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Korea Western Power Co., Ltd.
Presentation to Investors
November 2003
Agenda
I.
Korean Economic Environment
II. Power Industry Overview
III. Power Industry Restructuring Update
IV. Overview of Western Power
V. Financial Overview
VI. Summary
2
I. Korean Economic Environment
Strong Prospects for Growth



The Korean economy is one of the strongest performing economies in Asia
External and domestic demand is recovering sharply after a short-lived slowdown
The Korean economy is expected to rebound in 4Q03, with GDP forecasted to
increase 5.0 % in 2004
Asia GDP Growth
Korea GDP Growth Forecast
10.0%
World Bank
8.0%
 3.00% in 2003
 5.10% in 2004
6.0%
4.0%
Asian
Development Bank
 3.10% in 2003
Korea
Development
Institute
 2.60% in 2003
 5.00% in 2004
2002
China
KOREA
Thailand
India
Malaysia
Singapore
Indonesia
Taiwan
0.0%
Hong Kong
2.0%
 4.80% in 2004
1H03
Source: Bloomberg
4
Recognition of Success

Korea has demonstrated robust economic recovery and commitment to corporate
restructuring to emerge successfully from the Asian economic crisis, resulting in
credit rating upgrades between 3–5 times by the international credit rating agencies
Moody’s: A3
S&P: A-
Rating
A1
Rating
Rating
AA-
AAA+
A
ABBB+
BBB
BBBBB+
B-
A+
A3
ABaa2
BBB
Baa3
BBBBB+
Ba1
8/97
B+
12/97
2/99
3/02
Fitch: A
8/97 10/97 12/97 2/98 11/99 9/02
3/97
7/98
12/99
4/01
9/02
Korea’s single-A sovereign rating affirms the nation's successful restructuring efforts
and significant recovery from financial crisis.
5
I. Power Industry Overview
Nationwide Power Consumption


Historically, power consumption has grown faster than Korean GDP
Steady increase in electricity consumption in recent years driven largely by strong
industrial demand
Korean GDP and Domestic Power Consumption (1992–2002)
20.0%
14.7%
250,000
10.4%
11.4%
10.8%
11.8%
10.0%
200,000
150,000
7.6%
10.9%
5.4%
5.5%
8.3%
8.9%
8.0%
6.3%
5.0%
3.1%
-5.0%
-6.7%
0
1993
1994
1995
1996
Power consumption
1997
1998
Consumption growth rate
5.0%
0.0%
-3.6%
50,000
1992
10.0%
9.3%
6.8%
100,000
Source:
15.0%
10.7% 11.8%
Growth rate
Power consumption (GWh)
300,000
-10.0%
1999
2000
2001
2002
GDP growth rate
Statistics of Electric Power in Korea, KEPCO, Bank of Korea
7
Domestic Consumption Outlook


Power consumption will continue to adhere to the rising trend for 2003 and beyond
The consistent growth in electricity demand will provide additional room for
KOWEPO to grow its profitability
Projected Domestic Power Demand (2002A–2012F)
400,000
Unit: GWh
350,000
288,591
300,000
299,983
311,056
321,184
330,593
339,452
347,675 355,324
362,922 370,248
271,009
250,000
200,000
150,000
2002A
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: Electricity Supply & Demand Long-Term Basic Plan (2002), MOCIE
8
Reserve Margin
 Reserve margin is expected to increase steadily to 25% levels, peak demand and
ending capacity with projected CAGR of 3.9 % and 4.8% respectively
Projected Domestic Power Demand and Supply (2001A–2010F)
(MW)
80,000
40%
70,000
35%
60,000
30%
50,000
25%
40,000
20%
30,000
15%
20,000
10%
10,000
5%
0
0%
2001A
2002A
2003F
2004F
Peak Demand
2005F
2006F
Ending Capacity
2007F
2008F
2009F
2010F
Reserve Margin
Source: The 1st Basic Plan of Long-Term Electricity Supply & Demand
9
III. Power Industry Restructuring Update
Industry Restructuring Objectives
Increase Operational & Managerial Efficiency of the Korean Power Industry
Introduce Tariff Reforms Intended to “Gradually” Liberalize Electricity Prices in the
Interest of Ensuring a Stable Power Generation Environment
Promote Consumer Convenience through the Expansion of Consumer Choice by
Creating the Framework for a Competitive Open Electricity Market
Ensure Long-term, Inexpensive and Stable Electricity Supply in Korea
Develop a Competitive Generation and Distribution Market in Korea
“The Korean Government will Reform the Power Sector in a Way that Supports the
Gencos’ Financial Profiles, and Establishes a Competitive Regime” - Moody’s
11
Industry Restructuring Schedule
N G G
Generation
G G
N G G
G G
KPX
KPX
Transmission
Transmission
Transmission
Distribution
Distribution
Phase I
Preparation
Phase II
Generation Competition
D
D
Phase III
Wholesale Competition
D
D
D
D
Phase IV
Retail Competition
Under Review
1999

Announcement
of Industry
Restructuring
Plan
2000

Passage of
Restructuring
Bills
2001


Gencos, KPX
and KEC Setup
Cost-Based
Electricity Pool
System
Introduced
2003

Commence
Privatization
of Gencos
2004


Introduction of
Vesting
Contracts
Introduce PriceBased Two-Way
Bidding System
2005

Establish
Distribution
Companies
(Discos)
2009

Full
Competition
12
Industry Restructuring Initiatives & Progress

Privatization process has
been reviewed...
Cost Based Pool has
been established...
Introduction of Vesting
Contracts is the next
step...
Separating distribution
assets is being
reviewed...







Preparation for KOSEP’s IPO, instead of a sale of controlling
stake to a strategic investor, has been started
The privatization of the remaining gencos will be determined
after an evaluation of the KOSEP privatization
Electricity price is determined on a cost plus basis
Intermediate step to prepare gencos for wholesale competition
The proposed use of vesting contracts from 2004 onwardswill
minimise price volatility in the early stages of reform
Vesting contracts would result in operating cash flows
remaining highly stable for at least the next 2 years
The plan of separating distribution assets is under discussion
Mock operation will be conducted for a certain period before
actual separation in order to avoid or reduce trial and errors.
13
IV. Overview of Western Power
Snapshot of Western Power
Established
Number of Employees
April 2, 2001
1,587
Generation Capacity
7,946 MW(1)
Power Plant Complex
Taean, Pyeongtaek, Kunsan, Seoincheon, Samrangjin,
Cheongsong(1)
Total Assets (1H 2003)
W 2,960 billion (US$2.5 billion)(2)
Revenues (1H 2003)
W 1,060 billion (US$888 million)(2)
Power Sold (1H 2003)
17,751 GWh(2)
Credit Rating
BBB+ by S&P, Outlook: Positive
(1) Includes Cheongsong #1, 2 (600MW) under construction
(2) For the six months ending June 30, 2003; FX rate of W1,193.1/US$
15
Western Power’s Management

Strong management with a wealth of industry expertise
Individual
Position
Young-Cheol Lee
President & CEO
Experience




Young-Ki Park
Executive Auditor


Yoon-Tae Kim
Senior Vice President
General &
Affairs Division



Jeong-Kooc Han
Senior Vice President
Power Generation &
Construction Division


Academic Qualification
Senior Vice President, Western Power
Vice President, KEPCO
Managing Director of Samcheonpo, Boryeong
T/P Plant Division, KEPCO
35 Years of Industry Experience


BS, Hanyang University
PM (Project Management)
Program, Soong Shil
University
Head of International Intellectual Property
Training Institute, National Institute of
Professional Administration (2000~2001)
Various positions, Ministry of Trade, Industry and
Energy (1989~1997)


BA, Seoul National University
MBA, Yonsei University
Managing Director, Management Information
System and Public Relation Division, KEPCO
Head of Uijeongbu and Incheon Branches,
KEPCO
39 Years of Industry Experience


BA, Youngnam University
MBA, Hanyang University
Managing Director, Power Generation Dept.,
Western Power and Samcheonpo T/P Plant
Division, KEPCO
40 Years of Industry Experience

BS, Yonsei University
16
Western Power’s Plant Complex Capacity
90% of capacity is located near the Seoul and Gyeonggi metropolitan areas

Generation Capacity by Type of Plant
MW
3,500
3,480MW
3,000
Samrangjin
P/S
(600 MW)
2,500
Taean
Seoincheon
Seoul Metropolitan Area
1,466MW
#1~6
(3,000 MW)
Kunsan
(66 MW)
1,500
Coal
LNG
BC Oil
Pumped Storage
Cheongsong
P/S
(600 MW)
3,000MW
2,000
Plant Complex Location
Seoincheon
Cheongsong
(Under Construction)
(1,800 MW)
Kunsan
Pyeongtaek
(1,400 MW)
1,000
Pyeongtaek
Taean
Pyeongtaek
C/C (480 MW)
Samrangjin
0
Base Load
Intermediate Load
In Operation
Notes: As of June 30, 2003
Peak Load
Under Construction
17
Western Power’s Plant Complexes
Taean T/P(1)
Kunsan T/P
Pyeongtaek
T/P
Seoincheon
C/C
Pyeongtaek
C/C
Samrangjin
P/S
Capacity (MW)
3,000
66
1,400
1,800
480
600
# of Units
6
1
4
16
5
2
Load Type
Base
Intermediate
Intermediate
Peak
Peak
Peak
Main Fuel
Bituminous
Anthracite
B.C. Oil
LNG
LNG
P/S
Efficiency (%)
39.64
30.27
38.02
45.38
41.67
NA
Utilization (%)
87.70
69.89
38.80
44.41
31.94
9.25
Weighted
Avg. Age
5.1
34.8
21.1
10.9
10.4
17.6
Note: For the six months ending June 30, 2003
(1)
Additional capacity of 1,000MW will be added to Taean in the next several years
18
V. Financial Overview
Western Power’s Financial Overview (1H03)
Assets
Liabilities
Shareholders’
Equity
Notes:
 W 2,960 billion (US$ 2.5 billion)
– Fixed Assets/Total Assets Ratio : 86.1%
 W 1,097.1 billion (US$ 920 million)
– Debt-to-Capital Ratio : 31.6%
 W 1,860 billion (US$ 1.6 billion)
– Stake is Wholly Owned by KEPCO
Revenue
 W 1,060 billion (US$ 888 million)
– EBIT / EBITDA : W 213/ 354 billion
Profitability
 Net Income : W 131.8 billion (US$ 110.5 million)
– Net Margin: 12.5 %
For the six months ending June 30, 2003
FX rate of W1,193.1/US$
20
Western Power’s Financial Profile
Revenue & EBITDA (1H03)
Leverage Ratio (FY02 & 1H03)
1,200
45%
30%
Revenue
EBITDA
KEWESPO
20%
KOSPO
0
WESTERN
POWER
25%
KOMIPO
200
FY02
KEWESPO
400
35%
KOSPO
600
40%
WESTERN
POWER
Total Debt to Capital
800
KOSEPCO
Unit: KRW billion
1,000
KOMIPO

Western Power is the most profitable Korean genco
Western Power has been able to reduce its leverage in an effort to restructure
unfavorable dedt with strong cash flow
KOSEPCO

1H03
21
Western Power’s Key Financial Ratios
Western Power has achieved improving profitability
EBITDA Margin
40%
40%
40%
30%
30%
33.5%
29.1%
19.8%
20%
20%
20.2%
20%
15.7%
(1)
1H03
0%
FY02
0%
FY01
0%
1H03
10%
FY02
10%
FY01
10%
11.5%
12.5%
1H03
30%
Net Margin
FY02
35.1%
EBIT Margin
8.9%
FY01

FY 01 represents the period from Apr. 2, 2001 to Dec. 31, 2001
22
Western Power’s Key Credit Statistics
Western Power has healthy debt service and interest coverage ratios

EBITDA Interest Coverage
FFO Interest Coverage
12.0 x
12.0 x
Net Debt / EBITDA
4.0 x
10.7 x
8.5 x
9.0 x
9.0 x
3.0 x
2.9 x
7.4 x
5.8 x
6.0 x
2.0 x
3.9 x
(1)
1H03
0.0 x
FY02
0.0 x
FY01
0.0 x
1H03
1.0 x
FY02
3.0 x
FY01
3.0 x
FY01
1.2 x
1.1 x
1H03
Annualised
5.0 x
FY02
6.0 x
FY 01 represents the period from Apr. 2, 2001 to Dec. 31, 2001
23
Western Power’s Capex Requirements

Cheongsong plant is planned for completion in 2006, Total cost: KRW 259 billion
Initiated construction of Taean project in Nov 2003, targeted for completion in 2008,
Total cost: KRW 1,088 billion
Projected Capital Expenditure (2003 - 2008)
800
Unit: KRW billion

718.2
600
451.5
445.2
400
200
345.7
229.8
163.6
0
2003
2004
2005
Capacity Addition
2006
2007
2008
Facility Improvement
24
Western Power’s Debt Maturity Profile


Western Power is prepaying debt to further reduce leverage and smoothen cash flow
Debt restructuring would be completed by December 2003
Before Restructuring (Sep 2003)
After Restructuring (Dec 2003)
400
300
250.3
200
180.0
163.6
181.5
Unit: KRW billion
Unit: KRW billion
400
300
215.7
100
100
186.7
200
180.0
181.5
2007
2008
65.9
38.6
15.9
0.0
0
0
2003
2004
Debenture
2005
2006
2007
2008
LT Borrowings
2003
2004
2005
Debenture
2006
LT Borrowings
25
Western Power’s Debt Profile



US$ bond issuance in December 2002 diversified Western Power’s debt profile.
Western Power’s target financing mix is 50% from internal retained earning and 50%
from outside financing.
Western Power targets to maintain a mix of 60% from domestic / 40% from
international sources and, at the same time, 30% with floating / 70% with fixed rate.
Type of Instrument
Domestic
Loan
7%
Currency Distribution
KEPCO
Domestic
Bond
23%
USD
22%
Type of Interest
Floating
32%
Eurobond
22%
Corporate
Bond
24%
KDB
Private
Placement
Bond
24%
KRW
78%
Fixed
68%
Notes: As of September 2003, Before Restructuring
26
VI. Summary
Western Power – Investment Highlights
Key Credit Strengths of Western Power
Strong Economic
Fundamentals in
Korea
 Solid economic
recovery, backed by
robust domestic and
external demand
 Fourth largest FX
reserves
 Flexible fiscal and
monetary policy
 Single A credit ratings
by international
agencies
Favorable Industry
Conditions
 Economic recovery in
2004 to drive demand
for electricity
 Favorable demandsupply outlook
 Industry restructuring
proceeding gradually
under strict supervision
resulting in managed
competition and
improved operational
efficiency
Operational
Strengths
Strong Credit
Profile
 High thermal
efficiency and labor
productivity
 Highly experienced
management with
focus on cost and risk
management
 Strategically located
plants and wellbalanced plant mix
 Continuous
improvement in
operating and financial
performance
 Solid credit
fundamentals based on
profitable generation
business which was the
core of KEPCO
 Improving net margins
and decreasing
leverage
 Strong debt servicing
ability
Invest in the Leading Generation Company of Korea
28
Korea Western Power Co., Ltd.
Presentation to Investors
November 2003