) of investment, dividends and the changes in values in equity due to capital surplus and gain (loss) on investment securities in accumulated other comprehensive income.

(*2)

As of December 31, 2009, unrealized profits of (Won)44,889 million arisen from transactions with the Company were eliminated.

(*3)

Details of changes in the differences between the acquisition cost and net asset value of equity method investees for the year ended December 31, 2009 is as follows:


	Won (millions)
	Beginning balance		Acquisition	Amortization (Reversal)		Ending balance
Gangwon Wind Power Co., Ltd	(Won)	98	—	(49	)	49
Cheongna Energy Co., Ltd.		—	84	(8	)	76
Denison Mines Corporation		—	89,453	(1,150	)	88,303

Total	(Won)	98	89,537	(1,207	)	88,428

The Company’s portion on the negative accumulated other comprehensive income amounts were (Won)2,480 million and (Won)27,510 million, and positive accumulated other comprehensive income amounts of (Won)332,453 million and (Won)465,451 million as of December 31, 2008 and 2009, respectively. Such amounts have been accounted for as unrealized gains and losses on equity securities of affiliates within shareholders’ equity as accumulated other comprehensive income of the Company.

(e)

Summarized financial information regarding affiliated companies accounted for using the equity method as of and for the years ended December 31, 2008 and 2009 is shown in the following table (Won in million). There are no significant differences between carrying value of investment and share of underlying net equity except for Denison Mines Corporation explained in Note 6(d).


	2008
Affiliated Companies	Total Assets		Total Liabilities	Sales	Net Income(Loss)
Korea Gas Corporation	(Won)	20,807,767	16,624,885	23,324,594	435,153
Korea District Heating Co.		2,382,031	1,666,926	1,189,916	9,072
LG Powercom Corporation		1,937,073	944,983	1,273,769	5,991
Korea Electric Power Industrial Development Co., Ltd.		128,479	69,873	261,090	12,833
YTN		187,383	47,424	104,441	8,731
Gansu Datang Yumen Wind Power Co., Ltd.		148,453	112,812	5,777	(688	)
SPC Power Corporation		88,946	9,373	24,249	10,826
Datang Chifeng Renewable Co., Ltd.		785,065	521,100	47,090	15,188
Gemeng International Energy Group Co., Ltd.		1,741,968	1,051	12,524	(101,016	)
KEPCO Energy Resource Nigeria Limited		57,463	28,641	3,663	74
Gangwon Wind Power Co.		155,491	108,867	16,099	4,358
Hyundai Green Power Co., Ltd.		163,032	34,695	—	(1,283	)
Cheongna Energy Co., Ltd.		88,346	70,485	1,021	1,449
PT. Cirebon Electric Power		68,747	2,961	—	(726	)

F-40


	2009
Affiliated Companies	Total Assets		Total Liabilities	Sales	Net Income(Loss)
Korea Gas Corporation	(Won)	22,933,499	17,794,943	19,391,829	215,404
Korea District Heating Co.		2,902,148	2,032,962	1,248,195	149,179
LG Powercom Corporation		2,043,231	1,137,621	1,468,313	25,853
Korea Electric Power Industrial Development Co., Ltd.		124,685	67,736	125,303	4,718
YTN		329,654	165,974	105,432	26,038
Gansu Datang Yumen Wind Power Co., Ltd.		135,760	90,256	11,583	189
SPC Power Corporation		87,873	13,369	27,507	9,479
Datang Chifeng Renewable Co., Ltd.		877,027	604,504	97,018	28,293
Gemeng International Energy Group Co., Ltd.		1,611,481	4,714	—	(14,013	)
KEPCO Energy Resource Nigeria Limited.		33,990	9,767	—	(878	)
Gangwon Wind Power Co.		148,096	99,025	28,603	8,060
Hyundai Green Power Co., Ltd.		376,924	251,915	—	(3,076	)
Cheongna Energy Co., Ltd.		223,220	166,985	3,024	(1,011	)
PT. Cirebon Electric Power		433,702	300,686	—	(3,879	)
Eco Biomass Energy Sdn. Bhd.		10,919	—	—	—
Denison Mines Corporation		1,064,202	171,097	61,507	(141,534	)
Rabigh Electricity Company		790,210	795,382	—	—
KNOC Nigerian East Oil Co., Ltd.		256,243	283,919	—	—
KNOC Nigerian West Oil Co., Ltd.		153,075	177,994	—	—
SET Holdings		2,351,637	11,795	—	—
Areva NC Expansion		102,709	7	—	—

(7) Loans to Employees

The Company has provided housing and tuition loans to employees as follows as of December 31, 2008 and 2009:


	Won (millions)
	2008		2009
Current portion of long-term loans	(Won)	32,899	42,175
Long-term loans		426,943	441,808

	(Won)	459,842	483,983

(8) Other Non-current Assets

Other non-current assets as of December 31, 2008 and 2009 are as follows:


	Won (millions)
	2008		2009
Leasehold deposits	(Won)	260,247	277,327
Assets received from KEDO (Note 33(d))		93,625	93,519
Loans for oversea business		21,192	372,972
Others		129,344	147,042

	(Won)	504,408	890,860

F-41

(9) Restricted Cash and Cash Equivalents and Financial Instruments

There are certain amounts included in cash and cash equivalents and financial instruments, which are restricted in use for certain business purposes as of December 31, 2008 and 2009 as follows:


	Won (millions)
	2008		2009
Cash and cash equivalents	(Won)	88,835	77,469
Short-term financial instruments		50,000	65,858
Long-term financial instruments		5	5

	(Won)	138,840	143,332

(10) Inventories

Inventories as of December 31, 2008 and 2009 are summarized as follows:


	Won (millions)
	2008		2009
Raw materials(*)	(Won)	2,336,236	2,346,478
Supplies		1,264,450	1,066,922
Other		671,412	481,478

	(Won)	4,272,098	3,894,878

(*)

As of December 31, 2008 and 2009 the Company has nuclear fuel in process amounting to (Won)1,211,558 million and (Won)1,590,958 million, respectively.

(11) Other Current Assets

Other current assets as of December 31, 2008 and 2009 are summarized as follows:


	Won (millions)
	2008		2009
Current portion of long-term loans	(Won)	33,707	45,507
Accrued income		21,946	48,090
Advance payments		31,160	43,510
Prepaid expenses		35,772	35,497
Others		65,593	74,910

	(Won)	188,178	247,514

(12) Shareholders’ Equity

(a)	Capital Stock

The Company’s authorized share capital is 1,200,000,000 shares, which consists of common stock and non-voting preferred stock, par value (Won)5,000 per share. Under the Company’s articles of incorporation, the Company is authorized to issue up to 150,000,000 shares of non-voting preferred stock. No shares of preferred stock have ever been issued. As of December 31, 2009, 641,567,712 shares of common stock have been issued.

F-42

(b)	Capital Surplus

Capital surplus as of December 31, 2008 and 2009 are as follows:


	Won (millions)
	2008		2009
Paid-in capital in excess of par value	(Won)	835,140	835,140
Reserves for asset revaluation		12,552,973	12,552,973
Tax adjustment related to asset revaluation		742,125	742,125
Other capital surplus		428,293	538,325

	(Won)	14,558,531	14,668,563

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 can be used for capital injection or offset against any accumulated deficit by resolution of the shareholders.

(13) Capital Adjustments

Capital adjustments of December 31, 2008 and 2009 are as follows:


	Won (millions)
	2008		2009
Treasury stock(*)	(Won)	741,489	741,489
Other capital adjustments		—	98

	(Won)	741,489	741,587

(*)

The Company has 18,929,955 shares of treasury stock amounting to (Won)741,489 million as of December 31, 2008 and 2009 for the purpose of stock price stabilization.

(14) Accumulated Other Comprehensive Income

Accumulated other comprehensive income, net of tax as of December 31, 2008 and 2009 are as follows:


	Won (millions)
	2008			2009
Gain (loss) on valuation of available-for-sale securities, net	(Won)	(3,759	)	14,327
Equity in other comprehensive income of affiliates		329,973		437,941
Overseas operation translation credit		(5,598	)	(36,901	)
Gain on valuation of cash flow hedges (Note 25)		114,448		71,844

	(Won)	435,064		487,211

F-43

(15) Appropriated Retained Earnings

Appropriated retained earnings as of December 31, 2008 and 2009 are summarized as follows:


	Won (millions)
	2008		2009
Involuntary:
Legal reserve(*1)	(Won)	1,603,919	1,603,919
Voluntary:
Reserve for investment on social overhead capital(*2)		5,277,449	5,277,449
Reserve for research and human resources Development(*2)		330,000	330,000
Reserve for business rationalization(*3)		31,900	—
Reserve for business expansion(*4)		19,008,932	16,088,363
Reserve for dividend equalization(*5)		210,000	210,000

		24,858,281	21,905,812

	(Won)	26,462,200	23,509,731

(*1)

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 Company’s common stock. The legal reserve is not available for cash dividends; however, this reserve may be credited to paid-in capital or offset against accumulated deficit by the resolution of the shareholders.

(*2)

The reserve for the investment on social overhead capital and the reserve for research and human development are appropriated by the Company to avail itself of qualified tax credits to reduce corporate tax liabilities. These reserves are not available for cash dividends for a certain period as defined in the Tax Incentive Control Law.

(*3)

Until December 10, 2002 under the Special Tax Treatment Control Law (the “Law”), investment tax credit was allowed for certain investments. The Company was, however, required to appropriate from retained earnings the amount of tax benefits received and transfer such amount into a reserve for business rationalization. Effective December 11, 2002, the Company is no longer required to establish a reserve for business rationalization for tax benefits received for certain investments. However, existing reserves restricted for cash dividends and can be credited only to paid-in capital or offset against any accumulated deficit by resolution of the shareholders.

(*4)

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 reserve is required.

(*5)

The reserve for dividend equalization, which is considered a voluntary reserve, is appropriated by the Company to reduce fluctuation of dividend rate.

F-44

(16) Dividends

Details of dividends for the years ended December 31, 2007, 2008 and 2009 are as follows:


	Won (millions, except per share amount)
	Outstanding shares of common stock	Dividend rate		Dividend per share		Total dividend
2007:
Outstanding shares of common stock	622,619,085	15	%	(Won)	750	(Won)	466,964
Treasury shares	18,948,627	—			—		—

	641,567,712					(Won)	466,964

2008:
Outstanding shares of common stock	622,637,757	—	%	(Won)	—	(Won)	—
Treasury shares	18,929,955	—			—		—

	641,567,712					(Won)	—

2009:
Outstanding shares of common stock	622,637,757	—	%	(Won)	—	(Won)	—
Treasury shares	18,929,955	—			—		—

	641,567,712					(Won)	—

(17) Short-term Borrowings

Short-term borrowings as of December 31, 2008 and 2009 are as follows:

(a)	Local Currency Short-term Borrowings


Lender	Type	Annual interest rate %	Won (millions)
Lender	Type	Annual interest rate %	2008		2009
Eugene Investment & Securities	General	3.00	(Won)	71,100	10,000
Woori Bank	General	2.81		812,189	10,000
Korea Exchange Bank	General	3.00		85,000	50,000
Shinhan Bank	General	2.83		50,000	130,000
Samsung Securities	General	CD - 4bp,+72bp		40,000	—
Nonghyup	General	MOR+1.67		7,000	7,000
SK Securities	General	3.00		50,000	40,000
BOA	General	CD + 7bp		24,000	—
A.N.Z_KOREA	General	8.39		20,000	—
Kumho investment bank	General	3.00		—	30,000
Shinhan Investment Corp.	General	3.00		—	30,000

			(Won)	1,159,289	307,000

F-45

(b)	Foreign Currency Short-term Borrowings


Lender	Type	Annual interest rate %	Won (millions)
Lender	Type	Annual interest rate %	2008		2009
China Construction Bank	General	1.75~1.83	(Won)	15,784	22,714
Woori Bank	General	3M Libor+1.40		22,747	7,049
Korea Exchange Bank	General	3M Libor+1.45		31,706	18,154
Korea Development Bank	Commercial paper	0.61~4.70		35,229	—
Kookmin Bank	Commercial paper	3.82~5.08		49,374	—
HSBC Korea	Commercial paper	4.10		10,223	—
Deutsche Bank Korea	General	2.26		4,878
BNP Paribas	General	1.25		—	50,199
ABN-AMRO	General	1.3~2.2		—	68,250
Shinhan Bank	General	1.70		—	12,063
EXIM Bank	General	3M Libor rate+0.35		—	81,658
A.N.Z_KOREA	General	2.13		—	77,948
Other	Usance & etc.	3M Libor+1.40		28,480	39,445

			(Won)	198,421	377,480

(*)

As of December 31, 2009, 1M Libor for US$ is 0.23% and 3M Libor for Yen and US$ are 0.28% and 0.25%, respectively.

(18) Long-term Debt

Long-term borrowings as of December 31, 2008 and 2009 are as follows:

(a)	Local Currency Long-term Borrowings


Lender	Type	Maturity	Annual interest rate %	Won (millions)
Lender	Type	Maturity	Annual interest rate %	2008			2009
Korea Development Bank	Facility	2010~2044	0.50~6.87	(Won)	3,351,893		1,937,702
Industrial Bank of Korea	Development of power resource	2012	4.00		99,666		57,866
Ministry of Knowledge Economy	Development of power resource	2010	4.00		20,000		10,000
National Agricultural Cooperative Federation	Development of power resource	2011	3.08~4.00		114,375		66,875
Korea Exchange Bank	Energy rationalization	2010~2021	2.64~6.13		1,022,682		1,199,332
Others	General	2010~2042	1.75~4.00		1,015,375		562,638

					5,623,991		3,834,413
Less: Current portion					(2,201,430	)	(1,809,612	)

				(Won)	3,422,561		2,024,801

F-46

(b)	Foreign Currency Long-term Borrowings


Lender	Type	Maturity	Annual interest rate %	Won (millions)
Lender	Type	Maturity	Annual interest rate %	2008			2009
Japan Bank for international cooperation	Facility	2014	(a) 8.28% p.a. fixed and (b) 6M LIBOR +1.20 bps	(Won)	138,320		105,611
EXIM Bank	Project loans	2010~2014	5.00~7.27		225,252		110,529
Woori Bank	Project loans	2018	LIBOR+30bp		125,750		103,024
USEXIM	Facility	2014	4.48		73,227		56,120
Others	Facility	2013	3M Libor rate +0.70~3.05		16,885		149,791

					579,434		525,075
Less: Current portion					(52,390	)	(193,548	)

				(Won)	527,044		331,527

(c)	Debentures


			Annual interest rate %	Won (millions)
		Maturity	Annual interest rate %	2008			2009
Local currency debentures:
Electricity bonds		2010~2013	3.61~7.19	(Won)	10,050,000		15,500,000
Corporate bonds		2010~2011	3.96~7.55		4,030,010		5,840,010

					14,080,010		21,340,010

Foreign currency debentures:
FY-93		2013	7.75		440,125		408,660
FY-96		2010~2096	6.00~8.28		320,627		296,313
FY-97		2027	6.75~7.00		395,758		367,463
FY-03		2010~2013	5.12		188,626		175,140
FY-04		2010~2034	4.88~5.75		880,240		992,460
FY-05		2010~2012	3.13~5.25		821,306		768,850
FY-06		2016	5.24~5.50		817,376		758,940
FY-07		2010~2014	1.22~5.75		969,206		707,179
FY-08		2011~2018	3M USD Libor+1.5, 3M JPY Libor+1.8, 4.06~5.38		1,730,060		1,596,007
FY-09		2010~2014	3M EuroYenTibor+2.5, 5.5~6.25		—		1,877,682

					6,563,324		7,948,694

					20,643,334		29,288,704
Less:	Current portion				(2,190,963	)	(3,775,653	)
	Discount				(49,747	)	(76,358	)

				(Won)	18,402,624		25,436,693

F-47

(d)	Exchangeable Bonds


	Annual interest rate %	Won (millions)
Description	Annual interest rate %	2008			2009
Overseas exchangeable bonds(*)	0.00	(Won)	485,682		25,638
Overseas exchangeable bonds(*)	0.00		555,114		24,736

			1,040,796		50,374
Less: Current portion			—		—
Plus: Premium on debentures issued			—		—
Less: Discount on debentures issued			(49,729	)	(1,500	)
Conversion right adjustment			(39,123	)	(1,269	)

Exchangeable bonds, net		(Won)	951,944		47,605

(*)

On November 21, 2006, the Company issued overseas exchangeable bonds of JPY61,345,128,000 and EUR463,320,780 at a discounted value of JPY60,810,000,000 and EUR401,700,000, respectively. The main terms of the bonds are as follows:

•

Maturity date: November 23, 2011

•

Amount to be paid at maturity: JPY 61,345,128,000 and EUR 463,320,780

•

Exchange period: From January 4, 2007 to 10th day prior to its maturity.

•

Shares to be exchanged: Common stock of the Company or its equivalent DR

•

Exchange price: (Won)51,000 per share

•

Put option: Bondholders have a put option that they can exercise for JPY 61,132,293,000 and EUR 437,612,000 on November 23, 2009. The Notes will be redeemable at the option of the holder of notes, by depositing a demand of redemption at the specified office of a paying agent, not less than 30 or more than 60 days prior to November 23, 2009.

•

Call option: The Company has a call option that it can exercise on or at any time after November 23, 2009. Notes are callable if the closing price per common share on the Korea Stock Exchange or the ADSs on the New York Stock Exchange in each case, for each of any 20 trading days in a 30 consecutive trading period ending not more than 5 days prior to the date on which notice such redemption is given, is at least 120% of the conversion price or of the conversion price per ADS.

In accordance with Article 17—“Issuance of Convertible Bonds” and Article 11—“Calculation of Dividend for New Shares” of the Articles of Incorporation of the Company, distribution of dividends on new shares resulting from conversion of exchangeable bonds is deemed to have been issued at the beginning of the fiscal year.

On November 23, 2009, bondholders exercised a put option, 94.72% of JPY60,810,000 thousand and 95.54% of EUR401,700 thousand. The Company recorded a loss on early repayment of exchangeable bond and a loss on foreign currency transaction amounting to (Won)43,787 million and (Won)496,806 million, respectively.

F-48

(e)	Foreign currency debts, by currency, as of December 31, 2008 and 2009 are as follows:


	Won (millions), US$, JPY, PHP and EUR (thousands)
	2008				2009
	Foreign currency		Won equivalent		Foreign currency		Won equivalent
Short-term borrowings	US$	157,790	(Won)	198,421	US$	244,840	(Won)	285,875
	JPY	—		—	JPY	3,616,476		91,605

				198,421				377,480

Long-term borrowings	US$	390,826		491,464	US$	321,414		375,283
	PHP	3,315,884		87,970	PHP	5,913,600		149,792

				579,434				525,075

Debentures	US$	3,879,688		4,878,707	US$	5,378,496		6,279,932
	JPY	89,000,000		1,240,562	JPY	99,000,000		1,250,192
	EUR	250,000		444,055	EUR	250,000		418,570

				6,563,324				7,948,694

Exchangeable bond	JPY	61,345,128		485,682	JPY	3,238,248		25,638
	EUR	463,321		555,114	EUR	20,646		24,736

				1,040,796				50,374

			(Won)	8,381,975			(Won)	8,901,623

(f)	Aggregate maturities of the Company’s long-term debt as of December 31, 2009 are as follows:


	Won (millions)
Year ended December 31	Local currency borrowings		Foreign currency borrowings	Domestic debentures	Foreign debentures	Exchangeable bonds	Total
2010	(Won)	1,809,612	193,548	2,650,000	1,127,048	—	5,780,208
2011		1,410,721	68,488	3,420,000	1,237,391	50,374	6,186,974
2012		386,735	68,488	4,050,010	351,320	—	4,856,553
2013		62,794	68,488	3,680,000	2,452,822	—	6,264,104
2014		62,193	39,544	3,520,000	759,585	—	4,381,322
Thereafter		102,358	86,519	4,020,000	2,020,528	—	6,229,405

	(Won)	3,834,413	525,075	21,340,010	7,948,694	50,374	33,698,566

(19) Long-term debt under conditional agreements

Borrowings under conditional agreements as of December 31, 2008 and 2009 are as follows:


				Won (In millions)
Lender	Type	Maturity	Annual interest rate (%)	2008		2009
Korea Resources Corporation(*1)	Overseas business	2022~2024	3 year treasury notes—2.25	(Won)	3,592	7,039
Korea National Oil Corporation(*2)	Oil development business	2021~2023	3 year treasury notes—1.25		11,046	8,278

				(Won)	14,638	15,317

F-49

(*1)

The Company has borrowings under conditional agreements from Korea Resources Corporation for overseas resources development projects related to uranium research in Christ and Waterberry, Canada.

(*2)

The Company has borrowings under conditional agreements from Korea National Oil Corporation for overseas resources development projects related to deepwater OPL321 and OPL323 exploration in Nigeria.

In case the projects mentioned above fail, the Company is not obliged to repay the principal and interest. The Company shall make additional payments other than the principle and interest after commercial production begins. The long-term borrowings of prior period’s financial statement are reclassified to the borrowings under conditional agreement to conform to the current period’s presentation. The reclassification does not affect the income before tax or net assets.

(20) Assets and Liabilities Denominated in Foreign Currencies

Significant assets and liabilities of the Company (excluding foreign subsidiaries) denominated in foreign currencies other than those mentioned in Note 18 as of December 31, 2008 and 2009 are as follows:


	Won (millions), US$, JPY and EUR (thousands)
	2008				2009
	Foreign currency (thousands)(*)		Won equivalent (millions)		Foreign currency (thousands)(*)		Won equivalent (millions)
Assets:
Cash and cash equivalents	US$	17,789	(Won)	22,639	US$	162,469	(Won)	189,699
	CNY	62		11	CNY	—		—
	PHP	5,013		133	PHP	2,575		65
	INR	163,304		4,280	INR	111,761		2,803
	AUD	3,013		2,621	AUD	4,129		4,315
	EUR	209		383	EUR	1,798		3,011
	NGN	1,985		18	NGN	—		—
	PKR	—		—	PKR	14,236		199
	MGA	—		—	MGA	20,035		12
Short-term financial instruments	US$	500		629	US$	—		—
	INR	15,000		393	INR	20,664		518
Short-term loan	US$	—		—	US$	2,250		2,627
Trade receivables	US$	10,479		13,177	US$	8,138		9,502
	EUR	125		221	EUR	1,899		3,179
	INR	49,640		1,301	INR	137,328		3,444
	PKR	—		—	PKR	14,974		209
	PHP	1,216		32	PHP	—		—
Other accounts receivable	US$	7,483		9,410	US$	4,853		5,666
	INR	—		—	INR	48		1
	EUR	—		—	EUR	84		141
Accrued income	AUD	—		—	AUD	41		43
	INR	141		4	INR	291		7
Advance payments	US$	5,515		6,957	US$	285		333
Other current assets	PKR	—		—	PKR	125		2
	PHP	6,555		174	PHP	1,506		38
	INR	6,065		159	INR	7,131		179
	AUD	97		84	AUD	49		51
Long-term other accounts receivables	US$	—		—	US$	61		71
Other non-current assets	US$	564		709	US$	449		524
	EUR	30		54	EUR	15		25
	JPY	13,428		187	JPY	520		7
	CAD	2		2	CAD	—		—
	CNY	40		7	CNY	14		2

			(Won)	63,585			(Won)	226,676

F-50


	Won (millions), US$, JPY and EUR (thousands)
	2008				2009
	Foreign currency (thousands)(*)		Won equivalent (millions)		Foreign currency (thousands)(*)		Won equivalent (millions)
Liabilities:
Trade payables	US$	488,279	(Won)	614,010	US$	443,794	(Won)	518,173
	EUR	314		557	EUR	517		866
	JPY	33,062		461	JPY	—		—
	CNY	1,779		328	CNY	4,111		703
	PHP	1,342		36	PHP	—		—
	INR	4,680		123	INR	592		15
	AUD	630		548	AUD	—		—
	GBP	1		1	GBP	84		157
	CAD	—		—	CAD	166		184
	SEK	—		—	SEK	270		44
Other accounts payable	US$	32,966		42,582	US$	799		933
	EUR	1,459		2,657	EUR	664		1,112
	JPY	492		6,862	JPY	10,606,304		133,938
	CAD	52		54	CAD	327		362
	PHP	976		26	PHP	—		—
	INR	7,410		194	INR	13,144		330
	CHF	—		—	CHF	101		114
	GBP	29		53	GBP	22		42
	SEK	142		23	SEK	—		—
	PKR	—		—	PKR	4,078		57
Withholdings	US$	99		124	US$	80		93
	EUR	—		—	EUR	6		10
	CAD	179		186	CAD	36		40
Other current liabilities	US$	458		576	US$	421		492
	INR	130		3	INR	25,516		640
	AUD	10,593		278	AUD	100		105
	PHP	183		159	PHP	—		—

			(Won)	669,841			(Won)	658,410

(*)

Foreign currencies other than US$, JPY and EUR are converted into US$.

(21) Retirement and Severance Benefits

Changes in retirement and severance benefits for the years ended December 31, 2008 and 2009 are summarized as follows:


	Won (millions)
	2008			2009

Estimated accrual at beginning of year	(Won)	1,776,614		2,190,771
Provision for retirement and severance benefits		483,909		238,001
Payments		(78,204	)	(173,430	)
Others		8,452		7,487

Estimated accrual at end of year		2,190,771		2,262,829
Transfer to National Pension Fund		(91	)	(88	)
Deposit for severance benefit insurance		(455,223	)	(490,061	)

Net balance at end of year	(Won)	1,735,457		1,772,680

F-51

As of December 31, 2009, the future retirement and severance benefits which are expected to be paid to the Company’s employees upon their normal retirement age are as follows:


	Korean Won (in millions)		Translation into U.S. Dollars (Note 2) (in thousands)
2010	(Won)	79,624	$	68,426
2011		79,844		68,615
2012		96,843		83,223
2013		122,478		105,253
2014		125,027		107,444
2015 - 2019		952,713		818,728

The above amounts were determined based on the employees’ current salary rates as of end of the reporting period and the number of service years that will be accumulated upon their retirement date. The amounts do not include amounts that might be paid to employees that will cease working with the Company before their normal retirement age.

(22) Liability for Decommissioning Costs

Under the Korean Electricity Business Act (EBA) Article 94, the Company is required to record a liability for the dismantling of nuclear power plants and disposal of spent fuel and low & intermediate radioactive wastes. In addition, under the Korean Atomic Energy Act (AEA), an entity which constructs and operates a nuclear power reactor and related facilities must obtain permission from the Ministry of Education, Science and Technology (the “MEST”, formerly the Ministry of Science and Technology).

Effective January 1, 2004, the Company early adopted SKAS No. 17 and retrospectively adjusted the liability for decommissioning costs to the estimated fair value using discounted cash flows to settle the asset retirement obligations of dismantling and disposal of the nuclear power plants, spent fuel and low & intermediate radioactive waste.

In 2008, Radio-active Waste Management Act (“RWMA”) was enacted by the Korean Government, which became effective as of January 1, 2009, in an effort to centralize the disposal of spent fuel and low & intermediate radioactive waste and related management process.

The enactment of RWMA did not change the Company’s responsibility for dismantling of nuclear power plants. But performing the disposal of spent fuel and low & intermediate radioactive waste has been transferred to newly established Korea Radio-active Waste Management Corporation (“KRMC”), a government-owned entity.

As of December 31, 2008 and 2009, the Company has recorded a liability of (Won)5,470,764 million and (Won)5,695,224 million, respectively, for dismantling and decontaminating existing nuclear power plants; consisting of dismantling costs of nuclear plants of (Won)4,311,052 million and (Won)4,498,716 million as of December 31, 2008 and 2009 and storage costs of spent fuel and low & intermediate radioactive waste of (Won)1,159,712 million and (Won)1,196,508 million as of December 31, 2008 and 2009, respectively. Accretion expense consists of period-to-period changes in the liability for decommissioning costs resulting from passage of time and changes in estimate related to either the timing or the amount of the initial estimate of undiscounted cash flows. This cost is included in cost of electric power in the accompanying statements of operations.

F-52

Changes in the liability for decommissioning costs for the years ended December 31, 2008 and 2009 are summarized as follows:


	Won (millions)
	2008			2009
Balance at beginning of year	(Won)	8,206,267		5,470,764
Liabilities incurred		470,376		255,360
Accretion expense for year		379,281		223,387
Payments for year		(8,791	)	(254,287	)
Transfer to long-term other account payable(*)		(3,576,369	)	—

Balance at end of year	(Won)	5,470,764		5,695,224

(*)

For spent fuel discharged prior to December 31, 2008, the Company has accrued the liability of (Won)3,576,369 million. Under newly enacted RWMA, the Company is required to pay the disposal costs of spent fuel to KRMC over 15 years, after a 5 year grace period along with the interest at 4.36%. As a result, the liability of (Won)3,576,369 million was reclassified to the long-term other accounts payable.

(23) Provision for Decontamination of Transformer

Under the regulation of Persistent Organic Pollutants Management Act, enacted in 2007, the Company is required to remove polychlorinated biphenyls (PCBs), a toxin, from the insulating oil of its transformers by 2015. As a result of the enactments, the Company is required to inspect the PCBs contents of transformers and dispose of PCBs in excess of safety standards under the legally settled procedures.

As of December 31, 2008 and 2009, the Company has recorded a liability of (Won)249,947 million and (Won)231,470 million for inspection and disposal cost related to decontamination of existing transformers, respectively. Actual cost of decontaminating are expected to vary from those because of changes in assumed dates of regulatory requirement, technology, and costs of labor, material and equipment.

(24) Other Current Liabilities

Other current liabilities as of December 31, 2008 and 2009 are as follows:


	Won (millions)
	2008		2009
Advance received	(Won)	45,642	61,735
Withholdings		209,732	207,702
Unearned revenue		73,244	87,608
Dividends payable		9,318	17,923
Others		434,396	510,876

	(Won)	772,332	885,844

F-53

(25) Derivative Instruments Transactions

The Company has entered into the various swap contracts to hedge risks involving foreign currency and interest rate of foreign currency debts.

(a)

Currency swap contracts as of December 31, 2009 are as follows:


Counterparty	Contract	Settlement	Contract amounts in millions				Contract interest rate per annum
Counterparty	Year	Year	Pay		Receive		Pay (%)	Receive (%)
ABN AMRO	2008	2011	KRW	29,190	US$	30	4.15	3M Libor+1.3
ABN AMRO	2008	2011	KRW	28,050	JPY	3,000	4.50	Libor + 1.3
ABN AMRO	2008	2013	KRW	149,040	US$	150	5.03	5.38
ANZ	2008	2011	KRW	52,025	US$	50	5.17	3M USD Libor + 1.80
ANZ	2008	2011	KRW	18,700	JPY	2,000	4.50	Libor + 1.3
Barclays	2008	2013	KRW	187,020	US$	200	7.50	7.75
Barclays	2006	2016	KRW	94,735	US$	100	5.26	6.00
Barclays	2008	2013	KRW	56,652	US$	60	4.96	5.38
Barclays	2006	2016	KRW	71,888	US$	75	4.81	5.50
Barclays	2004	2011	KRW	138,252	US$	120	4.85	4.88
Barclays	2004	2014	KRW	172,875	US$	150	5.10	5.75
BNP Paribas	2008	2011	KRW	52,375	US$	50	5.92	3M USD Libor + 1.80
BNP Paribas	2008	2011	KRW	48,650	US$	50	4.15	3M Libor+1.3
BNP Paribas	2004	2011	KRW	17,282	US$	15	4.85	4.88
BNP Paribas	2008	2011	KRW	46,750	JPY	5,000	4.50	Libor + 1.3
BTMU	2007	2010	KRW	109,060	JPY	14,000	5.29	3M JPY EURO YEN Tibor + 0.5
BTMU	2010	2012	KRW	138,018	JPY	10,000	4.10	3M EURO YENT+0.5
Calyon	2008	2011	KRW	52,375	US$	50	5.92	3M USD Libor + 1.80

Citibank	2006	2016	KRW	94,735	US$	100	5.24	6.00
Citigroup	2008	2013	KRW	113,304	US$	120	4.96	5.38
Credit Suisse	2008	2013	KRW	140,265	US$	150	7.39	7.75
Credit Suisse	2004	2011	KRW	86,400	US$	75	Within 3 years: 4.875 After 3 years: [4.875-(10.9- JPY/KRW Spot rate)]	4.95
Credit Suisse	2006	2016	KRW	98,100	US$	100	5.48	5.50
Credit Suisse	2006	2016	KRW	94,735	US$	100	5.26	6.00
Credit Suisse	2009	2011	KRW	197,475	US$	150	5.00	4.75
Credit Suisse	2004	2011	KRW	115,210	US$	100	4.85	4.88
DBS	2008	2011	KRW	51,730	US$	50	5.78	3M USD Libor + 1.70
DBS	2008	2011	KRW	52,375	US$	50	6.01	3M USD Libor + 1.80
Deutsche Bank	2009	2014	KRW	126,610	USD	100	5.39	6.25
Deutsche Bank	2008	2010	KRW	172,959	EUR	125	2.46	3.13

F-54


Counterparty	Contract Year	Settlement Year	Contract amounts in millions				Contract interest rate per annum
Counterparty	Contract Year	Settlement Year	Pay		Receive		Pay (%)	Receive (%)
Deutsche Bank	2006	2016	KRW	71,888	US$	75	4.81	5.50
Deutsche Bank	2008	2013	KRW	149,040	US$	150	5.03	5.38
Goldman Sachs	2008	2013	KRW	113,304	US$	120	4.96	5.38
ING	2008	2011	KRW	50,495	US$	50	6.24	6M USD Libor + 1.50
JPMorgan Chase Bank	2004	2011	KRW	86,400	US$	75	Within 3 years: 4.875 After 3 years: [4.875-(10.9- JPY/KRW Spot rate)]	4.95
Merrill Lynch	2008	2010	KRW	86,479	EUR	63	2.46	3.13
Mizuho	2008	2011	KRW	28,860	JPY	3,000	5.82	3M JPY Libor + 1.70
Morgan Stanley	2009	2014	KRW	126,610	USD	100	5.32	6.25
Nomura	2009	2014	KRW	126,610	USD	100	5.35	6.25
Nomura	2009	2014	KRW	126,610	USD	100	5.33	6.25
SMBC	2007	2010	KRW	116,620	JPY	14,000	4.56	1.38
TOKYO-MITSUBISHI UFJ BANK	2007	2010	KRW	112,600	JPY	14,000	5.09	JPY Euro Yen 3m Timor+0.5
UBS	2008	2010	KRW	86,479	EUR	62,500	2.46	3.13
UBS AG	2006	2016	KRW	98,100	US$	100	5.48	5.50
Tokyo-Mitsubishi UFJ Bank	2007	2010	KRW	115,783	JPY	14,000	4.72	1.65
Woori Investment & Securities	2008	2011	KRW	10,346	US$	10	5.78	3M USD Libor + 1.70
Woori Investment & Securities	2008	2011	KRW	19,460	US$	20	4.15	3M Libor+1.3
Hana Bank	2004	2011	KRW	17,282	US$	15	4.85	4.88

(b)

Interest rate swap contracts as of December 31, 2009 are as follows:


	Notional amount in millions		Contract interest rate per annum
Counterparty	Notional amount in millions		Pay (%)	Receive (%)	Term
Korea Exchange Bank	KRW	50,000	5.19	3M CD+0.22%	2007-2010
Korea Exchange Bank	KRW	50,000	5.42	3M CD+0.21%	2007-2010
Korea Exchange Bank	KRW	100,000	5.42	3M CD+0.22%	2007-2010
Korea Exchange Bank	KRW	100,000	5.54	3M CD+0.27%	2007-2010
Korea Exchange Bank	KRW	100,000	5.30	3M CD+0.35%	2008-2011
Korea Exchange Bank	KRW	100,000	5.17	3M CD+0.38%	2008-2011
Korea Exchange Bank	KRW	200,000	4.69	4.88%	2009-2011
Korea Exchange Bank	KRW	100,000	CD 3M+0.54	3M CD+0.66%	2009-2012
Korea Development Bank	KRW	100,000	6.32	3M CD+0.66%	2008-2011
JPMorgan Chase Bank	KRW	172,800	4.65	Within 2 years: 4.875 After 2 years: [4.875-(10.9-JPY/KRW Spot rate)]	2005-2011
JPMorgan Chase Bank	KRW	100,000	6.13	CD+0.54%	2008-2011
ABN AMRO	KRW	100,000	4.79	CD+0.55%	2009-2012

F-55

(c)

Currency forward contracts as of December 31, 2009 are as follows:


	Contract Date	Settlement Date	Contract amounts				Contract exchange rate
Counterparty	Contract Date	Settlement Date	Receive (millions)		Pay (millions)		Contract exchange rate
Korea Exchange Bank	2009.12.30	2010.01.15	USD	6,000	KRW	6,989	1,164.90
ABN AMRO	2009.12.14	2010.01.15	USD	917	KRW	1,063	1,158.95
ABN AMRO	2009.12.23	2010.01.28	USD	5,000	KRW	5,922	1,184,45
ABN AMRO	2009.12.28	2010.01.29	USD	2,000	KRW	2,342	1,170.80
ABN AMRO	2009.12.30	2010.01.28	USD	3,000	KRW	3,506	1,168.70
BNP Paribas	2009.12.22	2010.01.25	USD	3,000	KRW	3,553	1,184.45
BNP Paribas	2009.12.30	2010.01.05	USD	15,000	KRW	17,447	1,163.16
Deagu Bank	2009.12.17	2010.01.21	USD	1,500	KRW	1,762	1,170.80
Barclays	2009.12.18	2010.01.22	USD	5,000	KRW	5,896	1,179.20
Barclays	2009.12.30	2010.01.27	USD	10,000	KRW	11,686	1,168.60
China Construction Bank	2009.12.10	2010.01.14	KRW	2,329	USD	2,000	1,164.35
China Construction Bank	2009.12.11	2010.01.14	USD	1,675	KRW	1,950	1,164.35
China Construction Bank	2009.12.11	2010.01.14	USD	2	KRW	3	1,164.35
China Construction Bank	2009.12.11	2010.01.14	USD	19	KRW	22	1,164.35
China Construction Bank	2009.12.11	2010.01.14	USD	4	KRW	5	1,164.35
China Construction Bank	2009.12.18	2010.01.14	USD	91	KRW	106	1,164.35
China Construction Bank	2009.12.22	2010.01.14	USD	209	KRW	243	1,164.35

(d)

Fair value of the financial derivatives as of December 31, 2008 and 2009 are as follows:


	Won (millions)
	Asset derivatives			Liability derivatives
	2008		2009	2008	2009
Cash flow hedging instruments
Investments:
Cross currency swaps	(Won)	925,814	618,347	—	18,100

Total cash flow hedge	(Won)	925,814	618,347	—	18,100

Trading instruments
Investments:
Interest rate swaps	(Won)	—	378	21,297	5,350
Cross currency swaps		400,732	137,309	—	11,533
Current assets:
Currency forward contracts		3	23	56	226
Interest rate swaps		—	—	—	2,797
Cross currency swaps		—	144,426	—	—

Total trading	(Won)	400,735	282,136	21,353	19,906

Total financial derivatives	(Won)	1,326,549	900,483	21,353	38,006

F-56

(e)

Valuation gains and losses on swap and forward contracts that do not qualify as hedges recorded as other income or expense for the years ended December 31, 2007, 2008 and 2009 are as follows:


	Won (millions)
	2007			2008		2009
Currency swaps
Gains	(Won)	33,144		1,365,831		12,193
Losses		(18,900	)	(5	)	(382,517	)
Interest rate swaps
Gains		2,594		—		13,828
Losses		—		(23,890	)	(300	)
Currency forward contracts
Gains		7,436		3		18
Losses		(44	)	(52	)	(226	)

	(Won)	24,230		1,341,887		(357,004	)

(f)

The gains on currency and interest swap contracts qualifying as cash flow hedges are reflected within accumulated other comprehensive income amounting to (Won)114,448 million and (Won)71,844 million, as of December 31, 2008 and 2009, respectively.

(g)

The transaction gains on derivatives are (Won)34,322 million, (Won)127,043 million and (Won)72,957 million for the years ended December 31, 2007, 2008 and 2009, respectively. The transaction losses on derivatives are (Won)39,752 million, (Won)281,157 million and (Won)30,101 million for the years ended December 31, 2007, 2008 and 2009, respectively. Transaction gains and losses are included in other income (expense) in the accompanying consolidated statements of operations.

(26) Power Generation, Transmission and Distribution Expenses

Power generation, transmission and distribution expenses for the years ended December 31, 2007, 2008 and 2009 are as follows:


	Won (millions)
	2007		2008	2009
Fuel	(Won)	10,391,353	15,721,978	14,857,559
Labor		1,908,475	2,189,385	1,881,694
Depreciation and amortization		5,030,798	5,314,557	5,423,418
Maintenance		2,154,252	1,592,774	1,622,887
Provision for decommissioning costs/accretion and related expenses		443,980	365,617	431,744
Research and development cost		198,948	461,079	464,377
Others		1,731,784	1,456,142	1,147,608

	(Won)	21,859,590	27,101,532	25,829,287

F-57

(27) Selling and Administrative Expenses

Details of selling and administrative expenses for the years ended December 31, 2007, 2008 and 2009 are as follows:


	Won (millions)
	2007		2008	2009
Labor	(Won)	579,692	651,426	544,668
Employee benefits		76,259	80,001	80,699
Sales commissions		362,705	384,305	384,119
Compensation for damages		1,533	9,317	561
Depreciation and amortization		82,266	138,215	89,423
Promotion		29,362	23,399	18,134
Commission-others		80,445	62,888	83,086
Bad debts		22,966	20,616	28,397
Maintenance		15,248	15,833	13,236
Research and development cost		110,497	106,529	102,914
Others		249,206	247,173	199,419

	(Won)	1,610,179	1,739,702	1,544,656

(28) Income Tax Expense (Benefit)

(a)

Income tax expense (benefit) for the years ended December 31, 2007, 2008 and 2009 are summarized as follows:


	Won (millions)
	2007			2008		2009
Current income tax expense	(Won)	1,035,386		737,426		138,106
Deferred income tax expense (benefit)		(109,221	)	(1,666,990	)	232,039

Income tax expense (benefit)	(Won)	926,165		(929,564	)	370,145

(b)

The provision for income taxes calculated using the normal tax rates differs from the actual provision for the years ended December 31, 2007, 2008 and 2009 for the following reasons:


	Won (millions)
	2007			2008		2009
Provision for income taxes at nominal tax rate	(Won)	658,153		(1,107,127	)	78,024
Tax effects of permanent differences:
Dividend income(*1)		(138,770	)	(143,743	)	(8,107	)
Other		8,068		3,044		11,567
Tax effects of investment in subsidiaries(*2)		452,753		(39,580	)	328,081
The tax effect of tax rate revision(*3)		—		270,385		(33,518	)
Other, net		(54,039	)	87,457		(5,902	)

Actual provision for income taxes	(Won)	926,165		(929,564	)	370,145

Effective tax rate		38.7	%	24.2	%	114.8	%

(*1)

Under the Corporate Income Tax Act Article 18 paragraph 2, a certain portion of dividend income is not taxable. In this regard, certain portions of equity in net income of affiliates are considered permanent differences.

F-58

(*2)

Equity income of consolidated subsidiaries was eliminated in the consolidated financial statements. However, tax effect of equity income was not eliminated as disposal gains or losses are taxable or deductible upon sales of subsidiaries.

(*3)

As a result of the revision of income tax law in 2009, 24.2% is applied in 2010 and 2011, and 22% is applied for fiscal years beginning after January 1, 2012.

(c)

The tax effects of temporary differences that result in significant portions of the deferred income tax assets and liabilities as of December 31, 2008 and 2009 are presented below:


	Won (millions)
	2008			2009
Loss on valuation of derivatives	(Won)	5,256		(94,528	)
Retirement and severance benefits		203,862		311,986
Deferred foreign exchange translation loss		44,855		8,213
Liability for decommissioning costs		1,198,417		1,246,837
Other long-term account payables		786,801		786,801
Accounts payable—purchase of electricity		301,987		177,213
Deferred tax asset for deficit carryforward		850,279		1,605,786
Deferred foreign exchange translation gain		(14,827	)	(33,631	)
Reserve for social overhead capital investment		(51,173	)	(34,589	)
Reserve for research and human resource development		(11,188	)	(35,943	)
Investment in subsidiaries and affiliates		(2,016,164	)	(2,338,845	)
Capitalized asset retirement costs		(397,715	)	(336,494	)
Others, net		418,459		(209,952	)

Net deferred tax assets (liabilities)	(Won)	1,318,849		1,052,854

Total deferred tax assets (liabilities)
Current assets		563,163		353,103
Non-current assets		1,963,520		1,689,851
Current liabilities		(14,125	)	(18,023	)
Non-current liabilities		(1,193,709	)	(972,077	)

	(Won)	1,318,849		1,052,854

(29) Earnings (Loss) Per Share

Basic earnings (loss) per common share are calculated by dividing controlling interest in net income (loss) by the weighted-average number of shares of common stock outstanding for each of the years ended December 31, 2007, 2008 and 2009 as follows:


	Won (millions)
	2007		2008		2009
Controlling interest in net income (loss)	(Won)	1,426,457	(2,955,339	)	(96,716	)
Weighted-average number of common shares outstanding		621,717,622	622,637,717		622,637,717

Basic earnings (loss) per common share	(Won)	2,294	(4,746	)	(155	)

F-59

Diluted earnings (loss) per share are calculated by dividing diluted controlling interest in net income (loss) by the weighted-average number of shares of common equivalent stock outstanding for the years ended December 31, 2007, 2008 and 2009 as follows:


	Won (millions)
	2007		2008		2009
Controlling interest in net income (loss)	(Won)	1,426,457	(2,955,339	)	(96,716	)
Exchangeable bond interest		20,031	—		—

Diluted net income (loss)		1,446,448	(2,955,339	)	(96,716	)

Weighted-average number of common shares and diluted securities outstanding		640,665,533	622,637,717		622,637,717

Diluted earnings (loss) per share	(Won)	2,258	(4,746	)	(155	)

In 2009, diluted earnings (loss) per share is the same as the basic earnings (loss) per share due to the anti-dilutive effect.

Exchangeable bonds to be convertible into common stocks as of December 31, 2009 are presented below:


	Exchange price (Won)	Exchange period	Number of shares to be issued
Overseas exchangeable bonds 2^nd	51,000	2007.01.04 ~ 2011.11.11	919,908

(30) Non-cash Investing and Financing Activities

Significant non-cash investing and financing activities for the years ended December 31, 2008 and 2009 are summarized as follows:


	Won (millions)
	2008		2009
Conversion of exchangeable bonds	(Won)	510	—
Transfer into current portion of long-term borrowings		2,253,820	2,003,160
Transfer into current portion of debentures		2,190,963	3,775,653

F-60

(31) Transactions and Balances with Related Parties

(a)

The nature of the relationship as of December 31, 2009 is as follows :


The nature of the relationship		Related Party
Shareholder of the Company		Ministry of Knowledge Economy Korea Finance Corporation(*)

Affiliate of the Company		Korea Gas Corporation Korea District Heating Co. LG Powercom Corporation Korea Electric Power Industrial Development Co., Ltd. YTN Gansu Datang Yumen Wind Power Co., Ltd. SPC Power Corporation Datang Chifeng Renewable Co., Ltd. Gemeng International Energy Group Co., Ltd. KEPCO Energy Resource Nigeria Limited. Gangwon Wind Power Co. Hyundai Green Power Co., Ltd. Cheongna Energy Co., Ltd. PT. Cirebon Electric Power Eco Biomass Energy Sdn. Bhd Denison Mines Corporation Rabigh Electricity Company KNOC Nigerian East Oil Co., Ltd. KNOC Nigerian West Oil Co., Ltd. SET Holdings Areva NC Expansion

(*)

As mentioned in Note 1(a), KDB’s entire shares in KEPCO were transferred to KoFC on October 28, 2009.

F-61

(b)

Significant transactions between the Company and related parties for the years ended December 31, 2007, 2008 and 2009 are as follows:


		Won (millions)
Related Party	Transactions	2007		2008	2009
Operating revenue and other income:
Korea Gas Corporation		(Won)	1,983	4,814	40,672
Korea District Heating Co., Ltd.	Sales of electricity and others		176,960	270,339	212,010
LG Powercom Corporation	”		75,265	73,093	77,238
Korea Electric Power Industrial Development Co., Ltd.	”		5,327	9,887	9,396
YTN	”		—	—	6,861
Rabigh Electricity Company	”		—	—	44,889

		(Won)	259,535	358,133	391,066

Operating and other expenses:
Korea Gas Corporation	Purchases of LNG	(Won)	5,351,071	7,881,723	6,022,633
Korea District Heating Co., Ltd.	Commissions for service and others		334	456,165	380
LG Powercom Corporation	”		67,413	73,153	71,794
Korea Electric Power Industrial Development Co., Ltd.	”		128,788	157,766	173,372
YTN	”		1,460	—	560

		(Won)	5,549,066	8,568,807	6,268,739

(c)

Receivables and payables arising from related parties transactions as of December 31, 2008 and 2009 are as follows:


		Won (millions)
Related party	Accounts	2008		2009
Receivables:
Korea Gas Corporation	Trade receivables and other accounts receivable	(Won)	3,711	4,677
Korea District Heating Co., Ltd.	”		63,221	42,580
LG Powercom Corporation	”		8,893	2,603
Korea Electric Power Industrial Development Co., Ltd.	”		439	181
Rabigh Electricity Company	”		—	227,607
Datang Chifeng Renewable Power Co., Ltd.	”		113,175	93,408

		(Won)	189,439	371,056

Payables:
Korea Gas Corporation	Trade payables and other accounts payable	(Won)	929,845	722,495
Korea District Heating Co., Ltd.	”		59,961	2,175
LG Powercom Corporation	”		4,601	2,691
Korea Electric Power Industrial Development Co., Ltd.	”		16,568	14,623
YTN	”		—	99

		(Won)	1,010,975	742,083

F-62

(d)

Long-term debt from related parties as of December 31, 2008 and 2009 are as follows:


			Won (millions)
Lender	Type	interest rate (%)	2008			2009
Korea Development Bank(*)	Facility	0.5~6.87	(Won)	3,351,893		1,937,702
Ministry of Knowledge Economy	Rural area development	4.0		20,000		10,000
Less : Current portion				(10,000	)	(10,000	)

			(Won)	3,361,893		1,937,702

(*)

As mentioned in Note 1(a), due to the reorganization of KDB into KoFC and KDB Financial Group, KDB and the Company are no longer directly related as of December 31, 2009. However, KoFC owns 94.3% of KDB Financial Group while KDB Financial Group owns 100% of KDB. As such, the Company has disclosed KDB as a related party as of December 31, 2009 above.

(e)

Guarantees provided by related companies for the Company as of December 31, 2009 are as follows:


		USD (thounsands)
Type	Related party	Currency	Guaranteed amounts	Type of borrowings	Balance of borrowing as of December 31, 2009
Payment guarantee(*)	Korea Development Bank	US$	651,663	Foreign currency bond	US$	533,334

(*)

Korea Development Bank has provided a repayment guarantee for some of foreign currency debentures of KEPCO and debt related to the power generation business of KEPCO Ilijan Corporation, which existed at the time of spin-off, but not redeemed as of December 31, 2009.

F-63

(32) Transactions and Balances with Consolidated Subsidiaries

(a)

Significant transactions among KEPCO and consolidated subsidiaries for the years ended December 31, 2007, 2008 and 2009 are as follows. These were eliminated in consolidation:


		Won (millions)
Consolidated subsidiaries	Transactions	2007		2008	2009
Operating revenue and other income:
KEPCO	Sales of electricity and others	(Won)	450,970	631,700	601,710
Korea Hydro & Nuclear Power Co., Ltd.	”		5,514,741	5,801,584	5,150,848
Korea South-East Power Co., Ltd.	”		2,146,334	3,102,176	3,723,306
Korea Midland Power Co., Ltd.	”		2,802,963	3,608,107	3,714,084
Korea Western Power Co., Ltd.	”		3,100,953	3,687,034	3,809,276
Korea Southern Power Co., Ltd.	”		3,733,243	4,647,023	4,613,557
Korea East-West Power Co., Ltd.	”		2,868,392	3,883,761	3,822,546
Others	Commissions for service and others		1,213,598	1,352,502	1,492,928

		(Won)	21,831,194	26,713,887	26,928,255

Operating and other expenses:
KEPCO(*)	Purchased power and others	(Won)	20,499,256	25,077,826	25,190,362
Korea Hydro & Nuclear Power Co., Ltd.	Commissions for service and others		719,076	809,484	895,516
Korea South-East Power Co., Ltd.	”		139,091	172,245	185,398
Korea Midland Power Co., Ltd.	”		138,064	198,752	194,730
Korea Western Power Co., Ltd.	”		120,066	182,435	173,284
Korea Southern Power Co., Ltd.	”		84,827	95,618	112,063
Korea East-West Power Co., Ltd.	”		120,999	164,536	156,889
Others	”		9,815	12,991	20,013

		(Won)	21,831,194	26,713,887	26,928,255

(*)

KEPCO has purchased electricity from its power generation subsidiaries through Korea Power Exchange.

F-64

(b)

Receivables and payables arising from KEPCO and consolidated subsidiaries transactions as of December 31, 2008 and 2009 are as follows. These were eliminated in the consolidation:


		Won (millions)
Consolidated subsidiaries	Accounts	2008		2009
Receivables:
KEPCO	Trade receivables and other accounts receivable	(Won)	1,366,570	1,237,686
Korea Hydro & Nuclear Power Co., Ltd.	”		990,144	1,172,682
Korea South-East Power Co., Ltd.	”		818,593	811,137
Korea Midland Power Co., Ltd.	”		374,625	415,385
Korea Western Power Co., Ltd.	”		480,977	539,282
Korea Southern Power Co., Ltd.	”		582,781	583,022
Korea East-West Power Co., Ltd.	”		661,659	667,567
Others	”		215,786	183,760

		(Won)	5,491,135	5,610,521

Payables:
KEPCO	Trade payables and other accounts payable	(Won)	3,932,976	4,123,008
Korea Hydro & Nuclear Power Co., Ltd.	”		441,247	336,327
Korea South-East Power Co., Ltd.	”		525,077	521,257
Korea Midland Power Co., Ltd.	”		57,181	50,042
Korea Western Power Co., Ltd.	”		124,996	112,469
Korea Southern Power Co., Ltd.	”		118,519	113,029
Korea East-West Power Co., Ltd.	”		259,060	245,137
Others	”		32,079	109,252

		(Won)	5,491,135	5,610,521

(c)

The elimination entries of revenues and expenses among KEPCO and consolidated subsidiaries for the year ended December 31, 2009 are summarized as follows:


Won (millions)			Won (millions)
Accounts	Amount		Accounts	Amount
Operating revenues	(Won)	26,817,726	Operating expenses	(Won)	26,763,749
Rental income		21,568	Rent expenses		11,695
Interest income		69,359	Commissions		71,578
Other income		19,602	Interest expenses		69,416
			Other expenses		11,817

	(Won)	26,928,255		(Won)	26,928,255

F-65

(d)

The elimination entries of receivables and payables among KEPCO and consolidated subsidiaries as of December 31, 2009 are summarized as follows:


Won (millions)			Won (millions)
Accounts	Amount		Accounts	Amount
Trade payables	(Won)	2,443,639	Trade receivables	(Won)	2,610,145
Other accounts payable		317,821	Other accounts receivables		148,027
Advances received		102,850	Construction in-progress		166,767
Unearned revenue		12,468	Other intangible asset		1,505,049
Other long-term account payable		1,055,952	Other long-term account receivable		1,053,929
Construction grants		1,671,816
Others		5,975	Others		126,604

	(Won)	5,610,521		(Won)	5,610,521

(e)

The Company has provided guarantees for related companies as of December 31, 2009 as follows:


Guaranteed company	Type	Amounts (In thousands)
KEPCO Ilijan Co.(*1)	Subsidiary	USD	72,000
KEPCO Shanxi International Ltd.(*2)	Subsidiary	USD	180,000
		RMB	800,000
KEPCO Lebanon SARL.(*3)	Subsidiary	USD	17,113
KEPCO SPC Power Corporation.(*4)	Subsidiary	USD	100,000
KEPCO Netherlands B.V.(*5)		SAR	100,000
KNOC Nigerian East Oil Co., Ltd.(*6)	Affiliated	USD	59,468
KNOC Nigerian West Oil Co., Ltd.(*6)
KOMIPO Global Pte Ltd.(*7)	Subsidiary	IDR	17,356,000

(*1)

KEPCO Ilijan Corporation, which is a subsidiary of KEPCO International Philippines Inc., is engaged in the power generation business in the Philippines and has borrowed US$242 million in 2000, as project financing from Japan Bank of International Cooperation and others. In connection with the borrowing, KEPCO Ilijan Corporation’s investment securities held by KEPCO International Philippines Inc. were pledged as collateral. The Company has provided the National Power Corporation and others with the guarantee not to exceed US$72 million on performance of the power generation business by KEPCO Ilijan Corporation.

(*2)

KEPCO Shanxi International Ltd., a wholly owned subsidiary, formed the consortium with Deutsche Bank and Shanxi International Electric Power Ltd. to invest in the Chinese electric power generation business. The consortium established Gemeng International Energy Group Co., Ltd. to support this business. The Company has provided HSBC and Export-Import Bank of Korea (the “EXIM Bank”) with the payment guarantee for KEPCO Shanxi International Ltd.’s loan of US$180 million. The Company agreed with Deutsche Bank to refund the investment of RMB800,000 thousand and pay the additional interest of Libor + 2% for the period from initial investment date to the unqualified date in accordance with terms of the agreement, if Gemeng International Energy Group Co., Ltd. fails to be listed on the Hong Kong stock exchange within 6 years from the establishment date.

(*3)

The Company has provided performance guarantees related to the operation of the Lebanon power generation plant amounting to US$ 17.2 million to the Lebanon Electricity Agency.

(*4)

The Company invested in power plant construction business in Cebu, Philippines and established KEPCO SPC Power Corporation to support this business. The Company has provided the debt payment guarantee amounting US$ 100,000 thousand to EXIM Bank for KEPCO SPC Power Corporation.

F-66

(*5)

The Company invested in power plant construction business in Rabigh, Saudi Arabia through KEPCO Netherlands B.V. (the wholly owned subsidiary), and established Rabigh Electricity Company (40% of ownership) to operate this business. Rabigh Electricity Company has provided the Saudi Electricity Company with the performance guarantee for PPA contract through Saudi British Bank and counter guarantees through EXIM Bank. In relation to the guarantee the Company has provided the payment guarantee amounting SAR 100 million to EXIM Bank for the above counter guarantees.

(*6)

In August 2005, a consortium consisting of the Company, Korea National Oil Corporation, a state-controlled enterprise, and Daewoo Shipbuilding & Marine Engineering won a bid from the federal government of Nigeria for exploration and production of oil in two off-shore blocks. This consortium holds 60% of the equity interest in the special purpose vehicle established to carry out the project regarding these two blocks and the Company holds 15% of the interest in the consortium. In March 2006, the consortium entered into production sharing contracts with the Nigerian National Petroleum Corporation in connection with this project. Under these contracts, if the consortium is successful in finding oil, it will be entitled to operate the related facilities for 20 years. Regarding the exploration and development project, the Company provides the Nigeria government with performance guarantee of USD 24,818 and USD 34,650 respectively.

However, in January 9, 2009, the leader of the consortium, Korea National Oil Corporation, was informed of a unilateral decision by the government of Nigeria to void allocation of the oil blocks granted to the consortium based on a claim that the consortium failed to pay full amount of the consideration. Korea National Oil Corporation has filed a suit in the Nigerian court challenging this assertion. On August 20, 2009, the Federal High Court in Nigeria ruled that the Nigerian government illegally cancelled offshore exploration rights with respect to the deep sea oil exploration projects and banned the Nigerian government from further interfering with the consortium. The Nigerian government subsequently appealed against the ruling and the case is still pending in court.

(*7)

PT Cirebon Electric Power, an affiliate of the Company is engaged in the power generation business in Indonesia. PT Cirebon Electric Power has commenced a construction of a 660MW thermal power plant for its power generation business. In relation to the power generation business, the Company has provided Indonesia Mizuho Bank with secondary performance guarantee of IDR 17.4 billion, through Korea Exchange Bank’s guarantee.

(33) Commitments and Contingencies

(a)

The Company is involved in legal proceedings regarding matters arising in the ordinary course of business. Related to these matters, as of December 31, 2009, the Company is engaged in 404 lawsuits as a defendant and 85 lawsuits as a plaintiff. The total amount claimed against the Company is (Won)187,102 million and the total amount claimed by the Company is (Won)55,885 million as of December 31, 2009. As of December 31, 2009, the Company recorded a liability related to the above claims amounting to (Won)30,022 million in other long-term liabilities. The outcome of these lawsuits cannot presently be determined. In the opinion of management, the ultimate results of these lawsuits will not have a material adverse effect on the Company’s financial position, results of operation, or liquidity.

F-67

(b)

Short-term Credit Facilities

Payment guarantee and short-term credit facilities from financial institutions as of December 31, 2009 are as follows:

(i)

Payment Guarantee


Description	Financial institution	Won (millions), US$ and SAR (thousands)
Payment of import letter of credit	Korea Exchange Bank and others	USD	1,000,481
		JPY	61,169
Inclusive credits	Kookmin Bank and others	KRW	120,100
	Hana Bank and others	USD	40,000
Borrowings	Korea Exchange Bank and others	KRW	486,582
		USD	335,838
Guarantees for bid	Korea Exchange Bank	INR	290,000
	Export-Import Bank of Korea	OMR	6,000
	Export-Import Bank of Korea	SAR	100,000
	Korea Exchange Bank and others	USD	700
Performance guarantees	Export-Import Bank of Korea and others	USD	120,600
		CHF	24,818
Payment of foreign currency(*)	Shinhan Bank and others	KRW	13,283
	Shinhan Bank and others	USD	11,512
	Korea Exchange Bank	EUR	72,000
Other guarantees	Seoul Guarantee Insurance Co.,Ltd.	KRW	450

(*)

Foreign currencies other than US$ and SAR are converted into US$.

(ii)

Overdraft and Others


		Won (millions), US$ and JPY (thousands)
Description	Financial institution	Credit lines
Overdraft	Korea Exchange Bank and others	(Won)	878,000
Commercial paper	Korea Exchange Bank and others	(Won)	775,000
		US$	130,000
Trade financing	National Agricultural Cooperative Federation and others	(Won)	71,500
Repayment guarantees for foreign currency debentures	Korea Develop Bank	US$	690,737
	Kookmin Bank	JPY	3,000,000

F-68

(c)

The Company has provided promissory notes as a guarantees as follows:


Objective	Providing company	Provided company	Description
Success repayable loan	KEPCO Nuclear Fuel Co., Ltd	Korea Resources Corporation	six promissory notes (blank)

(d)

The Company entered into an arrangement with the Korea Peninsula Energy Development Organization (“KEDO”) on December 15, 1999, to construct two 1,000,000 KW-class pressurized light-water reactor units in North Korea. But, the executive board of KEDO decided to terminate the light water reactor project on May 31, 2006 due to the political environment surrounding the Korean peninsula. On December 12, 2006, the Company entered into the Termination Agreement (“TA”) with KEDO.

According to the TA, the Company mainly accepts all rights and obligations related to the light water reactor outside of North Korea, from KEDO. In exchange, the Company waives the right to claim any expenses incurred and any potential claims by subcontractors to KEDO. As a result, the Company recorded transferred equipment in accordance with the TA as other non-current assets amounting to (Won)93,519 million. In addition, the Company recorded the estimated claims by subcontractors as other long-term liabilities amounting to (Won)15,139 million.

Pursuant to the terms of the TA, the Company is required to report the disposal or reuse of the transferred equipment to KEDO, and the gains and losses from the TA are shared with KEDO through the negotiation between two parties. The Company’s management believes that ultimate gains or losses cannot be reasonably estimated as of December 31, 2009 as it is contingent upon disposal or reuse of the related assets and settlement of obligations.

(e)

The Company entered into a Power Purchase Agreement with GS EPS Co., Ltd. and other independent power producers, under which the Company is required to annually purchase a minimum amount of power from these companies. The power purchased from these companies amounted to (Won)1,487,345 million, (Won)2,228,262 million and (Won)1,507,741 million for the years ended December 31, 2007, 2008 and 2009, respectively. In relation to the power purchases, the Company entered into long-term purchase contracts with various suppliers and the terms of these contracts can be summarized as follows:


Generation type		Contract expiration term
Combined cycle units		2018~2025
Photovoltaic power and other units		Annual rollover

Under these contracts, purchase quantities are not fixed, and purchase prices are annually reset based on certain formula for each generation type.

(f)

The Company has contracted Doosan Industrial Co., Ltd. and others amounting to (Won)9,050,866 million and JPY 17,811 thousand in the aggregate as of December 31, 2009, for construction of power plant facilities and facility maintenance.

(g)

The Company has bituminous coal, anthracite Coal, oil and LNG purchase contracts with domestic and foreign suppliers including Korea Gas Corporation (a related party) as of December 31, 2009. Under these contracts, the Company must purchase an annual quantity of coal. The purchase price is determined based on market prices. In relation to coal imports, the Company entered into long-term transportation contracts with Hanjin Shipping Co., Ltd. and others as of December 31, 2009.


Fuel type	Contract expiration Term	Quantity
Bituminous Coal	2010~2027	56,087 thousand ton/year
Anthracite Coal	2010	Set by government
Oil	2010	1,391 thousand kl/year
LNG	2026	Mutual agreement

F-69

(h)

During 2001, the Company voluntarily suspended operations of the Gangneung hydroelectric generating plant to improve the quality of water used in generating electricity. The expenses related to the suspension of operations, including depreciation on the utility plant during 2008 and 2009 amounting to (Won)6,020 million and (Won)5,722 million, respectively, were charged to other expenses. In December 2005, a hearing was held by government officials, and attended by representatives of the Company, Gangneung residents and Korea Environment Institute (KEI). At the hearing, the Korean government ordered the conditional suspension of operations based on the KEI findings on the environmental effect of Gangneung hydroelectric generating plant. As of December 31, 2009, Gangneung hydroelectric generating plant is still under conditional suspension of operations based on the KEI findings. The Company will be able to utilize this plant in the future provided that the quality of the water improves and the residents of Gangneung consent to operations. As of December 31, 2009, if the plant were to be discontinued, the tangible and intangible assets amounting to (Won)62,507 million, would be impaired. No adjustment has been made in the accompanying consolidated financial statements related to this matter.

(i)

As the national project administrator, the Company is currently researching the use of RDF (Refuse Derived Fuel) as an alternative source for power generation at Wonju city in the Gangwon province. For the project, the Company is expected to receive a total funding of (Won)9 billion from Korea Energy Management Corp and as of December 31, 2009, the Company has received (Won)4.5 billion from POSCO.

(j)

The Company imports all uranium ore concentrates from sources outside Korea (including the United States, United Kingdom, Kazakhstan, France, Russia, South Africa, Canada and Australia) and are paid for with currencies other than Won, primarily in U.S. dollars. In order to ensure stable supply, the Company entered into long-term and medium-term contracts with various suppliers, and supplements such supplies with purchases of fuels on spot markets. The long-term and medium-term contract periods vary among contractors and the stages of fuel manufacturing process. Contract prices for processing of uranium are generally based on market prices. Contract periods for ore concentrates, conversion, enrichment and design and fabrication are as follows:


Source of supply	Contract Year	Quantity
Concentrates	2010~2036	36,885 Ton U3O8
Conversion	2010~2012	11,083 Ton U
Enrichment	2010~2029	38,990 Ton SWU
Enriched Uranium	2010~2022	7,250 Ton U (4.5% enrichment)
Fuel design and fabrication	2010~2011	889 Ton U

(k)

In April 2005, the Company invested in Gangwon wind power corporation to participate in renewable energy industry. Gangwon wind power corporation entered into the loan contract for financing construction costs. The investments in Gangwon wind power (book value of (Won)7,412 million) are restricted as collateral with Industrial Bank of Korea and BNP PARIBAS.

(l)

On June 24, 2005, the Korean government announced its policy to relocate the headquarters of Public Agencies, including KEPCO and certain of its subsidiaries including six generation units, out of the Seoul metropolitan area to other provinces in Korea by the end of 2012. Pursuant to this policy, KEPCO’s headquarters are scheduled to be relocated to Naju in Jolla Province, which is approximately 300 kilometers south of Seoul, by the end of 2012.

(m)

On December 27, 2009, the Company entered into a contract with the Emirates Nuclear Energy Corporation (“ENEC”), a state-owned nuclear energy provider in the United Arab Emirates to design, build and help operate four civil nuclear power generation units for the United Arab Emirates’ civilian nuclear energy program. The contract amount is US$18.6 billion, subject to change based on certain price escalation provisions of the contract, and is to last until May 1, 2020. Under the contract, we are obligated to provide the design and construction of four nuclear power generation units, each with a capacity of 1,400 megawatts, supply nuclear fuel for three fuel cycles including initial loading and

F-70

provide technical support and training and education of the plant operation personnel. The generation units will be located in Sila, a region approximately 330 kilometers from Abu Dhabi, the capital of the United Arab Emirates, and the first units are expected to be completed by May 2017.

(34) Segment Information

The below segment information is based on the management’s disaggregation of the Company for making operating decisions. Operating segments that have similar economic characteristics and are similar in terms of the nature of their products and services, the nature of the production process, the type or class of customer, and methods of distribution have been aggregated into a segment.

Other segments that cannot be classified into the above-mentioned two segments have been combined and disclosed in an “all other” category. All other consists primarily of the operations from the engineering and maintenance for utility plant, information services, and sales of nuclear fuel, communication line leasing and others.

The Company evaluates performance of each segment based on net income. There are no revenues from transactions with a single external customer that amount to 10 percent or more of the consolidated revenues of the Company.

(a)

The following table provides information for each operating segment for the years ended December 31, 2007, 2008 and 2009.


	Won (millions)
	2007
	Electric business					All other		Consolidation adjustment		Consolidated
	Transmission & distribution			Power generation		All other		Consolidation adjustment		Consolidated
Unaffiliated revenues	(Won)	28,602,955		99,082		435,183		—		29,137,220
Intersegment revenues		380,930		20,155,982		1,263,606		(21,800,518	)	—

Total operating revenues		28,983,885		20,255,064		1,698,789		(21,800,518	)	29,137,220
Power generation, transmission and distribution costs		(24,749,725	)	(17,770,613	)	—		20,660,748		(21,859,590	)
Purchased power		(2,584,097	)	—		—		—		(2,584,097	)
Other operating cost		(43,657	)	(2,475	)	(1,305,609	)	1,090,062		(261,679	)
Selling and administrative expenses		(1,224,706	)	(291,529	)	(172,946	)	79,002		(1,610,179	)

Operating income		381,700		2,190,447		220,234		29,294		2,821,675


Interest income		82,447		133,570		48,752		(78,454	)	186,315
Interest expense		(602,489	)	(177,948	)	(34,931	)	78,247		(737,121	)
Equity income of affiliates		1,786,145		1,572		4,447		(1,672,600	)	119,564
Other, net		235,971		(105,194	)	84,925		(212,802	)	2,900

Income before income taxes		1,883,774		2,042,447		323,427		(1,856,315	)	2,393,333
Income taxes		(326,960	)	(552,122	)	(44,174	)	(2,909	)	(926,165	)

Segment earnings before minority interests	(Won)	1,556,814		1,490,325		279,253		(1,859,224	)	1,467,168

F-71


	Won (millions)
	2008
	Electric business					All other		Consolidation adjustment		Consolidated
	Transmission & distribution			Power generation		All other		Consolidation adjustment		Consolidated
Unaffiliated revenues	(Won)	30,980,762		34,550		544,788		—		31,560,100
Intersegment revenues		541,621		24,712,237		1,371,855		(26,625,713	)	—

Total operating revenues		31,522,383		24,746,787		1,916,643		(26,625,713	)	31,560,100
Power generation, transmission and distribution costs		(29,378,477	)	(23,855,042	)	—		26,131,987		(27,101,532	)
Purchased power		(4,433,889	)	—		—		—		(4,433,889	)
Other operating cost		(59,359	)	(9,193	)	(1,413,450	)	398,952		(1,083,050	)
Selling and administrative expenses		(1,309,860	)	(311,032	)	(235,969	)	117,159		(1,739,702	)

Operating income (loss)		(3,659,202	)	571,520		267,224		22,385		(2,798,073	)

Interest income		90,590		98,993		54,911		(73,543	)	170,951
Interest expense		(752,366	)	(281,970	)	(39,796	)	73,359		(1,000,773	)
Equity income of affiliates		(64,944	)	(9	)	1,824		161,740		98,611
Other, net		(120,310	)	(197,260	)	109,352		(106,101	)	(314,319	)

Income (loss) before income taxes		(4,506,232	)	191,274		393,515		77,840		(3,843,603	)
Income taxes		1,553,763		(523,598	)	(82,233	)	(18,368	)	929,564

Segment earnings before minority interests	(Won)	(2,952,469	)	(332,324	)	311,282		59,472		(2,914,039	)


	Won (millions)
	2009
	Electric business
	Transmission & distribution			Power generation		All other		Consolidation adjustment		Consolidated
Unaffiliated revenues	(Won)	33,164,995		214,305		614,552		—		33,993,852
Intersegment revenues		520,719		24,817,778		1,496,018		(26,834,515	)	—

Total operating revenues		33,685,714		25,032,083		2,110,570		(26,834,515	)	33,993,852
Power generation, transmission and distribution costs		(29,372,297	)	(22,818,239	)	—		26,361,249		(25,829,287	)
Purchased power		(3,666,468	)	—		—		—		(3,666,468	)
Other operating cost		(56,048	)	(12,371	)	(1,491,164	)	320,964		(1,238,619	)
Selling and administrative expenses		(1,159,598	)	(275,081	)	(207,784	)	97,807		(1,544,656	)

Operating income (loss)		(568,697	)	1,926,392		411,622		(54,495	)	1,714,822

Interest income		89,362		42,547		60,111		(78,155	)	113,865
Interest expense		(988,368	)	(640,474	)	(33,233	)	78,212		(1,583,863	)
Equity income of affiliates		1,513,752		(6,513	)	(8,117	)	(1,476,649	)	22,473
Other, net		(166,488	)	261,813		67,888		(108,098	)	55,116

Income (loss) before income taxes		(120,439	)	1,583,765		498,271		(1,639,184	)	322,413
Income taxes		42,727		(329,695	)	(103,836	)	20,659		(370,145	)

Segment earnings (loss) before minority interests	(Won)	(77,712	)	1,254,070		394,435		(1,618,525	)	(47,732	)

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(b)

The following table provides asset information for each operating segment as of December 31, 2008 and 2009.


	Won (millions)
	Electric business
	Transmission & distribution		Power generation	All other	Consolidation adjustment		Consolidated
December 31, 2008
Property, plant and equipment	(Won)	31,941,153	35,588,883	1,051,525	1,213,724		69,795,285
Intangible assets		195,951	2,182,367	69,731	(1,501,202	)	946,847
Total assets		66,868,176	48,725,647	3,591,874	(30,987,087	)	88,198,610
December 31, 2009
Property, plant and equipment	(Won)	33,346,531	38,398,615	1,205,295	1,082,990		74,033,431
Intangible assets		105,134	2,028,491	58,333	(1,509,613	)	682,345
Total assets		69,985,451	51,816,641	4,930,354	(33,524,415	)	93,208,031

(35) Comprehensive Statement of Income (Loss)

Comprehensive income (loss) for the years ended December 31, 2007, 2008 and 2009 is summarized as follows:


	Korean Won (in millions)									Translation into U.S. Dollars (Note 2) (in thousands)
	2007			2008			2009			2009
Net income (loss)	(Won)	1,467,168			(2,914,039	)		(47,732	)	$	(41,019	)
Other comprehensive income, net of tax :
Gain (loss) on valuation of available-for-sale securities		(1,309	)		(8,274	)		18,086			15,542
Equity in other comprehensive income of affiliates		7,734			205,359			107,968			92,784
Gain (loss) on valuation of derivatives		10,736			108,798			(42,604	)		(36,612	)
Overseas operations translation		28,859			45,266			(31,303	)		(26,901	)

Comprehensive income (loss)	(Won)	1,513,188		(Won)	(2,562,890	)	(Won)	4,415		$	3,794

The amounts of tax allocated to the other comprehensive income for the years ended December 31, 2007, 2008 and 2009 are as follows:


	Korean Won (in millions)									Translation into U.S. Dollars (Note 2) (in thousands)
	2007			2008			2009			2009
Gain (loss) on valuation of available-for-sale securities	(Won)	497			4,143			(5,101	)	$	(4,384	)
Equity in other comprehensive income of affiliates		(2,933	)		(44,346	)		(30,453	)		(26,170	)
Gain (loss) on valuation of derivatives		(4,072	)		(71,774	)		12,017			10,327
Overseas operations translation		(10,947	)		(14,233	)		8,829			7,587

Comprehensive income	(Won)	(17,455	)	(Won)	(126,210	)	(Won)	(14,708	)	$	(12,640	)

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(36) Subsequent Event

The Company issued debentures after December 31, 2009 and details of the issued debentures are as follows (Won in millions):


Subsidiary	Type	Annual interest rate (%)	Issue date	Maturity date	Amount
Korea Hydro & Nuclear Power Co., Ltd.	Corporate bond	4.67	2010.03.26	2015.03.26	(Won)	200,000
	Corporate bond	5.10	2010.04.20	2020.04.20		100,000
Korea Western Power Co., Ltd.	Corporate bond	5.08	2010.02.18	2015.02.18		120,000
	Corporate bond	4.57	2010.03.19	2015.03.19		100,000

(37) Plan and Progress for Adoption of K-IFRS

The Company is scheduled to prepare financial statements in accordance with Korean International Financial Reporting Standards (the “K-IFRS”) effective for financial statements issued for fiscal years beginning after January 1, 2011. The Company has set up a special task force and the Company has been assessing the impact that the adoption of K-IFRS may have on financial statements and has been conducting on-the-job training and off-the-job training to its employees. In addition, the task force regularly reports the introduction plan and progress to the management.

The differences between the K-IFRS and K-GAAP, which are expected to have significant influences on the Company are; property, plant and equipment, revenue recognition and others, and are subject to change according to the Company’s additional assessment.

(38) Reconciliation to United States Generally Accepted Accounting Principles

The accompanying consolidated financial statements are prepared in accordance with Korean GAAP which differs in certain respects from generally accepted accounting principles of the United States (“U.S. GAAP”). The significant differences between Korean GAAP and U.S. GAAP that affect the Company’s consolidated financial statements are described below.

(a)	Revenue Recognition

The Company reads meters and bills customers on a cycle basis. The Company does not accrue revenue for power sold to customers between the meter-reading date and end of the reporting period but records the revenue in the subsequent period. Under Korean GAAP, such practice is consistent with the Accounting Regulations for Public Enterprise Associated Government Agency, which have been approved by the Korean Ministry of Strategy and Finance (formerly the Korean Ministry of Finance and Economy) and considered by the utility industry in Korea as Korean GAAP. However under U.S. GAAP beginning in 2006, the Company began recognizing unbilled revenue related to the sale of power between the meter-reading dates, at the end of each reporting period.

(b)	Asset Revaluation and Depreciation

Under Korean GAAP, property, plant and equipment are stated at cost, except for those assets that are stated at their appraised values in accordance with the KEPCO Act and the Assets Revaluation Law of Korea. If an asset revaluation occurs, the revaluation becomes the new basis for the property, plant and equipment is established.

Under U.S. GAAP, property, plant and equipment must be stated at cost less accumulated depreciation and impairment. The revaluation of property, plant and equipment and the resulting depreciation of revalued

F-74

amounts are not considered in the consolidated financial statements prepared in accordance with U.S. GAAP. When revalued assets are sold, revaluation surplus related to those assets under Korean GAAP would be reflected in income as additional gain on the sale of property, plant and equipment under U.S. GAAP.

(c)	Special Depreciation

Under Korean GAAP, a special depreciation has been allowed prior to 1994, which represents an accelerated depreciation of certain facilities and equipment acquired for energy saving and anti-pollution purposes. However, such special depreciation is not in accordance with U.S. GAAP. The U.S. GAAP reconciliation reflects the adjustment of special depreciation to the Company’s normal depreciation method, based on the economic useful life of the asset. In 2008, the related facilities and equipment became fully depreciated under U.S. GAAP and as such there is no longer a GAAP difference to be reconciled.

(d)	Accounting for Regulation

Under U.S. GAAP accounting guidance for accounting for the effects of certain types of regulation, a regulated utility is required to defer the recognition of costs (a regulatory asset) or recognize obligations (a regulatory liability) if it is probable that, through the rate-making process, there will be a corresponding increase or decrease in future utility rates, while under Korean GAAP no such guidance exists.

The Government of the Republic of Korea approves the rates that the Company charges to its customers. The Company’s utility rates are designed to recover its reasonable costs plus a fair investment return. However, as discussed in Note 1(a), on April 2, 2001, six power generation subsidiaries were established in accordance with the Restructuring Plan. Since the power generation subsidiaries’ rates are determined by a competitive system in the market, they no longer meet the criteria for application of the guidance. Accordingly, since 2001, only the Company’s power transmission and distribution divisions have been subject to the criteria for the application of the guidance.

The Company recognizes a regulatory liability or regulatory asset in the consolidated financial statements by a charge or credit to operations to match revenues and expenses under the regulations for the establishment of utility rates. These assets or liabilities relate to the adjustments for capitalized foreign currency translation, reserve for self-insurance and deferred income taxes.

The following table shows the components of regulated assets and liabilities as of December 31, 2008 and 2009.


	Korean Won (in millions)					Translation into U.S. Dollars (Note 2) (in thousands)
	2008			2009		2009
Capitalized foreign currency translation	(Won)	609,723		559,357		$	480,692
Reserve for self-insurance		(115,268	)	(121,416	)		(104,341	)
Deferred income taxes		(1,068,372	)	(844,301	)		(725,563	)

	(Won)	(573,917	)	(406,360	)	$	(349,212	)

The regulated assets resulting from capitalized foreign currency translation are anticipated to be recovered over the weighted-averaged useful life of property, plant and equipment.

Regulatory assets and liabilities are established based on the current regulations and rate-making process. Accordingly, these assets and liabilities may be significantly changed due to the potential future deregulation or changes in the rate-making process.

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(e)	Reversal of Eliminated Profit on Transactions with Subsidiaries and Affiliated Companies

Under Korean GAAP, the Company’s share of the profit on transactions between KEPCO and its affiliated companies is eliminated in the preparation of the consolidated financial statements. Under U.S. GAAP for regulated enterprises, where the sales prices are reasonable and it is probable that, through the rate making process, future revenues approximately equal to the sales price will result from the Company’s use of the utility plant, no elimination of profit is necessary for reporting purposes.

(f)	Foreign Currency Translation

As discussed in Note 1(f), under Korean GAAP, the Company capitalizes certain foreign exchange transaction and translation gains and losses on borrowings associated with certain qualified assets during the construction period.

Under U.S. GAAP, all foreign exchange transaction gains and losses, referred to as either transaction or translation gains or losses under Korean GAAP, should be included in the results of operations for the current period. Accordingly, the amounts of foreign exchange transaction and translation gains and losses included in property, plant and equipment under Korean GAAP were reversed and recognized in current period earnings under U.S. GAAP.

Under Korean GAAP, convertible bonds denominated in foreign currency are regarded as non-monetary liabilities since they have equity-like characteristics. Accordingly, the Company does not recognize the associated foreign currency translation gain or loss.

Under U.S. GAAP, convertible bonds denominated in foreign currency are translated at exchange rates as of the end of the reporting period, and the resulting foreign currency transaction gain or loss is recognized in the period’s earnings.

(g)	Intangible Assets

Under Korean GAAP, all costs incurred during the research phase are expensed as incurred. Costs incurred during the development phase are recognized as an asset only if all of the following criteria for recognition are satisfied; (1) it is probable that future economic benefits that are attributable to the asset will flow into the entity; and (2) the cost of the asset can be reliably measured. If the costs incurred fail to satisfy all of these criteria, they are recorded as periodic expense as incurred.

Under U.S. GAAP, all costs incurred during the research and development stages are expensed as incurred, except for internal and external costs incurred to develop internal-use computer software during the application development stage should be capitalized.

Until 2008, as discussed in Note 5, under Korean GAAP, the Company recognized its payment to the City of Gyeongju, in the amount of (Won)300,000 million which was used for negotiations (based on government regulation) to establish a radio-active waste facility in the City, as an intangible asset. However, under U.S. GAAP, the Company recognized such amount as construction-in-progress for utility plants.

In 2009, as discussed in Notes 5 and 22, due to the transfer of roles related to the disposal of radio-active waste to KRMC, the Company transferred its intangibles asset, under Korean GAAP and its construction-in-progress, under U.S. GAAP to KRMC. The Company reclassified such amounts from respective accounts to other receivables, resulting in no GAAP difference.

(h)	Deferred Income Taxes

Under Korean GAAP, the effect of changes in tax law related to items recorded directly in shareholders’ equity is reflected directly in the shareholders’ equity, while under U.S. GAAP, the effect is reflected in continuing operations in the period of new tax law enactment.

F-76

(i)	Accounting for Uncertainty in Income Taxes

In July 2006, under U.S. GAAP new accounting guidance for uncertainty in income taxes, which sets out a consistent framework to use to determine the appropriate level of tax reserve for uncertain tax positions was issued. This guidance uses a two-step approach wherein a tax benefit is recognized if a position is more-likely-than-not to be sustained. The amount of the benefit is then measured to be the highest tax benefit which is greater than 50% likelihood of being realized. The difference between the benefit recognized for a position in accordance with this guidance and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit. Under Korean GAAP no such guidance exists.

The beginning balance of unrecognized tax benefits reconciles to the balance as of December 31, 2008, and 2009 in the following table:


	Korean Won (in millions)					Translation into U.S. Dollar (Note 2) (in thousands)
	2008			2009		2009
Total unrecognized tax benefits at January 1	(Won)	5,690		12,695		$	10,910
Amount of increase for current year’s tax position		11,394		71			61
Gross amount of increases for prior years’ tax position		458		53			46
Gross amount of decreases for prior years’ tax position		(4,847	)	(6,832	)		(5,871	)

Total unrecognized tax benefits at December 31	(Won)	12,695		5,987		$	5,146

Any changes in the amounts of unrecognized tax benefits related to temporary differences would result in a reclassification to deferred tax liability, and any changes in the amounts of unrecognized tax benefits related to permanent differences would result in an adjustment to income tax expense and therefore, the Company’s effective tax rate. As of December 31, 2008 and 2009, the unrecognized tax benefits included above which would, if recognized, affect the effective tax rate is (Won)6,438 million and (Won)1,312 million, respectively.

The Company’s continuing practice is to recognize interest and penalties, if any, related to income tax matters in income tax expense. After the adoption of the accounting guidance for uncertainty in income taxes, the Company has total gross accrual for interest expense and penalties of (Won)3,537 million and (Won)2,213 million as of December 31, 2008 and 2009, respectively.

The Company’s major tax jurisdiction is the Republic of Korea, and during the years ended December 31, 2007 and 2008, tax audits by National Tax Service for six entities, including the Company’s corporate entity were carried out. The unrecognized tax benefits of the entities as of December 31, 2009 reflect the results of tax audits.

(j)	Liabilities for Decommissioning Costs

Under Korean GAAP, as discussed in Note 22, since 2004, the Company has adopted SKAS No. 17 which requires companies to recognize its liability for decommissioning costs at estimated fair value. The Company should estimate the fair value using a discounted cash flow, for its asset retirement obligations for dismantling and disposal of the nuclear power plants, spent fuel and low & intermediate radioactive waste; along with recording a corresponding utility asset in the same amount. Expense is recorded for the period to period changes in the liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows, as the balance is accreted to the ultimate amount payable.

F-77

Under Korean GAAP, the discount rate (4.36%) was set upon adoption in 2004 for all liabilities prior to that date and such rate is used for those liabilities for all future periods. Liabilities incurred for facilities built subsequent to the adoption of this guidance are discounted at the then applicable discount rate under Korean GAAP. Upward and downward revisions to the undiscounted estimated cash flows are discounted at the initial rate used for that facility.

Under U.S. GAAP, the Company adopted the guidance related to asset retirement in 2003, which requires the Company to recognize an estimated liability for legal obligations associated with the retirement of tangible long-live assets. The fair value of the liabilities for decommissioning costs is determined using a present value approach and expense is recorded in each period for the accretion due to the passage of time to the amount ultimately payable. A corresponding amount is recorded as part of the book value of the related long-lived assets and depreciated over the useful lives of the assets.

Under U.S. GAAP, the discount rate for existing decommissioning liabilities prior to 2003 was set at adoption (6.49%). Liabilities incurred for facilities built subsequent to the adoption of this guidance, should be discounted at the then applicable discount rate under U.S. GAAP also. In addition, any changes that result in upward revisions to the undiscounted estimated cash flows shall be treated as a new liability and discounted at the then current discount rate. Any downward revisions to the undiscounted estimated cash flows will result in a reduction of the liability for decommissioning costs and is reduced from the recorded discounted liability at the rate that was used at the time the obligation was originally recorded.

As a result, substantially all of the different between the Korean GAAP liability and the U.S. GAAP liability is due to the different guidance adoption dates and the resulting different adoption date discount rates which impacts the liabilities assessed prior to the respective adoption dates, as discussed above. Also, subsequent to 2004, the Company uses the same discount rates under both GAAPs for liabilities related to new facilities, so no further GAAP differences will be created unless there are upward revisions in the amount payable.

In 2008, as discussed in Note 22, effective as of January 1, 2009, the Radio-active Waste Management Act (“RWMA”) was enacted by the Korean Government, in an effort to centralize the disposal of spent fuel and low & intermediate radioactive waste and related management process. The RWMA designated the Korea Radio-active Waste Management Corporation (“KRMC”) as the entity in charge of performing the disposal of spent fuel and low & intermediate radioactive waste. As a result, the Company’s related asset retirement obligation liabilities transferred to KRMC on RWMA enactment date.

As a result of the RWMA, the GAAP differences related to the asset retirement obligation liabilities for disposal of spent fuel and low & intermediate radioactive waste (for such liabilities related to periods prior to respective guidance’s adoptions) was eliminated, as the Company no longer needs to discount such liabilities at a different discount rate.

For liabilities related to disposal of spent fuel recognized prior to the RWMA, the Company reclassified (Won)3,576,369 million of liabilities to other long-term payables. This amount was the asset retirement obligation liability accrued under Korean GAAP, which was deemed as the liability which transferred to KRMC by RWMA. Due to the substantial transfer amount of the liability (payables) to KRMC, the RWMA established a fifteen year payment plan, with an initial five year grace period, for the transfer of liabilities incurred prior to the RWMA.

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Amounts reconciled from Korean GAAP to U.S. GAAP for capitalized asset retirement costs, net of accumulated depreciation and liabilities for decommission costs are as follows:


	Korean Won (in millions)					Translation into U.S. Dollar (Note 2) (in thousands)
	2008			2009		2009
Decrease in capitalized asset retirement costs, net of accumulated depreciation	(Won)	(866,658	)	(825,000	)	$	(708,976	)
Decrease in liabilities for decommissioning costs(*1)		1,397,480		1,410,014			1,211,716

Increase in shareholders’ equity	(Won)	530,822		585,014		$	502,740

(*1)

There was no change related to the decommissioning and disposal of nuclear power plants so the GAAP difference from January 2009 forward only relates to those remaining obligations.

Details of the Company’s asset retirement costs as of December 31, 2008 and 2009 under U.S. GAAP are as follows:


	Korean Won (in millions)					Translation into U.S. Dollar (Note 2) (in thousands)
	2008			2009		2009
Capitalized asset retirement costs	(Won)	1,134,699		1,198,381		$	1,029,847
Less : accumulated depreciation		(395,025	)	(493,862	)		(424,408	)

	(Won)	739,674		704,519		$	605,439

Changes in liabilities for decommissioning costs for the years ended December 31, 2008 and 2009 under U.S. GAAP are as follows:


	Korean Won (in millions)					Translation into U.S. Dollar (Note 2) (in thousands)
	2008			2009		2009
Balance at beginning of year	(Won)	5,911,298		4,073,284		$	3,500,437
Liabilities incurred		470,376		255,360			219,447
Accretion expense for the year		320,250		210,853			181,200
Payments		(8,791	)	(254,287	)		(218,525	)
Transfer to long-term other account payable(*1)		(3,576,369	)	—			—
Others(*2)		956,520		—			—

Balance at end of year	(Won)	4,073,284		4,285,210		$	3,682,559

(*1)

For spent fuel discharged prior to December 31, 2008, the Company has accrued the liability of (Won) 3,576,369 million. Under newly enacted RWMA, as the Company is required to pay KRMC over 15 years, after a 5 year grace period. As a result, the liability of (Won)3,576,369 million was reclassified to the long-term other accounts payable.

(*2)

With the transfer of performing the disposal of spent fuel and low and intermediate radioactive waste, the liability under U.S.GAAP increased by (Won)956,520 million to record the actual liability transferred to KRMC which was equivalent to the liability amount under Korean GAAP: There no longer exists a GAAP difference in 2009.

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(k)	Convertible Bonds

Under Korean GAAP, the value of conversion rights is recognized as capital surplus. Additionally, the convertible bonds are not subject to foreign currency translation as convertible bonds are regarded as non-monetary foreign currency liabilities.

Under U.S. GAAP, unless a conversion right is considered as an embedded derivative instrument requiring bifurcation, no portion of the proceeds from the issuance of the convertible debt securities should be attributed to the conversion feature. The Company has determined that the conversion feature embedded in its convertible debt should not be bifurcated. Additionally, the convertible bonds are subject to foreign currency translation as these convertible bonds are regarded as monetary foreign currency liabilities under U.S. GAAP.

(l)	Principles of Consolidation

Under Korean GAAP, noncontrolling interests in consolidated subsidiaries are presented as a component of shareholders’ equity in the consolidated statements of financial position.

Under U.S. GAAP, before the new consolidation guidance, noncontrolling interests were presented outside of the shareholders’ equity section in the consolidated statements of financial position. Effective January 1, 2009, the Company adopted the new consolidation accounting guidance under U.S. GAAP, the requirements of which include that the ownership interest in subsidiaries held by parties other than the parent shall be clearly identified and presented in the consolidated statements of financial position within equity, but separate from the parent’s equity. The provisions of this guidance were prospective upon adoption, except for the presentation and disclosure requirements which are required to be retrospectively applied. As such, the Company has retroactively amended its presentation of its noncontrolling interests in its subsidiaries in the consolidated statements of financial position.

(m)	Reserve for Self-insurance

Under Korean GAAP, in accordance with Accounting Regulations for Public Enterprise·Associate Government Agency, the Company provides a self-insurance reserve for loss from accident and liability to third parties that may arise in connection with the Company’s non-insured facilities. The self-insurance reserve is recorded until the amount meets a certain percentage of non-insured buildings and machinery.

U.S. GAAP considers loss from accidents and liability to third parties to be a contingency that is only provided for when a liability has been incurred. Contingent losses for self-insurance are generally recognized as a liability (undiscounted) when probable and reasonably estimable.

(n)	Gain on Disposal of Subsidiaries

Under Korean GAAP, when the parent company disposes of a portion of its investment in a subsidiary but still retains a controlling interest, any gain or loss on disposal should be recognized in capital surplus.

Under U.S. GAAP, historically the Company elected the accounting guidance to recognize such gain or loss in other income, as part of earnings. Effective January 1, 2009, the Company adopted the new consolidation accounting guidance under U.S. GAAP, which states that when changes in parent’s ownership interest in a subsidiary occurs, related gain or loss on disposal should be recognized in capital surplus. As retroactive application of such guidance is prohibited, the Company has prospectively applied this guidance. Consequently, the Company recognized gains from a disposal of subsidiary in 2007 as other income and as such accounted it for as an adjustment from net income under Korean GAAP to that under U.S. GAAP. In 2009, the Company also recognized gains from a disposal of subsidiary which it recognized in capital surplus, as such no reconciliation adjustment between Korean GAAP and U.S. GAAP was necessary.

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(o)	Gain on Valuation of Non-marketable Securities

Under Korean GAAP, non-marketable securities should be classified as available-for-sale and carried at cost or fair value if applicable, with unrealized holding gains and losses reported as other comprehensive income until realized.

Under U.S. GAAP, investments in non-marketable equity securities without significant influence that do not have a readily determinable fair value are stated at cost using the cost method. As a result of the reconciliation of difference, the shareholders’ equity as of December 31, 2008 and 2009 increased by (Won)6,266 million and (Won)10,873 million, respectively, compared to that under Korean GAAP.

(p)	Fair Value Hierarchy

Effective January 1, 2008, the Company adopted the accounting guidance for fair value measurements.

The accounting guidance provides for the following:

(i)

Defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework for measuring fair value;

(ii)

Establishes a three-level hierarchy for fair value measurements based upon the observable inputs to the valuation of an asset or liability at the measurement date;

(iii)

Requires consideration of nonperformance risk when valuing liabilities; and

(iv)

Expands disclosures about instruments measured at fair value.

The Company classifies fair value balances based on the fair value hierarchy defined by the accounting guidance for fair value measurements. The classification of valuation hierarchy for fair value measurements is based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1—Quoted prices for identical instruments in active markets;

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose significant inputs are observable: and

Level 3—Instruments whose significant inputs are unobservable.

Following is a description of the valuation methodologies the Company used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Investment securities

The Company classified available-for-sale equity securities with marketability within Level 1 of the valuation hierarchy if quoted prices are available in an active market. The Company generally classifies its securities within Level 2 of the valuation hierarchy if quoted prices for identical instruments in active markets are not available. The Company determines the fair values of its securities using pricing models, quoted prices of securities with similar characteristics or discounted cash flow models. These models are primarily industry-standard models that consider various assumptions, including time value and yield curve as well as other relevant economic measures.

Derivatives

Derivatives are composed of cross currency swap and interest rate swaps valued using internal models that use readily observable market inputs, such as foreign currency exchange rates and swap rates. The Company classified derivatives as Level 2 within the valuation hierarchy.

F-81

Under Korean GAAP, fair value of derivatives is determined assuming the same nonperformance risk for the entity and the counterparty. However, U.S. GAAP requires consideration of both the entity’s nonperformance risk and counterparty nonperformance risk in determining the fair value of a derivative instrument. Due to such differences, for U.S. GAAP purpose, net loss increased by (Won)15,698 million and decreased by (Won)13,719 million, and other comprehensive income decreased by (Won)68,706 million and increased by (Won)50,856 million, compared to those under Korean GAAP for year ended December 31, 2008 and 2009, respectively. Refer to Note 25 for disclosure of derivatives under Korean GAAP.

The following table presents assets and liabilities measured and recorded at fair value on a recurring basis as of December 31, 2009:


	Korean Won (in millions)
	2008				2009
	Level 1		Level 2	Total	Level 1	Level 2	Total
Assets:
Investment securities	(Won)	8,725	13,960	22,685	123,123	9,980	133,103
Financial derivatives		—	1,240,790	1,240,790	—	880,096	880,096

Total Assets	(Won)	8,725	1,254,750	1,263,475	123,123	890,076	1,013,199


Liabilities:
Financial derivatives	(Won)	—	19,997	19,997	—	36,996	36,996

Total Liabilities	(Won)	—	19,997	19,997	—	36,996	36,996

(q)	Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of significant financial instruments in which it is practicable to estimate that value:

(i)

Cash and cash equivalents, short term financial instruments, trade receivables, short-term borrowings, and trade payables: The carrying amount approximates fair value because of its nature or relatively short maturity.

(ii)

Investments: The fair value of investments with marketability is estimated based on quoted market prices for those or similar investments. For other investments for which there are no quoted market prices, it was not practicable to estimate the fair value of investments in unlisted companies.

(iii)

Long-term debt: The fair value of long-term debt is estimated based on the quoted market prices for the same or similar issues, or on the current rates offered for debt of the same remaining maturities.

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The carrying amounts and estimated fair values of the Company’s consolidated financial instruments as of December 31, 2008 and 2009 are summarized as follows:


	Korea Won (in millions)
	2008					2009
	Carrying Amount			Fair value		Carrying Amount		Fair value
Cash and cash equivalents	(Won)	1,452,886		1,452,886		1,489,390		1,489,390
Short-term financial instruments		316,442		316,442		356,115		356,115
Trade receivables and other account receivables		3,532,552		3,532,552		4,531,443		4,531,443
Investments:
Practicable to estimate fair value		22,685		22,685		133,103		133,103
Not practicable		201,746		N/A		155,734		N/A
Short-term borrowings		(1,357,710	)	(1,357,710	)	(684,480	)	(684,480	)
Trade payables and other accounts payable		(3,099,089	)	(3,099,089	)	(2,763,509	)	(2,763,509	)
Long-term other account payable		(3,576,369	)	(3,576,369	)	(3,576,369	)	(3,576,369	)
Long-term debt, including current portion		(27,763,594	)	(27,907,314	)	(33,634,756	)	(33,221,281	)

(r)	Supplementary U.S. GAAP Disclosures

The Company’s supplementary information for the statement of cash flows is as follows:


	Korean Won (in millions)				Translation into U.S. Dollars (Note 2) (in thousands)
	2007		2008	2009	2009
Interest paid, net of capitalized portion	(Won)	903,916	928,119	1,378,799	$	1,184,892
Income taxes paid		1,385,254	699,070	428,371		368,127

(s)	Scope of Equity Method

Under Korean GAAP, a company should account for its investment under the equity method of accounting, if it has significant influence. A company is presumed to have significant influence if it has the ability to nominate a board member, regardless of overall ownership percentage or other conditions that would be considered under U.S. GAAP.

Under U.S GAAP, to presume if a company has significant influence or not, the followings are some of the conditions it would consider; ability to nominate a board member, such board member’s voting power and limitation (if any), overall ownership percentage, influence compared to other investors, relationship between the investor and investee and etc. Due to such difference in guidance and practice, certain investments which are accounted for under the equity method under K GAAP, are accounted for as an available-for-sale investment under the cost basis with unrealized gains and losses reported as other comprehensive income until realized at each reporting date under U.S. GAAP. Under U.S. GAAP, net income increased by (Won)17,788 million and accumulated other comprehensive income increased by (Won)2,787, compared to that under Korean GAAP for year ended December 31, 2009.

(t)	Recent Changes in U.S. GAAP

In December 2007, the FASB issued the revised Accounting Standards Codification (ASC) 805, “Business Combinations”, which establishes principles and requirements for how an acquirer in a business

F-83

combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This revised guidance is to be applied prospectively to business combinations for which the acquisition date is on or after the beginning of an entity’s fiscal year that begins on or after December 15, 2008. The adoption of this revised guidance did not have a material impact on its results from operations or financial condition.

In December 2007, the FASB amended ASC 810, “Consolidation” for noncontrolling interests in consolidated financial statements. This amendment requires the ownership interest in subsidiaries held by parties other than the parent be clearly identified and presented in the consolidated statements of financial position within equity, but separate from the parent’s equity; the amount of consolidated net income attributable to the parent and the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of earnings; and changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently. This amendment is effective for fiscal years beginning on or after December 15, 2008. The provisions of this amendment were prospective upon adoption, except for the presentation and disclosure requirements. The Company applied the provisions prospectively beginning January 1, 2009 while amendments related to the presentation and disclosure requirements have been applied retrospectively to the Company’s consolidated financial statements for all periods presented. See Note 38(l) for presentation and disclosures required under ASC 810.

In March 2008, the FASB amended and expanded the disclosure requirements for derivative instruments and hedging activities required under ASC 815, “Derivatives and Hedging”. The amendments to ASC 815 requires increased qualitative, quantitative, and credit-risk disclosures. Required qualitative disclosures include: (1) How and why an entity is using a derivative instrument or hedging activity (e.g., for risk management or other purposes), (2) How the entity is accounting for its derivative instrument and hedged items under ASC 815 (and related guidance), and (3) How the instrument affects the entity’s financial position, financial performance, and cash flows. The Company adopted these disclosure requirements as of January 1, 2009. The adoption of this amendment to ASC 815 only affected the Company’s disclosures of derivative instruments and hedging activities, and did not have a material impact on its results from operations or financial position. See related Korean GAAP disclosure at Note 25 which is inclusive of such disclosures required under ASC 815.

In May 2008, the FASB updated ASC 470-20, “Debt with Conversion and Other Options” for convertible debt instruments that may be settled in cash upon conversion (Including Partial Cash Settlement). This guidance clarifies that convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement), not addressed by the accounting guidance for convertible debt and debt issued with stock purchase warrants. Additionally, this guidance specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2008 on a retrospective basis with no early adoption option. The Company’s adoption of this guidance did not have a material impact on its results from operations or financial condition.

In June 2008, the FASB ratified the consensus reached by ASC 815-40, “Derivatives and Hedging: Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock”. Under this guidance, an instrument (or embedded feature) would not be considered indexed to an entity’s own stock if its settlement amount is affected by variables other than those used to determine the fair value of a “plain vanilla” option or forward contract on equity shares, or if the instrument contains a feature (such as a leverage factor) that increases exposure to those variables. An equity-linked financial instrument (or embedded feature) would not be considered indexed to the entity’s own stock if the strike price is denominated in a currency other than the issuer’s functional currency. Effective January 1, 2009, the Company adopted this guidance. Such adoption did not have a material impact on its results from operations or financial condition.

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In June 2009, the FASB amended ASC 105, “Generally Accepted Accounting Principles”, which identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP. On the effective date of the changes to ASC 105, which was for financial statements issued for interim and annual periods ending after September 15, 2009, the ASC supersedes all then-existing non-SEC accounting and reporting standards. Under the ASC, all of its content carries the same level of authority and the GAAP hierarchy includes only two levels of GAAP: authoritative and non-authoritative. While the adoption of the ASC did not have a material impact on its financial position or results of operations, the ASC impacted the references to authoritative and non-authoritative accounting literature contained within the Notes.

In September and August 2009, respectively, the FASB issued Accounting Standards Updates (ASU) 2009-12, “Fair Value Measurements and Disclosure, and ASU 2009-05, “Measuring Liabilities at Fair Value”. ASU 2009-12 provides guidance for the fair value measurement of investments in certain entities that calculate the net asset value per share (or its equivalent) determined as of the reporting entity’s measurement date. Certain attributes of the investment (such as restrictions on redemption) and transaction prices from principal-to-principal or brokered transactions will not be considered in measuring the fair value of the investment. The amendments in this standard are effective for interim and annual periods ending after December 15, 2009. The adoption of ASU 2009-12 did not have a material impact on its financial position or results of operations.

ASU 2009-05 provides guidance on measuring the fair value of liabilities under ASC 820, “Fair Value Measurements and Disclosures”. This standard clarifies that in the absence of a quoted price in an active market for an identical liability at the measurement date, companies may apply approaches that use the quoted price of an investment in the identical liability or similar liabilities traded as assets or other valuation techniques consistent with the fair-value measurement principles in ASC 820. The standard permits fair value measurements of liabilities that are based on the price that a company would pay to transfer the liability to a new obligor. It also permits a company to measure the fair value of liabilities using an estimate of the price it would receive to enter into the liability at that date. The new standard is effective for interim and annual periods beginning after August 27, 2009 and applies to all fair-value measurements of liabilities required by GAAP. The Company is currently evaluating the impact that the adoption may have on its consolidated financial statements.

In May 2009, the FASB revised ASC 855, “Subsequent Events”. This guidance establishes standards of accounting for and disclosure of events that occur after the end of the reporting period but before the date that the financial statements are issued or are available to be issued. Specifically, the Statement sets forth (1) the period after the end of the reporting period during which management of a reporting entity will evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (2) the circumstances under which an entity will recognize events or transactions occurring after the end of the reporting period in its financial statements and (3) the disclosures that an entity will make about events or transactions that occurred after the end of the reporting period. This Standard is effective for interim and annual periods ending after June 15, 2009. The Company’s adoption of this guidance did not have a material impact on its results from operations or financial condition.

In January 2010, the FASB issued ASU 2010-06, “Improving Disclosures about Fair Value Measurements”. The ASU requires disclosing the amounts of significant transfers in and out of Level 1 and 2 fair value measurements and to describe the reasons for the transfers. The disclosures are effective for reporting periods beginning after December 15, 2009. Additionally, disclosures of the gross purchases, sales, issuances and settlements activity in Level 3 fair value measurements will be required for fiscal years beginning after December 15, 2010. The Company is currently evaluating the impact that the adoption may have on its consolidated financial statements.

In February 2010, the FASB issued ASU 2010-09 “Amendments to Certain Recognition and Disclosure Requirements”, which amends ASC 855 to address certain implementation issues related to an entity’s

F-85

requirement to perform and disclose subsequent-events procedures. The ASU adds a definition of the term “SEC filer” to the ASC Master Glossary and requires (1) SEC filers and (2) conduit debt obligors for conduit debt securities that are traded in a public market to evaluate subsequent events through the date the financial statements are issued. All other entities are required to evaluate subsequent events through the date the financial statements are available to be issued. The guidance is effective for interim or annual periods ending after June 15, 2010. The Company is currently evaluating the impact that the adoption may have on its consolidated financial statements.

In January 2010, the FASB issued ASU 2010-02 “Accounting and Reporting for Decreases in Ownership of Subsidiary—a Scope Clarification”, in response to practice issues entities had encountered in applying the decrease-in-ownership provisions in ASC 810-10. The ASU clarifies that the decrease-in-ownership provisions of ASC 810-10 and related guidance apply to (1) a “subsidiary or group of assets that is a business or nonprofit activity (2) a subsidiary or group of assets “that is a business or nonprofit activity that is transferred to an equity method investee or joint venture and (3) an exchange of a group of assets that constitutes a business or nonprofit activity for a noncontrolling interest in an entity (including an equity method investee or joint venture). In addition, the ASU clarifies that the decrease-in-ownership guidance does not apply to the sales of in-substance real estate or conveyances of oil and gas mineral rights, even if these transactions involve businesses. Finally, the ASU expands the disclosures required upon deconsolidation of a subsidiary. An entity will be required to follow the amended guidance beginning in the period that it first adopts ASC 810-10. For those entities that have already adopted ASC 810-10, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The Company is currently evaluating the impact that the adoption may have on its consolidated financial statements.

F-86

(u)	Effect on Net Income and Shareholders’ Equity

The effects of the significant adjustments to net income and shareholders’ equity that are required if U.S. GAAP were applied instead of Korean GAAP are summarized as follows:


	Korean Won (in millions)							Translation into U.S. dollars (Note 2) (in thousands)
	2007			2008		2009		2009
NET INCOME (LOSS) UNDER KOREAN GAAP	(Won)	1,467,168		(2,914,039	)	(47,732	)	$	(41,018	)
ADJUSTMENTS:
OPERATING INCOME
Asset revaluation (Note 38(b))		330,115		341,605		286,749			246,422
Special depreciation (Note 38(c))		(5,328	)	(2,776	)	—			—
Regulated operation (Note 38(d))		(2,135	)	157,423		167,557			143,993
Capitalized foreign currency translation (Note 38(f))		151,088		134,714		123,738			106,336
Reversal of eliminated profit on transactions with subsidiaries and affiliates (Note 38(e))		(1,461	)	(7,631	)	(8,464	)		(7,274	)
Liabilities for decommissioning costs and capitalized asset retirement costs (Note 38(j))		81,335		(844,988	)	54,192			46,571
Reserve for self-insurance (Note 38(m))		5,331		5,995		6,148			5,283
Revenue recognition (Note 38(a))		52,057		73,784		187,372			161,021
Intangible assets (Note 38(g))		(44,013	)	(4,965	)	15,135			13,006
Classification differences in the consolidated statements of income(*1)		(157,762	)	(25,807	)	(3,113	)		(2,675	)
OTHER INCOME (EXPENSES)
Asset revaluation—equity investments (Note 38(b))		13,349		12,339		12,257			10,533
Capitalized foreign currency translation (Note 38(f))		2,381		(863	)	(6,284	)		(5,400	)
Convertible bonds (Note 38(k))		(97,580	)	(520,731	)	659,405			566,670
Gain on disposal of subsidiaries (Note 38(n))		63,209		—		—			—
Equity income of affiliates(*2)		(132,914	)	(110,871	)	(52,516	)		(45,130	)
Scope of equity method (Note 38(s))		—		—		17,788			15,286
Credit valuation adjustment (Note 38(p))		—		(15,698	)	13,719			11,790
Classification differences in the consolidated statements of income(*1)		157,762		25,807		3,113			2,675
INCOME TAX EXPENSES
Deferred income taxes		(120,192	)	(198,222	)	(336,739	)		(289,382	)
Change in enacted tax rates (Note 38(h))		—		6,366		—			—
FIN48 Liabilities (Note 38(i))		(2,876	)	(178	)	6,449			5,542
Tax effect of gain on disposal of subsidiaries (Note 38(n))		(16,264	)	—		—			—
Tax effect of equity income of affiliates(*2)		24,944		17,492		2,624			2,254
EQUITY INCOME OF AFFILIATES, NET OF TAX(*2)		107,970		93,379		49,892			42,875

NET INCOME (LOSS) UNDER U.S. GAAP	(Won)	1,876,184		(3,777,865	)	1,151,290		$	989,378

CONTROLLING INTEREST UNDER U.S. GAAP	(Won)	1,835,473		(3,819,165	)	1,102,306		$	947,283
NONCONTROLLING INTEREST UNDER U.S. GAAP	(Won)	40,711		41,300		48,984		$	42,095

(*1)	Certain donations and gain or loss on disposal of property, plant and equipment are recorded in other income or expenses under Korean GAAP while recorded in operating expenses under U.S. GAAP. This reclassification does not affect the net income under U.S. GAAP.

(*2)	Under Korean GAAP, equity income of affiliates is presented as other income, while it is shown after income tax expense under U.S. GAAP.

F-87


	Korean Won (in millions)					Translation into U.S. dollars (Note 2) (in thousands)
	2008			2009		2009
SHAREHOLDERS’ EQUITY UNDER KOREAN GAAP ADJUSTMENTS:	(Won)	41,274,814		41,403,807		$	35,580,980
Current Asset
Account Receivables
Revenue recognition (Note 38(a))		1,069,171		1,256,543			1,079,829
UTILITY PLANT
Asset revaluation (Note 38(b))		(6,425,196	)	(6,138,447	)		(5,275,166	)
Capitalized asset retirement costs (Note 38(j))		(866,658	)	(825,000	)		(708,976	)
Construction in progress (Note 38(g))		300,000		—			—
Capitalized foreign currency translation (Note 38(f))		(1,046,947	)	(929,493	)		(798,774	)
Reversal of eliminated profit on transactions with subsidiaries and affiliates (Note 38(e))		107,918		99,454			85,467
INTANGIBLE ASSETS
Future radioactive wastes repository sites usage rights (Note 38(g))		(300,000	)	—			—
Research and development cost (Note 38(g))		(48,978	)	(33,843	)		(29,083	)
INVESTMENT SECURITIES
Asset revaluation (Note 38(b))		(36,446	)	(24,189	)		(20,787	)
Available-for-sale securities (Note 38(o))		6,266		10,873			9,344
Scope of equity method (Note 38(s))		—		20,575			17,681
FINANCIAL DERIVATIVES
Credit valuation adjustments (Note 38(p))		(85,759	)	(20,387	)		(17,520	)
DEFERRED INCOME TAXES		1,358,236		1,007,101			865,467
LIABILITIES
Liabilities for decommissioning costs (Note 38(j))		1,397,480		1,410,014			1,211,716
Regulated operation (Note 38(d))		(573,917	)	(406,360	)		(349,212	)
Reserve for self-insurance (Note 38(m))		115,268		121,416			104,341
Convertible bonds (Note 38(k))		(687,261	)	(27,856	)		(23,938	)
FIN48 Liabilities (Note 38(i))		(16,231	)	(8,200	)		(7,047	)
Credit valuation adjustments (Note 38(p))		1,356		558			480

SHAREHOLDERS’ EQUITY UNDER U.S. GAAP	(Won)	35,543,116		36,916,566		$	31,724,802

CONTROLLING INTEREST UNDER U.S. GAAP		35,230,171		36,539,993			31,401,188
NONCONTROLLING INTEREST UNDER U.S. GAAP		312,945		376,573			323,614

F-88

The reconciliation of operating income from Korean GAAP to U.S. GAAP for the years ended December 31, 2007, 2008 and 2009 is as follows:


	Korean Won (in millions)							Translation into U.S. dollars (Note 2) (in thousands)
	2007			2008		2009		2009
Operating income (loss) under Korean GAAP	(Won)	2,821,675		(2,798,073	)	1,714,822		$	1,473,658
Asset revaluation		330,115		341,605		286,749			246,422
Special depreciation		(5,328	)	(2,776	)	—			—
Regulated operation		(2,135	)	157,423		167,557			143,993
Capitalized foreign currency translation		151,088		134,714		123,738			106,336
Reversal of eliminated profit on transactions with subsidiaries and affiliates		(1,461	)	(7,631	)	(8,464	)		(7,274	)
Asset retirement obligation		81,335		(844,988	)	54,192			46,571
Reserve for self-insurance		5,331		5,995		6,148			5,283
Revenue recognition		52,057		73,784		187,372			161,021
Research and development cost		(44,013	)	(4,965	)	15,135			13,006
Classification differences in the consolidated statements of income		(157,762	)	(25,807	)	(3,113	)		(2,675	)

Operating income (loss) under U.S. GAAP	(Won)	3,230,902		(2,970,719	)	2,544,136		$	2,186,341

The reconciliation of utility plant from Korean GAAP to U.S. GAAP at December 31, 2008 and 2009 is as follows:


	Korean Won (in millions)					Translation into U.S. dollars (Note 2) (in thousands)
	2008			2009		2009
Utility plant, net under Korean GAAP	(Won)	69,795,285		74,033,431		$	63,621,733
Asset revaluation		(6,425,196	)	(6,138,447	)		(5,275,166	)
Capitalized asset retirement costs		(866,658	)	(825,000	)		(708,976	)
Construction in-progress		300,000		—			—
Capitalized foreign currency translation		(1,046,947	)	(929,493	)		(798,774	)
Reversal of eliminated profit on transactions with subsidiaries and affiliates		107,918		99,454			85,467

Utility plant, net under U.S. GAAP	(Won)	61,864,402		66,239,945		$	56,924,284

The reconciliation of total assets from Korean GAAP to U.S. GAAP at December 31, 2008 and 2009 is as follows:


	Korean Won (in millions)					Translation into U.S. dollars (Note 2) (in thousands)
	2008			2009		2009
Total assets under Korean GAAP	(Won)	88,198,610		93,208,031		$	80,099,713
Adjustments:
Account Receivables		1,069,171		1,256,543			1,079,829
Utility Plant		(7,930,883	)	(7,793,486	)		(6,697,449	)
Intangible assets		(348,978	)	(33,843	)		(29,083	)
Investment securities		(30,180	)	7,259			6,238
Financial derivatives		(85,759	)	(20,387	)		(17,520	)
Deferred income taxes		1,358,236		1,007,101			865,467

Total assets under U.S. GAAP	(Won)	82,230,217		87,631,218			75,307,195

F-89

The tax effects of temporary differences that resulted in significant portions of the deferred tax assets and liabilities at December 31, 2008 and 2009, computed under U.S. GAAP, and the description of the financial statement items that created these differences are as follows:


	Korean Won (in millions)					Translation into U.S. dollars (Note 2) (in thousands)
	2008			2009		2009
Deferred tax assets adjustments:
Asset revaluation	(Won)	1,240,849		1,178,901		$	1,013,106
Convertible bond		151,197		6,128			5,266
Regulated operation		126,262		89,399			76,827
Capitalized foreign currency translation		230,328		204,488			175,730
Research and development cost		10,775		7,445			6,398
FIN48 Liabilities		6,256		4,674			4,016
Scope of equity method		—		14,119			12,133
Credit valuation adjustments		18,867		4,485			3,854

Total deferred tax assets adjustments		1,784,534		1,509,639			1,297,330

Deferred tax liabilities adjustments:
Asset retirement obligation, net		(116,781	)	(128,703	)		(110,603	)
Reserve for self insurance		(25,359	)	(26,712	)		(22,955	)
Reversal of eliminated profit on transactions with subsidiaries and affiliates		(23,742	)	(21,880	)		(18,803	)
Revenue Recognition		(258,739	)	(304,083	)		(261,318	)
Available-for-sale securities		(1,379	)	(2,392	)		(2,055	)
Scope of equity method		—		(18,645	)		(16,023	)
Credit valuation adjustments		(298	)	(123	)		(106	)

Total deferred tax liabilities adjustments	(Won)	(426,298	)	(502,538	)	$	(431,863	)

Net deferred tax assets adjustments:		1,358,236		1,007,101		$	865,467

Net deferred tax assets under Korean GAAP	(Won)	1,318,849		1,052,854		$	904,786

Net deferred tax assets under U.S. GAAP	(Won)	2,677,085		2,059,955		$	1,770,254

F-90

Basic earnings (loss) per share (EPS) excludes dilution and is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Earnings (loss) per share for the years ended December 31, 2007, 2008 and 2009 under U.S. GAAP are as follows:


	Korean Won (in millions, except per share data)					Translation into U.S. dollars (Note 2) (in thousands, except per share data)
	2007		2008		2009	2009
Controlling interest under U.S. GAAP (a)	(Won)	1,835,473	(3,819,165	)	1,102,306	$	947,283

Effect of dilutive securities		24,283	—		77		67

Adjusted net income (b)	(Won)	1,859,756	(3,819,165	)	1,102,383	$	947,350

Weighted-average shares (c)		621,717,622	622,637,717		622,637,717		622,637,717
Effect dilutive securities		9,497,722	—		498,802		498,802

Adjusted weighted average shares (d)		631,215,344	622,637,717		623,136,519		623,136,519

Basic earnings (loss) per share under U.S. GAAP (a)/(c)	(Won)	2,952	(6,134	)	1,770	$	1.52

Diluted earnings (loss) per share under U.S. GAAP (b)/(d)(*)	(Won)	2,946	(6,134	)	1,769	$	1.52

Basic earnings (loss) per ADS under U.S. GAAP	(Won)	1,476	(3,067	)	885	$	0.76

Diluted earnings (loss) per ADS under U.S. GAAP(*)	(Won)	1,473	(3,067	)	884	$	0.76

(*)	In 2008, Euro and JPY denominated exchangeable bonds issued on November 21, 2006 that could potentially dilute basic EPS in the future were not included in the computation of diluted EPS because those would have been antidilutive.

F-91

INDEX OF EXHIBITS



	1.1			Articles of Incorporation, as amended on March 19, 2010 (in English)†

	2.1			Form of Deposit Agreement*

	8.1			List of Subsidiaries†

	12.1			Certifications of our Chief Executive Officer required by Rule 13a-14(a) of the Exchange Act (Certifications under Section 302 of the Sarbanes-Oxley Act of 2002)

	12.2			Certifications of our Chief Financial Officer required by Rule 13a-14(a) of the Exchange Act (Certifications under Section 302 of the Sarbanes-Oxley Act of 2002)

	13.1			Certifications of our Chief Executive Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of the United States Code (18 U.S.C. 1350) (Certifications under Section 906 of the Sarbanes-Oxley Act of 2002)

	13.2			Certifications of our Chief Financial Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of the United States Code (18 U.S.C. 1350) (Certifications under Section 906 of the Sarbanes-Oxley Act of 2002)

	15.1			The Korea Electric Power Corporation Act (in English)**

	15.2			Enforcement Decree of the Korea Electric Power Corporation Act (in Korean and English)***

	15.3			Government-Invested Enterprise Management Basic Act of 1983, as amended (in Korean and English)***

	15.4			Enforcement Decree of the Government-Invested Enterprise Management Basic Act of 1983, as amended (in Korean and English)***

†	Incorporated by reference to the Original Annual Report.

*	Incorporated by reference to the Registrant’s Registration Statement on Form F-6 with respect to the ADSs, registered under Registration No. 33-84612.

**	Incorporated by reference to the Registrant’s Annual Report on Form 20-F for the fiscal year ended December 31, 2002.

***	Incorporated by reference to the Registrant’s Registration Statement on Form F-3 filed on March 8, 2000, registered under Registration No. 333-9180.

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