TABLE OF CONTENTS
PART I
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 4A.
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 8.
ITEM 9.
ITEM 10.
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ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
ITEM 15.
ITEM 16.
ITEM 16A.
ITEM 16B.
ITEM 16C.
ITEM 16D.
ITEM 16E.
ITEM 16F.
ITEM 16G.
ITEM 16H.
ITEM 16I.
ITEM 16J.
ITEM 16K.
ITEM 17.
ITEM 18.
ITEM 19.
INDEX OF EXHIBITS
INDEX TO FINANCIAL STATEMENTS
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CERTAIN DEFINED TERMS AND CONVENTIONS
All references to “Korea” or the “Republic” in this annual report on Form 20-F, or this annual report, are references to the Republic of Korea. All references to the “Government” in this annual report are references to the government of the Republic of Korea. All references to “we,” “us,” “our,” “ours,” the “Company” or “KEPCO” in this annual report are references to Korea Electric Power Corporation and, as the context may require, its subsidiaries, and the possessive thereof, as applicable. All references to “the Ministry of Trade, Industry and Resources” and “the Ministry of Finance and Economy” include the respective predecessors thereof. All references to “tons” are to metric tons, equal to 1,000 kilograms, or 2,204.6 pounds. Any discrepancies in any table between totals and the sums of the amounts listed are due to rounding. All references to “IFRS” in this annual report are references to International Financial Reporting Standards Accounting Standards as issued by the International Accounting Standard Board. Unless otherwise stated, all of our financial information presented in this annual report has been prepared on a consolidated basis and in accordance with IFRS.
In addition, in this annual report, all references to:
“EWP” are to Korea East-West Power Co., Ltd.,
“KHNP” are to Korea Hydro & Nuclear Power Co., Ltd.,
“KOMIPO” are to Korea Midland Power Co., Ltd.,
“KOSEP” are to Korea South-East Power Co., Ltd.,
“KOSPO” are to Korea Southern Power Co., Ltd., and
“KOWEPO” are to Korea Western Power Co., Ltd.,
each of which is our wholly-owned generation subsidiary.
FORWARD-LOOKING STATEMENTS
This annual report includes “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934), including statements regarding our expectations and projections for future operating performance and business prospects. The words “believe,” “expect,” “anticipate,” “estimate,” “project” and similar words used in connection with any discussion of our future operation or financial performance identify forward-looking statements. In addition, all statements other than statements of historical facts included in this annual report are forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this annual report.
This annual report discloses, under the caption Item 3.D. “Risk Factors” and elsewhere, important factors that could cause actual results to differ materially from our expectations (“Cautionary Statements”). All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Cautionary Statements.
CURRENCY TRANSLATIONS AND EXCHANGE RATES
In this annual report, unless otherwise indicated, all references to “Won,” “KRW” or “W” are to the currency of Korea, all references to “U.S. dollars,” “Dollars,” “USD”, “$” or “US$” are to the currency of the United States of America; all references to “Euro”, “€” or “EUR” are references to the currency of the European Union; all references to “Yen”, “¥” or “JPY” are references to the currency of Japan; all references to “A$” or
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“AUD” are to the currency of Australia; all references to “HK$” or “HKD” are to the currency of Hong Kong; all references to “Fr.” or “CHF” are to the currency of Switzerland; all references to “kr” or “SEK” are to the currency of Sweden. Unless otherwise indicated, all translations from Won to U.S. dollars were made at Won 1,444.6 to US$1.00, which was the Noon Buying Rate of the Federal Reserve Board (the “Noon Buying Rate”) in effect as of December 31, 2025, which rates are available on the H.10 statistical release of the Federal Reserve Board. On April 10, 2026, the Noon Buying Rate was Won 1,483.9 to US$1.00. The exchange rate between the U.S. dollar and Korean Won may be highly volatile from time to time, and no representation is made that the Won or U.S. dollar amounts referred to in this annual report could have been or could be converted into U.S. dollars or Won, as the case may be, at any particular rate or at all.
The following table sets forth, for the periods and dates indicated, certain information concerning the Noon Buying Rate in Won per US$1.00.
Year Ended December 31,
2021
2022
2023
2024
2025
October
November
December
2026 (through April 10)
January
February
March
April (through April 10)
Source: Federal Reserve Board
Note:
The average rates for annual and interim periods were calculated by taking the simple average of the Noon Buying Rates on the last day of each month during the relevant period. The average rates for the monthly periods (or a portion thereof) were calculated by taking the simple average of the daily Noon Buying Rates during the relevant month (or a portion thereof).
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IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
OFFER STATISTICS AND EXPECTED TIMETABLE
KEY INFORMATION
[Reserved]
Capitalization and Indebtedness
Reasons for the Offer and Use of Proceeds
Risk Factors
Our business and operations are subject to various risks, many of which are beyond our control. If any of the risks described below actually occurs, our business, financial condition or results of operations could be seriously harmed. Such risks fall primarily under the categories below:
Risks relating to KEPCO primarily include:
increases in fuel prices that may not be passed on to customers;
Government policies that may affect the industry or our operations;
capacity expansion plans based on projections of long-term supply and demand of electricity proving to be inadequate against actual supply and demand;
being subject to various environmental legislations, regulations and Government initiatives;
incurrence of additional indebtedness;
fluctuation in the value of the Won against other currencies;
risks associated with new business strategies and overseas expansion opportunities;
an increase in electricity generated by and/or sourced from independent power producers eroding our market position;
labor unrest and increases in labor cost;
risks associated with the operation of nuclear power generation facilities;
difficulties in the construction and operation of our facilities due to opposition from civic groups and uncertainties in maintaining permits and licenses;
risk management policies and procedures failing to be effective, including but not limited to failing to prevent losses in our debt and foreign currency positions;
limited amount and scope of insurance coverage;
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inability to raise share capital without the Government’s participation;
claims by current or previous employees for unpaid wages;
attacks on physical security and cybersecurity;
Russia-related dealings; and
recent amendments to the Korean Commercial Code.
Risks relating to Korea and Global Economy primarily include:
unfavorable financial and economic conditions in Korea;
tensions with North Korea;
being subject to Korean corporate governance and disclosure standards; and
risks associated with enforcing a foreign judgment against us.
Risks relating to Our American Depositary Shares (ADSs) primarily include:
restrictions on withdrawal and deposit of common shares under the depositary facility;
ownership of our shares being restricted under Korean law;
no preemptive rights in certain circumstances;
being affected by the volatility of the Korean securities market;
dividend payments being affected by fluctuations in the exchange rate; and
restriction on the depositary bank from converting and remitting dividends under emergency circumstances.
Risks Relating to KEPCO
Increases in fuel prices may adversely affect our results of operations and profitability as we may not be able to pass on the increased cost to customers at a sufficient level or at all or on a timely basis.
In 2025, fuel costs constituted 24.1% of our cost of sales, and the ratio of fuel costs to our sales was 20.1%. Our generation subsidiaries purchase substantially all of the fuel that they use (except for anthracite coal) from suppliers outside Korea at prices determined in part by prevailing market prices in currencies other than Won. For example, most of the bituminous coal requirements (which accounted for approximately 37.0% of our fuel requirements in 2025 in terms of electricity output) are imported principally from Indonesia, Australia, Russia and, to a lesser extent, South Africa and others, which accounted for approximately 31.7%, 23.1%, 20.1%, 6.2% and 18.9%, respectively, of the annual bituminous coal requirements of our generation subsidiaries in 2025. Approximately 93.1% of the bituminous coal requirements of our generation subsidiaries in 2025 were purchased under long-term contracts and the remaining 6.9% from the spot market. Pursuant to the terms of our long-term supply contracts, prices are adjusted periodically based on prevailing market conditions. In addition, our generation subsidiaries purchase a significant portion of their fuel requirements under contracts with limited duration. See Item 4.B. “Business Overview—Fuel Sources and Requirements.”
The prices of our main fuel types, namely, bituminous coal, oil and liquefied natural gas (LNG), fluctuate, sometimes significantly, in tandem with their international market prices. For example, the average monthly spot price of Newcastle coal published on Ministry of Trade, Industry and Resources decreased from a monthly average of US$126.63 per ton for December 2024 to a monthly average price of US$108.27 per ton for December 2025 and increased to a monthly average price of US$133.86 per ton for March 2026. The prices of oil and LNG are substantially dependent on the price of crude oil, and according to Bloomberg (Bloomberg Ticker: PGCRDUBA), the average daily spot price of Dubai crude oil decreased from US$79.67 per barrel in 2024 to US$$68.37 per barrel in 2025 and increased to US$89.55 per barrel as of April 10, 2026. Furthermore, because
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the prices of LNG are dependent on the price of crude oil, an increase in such fuel prices can result in an increase in the prices of LNG, which, in turn, affects the cost of purchasing electricity from independent power producers. No assurance can be given that fuel prices will remain stable or will not significantly increase in the remainder of 2025 or thereafter. In addition, following the International Maritime Organization’s regulation referred to as IMO 2020 that regulates sulfur content of ships’ fuel oil, IMO 2023 was mandated from January 1, 2023. IMO 2023 regulates energy efficiency and carbon emissions of ships by setting specific indices that all ships are required to comply with such as energy efficiency and carbon emissions. Although we have seen mixed reactions in the market, there is a likelihood that installation of energy saving devices or modification of ships to improve their carbon emissions level may increase as the regulation strengthens. Such trends may significantly increase the operating cost of the shipping lines and the increased costs are expected to be passed onto customers like us via higher freight rates. If fuel prices increase substantially in the future within a short span of time, our generation subsidiaries may not be able to secure adequate fuel at commercially viable prices. In addition, any significant interruption or delay in the supply of fuel, bituminous coal in particular, from any of their suppliers may cause our generation subsidiaries to purchase fuel on the spot market at prices higher than the prices available under existing supply contracts, which would result in an increase in fuel costs.
As of January 1, 2021, we implemented a new cost pass-through tariff system to strengthen the link between our incurred costs and the tariffs charged to customers. This system also enhances transparency by separately billing fuel costs and climate/environment related costs. Previously, the electricity tariff consisted of two main components: (i) the base charge (the “Base Charge”) and (ii) the usage charge (the “Usage Charge”) based on the amount of electricity consumed by end-users. Under the new tariff system, there are new components to the tariff called the fuel cost adjusted charge (the “Fuel Cost Adjusted Charge”) and the climate/environment related charge (the “Climate/Environment Related Charge”). In principle, the Fuel Cost Adjusted Charge is calculated on a quarterly basis, and the formula for calculating the amount of the Fuel Cost Adjusted Charge is multiplying (i) the unit price of the Fuel Cost Adjusted Charge (the “Unit Price of the Fuel Cost Adjusted Charge”), which is the difference between a base fuel cost (the “Base Fuel Cost”) and an actual fuel cost (the “Actual Fuel Cost”) and (ii) the amount of electricity consumed. The Base Fuel Cost is the past twelve-month average fuel price of bituminous coal, LNG and Bunker C oil as posted by the Korea Customs Service. The twelve-month average fuel price is measured by taking the average of monthly fuel prices from twelve months in between thirteen and one month prior to the time a new Base Fuel Cost becomes effective. To illustrate, the Base Fuel Cost effective from January 2023 is the average of the fuel prices from December 2021 to November 2022. The Base Fuel Cost can be adjusted upon the revision of the electricity tariff as a whole as described in the penultimate paragraph of this risk factor. On the other hand, the Actual Fuel Cost is the past three-month average fuel price of the same fuels we use to measure the Base Fuel Cost. The past three-month average fuel price is measured by taking the average of monthly fuel prices from three months in between four and one month prior to the time the Fuel Cost Adjusted Charge is updated. To illustrate, for the second quarter of 2026, we used the fuel costs for September, October and November 2025 to calculate the three-month average fuel price.
The quarterly-adjusted Fuel Cost Adjusted Charge has built-in limits in view of price stability and other public policy considerations. First, there is a limit on any change in the Unit Price of the Fuel Cost Adjusted Charge to be no less than Won ±1 per kilowatt-hour. In other words, any change less than Won ±1 per kilowatt-hour will not be reflected. However, such limit does not apply if it is the first quarter during which the Base Fuel Cost has been newly updated. Second, the Unit Price of the Fuel Cost Adjusted Charge that exceeds Won ±5 per kilowatt-hour will not be reflected. In other words, the maximum adjustment that can be incorporated to the Unit Price of the Fuel Cost Adjusted Charge is equal to Won ±5 per kilowatt-hour from the Base Fuel Cost that is in effect. For example, in the third quarter of 2023, the Unit Price of the Fuel Cost Adjusted Charge was Won 10.2 per kilowatt-hour, meaning the Actual Fuel Cost was higher than the Base Fuel Cost by Won 10.2 per kilowatt-hour, but after being subjected to the limit of Won ±5 per kilowatt-hour, the Unit Price of the Fuel Cost Adjusted Charge came out to be Won 5.0 per kilowatt-hour.
However, our ability to pass on fuel and other cost increases to our customers may be limited due to Government regulations on the rates charged for the electricity we supply to our customers. In addition to the
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built-in limits described in the preceding paragraph, the new tariff system gives discretion to the Government to not wholly or partially adjust the quarterly Fuel Cost Adjusted Charge in case of extenuating circumstances, as determined by the Government. For example, in the second and third quarter of 2021, although the Unit Price of the Fuel Cost Adjusted Charge was Won –0.2 and Won +1.7 per kilowatt-hour respectively, the Government notified us to keep it at the same Won –3.0 per kilowatt-hour as the first quarter of 2021. In the fourth quarter of 2021, we increased the Unit Price of the Fuel Cost Adjusted Charge to Won 0.0 per kilowatt-hour. In the first and second quarters of 2022, although the Unit Price of the Fuel Cost Adjusted Charge as calculated should have been Won 3.0 per kilowatt-hour as the quarterly limit of Won ±3 per kilowatt-hour had existed back then, the Government notified us to keep it at the same Won 0.0 per kilowatt-hour as the fourth quarter of 2021. The Government has cited various policy reasons for withholding quarterly adjustments, including the need to mitigate the prolonged economic impact of the COVID-19 pandemic. As the quarterly limit of Won ±3 per kilowatt-hour was repealed in the third quarter of 2022 and with the approval by the Government, we ultimately increased the Unit Price of the Fuel Cost Adjusted Charge to Won 5.0 per kilowatt-hour in the third quarter of 2022, which represented the maximum permissible increase for 2022 under the regulatory cap. From then to the second quarter of 2026, the same Won 5.0 per kilowatt-hour increment has been applied to the Unit Price of the Fuel Cost Adjusted Charge. Recently, even though the quarterly adjustment amounts calculated under our formula were Won -1.8, Won -4.0, Won -2.5, Won -6.4, Won -6.4, Won -5.1, Won -4.2, Won -6.4, Won -12.1, Won -13.3 and Won -11.2 per kilowatt-hour per each quarter from the fourth quarter of 2023 to the second quarter of 2026, respectively, the Government notified us to maintain the Unit Price at Won 5.0 per kilowatt-hour, taking into consideration our financial condition and the fact that a substantial amount of the Fuel Cost Adjusted Charge that should have been reflected in previous years had not previously been reflected in the electricity tariff. However, no assurance can be given that such trend will continue, and even if fuel prices and the quarterly adjustment amounts calculated under our formula were to increase, the Government may decide not to adjust the quarterly Fuel Cost Adjusted Charge to levels sufficient to offset the impact of high fuel prices or at all, and our profit margins and results of operations may accordingly be adversely affected.
Also, because the Fuel Cost Adjusted Charge takes into account the fuel prices posted by Korea Customs Service, there may still be a mismatch in value between the actual prices the domestic generation companies pay for fuel in the open market and the adjustment that can be made through the Fuel Cost Adjusted Charge. The domestic generation companies include not only our generation subsidiaries but also independent power producers that are not affiliated with us, and we do not have access to fuel costs incurred by the independent power producers. As such, we use fuel prices posted by Korea Customs Service, which are easily accessible to our customers, for calculating the Fuel Cost Adjusted Charge.
Due to the likelihood of the Actual Fuel Cost being substantially over the adjustment limits imposed by the new tariff system and the Government’s discretion not to wholly or partially adjust the quarterly Fuel Cost Adjusted Charge in case of extenuating circumstances, there may be certain portions of the fuel costs that cannot be charged to our customers, even though those portions should have been included in the Fuel Cost Adjusted Charge. In such cases, we may accumulate such portions and reflect them in what is called the total comprehensive cost (the “Total Comprehensive Cost”), which is a variable we use to calculate the Base Charge and the Usage Charge of the tariff. The Total Comprehensive Cost, which we submit each year to the Government for review, is calculated using the relevant costs according to our settled accounts from the previous year and the proposed budget for the upcoming year. Under the Total Comprehensive Cost approach, the Base Charge and the Usage Charge are established at levels that would enable us to recover fair operating costs as well as fair investment return on the capital used in our operations. For further information on fair operating costs and fair investment return, please see Item 4.B. “Business Overview—Sales and Customers—Electricity Rates.” The Base Charge and the Usage Charge that are derived from the Total Comprehensive Cost need to be approved by the Government before they can be revised. The Government may, from time to time, consider different policy objectives to regulate the time and magnitude of such revision of the Base Charge and the Usage Charge of the electricity tariff. Therefore, changes in fuel costs may not be timely or fully reflected in the Usage Charge component of the tariff, where such adjustments are generally expected. In December 2021, there was a need to increase the Usage Charge by Won 9.8 per kilowatt-hour from January 2022 to reflect the rise in the Base Fuel
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Cost. With approval by the Government, we increased the Usage Charge by Won 4.9 per kilowatt-hour on April 1, 2022 and October 1, 2022 respectively, which resulted in a total increase of Won 9.8 per kilowatt-hour. Such increases were spread out into two rounds to relieve people’s hardship including the prolonged effects of COVID-19 pandemic. In addition, in October 2022, we increased the Usage Charge of the tariff by Won 7.0 to Won 11.7 per kilowatt-hour for industrial and commercial consumers and by Won 2.5 per kilowatt-hour for all other consumers, reflecting additional accumulated increases in fuel costs. In 2023, with the approval of the Government, we increased the Usage Charge by Won 11.4 and Won 8.0 per kilowatt-hour in January and May 2023, respectively, to reflect a portion of the increase in the Base Fuel Cost. Also, we increased the Usage Charge of the tariff by Won 6.7 to Won 13.5 per kilowatt-hour for large-scale industrial consumers in November 2023 to reflect additional accumulated increases in fuel costs. In its economic policy direction statement for 2023, the Government announced its plans to gradually increase the tariff in order to address our cumulative deficit by 2027. However, there is no assurance on whether such plans will be realized. On October 23, 2024, in coordination with the Government, we announced that, starting from October 24, 2024, we will increase electricity tariff on industrial consumers by an average of Won 16.1 per kilowatt-hour, representing an average increase of 9.7% from the previous tariff, while maintaining the same electricity tariff on the rest of the consumers.
Overall, despite the new tariff system, we may not be able to adjust our tariff in accordance with such system due to the reasons described above. If fuel prices increase rapidly and substantially and the current level of electricity tariff is not increased to a level sufficient to offset the impact of high fuel prices or not adjusted responsive to fuel price movements, our profit margins will be adversely affected and our business, financial condition, results of operations and cash flows may accordingly be adversely affected. For example, from 2021 to 2023, as fuel prices increased rapidly, we experienced substantial operating and net losses. Moreover, on January 2, 2025, the Ministry of Finance and Economy announced as part of its 2025 Economic Policy Directions the Government’s initiative to limit increases to public tariffs, which may also prevent electricity tariffs from being set at levels sufficiently responsive to fuel prices and negatively affect our business, financial condition, results of operations and cash flows.
The Government may adopt policy measures that affect the tariff rates in order to ease the burden on certain consumers, which may burden us financially.
Previously, there have been several adjustments to the existing tariff rates for certain consumers in order to ease the burden of electricity tariff on them. However, such adjustments may not reflect changes in fuel prices at a sufficient level or at all or on a timely basis, and our business, results of operations, financial condition and profitability may suffer as a result. For example, effective on January 1, 2017, the progressive rate structure applicable to the residential sector, which applies a gradient of increasing tariff rates for heavier electricity usage, was changed from a six-tiered structure with the highest rate being no more than 11.7 times the lowest rate (which gradient system has been in place since 2005) into a three-tiered structure with the highest rate being no more than three times the lowest rate, in order to reflect the changes in the pattern of electricity consumption and reduce the electricity charges payable by consumers. Additionally, a new tariff structure was implemented to encourage energy saving by offering rate discounts to residential consumers that voluntarily reduce electricity consumption while charging special high rates to residential consumers with heavy electricity consumption during peak usage periods in the summer and the winter. Further, during July and August 2018, the residential electricity charges were reduced by temporarily relaxing the application of the then tariff structure and offering higher rate discounts to economically or otherwise disadvantaged customers to ease the burden on households that have significantly increased their use of air conditioners during a heatwave. Subsequently, a joint task force team, consisting of industry experts, scholars and Government officials, was formed, which announced a proposal for amending the tariff structure aimed to lower electricity rates for households during the summer. As a result, in July 2019, the residential electricity tariff rate system was amended to expand the usage ceiling for the first two tiers of rates (from 200 kilowatts to 300 kilowatts for the first tier and from 400 kilowatts to 450 kilowatts for the second tier) applied during July and August each year. With the implementation of the new tariff system in September 2021, residents were given an option for a new schedule of residential tariffs, which
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was previously only provided to our industrial and commercial customers. The new schedule, called a seasonal and hourly tariff, allows residents to be charged under a monthly Base Charge plus increments depending on time, day and season. Each household may also choose to remain on the current tariff schedule which in contrast is a progressive schedule with seasonal adjustments. Our plan is to provide this option to households in Jeju Province in Korea first as many of these households are already equipped with the Advanced Metering Infrastructure (“AMI”) and consider a nationwide rollout depending on AMI penetration rates in each region.
On the other hand, there are also policy measures that have been repealed. For example, the rate discounts offered to residential consumers who voluntarily reduced electricity consumption and those offered to traditional wet markets were abolished in December 2019. The rate discounts for electric vehicles have been terminated in June 2022 and the rate discounts for households that use less than 200 kilowatt-hours were phased out to 50% in July 2021 and was terminated in July 2022. We also discontinued the 50% discount offered to customers who installed a renewable energy generator for their own industrial and general uses by December 2023. Despite these, there can be no assurance that the current and future adjustments in electricity tariff rates and rate discounts will not have an adverse impact on our business, results of operations, financial condition and profitability. See Item 4.B. “Business Overview—Sales and Customers—Electricity Rates” for more information on electricity tariff charged to our consumers.
The Government may adopt policy measures to substantially restructure the Korean electric power industry or our operational structure, which may have a material adverse effect on our business, operations and profitability.
From time to time, the Government considers various policy initiatives to foster efficiency in the Korean electric power industry and at times have adopted policy measures that have substantially modified our business and operations. For example, in January 1999, with the aim of introducing greater competition in the Korean electric power industry and thereby improving its efficiency, the Government announced a restructuring plan for the Korean electric power industry, or the Restructuring Plan. For a detailed description of the Restructuring Plan, see Item 4.B. “Business Overview—Restructuring of the Electric Power Industry in Korea.” As part of this initiative, in April 2001 the Government established the Korea Power Exchange to enable the sale and purchase of electricity through a competitive bidding process, established the Korea Electricity Commission to ensure fair competition in the Korean electric power industry, and, in order to promote competition in electricity generation, split off our electricity generation business to form one nuclear generation company and five non-nuclear generation companies, in each case, to be wholly owned by us. In 2002, the Government introduced a plan to privatize one of our five non-nuclear generation subsidiaries, but this plan was suspended indefinitely in 2004 due to prevailing market conditions and other policy considerations.
In August 2010, the Ministry of Trade, Industry and Resources announced the Proposal for the Improvement in the Structure of the Electric Power Industry, which was designed to promote responsible management by and improve operational efficiency of Government-affiliated electricity companies by fostering competition among them. Pursuant to this proposal, while our six generation subsidiaries continued to be our wholly-owned subsidiaries, in January 2011 the six generation subsidiaries were officially designated as “market-oriented public enterprises” (same as us) under the Act on the Management of Public Institutions, whereupon the President of Korea appoints the president and the standing director who is to become a member of the audit committee of each such subsidiary; the selection of non-standing directors of each such subsidiary is subject to approval by the Ministry of Finance and Economy; the president of each such subsidiary is required to enter into a management contract directly with the Ministry of Trade, Industry and Resources; and the Committee for Management of Public Institutions (which is comprised largely of Government officials and those recommended by Government officials) conducts performance evaluation of such subsidiaries. Previously, our president appointed the president and the statutory auditor of each such subsidiary; the selection of non-standing directors of each such subsidiary was subject to approval by our president; the president of each such subsidiary entered into a management contract with our president; and our evaluation committee conducted performance evaluation of such
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subsidiaries. As a result of these changes, our six generation subsidiaries took on additional operational responsibilities and management autonomy with respect to construction and management of generation units and procurement of fuel, while we as the parent company continued to oversee and coordinate, among others, finances, corporate governance, overseas businesses, including nuclear export technology and overseas resource development, that jointly affect us and our generation subsidiaries. See also Item 16.G. “Corporate Governance—The Act on the Management of Public Institutions—Applications of the Act on Our Generation Subsidiaries.”
In June 2016, the Government announced the Proposal for Adjustment of Functions of Public Institutions (Energy Sector) for the purpose of streamlining the operations of Government-affiliated energy companies by discouraging them from engaging in overlapping or similar businesses with each other, reducing non-core assets and activities and improving management and operational efficiency. The initiatives contemplated in this proposal that would affect us and our generation subsidiaries include the following: (i) the generation companies should take on greater responsibilities in overseas resource exploration and production projects as these involve procurement of fuels necessary for electricity generation while fostering cooperation among each other through closer coordination, (ii) KHNP should take a greater role in export of nuclear technology, and (iii) the current system of retail sale of electricity to end-users should be liberalized to encourage more competition. In accordance therewith, we transferred a substantial portion of our assets and liabilities in our overseas resource business to our generation subsidiaries as of December 31, 2016. In addition, pursuant to this Proposal, we considered publicly offering minority stakes in our five non-nuclear generation subsidiaries, KEPCO KDN and KHNP. However, the planned sales have been put on hold, primarily due to prevailing market conditions. In any event, we plan to maintain a controlling stake in each of these subsidiaries.
Other than as set forth above, we are not aware of any specific plans by the Government to resume the implementation of the Restructuring Plan or otherwise change the current structure of the electric power industry or the operations of us or our generation subsidiaries materially in the near future. However, for reasons relating to changes in policy considerations, socio-political, economic and market conditions and/or other factors, the Government may resume the implementation of the Restructuring Plan or initiate other steps that may change the structure of the Korean electric power industry or the operations of us or our generation subsidiaries materially. Any such measures may have a negative effect on our business, results of operations and financial condition. In addition, the Government, which beneficially owns a majority of our shares and exercises significant control over our business and operations, may from time to time pursue policy initiatives that could directly or indirectly impact our business and operations, and such initiatives may vary from the interest and objectives of our other shareholders.
Our capacity expansion plans, which are principally based on projections on long-term supply and demand of electricity in Korea, may prove to be inadequate.
We and our generation subsidiaries make plans for expanding or upgrading our generation capacity based on the Basic Plan Relating to the Long-Term Supply and Demand of Electricity (the “Basic Plan”), which is generally revised and announced every two years by the Government. In February 2025, the Government announced the Eleventh Basic Plan and subsequently amended it in March 2025, which covers the period from 2024 to 2038. The Eleventh Basic Plan focuses on (a) establishing an energy mix and equipment plan that comprehensively considers policy principles such as supply stability, efficiency and carbon neutrality and (b) proactively strengthening the power grid and advancing market sophistication to expand carbon-free power sources, and includes the following specific measures: (i) following the continued use of nuclear power as a carbon-free source, the Eleventh Basic Plan includes the construction of two new large nuclear power plants with an aggregate generation capacity of 2.8 gigawatts by 2038 and commercial operation of a small modular reactor with generation capacity of 0.7 gigawatts by 2035, which together with other previously planned facilities, is expected to increase nuclear power capacity from 24.7 gigawatts in 2023 to 35.2 gigawatts in 2038; (ii) aging coal-fired power plants to be gradually replaced with LNG plants and carbon-free power sources, with a principle of simultaneous replacement with the same capacity – accordingly, coal power capacity is expected to decrease from 39.2 gigawatts in 2023 to 22.2 gigawatts in 2038, while LNG power capacity is expected to increase from
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43.2 gigawatts in 2023 to 69.2 gigawatts in 2038; (iii) renewable energy will be systematically expanded, including expansion of solar and wind power generation capacities and market system reforms, which is expected to increase renewable energy generation capacity from 30.0 gigawatts in 2023 to 121.9 gigawatts in 2038; (iv) through the expansion of nuclear power, renewable energy, clean hydrogen and ammonia, reaching carbon-free share of 53.0% by 2030 and 70.7% by 2038, and ultimately achieving carbon neutrality; and (v) building a power grid with sufficient capacity to accommodate carbon-free energy sources. The Eleventh Basic Plan also aims to ensure a sufficient and timely electricity supply to advanced industries such as semiconductor clusters, as well as establishing an integrated supply-demand management system and an auction market in order to further stability and power source diversification.
Accordingly, we established the Eleventh Transmission and Substation Facilities Plan in accordance with the Eleventh Basic Plan in May, 2025. The Eleventh Transmission and Substation Facilities covers the period from 2024 to 2038 and focuses on initiatives such as the timely construction of transmission and substation facilities to meet increasing demand, integration of the management system for power plants including nuclear and renewable energy, and reinforcement of the national infrastructure grid to achieve carbon neutrality. Meanwhile, in July 2025, we established the First Long-Term Distribution System Plan, the first of its kind in the distribution sector, thereby implementing national energy policies and contributing to the stabilization of grid operations as well as the activation of distributed energy and new energy industries. The First Long-Term Distribution System Plan covers the analysis of the grid environment, regional surveys on distributed energy connections, and plans for building and managing distribution networks.
In March 2022, the Government enacted the Framework Act on Carbon Neutrality with the goal of transitioning to a carbon neutral society by 2050 through sustainable green growth. Carbon neutrality initiatives set forth in the Framework Act on Carbon Neutrality includes setting medium to long-term greenhouse gas reduction targets and implementing measures to combat the climate crisis. Accordingly, it will be important for us to cooperate with Government initiatives and minimize the environmental impact we have on the climate crisis through our operations.
Pursuant to the Special Act on the Activation of Distributed Energy enacted in June 2023, a power grid impact assessment system has been implemented since June 2024 which manages the production and consumption of electricity at regional levels, trying to prevent concentrated demand from specific areas that would require excessive expansion of the broader power grid. Additionally, in November 2024, we entered into an agreement with advanced industry companies for the construction of infrastructure facilities, which is expected to allow us to collaborate with customers and generation companies to reduce investment costs, utilize land more efficiently, and promote the timely completion of power facilities, thereby fostering new businesses.
We cannot assure that the Eleventh Basic Plan, the Eleventh Long-Term Transmission and Substation Facilities Plan, the Framework Act on Carbon Neutrality, the Special Act on the Activation of Distributed Energy or the respective plans to be subsequently adopted will successfully achieve their intended goals. If there is significant variance between the projected electricity supply and demand considered in planning our capacity expansions and the actual electricity supply and demand or if these plans otherwise fail to meet their intended goals or have other unintended consequences, this may result in inefficient use of our working capital, mispricing of electricity and undue financing costs on the part of us and our generation subsidiaries, among others, which may have a material adverse effect on our results of operations, financial condition and cash flows.
From time to time, we may experience temporary power shortages or circumstances bordering on power shortages due to factors beyond our control, such as extreme weather conditions. Such circumstances may lead to increased end-user complaints and greater public scrutiny, which may in turn require us to modify our capacity expansion plans, and if we were to substantially modify our capacity plans, this might result in additional capital expenditures and, as a result, have a material adverse effect on our results of operations, financial condition and cash flows.
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Although the Government makes significant efforts to encourage conservation of electricity, including through demand management programs, there is no assurance that such efforts will have the desired effect of substantially reducing the demand for electricity or improving efficient use thereof. See Item 4.B. “Business Overview— Sales and Customers.”
We are subject to various environmental legislations, regulations and related Government initiatives, including in relation to climate change and carbon neutrality, which could cause significant compliance costs and operational liabilities.
We are subject to national, local and overseas environmental laws and regulations, including increasing pressure to reduce emission of carbon dioxide from our electricity generation. Our operations could expose us to the risk of substantial liability relating to environmental, health and safety issues, such as those resulting from the discharge of pollutants and carbon dioxide into the environment and the handling, storage and disposal of hazardous materials. We may be responsible for the investigation and remediation of environmental conditions at current or former operational sites. We may also be subject to related liabilities (including liabilities for environmental damage, third-party property damage or personal injury) resulting from lawsuits brought by the Government or private litigants. In the course of our operations, hazardous wastes may be generated, disposed of or treated at third-party-owned or -operated sites. If those sites become contaminated, we could also be held responsible for the cost of investigation and remediation of such sites for any related liabilities, as well as for civil or criminal fines or penalties.
We intend to fully comply with our environmental obligations. However, our environmental measures, including the use of, or replacement with, environment-friendly but more expensive parts and equipment and budgeting capital expenditures for the installation or modification of such facilities, may result in increased operating costs and liquidity requirement. The actual cost of installation, replacement, modification and/or operation of such equipment and related liquidity requirement may depend on a variety of factors that are beyond our control. There is no assurance that we will continue to be in material compliance with legal or regulatory requirements or satisfy social norms and expectations in the future in relation to the environment, including in respect of climate change.
In recent years, the Government has introduced and implemented a number of new measures designed to reduce greenhouse gas emission, minimize environmental damage and spur related business opportunities. Some key examples of such Government initiatives pertinent to our and our generation subsidiaries’ operations are as follows:
Greenhouse Gas Emission Trading System, Related Emission Reduction Targets and the Greenhouse Gas Reduction Roadmap.
In accordance with the Act on Allocation and Trading of Greenhouse Gas Emission Allowances enacted in May 2012, the Government implemented a greenhouse gas emission trading system under which the Government will allocate the amount of permitted greenhouse gas emission to companies by industry and a company whose business emits more carbon than the permitted amount is required to purchase the right to emit more carbon through the Korea Exchange. The categories of allowances traded include the Korean Allowance Unit (KAU), which is the emissions allowance allocated to applicable companies by the Government; Korean Credit Unit (KCU), which is a tradable unit converted from external carbon offset certifications including the Korean Offset Credit; and Korean Offset Credit (KOC), which is the verified carbon offset credit obtained by companies for reducing carbon emissions through absorption or otherwise. The greenhouse gas emission trading system has been implemented in three stages. During the first phase (2015 to 2017), the Government gradually set up and conducted test runs of the trading system to ensure its smooth operation, allocating the greenhouse gas emission allowances free of charge. During the second phase (2018 to 2020), 97% of the greenhouse gas emission allowances were allocated free of charge, with 3% allocated through an auction. During the third phase (2021
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to 2025), the Government expanded the scale of the system through aggressive greenhouse gas emission reduction targets and by allocating 10% of the greenhouse gas emission allowances through an auction. In November 2025, the Government announced an increase in the paid allocation ratio to 15% for non-power generation industries and up to 50% for power generation industries during the fourth phase (2026 to 2030).
In connection with the Climate Change Response Initiatives and the 2030 National Greenhouse Gas Reduction Roadmap announced by the Government in December 2016, the Government announced the Long-term Low Greenhouse Gas Emission Development Strategies, which presents a long-term vision and national strategy for achieving carbon neutrality in 2050, and the Nationally Determined Contributions (“NDC”), which sets forth the greenhouse gas reduction targets by 2030. According to the Enforcement Decree of the Framework Act on Carbon Neutrality and Green Growth to Cope with Climate Crisis established in March 2022 and NDC figures announced by the Government in October 2021, the national target emission level in 2030 was 436.6 million tons, representing a 40% reduction as compared to 2018. The target emission level for the Transformation sector (electricity and heating) as a whole, which we are part of, was 149.9 million tons and represents 44.4% reduction as compared to 2018. Following the National Basic Plan for Carbon Neutrality & Green Growth established in April 2023, the Government has mandated annual sector-specific greenhouse gas reduction targets for the next 20 years from 2023 to 2042 and measures to achieve target emission levels to be implemented and adjusted every five years. In terms of the NDC, the national target emission level in 2030 remained unchanged at 436.6 million tons, but the target emission level for the Transformation sector (electricity and heating) in 2030 has been lowered to 145.9 million tons, representing a 45.9% reduction compared to 2018. The government confirmed the 2035 NDC in November 2025, which raised the reduction target by 53 to 61% compared to 2018 by 2035.
Adhering to such emission and greenhouse gas reduction requirement may result in significant additional compliance costs. For example, the daily market price of the Korean Allowance Units (KAU), one of the categories of allowance traded on the Korea Exchange and allocated to applicable companies by the Government, was Won 8,640 per ton in early 2015 but has generally increased since over time to Won 42,500 in April 2020. Since then, the price dropped to a record low of Won 7,200 in August 2023, with the price of KAU at Won 14,900 per ton as of March 24, 2026. An increase or volatility in the price may adversely affect our results of operation, financial condition and cash flows.
Obligatory and Voluntary Regulation of Coal-Fired Generation Units. The Government has introduced measures to address the high level of particulate matter pollution since October 2018. A formal regulation was implemented in 2019, and the Government tried to reduce the number of operational coal-fired generation units and the emissions emitted therefrom, particularly during periods of severe particulate matter pollution (typically from the month of December to March of the next year). We have also participated in such efforts. For example, as of March 31, 2026, 52 coal-fired generation units were subject to a cap of 80% of their capacity. On March 24, 2026, the Government announced that it would ease the restrictions on coal-fired generation units in response to an energy crisis caused by the prolonged conflict in the Middle East. Additionally, the Government closed down two decrepit coal-fired generation units (Boryeong #1 and #2) in December 2020. Other coal-fired generation units, Samcheonpo #1 and #2, were decommissioned ahead of schedule in May 2021, and Honam #1 and #2 units were decommissioned in December 2021. According to the Eleventh Basic Plan, the total coal-fired power plant capacity in 2038 will decrease to 22.2 gigawatts from 39.2 gigawatts in 2023, and its percentage of total power generation capacity will decrease to 8.3% in 2038 from 27.1% in 2023. In 2024 and 2025, our generation subsidiaries introduced a voluntary regulation to lower the output of coal-fired generation units, suspending the operations and imposing a cap of 80% on the output of certain coal-fired generation units. Although such measures may be subject to change, we expect to
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incur significant costs associated with the compliance of such measures, including more stringent particulate matter pollution regulations, retrofitting and overall replacement of environmental facilities.
Coal and LNG Consumption Taxes. Since July 1, 2014, largely based on policy considerations of tax equity among different fuel types as well as environmental concerns, consumption tax has also applied to bituminous coal, which previously was not subject to consumption tax unlike other fuel types such as LNG or bunker oil. Pursuant to the amended Individual Consumption Tax Act effective as of April 1, 2019, which involved an increase of the unit tax rate for coal by Won 10 per kilogram across the board, the base tax rate (which is subject to certain adjustments) was set at Won 46 per kilogram for bituminous coal. The consumption tax and surcharge on importation of LNG is Won 12 and Won 3.8 per kilogram, respectively. However, following rapid increases in the price of LNG and bituminous coal, in order to mitigate the adverse impact of price increases in the global energy market and manage inflation, the applicable individual consumption tax rates for coal and LNG have both been temporarily decreased by 15% during the period beginning August 2022 through December 2025. Any future increase in tax rates may adversely affect our overall fuel costs and power purchase cost.
Renewable Portfolio Standard. Under this program, each of our generation subsidiaries is required to generate a specified percentage of total electricity to be generated by such generation subsidiary in a given year in the form of renewable energy or, in case of a shortfall, purchase a corresponding amount of a Renewable Energy Certificate (a form of renewable energy credit) from other generation companies whose renewable energy generation surpass such percentage. Pursuant to the Act on the Promotion of the Development, Use, and Diffusion of New and Renewable Energy and its Enforcement Decree, the target percentage was 13.0% in 2023, 13.5% in 2024 and 14% in 2025. This Act and its Enforcement Decree aim to raise target percentage to 25% by 2030, and the target percentage for each year from 2025 through 2030 as of the date of this annual report is as specified in the table below. In 2024, all six of our generation subsidiaries met the target through renewable energy generation and/or the purchase of a Renewable Energy Certificate. Our generation subsidiaries’ compliance with the 2025 target is currently under evaluation, and if any generation subsidiary is found to have failed to meet the target for 2025 or fails to meet the target for subsequent years, such generation subsidiary may become subject to fines. Accordingly, the proposed target percentages may result in additional expenses for our generation subsidiaries.
Target Percentage under Renewable Portfolio Standard
Renewable Energy Expansion Plan. In December 2017, the Ministry of Trade, Industry and Resources announced the Renewable Energy 3020 Plan, an initiative to increase the generation and use of renewable energy on a nationwide basis. According to the plan, the Government plans to increase the required percentage of total electricity to be generated from renewable energy sources from 7% in 2016 to 20% by 2030 and the domestic renewable energy generation capacity to 72.7 gigawatts by 2030 through the expansion of solar and wind power generation capacities to 46.5 gigawatts and 19.3 gigawatts, respectively. According to the Eleventh Basic Plan announced in February 2025 which was subsequently amended in March 2025, the Government has set national targets of 121.9 gigawatts in renewable energy generation capacity in 2038, with the goal of increasing the percentage of total electricity to be generated from renewable energy sources to 29.2% by 2038.
New Energy Industry Fund. In January 2016, the Ministry of Trade, Industry and Resources announced an initiative to promote the new energy industry by creating the New Energy Industry Fund, which is made up of funds sponsored by Government-affiliated energy companies. We contributed Won 500 billion to the funds in 2016. The purpose of these funds is to invest in substantially all frontiers of the new energy industry, including renewable energy, energy storage systems, electric vehicles, small-sized self-sustaining electricity generation grids known as “micro-grids,” among others, as well as invest in start-up companies, ventures, small to medium-sized enterprise and project businesses that engage in these businesses but have not previously attracted sufficient capital from the private sector.
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Environmental and safety considerations in electricity supply and demand planning. In March 2017, the Electric Utility Act was amended to the effect that starting in June 2017, future national planning for electricity supply and demand in Korea should consider the environmental and safety impacts of such planning. Accordingly, the costs related to environmental and safety impacts, such as the desulfurization costs, have been reflected in the variable cost of generating electricity of each generation unit since August 2019. In December 2019, the Regulation on the Operation of the Electricity Market was revised to reflect the cost of trading greenhouse gas emission allowances in the variable cost of generating electricity of each generation unit and the revision was implemented in January 2022.
Renewable Energy 100. In line with the spread of Renewable Energy 100 (“RE100”), a global campaign by companies around the world to cover 100% of their electricity use with renewable energy by 2050, the Government introduced its own version of RE100 that allows companies and other consumers to choose energy sources from which their electricity is generated. In order for a domestic company to participate in RE100, it may purchase renewable energy through us in a competitive bidding process and be issued with a certificate of use of renewable energy, which we refer to as the Green Premium system, or enter into a power purchase agreement (“PPA”) either with a renewable energy generator through us as an intermediary (“third-party PPA”) or with a renewable energy generator directly such that the generator will supply electricity to the company without going through the existing electricity market (“direct PPA”). As of December 31, 2025, there are 13 third-party PPA of total contracted capacity of 33.6 megawatts and 72 direct-PPA of total contracted capacity of 836.7 megawatts. The use of direct PPA, particularly if it gains more widespread acceptance, may adversely affect our market share in electricity sales.
2050 Carbon-Neutrality Declaration. In response to the Paris Agreement and the United Nations Framework Convention on Climate Change (“UNFCCC”)’s goal to comprehensively replace fossil fuels and achieve global net-zero emission by 2050, the Government announced in November 2020 its commitment to implement policies in all areas of the industry to achieve Korea’s carbon neutrality by 2050 and in December 2020 announced broad 2050 carbon neutrality development strategies. In May 2021, the Government established a carbon neutrality committee which issued a preliminary draft of the carbon neutrality scenario in August 2021 that was finalized in October 2021. The final version proposes two scenarios, both of them which aim to achieve net-zero domestic carbon dioxide emissions by 2050. Scenario A will completely suspend thermal power generation by 2050, while scenario B will actively utilize technologies such as carbon capture, utilization and storage (“CCUS”) while allowing some thermal power generation to continue beyond 2050. In accordance with the Framework Act on Carbon Neutrality and Green Growth for Coping with Climate Crisis which came into effect on March 25, 2022, the carbon neutrality committee was renamed the 2050 Carbon Neutrality and Green Growth Committee. If any specific regulation or policy affecting our business is announced or implemented, we may experience increased regulatory scrutiny over carbon dioxide emission from our electricity generation activities and related projects overseas. We and our generation subsidiaries announced the 2050 Carbon-Neutrality Vision in November 2021 and will further invest in various renewable energy power generation projects, new business opportunities and core technology development with the goal of entirely replacing domestic coal power generation by 2050. In the process of pursuing such goals, our business strategy and investment plan may change from time to time and it may result in additional costs to us, including, among other things, increased production costs, additional taxes, reduced emission allowances or additional restrictions on production or operations, particularly as they may relate to our power generation business. In addition, the goal of achieving carbon neutrality by 2050 may be delayed or made impossible due to unexpected changes in policies or power market conditions, including a major shift in the supply and demand of electricity.
Hydrogen Energy Related Legislations. Following the amendment to the Hydrogen Economy Promotion and Hydrogen Safety Management Act in June 2022 and its Enforcement Decree enacted in December 2022, the Minister of Climate, Energy and Environment has designated KEPCO and other
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entities under the Community Energy System to purchase hydrogen-generated electricity. Under such Act, we are required to enter into contracts with hydrogen generators that are selected through competitive bidding process. The bidding market is comprised of the general hydrogen power market and the clean hydrogen power generation market, as categorized based on the type of fuel used. In consideration of the current ecosystem in which fuel cells are used, the general hydrogen power market is open to all kinds of hydrogen plants including plants using extracted or by-product hydrogen. On the other hand, the clean hydrogen power market is a market where only generators using clean hydrogen plants are allowed to participate. Clean hydrogen is categorized into carbon-free hydrogen, low-carbon hydrogen, and low-carbon hydrogen compounds (including ammonia) according to greenhouse gas emissions in the production and import procedure of hydrogen. According to the clean hydrogen certification system, hydrogen can be recognized as clean hydrogen if the CO2 emissions for the production of 1 kg of hydrogen is 4 kg or less. The Government has set the bidding volumes for 2023 to 2025 as shown in the table below.
General hydrogen market
Clean hydrogen market
The amount of hydrogen-generated electricity to be purchased by us is determined by the Minister of Trade, Industry and Energy after taking into consideration the Basic Plan and Hydrogen Economy Implementation Basic Plan and shall be determined by multiplying (i) the total amount to be purchased in the current year by (ii) the percentage of our purchase out of the total purchased amount in the year immediately preceding the year when the bidding market for the current year has been set up. The Minister shall allow us to reflect the cost arising from the purchase of hydrogen energy into the electricity tariff pursuant to the Act.
Complying with these Government initiatives and operating programs in furtherance thereof has involved and will likely continue to involve significant costs and resources on our part, which may adversely affect our results of operation, financial condition and cash flows. We expect our future compliance costs may increase as the requirements under Government initiatives and operating programs continue to become more rigorous. We may not be able to pass on the increased cost to customers at a sufficient level or at all or on a timely basis. Further, we and our generation subsidiaries could also become subject to substantial fines and other forms of penalties for non-compliance. Even without such financial losses, increased public awareness and adverse publicity about potential impacts on climate change or environmental harm from us or our industry could harm our reputation or otherwise impact the Company adversely. In recent years, investors have also begun to show increased interest about sustainability and climate change as it relates to their investment decisions. See Item 4.B. “Business Overview—Environmental, Social and Governance Programs.”
According to the new tariff system which came into effect on January 1, 2021, the Government introduced an additional component to the tariff called the Climate/Environment Related Charge. Previously, our climate and environment costs were embedded in the Usage Charge component of the tariff and our consumers could not discern the exact magnitude of such costs. By separating it out as an independent component, we intend to provide more information and transparency to our customers while having the flexibility to adjust it in alignment with the underlying costs. Even though the Climate/Environment Related Charge is planned to be adjusted every year by reflecting the change in climate and environment-related costs, the Government may change the date of adjustment in consideration of different policy objectives and there is no guarantee that the Climate/Environment Related Charge will be regularly updated, even though our climate and environment-related costs will likely increase each year. If there are discrepancies between our costs and the Climate/Environment Related Charge, we may accumulate such discrepancies and reflect them in our Total Comprehensive Cost. However, the electricity
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rate based on the Total Comprehensive Cost needs to be approved by the Government to be revised. There is no assurance that, particularly given the wide-ranging policy priorities of the Government, it will in fact raise the electricity rate to a level sufficient to fully cover additional costs associated with implementing and operating programs as described in this risk factor and do so on a timely basis or at all. If the Government does not do so or provide us and our generation subsidiaries with other forms of assistance to offset the costs involved, our results of operation, financial condition and cash flows may be materially and adversely affected. For details, please see Item 4.B. “Business Overview—Sales and Customers—Electricity Rates.”
We may require a substantial amount of additional indebtedness to refinance existing debt and for future capital expenditures.
We anticipate that a substantial amount of additional indebtedness will be required in the coming years in order to refinance existing debt, make capital expenditures for construction of generation plants and other facilities and/or make acquisitions, invest in renewable energy and the “new energy industry” projects and fund our overseas businesses. In 2023, 2024 and 2025, our capital expenditures in relation to the foregoing amounted to Won 15,518 billion, Won 16,720 billion and Won 18,701 billion, respectively, and our budgeted capital expenditures for 2026, 2027 and 2028 amount to Won 23,099 billion, Won 27,391 billion and Won 27,625 billion, respectively.
These businesses typically require a significant amount of capital investment, and such costs may unexpectedly and materially increase in the event of delays or other changes in circumstances, many of which are difficult to anticipate and are beyond our control. Furthermore, as fuel prices surge, our cost of purchasing electricity from domestic generation companies through the Korea Power Exchange may increase significantly. If we fail to recoup more tariff from our customers to account for such electricity sales-related costs, our debt may further increase.
From 2021 to 2023, we experienced net losses as global energy prices increased significantly and the power purchase costs increased accordingly, we issued more debt securities than before to meet increased working capital needs. On December 28, 2022, the National Assembly of Korea passed an amendment to Article 16 of KEPCO Act, which increased our debt ceiling as represented by the total outstanding debt securities on a separate basis to be no greater than five times (or six times if the Minister of the Ministry of Climate, Energy and Environment approves that it is urgently required to resolve a business crisis) the sum of our share capital and reserves updated at the end of each year. Such share capital and reserves are calculated on a separate basis under the KEPCO Act. Before such amendment, our debt ceiling was two times the sum of our share capital and reserves. Such increase in debt ceiling will be effective until December 31, 2027 and we may make use of the new debt ceiling to issue more debt securities to cover our losses, refinance existing debt and finance new capital expenditures. However, if the sum of our share capital and reserves decreases (including as a result of continued significant net losses), our debt ceiling will decrease as well and there will be no assurance that we can meet our funding requirements for capital or operational expenditures or debt repayment obligations. If we cannot meet such requirements, it could have a material adverse impact on our business, results of operations and financial condition.
Although we are not currently experiencing material difficulties in procuring long-term and short-term borrowings, there is no assurance that we will continue to be able to do so, particularly given the potential risk of increasing financial losses and the adverse business environment as discussed above. We expect that a portion of our long-term debt will need to be paid or refinanced through foreign currency-denominated borrowings and capital raising in international capital markets. Such financing may not be available on terms commercially acceptable to us or at all, especially if the global financial markets experience significant turbulence or a substantial reduction in liquidity or due to other factors beyond our control. If we are unable to obtain financing on commercially acceptable terms on a timely basis, or at all, we may be unable to meet our funding requirements for capital expenditures or debt repayment obligations, which could have a material adverse impact on our business, results of operations and financial condition.
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We and our generation subsidiaries have undertaken various programs to reduce debt and improve the overall financial health. For further information, see Item 4.B. “Business Overview—Financial Soundness Plan and Related Activities.” Despite our best efforts, however, for reasons beyond our control, including macroeconomic environments, government regulations and market forces (such as international market prices for our fuels), we cannot assure whether we or our generation subsidiaries will be able to successfully reduce debt burdens or otherwise improve our financial health to a level that would be optimal for our capital structure. If we or our generation subsidiaries fail to do so or the measures taken by us or our generation subsidiaries to reduce debt levels or improve financial health have unintended adverse consequences, such developments may have an adverse effect on our business, results of operations and financial condition.
The movement of Won against the U.S. dollar and other currencies may have a material adverse effect on us.
The Won has fluctuated significantly against major currencies from time to time. Between January and April 2026, the Won/U.S. dollar exchange rate swung sharply: it was approximately 1,478.33 Won per U.S. dollar on January 20, fell to 1,427.12 on February 25, and spiked to 1,509.86 on March 27. Even slight depreciation of Won against U.S. dollar and other foreign currencies may result in a material increase in the cost of fuel and equipment purchased by us from overseas since the prices for substantially all of the fuel materials and a significant portion of the equipment we purchase are denominated in currencies other than Won, generally in U.S. dollar.
Changes in foreign exchange rates may also impact the cost of servicing our foreign currency-denominated debt. As of December 31, 2025, 16.9% of our long-term debt (including the current portion but excluding original issue discounts and premium) without taking into consideration of swap transactions, was denominated in foreign currencies, principally U.S. dollar. In addition, even if we make payments in Won for certain fuel materials and equipment, some of these fuel materials may originate from other countries and their prices may be affected accordingly by the exchange rates between the Won and foreign currencies, especially the U.S. dollar. Since the substantial majority of our revenues are denominated in Won, we must generally obtain foreign currencies through foreign currency-denominated financings or from foreign currency exchange markets to make such purchases or service such debt. As a result, any significant depreciation of Won against the U.S. dollar or other major foreign currencies will have a material adverse effect on our profitability and results of operations.
We may not be successful in implementing new business strategies.
In 2025, we established medium to long-term business strategies for the years from 2026 to 2030. We plan to (i) enhance the stability of our power supply capabilities, which are central to our core business, (ii) respond proactively to the climate crisis in order to achieve carbon neutrality, (iii) secure future growth engines in areas such as overseas businesses and new energy businesses, (iv) establish a foundation for sustainable management through company-wide management innovation, and (v) lead the creation of social value across the energy industry ecosystem. To achieve these plans, we also developed 17 strategic initiatives, including the timely construction of key national power grids.
Due to their inherent uncertainties, such new and expanded strategic initiatives expose us to a number of risks and challenges, including the following:
there may be restrictions on business diversification due to various regulations that we and our subsidiaries must comply with;
new and expanded business activities may require unanticipated capital expenditures, although our revenue may not be sufficient to cover such expenditures;
if domestic and foreign competitions intensify due to a limited pool of professionals and core technology to pursue new businesses, we may lose competitiveness;
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new and expanded business activities may result in less growth or profit than we currently anticipate, and there can be no assurance that such business activities will become profitable at the level we desire or at all;
certain of our new and expanded businesses, particularly in the areas of renewable energy, require substantial government subsidies to become profitable, and such subsidies may be considerably reduced or entirely discontinued;
we may fail to identify and enter into new business opportunities in a timely fashion, putting us at a disadvantage vis-à-vis competitors; and
we may need to hire or retrain personnel to supervise and conduct the relevant business activities.
As part of our business strategy, we may also seek, evaluate or engage in potential acquisitions, joint ventures, strategic alliances, restructurings, combinations, rationalizations, divestments or other similar opportunities. The prospects of these initiatives are uncertain, and there can be no assurance that we will be able to successfully implement or grow new ventures, and these ventures may prove more difficult or costly than what we originally anticipated. In addition, we regularly review the profitability and growth potential of our existing and new businesses. As a result of such review, we may decide to exit from or to reduce the resources that we allocate to new or existing ventures in the future. There is a risk that these ventures may not achieve profitability or operational efficiencies to the extent originally anticipated, and we may fail to recover investments or expenditures that we have already made. Any of the foregoing may have a material adverse effect on our reputation, business, results of operations, financial condition and cash flows.
We plan to pursue overseas expansion opportunities that may subject us to different or greater risks than those associated with our domestic operations.
While our operations have been primarily based in Korea, we and our generation subsidiaries are actively expanding our overseas operations on a selective basis. In particular, we and our generation subsidiaries have been expanding and plan to further expand the construction and operation of renewable energy power plants, transmission and distribution.
Overseas operations involve risks, some of which are different from those we face in our domestic operations, such as:
challenges of complying with multiple foreign laws and regulatory requirements, including tax laws and laws regulating our operations and investments;
volatility of overseas economic conditions, including fluctuations in foreign currency exchange rates;
difficulties in enforcing creditors’ rights in foreign jurisdictions;
risk of expropriation and exercise of sovereign immunity where the counterparty is a foreign government;
difficulties in establishing, staffing and managing foreign operations;
differing labor regulations;
political and economic instability, natural calamities, war and terrorism;
lack of familiarity with local markets and rules of competition;
changes in applicable laws and regulations in Korea that affect foreign operations;
obstacles to the repatriation of earnings and cash; and
environmental regulations and public complaints regarding greenhouse gas emitting facilities, particularly overseas coal-fired power plants.
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Any failure by us to recognize or respond to these differences may adversely affect the success of our operations in those markets, which in turn could materially and adversely affect our businesses and results of operations. Moreover, such operations typically require a significant amount of capital investment, and such costs may unexpectedly and materially increase in the event of delays or other changes in circumstances, many of which are difficult to anticipate and are beyond our control.
Furthermore, although we seek to enter into overseas business opportunities in a prudent manner, some of our new international business ventures carry inherent risks that are different from our traditional business of electricity power generation, transmission and distribution. While the overseas businesses in the aggregate currently do not comprise a material portion of our overall business, the actual revenues and profitability from and investments and expenditures into such ventures may be substantially different from what we plan or anticipate and may have a material adverse impact on our overall businesses, results of operations, financial conditions and cash flows.
An increase in electricity generated by and/or sourced from independent power producers may erode our market position and hurt our business, growth prospects, revenues and profitability.
As of December 31, 2025, we and our generation subsidiaries owned approximately 53.4% of the total electricity generation capacity in Korea (excluding plants generating electricity for private or emergency use). New entrants to the electricity business will erode our market share and create significant competition, which could have a material adverse impact on our financial condition and results of operations.
In particular, we compete with independent power producers with respect to electricity generation. The independent power producers accounted for 36.3% of total power generation in 2025 and 46.6% of total generation capacity as of December 31, 2025. As of December 31, 2025, there were 44 independent power producers in Korean electricity market, excluding 7,355 renewable energy producers. Since 2013, private enterprises are permitted to own and operate coal-fired power plants in Korea as the Ministry of Trade, Industry and Resources approved plans for independent power producers to construct coal-fired power plants under the Sixth Basic Plan announced in February 2013. Under the Tenth Basic Plan announced in January 2023, three coal-fired power plants are planned to be constructed by independent power producers by 2024. Two of the three coal fired power plants planned for construction were completed in 2024, and the remaining one was completed in 2025. Furthermore, independent power producers are permitted to build additional generation capacity (whether coal-fired or not), in which case our market share in Korea may decrease and in turn may have a material adverse effect on our results of operations and financial condition.
In addition, under the Community Energy System adopted by the Government in 2004, a minimal amount of electricity is supplied directly to consumers on a localized basis by independent power producers outside the cost-based pool system. Such system is used by our generation subsidiaries and most independent power producers to distribute electricity nationwide. The purpose of this system is to geographically decentralize electricity supply and thereby reduce transmission losses and improve the efficiency of energy use. These entities do not supply electricity on a national level but are licensed to supply electricity on a limited basis to their respective districts under the Community Energy System. To date, the Community Energy System has not been widely adopted, especially in light of the significant level of capital expenditure required for such direct supply. However, if the Community Energy System were to be widely adopted, it may erode our currently dominant market position in the generation and distribution of electricity in Korea and may have a material adverse effect on our business, results of operations and financial condition.
Pursuant to the Electric Utility Act and the Enforcement Decree of the Electric Utility Act, purchasers of power capacity in excess of 30,000 Kilovolt-amps (kVA) (the threshold was previously 50,000 kVA prior to an amendment to the Enforcement Decree of the Electric Utility Act in June 2007) have been allowed to purchase electricity directly through the Korea Power Exchange. As market interest increased, the Korea Power Exchange amended the Rules on Operating Electricity Market in 2025, such as extending the mandatory retention period
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for switching to direct purchase from one year to three years, which is expected to make customers more careful in deciding to switch to direct purchases as they will be subject to a longer retention period. As of the end of 2025, there have been instances of direct power purchase by electricity consumers. Although direct purchases will still utilize KEPCO’s transmission network, an increase in direct purchases of electricity may adversely affect our market share in electricity sales and, particularly if it were to gain widespread acceptance, may negatively affect our business, financial condition, results of operations and cash flows.
Although we are currently the dominant market player in the electricity distribution in Korea, we cannot assure you that our market dominance will not face potential erosion in the future. For example, in June 2016, the Government announced the Proposal for Adjustment of Functions of Public Institutions (Energy Sector), which contemplated a gradual opening of the electricity trading market to the private sector. Although the proposal was withdrawn after a year of deliberation, no assurance can be given whether parties, including civic groups or the Government, may propose or demand similar measures for electricity trading market. It is difficult to predict whether such proposals or measures may come into effect and, if so, the timing and effect of such measures, which may result in a substantial reduction of our market share of electricity distribution in Korea and have a material adverse effect on our business, results of operation and cash flows.
See also Item 4.B. “Business Overview—Competition.”
Labor unrest or increases in labor cost may adversely affect our operations.
We and each of our generation subsidiaries have separate labor unions. As of December 31, 2025, approximately 73.6% of our and our generation subsidiaries’ employees in the aggregate were members of these labor unions. Since a six-week labor strike in 2002 by union members of our generation subsidiaries in response to a proposal to privatize of one of our generation subsidiaries, there has been no material labor dispute. However, we cannot assure you that there will not be a major labor strike or other material disruptions of operations by the labor unions of us and our generation subsidiaries if the Government resumes privatization or other restructuring initiatives or for other reasons, which may adversely affect our business and results of operations.
Furthermore, the Government, as part of a response to low fertility amidst an aging population in Korea and to make the lives of workers more stable, has pledged to reduce the number of non-permanent workers and increase the employment of permanent workers, in part by transitioning from non-permanent to permanent positions in the public sector. Our generation subsidiaries have transitioned some of its non-permanent workers to permanent positions by hiring them for an indefinite period or establishing subsidiaries and hiring them through such subsidiaries. Our thermal generation subsidiaries plan to form a labor-management consultative body to transition the in-house subcontracted workers for the fuel and environmental facilities to permanent positions. Although the Government guidelines suggest that we transition the non-permanent workers to permanent positions within our existing budget for the related business, we cannot assure you that this will not result in increased costs for us or our generation subsidiaries and have an adverse impact on us or our generation subsidiaries’ financial condition and results of operations.
Additionally, domestic and international policy changes may affect our relationship with our employees, such as the Government’s ratification of nine of the ten essential conventions of International Labor Organization and potential reformation of the public employee wage structure. We cannot assure you that such policy changes will not negatively affect our relationship with our employees, which may in turn adversely affect our business and results of operations.
Operation of nuclear power generation facilities inherently involves numerous hazards and risks, any of which could result in a material loss of revenues or increased expenses.
Through KHNP, we currently operate 26 nuclear-fuel generation units, among which four units (Kori #2,3,4 and Hanbit #1) have been temporarily shut down. Kori #2 has been shut down since April 8, 2023. KHNP
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submitted a safety evaluation report to the NSSC in April 2022 to seek approval for an extension of the life of Kori #2. Following the approval of its life extension in November 2025, measures are underway to resume operations during the first half of 2026. Similarly, Kori #3 and #4 as well as Hanbit #1 have been shut down since September 2024, August 2025 and December 2025 respectively. Administrative and technical protocols including the submission of safety evaluation reports for life extension approval of these three units are also underway.
Operation of nuclear power plants is subject to certain hazards, including environmental hazards such as leaks, ruptures and discharge of toxic and radioactive substances and materials. These hazards can result in severe consequences, including personal injuries or loss of life, severe damage to or destruction of property and natural resources, pollution or other environmental damage, clean-up responsibilities, regulatory investigations and penalties and suspension of operations. Nuclear power has a stable and relatively inexpensive cost structure (which is least costly among the fuel types used by our generation subsidiaries) and is the largest source of Korea’s electricity supply, accounting for 31.01% of electricity generated in Korea in 2025. Due to significantly lower unit fuel costs compared to those for thermal power plants, our nuclear power plants are generally operated at full capacity with only routine shutdowns for fuel replacement and maintenance, with limited exceptions.
From time to time, our nuclear generation units may experience unexpected shutdowns or maintenance-related stoppage. For example, following an earthquake in the vicinity in September 2016, four nuclear generation units at the Wolsong site were shut down for approximately three months as part of a preventive and safety assurance program although these units were not directly affected by the earthquake. Any prolonged or substantial breakdown, failure or suspension of operation of a nuclear unit could result in a material loss of revenues, an increase in fuel costs related to the use of alternative power sources, additional repair and maintenance costs, greater risk of litigation and increased social and political hostility to the use of nuclear power, any of which could have a material adverse impact on our financial condition and results of operations.
In response to the damage to the nuclear facilities in Japan as a result of the tsunami and earthquake in March 2011, the Government conducted additional safety inspections on nuclear power plants by a group of experts from governmental authorities, civic groups and academia. As a result of such inspections, KHNP prepared a comprehensive safety improvement plan including installing additional automatic shut-down systems for earthquakes, extending coastal barriers for seismic waves, procuring mobile power generators and storage batteries, installing passive hydrogen removers at nuclear facilities and improving the radiology emergency medical system. KHNP has been implementing such measures, with the goal of fully implementing by December 2030. KHNP also developed 10 additional supplementary safety measures by analyzing overseas plants and its current operations, and such measures were implemented in 2023. However, there is no assurance that the adoption and implementation of such measures will be sufficient to prevent damage in the future or that additional safety measures will not be required, the adoption and/or implementation of which may be costly and have a material adverse impact on our financial condition and results of operations.
In February 2025, the Government announced the Eleventh Basic Plan which was subsequently amended in March 2025 and focuses on, among other things, optimizing nuclear power sources while minimizing coal-fired power sources and developing eco-friendly power sources. Accordingly, construction of nuclear generation units Shin-Hanul #3 and #4 is underway, and operation of ten other nuclear generation units including Kori #2 may continue beyond their original retirement dates in or before 2030 subject to KHNP’s intention and only upon the NSSC’s approval following a satisfactory safety evaluation. As for new nuclear plants under construction, the construction of Shin-Hanul #2 was completed in April 2024, following Shin-Hanul #1 which commenced its commercial operation in December 2022, while construction of Saeul #3 and #4 (formerly named as Shin-Kori #5 and #6) is expected to be completed in 2026 and 2027 respectively. We cannot assure you that there will not be new challenges by civic groups or changes in the Government’s policies that may interfere with the construction of these or other nuclear units in the future. We may experience a loss of revenues and an increase in fuel costs (as nuclear fuel is the cheapest compared to coal, LNG or oil) as a result of such challenges, which could adversely affect our results of operation and financial condition. For example, in September 2023, a group
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of 40 Korean nationals brought a lawsuit against the Minister of Trade, Industry and Energy to rescind the approval for the Shin-Hanul #3 and 4. In November 2023, we applied to participate in the lawsuit as a stakeholder, and the first trial is in progress at the Seoul Administrative Court. The defendant in the lawsuit has been changed from the Minister of Trade, Industry and Energy to the Ministry of Climate, Energy and Environment.
As mentioned above, separate from Kori #2 whose life extension was approved in November 2025, there are nine other nuclear generation units whose lives under their initial operating licenses will expire by 2030. Under the Eleventh Basic Plan, we aim to continue their operation after such expirations, but we may find it difficult to have the life of those nuclear units extended. In April 2022, KHNP submitted a safety evaluation report to the NSSC to seek approval for an extension of the life of Kori #2, which shut down in April 2023. The life extension of Kori #2 was approved in November 2025, after which operation resumed in April 2026. In September 2022, KHNP also submitted a safety evaluation report to the NSSC to seek approval for an extension of the lives of Kori #3 and Kori #4, which were shut down in September 2024 and August 2025, respectively. In June 2023, KHNP also submitted a safety evaluation report to the NSSC to seek approval for an extension of Hanbit #1, which was shut down in December 2025. As future procedures will be carried out in accordance with relevant laws and regulations, it is uncertain at this time whether such extension of life will be granted. The failure to extend the life of these units would result in a loss of revenues from such units and an increase in our overall fuel costs (as nuclear fuel is cheaper compared to coal, LNG or oil), which could adversely affect our results of operation and financial condition. In addition, heightened concerns regarding the safety of operating nuclear generation units could impede with our ability to operate them for an extended period of time or at all. For example, the nuclear power plant at Wolsong #1 unit began operations in 1982 and ended its operations in 2012 pursuant to its 30-year operating license. In February 2015, the NSSC evaluated the safety of operating Wolsong #1 unit and approved its extended operation through November 2022. A civic group filed a lawsuit to annul such decision, and in February 2017, the Seoul Administrative Court ruled against the NSSC. The NSSC appealed this decision, and the civic group filed an injunction to suspend the operation of the Wolsong #1 unit. The civic group’s injunction was denied in July 2017. KHNP, which operated the unit pursuant to the NSSC’s initial decision, has joined this lawsuit. The legal proceeding has been finalized and was closed on June 13, 2020.
In addition, the current scheme for the construction and operation of nuclear generation units may be altered in the future, and we cannot assure you that current or future policies will not have an adverse impact on our or our generation subsidiaries’ financial condition and results of operations. In the past, in keeping with previous Eighth and Ninth Basic Plans to decrease reliance on nuclear power sources, on June 15, 2018, the board of directors of KHNP decided to (i) retire Wolsong #1 unit earlier than planned due to comprehensive evaluation of the economic viability and regional sentiment of its continuing operation and (ii) discontinue the construction of Chunji #1 and #2 as well as Daejin #1 and #2 units. On December 24, 2019, the NSSC approved the permanent shutdown of Wolsong #1 unit. From the beginning of 2018 to the end of 2019, impairment loss in connection with the property, plant and equipment of Wolsong #1 unit accrued to Won 572,216 million and reversal of impairment loss was Won 16,693 million. From the beginning of 2018 to the end of 2019, impairment loss in connection with the property, plant and equipment of Chunji #1 and #2 as well as Daejin #1 and #2 units amounted to Won 38,886 million. From the beginning of 2018 to the end of 2019, impairment loss in connection with the property, plant and equipment of Shin-Hanul #3 and #4 units accrued to Won 134,736 million. However, as the Tenth Basic Plan announced in January 2023 aims to restart the construction of Shin-Hanul #3 and #4, we recognized the reversal of all the accrued impairment losses related to the Shin-Hanul #3 and #4. The Government revised the Enforcement Decree of the Electricity Business Act in June 2021 and enacted a notice that will allow KHNP to be compensated for reasonable costs incurred in relation to the phase-out of nuclear power plants in accordance with the Government’s energy transition policy. KHNP applied for such compensation related to Wolsong #1 in June 2022. However, even if KHNP may apply for such compensation, there is no guarantee that it will cover the entire cost as the scope of such compensation has not been specifically determined yet. If KHNP cannot recoup its total cost, it may have an adverse impact on our financial condition.
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The construction and operation of our generation, transmission and distribution facilities involve difficulties, such as opposition from civic groups and uncertainties in maintaining permits and licenses, which may have an adverse effect on us.
From time to time, we encounter social and political opposition against construction and operation of our generation facilities (particularly nuclear units) and, to a lesser extent, our transmission and distribution facilities. For example, we experienced intense opposition from local residents and civic groups to the construction of transmission lines in the Milyang area, which we resolved through various compensatory and other support programs. Such opposition delayed the completion of the project. Although we and the Government have undertaken various community programs to address concerns of residents in areas near our facilities, civic and community opposition could result in delayed construction or relocation of our planned facilities. In 2025, in order to minimize potential delays in the construction of transmission lines, we established a grid deployment department which analyzes prior site selections and complaints to identify issues and provide better solutions to prevent construction delays and establish a strategic roadmap for improving the site selection process for timely construction of transmission lines, managing the site work process, and reviewing appropriate compensation levels.
In addition, our generation, transmission and distribution facilities generally require permits and licenses from the Government before we can operate them. For example, our nuclear power plants are operated under licenses for a fixed duration of time and such licenses can only be extended upon an approval by the NSSC following a satisfactory safety evaluation. Even in the case of a satisfactory safety evaluation and following approval, a civic or other group may file a lawsuit to challenge such evaluation and approval and apply for an injunction to prevent us from operating our facilities. Such civic and community opposition and the uncertainties in maintaining permits and licenses for our facilities could give rise to a material adverse impact on our business and results of operations.
Our risk management policies and procedures may not be fully effective at all times.
In the course of our operations, we must manage a number of risks, such as regulatory risks, market risks and operational risks. Although we devote significant resources to developing and improving our risk management policies and procedures and expect to continue to do so in the future, our risk management practices may not be fully effective at all times in eliminating or mitigating risk exposures in all market environments or against all types of risk, including risks that are unidentified or unanticipated, such as natural disasters or employee misconduct. KHNP is working to improve its risk monitoring and management system. For additional information, see Item 4.B. “Business Overview—Nuclear Safety.”
In April 2019, a forest fire broke out in Goseong in Gangwon Province, about 210 kilometers from Seoul, causing damages to nearby towns, covering approximately 1,260 hectares. The National Forensic Service has investigated the cause of the fire and has determined that the fire seems to have been started by an electrical arc from our utility pole’s wire, which broke as a result of a strong wind. Based on this finding and follow-up investigations by the Police Department of Goseong, seven employees of KEPCO were prosecuted in connection with the fire. In October 2023, the Supreme Court of Korea (the “Supreme Court”) acquitted the employees. As of March 31, 2026, we have settled with and completed the compensation payment of Won 81.6 billion in the aggregate to victims. In addition, we are also compensating the fire victims by providing a number of services, such as free supply of electricity. We are also implementing measures to prevent future fires that may result from an electrical arc, including a special maintenance program to be enforced during the dry seasons between March and May. We also implemented operational measures such as tailored operation of protective devices and suspension of operation during periods of low loads and plan to change power facility designs to reflect regional and seasonal characteristics, all of which are intended to help prevent similar incidents from happening in the future. Despite our efforts, however, such incidents may occur again, and we cannot assure you that they will not have a material adverse effect on us, our reputation or our operating results.
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Furthermore, our operational activities such as the generation of electricity involve inherent operating risks that may result in accidents resulting in serious injury or loss of life, environmental damage or property damage. Although we prioritize on-site safety management by engaging in communications with different stakeholders and seek to increase investments to foster a safe work environment, due to the inherent risks of our operations, no assurance can be given that there will not be future accidents.
The Serious Accident Punishment Act (“SAPA”), which imposes criminal liability on individuals and entities responsible for “serious accidents”, has taken effect since January 27, 2022. Under SAPA, the term “serious accident” encompasses not only accidents at industrial sites (e.g., at factories or construction sites), but also “public” disasters caused by defects in the design, manufacture, installation and management of products, product ingredients or public facilities/transportation. SAPA imposes criminal liability against (i) business owners or executives (as defined by the law) who fail to ensure the safety of their business operations and (ii) businesses or institutions who fail their supervisory duties. In case of willful misconduct or gross negligence, SAPA also imposes punitive damages of up to five times of the actual damages incurred. Although we have analyzed and have revised our policies, internal regulations and manuals in light of SAPA, there is no guarantee that we or our executives will not be subject to liability under SAPA, which may adversely affect our business, financial condition and result of operations.
We believe we and our subsidiaries are in compliance in all material respects with internal compliance policies and procedures and all other additional safety measures initiated internally or required by regulatory and governmental agencies. Under SAPA, businesses may present as a defense against liability that they have duly performed their duties to ensure the safety and health of the participants in their business operations. However, despite all precautionary and preventative measures undertaken by us, we cannot assure you whether these measures will prove to be fully effective at all times or be sufficient to address the known and unknown risks we face or that an incident that could cause harm to our operations and reputation will not happen in the future, including due to factors beyond our control.
Our risk management procedures may not prevent losses in debt and foreign currency positions.
We manage interest rate exposure for our debt instruments by limiting our variable rate debt exposure as a percentage of our total debt and closely monitoring the movements in market interest rates. We also actively manage currency exchange rate exposure for our foreign currency-denominated liabilities by measuring the potential loss using risk analysis software and entering into currency swap contracts to hedge such exposure when the possible loss exceeds a certain risk limit, as well as holding periodic foreign exchange risk management committee meetings. To the extent we have unhedged positions or our hedging and other risk management procedures do not work as intended, including as a result of changes in global macroeconomic environment and/or other factors, our results of operations and financial condition may be adversely affected.
The amount and scope of coverage of our insurance are limited.
Substantial liability may result from the operations of our nuclear generation units, the use and handling of nuclear fuel and possible radioactive emissions associated with such nuclear fuel. KHNP carries insurance for its generation units and nuclear fuel transportation, and we believe that the level of insurance is generally adequate and is in compliance with relevant laws and regulations. In addition, KHNP is the beneficiary of Government indemnity that covers damages which the insurance cannot cover. However, such insurance is limited in terms of amount and scope of coverage and does not cover all types or amounts of losses which could arise in connection with the ownership and operation of nuclear plants. Accordingly, material adverse financial consequences could result from a serious accident or a natural disaster to the extent it is neither insured nor covered by the Government indemnity.
In addition, our non-nuclear generation subsidiaries carry insurance covering certain risks, including fire, in respect of their key assets, including buildings and equipment located at their respective power plants,
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construction-in-progress and imported fuel and procurement in transit. Such insurance and indemnity, however, cover only a portion of the assets that these generation subsidiaries own and operate and do not cover all types or amounts of loss that could arise in connection with the ownership and operation of these power plants. In addition, our generation subsidiaries are not permitted to self-insure, and accordingly have not self-insured, against risks of their uninsured assets or business. Accordingly, material adverse financial consequences could result from a serious accident to the extent it is uninsured.
In addition, because neither we nor our non-nuclear generation subsidiaries carry any insurance against terrorist attacks, an act of terrorism would result in significant financial losses. See Item 4.B. “Business Overview—Insurance.”
We may not be able to raise share capital in the future without the participation of the Government.
Under applicable laws, the Government is required to directly or indirectly own at least 51% of our issued capital stock. As of December 31, 2025, the Government, directly and through Korea Development Bank (a statutory banking institution wholly owned by the Government), owned 51.1% of our issued capital stock. Accordingly, without changes in the existing Korean law, it may be difficult or impossible for us to undertake, without the participation of the Government, any equity financing in the future.
We may be exposed to potential claims made by current or previous employees for unpaid wages for the past three years under the expanded scope of ordinary wages and become subject to additional labor costs arising from the broader interpretation of ordinary wages under such decision.
Under the Labor Standards Act, an employee is legally entitled to “ordinary wages.” Under the guidelines previously issued by the Ministry of Employment and Labor, ordinary wages include base salary and certain fixed monthly allowances for work performed overtime during night shifts and holidays. Prior to the Supreme Court decision described below, many companies in Korea had typically interpreted these guidelines as excluding from the scope of ordinary wages fixed bonuses that are paid other than on a monthly basis, namely on a bi-monthly, quarterly or semi-annual basis, although such interpretation had been a subject of controversy and had been overruled in a few court cases.
In December 2013, the Supreme Court ruled that regular bonuses fall under the category of ordinary wages on the condition that those bonuses are paid regularly and uniformly, and that any agreement which excludes such regular bonuses from ordinary wage is invalid. One of the key rulings provides that bonuses that are given to employees (i) on a regular and continuous basis and (ii) calculated according to the actual number of days worked (iii) that are not incentive-based must be included in the calculation of “ordinary wages.” The Supreme Court further ruled that in spite of invalidity of such agreements, employees shall not retroactively claim additional wages incurred due to such court decision, in case that such claims provide employees with unexpected benefits that substantially exceed the wage level agreed by employers and employees and cause an unpredicted increase in expenditures for their company, which would lead the company to material managerial difficulty or would be a threat to the existence of the company. In that case, such claims are not acceptable as they are unjust and are in breach of the principle of good faith. However, in December 2021, the Supreme Court ruled that the claim of workers for additional wages should not be easily rejected for the reason of good faith if there is a possibility of overcoming business difficulties in the future.
Following such ruling by the Supreme Court, we and our subsidiaries became subject to a number of lawsuits filed by various industry-wide and company-specific labor unions based on claims that ordinary wage had been paid without including certain items that should have been included as ordinary wage. In July 2016, the court ruled against us, and in accordance with the court’s ruling, in August 2016 we paid Won 55.1 billion to the employees for three years of back pay plus interest. As of December 31, 2025, our subsidiaries set aside an aggregate amount of Won 196.5 billion to cover any potential future payments of additional ordinary wage in relation to the related lawsuits. We cannot presently assure you that the court will not rule against our
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subsidiaries in these lawsuits, or that the foregoing reserve amount will be sufficient to cover the amounts payable under the court rulings.
Furthermore, the issue of determining which labor costs should be additionally included as part of ordinary wages was not been fully resolved by the courts reviewing the lawsuits to which our subsidiaries were a party and other ordinary wage lawsuits filed against other companies. For instance, there were several cases pending review of the Supreme Court on whether the bonuses conditional to employee’s current employment status should be included as part of ordinary wages. The Supreme Court, in 2013, had ruled that such conditional bonuses are not a part of ordinary wages. However, in 2024, the Supreme Court overruled its prior interpretation, declaring that “fixity” shall no longer serve as a conceptual criterion for determining ordinary wages. Instead, the Court established a new framework based on whether the payment constitutes compensation for “prescribed work” and is paid “regularly and uniformly,” regardless of any additional conditions attached to the payment.
Recognizing that a full retroactive application of this new standard would undermine legal stability and the reliance interests formed under the prior precedents that centered on fixity, the Supreme Court limited the scope of the new rule. The new principle applies prospectively to ordinary wages calculated for work performed on or after December 19, 2024, except in the case at hand and in other lawsuits pending before the courts at the time of the decision where the applicability of ordinary wages was disputed (referred to as “parallel cases”).
See Item 8.A. “Consolidated Statements and Other Financial Information – Legal Proceedings.”
We are subject to physical security and cybersecurity risks.
Risks from cybersecurity and physical threats to energy infrastructure are increasing. Threat actors, including sophisticated nation-state actors, continue to seek to exploit potential vulnerabilities in the electric and natural gas utility industry, grid infrastructure, and other energy infrastructure, and attacks and disruptions, both physical, cyber, and hybrid targeting physical and cyber assets, are becoming increasingly sophisticated and dynamic. Several Governmental agencies have warned of increased risks related to physical attacks, ransomware attacks and cybersecurity threats related to the energy sector and its supply chains, and that the risks may escalate during periods of heightened geopolitical tensions. The continued adoption of advanced digital technologies increases the potential magnitude of impact such attacks may have. Moreover, the rapid evolution and broader adoption of artificial intelligence (“AI”) technologies may amplify our exposure to cybersecurity threats.
A security breach of our physical assets or information systems or those of our competitors, vendors, business partners and interconnected entities could materially impact us by, among other things, impairing the availability of electricity produced and distributed by us and/or the reliability of transmission and distribution systems, damaging grid infrastructure, interrupting critical business functions, impairing the availability of vendor services and materials that we rely on to maintain our operations, or by leading to the theft or inappropriate release of certain types of information, including critical infrastructure information, system data and architecture, sensitive customer, vendor, or employee data, or other confidential data. Our reliance on vendors to provide services and equipment increases the risk to assets, systems, and data.
In December 2014, KHNP became subject to a cybersecurity attack. Hackers infiltrated the computer network of former KHNP employees and threatened to shut down some of KHNP’s nuclear plants. Even though this incident ended without jeopardizing our nuclear operation in any material respect and none of the stolen data was material to our nuclear operation or the national nuclear policy, as such attacks continue to increase in sophistication and frequency, we may be subject to a material breach or material disruption in the future.
If a significant physical or cybersecurity breach or disruption were to occur, our reputation could be negatively affected, customer confidence in us could be diminished and we could be subject to legal claims, regulatory exposure, loss of revenues, increased costs including for infrastructure repairs, or operations shutdown, all of which could materially affect our financial condition and damage our business reputation.
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Moreover, the amount and scope of insurance maintained against losses resulting from any such security breaches or disruptions may not be sufficient to cover losses or otherwise adequately compensate for any disruptions to business that could result from such breaches or disruptions. The continued increase in Governmental requirements related to cybersecurity and evolving threat actor-capabilities could require changes to current measures taken by us or to our business operations and could adversely affect our consolidated financial statements.
As AI technology has emerged as a key tool for maximizing efficiency and driving innovation across various sectors, its increasingly widespread adoption has also resulted in a wide array of associated security risks, increasing the need for effective response strategies. For example, we are seeking to apply AI-driven technology such as predictive analysis in the operations and management of our power grid network in order to increase efficiency and improve stability. However, this may expose our power infrastructure to attacks designed to deceive, bypass, or disable security systems and AI-driven technology used in these projects, including though AI-generated malware or other sophisticated AI-powered cyberattacks. If such attacks are successful, the consequences could be severe, including leading to blackouts or loss of important and sensitive data. We are actively trying to improve and utilize better AI technology to combat and effectively address such risks, but no assurance can be given that we will not suffer a security breach which could materially affect our financial condition and damage our business reputation.
For our cybersecurity management policies, see Item 4.B. “Business Overview—Cybersecurity” and Item 16.K. “Cybersecurity.”
We engage in Russia-related dealings, including purchasing fuel supply, goods and services from Russia and Russian companies, and we may be adversely impacted in a material manner by sanctions concerning Russia imposed by the United States and other jurisdictions.
In 2025, we met 20.1% of our bituminous coal requirements from coals that originated from Russia. Additionally, we also purchased uranium and conversion and enrichment services of uranium concentrates from Russian suppliers and also purchase Russian origin LNG. In 2025, the total value of all goods and services originated or purchased from Russia was approximately US$ 1.1 billion.
United States, among other jurisdictions, adopted and maintains economic sanctions and export/import controls against Russia. U.S. Office of Foreign Assets Control’s (“OFAC”) sanctions block the property of certain designated individuals and entities, target certain sectors of the Russian economy, including the energy sector, and prohibit certain transactions by U.S. persons with certain targeted persons in targeted sectors of the Russian economy.
Since February 2022, the United States, the European Union, the United Kingdom, and other countries have imposed a host of additional economic sanctions on Russia, Belarus, and certain related persons in response to Russia’s military activities in Ukraine. OFAC now maintains comprehensive, territory-wide sanctions on Crimea, the self-described Donetsk People’s Republic (“DNR”) and Luhansk People’s Republic (“LNR”) in Ukraine, generally prohibiting any dealings by U.S. persons with these regions. OFAC also has blocking sanctions on certain major Russian financial institutions and their affiliates, Russian oligarchs and persons active in the energy, banking and finance sectors (along with their family members) and Russian government officials, and debt and equity restrictions on certain Russian state-owned enterprises. The U.S. government imposed extensive export controls on all dual-use items destined to Russia, including technology and software, as well as certain commercial items. The U.S. government also imposed a ban on importation into the U.S. of Russian crude oil, certain petroleum products, LNG, and coal, and OFAC has also prohibited all new investments in Russia by U.S. persons, wherever located. Non-U.S. persons that engage in certain prohibited transactions concerning Russia or with certain sanctioned Russian persons or entities may be subject to sanctions if any such dealings or transactions involve a nexus to U.S. jurisdiction, and they may also be subject to secondary sanctions for providing material support to Russian entities or individuals subject to certain blocking sanctions and certain
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other sanctionable transactions or activities. Notably, OFAC now has broad authority to impose blocking sanctions on any person determined to operate or have operated in the metals and mining as well as energy sectors the Russian economy. Additionally, the European Union, United Kingdom, and Switzerland, among other jurisdictions, have imposed a ban on the importation of coal and certain other solid fossil fuels. The European Union has also banned the transshipment operations relating to LNG originating in or exported from Russia as well as certain related services. Korea also announced export controls on certain non-strategic items for shipment to Russia or Belarus. Other countries, including Japan, have announced plans to phase out Russian coal imports in the future. Further sanctions by the U.S., Korea, and other jurisdictions including the European Union, Switzerland, and the United Kingdom may also be forthcoming.
We source Russian fuel products from counterparties in a number of these jurisdictions, including the European Union, Japan, and Switzerland and sanctions that have been or will be imposed by these and other jurisdictions may require us to restrict or modify our operations. While the U.S. and other countries’ sanctions measures announced to date do not amount to a comprehensive embargo against Russia and Russian persons, it is not possible to predict with a reasonable degree of certainty how developments in Russia and Ukraine may impact our Russia-related business dealings, including but not limited to our purchase of fuel sources from Russia, such as bituminous coal, uranium, uranium concentrates conversion and enrichment services, and LNG or with regard to other business with or involving Russian counterparties, such as provision of uranium conversion and enrichment-related services.
Although we do not believe that our dealings related to Russia violate applicable economic sanctions, our ongoing dealings related to Russia expose us to risk. Imposition of sanctions on parties we are dealing with or planning to deal with (directly or indirectly), including our contractual counterparties and suppliers of fuel sources, has caused us and may require us in the future to suspend or terminate our relationships with them and substitute them with alternative parties in order to comply with applicable sanctions. There is no guarantee that we will be able to procure contractual terms with the alternative parties that are better or at least similar to our current terms. In addition, the current and future sanctions against Russia-related business dealings may cause the global prices of fuels including coal, uranium, and LNG to rise as the overall fuel supply will be curbed. Also, we may not be able to pursue other businesses with Russian counterparties. Our failure to comply with applicable economic sanctions or export or import controls affecting Russia or Russian companies may result in administrative, civil, or criminal penalties. Such events may have a material adverse effect on our reputation, business, results of operations, financial condition and cash flows.
Recent Amendments to the Korean Commercial Code may increase the influence of minority shareholders.
The Korean Commercial Code has recently undergone three successive rounds of legislative amendments, the majority of which are in the process of coming into effect or will take effect in the near term.
The first round of amendments (the “First Amendment”), passed in July 2025, introduces key changes including: (i) expansion of directors’ fiduciary duties to expressly include shareholders; (ii) introduction of electronic shareholder meetings for listed companies, with mandatory parallel electronic and in-person meetings for listed companies of a certain size; and (iii) expansion of the so-called “3% rule,” limiting the voting rights of shareholders holding more than 3% of issued shares in the election and dismissal of audit committee members, with shares held by related parties of the largest shareholder aggregated for the purpose of calculating the threshold.
The second round of amendments (the “Second Amendment”), passed in August 2025, introduces key changes including: mandatory cumulative voting for large listed companies with total assets of at least Won 2 trillion, notwithstanding any contrary provision in their articles of incorporation.
The third round of amendments (the “Third Amendment”), passed in February 2026, introduces new rules on treasury shares, including a general requirement to cancel treasury shares within one year of acquisition and additional shareholder approval requirements for retaining or disposing of treasury shares beyond that period.
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These amendments are intended to enhance shareholder participation and strengthen the independence and effectiveness of boards and audit committees. Accordingly, they may increase the influence of minority shareholders, institutional investors, hedge funds or other activist shareholders in corporate governance matters. There is no assurance that such developments will not have a potential adverse effect on our business.
Risks Relating to Korea and the Global Economy
Unfavorable financial and economic conditions in Korea and globally may have a material adverse impact on us.
We are incorporated in Korea, where most of our assets are located and most of our income is generated. As a result, we are subject to political, economic, legal and regulatory risks specific to Korea, and our business, results of operations and financial condition are substantially dependent on the Korean consumers’ demand for electricity, which are largely dependent on developments relating to the Korean economy. Elevated energy and commodity prices, ongoing global supply chain realignments, geopolitical tensions including the ongoing Russia-Ukraine war, the military conflicts between Iran and other countries, broader instability in the Middle East, continued shifts in monetary policy by major central banks, volatility in global financial markets, and signs of economic slowdown in China and other key markets continue to create significant uncertainty regarding the global economic outlook, which has adversely affected, and may continue to adversely affect, the Korean economy. As the Korean economy is, in turn, highly dependent on the health and direction of the global economy, the prices of our securities may be adversely affected by investors’ reactions to developments in other countries. In addition, due to the ongoing volatility in the global financial markets, the value of the Won relative to the U.S. dollar has also fluctuated significantly in recent years, which also may adversely affect our financial condition and results of operations.
Changes in political leadership and the policy direction of the Korean government, including those following the inauguration of President Lee Jae Myung on June 4, 2025, may affect Korea’s political and economic environment, market conditions, investor sentiment and the overall business environment in Korea. Such developments could adversely affect companies operating in Korea, including us, and, in turn, our business, results of operations and financial condition.
Factors that determine economic and business cycles in the Korean or global economy are for the most part beyond our control and inherently uncertain. In light of the high level of dependence on the global economy, any of the foregoing developments could have a material adverse effect on the Korean economy and financial markets and on our business and profitability.
More specifically, factors that could have an adverse impact on Korea’s economy include, among others:
inflationary pressures and volatility in commodity prices resulting from global supply chain disruptions, geopolitical conflicts in Russia, Ukraine, Israel and other Middle Eastern states and other external shocks;
the military conflicts between Iran and other countries, including the Unities States and Israel;
changes in monetary policies by central banks around the world in response to inflation, growth or financial market conditions and ensuing volatility in foreign currency reserve levels, commodity prices (including oil, LNG and other fuel prices), exchange rates (particularly against the U.S. dollar), interest rates, stock market prices and inflows and outflows of foreign capital, either directly, into the stock markets, through derivatives or otherwise;
difficulties in the financial sectors in the United States, Europe, China and elsewhere and increased sovereign default risks in certain countries and the resulting adverse effects on the global financial markets;
adverse developments in the economies of countries and regions to which Korea exports goods and services (such as the United States, Europe, China and Japan), or in emerging market economies in
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Asia or elsewhere that could result in a loss of confidence in the Korean economy, including potentially as a result of the Brexit;
tariffs introduced by countries, including the U.S., on goods imported and resulting volatility and uncertainty in the global economy, including the potential escalation of ongoing trade conflicts between the U.S., China and other countries;
social and labor unrest or declining consumer confidence or spending resulting from lay-offs, increasing unemployment and lower levels of income;
uncertainty and volatility in the market prices of Korean real estate;
a decrease in tax revenues and a substantial increase in the Government’s expenditures for unemployment compensation and other social programs that together could lead to an increased Government budget deficit;
political uncertainty, including as a result of increasing strife among or within political parties in Korea, and political gridlock within the Government or in the legislature, which prevents or disrupts timely and effective policy making to the detriment of Korean economy, as well as the impeachment and indictment of the former president following a series of scandals and social unrest, which also involved the investigation of several leading Korean conglomerates and arrest of their leaders on charges of bribery and other possible misconduct;
deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deterioration resulting from territorial or trade disputes or disagreements in foreign policy, including as a result of any potential renegotiation of free trade agreements;
increases in social expenditures to support the aging population in Korea or decreases in economic productivity due to declining population size in Korea;
any other development that has a material adverse effect in the global economy, such as an act of war, the spread of terrorism or a breakout of an epidemic such as SARS, avian flu, swine flu, Middle East Respiratory Syndrome, Ebola or Zika virus, or natural disasters, earthquakes and tsunamis and the related disruptions in the relevant economies with global repercussions;
hostilities involving oil-producing countries in the Middle East and elsewhere and any material disruption in the supply of oil or a material increase in the price of oil resulting from such hostilities; and
an increase in the level of tensions or an outbreak of hostilities in the Korean peninsula or between North Korea and the United States.
Any future deterioration of the Korean economy could have an adverse effect on our business, financial condition and results of operations.
Tensions with North Korea could have an adverse effect on us and the market value of our shares.
Relations between Korea and North Korea have been tense throughout Korea’s modern history. The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events. In particular, there continues to be uncertainty regarding North Korea’s political leadership and policy direction, which has raised concerns with respect to the political and economic future of the region.
There continues to be heightened security tension in the region stemming from North Korea’s hostile military and diplomatic actions, including in respect of its nuclear weapons and long-range missile programs. Recently, North Korea fired artillery shells in maritime buffer zones in November 2019 as well as from October 2022 to December 2022 and shots on a guard post of Korea in May 2020. In September 2022, North Korea legislated five conditions under which it would launch a preemptive nuclear strike. In December 2022, five North
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Korean drones violated Korean airspace, one of which returned to the North but the rest disappeared. In September 2023, North Korea amended its constitution declaring itself to be a nuclear weapons state. In October 2024, North Korea conducted test launches of an intercontinental ballistic missile to the East Sea. In 2025 and 2026, North Korea has continued to advance its nuclear and missile capabilities: North Korea has developed new missile systems, such as new intercontinental ballistic missile systems, and has conducted test-firings of such systems, including the hypersonic missile test-fired in January 2026. North Korea has also deepened its military cooperation with Russia, including the exchange of weapons, technology and personnel, which has further heightened security tensions on the Korean Peninsula.
North Korea’s economy also faces severe challenges, including severe inflation and food shortages, which may further aggravate social and political tensions within North Korea. In addition, reunification of Korea and North Korea could occur in the future, which would entail significant economic commitment and expenditure by Korea that may outweigh any resulting economic benefits of reunification.
There can be no assurance that the level of tension on the Korean peninsula will not escalate in the future or that the political regime in North Korea may not suddenly collapse. Any further increase in tension or uncertainty relating to the military, political or economic stability in the Korean peninsula, including a breakdown of diplomatic negotiations over the North Korean nuclear program, occurrence of military hostilities, heightened concerns about the stability of North Korea’s political leadership or its actual collapse, a leadership crisis, a breakdown of high-level contacts or accelerated reunification could have a material adverse effect on our business, financial condition and results of operations, as well as the price of our common shares and our American depositary shares.
We are generally subject to Korean corporate governance and disclosure standards, which differ in significant respects from those in other countries.
Companies in Korea, including us, are subject to corporate governance standards applicable to Korean public companies which differ in many respects from standards applicable in other countries, including the United States. As a reporting company registered with the Securities and Exchange Commission and listed on the New York Stock Exchange, we are, and will continue to be, subject to certain corporate governance standards as mandated by the Sarbanes-Oxley Act of 2002, as amended. However, foreign private issuers, including us, are exempt from certain corporate governance standards required under the Sarbanes-Oxley Act or the rules of the New York Stock Exchange. We and our generation subsidiaries are also subject to a number of special laws and regulations to Government-controlled entities, including the Act on the Management of Public Institutions. For a description of significant differences in corporate governance standards, see Item 16.G. “Corporate Governance.” There may also be less publicly available information about Korean companies, such as us, than is regularly made available by public or non-public companies in other countries. Such differences in corporate governance standards and less public information could result in less than satisfactory corporate governance practices or disclosure to investors in certain countries.
You may not be able to enforce a judgment of a foreign court against us.
We are a corporation with limited liability organized under the laws of Korea. Substantially all of our directors and officers and other persons named in this annual report reside in Korea, and all or a significant portion of the assets of our directors and officers and other persons named in this annual report and substantially all of our assets are located in Korea. As a result, it may not be possible for holders of the American depository shares to affect service of process within the United States, or to enforce against them or us in the United States judgments obtained in United States courts based on the civil liability provisions of the federal securities laws of the United States. There is doubt as to the enforceability in Korea, either in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated on the United States federal securities laws.
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Risks Relating to Our American Depositary Shares (ADSs)
There are restrictions on withdrawal and deposit of common shares under the depositary facility.
Under the deposit agreement, holders of shares of our common stock may deposit those shares with the depositary bank’s custodian in Korea and obtain American depositary shares, and holders of American depositary shares may surrender American depositary shares to the depositary bank and receive shares of our common stock. However, under current Korean laws and regulations, the depositary bank is required to obtain our prior consent for the number of shares to be deposited in any given proposed deposit which exceeds the difference between (i) the aggregate number of shares deposited by us for the issuance of American depositary shares (including deposits in connection with the initial and all subsequent offerings of American depositary shares and stock dividends or other distributions related to these American depositary shares) and (ii) the number of shares on deposit with the depositary bank at the time of such proposed deposit. We have consented to the deposit of outstanding shares of common stock as long as the number of American depositary shares outstanding at any time does not exceed 80,153,810 shares. As a result, if you surrender American depositary shares and withdraw shares of common stock, you may not be able to deposit the shares again to obtain American depositary shares.
Ownership of our shares is restricted under Korean law.
Under the Financial Investment Services and Capital Markets Act, with certain exceptions, a foreign investor may acquire shares of a Korean company without being subject to any single or aggregate foreign investment ceiling. As one such exception, certain designated public corporations, such as us, are subject to a 40% ceiling on acquisitions of shares by foreigners in the aggregate. The Financial Services Commission may impose other restrictions as it deems necessary for the protection of investors and the stabilization of the Korean securities and derivatives market.
In addition to the aggregate foreign investment ceiling set out under the Financial Investment Services and Capital Markets Act, our Articles of Incorporation set a 3% ceiling on acquisition by a single investor (whether domestic or foreign) of the shares of our common stock. Any person (with certain exceptions) who holds our issued and outstanding shares in excess of such 3% ceiling cannot exercise voting rights with respect to our shares exceeding such limit.
The ceiling on aggregate investment by foreign investors applicable to us may be exceeded in certain limited circumstances, including as a result of acquisition of:
shares by a capitalization or stock dividends of reserves;
shares from paid-in capital increases created by the exercise of shareholders’ rights; or
shares by merger, inheritance or bequest.
A foreign investor who has acquired our shares in excess of any ceiling described above may not exercise his voting rights with respect to our shares exceeding such limit and the Financial Services Commission may take necessary corrective action against him.
Holders of our ADSs will not have preemptive rights in certain circumstances.
The Korean Commercial Act and our Articles of Incorporation require us, with some exceptions, to offer shareholders the right to subscribe for new shares in proportion to their existing ownership percentage whenever new shares are issued. If we offer any rights to subscribe for additional shares of our common stock or any rights of any other nature, the depositary bank, after consultation with us, may make the rights available to you or use reasonable efforts to dispose of the rights on your behalf and make the net proceeds available to you. The depositary bank, however, is not required to make available to you any rights to purchase any additional shares unless it deems that doing so is lawful and feasible and:
a registration statement filed by us under the U.S. Securities Act of 1933, as amended, is in effect with respect to those shares; or
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the offering and sale of those shares is exempt from or is not subject to the registration requirements of the U.S. Securities Act.
We are under no obligation to file any registration statement with the U.S. Securities and Exchange Commission in relation to the registration rights. If a registration statement is required for you to exercise preemptive rights but is not filed by us, you will not be able to exercise your preemptive rights for additional shares and you will suffer dilution of your equity interest in us.
The market value of your investment in our ADSs may fluctuate due to the volatility of the Korean securities market.
Our common stock is listed on the KRX KOSPI Division of the Korea Exchange, which has a smaller market capitalization and is more volatile than the securities markets in the United States and many European countries. The market value of ADSs may fluctuate in response to the fluctuation of the trading price of shares of our common stock on the Stock Market Division of the Korea Exchange. The Stock Market Division of the Korea Exchange has experienced substantial fluctuations in the prices and volumes of sales of listed securities and the Stock Market Division of the Korea Exchange has prescribed a fixed range in which share prices are permitted to move on a daily basis. Like other securities markets, including those in developed markets, the Korean securities market has experienced problems including market manipulation, insider trading and settlement failures. The recurrence of these or similar problems could have a material adverse effect on the market price and liquidity of the securities of Korean companies, including our common stock and ADSs, in both the domestic and the international markets.
The Korean government has the ability to exert substantial influence over many aspects of the private sector business community, and in the past has exerted that influence from time to time. For example, the Korean government has promoted mergers to reduce what it considers excess capacity in a particular industry and has also encouraged private companies to publicly offer their securities. Similar actions in the future could have the effect of depressing or boosting the Korean securities market, whether or not intended to do so. Accordingly, actual or perceived actions or inactions by the Korean government may cause sudden movements in the market prices of the securities of Korean companies in the future, which may affect the market price and liquidity of our common stock and ADSs.
Your dividend payments and the amount you may realize in connection with a sale of your ADSs will be affected by fluctuations in the exchange rate between the U.S. dollar and the Won.
Investors who purchase the American depositary shares will be required to pay for them in U.S. dollars. Our outstanding shares are listed on the Korea Exchange and are quoted and traded in Won. Cash dividends, if any, in respect of the shares represented by the American depositary shares will be paid to the depositary bank in Won and then converted by the depositary bank into U.S. dollars, subject to certain conditions. Accordingly, fluctuations in the exchange rate between the Won and the U.S. dollar will affect, among other things, the amounts a registered holder or beneficial owner of the American depositary shares will receive from the depositary bank in respect of dividends, the U.S. dollar value of the proceeds which a holder or owner would receive upon sale in Korea of the shares obtained upon surrender of American depositary shares and the secondary market price of the American depositary shares.
If the Government deems that certain emergency circumstances are likely to occur, it may restrict the depositary bank from converting and remitting dividends in U.S. dollars.
Under the Foreign Exchange Transaction Act, if the Government deems that certain emergency circumstances are likely to occur, it may impose restrictions such as requiring foreign investors to obtain prior Government approval for the acquisition of Korean securities or for the repatriation of interest or dividends
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arising from Korean securities or sales proceeds from disposition of such securities. These emergency circumstances include any or all of the following:
sudden fluctuations in interest rates or exchange rates;
extreme difficulty in stabilizing the balance of payments; and
a substantial disturbance in the Korean financial and capital markets.
The depositary bank may not be able to secure such prior approval from the Government for the payment of dividends to foreign investors when the Government deems that there are emergency circumstances in the Korean financial markets.
INFORMATION ON THE COMPANY
History and Development of the Company
General Information
Our legal and corporate name is Korea Electric Power Corporation. We were established by the Government on December 31, 1981 as a statutory juridical corporation in Korea under the Korea Electric Power Corporation Act (the “KEPCO Act”) as the successor to Korea Electric Company. Our registered office is located at 55 Jeollyeok-ro, Naju-si, Jeollanam-do, 58322, Korea, and our telephone number is 82-61-345-4218. Our website address is www.kepco.co.kr.
Our agent in the United States is Korea Electric Power Corporation, North America Office, located at 7th Floor, Parker Plaza, 400 Kelby Street, Fort Lee, NJ 07024.
The Korean electric utility industry traces its origin to the establishment of the first electric utility company in Korea in 1898. On July 1, 1961, the industry was reorganized by the merger of Korea Electric Power Company, Seoul Electric Company and South Korea Electric Company, which resulted in the formation of Korea Electric Company. From 1976 to 1981, the Government acquired the private minority shareholdings in Korea Electric Company. After the Government acquired all the remaining shares of Korea Electric Company, Korea Electric Company was dissolved, and we were incorporated in 1981 and assumed the assets and liabilities of Korea Electric Company. We ceased to be wholly owned by the Government in 1989 when the Government sold 21% of our common stock. As of December 31, 2025, the Government maintained 51.1% ownership in aggregate of our common shares by direct holdings and indirect holdings through Korea Development Bank, a statutory banking institution wholly owned by the Government.
Under relevant laws of Korea, the Government is required to own, directly or indirectly, at least 51% of our capital. Direct or indirect ownership of more than 50% of our outstanding common voting stock enables the Government to control the approval of certain corporate matters relating to us that require a shareholders’ resolution, including approval of dividends. The rights of the Government and Korea Development Bank as holders of our common stock are exercised by the Ministry of Climate, Energy and Environment, based on the Government’s ownership of our common stock and a proxy received from Korea Development Bank, in consultation with the Ministry of Finance and Economy.
We operate under the general supervision of the Ministry of Climate, Energy and Environment. The Ministry of Climate, Energy and Environment, in consultation with the Ministry of Finance and Economy, is responsible for approving, subject to review by the Korea Electricity Commission, the electricity rates we charge our customers. See Item 4.B. “Business Overview—Sales and Customers—Electricity Rates.” We furnish reports to officials of the Ministry of Climate, Energy and Environment, the Ministry of Finance and Economy and other Government agencies and regularly consult with such officials on matters relating to our business and affairs. See Item 4.B. “Business Overview—Regulation.” Our non-standing directors, who comprise a majority of our board
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of directors, must be appointed by the Ministry of Finance and Economy following the review and resolution of the Committee for Management of Public Institutions (which is established by law and chaired by the Minister of the Ministry of Finance and Economy and whose members consist of Government officials and others appointed by the President of Korea based on recommendation by the Minister of the Ministry of Finance and Economy) from a pool of candidates recommended by the director nomination committee. Our president and standing directors who concurrently serve as members of our audit committee must be appointed by the President of Korea upon the motion of the Minister of the Ministry of Climate, Energy and Environment (in the case of our president) and the Minister of the Ministry of Finance and Economy (in the case of our standing director who concurrently serves as a member of the audit committee) and following the nomination by our director nomination committee, the review and resolution of the Committee for Management of Public Institutions and an approval at the general meeting of shareholders. See Item 6.A. “Directors and Senior Management—Board of Directors” and Item 16.G. “Corporate Governance—The Act on the Management of Public Institutions.”
Business Overview
Introduction
We are an integrated electric utility company engaged in the transmission and distribution of substantially all of the electricity in Korea. Through our six wholly-owned generation subsidiaries, we also generate the substantial majority of electricity produced in Korea. As of December 31, 2025, we and our generation subsidiaries owned approximately 53.4% of the total electricity generation capacity in Korea (excluding plants generating electricity primarily for private or emergency use). In 2025, we sold to our customers 549,417 gigawatt-hours of electricity. We purchase electricity principally from our generation subsidiaries and, to a lesser extent, from independent power producers. Of the 545,192 gigawatt-hours of electricity we purchased in 2025, 33.2% was generated by KHNP, our wholly-owned nuclear and hydroelectric power generation subsidiary, 32.7% was generated by our wholly-owned five non-nuclear generation subsidiaries and 34.1% was generated by independent power producers that trade electricity to us through the cost-based pool system of power trading (excluding independent power producers that supply electricity under power purchase agreements with us). Our five non-nuclear generation subsidiaries are KOSEP, KOMIPO, KOWEPO, KOSPO and EWP, each of which is wholly owned by us and is incorporated in Korea. We derive substantially all of our revenues and profit from Korea, and substantially all of our assets are located in Korea.
Our revenues are closely tied to demand for electricity in Korea. In 2025, the gross domestic product, or GDP, increased by 1.0% compared to 2024, whereas the demand for electricity in Korea decreased by 0.07% compared to 2024. In 2025, we realized sales of Won 96,568 billion and net profit of Won 8,667 billion, compared to sales of Won 92,578 billion and net profit of Won 3,622 billion in 2024.
Strategy
We established our 2035 medium to long-term strategy to realize our vision of becoming a “Global Energy & Solution Leader”, driving transformation in the energy industry ecosystem. We plan to achieve this by pursuing the following eight strategic initiatives. Through these initiatives, we aim to provide better value to various stakeholders, including our country, customers and society. More specifically, our target for the country is to contribute to the achievement of national policy targets for energy transition such as establishing the foundation for carbon neutrality and to support sustainable growth by building a reliable and resilient national power grid. Our target for customers is to expand clean energy supply by enhancing digital-based customer interaction and renewable energy transactions. Our target for society is to create a future-oriented energy market by developing and commercializing carbon-neutral technology through collaboration with major stakeholders. Our eight strategic initiatives to achieve such targets are:
Establish a power grid system that can further contribute to achieving carbon neutrality. We plan to contribute to achieving carbon neutrality in 2050 with power grid innovation. We aim to secure grid capability for connecting renewable energy units by proactively constructing power facilities based on forecast and further enhance grid stability with intelligent and advanced grid system.
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Expand clean energy and promote strategic demand response. We plan to establish a foundation for expanding renewable energy by cooperating with our subsidiaries and independent power producers. Also, we aim to improve demand-side energy efficiency by collaborating with demand management business operators.
Lead future energy market and improve sales competitiveness. We plan to create reliable and resilient electricity system to achieve competency in future electricity market. We will also strive to expand our customized services through digital technologies and power data and establish reasonable and sustainable cost-based tariff system.
Lead platform-based new businesses. We plan to expand charging infrastructure and foster transition into electric vehicles. We also aim to improve energy efficiency by boosting operation of dispersed energy resources in a form of energy platform business.
Transform overseas business portfolio to focus on eco-friendly projects and core competencies. We plan to end our overseas coal-fired generation projects and switch substantial amount of our overseas business portfolio into eco-friendly projects. We aim to improve our competency and profitability by strengthening our overseas business capacity.
Secure future technologies and build a research and development (“R&D”) ecosystem. We plan to secure core technologies necessary for achieving carbon neutrality with aggressive R&D investment. In addition, we aim to introduce an R&D system based on collaboration among industries, universities and research institutes to establish a foundation for technological innovation and enhance our R&D capability.
Promote digitalization in overall supply chain. We aim to improve work efficiency and strengthen stability by introducing the latest digital technology and infrastructure to our business environment and developing a business model with new customer services based on data platforms.
Establish a highly reliable and highly efficient management system with respect to human beings and environment. We plan to establish a comprehensive ESG management system that promotes environment, safety and coexistence. Also, we aim to enhance our financial stability by pursuing management efficiency and stable profit structure.
Government Ownership and Our Interactions with the Government
The KEPCO Act requires that the Government own at least 51% of our capital stock. Direct or indirect ownership of more than 50% of our outstanding common voting stock enables the Government to control the approval of certain corporate matters which require a shareholders’ resolution, including approval of dividends. The rights of the Government and Korea Development Bank as holders of our common stock are exercised by the Ministry of Trade, Industry and Resources in consultation with the Ministry of Finance and Economy. We are currently not aware of any plans of the Government to cease to own, directly or indirectly, at least 51% of our outstanding common stock.
We play an important role in the implementation of the Government’s national energy policy, which is established in consultation with us, among other parties. As an entity formed to serve public policy goals of the Government, we seek to maintain a fair level of profitability and strengthen our capital base in order to support the growth of our business in the long term.
The Government, through its various policy initiatives for the Korean energy industry as well as direct and indirect supervision of us and our industry, plays an important role in our business and operations. Most importantly, the electricity tariff rates we charge to our customers are regulated by the Government taking into account, among others, our needs to recover fair operating costs, make capital investments and recoup a fair return on capital invested by us, as well as the Government’s overall policy considerations, such as inflation. See Item 4.B. “Business Overview—Sales and Customers—Electricity Rates.”
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In addition, pursuant to the Basic Plan determined by the Government, we and our generation subsidiaries have made, and plan to make, substantial expenditures for the construction of generation plants and other facilities to meet demand for electric power. See Item 5.B. “Liquidity and Capital Resources—Capital Requirements.”
Restructuring of the Electric Power Industry in Korea
On January 21, 1999, the Ministry of Trade, Industry and Resources published the Restructuring Plan. The overall objectives of the Restructuring Plan consist of: (i) introducing competition and thereby increasing efficiency in the Korean electric power industry, (ii) ensuring a long-term, inexpensive and stable electricity supply, and (iii) promoting consumer convenience through the expansion of consumer choice.
The following provides further details relating to the Restructuring Plan.
Phase I
During Phase I, which served as a preparatory stage for Phase II and lasted from the announcement of the Restructuring Plan in January 1999 until April 2001, we undertook steps to split our generation business units off into one wholly-owned nuclear generation subsidiary (namely, KHNP) and five wholly-owned non-nuclear generation subsidiaries (namely, KOSEP, KOMIPO, KOWEPO, KOSPO and EWP), each with its own management structure, assets and liabilities. These steps were completed upon approval at our shareholders’ meeting in April 2001. The Government’s principal objectives in the split-off of the generation units into separate subsidiaries were to: (i) introduce competition and thereby increase efficiency in the electricity generation industry in Korea, and (ii) ensure a stable supply of electricity in Korea.
Since the implementation of Phase I, we have had a substantial monopoly over electricity transmission and distribution in Korea. Although our ownership percentage of our generation subsidiaries will depend on further adjustments to the Restructuring Plan to be adopted by the Government, we plan to retain 100% ownership of our transmission and distribution business.
Phase II
At the outset of Phase II in April 2001, the Government introduced a cost-based competitive bidding pool system under which we purchase power from our generation subsidiaries and other independent power producers for transmission and distribution to customers. For a further description of this system, see “—Purchase of Electricity—Cost-based Pool System” below.
Pursuant to the Electric Utility Act amended in December 2000, the Government established the Korea Power Exchange in April 2001. The primary function of the Korea Power Exchange is to deal with the sale of electricity and implement regulations governing the electricity market to allow for electricity distribution through a competitive bidding process. The Government also established the Korea Electricity Commission in April 2001 to regulate the Korean electric power industry and ensure fair competition among industry participants. To facilitate this goal, the Korea Power Exchange established the Electricity Market Rules relating to the operation of the bidding pool system. To amend the Electricity Market Rules, the Korea Power Exchange must have the proposed amendment reviewed by the Korea Electricity Commission and then obtain the approval of the Ministry of Climate, Energy and Environment.
The Korea Electricity Commission’s main functions include implementation of standards and measures necessary for electricity market operation and review of matters relating to licensing participants in the Korean electric power industry. The Korea Electricity Commission also acts as an arbitrator in tariff-related disputes among participants in the Korean electric power industry and investigates illegal or deceptive activities of the industry participants.
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Privatization of Generation Subsidiaries
In April 2002, the Ministry of Trade, Industry and Resources released the basic privatization plan for five of our generation subsidiaries other than KHNP. Pursuant to this plan, we commenced the process of selling our equity interest in KOSEP in 2002. According to the original plan, this process was, in principle, to take the form of a sale of management control, potentially supplemented by an initial public offering as a way of broadening the investor base. In November 2003, KOSEP submitted its application to the Korea Exchange for a preliminary screening review, which was approved in December 2003. However, in June 2004, KOSEP made a request to the Korea Exchange to delay its stock listing due to unfavorable stock market conditions at that time.
In accordance with the Proposal for Adjustment of Functions of Public Institutions (Energy Sector) announced by the Government in June 2016, we considered a sale in the public market of a minority of our shares in our five non-nuclear generation subsidiaries, KEPCO KDN and KHNP gradually. However, the planned sales have been put on hold, primarily due to prevailing market conditions. In any event, we plan to maintain a controlling stake in each of these subsidiaries.
Suspension of the Plan to Form and Privatize Distribution Subsidiaries
In 2003, the Government established a Tripartite Commission consisting of representatives of the Government, leading businesses and labor unions in Korea to deliberate on ways to introduce competition in electricity distribution, such as by forming and privatizing new distribution subsidiaries. In 2004, the Tripartite Commission recommended against pursuing such privatization initiatives but instead creating independent business divisions within us to improve operational efficiency through internal competition. Following the adoption of such recommendation by the Government in 2004 and further studies by Korea Development Institute, in 2006 we created nine “strategic business units” (which, together with our other business units, were subsequently restructured into 14 such units in February 2012) that have a greater degree of autonomy with respect to management, financial accounting and performance evaluation while having a common focus on increasing profitability.
Initiatives to Improve the Structure of Electricity Generation
In August 2010, the Ministry of Trade, Industry and Resources announced the Proposal for Improvement in the Structure of the Electric Power Industry in order to resolve uncertainty related to restructuring plans for the electric power industry and maintain competitiveness of the electric power industry. Key initiatives of the proposal included the following: (i) maintain the current structure of having six generation subsidiaries and designate the six generation subsidiaries as market-oriented public enterprises, pursuant to the Act on the Management of Public Institutions in order to foster competition among the generation subsidiaries and promote efficiency in their operations, (ii) clarify the scope of the business of us and the six generation subsidiaries (namely, that we shall manage the financial structure and governance of the six generation subsidiaries and nuclear power plant and overseas resources development projects, while the six generation subsidiaries will have greater autonomy with respect to construction and management of generation units and procurement of fuel), (iii) create a nuclear power export business unit to systematically enhance our capabilities to win projects involving the construction and operation of nuclear power plants overseas, (iv) further rationalize the electricity tariff by adopting a fuel-cost based tariff system in 2011 and a voltage-based tariff system in a subsequent year, and (v) create separate accounting systems for electricity generation, transmission, distribution and sales with the aim of introducing competition in electricity sales in the intermediate future. The fuel-cost based tariff system went into effect on July 1, 2011 but the Ministry of Trade, Industry and Resources issued a hold order on July 29, 2011 and subsequently informed us it needs to be reassessed in light of the circumstances.
In January 2011, the Ministry of Finance and Economy created a “joint cooperation unit” consisting of officers and employees selected from the five thermal power generation subsidiaries in order to reduce inefficiencies in areas such as fuel transportation, inventories, materials and equipment and construction, etc. and
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allow the thermal power generation subsidiaries to continue utilizing the benefits of economy of scale after split off of our generation business units into separate subsidiaries. The purpose of the joint cooperation unit was to give greater autonomy to the generation subsidiaries with regard to power plant construction and management and fuel procurements, and thereby enhance efficiency in operating power plants. The main functions of the joint cooperation unit are as follows: (i) maintain inventories of bituminous coal through volume exchanges and joint purchases, (ii) reduce shipping and demurrage expenses through joint operation and distribution of dedicated vessels, (iii) reduce costs by sharing information on generation material inventories and (iv) sharing human resources among the five thermal power generation subsidiaries for construction projects, among other things.
Furthermore, in January 2011 the six generation subsidiaries were officially designated as “market-oriented public enterprises,” whereupon the President of Korea appoints the president and the statutory auditor of each such subsidiary; the selection of non-standing directors of each such subsidiary is subject to approval by the Minister of the Ministry of Finance and Economy; the president of each such subsidiary is required to enter into a management contract directly with the Minister of the Ministry of Climate, Energy and Environment; and the Public Enterprise Management Evaluation Team which is established by the Committee for Management of Public Institutions conducts performance evaluation of such subsidiaries. Previously, our president appointed the president and the statutory auditor of each such subsidiary; the selection of non-standing directors of each such subsidiary was subject to approval by our president; the president of each such subsidiary entered into a management contract with our president; and our evaluation committee conducted performance evaluation of such subsidiaries. For further details of the impact of the designation of our generation subsidiaries as “market-oriented public enterprises,” see Item 16.G. “Corporate Governance – The Act on the Management of Public Institutions.”
Proposal for Adjustment of Functions of Public Institutions (Energy Sector)
In June 2016, the Government announced the Proposal for Adjustment of Functions of Public Institutions (Energy Sector) for the purpose of streamlining the operations of Government-affiliated energy companies by discouraging them from engaging in overlapping or similar businesses with each other, reducing non-core assets and activities and improving management and operational efficiency. The initiatives contemplated in this proposal that would affect us and our generation subsidiaries include the following: (i) the generation companies should take on greater responsibilities in overseas resource exploration and production projects as these involve procurement of fuels necessary for electricity generation while fostering cooperation among each other through closer coordination, (ii) KHNP should take a greater role in export of nuclear technology, and (iii) the current system of retail sale of electricity to end-users should be liberalized to encourage more competition. In accordance therewith, we transferred a substantial portion of our assets and liabilities in our overseas resource business to our generation subsidiaries as of December 31, 2016. In addition, this Proposal contemplated selling a minority stake in our generation subsidiaries and KEPCO KDN, but the planned sales have been put on hold, as discussed above in “ –Privatization of Generation Subsidiaries.”
Purchase of Electricity
Cost-based Pool System
Since April 2001, the purchase and sale of electricity in Korea is required to be made through the Korea Power Exchange, which is a statutory not-for-profit organization established under the Electric Utility Act responsible for setting the price of electricity, handling the trading and collecting relevant data for the electricity market in Korea. The suppliers of electricity in the Korean electricity market consist of our six generation subsidiaries, which were split-off from us in April 2001, and independent power producers, which numbered 44 (excluding 7,355 renewable energy producers) as of December 31, 2025. We distribute electricity purchased through the Korea Power Exchange to end users.
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Our Relationship with the Korea Power Exchange
The key features of our relationship with the Korea Power Exchange include the following: (i) we and our six generation subsidiaries are member corporations of the Korea Power Exchange and collectively own 100% of its share capital, (ii) three of the 11 members of the board of directors of the Korea Power Exchange are currently our or our subsidiaries’ employees, and (iii) one of our employees is currently a member in three of the key committees of the Korea Power Exchange that are responsible for evaluating the costs of producing electricity, making rules for the Korea Power Exchange and gathering and disclosing information relating to the Korean electricity market.
Notwithstanding the foregoing relationships, however, we do not have control over the Korea Power Exchange or its policies since, among others, (i) the Korea Power Exchange, its personnel, policies, operations and finances are closely supervised and controlled by the Government, namely through the Ministry of Climate, Energy and Environment, and are subject to a host of laws and regulations, including, among others, the Electric Utility Act and the Act on the Management of Public Institutions, as well as the Articles of Incorporation of the Korea Power Exchange, (ii) we are entitled to elect no more than one-third of the Korea Power Exchange directors, and our representatives represent only a minority of its board of directors and committees (with the other members being comprised of representatives of the Ministry of Climate, Energy and Environment, employees of the Korea Power Exchange, businesspersons and/or scholars), and (iii) the role of our representatives in the policy making process for the Korea Power Exchange is primarily advisory based on their technical expertise derived from their employment within our company or our generation subsidiaries. Consistent with this view, the Finance Supervisory Service issued a ruling in 2005 that stated that we can exercise significant influence by virtue of right to nominate directors to the board of directors of the entity though the Government regulates the Company’s ability to make operating and financial decisions over the entity.
Pricing Factors
The price of electricity in the Korean electricity market is determined principally based on the cost of generating electricity using a system known as the “cost-based pool” system. Under the cost-based pool system, the price of electricity has two principal components, namely the marginal price (representing the variable cost of generating electricity) and the capacity price (representing the fixed cost of generating electricity).
Under the merit order system, the electricity purchase allocation, the system marginal price (as described below) and the final allocation adjustment are automatically determined based on an objective formula. The variable cost (including the adjusted coefficient as described below) and the capacity price are determined in advance of trading by the Cost Evaluation Committee, which is comprised of representatives from the Ministry of Climate, Energy and Environment, the Korea Power Exchange, us, generation companies, scholars and researchers (the “Cost Evaluation Committee”). Accordingly, a supplier of electricity cannot exercise control over the merit order system or its operations to such supplier’s strategic advantage.
Marginal Price
The primary purpose of the marginal price is to compensate the generation companies for fuel costs, which represents the principal component of the variable costs of generating electricity. We currently refer such marginal price as the “system marginal price.”
The system marginal price represents, in effect, the marginal price of electricity at a given hour at which the projected demand for electricity and the projected supply of electricity for such hour intersect, as determined by the merit order system, which is a system used by the Korea Power Exchange to allocate which generation units will supply electricity for which hour and at what price. To elaborate, the projected demand for electricity for a given hour is determined by the Korea Power Exchange based on a forecast made one day prior to trading, and such forecast takes into account, among others, historical statistics relating to demand for electricity nationwide
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by day and by hour, season and on-peak-hour versus off-peak hour demand analysis. The projected supply of electricity at a given hour is determined as the aggregate of the available capacity of all generation units that have submitted bids to supply electricity for such hour. These bids are submitted to the Korea Power Exchange one day prior to trading. On September 1, 2022, the trading system was further developed to facilitate optimal decisions on market prices and allow plans for generating power to be made with more sophistication, by taking into account thermal constraints, power transmission constraints and reserving power from the stage of making the generation plan.
Under the merit order system, the generation unit with the lowest variable cost of generating electricity among all the generation units that have submitted a bid for a given hour is first awarded a purchase order for electricity up to the available capacity of such unit as indicated in its bid. The generation unit with the next lowest variable cost is then awarded a purchase order up to its available capacity in its bid, and so forth, until the projected demand for electricity for such hour is met. We refer to the variable cost of the generation unit that is the last to receive the purchase order for such hour as the system marginal price, which also represents the highest price at which electricity can be supplied at a given hour based on the demand and supply for such hour. Generation units whose variable costs exceed the system marginal price for a given hour do not receive purchase orders to supply electricity for such hour. The variable cost of each generation unit is determined by the Cost Evaluation Committee on a monthly basis and reflected in the following month based on the fuel costs two months prior to such determination. The purpose of the merit order system is to encourage generation units to reduce its electricity generation costs by making its generation process more efficient, sourcing fuels from most cost-effective sources or adopting other cost savings programs.
The final allocation of electricity supply is further adjusted on the basis of other factors, including the proximity of a generation unit to the geographical area to which power is being supplied, network and fuel constraints and the amount of power loss. This adjustment mechanism is designed to adjust for transmission losses in order to improve overall cost-efficiency in the transmission of electricity to end-users.
The price of electricity at which our generation subsidiaries sell electricity to us is determined using the following formula:
Variable cost + [System marginal price – Variable cost] * Adjusted coefficient
An adjusted coefficient applies in principle to all generation units operated by our generation subsidiaries and the coal-fired generation units operated by independent power producers. The adjusted coefficient applicable to the generation units operated by our generation subsidiaries is determined based on considerations of, among others, electricity tariff rates and the relative fair returns on investment in respect of us compared to our generation subsidiaries. The purpose of the adjusted coefficient here is to prevent electricity trading from resulting in undue imbalances as to the relative financial results among generation subsidiaries as well as between us (as the purchaser of electricity) and our generation subsidiaries (as sellers of electricity). Such imbalances may arise from excessive profit taking by base load generators (on account of their inherently cheaper fuel cost structure compared to non-base load generators) as well as from fluctuations in fuel prices (it being the case that during times of rapid and substantial rises in fuel costs which are not offset by corresponding rises in electricity tariff rates charged by us to end-users, on a non-consolidated basis our profitability will decline compared to that our generation subsidiaries since our generation subsidiaries are entitled to sell electricity to us at cost plus a guaranteed margin). In comparison, the adjusted coefficient applicable to the coal-fired generation units operated by independent power producers is determined to enable such independent power producers to recover the total costs of building and operating such units.
The adjusted coefficient is determined by the Cost Evaluation Committee in principle on an annual basis, although in exceptional cases driven by external or structural factors such as rapid and substantial changes in fuel costs, adjustments to electricity tariff rates or changes in the electricity pricing structure, the adjusted coefficient may be adjusted on a quarterly basis.
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Capacity Price
In addition to payment in respect of the variable cost of generating electricity, generation units receive payment in the form of capacity price, the purpose of which is to compensate them for the fixed costs of constructing generation facilities, provide incentives for construction of new generation units and maintain reliability of the nationwide electricity transmission network.
The capacity price is determined by the Cost Evaluation Committee as a function of the following factors: (i) reference capacity price, (ii) reserve capacity factor, (iii) time-of-the-day capacity coefficient and (iv) performance capacity factor introduced since June 2022 instead of fuel switching factor which was effective since October 2016. The time-of-the-day capacity coefficient are determined annually before the end of December for the subsequent twelve-month period. The reference capacity price, reserve capacity factor and the fuel switching factor are determined annually before the end of June for the subsequent twelve-month period.
The reference capacity price refers to the Won amount per kilowatt-hour payable annually for annualized available capacity indicated in the bids submitted the day before trading (provided that such capacity is actually available on the relevant day of trading), and is determined based on the construction costs and maintenance costs of a standard generation unit and related transmission access facilities, and a base rate for loading electricity. Prior to October 2016, the same reference capacity price applied uniformly to all generation units. Since October 2016, the reference capacity price applies differentially to each generation unit depending on the start year of its commercial operation. Also, since December 2022, we have reduced margins from the reference capacity price applied to all generation units reflecting the reserve capacity. Accordingly, the reference capacity price currently ranges from Won 10.68 to 13.71 per kilowatt-hour.
The reserve capacity factor relates to the requirement to maintain a standard capacity reserve margin around 12% in order to prevent excessive capacity build-up as well as induce optimal capacity investment at the regional level. The capacity reserve margin is the ratio of peak demand to the total available capacity. Under this system, generation units in a region where available capacity is insufficient to meet demand for electricity as evidenced by failing to meet the standard capacity reserve margin receive increased capacity price. Conversely, generation units in a region where available capacity exceeds demand for electricity as evidenced by exceeding the standard capacity reserve margin receive reduced capacity price. Since October 2016, the reserve capacity factor also factors in the transmission loss per generation unit in order to favor transmission of electricity from a nearby generation unit.
The time-of-the-day capacity coefficient allows hourly and seasonal adjustments in order to incentivize our generation subsidiaries to operate their generation facilities at full capacity during periods of highest demand. For example, the capacity price paid differs depending on whether the relevant hour is an “on-peak” hour, a “mid-peak” hour or an “off-peak” hour (the capacity price being highest for the on-peak hours and lowest for the off-peak hours) and the capacity price paid is highest during the months of January, July and August when electricity usage is highest due to weather conditions.
The fuel switching factor, which was introduced in October 2016 to promote environmental sensitivities to climate change, has been changed into the performance capacity factor since June 2022 to comply with the market trend that differentially compensates the capacity price for the contribution to electricity system and operational flexibility of generation units. In addition, in January 2022, the environmental contribution factor was excluded from the fuel switching factor and instead reflected in the unit thermal cost of each generation unit in order to effectively respond to the greenhouse gas reduction.
Other than subject to the aforementioned variations, the same capacity pricing mechanism applies to all generation units regardless of fuel types used.
In the Ninth Basic Plan, the Government announced its plans to introduce real-time electricity trading market and supplementary service market, which have been upgraded to ensure appropriate valuation and
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compensation for supplementary energy sources and responses to volatility of renewable energy. Supplementary energy sources refer to power generators independent of us. The reorganization of the market system has been gradually implemented, starting with the implementation of a trading system reflecting constraints and reserves of electricity system in September 2022. In August 2023, we presented the design of the trading system, which would introduce real-time electricity trading market through which supplementary services can be traded. The new trading system was implemented in Jeju Province since June 2024. Under the new trading system, renewable energy generators exceeding one megawatt (mandatory for three megawatts) would be able to participate in market bidding.
Vesting Contract System
In May 2014, the Electric Utility Act was amended to introduce a “vesting contract” system in determining the price and quantity of electricity to be sold and purchased between the purchaser of electricity (namely, us) and the sellers of electricity (namely, our generation subsidiaries and independent power producers). Under the vesting contract system, electricity generators using base load fuels (such as nuclear, coal, hydro and by-product gas) at a particular generation unit were to be required to enter into a contract with the purchaser of electricity, which specifies, among other things, the quantity of electricity to be generated and sold at a particular generation unit and the price at which such electricity is sold, subject to certain adjustments.
The vesting contract system was introduced principally to prevent excessive profit-taking by low-cost producers of electricity using base load fuels (such as nuclear, coal, hydro and by-product gas) by replacing the adjusted coefficient as the basis for determining the guaranteed return to generation companies, as well as to enhance the stability of electricity supply by requiring long-term contractual arrangements for the purchase and sale of electricity and promote cost savings, productivity enhancements and operational efficiency by providing incentives and penalties depending on the degree to which the generation companies could supply electricity at costs below the contracted electricity prices.
In order to minimize undue shock to the electricity trading market in Korea, the vesting contract system was to be implemented in phases starting with by-product gas-based electricity in 2015. The vesting contract system for by-product gas-based electricity ended in 2020, and there are no active contracts remaining as of the end of 2025. However, we are in discussion with the Government to potentially extend the vesting contract system to wider base load fuels, including nuclear.
Power Trading Results
The results of power trading, as effected through the Korea Power Exchange, for us and our generation subsidiaries and independent power producers in 2025 are as follows:
Items
Generation Companies
Total
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Energy Sources
Load
Notes:
Others represent independent power producers that trade electricity through the cost-based pool system of power trading (excluding independent power producers that supply electricity under power purchase agreements with us).
Based on the payment made by us through Korea Power Exchange.
Power Purchased from Independent Power Producers under Power Purchase Agreements
In 2025, we purchased an aggregate of 26,358 gigawatt hours of electricity generated by independent power producers under existing power purchase agreements. These independent power producers had an aggregate generation capacity of 21,300 megawatts as of December 31, 2025.
Power Generation
As of December 31, 2025, we and our generation subsidiaries had a total of 860 generation units, including nuclear, thermal, hydroelectric and internal combustion units, representing total installed generation capacity of 83,555 megawatts. Our thermal units produce electricity using steam turbine generators fired by coal, oil and LNG. Our internal combustion units use oil or diesel-fired gas turbines and our combined-cycle units are primarily LNG-fired. We also purchase power from several generation plants not owned by our generation subsidiaries.
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The table below sets forth as of and for the year ended December 31, 2025 the number of units, installed capacity and the average capacity factor for each type of generating facilities owned by us and our generation subsidiaries.
Nuclear
Thermal:
Coal
LNG
Total thermal
Internal combustion
Combined-cycle(3)
Integrated gasification combined cycle(4)
Hydroelectric(5)
Wind
Solar
Fuel cell
Bio
Others(6)
Installed capacity represents the level of output that may be sustained continuously without significant risk of damage to plant and equipment.
Average capacity factor represents the total number of kilowatt-hours of electricity generated in the indicated period divided by the total number of kilowatt-hours that would have been generated if the generation units were continuously operated at installed capacity, expressed as a percentage.
Involves generation through gas and oil.
Involves generation through coal and gasified coal.
Includes generation through pumped storage.
Includes waste-to-energy.
Installed Capacity for Coal excludes the 500 megawatts of installed capacity of Taean #1 which was decommissioned as of January 1, 2026.
The expected useful life of a unit, assuming no substantial renovation, is approximately as follows: nuclear, over 40 years; thermal, over 30 years; internal combustion, over 25 years; and hydroelectric, over 55 years. Substantial renovation can extend the useful life of thermal units by up to 20 years.
We seek to achieve efficient use of fuels and diversification of generation capacity by fuel type. In the past, we relied principally upon oil-fired thermal generation units for electricity generation. The high average age of our oil-fired thermal units is attributable to our reliance on oil-fired thermal units as the primary means of electricity generation until mid-1970s. Since then, we have diversified our fuel sources and constructed relatively few oil-fired thermal units compared to units of other fuel types.
Since the oil shock in 1974, however, Korea’s power development plans have emphasized the construction of nuclear generation units. While nuclear units are more expensive to construct than thermal generation units of comparable capacity, nuclear fuel is less expensive than fossil fuels in terms of electricity output per unit cost. However, efficient operation of nuclear units requires that such plants be run continuously at relatively constant energy output levels. As it is impractical to store large quantities of electrical energy, we seek to maintain nuclear
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power production capacity at approximately the level at which demand for electricity is continuously stable. During those times when actual demand exceeds the usual level of electricity supply from nuclear power, we rely on units fired by fossil fuels and hydroelectric units, which can be started and shut down more quickly and efficiently than nuclear units, to meet the excess demand. Bituminous coal has been the least expensive thermal fuel per kilowatt-hour of electricity produced, and therefore our use of bituminous coal for generation takes the largest portion in excess of the stable demand level, except for meeting short-term surges in demand which require rapid start-up and shutdown. Thermal units fired by LNG, hydroelectric units and internal combustion units are the most efficient types of units for rapid start-ups and shutdowns, and therefore we use such units principally to meet short-term surges in demand. Anthracite coal is a less efficient fuel source than bituminous coal in terms of electricity output per unit cost.
Our generation subsidiaries have constructed and operated thermal and internal combustion units in order to help meet power demand. Subject to market conditions, our generation subsidiaries plan to continue to add additional thermal (other than coal-fired) and internal combustion units. These units generally take less time to complete construction than nuclear units.
The table below sets forth, for the periods indicated, the amount of electricity generated by facilities linked to our grid system and the amount of power used or lost in connection with transmission and distribution.
Electricity generated by us and our generation subsidiaries:
Oil
Combined-cycle
Hydro
Fuel cells
Others(2)
Total generation by us and our generation subsidiaries
Electricity generated by IPPs:
Thermal
Hydro, other renewable and others
Total generation by IPPs
Gross generation
Auxiliary use(3)
Pumped-storage(4)
Total net generation(5)
Transmission and distribution losses(6)
IPPs = Independent power producers
Unless otherwise indicated, percentages are based on gross generation.
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From June 2024, dispatchable renewable energy in Jeju is categorized as others.
Auxiliary use represents electricity consumed by generation units in the course of generation.
Pumped storage represents electricity consumed during low demand periods in order to store water which is utilized to generate hydroelectric power during peak demand periods.
Total net generation represents gross generation minus auxiliary and pumped-storage use.
Transmission and distribution losses rate represents total transmission and distribution losses divided by total net generation.
The table below sets forth our total capacity at the time of peak usage, and peak and average loads during, the indicated periods.
Total capacity
Peak load
Average load
Korea Hydro & Nuclear Power Co., Ltd.
We commenced nuclear power generation activities in 1978 when our first nuclear generation unit, Kori #1, began commercial operation. On April 2, 2001, all of our nuclear and hydroelectric power generation assets and liabilities were transferred to KHNP.
At KHNP’s five power plant complexes, Kori, Saeul, Wolsong, Hanbit and Hanul (each complex located in Busan, Ulsan, Gyeongju, Yonggwang and Ulchin, respectively), it operates 26 nuclear generation units, among which Kori #2,3,4 and Hanbit #1 have been shut down since April 2023, September 2024, August 2025, and December 2025 respectively. KHNP submitted a safety evaluation report to the NSSC in April 2022 to seek approval for an extension of the life of Kori #2, whose life extension was finally approved in November 2025. KHNP also operates 47 hydroelectric generation units including 16 pumped storage hydro generation units as well as 69 solar generation units and one wind generation unit as of December 31, 2025.
The table below sets forth the number of units and installed capacity as of December 31, 2025 and the average capacity factor by types of generation units in 2025 including Kori #2,3,4 and Hanbit #1.
Hydroelectric
KHNP commenced commercial operation of Saeul #1 (formerly named as Shin-Kori #3), with a 1,400 megawatt capacity, in December 2016, and Saeul #2 (formerly named as Shin-Kori #4) began commercial operations on August 2019. KHNP commenced commercial operation of Shin-Hanul #1 and Shin-Hanul #2 in
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December 2022 and April 2024, respectively. KHNP is currently building two additional nuclear generation units at Saeul complexes, each with a 1,400 megawatts capacity. KHNP expects to complete these units by 2026 and 2027. In June 2018, the board of directors of KHNP decided to retire Wolsong #1 unit earlier than planned due to comprehensive evaluation of the unit’s economic viability and regional sentiment of its continuing operation. The initial phase of the decommissioning of Kori #1, which primarily involves safety inspections and the removal of spent nuclear fuels, has begun after its permanent shutdown in June 2017. In April 2022, KHNP submitted a safety evaluation report to the NSSC to seek approval for an extension of the life of Kori #2, which has been shut down since April 8, 2023. Life extension of Kori #2 was approved in November 2025, after which operation resumed in April 2026.
The table below sets forth certain information with respect to the nuclear generation units of KHNP as of December 31, 2025.
Unit(4)
Reactor Design (2)
Kori #2
Kori #3
Kori #4
Shin-Kori #1
Shin-Kori #2
Saeul #1
Saeul #2
Wolsong #2
Wolsong #3
Wolsong #4
Shin-Wolsong #1
Shin-Wolsong #2
Hanbit #1
Hanbit #2
Hanbit #3
Hanbit #4
Hanbit #5
Hanbit #6
Hanul #1
Hanul #2
Hanul #3
Hanul #4
Hanul #5
Hanul #6
Shin-Hanul #1
Shin-Hanul #2
Total nuclear
“PWR” means pressurized light water reactor; “PHWR” means pressurized heavy water reactor.
“W” means Westinghouse Electric Corporation (U.S.A.); “D” means Doosan Heavy Industries & Construction Co., Ltd.; “KEPCO E&C” means KEPCO Engineering & Construction Co., Inc.; “AECL” means Atomic Energy of Canada Limited (Canada); “H” means Hanjung; “K” means Korea Atomic Energy Research Institute; “CE” means Combustion Engineering (U.S.A.); “F” means Framatome (France).
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“GEC” means General Electric Company (U.K.); “W” means Westinghouse Electric Corporation (U.S.A.); “A” means Alstom (France); “H” means Hanjung; “GE” means General Electric (U.S.A.); “D” means Doosan Heavy Industries & Construction Co., Ltd.; “Hitachi” means Hitachi Ltd. (Japan).
Kori #1 was permanently shut down on June 18, 2017. On December 24, 2019, the NSSC approved the permanent shutdown of Wolsong #1. Saeul #1 and 2 were formerly named as Shin-Kori #3 and 4. Shin-Hanul #1 and #2 commenced operation on December 7, 2022 and April 5, 2024, respectively. Kori #2 has been shut down since April 8, 2023, and KHNP submitted a safety evaluation report to the NSSC in April 2022 to seek approval for an extension of its life. Life extension of Kori #2 was approved in November 2025. Kori #3 and #4 as well as Hanbit #1 have been shut down since September 2024, August 2025 and December 2025 respectively. Safety evaluation reports for life extension approval of these three units have also been submitted.
Under extended-cycle operations, nuclear units can be run continuously for periods longer than the conventional twelve-month period between scheduled shutdowns for refueling and maintenance. Since 1987, we have adopted the mode of extended-cycle operations for all of our pressurized light water reactor units and plan to use it for our newly constructed units. The duration of shutdown for fuel replacement, maintenance and the evaluation period for approval to start after maintenance was 1,291.7 days in the aggregate in 2025. In addition, KHNP’s nuclear units experienced an average of 0.08 unplanned shutdowns per unit in 2025. In the ordinary course of operations, KHNP’s nuclear units routinely experience damage and wear and tear, which are repaired during routine shutdown periods or during unplanned temporary suspensions of operations. No significant damage has occurred in any of KHNP’s nuclear reactors, and no significant nuclear exposure or release incidents have occurred at any of KHNP’s nuclear facilities since the first nuclear plant commenced operation in 1978.
The table below sets forth certain information relating to KHNP’s pumped-storage and hydroelectric business units, including the installed capacity as of December 31, 2025 and the average capacity factor in 2025.
Location of Unit
Hwacheon
Chuncheon
Euiam
Cheongpyung
Paldang
Chilbo (Seomjingang)
Boseonggang
Kwoesan
Anheung (GangLim)
Kangreung
Topyeong
Muju
Sancheong
Yangyang
Yecheon
Yecheon (Mini)
Cheongpeoung
Samrangjin
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Cheongsong
Solar/Wind
The table below sets forth certain information, including the installed capacity as of December 31, 2025 and the average capacity factor in 2025, of the solar and wind power units of KHNP.
Yonggwang
Kori
Busan
Gapyeong
Yeoncheon
Jeju
Gyeongju
Ulsan
Asan
Haman
Hwaseong
Yeongcheon
Gyeongsan
Gumi
Changwon
There has been a growing supply of renewable energy such as solar and wind power. However, as such sources of power are susceptible to weather, there has been a growing demand for more stable renewable energy such as pumped storage hydro generation, which allows for prompt on-and-off transition. Since the last construction in 2011 of Yecheon pumped storage unit, KHNP is currently in the process of building five new pumped storage units which are expected to have an aggregate generation capacity of 3.7 gigawatts. KHNP is expecting to complete construction of the new pumped storage units before 2036.
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Korea South-East Power Co., Ltd.
The table below sets forth, by fuel type, the weighted average age and installed capacity as of December 31, 2025 and the average capacity factor and average fuel cost per kilowatt in 2025 based upon the net amount of electricity generated, of KOSEP.
Bituminous:
Samcheonpo #3, 4, 5, 6
Yeongheung #1, 2, 3, 4, 5, 6
Yeosu # 1, 2
Combined cycle and internal Combustion:
Bundang gas turbine #1,2,3,4,5,6,7,8; steam turbine #1, 2
Hydro, Solar and other renewable energy
Korea Midland Power Co., Ltd.
The table below sets forth, by fuel type, the weighted average age and installed capacity as of December 31, 2025 and the average capacity factor and average fuel cost per kilowatt in 2025 based upon the net amount of electricity generated, of KOMIPO.
Boryeong #3, 4, 5, 6, 7, 8
Shin Boryeong #1, 2
Shin Seocheon #1
Combined-cycle and internal combustion:
Boryeong gas turbine #1, 2, 3, 4, 5, 6; steamturbine #1, 2, 3
Incheon gas turbine #1, 2, 3, 4, 5, 6; steamturbine #1, 2, 3
Seoul gas turbine #1, 2; steam turbine #1, 2
Jeju gas turbine #1, 2; steam turbine #1, 2
Sejong gas turbine #1, 2; steam turbine #1
Jeju Internal Combustion Engine #1,2
Bio Oil:
Jeju #2, 3
Wind:
Yangyang #1, 2
Sejong Maebongsan
Jeju Sangmyung
Combined heat and power:
Wonju #1
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Hydroelectric:
Boryeong
Shin Boryeong
Shin Seocheon
Photovoltaic (“PV”) power and fuel cell generation:
Boryeong (PV) site
Shin Boryeong (PV) site
Seocheon (PV) site
Jeju (PV) site
Seoul (PV) site
Sejong (PV) site
Yeosu (PV) site
Incheon (PV) site
Incheon Asiad Sports(PV) site
Shin Boryeong (fuel cell) site
Incheon (fuel cell) site
5.9
31.7
82.4
193.73
Seoul (fuel cell) site
Sejong (fuel cell) site
Korea Western Power Co., Ltd.
The table below sets forth, by fuel type, the weighted average age and installed capacity as of December 31, 2025 and the average capacity factor and average fuel cost per kilowatt in 2025 based upon the net amount of electricity generated, of KOWEPO.
Taean #1, 2, 3, 4, 5, 6, 7, 8, 9, 10
LNG-fired:
Combined cycle:
Pyeongtaek #2
Gunsan
West Incheon
Combined heat:
Gimpo
Taean
Solar:
Pyeongtaek
Samryangjin
Sejong City
Gyeonggi-do
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Yeongam
Goheung
Iwon-ho
Mando
Fuel Cell:
West Incheon 1
West Incheon 2
Cheonan Cheongsu
Hwaseong Namyang
Gyeonggi Uiwang
Daejeon Hakha
Icheon Gwango
Iksan
Gwangju Gwangsan
Hwaseong Namyang 2
Gyeonggi Gwangju
Mungyeong 1
Daegu Suseong
Wind Power:
Hwasun
Jangheung
Integrated gasification combined cycle:
Korea Southern Power Co., Ltd.
The table below sets forth, by fuel type, the weighted average age and installed capacity as of December 31, 2025 and the average capacity factor and average fuel cost per kilowatt in 2025 based upon the net amount of electricity generated, of KOSPO.
Hadong #1, 2, 3, 4, 5, 6, 7, 8
Samcheok #1, 2
Shin Incheon #1, 2, 3, 4
Busan #1, 2, 3, 4
Yeongwol #1
Hallim
Andong #1
Nam Jeju #1
Shin Sejong #1
Nam Jeju #1, 2
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Wind power:
Hankyung
Seongsan
Small Hydropower
Fuel Cell
Korea East-West Power Co., Ltd.
The table below sets forth, by fuel type, the weighted average age and installed capacity as of December 31, 2025 and the average capacity factor and average fuel cost per kilowatt in 2025 based upon the net amount of electricity generated, of EWP.
Dangjin #1, 2, 3, 4, 5, 6, 7, 8, 9, 10
Anthracite:
Donghae #1, 2
Ulsan gas turbine #1, 2, 3, 4, 5, 6, 7, 8; steam turbine #1, 2, 3, 4
Ilsan gas turbine #1, 2, 3, 4, 5, 6; steam turbine #1, 2
Mini hydro, Photovoltaic, Fuel Cell, Wind-Power, Biomass:
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Power Plant Remodeling and Recommissioning
Our generation subsidiaries supplement power generation capacity through remodeling or recommissioning of thermal units. Recommissioning includes installation of anti-pollution devices, modification of control systems and overall rehabilitation of existing equipment. The following table shows recent remodeling and recommissioning initiatives by our generation subsidiaries.
Power Plant
Capacity
Completed (Year)
Extension
Company
Taean #1 - 10
6,100 MW
(500 MW×8,
1,050 MW×2)
EP (1) upgrade (#5, 2009)
EP upgrade (#6, 2010)
EP upgrade (#2, 2016)
EP upgrade (#1, 2017)
EP upgrade (#3, 4, 2018)
SCR (2) upgrade (#2, 4, 7, 2016)
SCR upgrade (#1, 8, 2017)
SCR upgrade (#3, 5, 6, 2018)
FGD (5) upgrade (#1, 2017)
FGD upgrade (#2, 3, 4, 2018)
SCR upgrade(#7, 2022)
SCR upgrade(#8, 2023)
Boryeong #3 - 6
2,050 MW
(#3: 550 , #4~6: 500×3)
Retrofit (#3, 2019)
Retrofit (#4, 2023)
Conversion into LNG-fired plant (#5, 6, scheduled to be completed in 2026 and 2027)
Lifetime extension
Conversion into LNG-fired Plant
Boryeong #7, 8
1,000 MW
(500 MW×2)
EP upgrade (#7, 2025)
EP upgrade (#8, 2026)
Yeosu #1, 2
668.6MW
(#1:340, #2:328.6MW)
Boiler Type Change
(CFBC (3):#1:2016, #2:2011)
Samcheonpo #5, 6
(500 MW ×2)
EP upgrade (2016 ~ 2017),
FGD, SCR, WESP(6) installation
(2019~2021)
Yeongheung #1, 2
1,600 MW
(800 MW ×2)
Yeongdong #1. 2
325 MW
(#1:125, #2:200 MW)
Boiler, Hybrid SCR & EP, Draft System Retrofit
(Biomass (4) #1: 2017, #2: 2020)
Dangjin #1 - 4
2,000MW
(500MW×4)
Dangjin #5 - 8
Dangjin #9 - 10
2,040MW
(1,020MW×2)
400 MW
(200 MW×2)
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Hadong #1 - 8
4,000 MW
(500 MW×8)
SCR Upgrade (#5. 2016)
SCR Upgrade (#2,3,5. 2017)
SCR Upgrade (#1,4,6,7. 2018)
SCR Upgrade (#8. 2019)
FGD Upgrade (#6, 2018)
FGD Upgrade (#2, 3, 2019)
FGD Upgrade (#4 2020)
FGD Upgrade (#5 2021)
Samcheok #1 - 2
2,044 MW
(1,022 MW×2)
SCR Upgrade (#2 2023)
SCR Upgrade (#1 2024)
SCR Upgrade (#2 2025)
SCR Upgrade (#1 2026)
“EP” means an electrostatic precipitation system.
“SCR” means a selective catalytic reduction system.
“CFBC” means a circulating fluidized bed combustion system.
“Biomass” means wood pallet powered plant.
“FGD” means flue-gas desulfurization designed to remove sulfur oxides.
“WESP” means wet electrostatic precipitator.
Transmission and Distribution
We currently transmit and distribute substantially all of the electricity in Korea.
As of December 31, 2025, our transmission system consisted of 36,183 circuit kilometers of lines of 765 kilovolts and others including high-voltage direct current lines, and we had 939 substations with aggregate installed transformer capacity of 379,998 megavolt-amperes.
As of December 31, 2025, our distribution system consisted of 152,266 megavolt-amperes of transformer capacity and 10,347,266 units of support with a total line length of 556,356 circuit kilometers.
We make substantial investments in our transmission and distribution systems to minimize power interruptions and improve efficiency. Our current projects principally focus on increasing the capabilities of our existing power networks and reducing transmission and distribution loss, which was 3.52% of our gross generation in 2025. To cope with increasing damages to large-scale transmission and distribution facilities, we plan to reinforce stability of our transmission and distribution facilities through stricter design and material specifications. In addition, we also plan to expand underground transmission and distribution facilities to meet customer demand for more environment-friendly facilities. In order to reduce the interruption time in power distribution, which is an indicator of the quality of electricity transmission, we also continue to invest in automation of electricity transmission and development of new transmission technologies, among others.
New Energy Industry Projects
Certain of our new energy industry projects are described below.
Advanced Metering Infrastructure
In July 2012, the Government implemented a master plan to build out a smart grid, which includes the Advanced Metering Infrastructure (“AMI”) roadmap. In August 2018 and February 2023, the Government
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updated the master plan to focus on building electricity market ecosystem and constructing smart energy consuming structure focused on energy efficiency. In accordance with such plan, we are in the process of installing “smart meters” and related communication networks and operating systems as part of the “smart grid” initiative in an effort to enhance efficiency in the power electricity industry and alleviate growing energy shortage concerns. Our goal is to complete such installation for all of the households in Korea. Smart meters refer to digital meters that record, on a real-time basis, electricity consumption within a household so that consumers will have a price-based incentive to enhance efficiency in their electricity usage. As of December 31, 2025, we have established a data communication network that enables smart meters for 20.5 million households, and we plan to establish it for remaining 1.1 million households from 2026. We have spent Won 1,800 billion on the AMI project as of the end of 2025 and expect to spend an additional Won 54 billion, bringing the total cost to approximately Won 1.9 trillion.
Smart Grids
Smart grids refer to next-generation networks for electricity distribution that integrate information technology into existing power grids with the aim of enabling two-way real time exchange of information between electricity suppliers and consumers for optimal efficiency in electricity use. As part of our overall business strategy, we are currently developing and implementing smart grids based on advanced information technology in order to promote more efficient allocation and use of electricity by consumers. We expect that such technology will improve efficiency and reduce electricity loss over the course of electricity transmission and distribution. We also expect that the smart grid initiative will significantly increase efficient energy consumption by providing real-time data to customers, which would in turn help to reduce greenhouse gas emission and decrease Korea’s reliance on foreign energy sources.
In alignment with the Government’s energy policy aimed at the production and consumption of environmentally sustainable electricity within the region, we undertook a grid-connected microgrid initiative tailored for energy-intensive industrial complexes. Beginning with the award of the Gumi National Industrial Complex microgrid project in 2022, we secured additional contracts for the Yeosu National Industrial Complex in 2023 and the Gwangyang National Industrial Complex in 2025. Through customized strategies tailored to each industrial complex, we are establishing a self-sufficient renewable energy ecosystem and developing sustainable, environmentally friendly industrial complexes.
Energy Storage Systems
In October 2013, as part of an endeavor to create new markets for energy demand management applications using information and communication technology, we established a business plan to roll out energy storage systems for frequency regulation nationwide. These systems involve the establishment and operation of batteries and transformers with large-sized charge and discharge capabilities adjacent to substations to transmit electricity stably with regulated frequencies and optimize the efficiency of the substation operation. This system allows full conversion of reserve capacity for frequency regulation at existing low-cost generators into electricity storage and, if operated in sizable scale, offers opportunities for substantial cost savings in the purchase of electricity.
In December 2014, we conducted a pilot project for this initiative by installing a total of 52 megawatt energy storage systems at the Seo-Anseong substation and the Shin-Yongin substation, which commenced commercial operations in July 2015. With the commencement of an energy storage system at Yeong-Ju substation in December 2023 and energy storage systems at five other substations, including Bu-buk, in September 2024, the total capacity of our energy storage systems reached 1,404 megawatts.
AI-based Substation Equipment Diagnostic & Analysis system (SEDA)
We have developed and deployed an AI-based Substation Equipment Diagnostic & Analysis system (“SEDA”), which utilizes advanced digital technologies, including IoT sensors and artificial intelligence, to assist
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in real-time monitoring and analysis of the condition of our power equipment. This system fosters early detection of potential failures and allows proactive maintenance, allowing us to improve the reliability and operational efficiency of our transmission and distribution assets.
SEDA has allowed to transition from a traditional time-based maintenance to a reliability-based maintenance system, allowing us to allocate maintenance activities based on equipment condition and risk levels rather than simple passage of time. From 2021 to 2025, we believe the application of SEDA has contributed to preventing an average of approximately 15 equipment failures per year, including 17 in 2025, resulting in improved system reliability and cost savings.
In addition, we are expanding the commercialization of its diagnostic technologies through collaboration with domestic and international partners. This includes joint development of integrated solutions with major equipment manufacturers and pilot projects with overseas utilities, such as demonstration projects completed in Malaysia, as well as ongoing initiatives to enter global markets in cooperation with European energy companies.
Fuel Sources and Requirements
Uranium, the principal fuel source for nuclear power, accounted for 46.1% and 48.1% and 48.7% of the fuel requirements for electricity generation by us and our generation subsidiaries in terms of electricity generated in 2023, 2024 and 2025, respectively.
All uranium ore concentrates used by KHNP are imported from, and conversion and enrichment of such concentrates are provided by, sources outside Korea and are paid for with currencies other than Won, primarily U.S. dollars.
In order to ensure a stable supply, KHNP enters into medium and long-term contracts with various suppliers and supplements such supplies with purchases in spot markets. In 2025, KHNP purchased approximately 4,412 tons of its uranium concentrate requirement under both long-term and spot supply contracts with suppliers in Canada, France, Australia, Switzerland, Kazakhstan and Uzbekistan. Under the long-term supply contracts, the purchase prices of uranium concentrates are adjusted annually based on base prices and spot market prices prevailing at the time of delivery. The conversion and enrichment services of uranium concentrates are provided by suppliers in France, Canada, Japan, the United Kingdom, the United States, and Switzerland. The uranium concentrates will then be further processed by a Korean company before they are ready for use. Except for certain fixed contract prices, contract prices for processing of uranium are adjusted annually in accordance with the general rate of inflation. KHNP intends to obtain its uranium requirements in the future, in part, through purchases under medium to long-term contracts and, in part, through spot market purchases.
Bituminous coal accounted for 38.0%, 35.4% and 37.0% of the fuel requirements for electricity generation by us and our generation subsidiaries in 2023, 2024 and 2025, respectively, and anthracite coal accounted for 0.5%, 0.5% and 0.4% of our fuel requirements for electricity generation in terms of electricity generated in 2023, 2024 and 2025, respectively.
In 2025, our generation subsidiaries purchased approximately 56.0 million tons of bituminous coal, of which approximately 31.7%, 23.1%, 20.1%, 6.2% and 18.9% were imported from Indonesia, Australia, Russia, South Africa and others, respectively. Approximately 93.1% of the bituminous coal requirements of our generation subsidiaries in 2025 were purchased under long-term contracts with the remaining 6.9% purchased in the spot market. Some of our long-term contracts relate to specific generating plants and extend through the end of the projected useful lives of such plants, subject in some cases to periodic renewal. Pursuant to the terms of our long-
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term supply contracts, prices are adjusted periodically based on market conditions. The average cost of bituminous coal per ton purchased under such contracts amounted to Won 177,376, Won 137,342 and Won 124,900 in 2023, 2024 and 2025, respectively.
In 2025, our generation subsidiaries purchased approximately 0.6 million tons of anthracite coal. The prices for anthracite coal under such contracts are set by the Government. The average cost of anthracite coal per ton purchased under such contracts was Won 182,527, Won 180,031 and Won 182,327 in 2023, 2024 and 2025, respectively.
Oil accounted for 0.02%, 0.0% and 0.1% of the fuel requirements for electricity generation by us and our generation subsidiaries in terms of electricity generated in 2023, 2024 and 2025, respectively.
In 2025, our generation subsidiaries purchased approximately 3.78 million barrels of fuel oil, substantial portion of which was purchased from domestic refiners through competitive open bidding. Purchase prices are based on the spot market price in Singapore. The average cost of oil per barrel was Won 191,452, Won 153,660 and Won 166,239 in 2023, 2024 and 2025, respectively.
LNG accounted for 12.0%, 11.9% and 9.9% of the fuel requirements for electricity generation by us and our generation subsidiaries in terms of electricity generated in 2023, 2024 and 2025, respectively. In 2025, for use in electricity generation we purchased approximately 4.87 million tons of LNG from Korea Gas Corporation, a Government-controlled entity in which we currently own a 20.47% equity interest (excluding treasury shares). In 2025, we purchased a substantial portion of our LNG requirements for use in power generation from Korea Gas Corporation. Under the terms of the LNG contract with Korea Gas Corporation, all of our five non-nuclear generation subsidiaries jointly and severally agreed to purchase a total of 5.18 million tons of LNG in 2025, subject to an automatic price adjustment annually based on a pre-determined formula if the actual purchased amount exceeds or falls short of the contracted amount. We believe the quantities of LNG provided under such contract will be adequate to meet the needs of our generation subsidiaries for LNG for the next several years. The LNG supply contracts between our generation subsidiaries and Korea Gas Corporation generally have a term of 20 years and provide for minimum purchase requirements for our generation subsidiaries, the specific terms of which are subject to negotiation between Korea Gas Corporation and our generation subsidiaries and approval by the Government. The average cost per ton of LNG was Won 1,391,146, Won 1,093,407 and Won 985,951, in 2023, 2024 and 2025, respectively. Korea Gas Corporation implemented a new individual tariffs formula, whereby the domestic power plants can negotiate lower prices directly with Korea Gas Corporation. The new formula applies to domestic power plants whose current contracts with Korea Gas Corporation expire after January 2022 and also to new power plants commencing operations from January 2022.
Meanwhile, KOMIPO procures LNG directly through a contract with a brokerage firm, in addition to the amount supplied by Korea Gas Corporation and Incheon City Gas Co., Ltd. In 2025, the total amount of KOMIPO’s direct LNG procurement was 0.26 million tons, with 69.57%, 6.69% and 23.74% of the total imported from Russia, Malaysia and other countries, respectively. KOWEPO procures LNG directly through contracts with brokerage firms, in addition to the amount supplied by Korea Gas Corporation. In 2025, the total amount of KOWEPO’s direct LNG procurement was 0.24 million tons, with 24%, 49%, and 27% of the total imported from the UAE, the United States, and Australia, respectively. KOSPO procures LNG through contracts with global major LNG suppliers such as IOCs, LNG producers, major traders, as well as Korea Gas Corporation. In 2025, the total amount of KOSPO’s direct LNG procurement was 0.4 million tons, sourced from the United States, Malaysia, and other countries. EWP procures LNG directly through contracts with brokerage firms, in addition to the volume supplied by Korea Gas Corporation. In 2025, the total amount of EWP’s direct LNG procurement was 0.126 million tons, with 48.12% imported from Malaysia and 51.88% from the Australia
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Hydroelectric power generation, including pumped storage, accounted for 1.3%, 1.6% and 1.6%, of the fuel requirements for electricity generation by us and our generation subsidiaries in terms of electricity generated in 2023, 2024 and 2025, respectively. The availability of water for hydroelectric power depends on rainfall and competing uses for available water supplies, including residential, commercial, industrial and agricultural consumption. Pumped storage enables us to increase the available supply of water for use during periods of peak electricity demand.
Sales and Customers
Our sales depend principally on the level of demand for electricity in Korea and the rates we charge for the electricity we sell to the end-users.
The table below sets forth, for the periods indicated, the annual rate of growth in Korea’s GDP and the annual rate of growth in electricity demand (measured by total annual electricity consumption) on a year-on-year basis. In 2025, the GDP increased by 1.0% compared to 2024, whereas the demand for electricity in Korea decreased by 0.1% compared to 2024.
Growth in GDP
Growth in electricity consumption
Electricity demand in Korea varies within each year for a variety of reasons other than the general growth in GDP demand. Electricity demand tends to be higher during daylight hours due to heightened commercial and industrial activities and electronic appliance use. Due to the use of air conditioning during the summer and heating during the winter, electricity demand is higher during these two seasons than the spring or the fall. Variation in weather conditions may also cause significant variation in electricity demand.
We sell electricity to our customers by installing electricity meters on-site and taking monthly readings of such meters, based upon which invoices are sent to our customers.
Demand by the Type of Usage
The table below sets forth consumption of electric power, and growth of such consumption on a year-on-year basis, by the type of usage (in gigawatt hours) for the periods indicated.
Residential
Commercial
Educational
Industrial
Agricultural
Street lighting
Overnight Power
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The industrial sector represents the largest segment of electricity consumption in Korea. Demand for electricity from the industrial sector was 280,221 gigawatt hours in 2025, representing a 2.1% decrease from 2024, due to economic slowdown in power-intensive industries such as petrochemicals and steel. Demand for electricity from the commercial sector depends largely on the level and scope of commercial activities in Korea. Demand for electricity from the commercial sector increased to 138,315 gigawatt hours in 2025, representing a 2.6% increase from 2024, due to the effects of a gradual recovery in consumption and an increase in demand for cooling and heating. Demand for electricity from the residential sector is largely dependent on population growth and use of heaters, air conditioners and other electronic appliances. Demand for electricity from the residential sector increased to 88,474 gigawatt hours in 2025, representing a 1.7% increase compared to 2024, due to the effects of increased demand for heating and cooling during the winter and summer seasons.
Demand Management
Our ability to provide adequate supply of electricity is principally measured by the facility reserve margin and the supply reserve margin. The facility reserve margin represents the difference between the peak usage during a year and the installed capacity at the time of such peak usage, expressed as a percentage of such peak usage. The supply reserve margin represents the difference between the peak usage in a year and the available capacity at the time of such peak usage, expressed as a percentage of such peak usage. The following table sets forth our facility reserve margin and supply reserve margin for the periods indicated.
Facility reserve margin
Supply reserve margin
In addition, in accordance with the delegating regulations of the Energy Use Rationalization Act, the Ministry of Trade, Industry and Resources designated us as a pilot operator for the Energy Efficiency Resource Standards (“EERS”) in 2018. To promote the development of energy-efficient technologies and practices, EERS sets energy savings targets for energy suppliers to pursue in proportion to their energy sales, requiring that, in 2026, we save as much as 0.3% of our 2024 electricity sales by reducing our customers’ consumption. In accordance with the EERS regulations, we plan to increase our savings target to 1% of annual electricity sales by 2031. The EERS pilot project is expected to be converted into an actual project in 2027 pursuant to the revision of the Energy Use Rationalization Act in 2026.
Electricity Rates
The Electric Utility Act and the Price Stabilization Act of 1975, each as amended from time to time, prescribe the procedures for the approval and establishment of rates charged for the electricity we sell. We submit our proposals for revisions of rates or changes in the rate structure to the Ministry of Climate, Energy and Environment. The Ministry of Climate, Energy and Environment then reviews these proposals and, following consultation with the Ministry of Finance and Economy and review by the Korea Electricity Commission, makes the final decision.
Under the Electric Utility Act and the Price Stabilization Act, electricity rates are established at the same level as the Total Comprehensive Cost that would enable us to recover our fair operating costs as well as receive a fair investment return on capital used in our operations. The fair operating costs are defined as the sum of our operating expenses attributable to our electricity supply, our adjusted income taxes and some of non-operational profit or loss.
The fair investment return on capital used in our operations represents an amount equal to the rate base multiplied by the rate of return.
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The rate base is currently equal to the sum of:
net utility plant in service (which is equal to utility plant minus accumulated depreciation minus revaluation reserve);
the portion of working capital which is equal to the appropriate level of operating costs minus depreciation and other non-cash charges while taking into account the actual time of cost recovery; and
the portion of construction-in-progress which is charged from our retained earnings.
The amounts used for the variables in the rates are those projected by us for the periods to be covered by the rate approval.
For the purpose of determining the fair rate of return, the rate base is divided into two components in proportion to our total equity and our total debt. The rate of return permitted in relation to the debt component of the rate base is set at a level designed to approximate the weighted average interest cost on all types of borrowing for the periods covered by the rate approval. The rate of return permitted in relation to the equity component of the rate base is set by applying the capital asset pricing model which takes account of the risk-free rate, the return on the Korea Stock Price Index, KOSPI, and the correlation of the stock price of our company with KOSPI. The fair rate of return needs to be approved by the Government in accordance with the Public Notice on Detailed Licensing Standards for Power Generation Business, Electricity Rates Calculation Standards, Permissible Error Range for Electric Meters, and Electric Power System Operation Guidelines. In 2024, the approved rate of return on the debt component of the rate base was 2.790% while the approved rate of return on the equity component of the rate base was 6.847%. As a result of such approved rates of returns, the fair rate of return in 2024 was determined to be 3.18%. The rate of return for 2025 has not yet been determined.
The Electric Utility Act and the Price Stabilization Act do not specify a basis for determining the reasonableness of our operating expenses or any other items (other than the level of the fair investment return) for the purposes of the rate calculation. However, the Government exercises substantial control over our budgeting and other financial and operating decisions.
In addition to the calculations described above, a variety of other factors are considered in setting overall tariff levels. These other factors include consumer welfare, our projected capital requirements, the effect of electricity tariff on inflation in Korea and the effect of tariff on demand for electricity.
From time to time, our actual rate of return on invested capital may differ significantly from the fair rate of return on invested capital assumed for the purposes of electricity tariff approvals, for reasons, among others, related to movements in fuel prices, exchange rates and demand for electricity that differ from what is assumed for determining our fair rate of return. For example, between 1987 and 1990, the actual rate of return was above the fair rate of return due to declining fuel costs and rising demand for electricity at a rate not anticipated for purposes of determining our fair rate of return. Similarly, depreciation of the Won against the U.S. dollar accounted for our actual rates of return being lower than the fair rate of return for the period from 1996 to 2000. For the period between 2006 and 2013, our actual rates of return were lower than the fair rate of return largely due to a general increase in fuel costs and additional facility investment costs incurred, the effects of which were not offset by timely increases in our tariff rates. Between 2014 and 2016, however, largely due to a decrease in fuel costs reflective of the drop in oil prices, our actual rate of return has surpassed the fair rate of return; however, substantially all of the resulting excess has been used to fund capital expenditure and repair and maintenance, and make investments in renewable energy and other environmental programs.
Partly in response to the variance between our actual rates of return and the fair rates of return, the Government from time to time increases the electricity tariff rates, but there typically is a significant time lag for the tariff increases as such increases requires a series of deliberation processes and administrative procedures and the Government also has to consider other policy considerations, such as the inflationary effect of overall tariff increases and the efficiency of energy use from sector-specific tariff increases.
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As of January 1, 2021, we implemented a new tariff system to reinforce the correlation between the costs we incur and the tariff we charge to our customers, among other changes. The new tariff system consists of three main changes.
First, we implemented a new cost pass-through tariff system to reinforce the correlation between the costs we incur and the tariff we charge to our customers and to enhance transparency by separately billing fuel costs and climate/environment related costs. Previously, the electricity tariff consisted of two main components: (i) the base charge (the “Base Charge”) and (ii) the usage charge (the “Usage Charge”) based on the amount of electricity consumed by end-users. Under the new tariff system, there are new components to the tariff called the fuel cost adjusted charge (the “Fuel Cost Adjusted Charge”) and the climate/environment related charge (the “Climate/Environment Related Charge”). In principle, the Fuel Cost Adjusted Charge is calculated on a quarterly basis, and the formula for calculating the amount of the Fuel Cost Adjusted Charge is multiplying (i) the unit price of the Fuel Cost Adjusted Charge (the “Unit Price of the Fuel Cost Adjusted Charge”), which is the difference between a base fuel cost (the “Base Fuel Cost”) and an actual fuel cost (the “Actual Fuel Cost”) and (ii) the amount of electricity consumed. The Base Fuel Cost is the past twelve-month average fuel price of bituminous coal, LNG and Bunker C oil as posted by the Korea Customs Service. The twelve-month average fuel price is measured by taking the average of monthly fuel prices from twelve months in between thirteen and one month prior to the time a new Base Fuel Cost becomes effective. To illustrate, the Base Fuel Cost effective from 2023 is the average of the fuel prices from December 2021 to November 2022. The Base Fuel Cost can be adjusted upon the revision of the electricity tariff as a whole. On the other hand, the Actual Fuel Cost is the past three-month average fuel price of the same fuels we use to measure the Base Fuel Cost. The past three-month average fuel price is measured by taking the average of monthly fuel prices from three months in between four and one month prior to the time the Fuel Cost Adjusted Charge is updated. To illustrate, for the second quarter of 2026, we used the fuel costs for September, October and November 2025 to calculate the three-month average fuel price.
However, our ability to pass on fuel and other cost increases to our customers may be limited due to Government regulations on the rates charged for the electricity we supply to our customers. In addition to the built-in limits described in the preceding paragraph, the new tariff system gives discretion to the Government to not wholly or partially adjust the quarterly Fuel Cost Adjusted Charge in case of extenuating circumstances, as determined by the Government. For example, in the second and third quarter of 2021, although the Unit Price of the Fuel Cost Adjusted Charge was Won –0.2 and Won +1.7 per kilowatt-hour respectively, the Government notified us to keep it at the same Won –3.0 per kilowatt-hour as the first quarter of 2021. In the fourth quarter of 2021, we increased the Unit Price of the Fuel Cost Adjusted Charge to Won 0.0 per kilowatt-hour. In the first and second quarters of 2022, although the Unit Price of the Fuel Cost Adjusted Charge as calculated should have been Won 3.0 per kilowatt-hour as the quarterly limit of Won ±3 per kilowatt-hour had existed back then, the Government notified us to keep it at the same Won 0.0 per kilowatt-hour as the fourth quarter of 2021. The Government cited different policy reasons for withholding the application of the quarterly Fuel Cost Adjusted Charge in the past, but one of the more consistent reasons has been alleviating the hardship caused by the prolonged economic effects of COVID-19 pandemic. As the quarterly limit of Won ±3 per kilowatt-hour was
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repealed in the third quarter of 2022 and with the approval by the Government, we ultimately increased the Unit Price of the Fuel Cost Adjusted Charge to Won 5.0 per kilowatt-hour in the third quarter of 2022, which represented the maximum permissible increase for 2022 under the regulatory cap. From the third quarter of 2022 to the second quarter of 2026, the same Won 5.0 per kilowatt-hour increment has been applied to the Unit Price of the Fuel Cost Adjusted Charge. Even though the quarterly adjustment amounts calculated under our formula were Won -1.8, Won -4.0, Won -2.5, Won -6.4, Won -6.4, Won -5.1, Won -4.2, Won -6.4, Won -12.1, Won -13.3 and Won -11.2 per kilowatt-hour per each quarter from the fourth quarter of 2023, to the second quarter of 2026, respectively, the Government notified us to maintain the Unit Price at Won 5.0 per kilowatt-hour, taking into consideration our financial conditions and the fact that a substantial amount of the Fuel Cost Adjusted Charge that should have been reflected in previous years has not previously been reflected in the electricity tariff.
Also, because the Fuel Cost Adjusted Charge takes into account the fuel prices posted by Korea Customs Service, there may still be a mismatch in value between the actual prices the domestic generation companies pay for their fuels in the open market and the adjustment that can be made through the Fuel Cost Adjusted Charge. The domestic generation companies include not only our generation subsidiaries but also independent power producers that are not affiliated with us and we do not have access to fuel costs incurred by the independent power producers. As such, we use fuel prices posted by Korea Customs Service, which are easily accessible to our customers, for calculating the Fuel Cost Adjusted Charge.
Due to the likelihood of the Actual Fuel Cost being substantially over the adjustment limits imposed by the new tariff system and the Government’s discretion not to wholly or partially adjust the quarterly Fuel Cost Adjusted Charge in case of extenuating circumstances, there may be certain portions of the fuel costs that cannot be charged to our customers, even though those portions should have been included in the Fuel Cost Adjusted Charge. In such cases, we may accumulate such portions and reflect them in what is called the Total Comprehensive Cost, which is a variable we use to calculate the Base Charge and the Usage Charge of the tariff. The Total Comprehensive Cost, which we submit each year to the Government for review, is calculated using the relevant costs according to our settled accounts from the previous year and the proposed budget for the upcoming year. Under the Total Comprehensive Cost approach, the Base Charge and the Usage Charge are established at levels that would enable us to recover fair operating costs as well as fair investment return on the capital used in our operations. For further information on fair operating costs and fair investment return, please see Item 4.B. “Business Overview—Sales and Customers—Electricity Rates.” The Base Charge and the Usage Charge that are derived from the Total Comprehensive Cost need to be approved by the Government before they can be revised. The Government may, from time to time, consider different policy objectives to regulate the time and magnitude of such revision of the Base Charge and the Usage Charge of the electricity tariff. Therefore, changes in the fuel costs may not be timely or fully reflected even through the Usage Charge of the tariff where they would typically be reflected. In December 2021, there was a need to increase the Usage Charge by Won 9.8 per kilowatt-hour from January 2022 to reflect the rise in the Base Fuel Cost. With approval by the Government, we increased the Usage Charge by Won 4.9 per kilowatt-hour on April 1, 2022 and October 1, 2022 respectively, which resulted in a total increase of Won 9.8 per kilowatt-hour. Such increases were spread out into two rounds to relieve people’s hardship including the prolonged effects of COVID-19 pandemic. In addition, in October 2022, we increased the Usage Charge of the tariff by Won 7.0 to Won 11.7 per kilowatt-hour on industrial and commercial consumers and by Won 2.5 per kilowatt-hour on all other consumers, reflecting additional accumulated increases in fuel costs. In 2023, with the approval of the Government, we increased the Usage Charge by Won 11.4 and Won 8.0 per kilowatt-hour in January and May 2023, respectively, to reflect a portion of the increase in the Base Fuel Cost. Also, we increased the Usage Charge of the tariff by Won 6.7 to Won 13.5 per kilowatt-hour for large-scale industrial consumers in November 2023 to reflect additional accumulated increases in fuel costs. In its economic policy direction statement for 2023, the Government announced its plans to gradually increase the tariff in order to address our cumulative deficit by 2027. However, there is no assurance on whether such plans will be realized. On October 23, 2024, in coordination with the Government, we announced that, starting from October 24, 2024, we will increase electricity tariff on industrial consumers by an average of Won 16.1 per kilowatt-hour, representing an average increase of 9.7% from the previous tariff, while maintaining the same electricity tariff on the rest of the consumers.
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Also, the new tariff system introduced an additional component to the tariff called a climate/environment related charge (the “Climate/Environment Related Charge”). Previously, our climate and environment costs were embedded in the Usage Charge component of the tariff and our consumers could not discern the exact magnitude of such costs. By separating it out as an independent component, we intend to provide more information and transparency to our customers while having the flexibility to adjust it in alignment with the underlying costs. The Climate/Environment Related Charge for the coming year is calculated by multiplying (i) our total estimated costs of (A) complying with the Renewable Portfolio Standard program, the greenhouse gas emission trading system and the coal-fired generation reduction program for the current year and (B) amounts paid back to customers under the Energy Cashback program, a program offering discounts (in the form of cashbacks) to participating customers who reduce electricity consumption beyond certain thresholds in order to promote energy conservation, and then dividing it by the electricity sales projected for the coming year (the “Climate/Environment Related Base Rate”), and (ii) the amount of electricity consumed. The value of the Climate/Environment Related Base Rate for 2025 was Won 9.0 per kilowatt-hour, which has been maintained up to the date of this annual report. Even though the Climate/Environment Related Charge is planned to be adjusted every year by reflecting the change in climate and environment-related costs but the Government may change the date of adjustment in consideration of different policy objectives. If there are discrepancies between our costs and the Climate/Environment Related Charge, we may accumulate such discrepancies and reflect them in our Total Comprehensive Cost. However, the electricity rate based on the Total Comprehensive Cost needs to be approved by the Government to be revised.
The tariff rates we charge for electricity vary among the different classes of consumers, which principally consist of industrial, commercial, residential, educational and agricultural consumers. The tariff also varies depending upon the voltage used, the season, the time of usage, the rate option selected by the user and, in the residential sector, the amount of electricity used per household, as well as other factors. For example, we adjust for seasonal tariff variations by applying higher rates when demand tends to rise such as during the months of June, July and August (when the demand tends to rise due to increased use of air conditioning) and November, December, January and February (when demand tends to rise due to increased use of heating), which reflects the policy of the Korean government to cope with the rise in electricity demand during peak seasons by encouraging a more efficient use of electricity by customers. In addition, we provide discounts on tariff rates to certain users such as low income households.
Our current tariff schedule reflecting the adjustments outlined above and effective from April 16, 2026 is summarized below by the type of usage:
Industrial. The monthly Base Charge varies from Won 5,550 per kilowatt to Won 9,810 per kilowatt depending on the type of contract, the voltage used and the rate option. The energy Usage Charge varies from Won 88.0 per kilowatt-hour to Won 242.9 per kilowatt-hour depending on the type of contract, the voltage used, the season, the time of day and the rate option.
Commercial. The monthly Base Charge varies from Won 6,160 per kilowatt to Won 9,810 per kilowatt depending on the type of contract, the voltage used and the rate option. The energy Usage Charge varies from Won 83.5 per kilowatt-hour to Won 229.4 per kilowatt-hour depending on the type of contract, the voltage used, the season, the time of day and the rate option.
Residential. The monthly Base Charge varies from Won 730 for electricity usage of less than 200 kilowatt-hours to Won 7,300 for electricity usage in excess of 400 kilowatt-hours. During the months of July and August each year, the usage ceiling for the first two tiers of rates increased from 200 kilowatts to 300 kilowatts for the first tier and from 400 kilowatts to 450 kilowatts for the second tier. Residential tariff also includes an energy Usage Charge ranging from Won 105.0 to Won 307.3 per kilowatt-hour for electricity usage depending on the amount of usage and voltage. During the peak usage periods during summer and winter, namely the months of July and August and December to February, a higher energy Usage Charge of Won 736.2 per kilowatt-hour applies to residential consumers whose monthly electricity consumption exceeds 1,000 kilowatts hour. Also, in
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the case of Jeju Island, in accordance with the new tariff system, residents may also opt for our new seasonal and hourly tariff schedule as an alternative. Under the new schedule, the monthly Base Charge is Won 4,310 per kilowatt. The Usage Charge varies from Won 125.8 per kilowatt-hour to Won 220.5 per kilowatt-hour depending on season and time of the day.
Educational. The monthly Base Charge varies from Won 5,230 per kilowatt to Won 6,980 per kilowatt depending on the voltage used and the rate option. The energy Usage Charge varies from Won 70.5 per kilowatt-hour to Won 187.1 per kilowatt-hour depending on the voltage used, the season and the rate option.
Agricultural. The monthly Base Charge varies from Won 360 per kilowatt to Won 1,210 per kilowatt depending on the type of usage. The energy Usage Charge varies from Won 48.3 per kilowatt-hour to Won 68.6 per kilowatt-hour depending on the type of contract, the voltage used and the season.
Street-lighting. The monthly Base Charge is Won 6,290 per kilowatt and the energy Usage Charge is Won 112.6 per kilowatt-hour. For electricity capacity of less than 1 kilowatt or for places where the installation of the electricity meter is difficult, a fixed rate of Won 47.2 per watt applies, with the minimum monthly charge of Won 1,220.
In 2001, as part of implementing the Restructuring Plan, the Ministry of Trade, Industry and Resources established the Electric Power Industry Basis Fund to enable the Government to take over certain public services previously performed by us. 3.7% of the tariff collected from our customers from December 28, 2005 through June 30, 2024, 3.2% of the tariff collected from our customers from July 1, 2024 through June 30, 2025, and 2.7% of the tariff collected from our customers from July 1, 2025 has been or will be transferred to the Electric Power Industry Basis Fund prior to us recognizing sales revenue.
On March 16, 2026, we announced a comprehensive restructuring of our time-of-use (TOU) electricity tariff system. This reform is designed to align price incentives with the expansion of and increased focus on renewable energy generation. The primary objective is to incentivize a shift in power demand toward daytime hours, when renewable energy generation, particularly solar power, is most abundant. Furthermore, the reform aims to mitigate curtailment issues, where excess generation occurs during daytime hours on weekends and holidays in spring and autumn seasons due to insufficient demand.
Key features of the reform include the following:
Adjustment of Time-of-Use Classification: During spring, summer and autumn seasons (March to October), the daytime periods (11:00 to 12:00 and 13:00 to 15:00) previously classified as peak-load have been reclassified as mid-load. Conversely, the evening period (18:00 to 21:00) has been shifted from mid-load to peak-load to reflect shifting demand patterns. These revised time-of-use standards apply to weekdays across all contract categories that are subject to TOU tariffs, including certain Industrial, Commercial, Educational, Electric Vehicle charging customers.
Tariff Rate Restructuring: We increased the off-peak (night time) rate by Won 5.1/kWh, while peak-load rates were reduced by an average of Won 15.4/kWh (Won 16.9/kWh for summer/winter and won 13.2/kWh for spring/autumn) across all seasons. These specific rate adjustments are applicable solely to Industrial(B).
Weekend and Holiday Incentives: A 50% discount on usage charges has been introduced for usage from 11:00 to 14:00 on weekends and holidays during spring (March to May) and autumn (September to October). This incentive is applicable only to Industrial(B) and Electric Vehicle charging.
The revised tariff system for Industrial(B) and Electric Vehicle charging is scheduled to take effect on April 16, 2026. Other applicable categories, such as Industrial(A)II, Commercial(A)II, Commercial(B), Educational(B), will adopt the adjusted TOU classifications beginning June 1, 2026.
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Direct Power Purchase
Pursuant to the Electric Utility Act and the Enforcement Decree of the Electric Utility Act, purchasers of power capacity in excess of 30,000 Kilovolt-amps (kVA) (the threshold was previously 50,000 kVA prior to an amendment to the Enforcement Decree of the Electric Utility Act in June 2007) have been allowed to purchase electricity directly through the Korea Power Exchange. As market interest increased, the Korea Power Exchange amended the Rules on Operating Electricity Market in 2025, such as extending the mandatory retention period for switching to direct purchase from one year to three years, which is expected to make customers more careful in deciding to switch to direct purchases as they will be subject to a longer retention period. As at the end of 2025, there have been some instances of direct power purchase by electricity consumers. Although direct purchases will still utilize KEPCO’s transmission network, an increase in direct purchases of electricity may adversely affect our market share in electricity sales and, particularly if it were to gain widespread acceptance, may negatively affect our business, financial condition, results of operations and cash flows.
Power Development Strategy
We and our generation subsidiaries make plans for expanding or upgrading our generation capacity based on the Basic Plan, which is generally revised and announced every two years by the Government. In February 2025, the Government announced the Eleventh Basic Plan and subsequently amended it in March 2025 which covers the period from 2024 to 2038. The Eleventh Basic Plan focuses on (a) establishing an energy mix and equipment plan that comprehensively considers policy principles such as supply stability, efficiency and carbon neutrality and (b) proactively strengthening the power grid and advancing market sophistication to expand carbon-free power sources, and includes the following specific measures: (i) following the continued use of nuclear power as a carbon-free source, the Eleventh Basic Plan includes the construction of two new large nuclear power plants with an aggregate generation capacity of 2.8 gigawatts by 2038 and commercial operation of a small modular reactor with generation capacity of 0.7 gigawatts by 2035, which together with other previously planned facilities, is expected to increase nuclear power capacity from 24.7 gigawatts in 2023 to 35.2 gigawatts in 2038; (ii) aging coal-fired power plants to be gradually replaced with carbon-free power sources and LNG plants, with a principle of simultaneous replacement with the same capacity—accordingly, coal power capacity is expected to decrease from 39.2 gigawatts in 2023 to 22.2 gigawatts in 2038, while LNG power capacity is expected to increase from 43.2 gigawatts in 2023 to 69.2 gigawatts in 2038; (iii) renewable energy will be systematically expanded, including expansion of solar and wind power generation capacities and market system reforms, which is expected to increase renewable energy generation capacity from 30.0 gigawatts in 2023 to 121.9 gigawatts in 2038; (iv) through the expansion of nuclear power, renewable energy, clean hydrogen and ammonia, reaching carbon-free share of 53.0% by 2030 and 70.7% by 2038, and ultimately achieving carbon neutrality; and (v) building a power grid with sufficient capacity to accommodate carbon-free energy sources. The Eleventh Basic Plan also aims to ensure a sufficient and timely electricity supply to advanced industries such as semiconductor clusters, as well as establishing an integrated supply-demand management system and an auction market in order to further stability and power source diversification.
Accordingly, we established the Eleventh Transmission and Substation Facilities Plan in accordance with the Eleventh Basic Plan in May, 2025. The Eleventh Transmission and Substation Facilities is covering the period from 2024 to 2038 and focuses on initiatives such as the timely construction of transmission and substation facilities to meet increasing demand, integration of the management system for power plants including nuclear and renewable energy, and reinforcement of the national infrastructure grid to achieve carbon neutrality.
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We cannot assure that the Framework Act on Carbon Neutrality, the Special Act on the Activation of Distributed Energy, the Twelfth Basic Plan, the Twelfth Long-Term Transmission and Substation Facilities Plan or the respective plans to be subsequently adopted will successfully achieve their intended goals. If there is significant variance between the projected electricity supply and demand considered in planning our capacity expansions and the actual electricity supply and demand or if these plans otherwise fail to meet their intended goals or have other unintended consequences, this may result in inefficient use of our working capital, mispricing of electricity and undue financing costs on the part of us and our generation subsidiaries, among others, which may have a material adverse effect on our results of operations, financial condition and cash flows.
Capital Investment Program
The table below sets forth, for each of the years ended December 31, 2023, 2024 and 2025, the amounts of capital expenditures for the construction of generation, transmission and distribution facilities.
The table below sets forth the currently estimated installed capacity for new or expanded generation units to be completed by our generation subsidiaries in each year from 2026 to 2029 based on the Eleventh Basic Plan, as amended.
Year
2026
2027
2028
2029
As part of our capital investment program, we also intend to add new transmission lines and substations, continue to replace overhead lines with underground cables and improve the existing transmission and distribution systems.
The actual number and capacity of generation units and transmission and distribution facilities we construct and the timing of such construction are subject to change depending upon a variety of factors, including, among others, changes in the Basic Plan, demand growth projections, availability and cost of financing, changes in fuel prices and availability of fuel, ability to acquire necessary plant sites, environmental considerations and community opposition.
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The table below sets forth, for the period from 2026 to 2028, the budgeted amounts of capital expenditures pursuant to our capital investment program, which primarily consist of budgets for the construction of generation, transmission and distribution facilities and, to a lesser extent, renewable energy generation and new energy industry projects. The budgeted amounts may vary from the actual amounts of capital expenditures for a variety of reasons, including, among others, the implementation of the Tenth Basic Plan currently in place, changes in the number of units to be constructed, the actual timing of such construction, changes in rates of exchange between the Won and foreign currencies and changes in interest rates.
Generation (1):
Renewables and others
Sub-total
Transmission and Distribution:
Transmission
Distribution
Others (2)
The budgeted amounts for our generation facilities are based on the Ninth Basic Plan, as amended.
Principally consists of investments in telecommunications and new energy industry projects, among others.
In January 2016, the Ministry of Trade, Industry and Resources announced an initiative to promote the new energy industry by creating the New Energy Industry Fund, which is made up of funds sponsored by Government-affiliated energy companies. We contributed Won 500 billion to the funds in 2016. The purpose of these funds is to invest in substantially all frontiers of the new energy industry, including renewable energy, energy storage systems, electric vehicles, small-sized self-sustaining electricity generation grids known as “micro-grids”, among others, as well as invest in start-up companies, ventures, small to medium-sized enterprise and project businesses that engage in these businesses but have not previously attracted sufficient capital from the private sector.
Furthermore, as a measure to address the high level of particulate matter pollution, in October 2018, the Government introduced a pilot regulation to lower the output of 35 coal-fired generation units to approximately 80% of their capacity that emit more than a certain amount of particulate matter. The regulation was formally implemented in January 2019, targeting 40 coal-fired power plants with high emissions of particulate matter. From March to June 2019, the scope expanded to cover 60 units in total. In addition, coal-fired generation units originally scheduled for preventive maintenance during the second half of 2019 were required to undertake such maintenance earlier in the spring of 2019. In November 2019, the Government pursued a reduction of coal-fired generation units in order to implement the Special Measures to Respond to the High Concentration Period (December to March) of Particulate Matter. We plan to continue to participate in the effort to reduce the particulate matter emissions from coal-fired generation units, not only during the winter but also during the spring. For example, as of March 31, 2026, 52 coal-fired generation units were subject to a cap of 80% of their capacity. On March 24, 2026, the Government announced that it would ease the restrictions on coal-fired generation units in response to an energy crisis caused by the conflict in Iran. Additionally, the Government adjusted the schedule to close down two decrepit coal-fired generation units (Boryeong #1 and #2), which were shut down in December 2020. Also, other coal-fired generation units, Samcheonpo #1 and #2, were shut down in
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May 2021 and Honam #1 and #2 units in December 2021. According to the Tenth Basic Plan announced in December 2022, the total coal-fired power plant capacity in 2036 will decrease to 27.1 gigawatts from 40.2 gigawatts in 2023, and its percentage of total power generation capacity will decrease to 11.3% in 2036 from 27.1% in 2023. While such measures may be subject to change, we expect to incur significant costs of complying with such measures, including in connection with more stringent particulate matter pollution regulations, retrofitting and overall replacement of environmental facilities.
We have financed, and plan to finance in the future, our capital investment programs primarily through net cash provided by our operating activities and financing in the form of debt securities and loans from domestic financial institutions, and to a lesser extent, borrowings from overseas financial institutions. In addition, in order to prepare for potential liquidity shortage, we maintain several credit facilities with financial institutions in the aggregate amounts of Won 15,828 billion and US$ 1,760 million on a consolidated basis, the full amount of which was available as of December 31, 2025. We, KHNP and KOMIPO also maintain global medium-term note programs in the aggregate amounts of US$ 19 billion, of which approximately US$ 9 billion remains currently available for future drawdown. See also Item 5.B. “Liquidity and Capital Resources—Capital Resources.”
Environmental, Social and Governance Programs
With the ESG Promotion Strategy established in 2022, we set the direction and strategic goals to advance the sectoral strategies in each of environment, social, governance to reflect environmental changes and strengthen infrastructure for the achievement of the strategies. To reach the ESG vision and strategic goals, we have identified strategic tasks for each sector of environment, social, governance and will continue to work on them in the future.
Environmental Programs
The Environmental Policy Basic Act, the Air Quality Preservation Act, the Water Environment Conservation Act, the Marine Environment Management Act and the Waste Management Act, collectively referred in this annual report as the Environmental Acts, are the major laws of Korea that regulate atmospheric emissions, wastewater, noise and other emissions from our facilities, including power generators and transmission and distribution units. Our existing facilities are currently in material compliance with the requirements of these environmental laws and international agreements, such as the United Nations Framework Convention on Climate Change, the Montreal Protocol on Substances that Deplete the Ozone Layer, the Stockholm Convention on Persistent Organic Pollutants and the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal. Additionally, we are endeavoring to develop and implement greenhouse gas reduction strategy in line with the new climate regime set forth by the Paris Climate Agreement.
We continuously endeavor to contribute to sustainable growth (whether as an economy, a society or an ecosystem) by actively taking actions that befit our social responsibility as a corporate citizen in the energy industry. For example, in 2005, we became the first public company in Korea to join the United Nations Global Compact, an international voluntary initiative designed to hold a forum for corporations, United Nations agencies, labor and civic groups to promote reforms in economic, environmental and social policies. As part of our involvement with such initiative, we issue an annual report named the “Sustainability Report” to disclose our activities from the perspectives of economy, environment and society, in accordance with the reporting guidelines of the Global Reporting Initiative, the official collaborating center of the United Nations Environment Program that works in cooperation with United Nations Secretary General. We recognize the interest in ESG within the investors’ community and are continuously pursuing safe and clean energy supply and distribution by reducing greenhouse gas emissions and enhancing our ability to respond to climate change, the details of such efforts provided through periodic sustainability reports. In addition, we made detailed disclosures on our sustainability reports in accordance with the global sustainability frameworks such as the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and the standards of the Sustainability
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Accounting Standards Board from 2020. In 2024, as TCFD was merged with the International Sustainability Standards Board, we applied the IFRS S1 and S2 in “2024 Sustainability Report” instead of the TCFD recommendations, and we also applied a domestic sustainability framework, “K-ESG Guidelines,” to improve our reporting of sustainability achievements. Since 2022, we have published an integrated report covering us and our six generation subsidiaries for reporting domestic and international sustainability achievements such as energy transition, response to climate change, sustainable supply chain and safety management. In 2025, we have expanded the reporting boundary to encompass the entire energy value chain including KEPCO E&C, KEPCO Nuclear Fuel, KEPCO KPS, and KEPCO KDN. In each year since 2014, we have been selected as one of the notable companies in the Asia Pacific region in the global electricity utility sector by the Dow Jones Best-in-Class (DJBIC) Indices (formerly DJSI), which measures management performance in terms of contribution to sustainability.
In recognition of our efforts and achievements to reduce greenhouse gas emissions in response to global climate change, in May 2013, we obtained the Carbon Trust Standard certification issued by Carbon Trust, a British nonprofit organization with the goal of establishing a sustainable, low carbon economy. In 2015, we obtained recertification from Carbon Trust by satisfying even more rigorous evaluation criteria. We are also a participant of the Carbon Disclosure Project, an international organization that promotes transparency in informational disclosure of carbon management process. From 2016 to 2021 and again in 2023, we were recognized by the Carbon Disclosure Project and received honors in the energy and utility sector.
In October 2020, we stated that we intend to focus on low-carbon and eco-friendly overseas projects, such as new and renewable energy and combined-cycle gas power generation and not pursue new projects in coal-fired power plants. For our overseas coal-fired power plant projects, we intend to sell them in multiple stages by analyzing the conditions of the sale, including the valuation of projects, identification of potential buyers, consultation with stakeholders and prioritization of better deals. We also aim to carry out our combined-cycle gas power generation projects on the condition that they adopt new technologies, such as ammonia or hydrogen co-firing and CCUS, which can reduce carbon emissions. In the long run, we aim to achieve carbon neutrality by reorganizing our business portfolio to focus on decarbonization, renewable energy and new businesses.
In December 2020, we established an Environment, Social and Governance (“ESG”) Committee within our board of directors to reinforce ESG-based management system and to ensure continuous performance in this area. Our ESG Committee is charged with resolving major management issues related to ESG, establishing ESG management strategies and business plans and checking on the overall direction of sustainable management. From 2021, we established an ESG Advisory Committee to support the ESG Committee. By operating the ESG Committee and the ESG Advisory Committee, we closely monitor the risks and opportunities related to ESG. Furthermore, our generation subsidiaries have established ESG Committees composed of non-standing directors to closely monitor ESG issues and manage ESG opportunities and risks.
We and our generation subsidiaries declared the carbon-neutrality vision called “ZERO for Green” in November 2021. The slogans for the vision include (i) “Zero Emission” of carbon in the power generation sector through bold transition to carbon-free power sources such as renewable energy and hydrogen; (ii) “Reliable Energy” to ensure stable supply to clean electricity to consumers through preemptive measures and optimal operation of the power grid; and (iii) “On Time” to secure core technology for carbon neutrality in a timely manner by dramatically expanding research and development investment. Also, in December 2021, we and our generation subsidiaries established the Carbon Neutrality Promotion Committee composed of our management and external experts to establish Company-wide strategies for carbon neutrality and to strengthen internal and external communication.
To achieve carbon neutrality by 2050 as announced by the Government, the electric power sector, which includes us and accounts for 33.5% (as of 2024) of total national greenhouse gas emissions, needs to play a leading role. The electric power sector, in particular, needs to not only increase the proportion of renewable energy such as wind and solar power, but also support carbon reduction in other sectors such as industry,
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transportation, and buildings by electrifying energy consumption. As we are on the top of the value chain for the power industry as a whole, we established our role and strategy to achieve carbon-neutrality. We plan to accelerate the timely connection of planned nuclear power plants, expand renewable energy through proactive system development, lead the development of core carbon-neutral technologies, and contribute to the achievement of a carbon-neutrality in the Transformation sector by improving energy efficiency.
Furthermore, we and our generation subsidiaries have issued green bonds since 2021, with an aggregate principal amount of US$5,350 million as of December 31, 2025, to expand domestic and overseas renewable energy businesses and renewable energy related facilities.
The table below sets forth the number of emission control equipment installed at thermal power plants by our generation subsidiaries as of December 31, 2025.
Flue Gas Desulfurization System
Selective Non-catalytic Reduction System
Selective Catalytic Reduction System
Electrostatic Precipitation System
Low NO2 Combustion System
In accordance with the Act on Allocation and Trading of Greenhouse Gas Emission Allowances, enacted in May 2012, the Government implemented a greenhouse gas emission trading system under which the Government will allocate the amount of permitted greenhouse gas emission to companies by industry and a company whose business emits more carbon than the permitted amount is required to purchase the right to emit more carbon through the Korea Exchange. The categories of allowances traded include the Korean Allowance Unit (KAU), which is the emissions allowance allocated to applicable companies by the Government; Korean Credit Unit (KCU), which is a tradable unit converted from external carbon offset certifications including the Korean Offset Credit; and Korean Offset Credit (KOC), which is the verified carbon offset credit obtained by companies for reducing carbon emissions through absorption or otherwise. The greenhouse gas emission trading system has been implemented in three stages. During the first phase (2015 to 2017), the Government gradually set up and conducted test runs of the trading system to ensure its smooth operation, allocating the greenhouse gas emission allowances free of charge. During the second phase (2018 to 2020), 97% of the greenhouse gas emission allowances were allocated free of charge, with 3% allocated through an auction. During the third phase (2021 to 2025), the Government has expanded the scale of the system with aggressive greenhouse gas emission reduction targets and allocating 10% of the greenhouse gas emission allowances through an auction. In November 2025, the Government announced an increase in the paid allocation ratio to 15% for non-power generation industries and up to 50% for power generation industries during the fourth phase (2026 to 2030).
In connection with the Climate Change Response Initiatives and the 2030 National Greenhouse Gas Reduction Roadmap announced by the Government in December 2016, the Government subsequently announced the Long-term Low Greenhouse Gas Emission Development Strategies, which presents a long-term vision and national strategy for achieving carbon neutrality in 2050, and the Nationally Determined Contributions (“NDC”), which sets forth the greenhouse gas reduction targets by 2030. According to the Enforcement Decree of the Framework Act on Carbon Neutrality and Green Growth to Cope with Climate Crisis established in March 2022 and the latest figures of NDC announced by the Government in March 2023, the national target level in 2030 was 436.6 million tons and represents 40% reduction as compared to 2018 and the target emission level for the Transformation sector (electricity and heating) as a whole which we are the part of was 145.9 million tons and represents 45.9% reduction as compared to 2018. In October 2021, in accordance with the Government’s goal of achieving carbon neutrality by 2050, the carbon neutrality committee has proposed two scenarios, both of them
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which aim to achieve net-zero domestic carbon dioxide emissions by 2050. Scenario A will completely suspend thermal power generation by 2050, while scenario B will actively utilize technologies such as CCUS while allowing some thermal power generation to continue beyond 2050. Following the National Basic Plan for Carbon Neutrality & Green Growth enacted in April 2023, the Government has mandated annual sector-specific greenhouse gas reduction targets for the next 20 years from 2023 to 2042 and measures to achieve such targets to be formulated and implemented every five years. In terms of the NDC, the national target emission level remained unchanged, but the target emission level in 2030 increased to 145.9 million tons, which represents a reduction rate of 45.9% compared to 2018 emission levels. The Government confirmed the 2035 NDC in November 2025, raising the country’s target emissions to up to 289.5 million tons by 2035, raising the reduction rate to 61% compared to 2018.
Adhering to such emission and greenhouse gas reduction requirement may result in significant additional compliance costs. For example, the daily market price of the KAUs traded through the Korea Exchange was Won 8,640 per ton in early 2015, and the price has increased continuously thereafter, reaching its peak price at Won 42,500 per ton on April 2, 2020. Since then, the price dropped to a record low of Won 7,200 in August 2023, with the price of KAU at Won 14,900 per ton as of March 24, 2026.
The table below sets forth the amount of annual emission from all generating facilities of our generation subsidiaries for the periods indicated. According to the Eleventh Basic Plan, the amount of CO2 emissions is expected to decrease due to the Government’s carbon-free energy conversion policy. We expect to abolish a total of 40 decrepit coal-fired power plants by 2038 and replace them with LNG power plants or carbon-free plants.
Year (1)
The amounts of annual SOx, NOx and TSP emission for 2023 and 2024 are expected to be determined once the national statistics are confirmed.
“TSP” means Total Suspended Particles.
For additional information, see Item 3.D. “Risk Factors—Risks Relating to KEPCO—We are subject to various environmental legislations, regulations and related Government initiatives, including in relation to climate change and carbon neutrality, which could cause significant compliance costs and operational liabilities.”
In order to comply with the current and expected environmental standards and address related legal and social concerns, we intend to continue to install additional equipment, make related capital expenditures and undertake several environment-friendly measures to foster community goodwill. For example, under the Persistent Organic Pollutants Management Act enacted in 2007, we are required to remove polychlorinated biphenyl, or PCBs, a toxin, from the insulating oil of our transformers by 2027. In addition, when constructing certain large new transmission and distribution facilities, we assess and disclose their environmental impact at the planning stage of such construction, and we consult with local residents, environmental groups and technical experts to generate community support for such projects. We exercise additional caution in cases where such facilities are constructed near ecologically sensitive areas such as wetlands or preservation areas. We also make reasonable efforts to minimize any negative environmental impact, for example, by using more environment-friendly technology and hardware. Additionally, we also undertake measures to minimize losses during the transmission and distribution process by making our power distribution network more energy-efficient in terms of loss of power, as well as to lower consumption of energy, water and other natural resources. Furthermore, we and our subsidiaries acquired the ISO 14001 certification, an environmental management system widely adopted internationally, in 2007 and have made it a high priority to make our electricity generation and distribution more
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environment-friendly. In 2014, we were awarded the presidential award for environmental contributions as a corporate citizen, after scoring the highest among 102 corporations that competed for the award. In order to encourage the implementation of environment-friendly measures by other corporations and enhance environmental awareness at a social level, we have been disclosing our environment-related activities and achievements to the public through the Environment Information System managed by the Ministry of Environment since 2012.
Our environmental measures, including the use of environment-friendly but more expensive parts and equipment and allocation of capital expenditures for the installation of such facilities, may result in increased operating costs and liquidity requirement. The actual cost of installation and operation of such equipment and related liquidity requirement will depend on a variety of factors which may be beyond our control. There is no assurance that we will continue to be in material compliance with legal or social standards or requirements in the future in relation to the environment.
As part of our medium to long-term strategic initiatives, we plan to take other measures designed to promote the generation and use of environment-friendly or green energy. See Item 4.B. “Business Overview—Strategy.”
Some of our generation facilities are powered by renewable energy sources, such as solar energy, wind power and hydraulic power. While such facilities are currently insignificant as a proportion of our total generation capacity or generation volume of our generation subsidiaries, we expect that the portion will increase in the future, especially since we are required to comply with the Renewable Portfolio Standard program as described below.
The following table sets forth the generation capacity and generation volume in 2025 of our generation facilities that are powered by renewable energy sources.
Hydraulic Power(1)
Wind Power
Solar Energy
Fuel Cells
Subtotal
As percentage of total(3)
Excluding generation capacity and volume of pumped storage, which is generally not classified as renewable energy.
From June 2024, dispatchable renewable energy was categorized as others.
As a percentage of the total generation capacity or total generation volume, as applicable, of us and our generation subsidiaries.
In order to deal with shortage of fuel and other resources and also to comply with various environmental standards, in 2012 the Government adopted the Renewable Portfolio Standard program, which replaced the Renewable Portfolio Agreement which had been in effect from 2006 to 2011. Under this program, each of our generation subsidiaries is required to generate a specified percentage of total electricity to be generated by such generation subsidiary in a given year in the form of renewable energy or, in case of a shortfall, purchase a corresponding amount of a Renewable Energy Certificate (a form of renewable energy credit) from other generation companies whose renewable energy generation surpass such percentage. Pursuant to the Act on the Promotion of the Development, Use, and Diffusion of New and Renewable Energy and its Enforcement Decree, the target percentage was 13.0% in 2023, 13.5% in 2024 and 14% in 2025. This Act and its Enforcement Decree aim to raise target percentage to 25% by 2030, and the target percentage for each year from 2026 through 2030 as
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of the date of this annual report is as specified in the table below. In 2024, all six of our generation subsidiaries met the target through renewable energy generation and/or the purchase of a Renewable Energy Certificate. Our generation subsidiaries’ compliance with the 2025 target is currently under evaluation, and if any generation subsidiary is found to have failed to meet the target for 2025 or fails to meet the target for subsequent years, such generation subsidiary may become subject to fines. Accordingly, the proposed target percentages may result in additional expenses for our generation subsidiaries.
As to how we plan to finance our capital expenditures related to our environmental programs, see “—Capital Investment Program.”
In March 2017, the Electric Utility Act was amended to the effect that starting in June 2017, future national planning for electricity supply and demand in Korea should consider the environmental and safety impacts of such planning, such as desulfurization costs. Accordingly, the costs related to environmental and safety impacts such as the desulfurization costs, have been reflected in our variable cost of generating electricity since August 2019. In December 2019, the Regulation on the Operation of the Electricity Market was revised to reflect the cost of trading greenhouse gas emission allowances in our variable cost of generating electricity and the revision was implemented in January 2022.
In line with the spread of RE100, a global campaign by companies around the world to cover 100% of their electricity use with renewable energy by 2050, the Government introduced its own version of RE100 that allows companies and other consumers to choose energy sources from which their electricity is generated. In order for a domestic company to participate in RE100, it needs to enter into either a third-party PPA or a direct PPA, or general and industrial customers may also purchase renewable energy through us in a competitive bidding process and be issued with a certificate of use of renewable energy, which we refer to as the green premium system. On June 21, 2021, the Ministry of Trade, Industry and Resources announced the “Guidelines on Third-Party Power Purchase Agreements for Renewable Energy Generation” that stipulated the method of transaction of renewable energy power among third parties. The relevant legislation for the direct PPA was enacted in the National Assembly in March 2021 and has been in force since October 2021. The Ministry of Trade, Industry and Resources finalized and announced detailed guideline for direct PPA in September 2022. As of December 31, 2025, there are 13 third-party PPAs with total contracted capacity of 33.6 megawatts and 72 direct PPA with total contracted capacity of 836.7 megawatts, which are effective under related law and guideline. If there is an expansion in the use of direct PPA, it may adversely affect our market share in electricity sales. In addition to the PPA, the green premium system started in January 2021 and we, on behalf of Korea Energy Agency, are in charge of managing the bidding for renewable energy, receiving bid prices from winning companies, issuing a certificate of use of renewable energy to companies on a quarterly basis and receiving fees from Korea Energy Agency for our service.
Following the amendment to the Hydrogen Economy Promotion and Hydrogen Safety Management Act in June 2022 and its Enforcement Decree enacted in December 2022, the Minister of Climate, Energy and Environment has designated KEPCO and other entities under the Community Energy System to purchase hydrogen-generated electricity. Under such Act, we are required to enter into contracts with hydrogen generators that are selected through competitive bidding process.
The bidding market is comprised of the general hydrogen power market and the clean hydrogen power generation market, as categorized based on the type of fuel used. In consideration of the current ecosystem in which fuel cells are used, the general hydrogen power market is open to all kinds of hydrogen plants including plants using extracted or by-product hydrogen. On the other hand, the clean hydrogen power market is a market where only generators using clean hydrogen plants are allowed to participate. Clean hydrogen is categorized into carbon-free hydrogen, low-carbon hydrogen, and low-carbon hydrogen compounds (including ammonia)
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according to greenhouse gas emissions in the production and import procedure of hydrogen. According to the clean hydrogen certification system, hydrogen can be recognized as clean hydrogen if the CO2 emissions for the production of 1 kg of hydrogen is less than 4 kg or less. The Government has set the bidding volumes for 2023 to 2025 through a relevant notice as shown in the table below.
Social Programs
In 2025, as part of our safety management activities, we further strengthened our company-wide safety management framework, organizational capabilities and field-centered communication efforts. We operated a company-wide Safety Innovation Task Force and declared a new safety management vision, while intensifying preventive activities focused on the three major high-risk accident types—electric shock, falls and caught-in/between incidents—which had accounted for a significant portion of serious accidents in the past.
We also reinforced the standing and professionalism of our safety organization by elevating the Safety Innovation Division and establishing a new Safety Planning Team, while expanding dedicated safety personnel and implementing reward and training measures to enhance the accountability and participation of site managers and department heads. In addition, we strengthened field-centered safety communication through site manager-led inspections, CEO site inspections and on-site management briefing sessions, while also operating feedback and incentive programs to encourage the exercise of workers’ stop-work authority.
At the same time, we expanded investment in AI-based safety technologies and smart safety training, including internally developed smart glasses software and immersive safety training programs. We also improved the efficiency and consistency of our management system by digitalizing key safety documents through an integrated safety management platform.
Building goodwill with local communities is important to us in light of concerns among the local residents and civic groups in Korea regarding construction and operation of generation units, particularly nuclear generation units. The Act for Supporting the Communities Surrounding Power Plants and the Act on the Compensation and Support for Areas Adjacent to Transmission and Substation Facilities require that the generation companies and the affected local governments carry out various activities up to a certain amount annually to address neighboring community concerns. Pursuant to these Acts, we and our generation subsidiaries, in conjunction with the affected local and municipal governments, undertake various programs, including scholarships and financial assistance to low-income residents.
Under the Act for Compensation and Support for Areas Adjacent to Transmission and Substation Facilities, activities required to be undertaken under the Act are funded partly by the Electric Power Industry Basis Fund (see “—Sales and Customers—Electricity Rates”) and partly by KHNP as part of its budget. KHNP is required to
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make annual contributions to the affected local communities in an amount equal to Won 0.25 per kilowatt-hour of electricity generated by its nuclear generation units during the one-year period before the immediately preceding fiscal year, Won 5 million per thousand kilowatts of hydroelectric generation capacity and Won 0.5 million per thousand kilowatts of pumped-storage generation capacity. In addition, under Korean tax law, KHNP is required to pay local tax levied on its nuclear generation units in an amount equal to Won 1 (effective January 1, 2015, which reflects an increase from the previous Won 0.5 per kilowatt-hour of their generation volume in the affected areas) and Won 2 per 10 cubic meters of water used for hydroelectric generation.
The Act on the Compensation and Support for Areas Adjacent to Transmission and Substation Facilities, enacted in 2014, prescribes measures to be taken by power generation or transmission companies with respect to the communities adjacent to transmission and substation facilities. Under this Act, those who own land or houses in the vicinity of transmission lines and substation may claim compensation for damages or compel purchase of such properties by the power generation or transmission companies which are legally obligated in principle to pay for such damages or purchase such properties. In addition, under this Act, residents of communities adjacent to transmission and substation facilities are entitled to subsidies on electricity tariff as well as support for a variety of welfare projects and collective business ventures.
Under the Special Act for the National Power Grid Expansion, which took effect in 2025, the scope of compensation for landowners affected by transmission and substation facilities has been further expanded. This Act also establishes enhanced support for resident welfare projects and new grants for local governments where such facilities are installed, ensuring comprehensive assistance for the host communities.
Prior to the construction of a generation unit, our generation subsidiaries perform an environmental impact assessment which is designed to evaluate public hazards, damage to the environment and concerns of local residents. A report reflecting this evaluation and proposing measures to address the problems identified must be submitted to and approved by the Ministry of Climate, Energy and Environment following agreement with related administrative bodies prior to the construction of the unit. Our generation subsidiaries are then required to implement the measures reflected in the approved report. Despite these activities, civic community groups may still oppose the construction and operation of generation units (including nuclear units), and such opposition could adversely impact our construction plans for generation units (including nuclear units) and have a material adverse effect on our business, results of operations and cash flow.
Upon relocation of our corporate headquarters in November 2014, we developed and established Bitgaram Energy Valley as a smart energy hub city in Gwangju and Jeollanam-do, to attract and facilitate the growth of start-ups and research institutions related to new energy industries while contributing to the local economy, balanced regional development and job creation.
To achieve this goal, through industry-academic cooperation including partnerships with the Korea Institute of Energy Technology and the Korea Institute of Energy Research, we support the R&D efforts of companies, develop new technologies, and publish R&D results. We also seek to create new growth engines by assisting innovative companies with their technology development and commercialization as they enter the global market. As of December 31, 2025, we have signed agreements with 694 companies relating to investments in the Bitgaram Energy Valley. We are currently developing Bitgaram Energy Valley to establish a spontaneous industrial ecosystem, which will contribute to the power industry as well as the national economy.
Additionally, we continue to pursue businesses that promote co-prosperity with small and medium-sized enterprises (“SMEs”), such as cultivating startups, exploring for cooperative R&D projects with SMEs, and supporting export business. We also strive to strengthen the fundamental self-reliance of SMEs with continuous engagement, through improving their productivity, training specialists and also financial supports. In addition, by operating the ‘SMEs Energy Technology Market’, we are promoting cooperation between energy-related public institutions and SMEs. As of December 31, 2025, we designated 152 “innovation products” to support the early
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market entry and procurement linkage of technology innovation products developed by the SMEs with superior R&D capabilities.
Governance
We operate a risk management system to prevent possible risks in advance and effectively respond to them. The audit committee under the board of directors conducts audits of accounting and major management tasks and evaluates the operational status of the internal accounting management system. Since 2020, the ESG committee has also been established and operates under the board of directors to manage non-financial risks associated with environment, social, and governance issues.
We operate an ethical management system to meet our management needs and aim to make it systematic and effective. We provide the basic principles of conduct through ethical guidelines such as the Code of Ethics and the Code of Conduct, establish step-by-step strategies for the ethical management of our vision and management policies, and engage in relevant activities. See also Item 16.B. “Code of Ethics.” Also, in December 2023, we established a Compliance Office directly under our CEO, which is an independent organization to operate our risk management system. Our plan is to establish and operate a company-wide internal control system to minimize risks of corruption or misconduct.
See also Item 16.G. “Corporate Governance” for a further description of independence, diversity of our board and other committees thereunder.
Nuclear Safety
KHNP takes nuclear safety as its top priority and continues to focus on ensuring the safe and reliable operation of nuclear power plants. KHNP also focuses on enhancing corporate ethics and transparency in the operation of its plants.
KHNP has a corporate code of ethics and is firmly committed to enhancing nuclear safety, developing new technologies and improving transparency. KHNP has also established the “Statement of Safety Policy for Nuclear Power Plants” to ensure the highest level of nuclear safety. Furthermore, KHNP invests approximately 4% of its total annual sales into research and development for the enhancement of nuclear safety and operational performance.
KHNP implements comprehensive programs to monitor, ensure and improve safety of nuclear power plants. In order to enhance nuclear safety through risk-informed assessment, KHNP conducts probabilistic safety assessments, including for low power-shutdown states, for all its nuclear power plants. In order to systematically verify nuclear safety and identify the potential areas for safety improvements, KHNP performs periodic safety reviews on a 10-year frequency basis for all its operating units. These reviews have been completed for all of our nuclear power plants once or more. In order to enhance nuclear safety and plant performance, KHNP has established a maintenance effectiveness monitoring program based on the maintenance rules issued by the United States Nuclear Regulatory Commission, which covers all of KHNP’s nuclear power plants in commercial operation.
KHNP has developed the Risk Monitoring System for operating nuclear power plants, which it implements in all of its nuclear power plants. The Risk Monitoring System is intended to help ensure nuclear plant safety. In addition, KHNP has developed and implemented the Severe Accident Management Guidelines and is developing the Severe Accident Management Guidelines for Low Power-Shutdown States in order to manage severe accidents for all of its nuclear power plants.
KHNP conducts various activities to enhance nuclear safety such as quality assurance audits and reviews by the KHNP Nuclear Review. KHNP maintains a close relationship with international nuclear organizations in
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order to enhance nuclear safety. KHNP invites international safety review teams such as the World Association of Nuclear Operators (“WANO”) Peer Review Team to its nuclear plants for purposes of meeting international standards for independent review of its facilities. KHNP actively exchanges relevant operational information and technical expertise with its peers in other countries. For example, KHNP conducted WANO Pre-Startup Peer Reviews for Shin-Hanul #1 unit in 2024. The recommendations and findings from this event were shared with KHNP’s other nuclear plants to implement improvements at such plants. In addition, KHNP conducted the Operational Safety Review Team mission at the International Atomic Energy Agency for Saeul units 1 and 2 (formerly named as Shin-Kori units 3 and 4) in the second half of 2022. The purpose of such application was to ensure that KHNP nuclear generation units reflect the global safety standards.
The average level of radiation dose per unit amounted to a relatively low level of 0.26 man-Sv in 2025, which was substantially lower than the global average of 0.54 man-Sv/year in 2025 as reported in the WANO performance indicator report.
In response to the damage to the nuclear facilities in Japan as a result of the tsunami and earthquake in March 2011, the Government conducted additional safety inspections on nuclear power plants by a group of experts from governmental authorities, civic groups and academia. As a result of such inspections, the Government required KHNP to perform 46 comprehensive safety improvement measures. As of December 31, 2025, KHNP has completed implementation of 45 measures and is currently implementing one last measure. The Government also established the Nuclear Safety & Security Commission in October 2011 for neutral and independent safety appraisals. KHNP developed ten additional measures through benchmarking of overseas cases and internal analysis of current operations. KHNP completed implementation of all ten measures.
From time to time, our nuclear generation units may experience unexpected shutdowns. For example, on September 12, 2016, multiple earthquakes including a magnitude 5.8 earthquake hit the city of Gyeongju, a home to KHNP’s headquarters and Wolsong Nuclear Power Plants. Although there was no material safety issues, KHNP had manually stopped the operations of Wolsong #1, #2, #3, and #4 units according to the safety guidelines. All units have resumed their operations on December 5, 2016, with the approval by the Nuclear Power Safety Commission. KHNP finished implementing measures to improve the safety by reinforcing seismic capability of its core facilities and performing stress tests across all its nuclear power plants. In 2018, KHNP finished the implementation of such measures for 24 units and enhanced seismic capability of the core facilities to withstand a magnitude 7.0 earthquake (6.5 before implementation). As for the units under construction, Saeul #3 and 4 (formerly named as Shin-Kori #5 and #6), the core facilities will be able to withstand a magnitude 7.4 earthquake.
Low and intermediate level waste (“LILW”), and spent nuclear fuels (“SNFs”) are stored in temporary storage facilities at each nuclear site of KHNP. The temporary LILW storage facilities at the nuclear sites had been sufficient to accommodate all LILWs produced up to 2015. Korea Radioactive Waste Agency (“KORAD”) completed the construction of a LILW disposal facility in the city of Gyeongju, and government approval for its operations was obtained in December 2014.
In order to increase the storage capacity of temporary storage facilities for SNFs, KHNP has been pursuing various projects, such as installing high-density racks in SNFs pools and building dry storage facilities. Through these activities, we expect that the storage capacity for SNFs in all nuclear power plant sites will be adequate to temporarily accommodate all SNFs produced by the operation of nuclear power plants before the operation of an intermediate storage facility. In December 2021, the Government decided on the national policy for the management of SNFs (Reference: The second master plan for High-Level Radioactive waste management) to secure an intermediate storage and disposal facility. The national policy for the management of SNFs includes a temporary operation plan for on-site SNFs storage facility on nuclear power plants before the operation of the intermediate storage facility.
In 2009, the Radioactive Waste Management Act (“RWMA”) was enacted in order to centralize management of the disposal of SNFs and LILW and enhance the security and efficiency of related management
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processes. The RWMA designates KORAD to manage the disposal of SNFs and LILW. Pursuant to the RWMA, the Government has established the Radioactive Waste Management Fund. The management expense for LILW is paid when LILW is transferred to KORAD, and the charge for SNFs is paid based on the quantity generated every quarter. LILW-related management costs and charges for SNFs are reviewed by the Ministry of Climate, Energy and Environment every two years.
In September 2025, the Special Act on High-Level Radioactive Waste and its enforcement Decree was enacted, aiming to establish a legal framework for procedures and systems for the safe management of interim storage and permanent disposal of spent nuclear fuel.
In addition, in February 2021, in accordance with the Government’s guidelines for strengthening the safety of nuclear power plants, the period for verifying seismic resilience of major equipment was extended. Due to safety concerns, the construction periods of Saeul #3 and #4 (formerly named as Shin-Kori #5 and #6) have been extended to September 2026 and September 2027, respectively.
All of KHNP’s nuclear plants are currently in compliance with Korean law and regulations and the safety standards of the IAEA in all material respects. For a description of certain past incidents relating to quality assurance in respect of KHNP, see Item 3.D. “Risk Factors—Risks Relating to KEPCO—Our risk management policies and procedures may not be fully effective at all times.”
Decommissioning
Decommissioning of a nuclear power unit is the process whereby the unit is shut down at the end of its life, the fuel is removed and the unit is eventually dismantled. KHNP renewed the operating license of Kori #1, the first nuclear power plant constructed in Korea, which commenced operation in 1978, for an additional ten years in 2007. At the recommendation of the Ministry of Trade, Industry and Resources, KHNP has decided not to renew the operating license of Kori #1 and the initial phase of decommissioning (namely, safety inspection and removal of spent nuclear fuels) of Kori #1 has begun after its permanent shutdown in June 2017. In addition, Wolsong #1 permanently shut down in 2019 and is being prepared for decommissioning. KHNP retains full financial and operational responsibility for decommissioning its units.
KHNP has accumulated decommissioning costs as a liability since 1983. The decommissioning costs of nuclear facilities are defined by the Radioactive-Waste Management Act, which requires KHNP to credit annual appropriations separately. These costs are estimated based on studies conducted by the relevant committees, and are reviewed by the Ministry of Climate, Energy and Environment every two years. As of December 31, 2025, KHNP recorded an accrual of Won 28,541 billion for the costs of dismantling and decontaminating existing nuclear power plants, which consisted of dismantling costs of nuclear plants of Won 24,176.9 billion and decommissioning costs of spent nuclear fuels and radioactive waste of Won 4,364.1 billion.
Overseas Activities
We are engaged in a number of overseas activities. Such activities help us diversify our revenue streams by leveraging our and our subsidiaries’ operational experience from providing a full range of services from power plant construction to specialized engineering and maintenance services. We are also able to build strategic relationships with countries that are or may become our fuel providers.
The total installed capacity amounts to 37,339 megawatts, comprising 23,094 megawatts of thermal power capacity which includes coal-fired and gas-fired combined cycle power capacities. We have continuously expanded our overseas projects starting with an oil-fired power plant in Malaya, the Philippines in 1995. As of the end of December 2025, we are engaged in 30 projects in 12 countries across Asia, the Middle East, Latin America, and North America. In addition, we operate 5,600 megawatts of nuclear power capacity and 8,645 megawatts of renewable energy capacity.
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Throughout the years, we have sought to expand our project portfolio to include the construction and operation of conventional thermal generation units, nuclear generation units and renewable energy power plants, transmission and distribution network and mining and development of fuels. While strategically important, we believe that our overseas activities, as currently being conducted, are not in the aggregate significant in terms of scope or amount compared to our domestic activities. In addition, a number of the overseas contracts currently being pursued are based on non-binding memoranda of understanding and the details of such projects may significantly change during the course of negotiating the definitive agreements.
Many of our overseas operations require a significant amount of capital investment, and such costs may
unexpectedly and materially increase in the event of delays or other changes in circumstances, many of which are difficult to anticipate and are beyond our control. See Item 3.D. “Risk Factors—Risks Relating to KEPCO—We may require a substantial amount of additional indebtedness to refinance existing debt and for future capital expenditures” and Item 3.D. “Risk Factors—Risks Relating to KEPCO—We plan to pursue overseas expansion opportunities that may subject us to different or greater risks than those associated with our domestic operations.”
Generation Projects
Nuclear Generation Projects
In December 2009, following an international open bidding process, we entered into a prime contract for the original contract amount of US$18.6 billion with the Emirates Nuclear Energy Corporation (“ENEC”), a state-owned nuclear energy provider of the UAE, to design and construct four civil nuclear power generation units to be located in Barakah, a region approximately 270 kilometers from Abu Dhabi, for the UAE’s peaceful nuclear energy program. Under the contract, we and our subcontractors, some of which are our subsidiaries, are to perform various duties including, among others, designing and constructing four nuclear power generation units each with a capacity of 1,400 megawatts, supplying nuclear fuel for three fuel cycles including initial loading, with each cycle currently projected to last for approximately 18 months, and providing technical support, training and education related to plant operation. The contract amount of US$18.6 billion was increased to US$19.1 billion as per the amendment signed in November 2017. As the project has yet to be completed, we are in discussions with other parties to the contract about the costs from extension of the construction period and delay liquidated damages for the UAE nuclear power plant project. No assurance can be given whether any costs associated with the foregoing will not exceed the amounts recognized as provisions or otherwise have an adverse impact on our business, results of operations, financial condition and profitability.
On October 20, 2016, in order to foster a long-term strategic partnership and stable management of the units’ post-construction, we entered into an investment agreement with ENEC to jointly establish Barakah One PJSC, a special purpose company which oversees the operation and management of the nuclear power plant in Barakah, UAE. We have an 18% equity interest in Barakah One PJSC, and also have an 18% equity interest in Nawah Energy Company, a subsidiary of ENEC, which is also responsible for the operation and maintenance of the Barakah nuclear power plant. On December 20, 2018, the board of directors of KEPCO resolved to invest additional US$380 million in Barakah One PJSC. KEPCO’s additional contribution of US$1.22 billion was made in March 2025 under the related contracts. KEPCO’s equity interest in the project is 18%, which remains unchanged. The total project cost of the Barakah nuclear power plant is expected to be approximately US$29.5 billion. Barakah One PJSC successfully achieved the commercial operation of Unit #1, #2, #3, and #4 of Barakah nuclear power plant in April 2021, March 2022, February 2023 and September 2024 respectively, with an expected plant life span of 60 years. On August 25, 2022, KHNP signed a contract for the construction of turbine islands in El Dabaa nuclear power plant project in Egypt with Atomstroyexport JSC (“ASE JSC”), a subsidiary of Rosatom. ASE JSC had won an order for El Dabaa project from Egyptian Atomic Energy Agency in 2017 to build a nuclear power plant that consists of four reactors of which capacity is 1,200 megawatts each. KHNP will construct about 80 buildings and structures including turbine islands in four units of El Dabaa and supply equipment. The construction of the project began in 2023 and is planned to be completed in 2029.
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On June 27, 2023, KHNP entered into a contract for construction of a tritium removal facility at Cernavoda nuclear power plant site in Romania. The procurer is S.N.NUCLEARELECTRICA S.A., a government owned organization that operates two units of CANDU reactors at Cernavoda. The value of the contract is approximately 193 million Euros. KHNP will provide engineering (based on the design of the tritium removal facility provided by the client), procurement, construction and commissioning services. The term is 50 months and the commencement date is July 23, 2023.
Since March 2022, KHNP had been participating in a tender launched by Electrárna Dukovany II (“EDUII”), a subsidiary of České Energetické Závody, and it was selected as the preferred bidder in July 2024. On June 17, 2025, KHNP entered into a contract with EDUII for the construction of Dukovany Unit #5 and #6. The value of the contract is approximately KRW 25,861 billion.
We have estimated the probable outflow of economic benefits in relation to prolongation costs associated with the nuclear generation projects described above and have recognized a provision of KRW 1,450 billion as of December 31, 2025.
Non-nuclear Generation Projects
We are currently engaged in two major power projects in the Philippines: (i) a minority ownership of SPC Power Corporation, a local utility corporation engaged in independent power generation, electricity distribution and other businesses, and (ii) CFBC Coal Power Plant, a 206-megawatt power plant in Cebu on a build, operate and own basis. The plant construction was completed in May 2011 and it will be operated until 2036. The project cost of the CFBC Coal Power Plant was US$451 million, which was project-financed on a limited recourse basis. To fulfill our responsibility for carbon neutrality, we are currently planning to sell our interests in SPC Power Corporation and the CFBC Coal Power Plant.
In April 2007, we formed a limited partnership with Shanxi International Electricity Group and Deutsche Bank, which was approved by the Chinese government, to develop and operate power projects in Shanxi Province, China. The total capital investment in these projects amounted to US$1.33 billion, of which our capital investment was US$532 million. We expect to participate in the operation of the project for 50 years ending in 2057. The total capacity of these projects is 9,742 megawatts and our equity interest in the partnership is 42%.
In July 2008, a consortium consisting of us and Xenel of Saudi Arabia won the bid to build, own and operate a gas-fired power plant with installed capacity of 373 megawatts in Al Qatrana, near Amman, and we entered into definitive agreements in October 2009. Construction of this project was completed in December 2011, and the plant is currently in operation and will operate until 2035. The total project cost was US$461 million, out of which the consortium made an equity contribution of US$143 million and the remainder was funded by debt financing. We and Xenel own 80:20 equity interests in the project, respectively. As part of the asset rationalization plan for our overseas projects in operation, we are planning to sell a portion of our equity interest in Al Qatrana project.
In December 2008, we formed a consortium with ACWA Power International of Saudi Arabia and submitted a bid for the 1,204-megawatt oil-fired power project in Rabigh, Saudi Arabia. In March 2009, we were selected as the preferred bidder and in July 2009, we entered into a power purchase agreement (“PPA”) with Saudi Electricity Company. Construction of the project was completed in April 2013, and we will participate in the operation of the plant for 20 years. The total project cost was approximately US$2.5 billion. We currently hold a 40.0% equity interest in the joint venture, Rabigh Electricity Company, which operates the project.
In August 2010, we led a consortium and won the bid to build, own and operate the 433-megawatt Norte II gas-fueled combined-cycle electricity generation facility in Chihuahua, Mexico, as ordered by the Commission Federal de Electricidad (“CFE”) of Mexico. The consortium established a special purpose vehicle, KST Electric Power Company (“KST”), to act as the operating entity, and in September 2010, KST entered into a PPA with CFE for 25 years until 2038. The total cost of the project was approximately US$426 million and we hold a 56% equity interest in the consortium. Our wholly-owned subsidiary, KEPCO Energy Service Company, currently manages the operation of the project.
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In October 2010, a consortium that we are part of was selected by Abu Dhabi Water & Electricity Authority, a state-run utilities provider in the UAE, as the preferred bidder in an international bidding for the construction and operation of the combined-cycle natural gas-fired electricity generation facility in Shuweihat, UAE with aggregate capacity of 1,600 megawatts. Construction was completed in July 2014 and we will operate the plant until 2039. The total project cost was approximately US$1.4 billion, of which 20% was financed through equity investments by the consortium members and the remaining 80% through debt financing.
In January 2012, a consortium consisting of us, Mitsubishi Corporation and Wartsila Development & Financial Services of Finland was selected by National Electric Power Corporation, a state-run electricity provider in Jordan, to build and operate a 573-megawatt diesel engine power project in Al Manakher. Construction of this project was completed in October 2014 and the plant is currently in operation and will be operated until 2039. The total project cost was approximately US$760 million, of which the consortium made an equity contribution of approximately US$190 million and the remainder was funded by debt financing.
In March 2013, a consortium consisting of us and Marubeni, a Japanese corporation, was selected by the Ministry of Industry and Trade of Vietnam for construction and operation of a 1,200-megawatt coal-fired power plant in Thanh Hoa province, Vietnam. The construction was started in July 2018 and completed in July 2022. The plant is currently in operation and will operate until 2047. The total project cost was approximately US$2.5 billion, of which 24% have been funded by equity contribution and the remaining 76% by debt financing. The share capital of the special purpose entity in charge of this project is US$568 million, and we, Marubeni and Tohoku Power hold 50%, 40% and 10% equity interest in the special purpose entity, respectively.
In November 2019, we entered into an energy conversion agreement comprising of a PPA with the Guam Power Authority for a term of 25 years to construct and operate Ukudu gas-fired power plant in Guam, United States, including a 198-megawatt gas-fired power plant. We and EWP hold 60% and 40% shares in the project, respectively. The total project cost is approximately US$708 million, and we invested US$85 million for the equity interest. The construction of the project started on May 31, 2022 and the plant was completed in December 25, 2025. The plant is operated as a base load generator, replacing old heavy fuel power plants in Guam.
In January 2020, Pulau Indah Power Plant in Malaysia, a special purpose company that we own 25% of the shares, received a Letter of Notification to develop 1,200 megawatts combined-cycle gas-fired power plant from the Energy Commission of Malaysia, the host of the project. The construction started in December 2020 and was completed by March 1, 2025. The total project cost is expected to be approximately US$715 million, and invested approximately US$44 million for equity interest. We signed a PPA in August 2020 with Tenaga Nasional Berhad, which will be effective from March 2025 for a period of 21 years.
On June 30, 2020, the board of directors approved our plan to invest US$51 million in the expansion of two coal-fired power plants, Java 9 and Java 10, on the Indonesian island of Java. We invested together with PT Perusahaan Listrik Negara (“PLN”), an Indonesian state electricity company, and PT Barito Pacific Tbk., an Indonesian company. The total project cost was approximately US$3.31 billion and we, PLN and Barito Pacific will respectively own 15%, 51% and 34% shares in the joint venture. The joint venture currently manages the operation of two units of 1,000-megawatt generation capacity. The construction of Java 9 and 10 was completed in the second quarter of 2025. The joint venture is a party to a 25-year PPA with PLN.
On October 5, 2020, the board of directors approved our plan to invest US$237 million in the construction of Vung Ang 2 coal-fired power plant in Vietnam in exchange for 40% shares in the project. The new plant will be located in Ha Tinh Province, Vietnam, adjacent to Vung Ang 1 power plant and will consist of two units with 600 megawatts generation capacity each. We started the construction in October 2021 and the power plant is expected to be completed in 2026. Diamond Generating Asia, a subsidiary of Mitsubishi Corporation, a Japanese corporation, is the main sponsor of this project. We will operate this plant together with other co-investors for 25 years.
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In September 2022, we entered into an energy conversion agreement with Saudi Aramco with regard to the cogeneration plant at Jafurah, in the Kingdom of Saudi Arabia. Pursuant to the agreement, we will build a cogeneration plant with a capacity of approximately 317 megawatts of electricity generation and 694 kilo pounds per hour of steam output. When the construction is complete, this plant will supply electricity and steam to Jafurah Gas Plant for twenty years. We and Saudi Aramco hold 60% and 40% shares in the project respectively and the total project cost is expected to be approximately US$504 million. We started construction in the fourth quarter of 2022 and expect to commence commercial operation during the first half of 2026.
In November 2024, we were selected as the successful bidder with ACWA Power and Saudi Electricity Company for the Rumah 1 and Nairyah 1 gas-fired combined cycle power plant projects in the Kingdom of Saudi Arabia and entered into a power purchase agreement with Saudi Power Procurement Company (“SPPC”) with a term of 25 years. We will build power plants with a total capacity of 3,780 megawatts, and the total project cost is expected to be approximately US$4.1 billion. We hold a 30% share in the project, while ACWA Power and Saudi Electricity Company each hold a 35% share. We expect to commence commercial operation in the second quarter of 2028.
In December 2025, we entered into an energy conversion agreement with Saudi Aramco with regard to the Jafurah Phase 2 cogeneration plant, in the Kingdom of Saudi Arabia. Pursuant to the agreement, we will build a cogeneration plant with a capacity of approximately 331 megawatts of electricity generation and 1,025 kilo pounds per hour of steam output. When the construction is complete, this plant will supply electricity and steam to Jafurah Gas Plant for 16 years. This project utilizes the project company which was established for Jafurah Phase1 project in 2022, and we and Saudi Aramco hold 60% and 40% shares in the project respectively and the total project cost is expected to be approximately US$758 million. We expect to commence commercial operation in June 2029.
Renewable Energy, Transmission & Distribution Projects
We are currently pursuing overseas projects to increase sales and net profit from renewable energy and grid projects, diversify our businesses and actively address climate change. Specifically, we are looking at offshore wind power market, grid investment projects and large-scale clean development mechanism projects. We plan to expand our projects while aligning to the energy transition trend toward carbon neutrality.
Since 2004, joint ventures between us and China Datang Corporation of the People’s Republic of China have built and operated a number of wind farms in Inner Mongolia, Liaoning and Gansu provinces. We own 40% of these joint ventures, whose equity in the aggregate amount is approximately US$450 million. The projects are funded one-third by equity contributions and two-thirds by debt financing. As of December 31, 2025, the joint venture operates 22 wind farms with a total capacity of 1,017 megawatts and a 7-megawatt photovoltaic power station.
In December 2015, we entered into an agreement with the Ministry of Energy and Mineral Resources of Jordan to build, own and operate a wind farm with installed capacity of 89.1 megawatts in Fujeij in Ma’an Governorate, Jordan. Commercial operations commenced on July 14, 2019. Total project cost of approximately US$181 million was financed 41% by our equity investment and 59% by debt financing. As part of the asset optimization plan for our overseas projects under operation, we are currently planning to sell a portion of our equity interest in Fujeij project.
In June 2015, we entered into a memorandum of understanding with Energy Product (“EP”), a Japanese local developer, to build, own and operate a photovoltaic power station with a capacity of 28 megawatts, together with a 13.7-megawatt-hour energy storage system, in Chitose, Hokkaido Prefecture in Japan. The power station began operating in July 2017. The total project cost was approximately JPY 10.9 billion, of which 20% was financed through 80:20 equity investments by us and EP. In July 2021, our 15.1% equity interest and the entire equity stake of EP was sold to NH-Amundi. As a result, we now hold 65% and NH-Amundi holds 35% of the total equity interest.
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In June 2017, we won a project to build, own and operate a photovoltaic power station with a capacity of 60 megawatts and a 32 megawatt-hour energy storage system in Guam, United States for 25 years. The total project cost was approximately US$186 million, and we financed 22% of the cost through equity investment and held 100% of the equity interest. The remaining 78% was funded through debt and tax equity financing. We have entered into a PPA with Guam Power Authority in August 2018. The construction of the project started in May 2020 and commercial operation commenced in June 2022. The entire volume of electricity generated from the power station will be purchased by Guam Power Authority until 2047.
In September 2017, we entered into an agreement with Recurrent Energy to operate 3 solar photovoltaic projects in southern California, United States, with a capacity of 235 megawatts for 34 years. KEPCO partnered with Corporate Partnership Fund, a Korean private equity fund. We invested US$ 38 million in the project.
In October 2018, we entered into a Share Purchase Agreement and Share Subscription Agreement to operate a photovoltaic power station with a capacity of 50 megawatts in Calatagan in the Philippines. We own 38% interest and financed PHP 2.25 billion (approximately US$ 42.8 million) for the project, of which 80% was financed through equity investments and the remaining 20% through debt financing.
In October 2019, KEPCO and Sprott Korea as a consortium entered into a Share Purchase Agreement and Shareholders Agreement with Canadian Solar INC to develop and operate a photovoltaic power station with a capacity of 294 megawatts in Sonora and other states of Mexico for 35 years. We invested US$ 41 million in the project, and the transaction marks KEPCO’s first investment in the solar market in Mexico. The project consists of three power plants, two of which are currently in operation, and the other power plant is expected to start commercial operation in 2026.
In July 2021, a consortium comprised of us, Japan’s Kyushu Electric Power Co., Inc. and Électricité de France has been nominated as the successful bidder for the HVDC-VSC subsea transmission system construction and operation project of UAE announced by the Abu Dhabi National Oil Company (“ADNOC”), and clinched the deal through an international tender against numerous competitors. This project will supply power for the offshore production and operations facilities of ADNOC, by constructing and operating for 35 years a subsea transmission system along 2 routes with a total length of 272 kilometers. This mega project is worth US$3.8 billion and is expected to generate a stable profit through a long-term transmission agreement with the procurer for 35 years. Construction of the project commenced in September 2022 and remains ongoing. Commercial operation is expected in the fourth quarter of 2026.
In August 2023, we entered into an agreement with Ministerio de Energía y Minas to construct and expand three 138/12.5 kilovolts distribution substations in the Dominican Republic. In total, 200 megavolt-ampere of transformation facilities will be constructed, and the total project cost is expected to be approximately US$ 38 million. We will be in charge of design, procurement and construction, and we expect to complete construction of the substations by March 2027.
In September 2024, a consortium comprised of us, Korea East-West Power Co., Ltd. and Samsung C&T Corporation was awarded the Phase 4 renewable energy project in Guam. The consortium is currently developing and constructing a new photovoltaic power generation station and a battery energy storage system, with expected capacities of 132 megawatts and 326 megawatt-hour, respectively. Under the power purchase agreement, the Guam Power Authority will purchase the entire volume of electricity generated from the power station for a period of 25 years. The total project cost is expected to be approximately US$ 511 million. Commercial operation is expected to begin in the first quarter of 2028.
In October 2024, a consortium comprised of us, Abu Dhabi Future Energy Company and GD Power Development Co., Ltd was selected as a shortlisted bidder for the 2,000 megawatt Sadawi Solar PV Independent Power Plant by the SPPC. The consortium entered into the major project agreements in November 2024 and is developing a new photovoltaic power station. Under the power purchase agreement, SPPC will purchase the
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entire volume of electricity generated from the power station for a period of 25 years. The total project cost is expected to be approximately US$ 1.1 billion, and construction commenced in July 2025 and is currently ongoing. Commercial operation is expected to begin in the second half of 2027.
In October 2025, a consortium consisting of KEPCO, Etihad Water and Electricity, and Nesma Renewable Energy was awarded the contract for the 1,500 MW Dawadmi Wind Independent Power Plant by SPPC. The principal project agreements became effective in January 2026, including a power purchase agreement under which SPPC will purchase the entire electricity output generated from the plant for a period of 25 years. The total project cost is estimated at approximately US$ 879 million, with construction scheduled to commence in 2026. Commercial operation is anticipated to begin in the second half of 2028.
Exploration and Production Projects
Previously, we were engaged in a bituminous coal mining project in Bylong, Australia. In July 2015, KEPCO Bylong submitted a development application to the State Government of New South Wales (the “NSW”) of Australia. In September 2019, the Independent Planning Commission of the NSW, i.e., the state regulator, refused to accept our development application. After many rounds of legal proceedings, our request for appeal to the High Court of Australia was finally rejected in February 2022. As of December 31, 2025, we have invested approximately KRW 810 billion in the Bylong project and the impairment loss has accrued to approximately KRW 554 billion. We are currently reviewing various alternative plans to minimize our loss.
Our nuclear generation subsidiary, KHNP, is also pursuing development projects for procurements of uranium in countries including Canada, France and Niger.
Our subsidiaries, KOSEP, KOMIPO, KOWEPO, KOSPO and EWP, have been engaged in mining projects in Kalimantan, Indonesia, collectively holding a 20% equity interest in PT Bayan Resources TBK.
North Korea
Gaeseong Industrial Complex
Since 2005, we have provided electricity to the industrial complex located in Gaeseong, North Korea, which was established pursuant to an agreement made during the summit meeting of the two Koreas in June 2000. The Gaeseong Industrial Complex is the largest economic project between the two Koreas and is designed to combine Korea’s capital and entrepreneurial expertise with the availability of land and labor of North Korea. In March 2005, we built a 22.9 kilovolt distribution line from Munsan substation in Paju, Gyeonggi-do to the Gaeseong Industrial Complex and became the first to supply electricity to pilot zones such as ShinWon Ebenezer. In April 2006, we started to construct a 154 kilovolt, 16 kilometer transmission line connecting Munsan substation to the Gaeseong Industrial Complex as well as Pyunghwa substation in the complex and began operations in May 2007.
At the end of 2015, we supplied electricity to 254 units, including administrative agencies, support facilities and resident corporations, using a tariff structure identical to that of Korea. However, we suspended power transmission to the Gaeseong Industrial Complex since February 11, 2016 following the Government’s decision to halt operations of the industrial complex to impede North Korea’s utilization of funds from the industrial complex to finance its nuclear and missile programs. On August 14, 2018, we resumed power transmission to the facilities that are part of the Joint Liaison Office between South and North Korea but we suspended it again on June 16, 2020 in compliance with the request by the Ministry of Unification of the Korean Government. It has been reported in the media that the parties have now temporarily closed the Joint Liaison Office in accordance with the request by North Korea to stop the spread of COVID-19 and all KEPCO personnel have withdrawn from the facilities without resuming power transmission since June 16, 2020.
As of December 31, 2025, the book value of our facility located at the Gaeseong Industrial Complex was Won 0. For the year ended December 31, 2025, there are no trade receivables related to the companies residing in
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Gaeseong Industrial Complex. It is currently uncertain if we can exercise the property rights for our facility in the Gaeseong Industrial Complex. No assurance can be given that we will not experience any material losses as a result of the suspension of this project or failure of the project as a result of a breakdown or escalation of hostilities in the relationship between Korea and North Korea. See Item 3.D. “Risk Factors—Risks Relating to Korea and the Global Economy—Tensions with North Korea could have an adverse effect on us and the market value of our shares.”
Insurance
We and our generation subsidiaries carry insurance covering against certain risks, including fire, in respect of key assets, including buildings, equipment, machinery, construction-in-progress and procurement in transit, as well as, in the case of us, directors’ and officers’ liability insurance. We and our generation subsidiaries maintain casualty and liability insurance against risks related to our business to the extent we consider appropriate. Other than KHNP, neither we nor our generation subsidiaries separately insure against terrorist attacks. These insurance and indemnity policies, however, cover only a portion of the assets that we own and operate and do not cover all types or amounts of loss that could arise in connection with the ownership and operation of these assets.
Substantial liability may result from the operations of our nuclear generation units, the use and handling of nuclear fuel and possible radioactive emissions associated with such nuclear fuel. KHNP maintains property and liability insurance against risks of its business to the extent required by the related law and regulations or considered as appropriate and otherwise self-insures against such risks. KHNP carries insurance for its generation units against certain risks, including property damage, nuclear fuel transportation and liability insurance for personal injury and property damage. KHNP carries property damage insurance covering up to US$1 billion per accident for all properties within its plant complexes, which includes property insurance coverage for acts of terrorism up to US$300 million and for breakdown of machinery up to US$300 million. In addition to the insurance on operating nuclear power generation units, KHNP has construction insurance for Saeul #3 and #4 (formerly named as Shin-Kori #5 and #6) and Shin-Hanul #3 and #4. KHNP maintains nuclear liability insurance for personal injury and third-party property damage for coverage of up to 300 million Special Drawing Rights, or SDRs, which amounts to approximately US$406.47 million, at the rate of 1 SDR = US$1.354910 as posted on the Internet homepage of the International Monetary Fund on July 31, 2025 per plant complex, for a total coverage of 1.8 billion SDRs. KHNP is also the beneficiary of a government indemnity with respect to such risks for damage claims of up to Won 300 million SDRs per nuclear plant complex, for a total coverage of 1.8 billion SDRs. Under the Nuclear Damage Compensation Act of 1969, as amended, KHNP is liable only up to 900 million SDRs, per single accident per plant complex; provided that such limitation will not apply where KHNP intentionally causes harm or knowingly fails to prevent the harm from occurring. KHNP will receive the Government’s support, subject to the approval of the National Assembly, if (i) the damages exceed the amount of insurance coverage and (ii) the Government deems such support to be necessary for the purposes of protecting damaged persons and supporting the development of nuclear energy business. KHNP carries insurance for its generation units and nuclear fuel transportation, and we believe that the level of insurance is generally adequate and is in compliance with relevant laws and regulations. In addition, KHNP is the beneficiary of government indemnity which covers a portion of liability in excess of the insurance. However, such insurance is limited in terms of amount and scope of coverage and does not cover all types or amounts of loss which could arise in connection with the ownership and operation of nuclear plants. Accordingly, material adverse financial consequences could result from a serious accident or a natural disaster to the extent it is neither insured nor covered by the Government indemnity. See Item 3.D. “Risk Factors—Risks Relating to KEPCO—The amount and scope of coverage of our insurance are limited.”)
Competition
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In particular, we compete with independent power producers with respect to electricity generation. The independent power producers accounted for 36.3% of total power generation in 2025 and 46.6% of total generation capacity as of December 31, 2025. As of December 31, 2025, there were 44 independent power producers in Korean electricity market, excluding 7,355 renewable energy producers. Since 2013, private enterprises are permitted to own and operate coal-fired power plants in Korea as the Ministry of Trade, Industry and Resources approved plans for independent power producers to construct coal-fired power plants under the Sixth Basic Plan announced in February 2013. Under the Tenth Basic Plan announced in January 2023, three coal-fired power plants are planned to be constructed by independent power producers by 2024. Two of the three coal fired power plants planned for construction were completed in 2024 and the remaining one was completed in 2025. Furthermore, independent power producers are permitted to build additional generation capacity (whether coal-fired or not), our market share in Korea may decrease.
Our market dominance in the electricity distribution in Korea also may face potential erosion in light of the recent Proposal for Adjustment of Functions of Public Institutions (Energy Sector) announced by the Government in June 2016. This proposal contemplates a gradual opening of the electricity trading market to the private sector although no detailed roadmap has been provided for such opening. It is currently premature to predict to what extent, or in what direction, the liberalization of the electricity trading market will happen. Nonetheless, any significant liberalization of the electricity trading market may result in substantial reduction of our market share in electricity distribution in Korea, which would have a material adverse effect on our business, results of operation and cash flows.
The electric power industry, which began its liberalization process with the establishment of our power generation subsidiaries in April 2001, may become further liberalized in accordance with the Restructuring Plan. See Item 4.B. “Business Overview—Restructuring of the Electric Power Industry in Korea.”
In the residential sector, consumers may use natural gas, oil and coal for space and water heating and cooking. However, currently there is no practical substitute for electricity for lighting and other household appliances, which is available on commercially affordable terms.
In the commercial sector, electricity is the dominant energy source for lighting, office equipment and air conditioning. For its other uses, such as space and water heating, natural gas and, to a lesser extent, oil, provide competitive alternatives to electricity.
In the industrial sector, electricity is the dominant energy source for a number of industrial applications, including lighting and power for many types of industrial machinery and processes that are available on commercially affordable terms. For other uses, such as heating, electricity competes with oil and natural gas and potentially with gas-fired combined heating and power plants.
Regulation
We are a statutory juridical corporation established under the KEPCO Act for the purpose of ensuring a stable supply of electric power and further contributing toward the sound development of the national economy
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through facilitating development of electric power resources and carrying out proper and effective operation of the electricity business. The KEPCO Act (including the amendment thereto) prescribes that we engage in the following activities:
development of electric power resources;
generation, transmission, transformation and distribution of electricity and other related business activities;
research and development of technology related to the businesses mentioned in items 1 and 2;
overseas businesses related to the businesses mentioned in items 1 through 3;
investments or contributions related to the businesses mentioned in items 1 through 4;
businesses incidental to items 1 through 5;
development and operation of certain real estate held by us to the extent that:
it is necessary to develop certain real estate held by us due to external factors, such as relocation, consolidation, conversion to indoor or underground facilities or deterioration of our substation or office; or
it is necessary to develop certain real estate held by us to accommodate development of relevant real estate due to such real estate being incorporated into or being adjacent to an area under planned urban development; and
other activities entrusted by the Government.
The KEPCO Act currently requires that our profits be applied in the following order of priority:
first, to make up any accumulated deficit;
second, to set aside 20.0% or more of profits as a legal reserve until the accumulated reserve reaches one-half of our capital;
third, to pay dividends to shareholders;
fourth, to set aside a reserve for expansion of our business;
fifth, to set aside a voluntary reserve for the equalization of dividends; and
sixth, to carry forward surplus profit.
As of December 31, 2025, we had a legal reserve of Won 1,605 billion and a voluntary reserve for expansion of our business of Won 567 billion. For the avoidance of doubt, all such reserves have been calculated on a consolidated basis.
On December 28, 2022, the National Assembly of Korea passed an amendment to Article 16 of KEPCO Act which increased our debt ceiling on total outstanding debt securities on a separate basis to be no greater than five times (or six times if the Minister of the Ministry of Climate, Energy and Environment approves if it is urgently required to resolve a business crisis situation) the sum of our share capital and reserves updated at the end of each year. Such share capital and reserves are calculated on a separate basis under the KEPCO Act. Before such amendment, our debt ceiling was two times the sum of our share capital and reserves. Such increase in debt ceiling will be effective until December 31, 2027 and we may make use of the new debt ceiling to issue more debt securities to cover our losses, refinance existing debt and finance new capital expenditures. However, if the sum of our share capital and reserves decreases (including as a result of continued significant net losses), our debt ceiling will decrease as well and there will be no assurance that we can meet our funding requirements for capital or operational expenditures or debt repayment obligations, which situation could have a material adverse impact on our business, results of operations and financial condition.
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We are under the supervision of the Ministry of Climate, Energy and Environment, which has principal supervisory responsibility (in consultation with other Government agencies, such as the Ministry of Finance and Economy, as applicable) over us with respect to the appointments of our directors and our other senior management as well as approval of electricity tariff rate adjustments, among others.
Because the Government owns part of our capital stock, the Government’s Board of Audit and Inspection may audit our books.
The Electric Utility Act requires that separate licenses be obtained for generation, transmission, distribution and sale of electricity, subject to limited exceptions. We hold the licenses to transmit, distribute and sell electricity, and each of our six generation subsidiaries hold an electricity generation license. The Electric Utility Act governs the formulation and approval of electricity rates in Korea. See “—Sales and Customers—Electricity Rates” above. Under the current Electric Utility Act, a single business entity cannot engage in two or more types of electricity businesses concurrently. Notwithstanding the foregoing, our generation subsidiaries are permitted to directly participate in the development of renewable energy projects, and we may also participate through the establishment of new entities.
Our operations are subject to various laws and regulations relating to environmental protection and safety.
Financial Soundness Plan and Related Activities
In light of the general policy guideline of the Government for public institutions (including us and our generation subsidiaries) to reduce their respective overall debt levels, we and our generation subsidiaries have, in consultation with the Ministry of Climate, Energy and Environment and the Ministry of Finance and Economy, set target debt-to-equity levels every year and undertaken various programs to reduce debt and also strived to improve the overall financial stability.
In 2022, we and our generation subsidiaries established and implemented a five-year financial soundness plan in accordance with the guidelines of the Ministry of Finance and Economy. This plan includes sale of assets (sale of non-core assets such as idle properties, investment shares, and overseas coal power plants), expenditure restructuring (adjustment or deferral of investment without affecting stable power supply and safety management), cost efficiency improvement through intense low-budget strategies, profit growth through business system improvements, and capital expansion through revaluation of tangible assets like land. We and our generation subsidiaries have been complying with this plan to date.
In addition, since 2023, we have implemented additional measures to lower our debt levels. The measures included extension of the existing financial soundness plan, sale of additional assets (including saleable assets in the greater Seoul region and investment shares), lease of office buildings, downsizing of headquarters and business office re-organizations and launching an emergency management innovation committee within our company.
Despite our best efforts, however, for reasons beyond our control, including macroeconomic environments, government regulations and market forces (such as international market prices for our fuels), we cannot assure whether we or our generation subsidiaries will be able to successfully reduce debt burdens or otherwise improve our financial health or to a level that would be optimal for our capital structure. If we or our generation subsidiaries fail to do so or the measures taken by us or our generation subsidiaries to reduce debt levels or improve financial health have unintended adverse consequences, such developments may have an adverse effect on our business, results of operations and financial condition.
Establishment of a University
In order to enhance the competitiveness of the national energy industry, cultivate high-quality talents to revitalize the Bitgaram Energy Valley, and secure a differentiated research platform to create a new energy market, we established a university in Jeollanam-do Province in the southwestern region of Korea in accordance with the Government’s five-year state management plan.
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The university, which is called as Korea Institute of Energy Technology (“KENTECH”) is a research and entrepreneurship-oriented university specializing in the energy field and aims to be a small yet robust university with approximately 100 faculty members and 1,000 students. On April 17, 2020, the Ministry of Education authorized us to form a legal entity for the university. The total funding expected through 2025, which is when the university’s organization is expected to be completed, is Won 828.9 billion, excluding the land that was freely endowed to us. The funding for establishing the university will be jointly borne by us and the central and municipal governments.
For ten years after the commencement of the university in 2022, we expect to receive funding (to be used as expenses for operating the university) from the municipal government in the amount of Won 200 billion. In addition, we expect to receive funding from the central government that is at least in the same amount as we expect to receive from the municipal government. After taking into account the funding from the governments, we anticipate our contribution to the university through 2026 to be approximately Won 630 billion depending on the amount of contribution from the central government.
On August 8, 2019, our board of directors resolved to make an initial contribution of Won 60 billion for the promotion, initial operation and the design of the university campus, and the contribution was made in 2020. On March 24, 2021, a special law was passed in the National Assembly and finally enacted on April 1, 2021, giving an autonomy to the university and laying out the basis for direct financial support from the central and municipal governments. On May 21, 2021, our board resolved to make an additional contribution of Won 64.5 billion to the university and Won 41.3 billon of such contribution was made in December 2021. The remaining contribution of Won 23.2 billion was made by our affiliates. In addition, on July 15, 2022, our and our affiliates’ boards of directors decided to contribute Won 47.9 billion for funding the construction and operation of major campus facilities and completed the contribution in December 2022. In 2023, our and our affiliates’ boards of directors decided to contribute additional Won 110.6 billion, of which we contributed Won 70.8 billion and our affiliates contributed the remaining Won 39.8 billion. In 2024, our and our affiliates’ boards of directors decided to contribute an additional Won 177.8 billion, of which we contributed Won 113.8 billion and our affiliates contributed the remaining Won 64 billion. In 2025, our and our affiliates’ boards of directors decided to contribute an additional Won 71.7 billion, of which we contributed Won 45.9 billion and our affiliates contributed the remaining Won 25.8 billion. In March 2026, our board of directors decided to make an initial contribution of Won 48.8 billion as part of the contribution for the fiscal year 2026.
On March 2, 2022, KENTECH held its first entrance ceremony with congratulatory remarks from the President of Korea. On February 27, 2026, KENTECH held its first commencement ceremony with congratulatory remarks from senior officials of the central government and heads of municipal governments. As of 2026, the university is expected to have a total enrollment of 531 undergraduate students and 212 graduate students.
Currently, we are striving to adjust facility costs and tighten the budget of KENTECH as part of our initiative to improve our financial conditions. In order to minimize potential financial risks, we plan to let the university generate its own profits too, by, for example, attracting development funds and research and development investments and commercializing new technology among other means. Despite our efforts and anticipated funding from the municipal and central governments, we cannot assure you that the magnitude of our expected or actual contribution to the university will not have material adverse effects on our profit margins, results of operations or cash flows.
Proposed Sale and Purchase of Equity Interests
KEPCO Engineering & Construction Co., Inc.
Pursuant to the Third Phase of the Public Institution Reform Plan announced by the Government in August 2008, we conducted the initial public offering of Korea Engineering and Construction Co., Inc., or KEPCO E&C formerly known as Korea Power Engineering Co., Ltd., in December 2009 for gross proceeds to us of Won
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165 billion, following which we owned 77.9% of KEPCO E&C’s shares. In furtherance of the Public Institution Reform Plan and to improve our financial profile, we sold our equity interests representing 3.1%, 4.0%, 4.5% and 0.54% of KEPCO E&C shares in November 2011, December 2013, December 2014 and December 2016, respectively, in each case to third party investors. As part of our financial soundness plan, on June 24, 2022, our board of directors decided additional sale of KEPCO E&C shares. We sold 14.77% of KEPCO E&C’s shares on December 27, 2023. We currently hold a 51.0% equity interest in KEPCO E&C.
Korea Electric Power Industrial Development Co., Ltd.
In 2003, we privatized Korea Electric Power Industrial Development, or KEPID, formerly our wholly-owned subsidiary, by selling 51.0% of its equity interest to Korea Freedom Federation. Pursuant to the Fifth Phase of the Public Institution Reform Plan announced by the Government in 2009, we sold 20% of the KEPID shares through additional listing.
Cybersecurity
Cybersecurity presents an ever-evolving challenge to the electric power industry, and we and our generation subsidiaries have identified cybersecurity as a key enterprise risk. Our operations require the continuous availability of critical information and operational technology systems, sensitive customer and employee data, and infrastructure information, all of which are targets for malicious actors. In order to effectively respond to such cybersecurity risk, we have established various cybersecurity management systems and cybersecurity threat response solutions and have also implemented other prevention and response measures.
In accordance with laws and regulations, we have established and implemented a cybersecurity management system, which is called “Cybersecurity GRC System,” through which we identify, evaluate and manage cybersecurity risks. Additionally, the National Intelligence Service and the Ministry of Climate, Energy and Environment perform regular audits to identify, evaluate and manage material risks from cybersecurity threats in accordance with the Basic Guidelines for National Information Security and the detailed guidelines for information security issued by the Ministry of Climate, Energy and Environment.
We have formed an Information Security Committee under the supervision of our information security department. The Information Security Committee’s responsibilities include, among others, conducting investigations into cybersecurity incidents and developing preventive strategies. Moreover, we and our generation subsidiaries have jointly established a Cybersecurity Committee, a cybersecurity oversight group comprised of senior management teams of the respective companies, including Chief Information Security Officers, to monitor cybersecurity policies and provide strategic direction for the prevention, detection, mitigation and remediation of cybersecurity risks.
We use contractual terms to impose cybersecurity requirements on third-party service providers for compliance with our cybersecurity policies, including the requirement to immediately inform us of any occurrence of cybersecurity threats during the provision of their service. We and our generation subsidiaries conduct training, policies, technical and procedural controls and mitigation plans to address risks from cybersecurity threats.
In anticipation of the amendment of the Act on Promotion of Information and Communications Network Utilization and Information Protection in January 2020, we designated a Chief Information Security Officer (“CISO”) who is dedicated to cybersecurity management. In late 2020, we reorganized our security management organization to enhance its independence by transferring it from our Safety and Security Department to Co-prosperity and Cooperation Division. All material cybersecurity-related matters are promptly notified to the CISO, who provides updates on security control to the Chief Business Management Officer on a weekly basis. Under further amendment to the Act on Promotion of Information and Communications Network Utilization and Information Protection in December 2021, our generation subsidiaries also designated a CISO and reported their
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designation to the Ministry of Science and ICT of the Government. In February 2025, in order to strengthen our cyber threat response system, we elevated the former team-level unit to the Information Security Department under the Business Management Division.
Since 2021, we have formed a team in collaboration with the National Intelligence Service and other institutions to participate in the international cybersecurity attack and defense exercise (Locked Shields) hosted by the NATO Cooperative Cyber Defense Centre of Excellence. By participating in this exercise, we are able to enhance our ability to collaborate against cybersecurity attacks on critical infrastructure. In addition, since 2021, for the first time as a public corporation in Korea, we have started hosting annually the Electric Sector Cybersecurity Contest, in which more than 20 organizations, including our generation subsidiaries, universities, and high schools, participate. By hosting this competition, we are bolstering our capacity to respond to cybersecurity attacks on power grids jointly with our generation subsidiaries and attracting skilled information security personnel to join us.
In 2021, we introduced personal information pseudonym processing system. In order to prevent the leakage of personal information, we have also implemented Digital Rights Management (“DRM”) and personal information detection solution on our computers. To strengthen personal information protection, we assigned a dedicated staff to manage personal information protection in 2022, implemented personal information detection solution used in data transmission between internal and external networks, and established personal information exposure detection system that automatically detects when personal information is present or exposed on an Internet website.
In 2023, we implemented comprehensive measures to address ransomware threats targeting our electric power infrastructure. This included tailored solutions and reinforcement of our ICT system’s backup and recovery capabilities. Furthermore, we established and fully operationalized a backup security control center to ensure continued responses to cybersecurity threats during potential disasters. Collaborating with the Korea Internet & Security Agency, we introduced security enhancement initiatives such as the “Bug Bounty” program. Additionally, we developed and deployed automatic security vulnerability diagnosis software to identify and fix cybersecurity blind spots. Our aim is to establish a robust system that not only prevents cybersecurity threats but also enables swift responses in case of a breach.
In 2024, we participated as a representative public institution in “Cyber Summit Korea (CSK) 2024”, the first international cybersecurity event hosted by the National Intelligence Service of Korea. During this event, we took part in international cyber defense training exercises, demonstrating our enhanced cyber defense capabilities in the global energy sector. We have worked to improve our security management system for information systems and ICT service projects and have established comprehensive measures to protect personal data on our public websites. We have also worked to build a secure cloud-based working environment, prioritizing protection of sensitive company internal information as well as personal information.
With the growing adoption of AI technologies, there is an increasing demand for AI solutions tailored to KEPCO’s business areas to improve operational efficiency in the power sector. To this end, we are in the process of developing a mid-to-long-term master plan, which includes identifying areas where AI may be used and implementing them in stages. We also plan to launch pilot projects to verify the performance, usability, and security of these AI technologies. To ensure the safe use of AI platforms, we plan to apply a range of security measures in accordance with the National Intelligence Service’s “Security Guidelines for National Network Protection Systems.” These include user authentication, prevention of confidential data leakage and malicious content infiltration, and the establishment of a real-time monitoring system to detect cyber-attack attempts, such as hacking.
KHNP is also exposed to ongoing cyber threats, and accordingly is continuing efforts to strengthen its security management system by maintaining the international security standard, ISO27001, and the Korean standard, Personal Information & Information Security Management System certification. In September 2019,
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KHNP established an organization dedicated to nuclear control security in accordance with the Government’s strengthened information security regulation. Also, in 2023, KHNP established the Control System Security Section within the Cyber Security Control Center to strengthen cybersecurity response capabilities.
Organizational Structure
As of December 31, 2025, we have 169 subsidiaries, 107 associates and 122 joint ventures (not including any special purpose entities).
Subsidiaries
Our wholly-owned six generation subsidiaries are KHNP, KOSEP, KOMIPO, KOWEPO, KOSPO and EWP. Our non-generation subsidiaries include KEPCO E&C, KEPCO KPS, KEPCO NF, and KEPCO KDN. For a full list of our subsidiaries, including foreign subsidiaries, and their respective jurisdiction of incorporation, please see Exhibit 8.1 attached to this annual report.
Associates and Joint Ventures
An associate is an entity over which we have significant influence and that is neither a subsidiary nor a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but does not have control or joint control over those policies. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint ventures) have rights to the net assets of the arrangement.
The table below sets forth each of our associates and joint ventures as of December 31, 2025 by name, the percentage of our shareholdings and their principal activities.
Principal Activities
Associates:
Korea Gas Corporation (9)
Gangwon Wind Power Co., Ltd. (1)
Hyundai Green Power Co., Ltd.
Korea Power Exchange (2)
Taebaek Guinemi Wind Power Co., Ltd. (26)
Daeryun Power Co., Ltd. (1)
KNH Solar Co., Ltd.
SPC Power Corporation (27)
Gemeng International Energy Co., Ltd.
PT. Cirebon Electric Power
KNOC Nigerian East Oil Co., Ltd. (3)
KNOC Nigerian West Oil Co., Ltd. (3)
PT Wampu Electric Power
PT. Bayan Resources TBK
S-Power Co., Ltd.
Xe-Pian Xe-Namnoy Power Co., Ltd.
PT. Mutiara Jawa
Noeul Green Energy Co., Ltd.
Goseong Green Power Co., Ltd.
Gangneung Eco Power Co., Ltd.
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Shin Pyeongtaek Power Co., Ltd.
Haeng Bok Do Si Photovoltaic Power Co., Ltd.
Dongducheon Dream Power Co., Ltd. (4)
Jinbhuvish Power Generation Pvt. Ltd. (1)
Daejung Offshore Wind Power Co., Ltd.
GS Donghae Electric Power Co., Ltd.
Daegu Photovoltaic Co., Ltd.
Busan Green Energy Co., Ltd.
Hansuwon KNP Co., Ltd.
Korea Electric Power Corporation Fund (5)
Energy Infra Asset Management Co., Ltd. (31)
YaksuESS Co., Ltd.
Nepal Water & Energy Development Company Private Limited (6, 29)
Gwangyang Green Energy Co., Ltd.
PND solar Co., Ltd.
Hyundai Eco Energy Co., Ltd. (1)
YeongGwang Yaksu Wind Electric Co., Ltd. (1)
Green Energy Electricity Generation Co., Ltd.
Korea Energy Solutions Co., Ltd.
ITR Co., Ltd. (29, 30)
STN Co., Ltd.
Indeck Niles Development, LLC
Indeck Niles Asset Management, LLC
Hanwha Corporation-linked Sunlight Power Special Private Equity Investment Trust No. 1
Suwon New Power Co., Ltd.
Gwangbaek Solar Power Investment Co., Ltd.
Go deok Clean Energy Co., Ltd.
SureDataLab Co., Ltd. (29)
SEP Co., Ltd.
Hankook Electric Power Information Co., Ltd. (11)
Tronix Co., Ltd. (11)
O2&B Global Co., Ltd.
Muan Sunshine Solar Power Plant Co., Ltd.
Bigeum Resident Photovoltaic Power Co., Ltd.
Goesan Solar Park Co., Ltd.
Saemangeum Heemang Photovoltaic Co., Ltd.
Bitgoel Eco Energy Co., Ltd.
Jeju Gimnyeong Wind Power Co., Ltd.
Seoroseoro Sunny Power Plant Co., Ltd.
Muan Solar park Co., Ltd.
YuDang Solar Co., Ltd.
Anjwa Smart Farm & Solar City Co., Ltd.
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KPE Green Energy Co., Ltd.
G.GURU Co., Ltd. (29)
UD4M Co., Ltd. (8)
Dongbu Highway Solar Co., Ltd.
Seobu Highway Solar Co., Ltd.
Korea Energy Data Co., Ltd.
Gangneung Sacheon Fuel Cell Co., Ltd.
Taebaek Gadeoksan Wind Power Co., Ltd.
Chuncheon Green Energy Co., Ltd.
Yeomsubong Wind Power Co., Ltd.
Yeongyang Wind Power Corporation II
Haeparang Energy Co., Ltd.
Saemangeum Sebit Power Plant Co., Ltd. (10)
PlatformN. Co., Ltd.
PT. Cirebon Energi Prasarana (7)
Green Radiation Co., Ltd. (11,39)
Future Convergence Technology Laboratory. Co., Ltd.
Eco Motion Co., Ltd.
REC’s Innovation Co., Ltd. (31)
ACE
Environment and Energy Co., Ltd. (11)
Santiago Solar Power SpA
Yanggu Floating Photovoltaic Power Plant Inc.
Power Embedded
Changwon SG Energy Co., Ltd. (11)
Donpyung Technology. Co., Ltd.
HORANG ENERGY Inc.
Hoenggye Renewable Energy Co., Ltd
Haman Green Energy Co., Ltd.
Songsan Green Energy Co., Ltd. (6)
SkyPic Inc.
HyChangwon Fuel Cell. Co., Ltd.
Dreams Co.,Ltd. (11)
DEEPAI Co.,Ltd. (11, 36)
Amaala Sustainable Company for Energy LLC (7)
Remal First Holding Company
Naseem First Holding Company
Cheonwang Green Energy Co., Ltd.
Namjeju Bitdream Energy Co., Ltd.
Jeju Bukchon BESS Power Plant Co., Ltd.
Commerce and Industry Energy Co., Ltd.
KI Tech Co., Ltd.
Enlight Energy Advanced Industry Venture Fund
Gunsan Green Energy Co., Ltd.
Joint Ventures:
Shuweihat Asia Power Investment B.V.
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Shuweihat Asia Operation & Maintenance Company (12)
Waterbury Lake Uranium L.P. (13,29)
ASM-BG Investicii AD
RES Technology AD
KV Holdings, Inc. (27)
KEPCO SPC Power Corporation (12,27)
Gansu Datang Yumen Wind Power Co., Ltd.
Datang Chifeng Renewable Power Co., Ltd.
Datang KEPCO Chaoyang Renewable Power Co., Ltd.
Rabigh Electricity Company (13)
Rabigh Operation & Maintenance Company Limited
Jamaica Public Service Company Limited
KW Nuclear Components Co., Ltd.
Busan Shinho Solar Power Co., Ltd.
Global Trade Of Power System Co., Ltd. (14)
Expressway Solar-light Power Generation Co., Ltd.
Amman Asia Electric Power Company (12)
KAPES, Inc. (12)
Honam Wind Power Co., Ltd.
Korea Power Engineering Service Co., Ltd.
Chun-cheon Energy Co., Ltd.
Yeonggwangbaeksu Wind Power Co., Ltd. (14)
Nghi Son 2 Power LLC
Kelar S.A. (12)
PT. Tanjung Power Indonesia
Incheon New Power Co., Ltd. (16)
Seokmun Energy Co., Ltd.
Daehan Wind Power PSC
Barakah One Company (17)
Nawah Energy Company (17)
MOMENTUM
Daegu Green Power Co., Ltd. (18)
Yeonggwang Wind Power Co., Ltd.
Chester Solar IV SpA (15)
Chester Solar V SpA (15)
Diego de Almagro Solar SpA (15)
South Jamaica Power Company Limited
Daesan Green Energy Co., Ltd.
RE Holiday Holdings LLC
RE Pioneer Holdings LLC
RE Barren Ridge 1 Holdings LLC
RE Astoria 2 LandCo LLC
RE Barren Ridge LandCo LLC
Laurel SpA (15)
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KIAMCO KOWEPO Bannerton Hold Co Pty Ltd (14)
Cheong-Song Noraesan Wind Power Co., Ltd. (13)
Chester Solar I SpA (15)
Solar Philippines Calatagan Corporation
Saemangeum Solar Power Co., Ltd. (19)
Chungsongmeon BongSan wind power Co., Ltd. (14)
Jaeun Resident Wind Power Plant Co., Ltd. (14)
Dangjin Eco Power Co., Ltd.
Haemodum Solar Co., Ltd.
Yangyang Wind Power Co., Ltd.
HORUS SOLAR, S.A. DE C.V. (20)
RECURSOS SOLARES PV DE MEXICO II, S.A. DE C.V. (20)
SUNMEX RENOVABLES, S.A. DE C.V. (20)
Stavro Holding II A.B.
Solaseado Solar Power Co., Ltd.
Yeongam Solar Power Co., Ltd. (14)
Samsu Wind Power Co., Ltd. (14)
Pulau Indah Power Plant Sdn. Bhd.
NH-Amundi Global Infrastructure Investment Private Investment Trust 21
Shin-han BNPP Private Investment Trust for East-West Sunlight Dream (12)
PT Barito Wahana Tenaga
Cheongna Energy Co., Ltd. (19)
Naepo Green Energy Co., Ltd.
Boim Combined Heat and Power Generation Co., Ltd. (21)
OneEnergy Asia Limited
KAS INVESTMENT I LLC (13)
KAS INVESTMENT II LLC (13)
Energyco Co., Ltd.
CAES, LLC
Hapcheon Floating Photovoltaic Power Plant Inc. (14)
Busan Industrial Solar Power Co., Ltd.
Bitsolar Energy Co., Ltd.
Pulau Indah O&M Sdn. Bhd. (14)
Guadalupe Solar SpA (22)
Omisan Wind Power Co., Ltd.
Foresight Iberian Solar Group Holding, S.L. (22)
Yeongwol Eco Wind Co., Ltd.
Gurae Resident Power Co., Ltd.
Cheongju Eco Park Co., Ltd.
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Enel X Midland Photovoltaic, LLC
Geumsungsan Wind Power Co., Ltd.
KEPCO KPS CARABAO Corp. (16)
Prime Swedish Holding AB
Goheung New Energy Co., Ltd.
Gunsan Land Solar Co., Ltd. (22,28)
International Offshore Power Transmission Holding Company Limited
Pyeongchang Wind Power Co., Ltd. (25)
Eumseong Eco Park Co., Ltd.
Changwon Nu-ri Energy Co., Ltd. (14)
PungBack Wind Farm Corporation (24)
Trumbull Asset Management, LLC (25)
S-Power Chile SpA
Seungmun Green Energy
Seobusambo highway photovoltaics Co., Ltd. (23)
Yangyang Suri Wind Power Co., Ltd. (13)
KEPCO for Power Company (32)
Taebaek Wind Power Co., Ltd. (33)
Kumyang Eco Park Co., Ltd.
Jeongeup Green Power Co., Ltd. (34)
Hadong E-factory Co., Ltd. (13)
Namyangju Combined Heat and Power Co., Ltd. (35)
Samcheok Eco Materials Co., Ltd. (37)
Wadi Noor Solar Power Company SAOC
Fairhaven Energy Storage LLC
Rutile BESS Holdings, LLC
Trumbull Development Partners, LLC (38)
Imha Floating Photovoltaic Power Plant Inc. (13)
EDFR KOWEPO AJBAN PV HOLDING LIMITED
Roof One Energy Co., Ltd.
Taean Haetdeulwon Solar Power Co., Ltd.
Haetbyeotgil Solar Power Co., Ltd.
Seongseo Neulpureun Energy Co., Ltd.
Luluah SKY Energy Holding Ltd. (34)
KES Yona Holdings LLC (38)
Siraj AlTaqa AlNazifa
Nour Ibri Solar Power Company
Lucy Equity Holdings, LLC
The effective percentage of ownership is less than 20%. However, the Group can exercise significant influence by virtue of its contractual right to appoint directors to the board of directors of the entity, and by strict decision criteria of the Group’s financial and operating policy of the board of directors.
The effective percentage of ownership is 100%. However, the Government regulates the Group’s ability to make operating and financial decisions over the entity, as the Government requires maintaining arms-length
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The effective percentage of ownership is less than 20%. However, the Group can exercise significant influence by virtue of its contractual right to appoint one out of four members of the steering committee of the entity. Moreover, the Group has significant financial transactions, which can affect its significant influence on the entity.
The effective percentage of ownership is 34.01% considering the conversion of redeemable convertible preferred stock into ordinary stock.
The effective percentage of ownership is more than 50% but the Group does not hold control over relevant business while it exercises significant influence by participating in the Investment Decision Committee. Accordingly, the entity is classified as an associate.
The effective percentage of ownership is more than 50% but the Group does not hold control over the entity according to the shareholders’ agreement. Accordingly, the entity is classified as an associate.
The effective percentage of ownership is less than 20%. However, the entity is classified as an associate because the Group exercises significant influence over the decisions related to finance and operation.
The effective percentage of ownership is 14.29% due to the acquisition of treasury stocks. The effective percentage of ownership is less than 20%. However, the Group exercises significant influence over the decisions related to finance and operation by virtue of right to nominate directors to the board of directors of the entity.
The effective percentage of ownership is 21.66%, considering hybrid bonds.
The effective percentage of ownership is less than 20%. However, the entity is classified as an associate because the Group exercises significant influence over the entity.
The effective percentage of ownership is more than 50%. However, according to the shareholders’ agreement, all critical financial and operating decisions must be agreed to by all ownership parties and the Group can exercise same voting rights as other shareholders at the board of directors. Accordingly, the entities are classified as joint ventures.
The effective percentage of ownership is less than 50%. However, the investment is classified as a joint venture because decisions regarding significant financial and operating policies require the unanimous consent of all parties sharing control.
According to the shareholders’ agreement, the parties have joint control over all decisions related to finance and operation. Accordingly, the entity is classified as joint ventures.
Although the Group holds majority of shares in the entities marked above by acquiring additional shares for the year ended December 31, 2025, the entities are classified as joint ventures due to the shareholders’ agreement requiring unanimous approval from the entities’ board of directors for making material decisions on financial and operational policies.
The joint arrangement which the Group has joint control is structured through a separate company. The parties have joint control over the joint arrangement are classified as joint ventures, judging that they have rights to the net assets of the arrangement.
The effective percentage of ownership is less than 50%. However, decisions in relevant activities must be agreed by ownership parties. Accordingly, the entity is classified as joint ventures.
Although the nominal percentage of ownership is 29%, the effective percentage of ownership is 54.24%, considering the interest of financial investors as a liability component.
The effective percentage of ownership is more than 50%. However, decisions in relevant activities must be agreed by all ownership parties. Accordingly, the entity is classified as a joint venture.
The effective percentage of ownership is less than 50%. However, according to the shareholders’ agreement, decisions related principal operation must be agreed by all ownership parties. Accordingly, the entity is classified as a joint venture.
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According to the Boim Combined Heat and Power Generation Co., Ltd. Investment Agreement signed in March 2011, the Group has a commitment to guarantee principal and certain returns on shares of REC’s Innovation Co., Ltd. (formerly, Wang San Engineering Co., Ltd.). held by NH Power 2nd Co., Ltd. and the National Agricultural Cooperative Federation. Since NH Power 2nd Co., Ltd. and the National Agricultural Cooperative Federation have put option regarding their share of the entity, the Group was deemed to have acquired an additional 15.6% stake. As a result, the effective percentage of ownership is 46.3% in the current and prior period. In accordance with shareholders’ agreement signed during the current period, the Group has joint control with other investors in making important financial and operation decisions, so it has been reclassified from an associate to a joint venture.
Although the effective percentage of ownership is more than 50%, decisions in relevant activities must be agreed by all members of the board of directors.
The effective percentage of ownership is 37%, considering potential common stock.
The effective percentage of ownership is more than 50%. However, decisions in relevant activities must be agreed by all members of the board of directors. Accordingly, the entity is classified as a joint venture.
The effective percentage of ownership is more than 50%. However, by the shareholders’ agreement, the Group does not hold control over relevant business while it exercises significant influence by participating in the Investment Decision committee. Accordingly, the entity is classified as an associate.
The Group is planning to sell its investment in SPC Power Corporation, KEPCO SPC Power Corporation, and KV Holdings, Inc. and the timing of and proceeds from such sales transaction is not specified as of December 31, 2025.
The nominal percentage of ownership is 75.29% and the effective percentage of ownership is 53.83%, as the Group has an obligation to provide excessive dividend income to Gunsan City when a certain rate of return defined in the shareholders’ agreement is met.
During the period ended December 31, 2025, the Group’s ownership interest in the entity changed due to a disproportionate capital increase by the financial investors.
Although the Group’s effective percentage of ownership is less than 20%, the entity has been classified as an associate as the Group has significant influence on the entity considering the fact that ordinary resolutions passed at the shareholders’ meeting require the majority decision and the Group has the right to elect the entity’s directors.
Although the Group’s effective percentage of ownership is less than 20%, the Group can exercise significant influence on the entity through its contractual right to appoint one director to the entity’s board of directors.
Although the Group’s effective percentage of ownership is more than 50%, the entity is classified as a joint venture since the entity’s material financial and operational decisions require unanimous agreement of members in the board of directors due to the shareholders’ agreement.
Although the Group’s effective percentage of ownership is more than 50%, the entity is classified as a joint venture considering the minimum number of the entity’s board of directors’ members required to agree for making decision on material financial and operational policies due to the joint shareholders’ agreement.
Although the Group’s effective percentage of ownership is less than 50%, the entity is reclassified as a joint venture considering the Group can exercise significant influence on the entity due to the Group’s contractual right to appoint a director to the entity’s board of directors and the minimum number of the entity’s board of directors members required to agree for making decision on material financial and operational policies in accordance with the joint shareholders’ agreement.
Although the Group’s effective percentage of ownership is more than 50%, the entity is classified as a joint venture since the entity’s material financial and operational decisions require unanimous agreement of members in the board of directors.
The effective ownership interest is 1.32%, considering convertible redeemable preferred shares.
Although the Group’s effective percentage of ownership is less than 50%, the entity is reclassified as a joint venture considering the minimum number of the entity’s board of directors’ members required to agree for making decision on material financial and operational policies as the joint shareholders’ agreement revised in the year ended December 31, 2025.
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Although the Group’s effective percentage of ownership is more than 50%, the entity is classified as a joint venture since the entity’s material financial and operational decisions require unanimous agreement of the representative committee due to the shareholders’ agreement.
The effective ownership interest is 10%, considering convertible redeemable preferred shares.
Property, Plant and Equipment
Our property consists mainly of power generation, transmission and distribution equipment and facilities in Korea. See Item 4.B. “Business Overview—Power Generation,” “—Transmission and Distribution” and “—Capital Investment Program.” In addition, we own our corporate headquarters building complex at 55 Jeollyeok-ro, Naju-si, Jeollanam-do, 58322, Korea. As of December 31, 2025, the net book value of our property, plant and equipment was Won 187,752 billion. As of December 31, 2025, the net book value of our investment properties, which are accounted for separately from our property, plant and equipment, amounted to Won 239 billion. No significant amount of our properties is leased. There are no material encumbrances on our properties, including power generation, transmission and distribution equipment and facilities.
Pursuant to a Government plan announced in 2005, which mandated relocation of the headquarters of select government-invested enterprises from the Seoul metropolitan area to other provinces in Korea as part of an initiative to foster balanced economic growth in the provinces, we, our generation subsidiaries and certain of our subsidiaries relocated their respective headquarters to designated locations during 2014 and 2015. Our headquarters are currently located in Naju in Jeollanam-do, while the headquarters of our six generation subsidiaries and other subsidiaries are located in various cities outside of Seoul across Korea.
In connection with the relocation of our headquarters, in September 2014 we entered into an agreement to sell the property housing our prior headquarters to a consortium consisting of members of the Hyundai Motor group for Won 10,550 billion through an open bidding. The sale was completed in September 2015.
During 2025, we completed the disposal of 155 properties on a separate basis (including residential properties, storage spaces, and substation lots that are located in Korea) which are not directly related to our operations for an aggregate sale price of approximately Won 312 billion. The book value of such properties amounted to Won 33 billion, representing 0.4% of our total real properties as of December 31, 2025. The foregoing sales reflect our ongoing efforts to improve our financial soundness through related financial stabilization plan and enhance our management efficiency, selling non-core properties that have no direct relations to electricity facilities.
UNRESOLVED STAFF COMMENTS
We do not have any unresolved comments from the SEC staff regarding our periodic reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion on our operating and financial review and prospects together with our consolidated financial statements and the related notes which appear elsewhere in this annual report. Our results of operations, financial condition and cash flows may materially change from time to time, for reasons including various policy initiatives (including changes to the Restructuring Plan) by the Government in relation to the Korean electric power industry, and accordingly our historical performance may not be indicative of our future performance. See Item 4.B. “Business Overview—Restructuring of the Electric Power Industry in Korea” and Item 3.D. “Risk Factors—Risks Relating to KEPCO—The Government may adopt policy measures to substantially restructure the Korean electric power industry or our operational structure, which may have a material adverse effect on our business, operations and profitability.”
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Operating Results
Overview
We are a predominant market participant in the Korean electric power industry, and our business is heavily regulated by the Government, including with respect to the tariffs we charge to customers for the electricity we sell. In addition, our business requires a high level of capital expenditures for the construction of electricity generation, transmission and distribution facilities and is subject to a number of variable factors, including demand for electricity in Korea and fluctuations in fuel costs, which are in turn impacted by the movements in the exchange rates between the Won and other currencies.
If fuel prices rise substantially and rapidly in the future, such an increase may have a material adverse effect on our results of operations and profitability. For example, our net losses in 2023 were largely due to sustained rise in fuel costs that were neither timely nor sufficiently offset by a corresponding rise in electricity tariffs that we charge to our customers. Even though the Government from time to time increases the electricity tariff rates, such increase may be insufficient to fully offset the adverse impact from the rises in fuel costs, and since tariff increase typically require lengthy public deliberations in order to be implemented, they often occur with a significant time lag and, as a result, our results of operations and cash flows may suffer. To reinforce the correlation between the costs we incur and the tariff we charge to our customers, we have implemented a new cost pass-through tariff system since January 1, 2021. However, such system also has built-in limits and subject to the Government’s discretion. For more information, please see Item 4.B. “Business Overview—Sales and Customers—Electricity Rates.”
In addition, we expect complying with the Government’s environment-related initiatives and regulations may continue to impose significant costs and resources on us, which may adversely affect our results of operation, financial condition and cash flows. For example, we recognized Won 77 billion in 2023, Won 164 billion in 2024 and Won 247 billion in 2025 as costs to purchase greenhouse gas emission allowances. The general increase in such costs is largely attributable to the increase in the market price of the Korean Allowance Units (KAU), which is one of the main greenhouse gas allowances in Korea. As the price of KAUs is determined by the market, there is no guarantee that such price will not increase in the future.
Furthermore, as we are required to supply increasing amount of renewable energy, we expect the associated cost will continue to rise.
The results of our operations are largely affected by the following factors:
demand for electricity;
electricity rates we charge to our customers;
fuel costs; and
the exchange rates of Won against other foreign currencies, in particular the U.S. dollar.
Demand for Electricity
Our sales are largely dependent on the level of demand for electricity in Korea and the rates we charge for the electricity we sell.
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Demand for electricity may be categorized either by the type of its usage or by the type of customers. The following describes the demand for electricity by the type of its usage, namely, industrial, commercial and residential:
The industrial sector represents the largest segment of electricity consumption in Korea. Demand for electricity from the industrial sector was 280,221 gigawatt hours in 2025, representing a 2.1% decrease from 2024, due to economic slowdown in power-intensive industries such as petrochemicals and steel.
Demand for electricity from the commercial sector depends largely on the level and scope of commercial activities in Korea. Demand for electricity from the commercial sector increased to 138,315 gigawatt hours in 2025, representing a 2.6% increase from 2024, due to the effects of a gradual recovery in consumption and an increase in demand for cooling and heating.
Demand for electricity from the residential sector is largely dependent on population growth and use of heaters, air conditioners and other electronic appliances. Demand for electricity from the residential sector increased to 88,474 gigawatt hours in 2025, representing a 1.7% increase compared to 2024, due to the effects of increased demand for heating and cooling during the winter and summer seasons.
For a discussion on demand by the type of customers, see Item 4.B. “Business Overview—Sales and Customers—Demand by the Type of Usage.”
Since our inception, we have had the predominant market share in terms of electricity generated in Korea. As for electricity we purchase from the market for transmission and distribution to our end-users, our generation subsidiaries accounted for 68.3%, 67.7% and 65.9% in 2023, 2024 and 2025, respectively, while the remainder was accounted for by independent power producers. As for transmission and distribution of electricity, we have historically handled, and expect to continue to handle, substantially all of such activities in Korea.
We expect that we will continue to have a dominant market share in the generation, transmission and distribution of electricity in Korea for the foreseeable future, absent any substantial changes to the Restructuring Plan or other policy initiatives by the Government in relation to the Korean electric power industry, or an unexpected level of market penetration by independent power producers, localized electricity suppliers under the Community Energy System or increases in direct PPA. However, our market dominance in the electricity distribution in Korea may face potential erosion in light of the recent Proposal for Adjustment of Functions of Public Institutions (Energy Sector) announced by the Government in June 2016. This proposal contemplates a gradual opening of the electricity trading market to the private sector although no detailed roadmap has been provided for such opening. It is currently premature to predict to what extent, or in what direction, the liberalization of the electricity trading market will happen. Any significant liberalization of the electricity trading market may result in substantial reduction of our market share in electricity distribution in Korea, which would have a material adverse effect on our business, results of operation and cash flows. See Item 4.B. “Business Overview—Competition.”
Under the Electric Utility Act and the Price Stabilization Act, electricity rates are established at the level that would enable us to recover our fair operating costs as well as receive a fair investment return on capital used in our operations. From time to time, our actual rate of return on invested capital may differ significantly from
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the fair investment return that was assumed for the purposes of electricity tariff approvals, for reasons, among others, related to movements in fuel prices, exchange rates and demand for electricity that differs from what is assumed for determining our fair investment return. As of January 1, 2021, we implemented a new tariff system to reinforce the correlation between the costs we incur and the tariff we charge to our customers, among other changes. However, even under the new system, our ability to pass on fuel and other cost increases to our customers may be limited due to Government regulations on the electricity rates. For further discussion of the fair operating costs, the fair investment return and the new tariff system, see Item 4.B. “Business Overview—Sales and Customers—Electricity Rates.”
Fuel Costs
Because the Government heavily regulates the rates we charge for the electricity we sell (see Item 4.B. “Business Overview—Sales and Customers—Electricity Rates”), our ability to pass on cost increases to our customers is limited.
Cost of fuel in any given year is a function of the volume of fuels consumed and the unit fuel cost for the various types of fuel used for generation of electricity which affects the cost structure for both our generation subsidiaries and independent power producers from whom we purchase electric power. A significant change in the unit fuel costs materially impacts the costs of electricity generated by our generation subsidiaries, which mainly comprise our fuel costs under the cost of sales, as well as, to our knowledge, the costs of electricity generated by the independent power producers that sell their electricity to us (see Item 4.B. “Business Overview—Purchase of Electricity—Cost-based Pool System”), which mainly comprise our purchased power costs under the cost of sales. We are however unable to provide a comparative analysis since the unit fuel cost information for independent power producers and their cost structures are proprietary information.
Fuel costs constituted 30.1%, 27.5% and 24.1% of our cost of sales, and the ratio of fuel costs to our sales was 30.8%, 24.3% and 20.1% in 2023, 2024 and 2025, respectively. Substantially all of the fuel (except for anthracite coal) used by our generation subsidiaries is imported from outside of Korea at prices determined in part by prevailing market prices in currencies other than Won. In addition, our generation subsidiaries purchase a significant portion of their fuel requirements under contracts with limited quantity and duration. Pursuant to the terms of our long-term supply contracts, prices are adjusted from time to time subject to prevailing market conditions. See Item 4.B. “Business Overview—Fuel Sources and Requirements.”
Coal accounted for 38.5%, 35.9% and 37.4% of our fuel requirements in 2023, 2024 and 2025, respectively. Nuclear generation accounted for 46.1%, 48.1% and 48.7% of our fuel requirements in 2023, 2024 and 2025, respectively. LNG accounted for 12.0%, 11.9% and 9.9% of our fuel requirements in 2023, 2024 and 2025, respectively. Oil accounted for 0.02%, 0.0% and 0.1% of our fuel requirements in 2023, 2024 and 2025, respectively. In each case, the fuel requirements are measured by the amount of electricity generated by us and our generation subsidiaries and do not include electricity purchased from independent power producers. In order to ensure stable supplies of fuel materials, our generation subsidiaries enter into medium and long-term contracts with various suppliers and supplement such supplies with fuel materials purchased on spot markets.
The price of bituminous coal, which represents our largest fuel requirement, fluctuates significantly from time to time. In 2025, approximately 93.1% of the bituminous coal requirements of our generation subsidiaries was purchased under long-term contracts, and the remaining 6.9% was purchased on the spot market. For example, the average monthly spot price of Newcastle coal published on Ministry of Trade, Industry and Resources decreased from a monthly average price of US$126.63 per ton for December 2024 to a monthly average price of US$108.27 per ton for December 2025 and increased to a monthly average price of US$133.86 per ton for March 2026. If the price of bituminous coal were to sharply rise, our generation subsidiaries may not be able to secure their respective bituminous coal supplies at prices commercially acceptable to them. In addition, any significant interruption or delay in the supply of fuel, bituminous coal in particular, from any of their suppliers could cause our generation subsidiaries to purchase fuel on the spot market at prices higher than contracted, resulting in an increase in fuel costs.
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The prices of oil and LNG also fluctuate significantly from time to time. The prices of oil and LNG are substantially dependent on the price of crude oil, and according to Bloomberg (Bloomberg Ticker: PGCRDUBA), the average daily spot price of Dubai crude oil decreased from US$81.93 per barrel in 2023 to US$79.67 per barrel in 2024 and US$ $68.37 per barrel in 2025, and increased further to US$89.55 per barrel as of April 10, 2026.
Nuclear power has a stable and relatively low-cost structure and forms a significant portion of electricity supplied in Korea. Due to significantly lower unit fuel costs compared to those for thermal power plants, our nuclear power plants are generally operated at full capacity with only routine shutdowns for fuel replacement and maintenance, with limited exceptions. In case of shortage in electricity generation resulting from stoppages of the nuclear power plants, we seek to make up for such shortage with power generated by our thermal power plants.
Movements of the Won against the U.S. Dollar and Other Foreign Currencies
Korean Won has fluctuated significantly against major currencies from time to time. For fluctuations in exchange rates, see pages 1-2 of this annual report. In particular, Korean Won underwent substantial fluctuations during the global financial crisis as well as recently, and remains subject to significant volatility. The Noon Buying Rate per one U.S. dollar was Won 1,291.0 on December 31, 2023, Won 1,477.9 on December 31, 2024, Won 1,444.6 on December 31, 2025 and Won 1,483.9 as of April 10, 2026. In 2024 and 2025, the Won generally depreciated against the U.S. dollar and other foreign currencies, and such depreciation has resulted in a significant increase in the cost of fuel materials and equipment purchased from overseas as well as the cost of servicing our foreign currency debt. As of December 31, 2025, 16.9% of our long-term debt (including the current portion but excluding original issue discounts and premium) without taking into consideration of swap transactions was denominated in foreign currencies, principally U.S. dollars. The prices for substantially all of the fuel materials and a significant portion of the equipment we purchase are stated in currencies other than Won, generally in U.S. dollars. Since a substantial portion of our revenues is denominated in Won, we must generally obtain foreign currencies through foreign currency-denominated financings or from foreign currency exchange markets to make such purchases or service such debt, fulfill our obligations under existing overseas investments and make new overseas investments. As a result, any significant depreciation of Won against U.S. dollar or other foreign currencies will have a material adverse effect on our profitability and results of operations. See Item 3.D. “Risk Factors—Risks Relating to KEPCO—The movement of Won against the U.S. dollar and other currencies may have a material adverse effect on us.”
Recent Accounting Changes
See Note 2.(5) to our consolidated financial statements included in this annual report for changes in accounting standards. We believe that these new and revised standards have no material impact on our consolidated financial statements.
Material Accounting Policies
See Note 3 to our consolidated financial statements included in this annual report for material accounting policies.
Consolidated Results of Operations
The selected consolidated financial data set forth below as of and for the years ended December 31, 2023, 2024 and 2025 have been derived from our audited consolidated financial statements which have been prepared in accordance with IFRS.
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You should read the following data with the more detailed information contained in Item 18. “Financial Statements.” Historical results do not necessarily predict future results.
Sales
Cost of sales
Gross profit (loss)
Selling and administrative expenses
Other income, net
Other gains, net
Operating profit (loss)
Finance expenses, net
Profit related to associates, joint ventures and subsidiaries
Profit (loss) before income tax
Income tax benefit (expense)
Profit (loss) for the period
Other comprehensive income (loss)
Total comprehensive income (loss)
The financial information denominated in Won as of and for the year ended December 31, 2025 has been translated into U.S. dollars at the exchange rate of Won 1,444.55 to US$1.00, which was the Noon Buying Rate as of December 31, 2025.
2025 Compared to 2024
In 2025, our consolidated sales, which is principally derived from the sale of electric power, increased by 4.3% to Won 96,568 billion in 2025 from Won 92,578 billion in 2024 primarily reflecting an increase in sales of electric power. Our sale of electric power increased by 4.6% to Won 95,168 billion in 2025 from Won 91,019 billion in 2024, primarily due to an increase in the average unit sales price. The volume of electricity sold decreases by 0.1% to 549,417 gigawatt hours in 2025 from 549,821 gigawatt hours in 2024 primarily due to a 2.1% decrease in the volume of electricity sold to the industrial sector, which represents the largest segment of electricity consumption in Korea, to 280,221 gigawatt hours in 2025 from 286,212 gigawatt hours in 2024, which was partially offset by a 2.6% increase in the volume of electricity sold to the commercial sector, which represents the second largest segment of electricity consumption in Korea, to 138,315 gigawatt hours in 2025 from 134,807 gigawatt hours in 2024, as well as a 1.7% increase in the volume of electricity sold to the residential sector to 88,474 gigawatt hours in 2025 from 86,989 gigawatt hours in 2024.
The decrease in the volume of electricity sold to the industrial sector was primarily due to a decrease in industrial activities, such as the slowdown in the petrochemicals and steel industries. The increase in the volume of electricity sold to the commercial sector was primarily due to the gradual recovery in consumption and the rising demand for cooling caused by the higher average temperatures during the summer. The increase in the volume of electricity sold to the residential sector was primarily due to a record-long heatwave and prolonged tropical nights. The average unit sales price increased by 4.6% to Won 170.37 per kilowatt-hour in 2025 from Won 162.92 per kilowatt-hour in 2024, primarily due to an increase in the unit sales price in the industrial sectors. Our sales of construction services decreased by 20.7% to Won 674 billion in 2025 from Won 849 billion in 2024, primarily due to re-estimation of total expected project cost, reflecting increased claim costs related to our UAE nuclear power plant project.
Our consolidated cost of sales, which is principally derived from the purchase of power from independent power producers, raw materials used and depreciation, decreased by 1.5% to Won 80,705 billion in 2025 from
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Won 81,964 billion in 2024, primarily due to a 1.8% decrease in power purchase, a 11.5% decrease in raw materials used, and a 1.6% decrease in depreciation.
Power purchase, which accounted for 42.2% and 42.3% of our cost of sales in 2025 and 2024, respectively, decreased by 1.8% to Won 34,053 billion in 2025 from Won 34,660 billion in 2024, primarily due to a decrease in the unit price of power purchase. The decrease in the unit price of power purchase was mainly due to a decrease in fuel costs.
Raw materials used, which accounted for 23.1% and 25.7% of our cost of sales in 2025 and 2024, respectively, decreased by 11.5% to Won 18,643 billion in 2025 from Won 21,070 billion in 2024, primarily due to decreases in fuel prices.
Depreciation expense, excluding amortization of nuclear fuel charged to fuel costs in the amounts of Won 1,794 billion and Won 2,217 billion in 2025 and 2024, respectively, increased by 1.9% to Won 11,593 billion in 2025 from Won 11,381 billion in 2024, primarily due to additional property, plant and equipment acquired in relation to the construction of new generation facilities pursuant to our capital investment program.
Other cost of sales increased by 74.6% to Won 3,014 billion in 2025 from Won 1,726 billion in 2024, primarily due to an increase in our greenhouse gas emissions and related costs. For example, we spent approximately Won 247 billion on greenhouse gas emission allowances in 2025 compared to Won 164 billion in 2024. For further information, please see Item 4.B. “Business Overview—Environmental, Social and Governance Programs.”
As a cumulative result of the foregoing factors, our consolidated gross profit increased to Won 15,863 billion in 2025 from Won 10,614 billion in 2024, and our consolidated gross profit margin improved to 16.4% in 2025 from 11.5% in 2024. The increase in our consolidated gross profit was largely attributable to a 1.5% decrease in our consolidated cost of sales (which was mainly due to a 1.8% decrease in power purchase costs, a 11.5% decrease in raw materials used), which was accompanied by a 4.3% increase in our consolidated sales which was primarily due to a 4.6% increase in the average unit sales price.
Our consolidated selling and administrative expenses slightly increased by 5.3% to Won 3,234 billion in 2025 from Won 3,070 billion in 2024, mainly due to an increase in salaries, welfare and benefit expense and commission.
Our consolidated other income, net of expenses, increased by 25.5% to Won 1,044 billion in 2025 from Won 832 billion in 2024, mainly as a result of a decrease in donations.
Our consolidated net other gains increased to Won 339 billion in 2025 from Won 85 billion in 2024, mainly as a result of an increase in gains on disposal of property, plant and equipment.
As a cumulative effect of the foregoing factors, our consolidated operating profit increased to Won 14,011 billion in 2025 from Won 8,461 billion in 2024, and our consolidated operating margin increased to 14.5% in 2025 from 9.1% in 2024. This was mainly due to decreased fuel costs at our subsidiaries as a result of lower prices of LNG and other raw materials, as well as decreased power purchase expenses from independent power generators as a result of a decrease in the unit price of power purchase which decreased as a result of lower system marginal prices driven by lower fuel costs.
Our consolidated finance expenses, net, decreased by 26.6% to Won 3,001 billion in 2025 from Won 4,087 billion in 2024, primarily as a result of decreased losses on foreign currency translation.
Our consolidated profit related to associates, joint ventures and subsidiaries decreased by 34.7% to Won 576 billion in 2025 from Won 882 billion in 2024, primarily due to a decreased share in the profit of Korea Gas Corporation.
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As a cumulative effect of the foregoing factors, our consolidated profit before income taxes increased to Won 11,587 billion in 2025 from Won 5,257 billion in 2024.
Our income tax expense increased to Won 2,920 billion in 2025 from Won 1,635 billion in 2024, largely as a result of the increase in profit before income tax. Our effective tax rate, which represents tax expense as a percentage of profit before income taxes, decreased to 25.2% in 2025 from 31.1% in 2024. The decrease in the effective tax rate was primarily attributable to non-recurring factors, including a one-off change in the statutory tax rate and the impact of non-taxable income. See Note 41 to our consolidated financial statements included in this annual report.
As a cumulative result of the above factors, our consolidated profit increased to Won 8,667 billion in 2025 from Won 3,622 billion in 2024. Our consolidated net profit margin also increased to 9.0% in 2025 from 3.9% in 2024. Our profit attributable to the owners of the company increased to Won 8,545 billion in 2025 from Won 3,492 billion in 2024.
Other comprehensive income of Won 629 billion in 2024 turned into a loss of Won 145 billion in 2025, largely due to a decrease in share of other comprehensive income of associates and joint ventures and foreign currency translation of foreign operations.
As a cumulative result of the above factors, our consolidated total comprehensive income increased to Won 8,521 billion in 2025 from Won 4,251 billion in 2024.
2024 Compared to 2023
In 2024, our consolidated sales, which is principally derived from the sale of electric power, increased by 5.8% to Won 92,578 billion in 2024 from Won 87,476 billion in 2023 primarily reflecting an increase in sales of electric power. Our sale of electric power increased by 5.9% to Won 91,019 billion in 2024 from Won 85,940 billion in 2023, primarily due to an increase in the average unit sales price, as well as an increase in the volume of electricity sold. The volume of electricity sold increased by 0.7% to 549,821 gigawatt hours in 2024 from 545,966 gigawatt hours in 2023 primarily due to a 3.0% increase in the volume of electricity sold to the commercial sector, which represents the second largest segment of electricity consumption in Korea, to 134,807 gigawatt hours in 2024 from 130,844 gigawatt hours in 2023 as well as a 5.6% increase in the volume of electricity sold to the residential sector to 86,989 gigawatt hours in 2024 from 82,348 gigawatt hours in 2023, which was partially offset by a 1.5% decrease in the volume of electricity sold to the industrial sector, which represents the largest segment of electricity consumption in Korea, to 286,212 gigawatt hours in 2024 from 290,555 gigawatt hours in 2023. The increase in the volume of electricity sold to the commercial sector was primarily due to the rising demand for cooling caused by the higher average temperatures during the summer. The increase in the volume of electricity sold to the residential sector was primarily due to a record-long heatwave and prolonged tropical nights. The decrease in the volume of electricity sold to the industrial sector was primarily due to a decrease in industrial activities, such as the slowdown in the construction sector. The average unit sales price increased by 6.6% to Won 162.92 per kilowatt-hour in 2024 from Won 152.80 per kilowatt-hour in 2023, primarily due to an increase in the unit sales price in the residential and industrial sectors. Our sales of construction services increased by 8.2% to Won 849 billion in 2024 from Won 785 billion in 2023, primarily due to an increase in the sales amount recorded from the ongoing construction of our Guam Ukudu Combined thermal power plant project and El Dabaa nuclear power plant project as the construction projects progress over time.
Our consolidated cost of sales, which is principally derived from the purchase of power from independent power producers, raw materials used and depreciation, decreased by 8.6% to Won 81,964 billion in 2024 from Won 89,700 billion in 2023, primarily due to a 9.5% decrease in power purchase and a 22.4% decrease in raw materials used, which was partially offset by a 7.7% increase in depreciation.
Power purchase, which accounted for 42.3% and 42.7% of our cost of sales in 2024 and 2023, respectively, decreased by 9.5% to Won 34,660 billion in 2024 from Won 38,304 billion in 2023, primarily due to decreases in the unit price of power purchase. The decrease in unit price of power purchase was mainly due to a decrease in fuel costs.
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Raw materials used, which accounted for 25.7% and 30.3% of our cost of sales in 2024 and 2023, respectively, decreased by 22.4% to Won 21,070 billion in 2024 from Won 27,136 billion in 2023, primarily due to decreases in fuel prices.
Depreciation expense, excluding amortization of nuclear fuel charged to fuel costs in the amounts of Won 2,217 billion and Won 1,329 billion in 2024 and 2023, respectively, increased by 0.8% to Won 11,381 billion in 2024 from Won 11,294 billion in 2023, primarily due to additional property, plant and equipment acquired in relation to the construction of new generation facilities pursuant to our capital investment program.
Other cost of sales increased by 10.1% to Won 1,726 billion in 2024 from Won 1,568 billion in 2023, primarily due to an increase in our greenhouse gas emissions and related costs. For example, we spent approximately Won 164 billion on greenhouse gas emission allowances in 2024 compared to Won 77 billion in 2023. For further information, please see Item 4.B. “Business Overview—Environmental, Social and Governance Programs.”
As a cumulative result of the foregoing factors, our consolidated gross profit (loss) increased to Won 10,614 billion in 2024 from Won (2,223) billion in 2023, and our consolidated gross profit margin improved to a profit of 11.5% in 2024 from a loss of 2.5% in 2023. The increase in our consolidated gross profit was largely attributable to an 8.6% decrease in our consolidated cost of sales (which was mainly due to a 9.5% decrease in power purchase costs, a 22.4% decrease in raw materials used), which was accompanied by a 5.8% increase in our consolidated sales which was primarily due to a 35.2% increase in the average unit sales price.
Our consolidated selling and administrative expenses slightly increased by 0.3% to Won 3,070 billion in 2024 from Won 3,062 billion in 2023, mainly due to an increase in salaries and repairs and maintenance expenses.
Our consolidated other income, net of expenses, decreased by 18.2% to Won 832 billion in 2024 from Won 1,017 billion in 2023, mainly as a result of an increase in donations.
Our consolidated net other gains increased to Won 85 billion in 2024 from Won 23 billion in 2023, mainly as a result of an increase in gains on disposal of property, plant and equipment.
As a cumulative effect of the foregoing factors, our consolidated operating profit (loss) increased to Won 8,461 billion in 2024 from Won (4,245) billion in 2023, and our consolidated operating margin increased to 9.1% in 2024 from (4.9)% in 2023. This was mainly due to decreased fuel costs as a result of a lower price of LNG and other raw materials and decreased power purchase expenses as a result of a decrease in the unit price of power purchase due to a decrease in the system marginal price of electricity, which decreased as a result of lower fuel costs.
Our consolidated finance expenses, net, increased by 4.2% to Won 4,087 billion in 2024 from Won 3,922 billion in 2023, primarily as a result of increased losses on foreign currency translation.
Our consolidated profit related to associates, joint ventures and subsidiaries increased by 43.9% to Won 882 billion in 2024 from Won 613 billion in 2023, primarily due to an increased share in the profit of Korea Gas Corporation.
As a cumulative effect of the foregoing factors, our consolidated profit (loss) before income taxes increased to Won 5,257 billion in 2024 from Won (7,554) billion in 2023.
Our income tax expense increased to Won 1,635 billion in 2024 from an income tax benefit of Won 2,838 billion in 2023, largely as a result of the increase in profit before income tax. Our effective tax rate, which represents tax expense as a percentage of profit before income taxes, was 31.10% in 2024. See Note 41 to our consolidated financial statements included in this annual report.
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As a cumulative result of the above factors, our consolidated profit (loss) increased to Won 3,622 billion in 2024 from Won (4,716) billion in 2023. Our consolidated net profit margin also increased to 3.9% in 2024 from (5.4)% in 2023. Our profit (loss) attributable to the owners of the company increased to Won 3,492 billion in 2024 from Won (4,823) billion in 2023.
Other comprehensive income (loss) increased to Won 629 billion in 2024 from Won (229) billion in 2023, largely due to an increase in net change in fair value of equity investments at fair value through other comprehensive income and share of other comprehensive income of associates and joint ventures, net of tax.
As a cumulative result of the above factors, our consolidated total comprehensive income (loss) increased to Won 4,251 billion in 2024 from Won (4,945) billion in 2023.
Segment Results
We operate in the following business segments: transmission and distribution, nuclear power generation, non-nuclear power generation, plant maintenance & engineering service and others. The transmission and distribution segment, which is operated by us, the parent company, consists of operations related to the transmission, distribution and sale to end-users of electricity purchased from our generation subsidiaries, as well as from independent power producers. The nuclear power generation segment is operated by our one nuclear generation subsidiary and non-nuclear power generation segment is operated by our five non-nuclear generation subsidiaries, which consist of operations related to the generation of electricity sold to the parent company through the Korea Power Exchange. The transmission and distribution segment, the nuclear power generation segment, and the non-nuclear power generation segment together represent our electricity business. The remainder of our operation consists primarily of operations related to the plant maintenance and engineering service and others including mainly overseas businesses. In 2023, 2024 and 2025, the unaffiliated revenues of the nuclear power generation and the non-nuclear power generation (representing the six generation subsidiaries) and all our other revenues in the aggregate amounted to only 4.7%, 4.3% and 4.4% of our consolidated revenues, respectively, and the results of operations for our business segments substantially mirror our consolidated results of operations. For further information, see Note 4 of the notes to our consolidated financial statements included in this annual report.
Other
Our operations are materially affected by the policies of or factors relating to the Government. See Item 4.B. “Business Overview—Regulation.”
Liquidity and Capital Resources
We expect that our capital requirements, capital resources and liquidity position may change in the course of implementing the Restructuring Plan. See Item 4.B. “ —Business Overview—Restructuring of the Electric Power Industry in Korea” and Item 3.D. “Risk Factors—Risks Relating to KEPCO—The Government may adopt policy measures to substantially restructure the Korean electric power industry or our operational structure, which may have a material adverse effect on our business, operations and profitability.”
Capital Requirements
For the foreseeable future, we anticipate that the following will be the main drivers of our capital requirements:
working capital requirements, the largest component of which is fuel purchases and power purchase costs;
capital expenditures pursuant to our capital investment program;
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payment of principal and interest on our existing debt; and
overseas investments.
In addition, if there is an unanticipated material change to the Restructuring Plan, the Basic Plan or other major policy initiatives of the Government relating to the electric power industry, or a natural disaster, such change may require a significant amount of additional capital requirements.
Capital Expenditures
We anticipate that capital expenditures will be the most significant use of our funds in the next several years. Our capital expenditures relate primarily to the construction of new generation units, maintenance of existing generation units and expansion of our transmission and distribution systems. Our capital expenditures generally follow budgets established under the Basic Plan, which contains projections relating to the supply and demand of electricity of Korea based on which we plan the construction of additional generation units and transmission systems.
Our total capital expenditures for the construction of generation, transmission and distribution facilities were Won 15,518 billion, Won 16,720 billion and Won 18,701 billion in 2023, 2024 and 2025, respectively, and under our current budgets, are estimated to be approximately Won 23,099 billion, Won 27,391 billion and Won 27,625 billion in 2026, 2027 and 2028, respectively. We plan to finance our capital expenditures primarily through cash from operation of business, construction grants, issuance of securities in the capital markets and borrowings from financial institutions.
Furthermore, as part of the Comprehensive Measures against Particulate Matter and the Eighth, Ninth, Tenth, Eleventh Basic Plan, announced by the Government in September 2017, December 2017, December 2020 and January 2023 and February 2025 respectively, the Government set forth the following policy directions relating to coal-fired generation units: (i) 28 decrepit coal-fired generation units will be decommissioned and converted to LNG fuel use by 2036 and 12 decrepit coal-fired generation units will be converted to carbon-free energy sources, including pumped-storage hydro, hydrogen power generation and ammonia co-firing by 2038, (ii) in principle, construction of new coal-fired generation units shall not be planned, (iii) coal-fired generation units that are 30 years or older shall temporarily cease operations from December to February of each year from 2020, which has also been done from March to June in 2018 and 2019, (iv) coal-fired generation units shall be put through comprehensive functional and environmental upgrades and (v) coal-fired generation units shall be subject to emission standards that came into effect in January 2019 that are twice as more rigorous than the previous standards. Compliance with such measures is expected to result in significant additional costs.
We also established a research and entrepreneurship-oriented university specializing in the energy field. See Item 4.B. “Business Overview—Establishment of a University.” On August 8, 2019, our board of directors resolved to make an initial contribution of Won 60 billion for the promotion, initial operation and the design of the university campus, and the actual contribution was made in 2020. On May 21, 2021, our board resolved to make an additional contribution of Won 64.5 billion to the university and Won 41.3 billon of such contribution was made in December 2021. The remaining contribution of Won 23.2 billion was made by our affiliates. In addition, on July 15, 2022, our and our affiliates’ boards decided to contribute Won 47.9 billion for funding the construction and operation of major campus facilities and completed the contribution by December 2022. In
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2023, our and our affiliates’ boards of directors decided to contribute additional Won 110.6 billion, of which we contributed Won 70.8 billion and our affiliates contributed the remaining Won 39.8 billion. In 2024, our and our affiliates’ boards of directors decided to contribute an additional Won 177.8 billion, of which we contributed Won 113.8 billion and our affiliates contributed the remaining Won 64 billion. In 2025, our and our affiliates’ boards of directors decided to contribute an additional Won 71.7 billion, of which we contributed Won 45.9 billion and our affiliates contributed the remaining Won 25.8 billion. In March 2026, our board of directors decided to make an initial contribution of Won 48.8 billion as part of the contribution for the fiscal year 2026.
Fuel Purchases
We require significant funds to finance our operations, principally in relation to the purchase of fuels by our generation subsidiaries for generation of electricity. In 2023, 2024 and 2025, fuel costs constituted 30.1%, 27.5% and 24.1% of our cost of sales and the ratio of fuel costs to our sales was 30.8%, 24.3% and 20.1%, respectively. We plan to fund our fuel purchases primarily with net operating cash, although in cases of rapid increases in fuel prices as is the case from time to time, we may also rely on borrowings from financial institutions and issuance of debt securities in the capital markets.
Repayment of Existing Debt
Payments of principal and interest on indebtedness will require considerable resources. The table below sets forth the scheduled maturities of outstanding interest-paying debt (excluding original issue discounts and premium) of us and our six wholly-owned generation subsidiaries as of December 31, 2025 for each year from 2026 to 2030 and thereafter without taking into consideration of swap transactions. As of December 31, 2025, such debt represented 96.6% of our outstanding debt on a consolidated basis.
Year ended December 31
2030
Thereafter
Total(1)
The figures may not add up to the relevant total numbers due to rounding.
We and our six wholly-owned generation subsidiaries incurred interest charges (including capitalized interest) in relation to our interest-bearing debt of Won 5,023 billion, Won 5,328 billion and Won 4,943 billion, in 2023, 2024 and 2025, respectively. We anticipate that interest charges will increase in future years because of, among other factors, anticipated increases in our long-term debt. See “—Capital Resources” below. The weighted average rates of interest on our and our six wholly-owned generation subsidiaries’ interest-bearing long-term debt and borrowings under existing swap contracts were 3.33%, 3.19% and 3.02% in 2023, 2024 and 2025, respectively.
Overseas Investments
As part of our revenue diversification strategy, we plan to continue to make overseas investments on a selective basis, which will be funded primarily through foreign currency-denominated borrowings and debt securities issuances as well as net operating cash from such investments.
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Capital Resources
Net cash provided by operating activities
Long-term debt (excluding current portion)(2)
Current portion of the long-term debt
Total long-term debt(3)
Won-denominated long-term debt
Foreign currency-denominated long-term debt
Other long-term liabilities(4)
Short-term borrowings
Total equity
Long-term debt, net consists of long-term borrowings and debt securities (excluding the current portions but including original issue discounts and premiums) without taking into consideration of swap transactions.
Total long-term debt (including the current portion but excluding original issue discounts and premium) without taking into consideration of swap transactions.
Other long-term liabilities consist of total non-current liabilities of our consolidated financial statements included in this annual report minus long-term debt (excluding current portion) of this table.
We have traditionally met our working capital and other capital requirements primarily from net cash provided by operating activities, issuance of debt securities and borrowings from financial institutions. Net cash provided by operating activities is primarily a function of electricity sales and fuel purchases and is also affected by increases and decreases in trade receivables, trade payables and inventory related to electricity sales and fuel purchases. Net cash provided by operating activities was Won 1,522 billion, Won 15,876 billion and Won 20,880 billion in 2023, 2024 and 2025, respectively.
As of December 31, 2023, 2024 and 2025, our long-term debt (excluding the current portion but including original issue discounts and premium), without taking into consideration of swap transactions, amounted to Won 92,510 billion, Won 88,091 billion and Won 83,882 billion, respectively, representing 248.2%, 213.0%, 170.1% of equity, respectively, as of such dates. As of December 31, 2023, 2024 and 2025, the current portions of our long-term debt were Won 30,454 billion, Won 35,319 billion and Won 35,908 billion, respectively. As of December 31, 2023, 2024 and 2025, our short-term borrowings amounted to Won 10,667 billion, Won 9,123 billion and Won 9,979 billion, respectively. See Note 23 of the notes to our consolidated financial statements included in this annual report. Total long-term debt (including the current portion but excluding original issue discounts and premium), without taking into consideration of swap transactions, as of December 31, 2025 was Won 120,005 billion, of which Won 99,743 billion was denominated in Won and an equivalent of Won 20,262 billion was denominated in foreign currencies, primarily U.S. dollars. We, KHNP and KOMIPO also maintain global medium-term note programs in the aggregate amount of US$ 19 billion, of which approximately US$ 9 billion remains currently available for future drawdown.
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As we experienced net losses during 2022 and 2023 as global energy prices increased significantly and the power purchase costs increased accordingly, we issued more debt securities than before to meet increased working capital requirement. On December 28, 2022, the National Assembly of Korea passed an amendment to Article 16 of KEPCO Act which increased our debt ceiling on total outstanding debt securities on a separate basis to be no greater than five times (or six times if the Minister of the Ministry of Climate, Energy and Environment approves if it is urgently required to resolve a business crisis situation) the sum of our share capital and reserves updated at the end of each year. Such share capital and reserves are calculated on a separate basis under the KEPCO Act. Before such amendment, our debt ceiling was two times the sum of our share capital and reserves. Such increase in debt ceiling will be effective until December 31, 2027 and we may make use of the new debt ceiling to issue more debt securities to cover our losses, refinance existing debt and finance new capital expenditures. However, if the sum of our share capital and reserves decreases (including as a result of continued significant net losses), our debt ceiling will decrease as well and there will be no assurance that we can meet our funding requirements for capital or operational expenditures or debt repayment obligations, which situation could have a material adverse impact on our business, results of operations and financial condition.
Subject to the implementation of our capital expenditure plan and the sale of our interests in our generation subsidiaries and other subsidiaries, our long-term debt may increase or decrease in future years. Until recently, a significant portion of our long-term debt was raised through foreign currency-denominated borrowings. Our foreign currency-denominated long-term debt (including the current portion but excluding original issue discounts and premium), without taking into consideration of swap transactions, amounted to Won 21,550 billion and Won 20,262 billion as of December 31, 2024 and 2025, respectively.
Our ability to incur long-term debt in the future is subject to a variety of factors, many of which are beyond our control, including, the amount of capital that other Korean entities may seek to raise in capital markets. Economic, political and other conditions in Korea may also affect investor demand for our securities and those of other Korean entities. In addition, our ability to incur debt will also be affected by the Government’s policies relating to foreign currency borrowings, the liquidity of the Korean capital markets and our operating results and financial condition. In case of adverse developments in Korea, the price at which such financing may be available may not be acceptable to us.
We incur our short-term borrowings primarily through commercial papers sold to domestic financial institutions. We have not had any material difficulties in obtaining short-term borrowings. In addition, in order to prepare for potential liquidity shortage, we maintain several credit facilities with financial institutions, with Won-denominated facilities amounting to Won 15,828 billion in aggregate and foreign currency-denominated facilities amounting to US$ 1,760 million in aggregate. The full amount of these facilities was available as of December 31, 2025.
We may raise capital from time to time through issuance of equity securities. However, there are certain restrictions on our ability to issue equity instruments, including limitations on shareholding by foreigners. In addition, without changes in the existing KEPCO Act which requires that the Government, directly or pursuant to the Korea Development Bank Act, through Korea Development Bank, own at least 51% of our capital stock, it may be difficult or impossible for us to undertake any equity financing other than sales of treasury stock without the Government’s participation. Even if we are able to conduct equity financing with the Government’s participation, prevailing market conditions may be such that we may not be able conduct equity financing on terms that are commercially acceptable to us. See Item 3.D. “Risk Factors—Risks Relating to Korea and the Global Economy.”
Our total equity increased by 19.2% from Won 41,363 billion as of December 31, 2024 to Won 49,323 billion as of December 31, 2025, mainly as a result of an increase in total comprehensive income.
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Liquidity
Property, plant and equipment, net
Current trade and other payables, net
Current financial liabilities, net
Net cash used in investing activities
Net cash provided by financing activities
Net working capital (deficit)(2)
Net working capital is defined as current assets minus current liabilities. For the periods indicated, current liabilities exceeded current assets, which resulted in working capital deficit for such periods.
Our liquidity is substantially affected by our acquisition of property, plant and equipment, fuel purchases and schedule of repayment of debt. Our property, plant and equipment increased by 2.6% from Won 182,983 billion as of December 31, 2024 to Won 187,752 billion as of December 31, 2025. As the fuel costs decreased by 13.8% from Won 22,538 billion in 2024 to Won 19,436 billion in 2025, our current trade and other payables also decreased by 8.4% from Won 9,411 billion as of December 31, 2024 to Won 8,622 billion as of December 31, 2025. Our current financial liabilities increased by 3.3% from Won 44,466 billion as of December 31, 2024 to Won 45,939 billion as of December 31, 2025 according to our debt repayment schedule.
Our net cash flow from operating activities increased by 31.5% to a net cash inflow of Won 20,880 billion in 2025 from a net cash inflow of Won 15,876 billion in 2024, primarily due to an increase in cash generated from sales of electricity.
Our net cash flow from investing activities decreased by 30.9% to a net cash outflow of Won 18,445 billion in 2025 from a net cash outflow of Won 14,093 billion in 2024, primarily due to a decrease in acquisition of financial assets of Won 1,805 billion and a decrease in acquisition of property, plant and equipment of Won 1,618 billion, offset by an increase in proceeds from disposals of financial assets of Won 1,061 billion.
Our net cash flow from financing activities increased by 31.6% to a net cash outflow of Won 2,635 billion in 2025 from a net cash outflow of Won 3,849 billion in 2024, primarily due to an increase in proceeds of short-term borrowings of Won 2,485 billion and an increase in proceeds from long-term borrowings and debt securities of Won 1,591 billion, offset by a decrease in repayment of long-term borrowings and debt securities of 2,411 billion.
Due to the capital-intensive nature of our business as well as significant volatility in fuel prices, from time to time we operate with working capital deficits, and we may have substantial working capital deficits in the future. As of December 31, 2023, 2024 and 2025, we had a working capital deficit of Won 31,712 billion, Won 34,714 billion and Won 36,392 billion, respectively. We have traditionally met our working capital and
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other capital requirements primarily with net cash provided by operating activities, issuance of debt securities, borrowings from financial institutions and construction grants. We also incur short-term borrowings primarily through commercial papers sold to domestic financial institutions. We have not had any material difficulties in obtaining short-term borrowings. See “—Capital Resources.”
We may face liquidity concerns in the case of sudden and sharp depreciation of the Won against major foreign currencies or depreciation over a sustained period of time. While substantially all of our revenues and our cash and cash equivalents are denominated in Won, we pay for substantially all of our fuel purchases in foreign currencies. Furthermore, as a substantial portion of our long-term debt is denominated in foreign currencies, the payment of principal and interest thereon is made in foreign currencies. In the past, we have incurred foreign currency debt principally due to the limited availability and the high cost of Won-denominated financing in Korea. However, in light of increasing sophistication of Korean capital markets and the recent increase in Won liquidity in Korean financial markets, we plan to reduce the portion of our debt which is denominated in foreign currencies, even though we intend to continue to raise certain amounts of capital through long-term foreign currency debt for purposes of maintaining diversity in our funding sources as well as paying for overseas investments and fuel procurements in foreign currencies. As of December 31, 2025, 16.9% of our long-term debt (including the current portion but excluding original issue discounts and premium), without taking into consideration of swap transactions, was denominated principally in U.S. dollars.
We enter into currency swaps and other hedging arrangements with respect to our foreign currency denominated debt only to a limited extent primarily due to the limited size of the Korean market for such derivative instrument. Such instruments include combined currency and interest rate swap agreements, interest rate swaps and foreign exchange agreements. We do not enter into derivative financial instruments for the purpose of hedging market risk resulting from fluctuations in fuel costs. Our policy is to hold or issue derivative financial instruments for hedging purposes only. See Note 12 of the notes to our consolidated financial statements.
We did not pay any dividends in respect of fiscal year 2023 on a separate basis. In fiscal year of 2024, paid dividends of Won 213 per share, and the total dividend amount was Won 137 billion. In fiscal year of 2025, paid dividends of Won 1,542 per share, and the total dividend amount was Won 990 billion.
Contractual Obligations
The following summarizes our known contractual obligations on a consolidated basis as of December 31, 2025 and the effect such obligations are expected to have on liquidity and cash flow in future periods. See Note 45.(2) of the notes to our consolidated financial statements included in this annual report for our management of short, medium and long-term funding and liquidity management requirements.
Borrowings and debt securities(1)
Lease liabilities
Trade and other payables
Financial guarantee contracts(2)
Total(3)
These includes interest payments on the borrowings and debts for the periods indicated.
This represents the total guarantee amounts associated with the financial guarantee contracts. Financial guarantee liabilities which are recognized as of December 31, 2024 and 2025 are Won 30,924 million and Won 50,709 million, respectively.
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For a description of our commercial commitments and contingent liabilities, see Note 50 of the notes to our consolidated financial statements included in this annual report.
We meet our coal requirements primarily through purchases of bituminous coal and anthracite coal under long-term supply contracts with domestic and foreign suppliers. Under these long-term supply contracts, purchase prices are adjusted periodically based on prevailing market conditions.
We also purchase a substantial portion of our LNG requirements from Korea Gas Corporation, a related party. We negotiate annually with Korea Gas Corporation and other suppliers to purchase LNG. We have also entered into long-term transportation contracts with Pan Ocean Co., Ltd. and others.
We import all uranium ore concentrates from sources outside Korea (including Kazakhstan, Canada, France, the United Kingdom, Switzerland and Uzbekistan) under medium to long-term contracts and purchases in spot markets, and pay for such concentrates with currencies other than Won, primarily U.S. dollars. Except for certain fixed contract prices, contract prices for processing of uranium are adjusted annually based on base prices and spot market prices prevailing at the time of delivery.
The fuel purchase price is typically negotiated near or at the time of purchase subject to prevailing market conditions. In 2025, the fuel cost incurred to us was Won 19,436 billion. See Note 49.(2) of the notes to our consolidated financial statements for further details of these contracts.
Under the Long-term Transmission and Substation Plan approved by the Ministry of Climate, Energy and Environment, we are responsible for the construction of all of our power transmission facilities and the maintenance and repair expenses for such facilities. Also, our generation subsidiaries make plans for expanding our generation capacity based on the Basic Plan, which is generally revised and announced every two years by the Government. For a description of our commitments for acquisition of property, plant and equipment, see Note 49.(1) of the notes to our consolidated financial statements included in this annual report.
Payment guarantee
See Note 50.(2) to our consolidated financial statements included in this annual report for payment guarantees and short-term credit facilities from financial institutions.
Overdraft and Others
See Note 47.(7) to our consolidated financial statements included in this annual report for existing guarantees provided by us to our associates, joint ventures and others.
Other than as described in this annual report and also in Notes 47 and 50 of the notes to our consolidated financial statements included in this annual report, we did not have any other material credit lines and guarantee commitments provided to any third parties as of December 31, 2025.
Research and Development, Patents and Licenses, etc.
Research and Development
In accordance with our 2035 mid-to-long-term strategy, we have established the development of core new energy technologies and the expansion of their commercialization as our strategic objectives. Accordingly, we are pursuing technology development with a focus on five core research and development areas: (1) sustainable
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power grids, (2) AI for energy, (3) carbon neutrality, (4) expansion of new energy businesses, and (5) generation of new revenue streams. In line with these areas, we are developing core strategic technologies based on the development goals for each respective field.
Sustainable power grids. We are developing technologies to support the timely construction of transmission networks and to ensure the stability of the electric power system, in response to the expansion of renewable energy and the surge in electricity demand driven by high-tech industries.
AI for energy. We are integrating AI technology across all aspects of our operations to enhance operational efficiency. Furthermore, we are securing technologies for advanced facility management, prevention of serious accidents, and response to future cyber threats.
Carbon neutrality. We are focusing on the development of carbon capture, utilization, and storage(CCUS) technologies, life- cycle management of SF6 gas, and clean fuel combustion technologies to achieve national greenhouse gas reduction targets.
Expansion of new energy businesses. We are securing competitiveness within the renewable energy market and diversifying our business portfolio, including offshore wind power, solar energy, RE100 industrial complexes, and microgrids (MG).
Generation of new revenue streams. We are identifying new business models and developing related technologies to generate new revenue in response to future environmental changes, beyond our existing electric power business.
In addition, we cooperate closely with several other electric utility companies and research institutes, both foreign and domestic, on various projects to diversify the scope and scale of our research and development activities.
In 2026, consistent with the Government guidelines, we plan to invest approximately 1.97% of our annual estimated net sales on a separate basis in research and development. We and our six generation subsidiaries invested Won 865 billion, Won 859 billion and Won 860 billion in 2023, 2024 and 2025, respectively, and plan to invest Won 1,230 billion in 2026. We and the six generation subsidiaries have 1,503 employees engaged in research and development activities as of December 31, 2025. As a result of our research, we and the six generation subsidiaries have 11,589 registered patents and 14,015 patent applications outstanding in Korea and abroad as of December 31, 2025.
Trend Information
Trends, uncertainties and events which could have a material impact on our sales, liquidity and capital resources are discussed above in Item 4.B. “Business Overview—Sales and Customers,” Item 5.A. “Operating Results” and Item 5.B. “Liquidity and Capital Resources.”
Critical Accounting Estimates
See Note 2.(4) to our consolidated financial statements included in this annual report and other sections of our consolidated financial statements referred to thereunder for accounting estimates that have the most significant effect on the amounts recognized in our consolidated financial statements.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors and Senior Management
Board of Directors
Under the KEPCO Act, the Act on the Management of Public Institutions and our Articles of Incorporation, our board of directors, which is required to consist of not more than 15 directors, is vested with the authority over our management. We have seven standing directors (‘sang-im-isa’ in Korean), including the president, and eight non-standing directors (‘bi-sang-im-isa’ in Korean).
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Pursuant to the Act on the Management of Public Institutions and our Articles of Incorporation, we have two types of directors: standing directors and non-standing directors. Although the classification of the directors applicable to us as a statutory juridical corporation established under the KEPCO Act is different from the classification under the Korean Commercial Act, which consists of (i) an inside director (‘sa-nae-isa’ in Korean), (ii) an outside director (‘sa-oe-isa’ in Korean) and (iii) other directors who do not serve their directorship positions in full-time capacity but do not qualify as outside directors (‘gita-bi-sang-moo-isa’ in Korean), all of our non-standing directors have been, and are currently appointed from, candidates who satisfy the qualifications of an outside director under the Korean Commercial Act, as the KEPCO Act generally requires us to apply the Korean Commercial Act as applicable.
The Act on the Management of Public Institutions and our Articles of Incorporation require that the number of standing directors, including our president, must be less than one-half of incumbent directors to ensure non-standing directors’ independence from the management and the role of checks and balances. Also, a senior non-standing director appointed by the Ministry of Finance and Economy becomes our chairperson of the board following the review and resolution of the Committee for Management of Public Institutions.
Standing Directors
The standing directors refer to our directors who serve their directorship positions in full-time capacity.
Our president serves as our chief executive officer and represents us and administers our day-to-day business in all matters and bears the responsibility for the management’s performance. Our president is appointed by the President of Korea upon the motion of the Ministry of Climate, Energy and Environment following the nomination by our director nomination committee, the review and resolution of the Committee for Management of Public Institutions pursuant to the Act on the Management of Public Institutions and an approval at the general meeting of our shareholders.
In the event the president acts in violation of law or the Articles of Incorporation, is negligent in his duties, or otherwise is deemed to be significantly impeded in performing his official duties as president, the board of directors may by resolution request Ministry of Climate, Energy and Environment to dismiss or recommend the dismissal of the president.
Our standing director(s) who concurrently serves as a member of the audit committee is appointed through the same appointment process applicable to our president, except that the motion for appointment is made by the Ministry of Finance and Economy instead of the Ministry of Climate, Energy and Environment. Such director is non-executive in that he or she does not participate in the management and meets the requirements of independence set forth in Section 303A.02 of the NYSE Listed Company Manual and Rule 10A-3 under the Exchange Act.
Standing directors other than our president or those who concurrently serve as members of the audit committee are appointed by our president with the approval at the general meeting of our shareholders.
The names, titles and outside occupations, if any, of the standing directors as of April 27, 2026 and the respective years in which they took office are set forth below.
Name (Gender)
Position
Outside Occupation
Position Held Since
Kim, Dong-Cheol (Male)
Jun, Young-Sang (Male)
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Oh, Heung-Bok (Male)
Jung, Chi-Kyo (Male)
Ahn, Jung-Eun (Male)
Kim, Jae-Koon (Male)
Kim, Dong-Cheol has been our President & Chief Executive Officer since September 19, 2023. Prior to his current position, he served as a member of the 17th, 18th, 19th, and 20th National Assembly, Floor Leader of Bareun Mirae Party and People’s Party, Chairperson of Land Infrastructure and Transport Committee of the National Assembly, and Chairperson of Trade, Industry and Energy Committee. Mr. Kim received a B.A. from Seoul National University.
Jun, Young-Sang has been our Standing Director since March 7, 2023. Mr. Jun previously served as a professor of Public Administration at Konkuk University and an operation director at the Korean Association for Public Administration. Mr. Jun received a Ph.D. in Public Administration from Konkuk University.
Oh, Heung-Bok has been our Standing Director since February 21, 2024. Mr. Oh also currently serves as our Corporate Senior Vice President and Chief Financial & Strategic Planning Officer and previously served as the Head of KEPCO Academy, Vice President and Head of Human Resources Department and Vice President at KEPCO Nam-Seoul Regional Headquarter. Mr. Oh received a M.A. in Public Administration from Korea University.
Jung, Chi-Kyo has been our Standing Director since May 28, 2025. Mr. Jung also currently serves as our Corporate Senior Vice President and Chief Safety Officer, Chief Operation Officer. Mr. Jung previously served as the Head of North Gyeonggi regional Headquarters KEPCO and Vice President and Head of Distribution Planning Department. Mr. Jung received a B.S. in Electrical Engineering from Chung-Ang University.
Ahn, Jung-Eun has been our Standing Director since January 6, 2025. Mr. Ahn also currently serves as our Corporate Senior Vice President and Chief Business Management Officer and previously served as Executive Vice President & Chief Co-prosperity & Cooperation Officer and Vice President & Head of Office of the President. Mr. Ahn received an MBA from Helsinki School of Economics.
Kim, Jae-Koon has been our Standing Director since April 27, 2026. Mr. Kim also currently serves as our Corporate Senior Vice President and Chief Power System Officer and previously served as the Head of Busan-Ulsan Regional Headquarters KEPCO and Vice President and Head of New Transmission Business Department. Mr. Kim received a M.S. in electrical engineering from Kyungpook National University.
Non-standing Directors
The non-standing directors refer to our directors who do not serve their directorship positions in full-time capacity. The non-standing directors currently do not hold any executive positions with us or our subsidiaries.
Our non-standing directors must be appointed by the Minister of the Ministry of Finance and Economy following the review and resolution of the Committee for Management of Public Institutions from a pool of
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candidates recommended by the director nomination committee. Our non-standing directors must have ample knowledge and experience in business management and cannot have a dual-role as a public servant other than as a public education officer at a public school. At least one of our non-standing directors must have held his/her office with us for at least three years and either (a) be recommended by the representative of our employees (or the representative of the labor union if there is a labor union comprising the majority of our employees) or (b) obtain consent from the majority of our employees. Our non-standing directors must be approved at the general meeting of our shareholders to become members of our audit committee.
We have reinforced the decision-making power of non-standing directors by requiring both a majority and the chairperson of the board be non-standing directors. Our non-standing directors may request any information necessary to fulfill their duties from our president, and except in special circumstances, our president must comply with such request.
The names, titles and outside occupations, if any, of the non-standing directors as of April 27, 2026 and the respective years in which they took office are set forth below.
Principal Occupation
Han, Jin-Hyun (Male)
Non-Executive Director, Chairperson of the Board of Directors
Chairperson of the Power System Committee
Kim, Jong-Woon (Male)
Non-Executive Director
Member of the ESG Committee
Kim, Jun-Ki (Male)
Kim, Sung-Eun (Female)
Professor of Advanced Technology
Business, Kyung Hee University
Graduate School
Lee, Sung-Ho(1) (Male)
Cho, Seong-Jin (Male)
Member of the Power System Committee
Kang, Hoon (Male)
Lee, Heung-Ryul (Male)
Lee, Sung-Ho resigned on April 1, 2026. Under Korean law, Mr. Lee will continue to serve as a member of the audit committee until his successor is appointed.
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Han, Jin-Hyun has been our Non-Standing Director since August 30, 2023. Mr. Han is currently the adviser of a law firm, Lee and Ko. Mr. Han previously served as Vice Minister of the Ministry of Trade, Industry and Resources and the Vice Chairman of Korea International Trade Association. Mr. Han received a B.A. from Chonnam National University, an M.A. from Korea University, and a Ph.D. from Seoul National University of Science and Technology in Economics.
Kim, Jong-Woon has been our Non-Standing Director since August 22, 2022. Mr. Kim previously served as the President of the 6th Naju City Council and a member of the 5th and 6th Naju City Council. Mr. Kim received a B.A. in Public Administration from Gwangju University.
Kim, Jun-Ki has been our Non-Standing Director since May 2, 2023. Mr. Kim is currently the vice president of planning at Seoul National University. Mr. Kim previously served as the President of Seoul National University’s Graduate School of Public Administration. Mr. Kim received a B.A. from London School of Economics, an M.A. and a Ph.D. in Public Policy from Harvard University in Economics.
Kim, Sung-Eun has been our Non-Standing Director since November 8, 2023. Ms. Kim is currently a Professor of Advanced Technology Business at Kyung Hee University Graduate School. Ms. Kim received a B.A. in Communication Studies from Ewha Womans University, an M.B.A. from Cornell University, and an M.A. in Business Tax Law Studies from University of Southern California.
Lee, Sung-Ho has been our Non-Standing Director since November 8, 2023. Mr. Lee is currently a Professor of Business Administration at University of Seoul and Vice Chairman of Korean Academic Society of Business Administration. Mr. Lee received a B.A. from Korea University, an M.B.A. from University of Wisconsin, and a Ph.D. from University of Illinois in Business Administration. Mr. Lee resigned from his position as Non-Standing Director on April 1, 2026; however, under Korean law, Mr. Lee will continue to serve as a member of the audit committee until his successor is appointed.
Cho, Seong-Jin has been our Non-Standing Director since December 4, 2023. Mr. Cho previously served as a Professor of Energy Science at Kyung Sung University and the Non-Executive Director of Korea Hydro & Nuclear Power Co., Ltd. Mr. Cho received a B.S. in Physics, an M.S. and a Ph.D. in Nuclear Physics from Yonsei University.
Kang, Hoon has been our Non-Standing Director since May 1, 2024. Ms. Kang is currently a Attorney at Law of Barun Law LLC. Mr. Kang previously served as an adjunct professor of Seoul National University and Legal Secretary of the Office of the President. Mr. Kang received a B.A. in Law from Seoul National University.
Lee, Heung-Ryul has been our Non-Standing Director since May 7, 2025. Mr. Lee was appointed as an employee representative director. Mr. Lee previously served as a head of planning department of labor union. Mr. Lee received a B.A. in Public Administration from Kunsan National University.
Term of Office of Directors
The term of our president is three years, while that of our directors (standing or non-standing, but except for the president) is two years. According to the Act on the Management of Public Institutions, our president cannot be dismissed unless it is requested by the President of Korea pursuant to the Act on the Management of Public Institutions or upon an event as specified in our Articles of Incorporation. Under the Korean Commercial Act, if the number of directors is less than the number required under the law or the articles of incorporation, an incumbent director whose term has ended or who has resigned shall nevertheless continue his or her role as a director until a newly appointed director takes office. In such case, our directors may serve as directors beyond two years.
Resolutions of meeting of the Board of Directors
Attendance by a majority of the board members constitutes a voting quorum for our board meetings, and resolutions can be passed by a majority of the board members.
The business address of our directors is 55 Jeollyeok-ro, Naju-si, Jeollanam-do, 58322, Korea.
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Audit Committee
Under the Act on the Management of Public Institutions, which took effect as of April 1, 2007, we are designated as a “market-oriented public enterprise” and, as such, are required to establish an audit committee in lieu of the pre-existing board of auditors upon expiration of the term of the last remaining member of the board of auditors. In September 2007, we amended our Articles of Incorporation to establish, in lieu of the pre-existing board of auditors, an audit committee meeting the requirements under the Sarbanes-Oxley Act. Under the Act on the Management of Public Institutions, the Korean Commercial Act and the amended Articles of Incorporation, we are required to maintain an audit committee consisting of three members, of which not less than two members are required to be non-standing directors. In addition, pursuant to certain amendments to the Act on the Management of Public Institutions that became effective as of January 1, 2021, in appointing the standing member of the audit committee, the director nomination committee shall recommend the person who is qualified in any of the followings: (i) a person who is qualified as a certified public accountant or an attorney and has a minimum of three years of experience in work related to such qualification, (ii) a person who has served as an assistant professor or at a higher position for at least three years in areas directly related to audit, investigation and judicial affairs, budget and accounting, investigation, planning and evaluation, etc. (hereinafter referred to as “audit-related works”) at a school under subparagraphs 1 through 5 of Article 2 of the Higher Education Act), (iii) a person who has been in charge of audit-related works for at least three years at a public institution, stock-listed corporation or research institute under Article 9(15)3 of the Financial Investment Services and Capital Markets Act and has experience prescribed by Presidential Decree, (iv) person who has been in charge of audit-related works for at least three years at the state or a local government and has served as a public official at the level prescribed by Presidential Decree, or (v) person with other expertise in accordance with the affairs of the relevant institution and qualified as prescribed by Presidential Decree.
The roles and responsibilities of our audit committee members are to perform the functions of an audit committee meeting the requirements under the Sarbanes-Oxley Act. Our audit committee was established on December 8, 2008.
On April 2, 2021, we amended our Articles of Incorporation to incorporate an amendment to the Commercial Act implemented on December 29, 2020, which requires at least one director who will serve as a member of the audit committee to be appointed separately from other directors at the meeting of shareholders.
On November 7, 2022, we amended our Articles of Incorporation to incorporate an amendment to the Commercial Act enacted on December 29, 2020. To appoint a member of the audit committee, the Articles requires affirmative votes of (i) at least a majority of the voting rights of the shareholders present at the shareholders meeting and (ii) at least one-fourth of the total voting rights issued and outstanding. In accordance with our amended Articles, if our board of directors passes a resolution, shareholders may exercise their votes by electronic means. In the case where electronic votes are allowed, it requires affirmative votes of at least a majority of the voting rights participating in the voting for appointment of a member of the audit committee.
Jun, Young-Sang, a standing director, Kim, Sung-Eun, a non-standing director, and Lee, Sung-Ho, who has resigned from his position as a non-standing director effective April 1, 2026, are currently members of our audit committee. All such members of the audit committee are independent within the meaning of the Korea Exchange listing standards, the regulations promulgated under the Korean Commercial Act and the New York Stock Exchange listing standards.
ESG Committee
We established an Environment, Social and Governance (“ESG”) Committee within our board of directors to reinforce ESG-based management system and to ensure consistent performance in this area. The ESG Committee consists of four directors. As of the date of this annual report, our ESG committee consists of three non-standing directors, Kim, Jun-Ki and Kim, Jong-Woon, and Kang, Hoon, and one standing director, Oh, Heung-Bok. Our ESG Committee is charged with resolving major management issues related to ESG,
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establishing ESG management strategies and business plans and checking on the overall direction of sustainable management. In 2025, the ESG Committee was convened four times, and its major agenda included the establishment of 2025 environment management plan and publication of a sustainability report.
Power System Committee
We established the Power System Committee within our board of directors to review, evaluate and improve our major power system policies. The Power System Committee consists of four directors. As of the date of this annual report, our Power System Committee consists of three non-standing directors, Han, Jin-Hyun and Cho, Seong-Jin and Lee, Heung-Ryul, and one standing director, Kim, Jae-Koon. Our Power System Committee is responsible for reviewing and addressing major agenda items in the electric power sector, such as major implementation plans related to the power system as requested by the board of directors and inspection of the performance evaluation and feedback of major policies of the power system. In 2025, the Power System Committee convened four times, and its major agenda included the establishment of Eleventh Transmission and Substation Facilities Plan and the initiation of major construction projects exceeding 345 kV.
Compensation
The aggregate amount of remuneration paid to our standing and non-standing directors consist of (i) salaries and wages paid to standing and non-standing directors, which amounted to Won 1,618 million in aggregate in 2025, and (ii) accrued retirement and severance benefits for standing directors, which amounted to Won 62 million in 2025. Under the Act on the Management of Public Institution, our executive officers include the president and the standing and non-standing directors. Standing directors, except the standing director who concurrently serves as a member of our audit committee, take executive positions with our company while the other directors, including non-standing directors, do not. We do not have any other officer who is in charge of a principal business unit, division or function, any other officer who performs a policy making function or any other person who performs similar policy making functions for us.
Board Practices
Under the Act on the Management of Public Institutions and our Articles of Incorporation, for appointments made after April 1, 2007, the term of office for our president is three years and the term of our office for our directors (whether standing or non-standing but not the president) is two years. Our president and directors may be reappointed for one or more additional terms of one year. In order to be reappointed, the president must be evaluated on the basis of his management performance; a standing director, on the basis of the performance of the duties for which he was elected, or if the standing director has executed an incentive bonus contract, on the basis of his performance under the contract; and a non-standing director, on the basis of his performance of the duties for which he was elected.
Our board currently does not maintain a compensation committee. See Item 16.G. “Corporate Governance.” However, we currently maintain an audit committee meeting the requirements of the Sarbanes-Oxley Act to perform the roles and responsibilities of the compensation committee. Prior to the establishment of the audit committee on December 8, 2008 pursuant to the Act on the Management of Public Institutions, we maintained a board of auditors, which performed the roles and responsibilities required of an audit committee under the Sarbanes-Oxley Act, including the supervision of the financial and accounting audit by the independent registered public accountants.
Our president’s management contract includes benefits upon termination of his employment. The amount for termination benefits payable equals the average value of compensation for one month times the number of years the president is employed by us, provided that the president is only eligible for termination benefits after more than one year of continuous service.
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The termination benefits for our standing directors are determined in accordance with our internal regulations for executive compensation. Standing directors are eligible for benefits only upon termination of employment or death following one year of continuous service.
See also Item 16.G. “Corporate Governance” for a further description of our board practices.
Employees
As of December 31, 2025, we and our generation subsidiaries had a total of 48,650 regular employees, almost all of whom are employed within Korea. Approximately 10.9% of our regular employees (including employees of our generation subsidiaries) are located at our head office.
The following table sets forth the number of and other information relating to our regular employees, not including directors or senior management, as of December 31, 2025.
Regular Employees
Administrative
Engineers
Others
Head Office Employees
% of total
Members of Labor Union
We and each of our generation subsidiaries have separate labor unions. Approximately 73.6% of our and our generation subsidiaries’ employees in the aggregate are members of these labor unions, each of which negotiates a collective bargaining agreement for its members each year. Under applicable Korean law, an employee-employer cooperation committee comprised of an equal number of representatives of management and labor (which shall be no less than three and no more than ten representatives from each of management and labor) is required to be established. Accordingly, an employee-employer cooperation committee composed of eight representatives of management and eight representatives of labor has been established within our company and at each of our generation subsidiaries. The committee meets periodically to discuss various labor issues.
Since our formation in 1981, our businesses had not been interrupted by any work stoppages or strikes except in early 2002, when employees belonging to our five non-nuclear generation subsidiaries went on strike for six weeks to protest the Government’s decision to privatize such non-nuclear generation subsidiaries according to the Restructuring Plan, which privatization plan has since been suspended indefinitely. See Item 3.D. “Risk Factors—Risks Relating to KEPCO—The Government may adopt policy measures to substantially restructure the Korean electric power industry or our operational structure, which may have a material adverse effect on our business, operations and profitability.”
We believe our relations with our employees are generally good.
Share Ownership
As of December 31, 2025, none of our directors and members of our administrative, supervisory or management bodies own more than 0.1% of our common stock, individually or in the aggregate.
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Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major Shareholders
The following table sets forth information relating to certain owners of our capital stock as of December 31, 2025:
Title of Class
Identity of Person or Group
Common stock
Government
Common shares
American depositary shares (3)
Percentages are based on issued shares of common stock.
Korea Development Bank is a Government-controlled entity.
The number for American depositary shares (ADSs) presented in this table is the number of common shares underlying the total outstanding ADSs. The actual number of the total outstanding ADSs, each representing one-half of a common share, is 25,512,472.
All of our shareholders have equal voting rights. See Item 10.B. “Memorandum and Articles of Incorporation—Description of Capital Stock—Voting Rights.”
Related Party Transactions
We are engaged in a variety of transactions with our affiliates. We have related party transactions with Government-controlled entities such as Korea Gas Corporation, our consolidated subsidiaries and our equity investees. In addition, we engage in related party transactions with Korea Development Bank, one of our major shareholders. See Note 47 of the notes to our consolidated financial statements included in this annual report for a description of transaction and balances with our related parties.
In the past three years, our related party transactions principally consisted of purchases of LNG from Korea Gas Corporation and long-term borrowings from Korea Development Bank. In 2023, 2024 and 2025, we and our generation subsidiaries purchased LNG from Korea Gas Corporation in the aggregate amount of Won 8,874 billion, Won 6,624 billion and Won 4,959 billion, respectively. As of December 31, 2025, we had borrowings from Korea Development Bank in the aggregate amount of Won 306 billion, which had interest rates ranging from 0.50% to 4.94%, CB rate + 0.90%, as well as 1 year KDB rate + 1.03% for certain operating funds.
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We also engage in extensive transactions with our consolidated generation subsidiaries, including the purchase of electricity from them through Korea Power Exchange, sales of electricity to them, payment and receipt of commissions for services and receivables and payables transactions. These are eliminated in the consolidation process. We also provide guarantees for certain of our affiliates. See Note 47.(7) to our consolidated financial statements included in this annual report for payment guarantees. We also have certain relationships with the Korea Power Exchange. See Item 4.B. “Business Overview—Purchase of Electricity—Cost-based Pool System.”
For a further description of our transactions with our affiliates, see Note 47 of the notes to our consolidated financial statements included in this annual report.
Item 7.C. Interests of Experts and Counsel
FINANCIAL INFORMATION
Item 8.A. Consolidated Statements and Other Financial Information
See Item 18. “Financial Statements” and our consolidated financial statements included in this annual report.
Legal Proceedings
As of December 31, 2025, we and our subsidiaries were engaged in 706 lawsuits as a defendant and 244 lawsuits as a plaintiff. As of the same date, the total amount of damages claimed against us and our subsidiaries was 800 billion, for which we have made a provision of Won 352 billion as of December 31, 2025, and the total amount claimed by us and our subsidiaries was Won 531 billion as of December 31, 2025. While the outcome of any of these lawsuits cannot presently be determined with certainty, our management currently believes that the final results from these lawsuits will not have a material adverse effect on our liquidity, financial position or results of operations.
The following are potentially significant claims pertaining to us and our subsidiaries.
As a result of such ruling by the Supreme Court, we and our subsidiaries became subject to a number of lawsuits filed by various industry-wide and company-specific labor unions based on claims that ordinary wage had been paid without including certain items that should have been included as ordinary wage. In July 2016, the court ruled against us, and in accordance with the court’s ruling, in August 2016 we paid Won 55.1 billion to the
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employees for three years of back pay plus interest. As of December 31, 2025, our subsidiaries set aside an aggregate amount of Won 196.5 billion to cover any potential future payments of additional ordinary and wage in relation to the related lawsuits. All cases are currently on-going at various stages of proceedings. We cannot presently assure you that the courts will not ultimately rule against our subsidiaries in these lawsuits, or that the amount of our reserves against these lawsuits will be sufficient to cover the amounts actually payable under court rulings. Any of these developments would adversely affect our results of operations.
Furthermore, the issue of determining which labor costs should be additionally included as part of ordinary wages has not been fully resolved by the courts reviewing the lawsuits to which our subsidiaries are a party and other ordinary wage lawsuits filed against other companies. For instance, there are several cases pending review of the Supreme Court on whether the bonuses conditional to employee’s current employment status should be included as part of ordinary wages. The Supreme Court, in 2013, had ruled that such conditional bonuses are not a part of ordinary wages, yet there were several lower court cases challenging the Court’s interpretation. Although there was a case of the Supreme Court on November 2022 where it ceased the trial and dismissed the appeal against the lower court case challenging the Court’s interpretation, it is not clear from the above case whether the Supreme Court changed its previous interpretation. If the Supreme Court changes its previous interpretation in its review of the currently pending cases, it is expected to be followed by a series of lawsuits asking for additional payments of the ordinary wages. Due to such uncertainty, we cannot presently assure you that there will not be additional lawsuits in relation to ordinary wages and that we or our subsidiaries may not become liable for greater amount of damages as a result of these lawsuits. Furthermore, court decisions or labor legislations expanding the definition of ordinary wages may prospectively increase the labor costs of us and our subsidiaries. As a result, there can be no assurance that the above-described lawsuits and circumstances will not have a material adverse effect on our results of operations.
In April 2019, a forest fire broke out in Goseong in Gangwon Province, about 210 kilometers from Seoul, causing damages to nearby towns, covering approximately 1,260 hectares. The National Forensic Service has investigated the cause of the fire and has determined that the fire seems to have been started by an electrical arc from our utility pole’s wire, which broke as a result of a strong wind. Based on this finding and follow-up investigations by the Police Department of Goseong, seven employees of KEPCO were prosecuted in connection with the fire. In October 2023, the Supreme Court acquitted the employees. As of March 31, 2026, we have settled with and completed the compensation payment of Won 81.6 billion to victims. In addition, we are also compensating the fire victims by providing a number of services, such as free supply of electricity. We are also implementing measures to prevent future fires that may result from an electrical arc, including a special maintenance program to be enforced during the dry seasons between March and May. We also implemented operational measures such as tailored operation of protective devices and suspension of operation during periods of low loads and plan to change power facility designs to reflect regional and seasonal characteristics, all of which are intended to help prevent similar incidents from happening in the future.
Our generation subsidiaries, currently and from time to time, are involved in lawsuits incidental to the conduct of their business. A significant number of such lawsuits are based on the claim that the construction and operation of the electricity generation units owned by our generation subsidiaries have impaired neighboring fish farms. Our generation subsidiaries normally pay compensation to the members of fishery associations near our power plant complex for expected losses and damages arising from the construction and operation of their power plants in advance. Despite such compensation paid by us, a claim may still be filed against our generation subsidiaries challenging the compensation paid by us.
In September 2023, a group of 40 Korean nationals brought a lawsuit against the Minister of Trade, Industry and Energy to rescind the approval for the construction of Shin-Hanul nuclear power plant #3 and #4. In November 2023, we applied to participate in the lawsuit as a stakeholder, and the first trial is currently in progress at the Seoul Administrative Court. The defendant in the lawsuit has been changed from the Minister of Trade, Industry and Energy to the Ministry of Climate, Energy and Environment.
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The nuclear power plant at Wolsong #1 unit began operations in 1982 and ended its operations in 2012 pursuant to its 30-year operating license. In February 2015, the NSSC evaluated the safety of operating Wolsong #1 unit and approved its extended operation until November 2022. However, on June 15, 2018, the board of directors of KHNP decided to retire Wolsong #1 unit earlier than planned due to comprehensive evaluation of the economic viability and regional sentiment of its continuing operation. On December 24, 2019, the NSSC approved the permanent shutdown of Wolsong #1 unit. The Board of Audit and Inspection of Korea carried out an investigation into whether the shutdown of Wolsong #1 unit was economically feasible and reported that the benefits of continued operations were set unreasonably low compared to the benefits of being immediately shut down, which may have led to the approval of the permanent shutdown of Wolsong #1 unit. According to the results for the investigation on October 20, 2020, KHNP established new guidelines for economic feasibility assessment in December 2021. On June 30, 2021, the Daejeon District Prosecutor’s Office indicted the former CEO of KHNP for his role in approving the early retirement of Wolsong #1 unit, which was the subject of the aforementioned investigation by the Board of Audit Inspection of Korea. The former CEO of KHNP is facing charges of breach of trust and obstruction of business and the case is currently being adjudicated at the Daejeon District Court.
Kori #2 unit began operations in 1983 and was suspended in 2023 due to the expiration of its initial operating license. However, equipment improvements are currently underway following an amendment to the operating license for continued operation from the Nuclear Safety and Security Commission(NSSC). In February 2026, local residents and others filed a lawsuit against the NSSC to cancel the operating license amendment for the life extension of Kori #2 unit. KHNP, determining the need to participate in the lawsuit as an interested party, is currently undergoing procedures for intervention in the litigation.
We and our subsidiaries are also involved in the following arbitrations, among others.
Enzen, one of our subcontractors, filed an arbitration case against us over a contractual dispute in connection with the electric power IT modernization project in Kerala, India. We have not recognized any losses because the probability of economic benefit outflow is remote and the related amount cannot be reasonably determined.
On November 9, 2018, certain of our former executive and employees were convicted in a district court on charges for receiving bribes. In May 2019, the appellate court confirmed the charges.
As part of our efforts to prevent recurrence of similar cases, we have implemented the following measures:
Implementing web training program on integrity for all employees,
Strengthening integrity and anti-corruption evaluation systems for high-ranking officers and reflecting such results in performance evaluations,
Increasing the punishment and penalties for employee corruption, and
Declaring management unaffected by conflicts of interest through banning the pursuit of private interests in the course of job performance and creating a work environment that caters integrity.
We do not believe such claims or proceedings, individually or in the aggregate, have had or will have a material adverse effect on us and our generation subsidiaries. However, we cannot assure you that this will be the case in the future, given the possibility that we may become subject to more legal and arbitral proceedings arising from changes in the environmental laws and regulations as they become applicable to us and our generation subsidiaries, and the related growth in demand for more compensation by actual and potential affected parties. Further, we cannot assure you that the above convictions and/or related events will not have an adverse effect on our reputation as well as the price of our common shares and our American depositary shares.
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Dividend Policy
For our dividend policy, see Item 10.B. “Memorandum and Articles of Incorporation—Description of Capital Stock—Dividend Rights.” For a description of the tax consequences of dividends paid to our shareholders, see Item 10.E. “Taxation—Korean Taxes—Shares or ADSs—Dividends on the Shares of Common Stock or ADSs” and Item 10.E. “Taxation—U.S. Federal Income Tax Consideration for U.S. Persons—Tax Consequences with Respect to Common Stock and ADSs—Distributions on Common Stock or ADSs.”
Item 8.B. Significant Changes
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.
THE OFFER AND LISTING
Item 9.A. Offer and Listing Details
Notes
We have issued the following registered notes and debentures, which are traded principally in the over-the- counter market:
7.95% Zero-To-Full Debentures, due April 1, 2096 (the “7.95% Debentures”);
6% Debentures due December 1, 2026, (the “6% Debentures”);
7% Debentures due February 1, 2027 (the “7% Debentures”); and
6-3/4% Debentures due August 1, 2027 (the “6-3/4% Debentures,” and together with the 7.95% Debentures, the 6% Debentures and the 7% Debentures, the “Registered Debt Securities”).
Sales prices for the Registered Debt Securities are not regularly reported on any United States securities exchange or other United States securities quotation service.”
Share Capital
The principal trading market for our common stock is the Korea Exchange. Our common stock is also listed on the New York Stock Exchange in the form of ADSs. The ADSs have been issued by Citibank, N.A. as depositary and are listed on the New York Stock Exchange under the symbol “KEP.” One ADS represents one-half of one share of our common stock. As of December 31, 2025, 25,512,472ADSs representing 2.0% shares of our common stock were outstanding.
Common Stock
Shares of our common stock are listed on the KRX KOSPI Market of the Korea Exchange. The table below shows the high and low closing prices on the KRX KOSPI Market of the Korea Exchange for our common stock since 2018.
Period
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
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ADSs
The table below shows the high and low closing prices on the New York Stock Exchange for the outstanding ADSs since 2018. Each ADS represents one-half of one share of our common stock.
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Plan of Distribution
Markets
The Korea Exchange
The Korea Exchange began its operations in 1956, originally under the name of the Korea Stock Exchange. On January 27, 2005, pursuant to the Korea Securities and Futures Exchange Act, the Korea Exchange was officially created through the consolidation of the Korea Stock Exchange, the Korea Futures Exchange, the KOSDAQ Stock Market, Inc., or KOSDAQ, and the KOSDAQ Committee within the Korea Securities Dealers Association, which was in charge of the management of the KOSDAQ. The KRX KOSPI Market of the Korea Exchange, formerly the Korea Stock Exchange, has a single trading floor located in Seoul. The Korea Exchange is a limited liability company, the shares of which are held by (i) securities companies and futures companies that were the members of the Korea Stock Exchange or the Korea Futures Exchange and (ii) the shareholders of the KOSDAQ.
As of March 31, 2026, the aggregate market value of equity securities listed on the KOSPI of the Korea Exchange was approximately Won 4,159,086 billion. The average daily trading volume of equity securities for the first quarter of 2026 was approximately 892 million shares with an average transaction value of Won 29,647 billion.
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The Korea Exchange has the power in some circumstances to suspend trading of shares of a given company or to de-list a security. The Korea Exchange also restricts share price movements. All listed companies are required to file accounting reports annually, semi-annually and quarterly and to release immediately all information that may affect trading of a security.
The Government has in the past exerted, and continues to exert, substantial influence over many aspects of the private sector business community which can have the intention or effect of depressing or boosting the market. In the past, the Government has informally both encouraged and restricted the declaration and payment of dividends, induced mergers to reduce what it considers excess capacity in a particular industry and induced private companies to publicly offer their securities.
The Korea Exchange publishes the Korea Composite Stock Price Index, or KOSPI, every ten seconds, which is an index of all equity securities listed on the KRX KOSPI Market of the Korea Exchange. On January 1, 1983, the method of computing KOSPI was changed from the Dow Jones method to the aggregate value method. In the new method, the market capitalizations of all listed companies are aggregated, subject to certain adjustments, and this aggregate is expressed as a percentage of the aggregate market capitalization of all listed companies as of the base date, January 4, 1980.
Movements in KOSPI in the past six years are set out in the following table:
Source: The Korea Exchange
Shares are quoted “ex-dividend” on the first trading day of the relevant company’s accounting period; since the calendar year is the accounting period for the majority of listed companies, this may account for the drop in KOSPI between its closing level at the end of one calendar year and its opening level at the beginning of the following calendar year. Such drop is not observed as often since the official ruling by The Ministry of Justice of Korea on January 31, 2023, that the record date for determining shareholders entitled to exercise of their voting rights at the general meeting of shareholders for declaration of dividends and the record date for determining the shareholders entitled to payment of dividends so declared may be set as different dates.
With certain exceptions, principally to take account of a share being quoted “ex-dividend” and “ex-rights,” upward and downward movements in share prices of any category of shares on any day are limited under the rules of the Korea Exchange to 30% of the previous day’s closing price of the shares, rounded down as set out below:
Previous Day’s Closing Price (Won)
less than 2,000
2,000 to less than 5,000
5,000 to less than 20,000
20,000 to less than 50,000
50,000 to less than 200,000
200,000 to less than 500,000
500,000 or more
The above table is applicable since December 11, 2023.
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As a consequence, if a particular closing price is the same as the price set by the fluctuation limit, the closing price may not reflect the price at which persons would have been prepared, or would be prepared to continue, if so permitted, to buy and sell shares. Orders are executed on an auction system with priority rules to deal with competing bids and offers.
Due to deregulation of restrictions on brokerage commission rates, the brokerage commission rate on equity securities transactions may be determined by the parties, subject to commission schedules being filed with the Korea Exchange by the securities companies. In addition, a securities transaction tax will generally be imposed on the transfer of shares or certain securities representing rights to subscribe for shares. A securities transaction tax of 0.05% and special agricultural and fishery tax of 0.15% of the sales prices will also be imposed on transfer of these shares and securities on the Korea Exchange. See Item 10.E. “Taxation—Korean Taxes.”
The number of companies listed on the KRX KOSPI Market of the Korea Exchange since 2020, the corresponding total market capitalization at the end of the periods indicated and the average daily trading volume for those periods are set forth in the following table:
Converted at the Noon Buying Rate at the end of the periods indicated.
Nextrade, Korea’s alternative trading system (ATS), commenced operations on March 4, 2025. As a result, trading hours have been extended, order types diversified, and transaction costs are expected to decrease due to fee competition. In addition, to ensure investor protection in the context of operating multiple markets, the regulatory authorities have transitioned to an integrated market supervision and oversight system. The Nextrade operates a Pre-Market session from 8:00 a.m. to 8:50 a.m. and an After-Market session from 3:30 p.m. to 8:00 p.m., in addition to the regular trading hours of the Korea Exchange. As a result, daily stock trading hours in Korea will be extended to a total of 12 hours. As of March 31, 2026, 647 stocks were trading on the ATS, including KEPCO.
The Korean securities markets are principally regulated by the Financial Services Commission and the Financial Investment Services and Capital Markets Act. The law imposes restrictions on insider trading and price manipulation, requires specified information to be made available by listed companies to investors and establishes rules regarding margin trading, proxy solicitation, takeover bids, acquisition of treasury shares and reporting requirements for shareholders holding substantial interests.
Protection of Customer’s Interest in Case of Insolvency of Financial Investment Companies with a Brokerage License
Under Korean law, the relationship between a customer and a financial investment company with a brokerage license in connection with a securities sell or buy order is deemed to be consignment, and the
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securities acquired by a consignment agent (i.e., the financial investment company with a brokerage license) through such sell or buy order are regarded as belonging to the customer insofar as the customer and the consignment agent’s creditors are concerned. Therefore, in the event of bankruptcy or reorganization procedures involving a financial investment company with a brokerage license, the customer of such financial investment company is entitled to the proceeds of the securities sold by such financial investment company.
When a customer places a sell order with a financial investment company with a brokerage license which is not a member of the Korea Exchange and this financial investment company places a sell order with another financial investment company with a brokerage license which is a member of the Korea Exchange, the customer is still entitled to the proceeds of the securities sold received by the non-member company from the member company regardless of the bankruptcy or reorganization of the non-member company.
Likewise, when a customer places a buy order with a non-member company and the non-member company places a buy order with a member company, the customer has the legal right to the securities received by the non-member company from the member company because the purchased securities are regarded as belonging to the customer insofar as the customer and the non-member company’s creditors are concerned.
Under the Financial Investment Services and Capital Markets Act, the Korea Exchange is obliged to indemnify any loss or damage incurred by a counterparty as a result of a breach by its members. If a financial investment company with a brokerage license which is a member of the Korea Exchange breaches its obligation in connection with a buy order, the Korea Exchange is obliged to pay the purchase price on behalf of the breaching member.
As the cash deposited with a financial investment company with a brokerage license is regarded as belonging to such financial investment company, which is liable to return the same at the request of its customer, the customer cannot take back deposited cash from the financial investment company with a brokerage license if a bankruptcy or reorganization procedure is instituted against such financial investment company and, therefore, can suffer from loss or damage as a result. However, the Depositor Protection Act provides that Korean Deposit Insurance Corporation will, upon the request of the investors, pay investors up to Won 50 million per depositor per financial institution in case of such financial investment company’s bankruptcy, liquidation, cancellation of securities business license or other insolvency events (collectively, the “Insolvency Events”). On December 27, 2024, the National Assembly passed an amendment to the Depositor Protection Act to raise the deposit protection limit from the current Won 50 million to Won 100 million, which took effect on September 1, 2025. Pursuant to the Financial Investment Services and Capital Markets Act, subject to certain exceptions, financial investment companies with a brokerage license are required to deposit the cash received from their customers with the Korea Securities Finance Corporation, a special entity established pursuant to the Financial Investment Services and Capital Markets Act. Set-off or attachment of cash deposits by financial investment companies with a brokerage license is prohibited. The premiums related to this insurance under the Depositor Protection Act are paid by financial investment companies with a brokerage license.
Selling Shareholders
Dilution
Expenses of the Issue
ADDITIONAL INFORMATION
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Memorandum and Articles of Incorporation
Set forth below is information relating to our capital stock, including brief summaries of material provisions of our Articles of Incorporation, the KEPCO Act, the Financial Investment Services and Capital Markets Act, the Korean Commercial Act and certain related laws of Korea, all currently in effect. The following summaries are qualified in their entirety by reference to our Articles of Incorporation and the applicable provisions of the KEPCO Act, Financial Investment Services and Capital Markets Act, the Korean Commercial Act, the Act on the Management of Public Institutions and certain related laws of Korea.
Objects and Purposes
We are a statutory juridical corporation established under the KEPCO Act for the purpose of ensuring “stabilization of the supply and demand of electric power, and further contributing toward the sound development of the national economy through expediting development of electric power resources and carrying out proper and effective operation of the electricity business.” The KEPCO Act and our Articles of Incorporation (Article 2) contemplate that we engage in the following activities:
Our registered name is “Hankook Chollryuk Kongsa” in Korean and “Korea Electric Power Corporation” in English. Our registration number in the commercial registry office is 114671-0001456.
Directors
Under the KEPCO Act and our Articles of Incorporation, our board of directors consists of our president, standing directors and non-standing directors. A majority of the board members constitutes a voting quorum, and resolutions will be passed by a majority of the board members. Directors who have an interest in certain agenda proposed to the board may not vote on such issues.
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On April 2, 2021, we amended our Articles of Incorporation to accommodate new requirements under the Korean Commercial Act by requiring at least one director who will serve as a member of the audit committee to be appointed separately from other directors and adding details to the dividend record date in the article on shareholder rights.
On November 7, 2022, we further amended our Articles of Incorporation to incorporate an amendment to the Act on the Management of Public Institutions implemented on August 4, 2022, which requires a “market-oriented public enterprise” like us to appoint at least one non-standing director who has held his or her office for at least three years and either (a) is recommended by the representative of the employees (or the representative of the labor union if there is a labor union comprising the majority of the employees) or (b) obtains consent from the majority of the employees. The term of office of a labor director is two years, and candidates must be recommended and approved in accordance with the Act. In accordance with the guidelines for the management of public institutions, we have assigned labor directors in the appropriate departments or duties to ensure that they are able to carry out their responsibilities efficiently, and provide them with educational opportunities.
The standards of remuneration for our officers, including directors, shall be determined by a resolution of the board of directors, provided that the maximum amount of remuneration to be paid to our officers shall be determined by shareholder resolution and provided that the remuneration standards for the president and standing directors shall be determined by board resolution in accordance with the guideline thereon established by the Minister of the Ministry of Finance and Economy through review and resolution of our management committee. Directors who have an interest may not participate in the meeting of the board of directors for determining the remuneration for officers.
Neither the KEPCO Act nor our Articles of Incorporation have provisions relating to (i) borrowing powers exercisable by the directors and how such borrowing powers can be varied, (ii) retirement or non-retirement of directors under an age limit requirement, or (iii) the number of shares required for a director’s qualification.
Currently, our authorized share capital is 1,200,000,000 shares, which consists of shares of common stock and shares of non-voting preferred stock, par value Won 5,000 per share. Under our Articles of Incorporation, we are authorized to issue up to 150,000,000 non-voting preferred shares. As of December 31, 2025, 641,964,077 common shares were issued and no non-voting preferred shares have been issued. All of the issued and outstanding common shares are fully-paid and non-assessable and are in registered form. Our shares are electronically registered with our account management institution in lieu of issuing share certificates.
Description of Capital Stock
Dividend Rights
Under the KEPCO Act, we are authorized to pay preferential dividends on our shares held by public shareholders as opposed to those held by the Government. Dividends to public shareholders are distributed in proportion to the number of shares of the relevant class of capital stock owned by each public shareholder following approval by the shareholders at a general meeting of shareholders. Korea Development Bank may receive dividends in proportion to the numbers of our shares held by them. Under the Korean Commercial Act and our Articles of Incorporation, we will pay full annual dividends on newly issued shares.
Under our Articles of Incorporation, holders of non-voting preferred shares (of which there are currently none) are entitled to receive an amount not less than 8% of their par value as determined by a resolution of the board of directors at the time of their issuance. However, stock dividends shall be paid based on par value and may not exceed the amount equivalent to a half of the total amount of profit available for dividend payment.
We declare our dividend annually at the annual general meeting of shareholders which is held within three months after the end of the fiscal year. The Ministry of Justice of Korea has recently issued an official ruling to
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the effect that (i) a record date for determining shareholders entitled to exercise of their voting rights at the general meeting of shareholders for declaration of dividends and (ii) a record date for determining the shareholders entitled to payment of dividends so declared may be separately set. Based on the foregoing official ruling, the Government is recommending the listed companies to set the record date for determining the shareholders entitled to payment of dividends after the date of the general meeting of shareholders by resolution of their board of directors so that the investors may invest in the shares of the listed companies after checking whether the dividend is declared and the amount of dividend so declared.
In line with this recommendation, we amended our Articles of Incorporation, which were approved by the Ministry of Climate, Energy and Environment on April 7, 2026, and took effect on April 8, 2026. Under these amendments, the annual dividend will be paid to the shareholders on record as of the date determined by a resolution of the board of directors, while the record date for determining shareholders entitled to exercise their voting rights at the general meeting of shareholders for declaration of dividends will remain December 31. Annual dividends may be distributed either in cash or in our shares. However, a dividend of shares must be distributed at par value, and dividends in shares may not exceed one-half of the annual dividend.
Under the Korean Commercial Act and our Articles of Incorporation, we do not have an obligation to pay any annual dividend unclaimed for five years from the payment date.
The KEPCO Act provides that we shall not pay an annual dividend unless we have made up any accumulated deficit and set aside as a legal reserve an amount equal to 20.0% or more of our net profit until our accumulated reserve reaches one-half of our stated capital.
Distribution of Free Shares
In addition to dividends in the form of shares to be paid out of retained or current earnings, the Korean Commercial Act permits us to distribute to our shareholders an amount transferred from our capital surplus or legal reserve to stated capital in the form of free shares.
Voting Rights
Holders of our common shares are entitled to one vote for each common share, except that voting rights with respect to any common shares held by us or by a corporate shareholder, more than one-tenth of whose outstanding capital stock is directly or indirectly owned by us, may not be exercised. Any person (with certain exceptions) who holds more than 3% of our issued and outstanding shares cannot exercise voting rights with respect to the shares in excess of this 3% limit. See “—Limitation on Shareholdings.” Pursuant to the Korean Commercial Act, cumulative voting is permissible in relation to the appointment of directors. Under the Korean Commercial Act, a cumulative vote can be requested by the shareholders of a corporation representing at least 1% of the total voting shares of such corporation if the relevant shareholders’ meeting is intended to elect more than two seats of the board of directors and the request for cumulative voting is made to the management of the corporation in writing at least six weeks in advance of the shareholders’ meeting. Under this new voting method, each shareholder will have multiple voting rights corresponding to the number of directors to be appointed in such voting and may exercise all such voting rights to elect one director. Shareholders are entitled to vote cumulatively unless the Articles of Incorporation expressly prohibit cumulative voting. Our current Articles of Incorporation do not prohibit cumulative voting. Except as otherwise provided by law or our Articles of Incorporation, a resolution can be adopted at a general meeting of shareholders by affirmative majority vote of the voting shares of the shareholders present or represented at a meeting, which must also represent at least one-fourth of the voting shares then issued and outstanding. The holders of our non-voting preferred shares (other than enfranchised preferred shares (as described below)) are not entitled to vote on any resolution or to receive notice of any general meeting of shareholders unless the agenda of the meeting includes consideration of a resolution on which such holders are entitled to vote. If we are unable to pay any dividend to holders of non-voting preferred shares as provided in our Articles of Incorporation, the holders of non-voting preferred
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shares will become enfranchised and will be entitled to exercise voting rights until such dividends are paid. The holders of these “enfranchised preferred shares” have the same rights as holders of our common shares to request, receive notice of, attend and vote at a general meeting of shareholders. Pursuant to the KEPCO Act and our Articles of Incorporation, the appointment of standing directors, the president and standing member of the audit committee are subject to shareholder approval.
Under the Korean Commercial Act, for the purpose of electing our standing member of the audit committee, a shareholder (together with certain related persons) holding more than 3% of the total shares having voting rights may not exercise voting rights with respect to shares in excess of such 3% limit and, according to the amendments to Articles of Incorporation and the Korean Commercial Act, the standing member of the audit committee should be appointed separately from other directors with the procedures and methods stipulated in Article 542-12 of the Korean Commercial Act. On November 7, 2022, we amended our Articles of Incorporation to incorporate an amendment to the Commercial Act implemented on December 29, 2020, which requires the affirmative votes of at least a majority of the voting rights of the shareholders present at the shareholders meeting for appointment of a member of the audit committee in lieu of the affirmative votes of (a) at least a majority of the voting rights of the shareholders present at the shareholders meeting and (b) at least one-fourth (1/4) of the total number of shares with the voting rights issued and outstanding if the shareholders are permitted to exercise a vote by electronic means at such shareholders meeting by the resolution of our board of directors.
The Korean Commercial Act provides that the approval by holders of at least two-thirds of those shares having voting rights present or represented at a meeting, where such shares also represent at least one-third of the total issued and outstanding shares having voting rights, is required in order to, among other things:
amend our Articles of Incorporation;
remove a director (including a member of the audit committee);
effect any dissolution, merger, consolidation or spin-off of us;
transfer the whole or any significant part of our business;
effect the acquisition by us of all of the business of any other company;
effect the acquisition by us of the business of another company that may have a material effect on our business;
reduce capital; or
issue any new shares at a price lower than their par value.
Under our Articles of Incorporation, an approval by the Ministry of Climate, Energy and Environment is required in order to amend the Articles of Incorporation. Any change to our authorized share capital requires an amendment to our Articles of Incorporation.
In addition, in the case of amendments to our Articles of Incorporation or any merger or consolidation of us or in certain other cases which affect the rights or interests of the non-voting preferred shares a resolution must be adopted by a meeting of the holders of non-voting preferred shares approving such event. This resolution may be adopted if approval is obtained from holders of at least two-thirds of those non-voting preferred shares present or represented at such meeting and such non-voting preferred shares also represent at least one-third of our total issued and outstanding non-voting preferred shares.
A shareholder may exercise his voting rights by proxy. The proxy shall present the power of attorney prior to the start of the general meeting of shareholders. Under the Financial Investment Services and Capital Markets Act and our Articles of Incorporation, no one other than us may solicit a proxy from shareholders.
Subject to the provisions of the deposit agreement, holders of our American Depositary Shares (“ADSs”) are entitled to instruct the depositary, whose agent is the record holder of the underlying common shares, how to exercise voting rights relating to those underlying common shares.
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Preemptive Rights and Issuance of Additional Shares
Authorized but unissued shares may be issued at such times and, unless otherwise provided in the Korean Commercial Act, upon such terms as our board of directors may determine. The new shares must be offered on uniform terms to all our shareholders who have preemptive rights and who are listed on the shareholders’ register as of the record date. Subject to the limitations described under “—Limitation on Shareholdings” below and with certain other exceptions, all our shareholders are entitled to subscribe for any newly issued shares in proportion to their existing shareholdings. Under the Korean Commercial Act, we may vary, without shareholder approval, the terms of such preemptive rights for different classes of shares. Public notice of the preemptive rights to new shares and their transferability must be given not less than two weeks (excluding the period during which the shareholders’ register is closed) prior to the record date. Our board of directors may determine how to distribute shares for which preemptive rights have not been exercised or where fractions of shares occur.
Our Articles of Incorporation provide that new shares that are (1) publicly offered pursuant to the Financial Investment Services and Capital Markets Act, (2) issued to members of our employee stock ownership association, (3) represented by depositary receipts, (4) issued through offering to public investors, or (5) issued to investors in kind under the State Property Act may be issued pursuant to a resolution of the board of directors to persons other than existing shareholders, who in such circumstances will not have preemptive rights.
Under our Articles of Incorporation, we may issue convertible bonds or bonds with warrants each up to an aggregate principal amount of Won 2,000 billion and Won 1,000 billion, respectively, to persons other than existing shareholders. However, the aggregate principal amount of convertible bonds and bonds with warrants so issued to persons other than existing shareholders may not exceed Won 2,000 billion. The convertible bonds or bonds with warrants issued by us shall be electronically registered on the electronic registry maintained by the electronic registrar, in lieu of issuing any physical certificates representing such bonds in accordance with the Electronic Registration Act.
Under the Financial Investment Services and Capital Markets Act and our Articles of Incorporation, members of our employee stock ownership association, whether or not they are our shareholders, have a preemptive right, subject to certain exceptions, to subscribe for up to 20.0% of any shares publicly offered pursuant to the Financial Investment Services and Capital Markets Act. This right is exercisable only to the extent that the total number of shares so acquired and held by members of our employee stock ownership association does not exceed 20.0% of the total number of shares then outstanding.
Liquidation Rights
In the event of our liquidation, the assets remaining after payment of all debts, liquidation expenses and taxes will be distributed among shareholders in proportion to the number of shares held. Holders of our non-voting preferred shares have no preference in liquidation.
Rights of Dissenting Shareholders
In certain limited circumstances (including, without limitation, the transfer of the whole or any significant part of our business or the merger, or consolidation upon a split-off of us with another company), dissenting holders of shares have the right to require us to purchase their shares. To exercise such right, shareholders must submit a written notice of their intention to dissent to us prior to the general meeting of shareholders or the class meeting of holders of non-voting preferred shares, as the case may be. Within 20 days after the date on which the relevant resolution is passed at such meeting, such dissenting shareholders must request us in writing to purchase their shares. We are obligated to purchase the shares of dissenting shareholders within one month after the expiration of such 20-day period. The purchase price for such shares must be determined through negotiation between the dissenting shareholders and us. Under the Financial Investment Services and Capital Markets Act, if we cannot agree on a price through negotiation, the purchase price will be the average of (1) the weighted
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average of the daily share price on the Korea Exchange for a two-month period before the date of adoption of the relevant board resolution, (2) the weighted average of the daily share price on the Korea Exchange for the one month period before such date and (3) the weighted average of the daily share price on the Korea Exchange for the one week period before such date. However, if we or dissenting shareholders who requested us to purchase their shares oppose such purchase price, the determination of a purchase price may be filed with a court. Holders of ADSs will not be able to exercise dissenter’s rights unless they have withdrawn the underlying Common Stock and become our direct shareholders.
Transfer of Shares
Under the Electronic Registration Act, the transfer of shares is effected by the electronic registration of such transfers on an electronic register pursuant to the Electronic Registration Act, under which the electronic registration of stocks, bonds and transfers thereof will be required. To assert shareholders’ right against us, the transferee must have his name and address registered on our electronic register of shareholders. For this purpose, a shareholder is required to apply for electronic registration of transfers between accounts.
These requirements do not apply to the holders of ADSs. Under current Korean regulations, the Korea Securities Depository, foreign exchange banks (including domestic branches of foreign banks), financial investment companies with a dealing, brokerage or collective investment license and internationally recognized foreign custodians are authorized to act as agents and provide related services for foreign shareholders. Our transfer agent is Kookmin Bank, located at 26, Gukjegeumyung-ro 8-gil, Yeongdeungpo-gu, Seoul, Korea. Certain foreign exchange controls and securities regulations apply to the transfer of our shares by non-residents of Korea or non-Koreans. See Item 9. “The Offer and Listing.”
Acquisition of Our Own Shares
Under the Korean Commercial Act, we may acquire our own shares through (1) purchases on a stock exchange or (2) purchase of the shares in proportion to the number of shares held by each shareholder on equal terms and conditions, by a resolution at a Shareholders’ meeting. The aggregate amount of the acquisition price shall not exceed the excess of our net assets, on a non-consolidated basis, over the sum of (1) our stated capital, (2) the total amount of our capital surplus reserve and earned surplus reserve which have accumulated up to the end of the previous fiscal year, (3) our earned surplus required to be accumulated for the then current fiscal year and (4) our net assets stated in the balance sheet as being increased as a result of the evaluation of the assets and liabilities in accordance with our accounting principles without being set off against any unrealized losses. In addition, under the Korean Commercial Act, we may not acquire our own shares if our net assets may fall short of the aggregate amount of the item (1) to (4) above, on a non-consolidated basis, as of the conclusion of the relevant business year of us. In general, our subsidiaries 50% or more of whose shares are owned by us may not acquire our shares.
General Meeting of Shareholders
The ordinary general meeting of our shareholders is held within three months after the end of each fiscal year, and subject to board resolution or court approval, an extraordinary general meeting of our shareholders may be held as necessary or at the request of shareholders holding an aggregate of 1.5% or more of our outstanding common shares for at least six consecutive months. Under the Korean Commercial Act, an extraordinary general meeting of shareholders may be convened at the request of our audit committee, subject to a board resolution or court approval. Holders of non-voting preferred shares may only request a general meeting of shareholders once the non-voting preferred shares have become enfranchised as described under “—Description of Capital Stock—Voting Rights” above. Written notices setting forth the date, place and agenda of the meeting must be given to shareholders at least two weeks prior to the date of the general meeting of shareholders. However, pursuant to the Korean Commercial Act and our Articles of Incorporation, with respect to holders of less than 1% of the total number of our issued and outstanding shares which are entitled to vote, notice may be given by
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placing at least two public notices at least two weeks in advance of the meeting in at least two daily newspapers published in Seoul or by placing a public notice in the electrical disclosure system of the Financial Supervisory Service or the Korea Exchange, at least two weeks in advance of the meeting. Currently, for giving such notice, we use an electronic disclosure system available for access at a website maintained by the Financial Supervisory Service (known as the Data Analysis, Retrieval and Transfer System, or DART). Shareholders not on the shareholders’ register as of the record date are not entitled to receive notice of the general meeting of shareholders or attend or vote at such meeting. Holders of the enfranchised preferred shares on the shareholders’ register as of the record date are entitled to receive notice of, and to attend and vote at, the general meetings. Otherwise, holders of non-voting preferred shares are not entitled to receive notice of general meetings of shareholders or vote at such meetings.
The general meeting of shareholders is held in Naju, Jeollanam-do.
Register of Shareholders and Record Dates
Our transfer agent, Kookmin Bank, maintains the register of our shareholders at its office in Seoul, Korea. It registers transfers of our shares on the register of shareholders upon presentation of the share certificates.
The register of shareholders may be closed from January 1 to January 31 of each year. The Ministry of Justice of Korea has recently issued an official ruling to the effect that (i) a record date for determining shareholders entitled to exercise of their voting rights at the general meeting of shareholders for declaration of dividends and (ii) a record date for determining the shareholders entitled to payment of dividends so declared may be separately set. Based on the foregoing official ruling, the Government is recommending the listed companies to set the record date for determining the shareholders entitled to payment of dividends after the date of the general meeting of shareholders by resolution of their board of directors so that the investors may invest in the shares of the listed companies after checking whether the dividend is declared and the amount of dividend so declared.
In line with this recommendation, we amended our Articles of Incorporation, which were approved by the Ministry of Climate, Energy and Environment on April 7, 2026, and took effect on April 8, 2026. Under these amendments, the annual dividend will be paid to the shareholders on record as of the date determined by a resolution of the board of directors, while the record date for determining shareholders entitled to exercise their voting rights at the general meeting of shareholders for declaration of dividends will remain December 31.
Further, the Korean Commercial Act and our Articles of Incorporation permit us at least two weeks’ public notice to set a record date and/or close the register of shareholders for not more than three months for the purpose of determining the shareholders entitled to certain rights pertaining to our shares. The trading of our shares and the electronic registration of share transfer between accounts pursuant to the Electronic Registration Act in respect of them may continue while the register of shareholders is closed.
Annual Report
At least one week prior to the annual general meeting of shareholders, our business report and audited consolidated financial statements must be made available for inspection at our principal office and at all branch offices. Copies of business reports, the audited non-consolidated financial statements and any resolutions adopted at the general meeting of shareholders will be available to our shareholders.
Under the Financial Investment Services and Capital Markets Act, we must file with the Financial Services Commission and the Korea Exchange an annual report within 90 days after the end of our fiscal year, a half-year report within 45 days after the end of the first six months of our fiscal year and quarterly reports within 45 days after the end of the first three months and nine months of our fiscal year. Following our adoption of IFRS starting in January 1, 2011 pursuant to regulatory requirements for listed companies in Korea, we are required to file annual, half-year and quarterly reports containing annual and interim financial statements and notes thereto on a consolidated basis as well as on a separate basis.
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In addition, pursuant to the Enforcement Decree of the Commercial Act, when a Korean listed company convokes a meeting of shareholders, it shall provide shareholders with the annual report and the audit report by sending them via email or posting them on its website no later than a week prior to the meeting of shareholders.
Limitation on Shareholdings
No person other than the Government, our employee stock ownership association and persons who obtain an approval from the Financial Services Commission may hold for its account more than 3% of our total issued and outstanding shares. In calculating shareholdings for this purpose, shares held by your spouse and your certain relatives or by your certain affiliates (such spouses, relatives and affiliates are together referred to as “Affiliated Holders”) are deemed to be held by you. If you hold our shares in violation of this 3% limit, you are not entitled to exercise the voting rights or preemptive rights of our shares in excess of such 3% limit and the Financial Services Commission may order you to take necessary corrective action. In addition, the KEPCO Act currently requires that the Government, directly or through Korea Development Bank, own not less than 51% of our capital. For other restrictions on shareholdings, see Item 9. “The Offer and Listing.”
Change of Control
The KEPCO Act requires that the Government, directly or pursuant to the Korea Development Bank Act, through Korea Development Bank, own not less than 51% of our capital.
Disclosure of Share Ownership
Under the Financial Investment Services and Capital Markets Act, any person whose direct or beneficial ownership of a listed company’s shares with voting rights, equity-related debt securities including convertible bonds, bonds with warrants, exchangeable bonds, certificates representing the rights to subscribe for common shares, derivatives-linked securities and depository receipts of the aforementioned securities (collectively referred to as “Equity Securities”), together with the Equity Securities directly or beneficially owned by certain related persons or by any person acting in concert with the person, accounts for 5% or more of our total outstanding Equity Securities is required to report the status and purpose (in terms of whether the purpose of shareholding is to participate in the management of the issuer) of the holdings and the material contents of the agreements relating to the Equity Securities and other matters prescribed by the Presidential Decree under the Financial Investment Services and Capital Markets Act to the Financial Services Commission of Korea and the Korea Exchange within five business days after reaching the 5% ownership interest threshold.
In addition, (A) any change in the number of the owned Equity Securities that is 1% or more of the total outstanding Equity Securities subsequent to the report or (B) any change in (i) the purpose of the shareholding or ownership of the Equity Securities (whether such shareholding or ownership is to participate in the management of the listed company or not), (ii) whether such shareholding or ownership is for a simple investment purpose or not (limited to the case where the purpose of the shareholding or ownership of the Equity Securities is not to participate in the management of the listed company), (iii) the major terms and conditions of the agreements relating to the Equity Securities owned (such as trust agreements and collateral agreements) to the extent the number of relevant Equity Securities is 1% or more of the total outstanding Equity Securities or (iv) the type of the ownership (direct ownership or holdings) to the extent the number of relevant Equity Securities is equal to or exceeds 1% of the total outstanding Equity Securities, subsequent to the report, must be reported to the Financial Services Commission and the Korea Exchange. Changes set forth in clauses (A) and (B) above must be reported within five business days from the date of such change (or by the tenth day of the month following the month in which the change described in (A) above occurs, in the case of a person (other than certain professional investors prescribed by the Presidential Decree under the Financial Investment Services and Capital Markets Act) with a purpose of simple investment, or within ten business days from the date of such change in the case of a person with a purpose of general investment with no intent to seek management control).
Notwithstanding the foregoing, certain professional investors prescribed by the Presidential Decree of the Financial Investment Services and Capital Markets Act may report the 5% ownership status and the changes
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described in (A) above to the Financial Services Commission and the Korea Exchange by the tenth day of the month immediately following the end of the quarter in which such 5% ownership interest is reached or the change occurs.
When filing a report to the Financial Services Commission and the Korea Exchange in accordance with the reporting requirements described above, a copy of such report must be sent to the relevant listed company. Violation of these reporting requirements may subject a person to sanctions such as prohibition on the exercise of voting rights with respect to the Equity Securities for which the reporting requirement was violated or fines or imprisonment. Furthermore, the Financial Services Commission may order the disposal of the Equity Securities for which the reporting requirement was violated or may impose administrative fine.
A person reporting to the Financial Services Commission and the Korea Exchange that his purpose of holding the Equity Securities is to participate in the management of the listed company is prohibited from acquiring additional Equity Securities of the listed company and exercising voting rights during the period commencing from the date on which the event triggering the reporting requirements occurs to the fifth day from the date on which the report is made.
Material Contracts
None.
Exchange Controls
General
The Foreign Exchange Transaction Act and the Presidential Decree and regulations under that Act and Decree, or collectively the Foreign Exchange Transaction Laws, regulate investment in Korean securities by non-residents and issuance of securities outside Korea by Korean companies. Non-residents may invest in Korean securities pursuant to the Foreign Exchange Transaction Laws. The Financial Services Commission has also adopted, pursuant to its authority under the Financial Investment Services and Capital Markets Act, regulations that regulate investment by foreigners in Korean securities and issuance of securities outside Korea by Korean companies.
Subject to certain limitations, the Ministry of Finance and Economy has the authority to take the following actions under the Foreign Exchange Transaction Laws: (i) if the Government deems it necessary on account of war, armed conflict, natural disaster or grave, sudden and significant changes in domestic or foreign economic circumstances or similar events or circumstances, the Ministry of Finance and Economy may temporarily suspend performance under any or all foreign exchange transactions, in whole or in part, to which the Foreign Exchange Transaction Laws apply (including suspension of payment and receipt of foreign exchange) or impose an obligation to deposit, safe-keep or sell any instruments of payment to the Bank of Korea or certain other governmental agencies or a foreign exchange equalization fund or financial institutions, or effective from July 18, 2017, impose an obligation on resident creditors to collect and recover debts owed by non-resident debtors, and (ii) if the Government concludes that the international balance of payments and international financial markets are experiencing or are likely to experience significant disruption or that the movement of capital between Korea and other countries are likely to adversely affect the Korean Won, exchange rates or other macroeconomic policies, the Ministry of Finance and Economy may take action to require any person who intends to effect or effects a capital transaction to obtain permission or to deposit a portion of the instruments of payment acquired in such transactions with the Bank of Korea or a foreign exchange equalization fund or financial institutions.
Government Review of Issuances of Debt Securities and ADSs and Report for Payments
In order for us to issue debt securities of any series outside of Korea, we are required to file a report with our designated foreign exchange bank or the Ministry of Finance and Economy on the issuance of such debt
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securities, depending on the issuance amount. The Ministry of Finance and Economy may at its discretion direct us to take measures as necessary to avoid undue exchange rate fluctuations before it accepts such report. Furthermore, in order for us to make payments of principal of or interest on the debt securities of any series and other amounts as provided in an indenture and such debt securities, we are required to present relevant documents to the designated foreign exchange bank at the time of each actual payment. The purpose of such presentation is to ensure that the actual remittance is consistent with the terms of the transaction reported to our designated foreign exchange bank or the Ministry of Finance and Economy.
In order for us to offer for purchase shares of our common stock held in treasury in the form of ADSs or issue shares of our common stock represented by the ADSs, we are required to file a prior report of such offer or issuance with our designated foreign exchange bank or the Ministry of Finance and Economy, depending on the offering amount. The Ministry of Finance and Economy may at its discretion direct us to take measures as necessary to avoid undue exchange rate fluctuations before it accepts such report. No further governmental approval is necessary for the initial offering and issuance of the ADSs.
In order for a depositary to acquire any existing shares of our common stock from holders of these shares of common stock (other than from us) for the purpose of issuance of depositary receipts representing these shares of common stock, the depositary would be required to obtain our consent for the number of shares to be deposited in any given proposed deposit which exceeds the difference between (1) the aggregate number of shares deposited by us or with our consent for the issuance of ADSs (including deposits in connection with the initial and all subsequent offerings of ADSs and stock dividends or other distributions related to these ADSs) and (2) the number of shares on deposit with the depositary at the time of such proposed deposit. We may not grant this consent for the deposit of shares of our common stock in the future, if our consent is required. Therefore, a holder of ADSs who surrenders ADSs and withdraws shares of our common stock may not be permitted subsequently to deposit such shares and obtain ADSs.
In addition, we are also required to notify the Ministry of Finance and Economy upon receipt of the full proceeds from the offering of ADSs. No additional governmental approval is necessary for the offering and issuance of ADSs.
Reporting Requirements for Holders of Substantial Interests
Under the Financial Investment Services and Capital Markets Act, any person whose direct beneficial ownership of a listed company’s Equity Securities, together with the Equity Securities beneficially owned by certain related persons or by any person acting in concert with such person, accounts for 5% or more of our total outstanding Equity Securities is required to report the status and purpose (namely, whether the purposes of the share ownership is to participate in the management of the issuer) of the holdings and the material contents of the agreements relating to the Equity Securities and other matters prescribed by the Presidential Decree under the Financial Investment Services and Capital Markets Act to the Financial Services Commission and the Korea Exchange within five business days after reaching the 5% ownership interest and any change in ownership interest subsequent to the report which equals or exceeds 1.0% of the total outstanding Equity Securities is required to be reported to the Financial Services Commission and the Korea Exchange within five business days from the date of the change.
In addition, (A) any change in the number of the owned Equity Securities that is 1% or more of the total outstanding Equity Securities subsequent to the report or (B) any change in (i) the purpose of the shareholding or ownership of the Equity Securities (whether such shareholding or ownership is to participate in the management of the listed company or not), (ii) whether such shareholding or ownership is for a simple investment purpose or not (limited to the case where the purpose of the shareholding or ownership of the Equity Securities is not to participate in the management of the listed company), (iii) the major terms and conditions of the agreements relating to the Equity Securities owned (such as trust agreements and collateral agreements) to the extent the number of relevant Equity Securities is 1% or more of the total outstanding Equity Securities or (iv) the type of
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the ownership (direct ownership or holdings) to the extent the number of relevant Equity Securities is equal to or exceeds 1% of the total outstanding Equity Securities, subsequent to the report, must be reported to the Financial Services Commission and the Korea Exchange. Changes set forth in clauses (A) and (B) above must be reported within five business days from the date of such change (or by the tenth day of the month following the month in which the change described in (A) above occurs, in the case of a person (other than certain professional investors prescribed by the Presidential Decree under the Financial Investment Services and Capital Markets Act) with a purpose of simple investment, or within ten business days from the date of such change in the case of a person with a purpose of general investment with no intent to seek management control).
Notwithstanding the foregoing, certain professional investors prescribed by the Presidential Decree of the Financial Investment Services and Capital Markets Act may report the 5% ownership status and the changes described in (A) above to the Financial Services Commission and the Korea Exchange by the tenth day of the month immediately following the end of the quarter in which such 5% ownership interest is reached or the change occurs.
In addition to the reporting requirements described above, any person whose direct or beneficial ownership of our voting stock and/or depository receipts for our voting stock accounts for 10.0% or more of the total issued and outstanding voting stock, whom we refer to as a major shareholder, must file a report to the Securities and Futures Commission and to the Korea Exchange within five business days after the date on which the person reached such shareholding percentage. In addition, such person must file a report to the Securities and Futures Commission and to the Korea Exchange regarding any subsequent change in his/her shareholding. Such report on subsequent change in shareholding must be filed within five business days of the occurrence of any such change. Violation of these reporting requirements may subject a person to criminal sanctions such as fines and imprisonment.
Restrictions Applicable to ADSs
No governmental approval is necessary for the sale and purchase of ADSs in the secondary market outside Korea or for the withdrawal of shares of our common stock underlying ADSs and the delivery inside Korea of the withdrawn shares.
Special Reporting Requirement for Companies Whose Securities Are Listed on Foreign Exchanges
Under the regulations of the Financial Services Commission and the Korea Exchange, (i) if a company listed on the Korea Exchange has submitted a public disclosure of material matters to a foreign financial investment supervisory authority pursuant to the laws of the foreign jurisdiction, then it must submit a copy of the public disclosure and a Korean translation thereof to the Financial Services Commission of Korea and the Korea Exchange, and (ii) if a company listed on the Korea Exchange is approved for listing on a foreign stock market or determined to be de-listed from the foreign stock market or actually listed on, or de-listed from, a foreign stock
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market, then it must submit a copy of any document, which it submitted to or received from the relevant foreign government, foreign financial investment supervisory authority or the foreign stock market, and a Korean translation thereof to the Financial Services Commission of Korea and the Korea Exchange.
Persons who have acquired shares of our common stock as a result of the withdrawal of shares of common stock underlying ADSs may exercise their preemptive rights for new shares, participate in free distributions and receive dividends on shares of our common stock without any further governmental approval.
Restrictions Applicable to Common Stock
Under the Foreign Exchange Transaction Laws and the Regulations on Financial Investment Business (together, the “Investment Rules”), foreigners are permitted to invest, subject to certain exceptions and procedural requirements, in all shares of Korean companies unless prohibited by specific laws. Foreign investors may trade shares listed on the Korea Exchange only through the Korea Exchange except for certain limited circumstances. These circumstances include, among others, (1) odd-lot trading of shares, (2) acquisition of shares by a foreign company as a result of a merger, (3) acquisition or disposal of shares in connection with a tender offer, (4) acquisition of shares by exercise of warrant, conversion right under convertible bonds, exchange right under exchangeable bonds or withdrawal right under depositary receipts, each issued outside of Korea by a Korean company, such shares being “Converted Shares,” (5) acquisition of shares through exercise of rights under securities issued outside of Korea, (6) acquisition of shares as a result of inheritance, donation, bequest or exercise of shareholders’ rights (including preemptive rights or rights to participate in free distributions and receive dividends), (7) over-the-counter transactions between foreigners of a class of shares for which a ceiling on aggregate acquisition by foreigners (as explained below) exists and has been reached or exceeded, (8) acquisition of shares by direct investment under the Foreign Investment Promotion Law, (9) acquisition and disposal of shares on an overseas stock exchange market, if such shares are simultaneously listed on the KRX KOSPI Market or the KRX KOSDAQ Market of the Korea Exchange and such overseas stock exchange, and (10) arm’s length transactions between foreigners in the event all such foreigners belong to an investment group managed by the same person.
Following the amendment and enforcement of the Regulations on Financial Investment Business as of December 14, 2023, (i) the foreign investor registration requirement has been abolished, and foreign investors are allowed to open a brokerage account with a financial investment company or financial institution in Korea only with (in case of the foreign legal entity) LEI (Legal Entity Identifier) or (in case of the foreign individual) his or her passport number (as the case may be), (ii) the scope of the over-the-counter transactions exceptionally permitted such as the transactions without change of actual owner (e.g., merger of funds, transaction between feeder fund and master fund, between asset manager and fund managed by such asset manager or between funds managed by the same asset manager) has been expanded, (iii) the use of omnibus account for foreign investors has been facilitated by abolishing the reporting requirement for trading details of the listed shares by each end-investor immediately after the settlement and (iv) the post-reporting procedures, applying to the over-the-counter transactions exceptionally permitted, have been simplified.
A foreign investor may appoint one or more standing proxies from among the Korea Securities Depository, foreign exchange banks (including domestic branches of foreign banks), financial investment companies (including domestic branches of foreign financial investment companies) with a dealing, brokerage or collective investment license, certain eligible foreign custodians and Bank of Korea (limited to business regarding treasury bonds, fiscal bonds, monetary stabilization bonds and foreign exchange stabilization bonds held or to be held by foreign central banks, international financial organizations, foreign governments, etc.) which will exercise shareholders’ rights or perform any matters related to the foregoing activities if the foreign investor does not perform these activities himself. Generally, a foreign investor may not permit any person, other than his/her standing proxy, to exercise rights relating to his shares or perform any tasks related thereto on his behalf. However, a foreign investor may be exempted from complying with these standing proxy rules with the approval of the Governor of the Financial Supervisory Service in cases deemed inevitable by reason of conflict between the laws of Korea and those of the home country of the foreign investor.
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The shares of a listed Korean company owned by a foreign investor must be deposited (including electronically registered in accordance with the Electronic Registration Act) through an eligible custodian in Korea. Only the Korea Securities Depository, foreign exchange banks (including domestic branches of foreign banks), financial investment companies (including domestic branches of foreign financial investment companies) with a dealing, brokerage or collective investment license and certain eligible foreign custodians are eligible to be a custodian of shares for a foreign investor; provided, however, that a foreign investor is exempted from the above requirement if it (i) acquires shares publicly offered or sold outside Korea for the purpose of listing on an overseas stock exchange or (ii) acquires or disposes of shares through an overseas stock exchange if such shares are simultaneously listed on the Korea Exchange and such overseas stock exchange. Furthermore, a foreign investor may be exempted from complying with this deposit requirement with the approval of the Governor of the Financial Supervisory Service in circumstances where compliance with that requirement is made impracticable, including cases where compliance would contravene the laws of the home country of such foreign investor.
Under the Investment Rules, with certain exceptions, a foreign investor may acquire shares of a Korean company without being subject to any single or aggregate foreign investment ceiling. However, certain designated public corporations are subject to a 40.0% ceiling on acquisitions of shares by foreigners in the aggregate and a ceiling on acquisitions of shares by a single foreign investor provided in the Articles of Incorporation of such corporations. Of the Korean companies listed on the Korea Exchange, we are so designated. The Financial Services Commission may impose other restrictions as it deems necessary for the protection of investors and the stabilization of the Korean securities and derivatives market. Generally, the ownership of Converted Shares constitutes foreign ownership for purposes of such aggregate foreign ownership limit. However, the acquisition of Converted Shares is one of the exceptions under which foreign investors may acquire shares of designated corporations in excess of the 40.0% ceiling.
In addition to the aggregate foreign investment ceiling set out under the Financial Investment Services and Capital Markets Act, our Articles of Incorporation set a 3% ceiling on acquisition by a single investor (whether domestic or foreign) of the shares of our common stock. Any person (with certain exceptions) who holds more than 3% of our issued and outstanding shares cannot exercise voting rights with respect to our shares in excess of this 3% limit.
The ceiling on aggregate investment by foreigners applicable to us may be exceeded in certain limited circumstances, including as a result of acquisition of:
shares by a depositary issuing depositary receipts representing such shares (whether newly issued shares or outstanding shares);
Converted Shares;
Shares, stock option from the exercise of shareholders’ rights; or
shares by gift, inheritance or bequest.
A foreigner who has acquired shares in excess of any ceiling described above may not exercise his voting rights with respect to the shares exceeding such limit and the Financial Services Commission may take necessary corrective action against him.
Under the Foreign Exchange Transaction Laws, a foreign investor who intends to acquire shares must designate a foreign exchange bank at which he must open a foreign currency account and a Won account exclusively for stock investments. No approval is required for remittance into Korea and deposit of foreign currency funds in the foreign currency account. Foreign currency funds may be transferred from the foreign currency account at the time required to place a deposit for, or settle the purchase price of, a stock purchase transaction to a Won account opened at a securities company. Funds in the foreign currency account may be remitted abroad without any governmental approval.
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Dividends on shares of our common stock are paid in Won. No governmental approval is required for foreign investors to receive dividends on, or the Won proceeds of the sale of, any shares to be paid, received and retained in Korea. Dividends paid on, and the Won proceeds of the sale of, any shares held by a non-resident of Korea must be deposited either in a Won account with the investor’s securities company or the investor’s Won account. Funds in the investor’s Won account may be transferred to his foreign currency account or withdrawn for local living expenses, provided that any withdrawal of local living expenses in excess of a certain amount should be reported to the Governor of the Financial Supervisory Service. Funds in the investor’s Won account may also be used for future investment in shares or for payment of the subscription price of new shares obtained through the exercise of preemptive rights.
Financial investment companies with a securities dealing, brokerage or collective investment license are allowed to open foreign currency accounts with foreign exchange banks exclusively for accommodating foreign investors’ stock investments in Korea. Through these accounts, these securities companies and asset management companies may enter into foreign exchange transactions on a limited basis, such as conversion of foreign currency funds and Won funds, either as a counterparty to or on behalf of foreign investors without them having to open their own accounts with foreign exchange banks.
Taxation
Korean Taxes
The following summary describes the material Korean tax consequences of ownership of the Registered Debt Securities and ADSs. Persons considering the purchase of the Registered Debt Securities or ADSs should consult their own tax advisors with regard to the application of the Korean income tax laws to their particular situations as well as any tax consequences arising under the laws of any other taxing jurisdiction. Reference is also made to a tax treaty between Korea and the United States entitled “Convention Between the United States of America and the Republic of Korea for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and the Encouragement of International Trade and Investment,” signed on June 4, 1976 and entered into force on October 20, 1979.
The following summary of Korean tax considerations applies to you so long as you are not:
a resident of Korea;
a corporation having its head office, principal place of business or place of effective management in Korea; or
engaged in a trade or business in Korea through a permanent establishment or a fixed base to which the relevant income is attributable or with which the relevant income is effectively connected.
Registered Debt Securities
Taxation of Interest
Pursuant to the Special Tax Treatment Control Law (“STTCL”), when we make payments of interest to you on the Registered Debt Securities, no amount will be withheld from such payments for, or on account of, any income taxes of any kind imposed, levied, withheld or assessed by Korea or any political subdivision or taxing authority thereof or therein, provided that Registered Debt Securities are deemed to be foreign currency-denominated bonds issued outside of Korea for the purpose of the STTCL.
If the tax exemption under the STTCL referred to above were to cease to be in effect, the rate of income tax or corporation tax applicable to the interest on the Registered Debt Securities would be 14% of income for a non-resident without a permanent establishment in Korea. In addition, local income tax would be imposed at the rate of 10.0% of the income tax or corporation tax (which would increase the total tax rate to 15.4%), unless
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reduction is available under an applicable income tax treaty. If you are a qualified resident in a country that has entered into a tax treaty with Korea, you may qualify for an exemption or a reduced rate of Korean withholding tax. See the discussion under “—Shares or ADSs—Tax Treaties” below for an additional explanation on treaty benefits.
In order to obtain the benefits of an exemption or a reduced withholding tax rate under a tax treaty, you must submit to us, prior to the interest payment date, such evidence of tax residence as may be required by the Korean tax authorities in order to establish your entitlement to the benefits of the applicable tax treaty.
Furthermore, Korean tax laws require the beneficial owner to submit an application for tax exemption together with the documents proving the beneficial owner of such Korean source income (including a certificate of tax residence of the beneficial owner issued by a competent authority of the country of tax residence of the beneficial owner) to a withholding obligor paying Korean source income in order to benefit from the available exemption pursuant to the relevant tax treaty. Under Korean tax laws and subject to certain exceptions, the Overseas Investment Vehicle must obtain an application for tax exemption along with the documents proving the beneficial owner of such Korean source income (including a certificate of tax residence) from the beneficial owner and forward it to the withholding obligor along with an overseas investment vehicle report (prepared by the Overseas Investment Vehicle) which includes a detailed statement on the beneficial owner together with the application for tax exemption received from the beneficial owner. The withholding obligor must submit the application and the report to the relevant tax office by the ninth day of the month following the date of the first payment of such income. In the case of an application for a reduced withholding tax rate, the withholding obligor is required to submit such application (together with the supporting documents and the applicable overseas investment vehicle report in the case of income paid to an Overseas Investment Vehicle) to the relevant district tax office by the end of February of the year following the year in which the payment of such income occurred.
Due to recent amendment to the Korean tax laws, which applies for fiscal years beginning on or after January 1, 2020, Overseas Investment Vehicles may be regarded as beneficial owners of Korean sourced income in certain situations. Pursuant to such amendment, Overseas Investment Vehicles may be treated as beneficial owners of Korean source income if one of the following conditions are met: (i) the Overseas Investment Vehicle is subject to taxation in the jurisdiction in which it resides and there is no intentional tax avoidance purpose to establishing the Overseas Investment Vehicle in the jurisdiction; (ii) the Overseas Investment Vehicle is deemed as the beneficial owner under a tax treaty; or (iii) the Overseas Investment Vehicle is unable to confirm its list of beneficial owners investing in the Overseas Investment Vehicle (if only a portion of the beneficial owners are confirmed, applies with respect to the remaining unconfirmed list of beneficial owners). Overseas Investment Vehicles that are not regarded as foreign “corporations” for purposes of the Korean tax law may be recognized as beneficial owners if one of the above conditions (ii) or (iii) are met. Starting from January 1, 2022, the above conditions (i) and (ii) are changed as follows: (i) under the applicable tax treaty, the Overseas Investment Vehicle bears tax liabilities in the country in which it is established and the Korean source income is eligible for the treaty benefits under the tax treaty; or (ii) where the Overseas Investment Vehicle does not meet the above condition (i), the Overseas Investment Vehicle is deemed to be the beneficial owner of the Korean source income under the applicable tax treaty and the Korean source income is eligible for the treaty benefits under the tax treaty. Further, Overseas Investment Vehicles that meet condition (iii) would be subject to the default statutory withholding tax rate under the Korean tax laws and the treaty withholding rates under relevant tax treaties would not apply even though the Overseas Investment Vehicles are deemed to be beneficial owners of Korean source income.
Taxation of Capital Gains
Korean tax laws currently exclude from Korean taxation gains made by a non-resident without a permanent establishment in Korea from the sale of a Registered Debt Security to another non-resident (except where a non-resident sells Registered Debt Securities to another non-resident’s permanent establishment in Korea, if any). In addition, capital gains realized from the transfer of Registered Debt Securities outside Korea by non-residents with or without permanent establishments in Korea are currently exempt from taxation by virtue of
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the STTCL, provided that the issuance of such Registered Debt Securities is deemed to be an overseas issuance of foreign currency-denominated bonds under the STTCL. If you sell or otherwise dispose of a Registered Debt Security through other ways than those mentioned above, any gain realized on the transaction will be taxable at ordinary Korean withholding tax rates (which is the lesser of 11.0% (including local income tax) of the gross sale proceeds or 22.0% (including local income tax) of the net gain, subject to the production of satisfactory evidence of the acquisition cost of such Registered Debt Securities and certain direct transaction costs attributable to the disposal of such Registered Debt Securities), unless an exemption is available under an applicable income tax treaty. See the discussion under “—Shares or ADSs—Tax Treaties” below for an additional explanation on treaty benefits.
In order to obtain the benefit of an exemption from tax pursuant to a tax treaty, you must submit to the purchaser or any other withholding obligor, prior to or at the time of payment, such evidence of your tax residence as the Korean tax authorities may require in support of your claim for treaty benefits.
Inheritance Tax and Gift Tax
If you die while you are the holder of Registered Debt Securities, the subsequent transfer of the Registered Debt Securities by way of succession will be subject to Korean inheritance tax. Similarly, if you transfer Registered Debt Securities as a gift, the donee will be subject to Korean gift tax and you may be required to pay the gift tax if the donee fails to do so.
At present, Korea has not entered into any tax treaty relating to inheritance or gift taxes.
Shares or ADSs
Dividends on the Shares of Common Stock or ADSs
We will deduct Korean withholding tax from dividends (whether in cash or in shares) paid to you at a rate of 22% (inclusive of local income tax). If you are a qualified resident in a country that has entered into a tax treaty with Korea, you may qualify for a reduced rate of Korean withholding tax. See the discussion under “—Tax Treaties” below for an additional explanation on treaty benefits.
In order to obtain the benefits of a reduced withholding tax rate under a tax treaty, you must submit to the Korea Securities Depository, prior to the dividend payment date, such evidence of tax residence as may be required by the Korean tax authorities in order to establish your entitlement to the benefits of the applicable tax treaty. Evidence of tax residence may be submitted to the Korea Securities Depository through the withholding tax agent. If we distribute to you free shares representing a transfer of certain capital reserves or asset revaluation reserves into paid-in capital, such distribution may be subject to Korean withholding tax.
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Furthermore, Korean tax laws require the beneficial owner to submit an application for entitlement to a reduced tax rate together with the documents proving the beneficial owner of such Korean source income (including a certificate of tax residence of the beneficial owner issued by a competent authority of the country of tax residence of the beneficial owner) to a withholding obligor paying Korean source income in order to benefit from the available reduced tax rate pursuant to the relevant tax treaty. Under Korean tax laws and subject to certain exceptions, the Overseas Investment Vehicle must obtain an application for entitlement to a reduced tax rate along with the documents proving the beneficial owner of such Korean source income (including a certificate of tax residence) from the beneficial owner and submit to the withholding obligor an overseas investment vehicle report (prepared by the Overseas Investment Vehicle) which includes a detailed statement on the beneficial owner together with the application for entitlement to a reduced tax rate received from the beneficial owner.
If you hold common shares or ADSs and receive the dividend through an account at the Korea Securities Depository held by a foreign depositary settlement institute, you are not required to submit the application for entitlement to a reduced tax rate. However, the documents proving the beneficial owner of such Korean source income (including a certificate of tax residence of the beneficial owner) may need to be submitted to us through such foreign depositary settlement institute.
As a general rule, capital gains earned by non-residents upon the transfer of the common shares or ADSs would be subject to Korean income tax at a rate equal to the lesser of (i) 11.0% (including local income tax) of the gross proceeds realized or (ii) 22.0% (including local income tax) of the net realized gain (subject to the production of satisfactory evidence of the acquisition costs and certain direct transaction costs arising out of the transfer of such common shares or ADSs), unless such non-resident is exempt from Korean income taxation under an applicable Korean tax treaty into which Korea has entered with the non-resident’s country of tax residence. Please see the discussion under “—Tax Treaties” below for an additional explanation on treaty benefits. Even if you do not qualify for any exemption under a tax treaty, you will not be subject to the foregoing income tax on capital gains if you qualify for the relevant Korean domestic tax law exemptions discussed in the following paragraphs.
You will not be subject to Korean income taxation on capital gains realized upon the transfer of our common stocks or ADSs through the Korea Exchange if you (i) have no permanent establishment in Korea and (ii) did not own or have not owned (together with any shares owned by any entity which you have a certain special relationship with and possibly including the shares represented by the ADSs) 25.0% or more of our total issued and outstanding shares at any time during the calendar year in which the sale occurs and during the five calendar years prior to the calendar year in which the sale occurs.
It should be noted that (i) capital gains earned by you (regardless of whether you have a permanent establishment in Korea) from the transfer of ADSs outside Korea will be exempted from Korean income taxation provided that ADSs are deemed to have been issued overseas under the STTCL, but (ii) if and when an owner of the underlying shares of stock transfers ADSs after conversion of the underlying shares into ADSs, the exemption described in (i) is not applicable.
If you are subject to tax on capital gains with respect to the sale of ADSs, or of shares of common stock which you acquired as a result of a withdrawal, the purchaser or, in the case of the sale of shares of common stock on the Korea Exchange or through an investment dealer or investment broker under the Financial Investment Services and Capital Markets Act, an investment dealer or investment broker is required to withhold Korean tax from the sales price in an amount equal to 11.0% (including local income tax) of the gross realization proceeds and to make payment of these amounts to the Korean tax authority, unless you establish your entitlement to an exemption under an applicable tax treaty or domestic tax law or produce satisfactory evidence of your acquisition cost and transaction costs for the shares of common stock or the ADSs.
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However, if you transfer the ADSs following an exchange of the underlying shares of stock owned by you for ADSs to a purchaser who is a non-resident or a foreign company without a permanent establishment in Korea, you are obligated to file an income tax return and pay tax on gain realized from such transfer unless exempt under an applicable tax treaty or domestic law. Further, if you transfer the shares of common stock outside of Korea (excluding a transfer on a foreign exchange) to non-residents or foreign companies without permanent establishments in Korea, you are obligated to file an income tax return and pay income tax on capital gain realized from such transfer unless exempt under an applicable tax treaty or domestic law. If a purchaser or an investment dealer or investment broker, as the case may be, withholds and remits the tax on capital gains derived from transfer of shares of common stock or ADSs, your obligation to file an income tax return and pay income tax will not apply.
In order to obtain the benefit of an exemption from tax pursuant to a tax treaty, you must submit to the purchaser or the investment dealer or the investment broker, or through the ADS depositary, as the case may be, prior to or at the time of payment, such evidence of your tax residence as the Korean tax authorities may require in support of your claim for treaty benefits. Please see the discussion under “—Tax Treaties” below for an additional explanation on claiming treaty benefits. Furthermore, Korean tax laws require the beneficial owner to submit an application for tax exemption together with the documents proving the beneficial of such Korean source income (including a certificate of tax residence of the beneficial owner issued by a competent authority of the country of tax residence of the beneficial owner) to a withholding obligor paying Korean source income in order to benefit from the available exemption pursuant to the relevant tax treaty. Under Korean tax laws and subject to certain exceptions, the Overseas Investment Vehicle must obtain an application for tax exemption along with the documents proving the beneficial owner of such Korean source income (including a certificate of tax residence) from the beneficial owner and forward it to the withholding obligor along with an overseas investment vehicle report (prepared by the Overseas Investment Vehicle) which includes a detailed statement on the beneficial owner together with the application for tax exemption received from the beneficial owner. The withholding obligor must submit the application and the report to the relevant tax office by the ninth day of the month following the date of the first payment of such income. In the case of an application for a reduced withholding tax rate, the withholding obligor is required to submit such application (together with the supporting documents and the applicable overseas investment vehicle report in the case of income paid to an Overseas Investment Vehicle) to the relevant district tax office by the end of February of the year following the year in which the payment of such income occurred.
Tax Treaties
Korea has entered into a number of income tax treaties with other countries (including the United States), which would reduce or exempt Korean withholding tax on dividends on, and capital gains on transfer of, shares of our common stock or ADSs. For example, under the Korea-United States income tax treaty, reduced rates of Korean withholding tax of 16.5% or 11.0% (respectively, including local income tax, depending on your status and shareholding ratio) on dividends and an exemption from Korean withholding tax on capital gains are available to residents of the United States that are beneficial owners of the relevant dividend income or capital gains. However, under Article 17 (Investment of Holding Companies) of the Korea-United States income tax treaty, such reduced rates and exemption do not apply if (i) you are a United States corporation, (ii) by reason of any special measures, the tax imposed on you by the United States with respect to such dividends or capital gains is substantially less than the tax generally imposed by the United States on corporate profits, and (iii) 25.0% or more of your capital is held of record or is otherwise determined, after consultation between competent authorities of the United States and Korea, to be owned directly or indirectly by one or more persons who are not individual residents of the United States. Also, under Article 16 (Capital Gains) of the Korea-United States income tax treaty, the exemption on capital gains does not apply if you are an individual, and (a) you maintain a fixed base in Korea for a period or periods aggregating 183 days or more during the taxable year and your ADSs or shares of common stock giving rise to capital gains are effectively connected with such fixed base or (b) you are present in Korea for a period or periods of 183 days or more during the taxable year.
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You should inquire for yourself whether you are entitled to the benefit of an income tax treaty with Korea. It is the responsibility of the party claiming the benefits of an income tax treaty in respect of interest or dividend payments or capital gains to submit to us, the purchaser or the investment dealer or the investment broker, as applicable, the documents proving the beneficial owner of such Korean source income including a certificate as to his tax residence. In the absence of sufficient proof, we, the purchaser or the investment dealer or the investment broker, as applicable, must withhold tax at the normal rates.
If you die while holding an ADS or donate an ADS, it is unclear whether, for Korean inheritance and gift tax purposes, you will be treated as the owner of the shares of common stock underlying the ADSs. If the tax authority interprets depositary receipts as the underlying share certificates, you may be treated as the owner of the shares of common stock and your heir or the donee (or in certain circumstances, you as the donor) will be subject to Korean inheritance or gift tax presently at the rate of 10.0% to 50.0%, depending on the value of the ADSs or shares of common stock.
If you die while holding a share of common stock or donate a share of common stock, your heir or donee (or in certain circumstances, you as the donor) will be subject to Korean inheritance or gift tax at the same rate as indicated above.
Securities Transaction Tax
If you transfer shares of common stock on the Stock Market of the Korea Exchange, you will be subject to a securities transaction tax at the rate of 0.05% (starting from January 1, 2026) and an agriculture and fishery special surtax at the rate of 0.15% of the sale price of the shares of common stock. If your transfer of the shares of common stock is not made on the Stock Market of the Korea Exchange, subject to certain exceptions you will be subject to securities transaction tax at the rate of 0.35% and will not be subject to an agriculture and fishery special surtax.
Under the Securities Transaction Tax Law, depositary receipts (such as ADSs) constitute share certificates subject to the securities transaction tax. However, a transfer of depositary receipts listed on the New York Stock Exchange, NASDAQ National Market or other qualified foreign exchanges will be exempt from the securities transaction tax although depositary receipts, including ADSs, constitute share certificates subject to the securities transaction tax.
In principle, the securities transaction tax, if applicable, must be paid by the transferor of the shares or rights. When the transfer is effected through the Korea Securities Depository, the Korea Securities Depository is generally required to withhold and pay the tax to the tax authorities. When such transfer is made through an investment dealer or investment broker under the Financial Investment Services and Capital Markets Act only, such investment dealer or investment broker is required to withhold and pay the tax. Where the transfer is effected by a non-resident without a permanent establishment in Korea, other than through the Korea Securities Depository or an investment dealer or investment broker, the transferee is required to withhold the securities transaction tax for payment to the Korean tax authority.
U.S. Federal Income Tax Considerations for U.S. Persons
The following is a summary of certain U.S. federal income tax consequences of the ownership and disposition of the Registered Debt Securities, common stock and ADSs for beneficial owners of the Registered
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Debt Securities, common stock and ADSs that are “U.S. Persons” (as defined below). For purposes of this summary, you are a “U.S. Person” if you are any of the following for U.S. federal income tax purposes:
an individual citizen or resident of the United States;
a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust if (1) it is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.
This summary is based on current law, which is subject to change (perhaps retroactively), is for general purposes only and should not be considered tax advice. This summary does not represent a detailed description of the U.S. federal income tax consequences to you and does not address the effects of the Medicare contribution tax on net investment income, U.S. federal estate and gift taxes or foreign, state, local or other tax considerations that may be relevant to you in light of your particular circumstances. The discussion set forth below is applicable to you only if (i) you are a resident of the United States for purposes of the current income tax treaty between the United States and Korea (the “Treaty”), (ii) your Registered Debt Securities, common stock or ADSs are not, for purposes of the Treaty, effectively connected with a permanent establishment in Korea and (iii) you otherwise qualify for the full benefits of the Treaty. This summary deals only with Registered Debt Securities, common stock or ADSs held as capital assets, and it does not represent a detailed description of the U.S. federal income tax consequences applicable to you if you are subject to special treatment under the U.S. federal income tax laws (including if you are a dealer in securities or currencies, a financial institution, a regulated investment company, a real estate investment trust, an insurance company, a tax-exempt organization, a person holding the Registered Debt Securities, common stock or ADSs as part of a hedging, integrated or conversion transaction, constructive sale or straddle, a person owning 10.0% or more of our stock (by vote or value), a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings, a person liable for alternative minimum tax, a person required to accelerate the recognition of any item of gross income with respect to the Registered Debt Securities, common stock or ADSs as a result of such income being recognized on an applicable financial statement, a partnership or other pass-through entity (or an investor therein), or a U.S. Person whose “functional currency” is not the U.S. dollar). We cannot assure you that a change in law will not alter significantly the tax considerations that we describe in this summary.
If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds the Registered Debt Securities, common stock or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our Registered Debt Securities, common stock or ADSs, you should consult your tax advisor.
Because of the 100-year maturity of the One Hundred Year 7.95% Zero-to-Full Debentures, due April 1, 2096 (the “ZTF Debentures”), it is not certain whether the ZTF Debentures will be treated as debt for U.S. federal income tax purposes. The discussion below assumes that the ZTF Debentures (as well as the other Registered Debt Securities) will be treated as debt, except that a summary of the consequences to you if the ZTF Debentures were not treated as debt is provided under “Tax Consequences with Respect to Registered Debt Securities Generally—ZTF Debentures Treated as Equity” below.
The discussion below of the tax consequences of the ownership and disposition of ADSs assumes that the deposit agreement, and all other related agreements, will be performed in accordance with their terms.
You should consult your own tax advisor concerning the particular U.S. federal income tax consequences to you of the ownership and disposition of the Registered Debt Securities, common stock and
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ADSs, as well as the consequences to you arising under other United States federal tax laws and the laws of any other taxing jurisdiction.
Tax Consequences with Respect to Registered Debt Securities Generally
Payments
Except as provided below with regard to original issue discount on the ZTF Debentures, interest on a Registered Debt Security will generally be taxable to you as ordinary income at the time it is paid or accrued in accordance with your method of accounting for tax purposes. Principal payments on an amortizing Registered Debt Security generally will constitute a tax-free return of capital to you to the extent of your adjusted tax basis in the Registered Debt Security, and any principal payments in excess of your adjusted tax basis generally will be taxed as capital gain.
Although interest payments to you are currently exempt from Korean taxation provided that Registered Debt Securities are deemed to be foreign currency-denominated bonds issued outside of Korea for the purpose of the STTCL (see—“Korean Taxes—Registered Debt Securities—Taxation of Interest,” above), if the Korean law providing for the exemption is repealed, then, in addition to interest payments on the Registered Debt Securities and original issue discount on the ZTF Debentures, you will be required to include in income any additional amounts paid and any Korean tax withheld from interest payments notwithstanding that you in fact did not receive such withheld tax. You may be entitled to credit such Korean tax (up to the Treaty rate), subject to applicable conditions and limitations in the Internal Revenue Code of 1986, as amended (the “Code”). However, Treasury regulations addressing foreign tax credits (the “Foreign Tax Credit Regulations”) impose additional requirements for foreign taxes to be eligible for a foreign tax credit, and there can be no assurance that those requirements will be satisfied if you do not elect to apply the benefits of the Treaty. The Department of the Treasury and the Internal Revenue Service (the “IRS”) are considering proposing amendments to the Foreign Tax Credit Regulations. In addition, notices from the IRS provide temporary relief by allowing taxpayers that comply with applicable requirements to apply many aspects of the foreign tax credit regulations as they previously existed (before the release of the current Foreign Tax Credit Regulations) for taxable years ending before the date that a notice or other guidance withdrawing or modifying the temporary relief is issued (or any later date specified in such notice or other guidance). For purposes of calculating the foreign tax credit, interest income on a Registered Debt Security (including additional amounts and any Korean taxes withheld in respect thereof) and original issue discount on a ZTF Debenture will be treated as foreign source income and will generally be considered passive category income. You will generally be denied a foreign tax credit for Korean taxes imposed with respect to the Registered Debt Securities if you do not meet a minimum holding period requirement during which you are not protected from risk of loss. Instead of claiming a foreign tax credit, you may be able to deduct Korean withholding taxes on interest in computing your taxable income, subject to generally applicable limitations under U.S. law (including that a U.S. Person is not eligible for a deduction for otherwise creditable foreign income taxes paid or accrued in a taxable year if such U.S. Person claims a foreign tax credit for any foreign income taxes paid or accrued in the same taxable year). The rules governing the foreign tax credit and deductions for foreign taxes are complex. Investors are urged to consult their tax advisors regarding the availability of the foreign tax credit or a deduction under their particular circumstances.
Original Issue Discount
The ZTF Debentures were issued with original issue discount (“OID”) for U.S. federal income tax purposes in an amount equal to the difference between (i) the sum of all scheduled amounts payable on the ZTF Debentures (including the interest payable on such ZTF Debentures) and (ii) the “issue price” of the ZTF Debentures. The “issue price” of each ZTF Debenture is the first price at which a substantial amount of the ZTF Debentures was sold to the public (other than to an underwriter, broker, placement agent or wholesaler). If you hold ZTF Debentures, then (subject to the discussion in “—Acquisition Premium; Bond Premium” below) you generally must include OID in gross income (as ordinary income) in advance of the receipt of cash attributable to that income, regardless of your method of accounting. However, you generally will not be required to include separately in income cash payments received on the ZTF Debentures, even if denominated as interest.
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The amount of OID includible in income by the holder of a ZTF Debenture is the sum of the “daily portions” of OID with respect to the ZTF Debenture for each day during the taxable year or portion of the taxable year in which such holder held such ZTF Debenture, or “accrued OID” (for a discussion relevant to subsequent purchasers, see “—Market Discount” and “—Acquisition Premium; Bond Premium,” below). The daily portion is determined by allocating to each day in any “accrual period” a pro rata portion of the OID allocable to that accrual period. The “accrual period” for a ZTF Debenture may be of any length and may vary in length over the term of the ZTF Debenture, provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs on the first day or the final day of an accrual period. The amount of OID allocable to any accrual period other than the final accrual period is an amount equal to the product of the ZTF Debenture’s adjusted issue price at the beginning of such accrual period and its yield to maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period). OID allocable to a final accrual period is the difference between the amount payable at maturity and the adjusted issue price at the beginning of the final accrual period. The “adjusted issue price” of a ZTF Debenture at the beginning of any accrual period is equal to its issue price increased by the accrued OID for each prior accrual period (for subsequent purchasers, determined without regard to the amortization of any acquisition or bond premium, as described below) and reduced by any payments previously made on such ZTF Debenture. Under these rules, you will have to include in income increasingly greater amounts of OID in successive accrual periods. We are required to provide information returns stating the amount of OID accrued on ZTF Debentures held of record by persons other than corporations and other exempt holders.
As discussed above, although interest payments to you are currently exempt from Korean taxation provided that Registered Debt Securities are deemed to be foreign currency-denominated bonds issued outside of Korea for the purpose of the STTCL (see—“Korean Taxes—Registered Debt Securities—Taxation of Interest,” above), if the Korean law providing for the exemption is repealed, then Korean withholding tax may be imposed at times that differ from the times at which you are required to include interest or OID in income for U.S. federal income tax purposes and this disparity may limit the amount of foreign tax credit available.
Market Discount
If you purchase a Registered Debt Security other than a ZTF Debenture for an amount that is less than its stated redemption price at maturity, or, in the case of a ZTF Debenture, its adjusted issue price, the amount of the difference will be treated as “market discount” for U.S. federal income tax purposes, unless that difference is less than a specified de minimis amount. Under the market discount rules, you will be required to treat any principal payment on, or any gain on the sale, exchange, retirement or other disposition of, a Registered Debt Security as ordinary income to the extent of the market discount that you have not previously included in income and are treated as having accrued on the Registered Debt Security at the time of the payment or disposition. In addition, you may be required to defer, until the maturity of the Registered Debt Security or its earlier disposition in a taxable transaction, the deduction of all or a portion of the interest expense on any indebtedness attributable to the Registered Debt Security. Any amount treated as ordinary income pursuant to the market discount rules generally should be treated as foreign source income.
Any market discount will be considered to accrue ratably during the period from the date of acquisition to the maturity date of the Registered Debt Security, unless you elect to accrue on a constant interest method. Your election to accrue market discount on a constant interest method is to be made for the taxable year in which you acquired the Registered Debt Security, applies only to that Registered Debt Security and cannot be revoked. Special rules will apply in determining the accrual of market discount for an amortizing Registered Debt Security. You may elect to include market discount in income currently as it accrues, on either a ratable or constant interest method, in which case the rule described above regarding deferral of interest deductions will not apply. Your election to include market discount in income currently, once made, applies to all market discount obligations acquired by you on or after the first day of the first taxable year to which your election applies and may not be revoked without the consent of the IRS. You should consult your own tax advisor before making this election.
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Acquisition Premium; Bond Premium
If you purchase a ZTF Debenture for an amount that is greater than its adjusted issue price but equal to or less than the sum of all amounts payable on the ZTF Debenture after the purchase date, you will be considered to have purchased that ZTF Debenture at an “acquisition premium.” Under the acquisition premium rules, the amount of OID that you must include in gross income with respect to a ZTF Debenture for any taxable year will be reduced by the portion of the acquisition premium properly allocable to that year.
If you purchase a Registered Debt Security for an amount in excess of the sum of all amounts payable on the Registered Debt Security after the purchase date other than qualified stated interest (as defined in the Code), you will be considered to have purchased the Registered Debt Security at a “premium” and, if such Registered Debt Security is a ZTF Debenture, you will not be required to include any OID in income. Interest on a debt instrument is generally treated as qualified stated interest if it is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually at a single fixed rate. The interest on the ZTF Debentures does not constitute qualified stated interest. You generally may elect to amortize any premium on a Registered Debt Security over the remaining term of the Registered Debt Security on a constant yield method as an offset to interest when includible in income under your regular accounting method. In the case of instruments that provide for alternative payment schedules, bond premium is calculated by assuming that (a) you will exercise or not exercise options in a manner that maximizes your yield, and (b) we will exercise or not exercise options in a manner that minimizes your yield (except that we will be assumed to exercise call options in a manner that maximizes your yield). If you do not elect to amortize bond premium, that premium will decrease the gain or increase the loss you would otherwise recognize on disposition of a Registered Debt Security. Your election to amortize premium on a constant yield method will also apply to all taxable debt obligations held or subsequently acquired by you on or after the first day of the first taxable year to which the election applies. You may not revoke the election without the consent of the IRS. You should consult your own tax advisor before making this election.
Sale, Exchange and Retirement of Registered Debt Securities
Upon the sale, exchange, retirement or other disposition of a Registered Debt Security, you generally will recognize gain or loss equal to the difference between the amount you receive (not including an amount equal to any accrued qualified stated interest, which will be taxable as ordinary income to the extent not previously included in income) and your adjusted tax basis in the Registered Debt Security. Your adjusted tax basis in a Registered Debt Security other than a ZTF Debenture will generally be your cost of obtaining the Registered Debt Security, increased by any market discount previously included in income and reduced by payments of principal you receive and any bond premium that you have previously amortized. Your adjusted tax basis in a ZTF Debenture will, in general, be your cost therefor, increased by any market discount and OID previously included in income and reduced by any cash payments on the ZTF Debenture and any bond premium that you have previously amortized. Except as described above with respect to market discount, your gain or loss realized upon the sale, exchange, retirement or other disposition of a Registered Debt Security will be capital gain or loss and will generally be long-term capital gain or loss if, at the time of the sale, exchange, retirement or other disposition, you have held the Registered Debt Security for more than one year. Long-term capital gains of non-corporate U.S. Persons (including individuals) are eligible for reduced rates of taxation. Your ability to deduct capital losses is subject to limitations.
Except as described above with respect to market discount, your gain or loss realized upon the sale, exchange, retirement or other disposition of a Registered Debt Security will generally be treated as U.S. source gain or loss. Consequently, you may not be able to use a foreign tax credit for any Korean tax imposed on the disposition of Registered Debt Securities unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources. However, pursuant to the Foreign Tax Credit Regulations, unless you elect to apply the benefits of the Treaty, any such Korean tax would generally not be a foreign income tax eligible for a foreign tax credit (regardless of any other income that you may have that is
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derived from foreign sources). In such case, the non-creditable Korean tax may reduce the amount realized upon the sale, exchange, retirement or other disposition. As discussed above, however, notices from the IRS provide temporary relief by allowing taxpayers that comply with applicable requirements to apply many aspects of the foreign tax credit regulations as they previously existed (before the release of the current Foreign Tax Credit Regulations) for taxable years ending before the date that a notice or other guidance withdrawing or modifying the temporary relief is issued (or any later date specified in such notice or other guidance). If any Korean tax is imposed upon the disposition of Registered Debt Securities and you apply such temporary relief, such Korean tax may be eligible for a foreign tax credit or deduction, subject to the applicable conditions and limitations. Investors are urged to consult their tax advisors regarding the availability of the foreign tax credit or a deduction under their particular circumstances.
ZTF Debentures Treated as Equity
If the ZTF Debentures were treated as equity for U.S. federal income tax purposes, amounts actually or deemed paid with respect to the ZTF Debentures would be deemed dividends for U.S. federal income tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes).
You would include the amounts actually or deemed paid by us on the ZTF Debentures (before reduction for Korean withholding tax, if any) as dividend income when actually or constructively paid by us. Section 305 of the Code, which would apply to the ZTF Debentures if they were treated as equity for U.S. federal income tax purposes, requires current accrual of dividends under principles similar to the accrual of OID. Amounts treated as dividends will not be eligible for the dividends received deduction generally allowed to U.S. corporations. In addition, it is unclear whether any amounts treated as dividends would be eligible for the reduced rates of taxation that apply to “qualified dividend income” (as described below in “—Tax Consequences with Respect to Common Stock and ADSs—Distributions on Common Stock or ADSs”).
Tax Consequences with Respect to Common Stock and ADSs
In general, for U.S. federal income tax purposes, holders of ADSs will be treated as the owners of the underlying common stock that is represented by such ADSs. Accordingly, deposits or withdrawals of common stock for ADSs will not be subject to U.S. federal income tax.
Distributions on Common Stock or ADSs
The gross amount of distributions (other than certain pro rata distributions of common stock or rights to subscribe for common stock) to holders of common stock or ADSs (including amounts withheld in respect of Korean withholding taxes) will be taxable dividends to such holders to the extent paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Such income (including withheld taxes) will be includable in the gross income of a holder as ordinary income on the day actually or constructively received by the holder, in the case of common stock, or by the depositary, in the case of ADSs. Such dividends will not be eligible for the dividends received deduction generally allowed to corporations under the Code.
Subject to applicable limitations (including a minimum holding period requirement), certain dividends received by non-corporate U.S. Persons from a qualified foreign corporation may be treated as “qualified dividend income” that is subject to reduced rates of taxation. A qualified foreign corporation includes a foreign corporation that is eligible for the benefits of an income tax treaty with the United States, if such treaty contains an exchange of information provision and the U.S. Treasury Department has determined that the treaty is satisfactory for purposes of the legislation. The U.S. Treasury Department has determined that the Treaty, which contains an exchange of information provision, is satisfactory for these purposes. In addition, we believe we are eligible for the benefits of the Treaty. In addition, a foreign corporation is also treated as a qualified foreign
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corporation with respect to dividends paid by that corporation on shares (or ADSs backed by such shares) that are readily tradable on an established securities market in the United States. Although shares of our common stock will generally not be considered readily tradable for these purposes, U.S. Treasury Department guidance indicates that our ADSs, which are listed on the New York Stock Exchange, are readily tradable on an established securities market in the United States. There can be no assurance that our ADSs will be considered readily tradable on an established securities market in the United States in later years. Holders should consult their own tax advisors regarding the application of the foregoing rules to their particular circumstances.
The amount of any dividend paid in Won will equal the U.S. dollar value of the Won received calculated by reference to the exchange rate in effect on the date the dividend is received by the holder, in the case of common stock, or by the depositary, in the case of ADSs, regardless of whether the Won are converted into U.S. dollars. If the Won received as a dividend are not converted into U.S. dollars on the date of receipt, a holder will have a basis in the Won equal to their U.S. dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other disposition of the Won will be treated as U.S. source ordinary income or loss. The amount of any distribution of property other than cash will be the fair market value of such property on the date of distribution.
The maximum rate of withholding tax on dividends paid to you pursuant to the Treaty is 16.5%. You will be required to properly demonstrate your entitlement to the reduced rate of withholding under the Treaty (see “—Korean Taxes—Shares or ADSs —Tax Treaties”). Subject to certain conditions and limitations, Korean withholding taxes (up to the Treaty rate) may be treated as foreign taxes eligible for credit against your U.S. federal income tax liability. However, the Foreign Tax Credit Regulations impose additional requirements for foreign taxes to be eligible for a foreign tax credit, and there can be no assurance that those requirements will be satisfied if you do not elect to apply the benefits of the Treaty. The Department of the Treasury and the IRS are considering proposing amendments to the Foreign Tax Credit Regulations. In addition, notices from the IRS provide temporary relief by allowing taxpayers that comply with applicable requirements to apply many aspects of the foreign tax credit regulations as they previously existed (before the release of the current Foreign Tax Credit Regulations) for taxable years ending before the date that a notice or other guidance withdrawing or modifying the temporary relief is issued (or any later date specified in such notice or other guidance). For purposes of calculating the foreign tax credit, dividends paid on the common stock or ADSs will be treated as foreign source income and will generally be considered passive category income. You will generally be denied a foreign tax credit for Korean taxes imposed on dividends paid on common stock or ADSs if you do not meet a minimum holding period requirement during which you are not protected from risk of loss. Instead of claiming a foreign tax credit, you may be able to deduct Korean withholding taxes on dividends in computing your taxable income, subject to generally applicable limitations under U.S. law (including that a U.S. Person is not eligible for a deduction for otherwise creditable foreign income taxes paid or accrued in a taxable year if such U.S. Person claims a foreign tax credit for any foreign income taxes paid or accrued in the same taxable year). The rules governing the foreign tax credit and deductions for foreign taxes are complex. Investors are urged to consult their tax advisors regarding the availability of the foreign tax credit or a deduction under their particular circumstances, including the possible adverse impact on creditability to the extent you are entitled to a refund of any Korean tax withheld or a reduced rate of withholding.
To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits for a taxable year, as determined under U.S. federal income tax principles, the distribution will first be treated as a tax- free return of capital, causing a reduction in the adjusted basis of the common stock or ADSs (thereby increasing the amount of gain, or decreasing the amount of loss, to be recognized by the investor on a subsequent disposition of the common stock or ADSs), and the balance in excess of adjusted basis will be taxed as capital gain recognized on a sale or exchange of property. Consequently, such distributions in excess of our current and accumulated earnings and profits would not give rise to foreign source income and you generally would not be able to use a foreign tax credit for any Korean withholding tax imposed on such distributions unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources. However, we do not expect to keep earnings and profits in accordance with U.S. federal income tax principles. Therefore, you should expect that a distribution will generally be reported and treated as a dividend (as discussed above).
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Distributions of common stock or rights to subscribe for common stock that are received as part of a pro rata distribution to all of our shareholders generally will not be subject to U.S. federal income tax. Consequently, such distributions will not give rise to foreign source income and you generally will not be able to use a foreign tax credit for any Korean withholding tax imposed on such distributions unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources.
Sale, Exchange or Other Disposition of ADSs or Common Stock
Upon the sale, exchange or other disposition of ADSs or common stock, you generally will recognize capital gain or loss equal to the difference between the amount realized upon the sale, exchange or other disposition and your adjusted tax basis in the ADSs or common stock, both as determined in U.S. dollars. The capital gain or loss will be long-term capital gain or loss if, at the time of the sale, exchange or other disposition, the ADSs or common stock have been held by you for more than one year. Long-term capital gains of non-corporate U.S. Persons (including individuals) are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.
Any gain or loss recognized by you will generally be treated as U.S. source gain or loss. Consequently, you may not be able to use a foreign tax credit for any Korean tax imposed on the disposition of ADSs or common stock unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources. However, pursuant to the Foreign Tax Credit Regulations, unless you elect to apply the benefits of the Treaty, any such Korean tax would generally not be a foreign income tax eligible for a foreign tax credit (regardless of any other income that you may have that is derived from foreign sources). In such case, the non-creditable Korean tax may reduce the amount realized upon the disposition of ADSs or common stock. As discussed above, however, notices from the IRS provide temporary relief by allowing taxpayers that comply with applicable requirements to apply many aspects of the foreign tax credit regulations as they previously existed (before the release of the current Foreign Tax Credit Regulations) for taxable years ending before the date that a notice or other guidance withdrawing or modifying the temporary relief is issued (or any later date specified in such notice or other guidance). If any Korean tax is imposed upon the disposition of ADSs or common stock and you apply such temporary relief, such Korean tax may be eligible for a foreign tax credit or deduction, subject to the applicable conditions and limitations. Investors are urged to consult their tax advisors regarding the availability of the foreign tax credit or a deduction under their particular circumstances.
You should note that any Korean securities transaction tax will not be treated as a creditable foreign tax for U.S. federal income tax purposes.
Passive Foreign Investment Company Rules
Based upon the past and projected composition of our income and assets and the valuation of our assets, we do not believe that we were a passive foreign investment company (a “PFIC”) for 2025, and we do not expect to be a PFIC in 2026 or to become one in the foreseeable future, although there can be no assurance in this regard. If, however, we become a PFIC, such characterization could result in adverse U.S. tax consequences to you. For example, if we become a PFIC, our U.S. investors may become subject to increased tax liabilities under U.S. tax laws and regulations and will become subject to burdensome reporting requirements. In addition, non-corporate U.S. Persons will not be eligible for reduced rates of taxation on any dividends received from us if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year. Our PFIC status is determined on an annual basis and depends on the composition of our income and assets in each year. Specifically, we will be classified as a PFIC for U.S. federal income tax purposes for any taxable year if either: (i) 75% or more of our gross income in such year is passive income, or (ii) the average percentage of our assets by value in such year which produce or are held for the production of passive income (which generally includes cash) is at least 50%. We cannot assure you that we will not be a PFIC for 2026 or any future taxable year.
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Information Reporting and Backup Withholding
In general, information reporting requirements will apply to payments of interest and principal on Registered Debt Securities, accruals of OID on ZTF Debentures, dividend payments in respect of the common stock or ADSs or the proceeds received on the sale, exchange, retirement or other disposition of the Registered Debt Securities, common stock or ADSs that are paid within the United States (and in certain cases, outside of the United States), unless in each case you establish that you are an exempt recipient. A backup withholding tax may apply to the payment of such amounts if you fail to provide an accurate taxpayer identification number and a certification that you are not subject to backup withholding or if you fail to report interest and dividends required to be shown on your U.S. federal income tax returns. The amount of any backup withholding from a payment to you will be allowed as a refund or a credit against your U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Dividends and Paying Agents
Statements by Experts
Documents on Display
We are subject to the information requirements of the Exchange Act, and, in accordance therewith, are required to file reports, including annual reports on Form 20-F, and other information with the U.S. Securities and Exchange Commission. You may inspect and copy these materials, including this annual report and the exhibits thereto, at SEC’s Public Reference Room 100 Fifth Street, N.E., Washington D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the public reference rooms. As a foreign private issuer, we are also required to make filings with the Commission by electronic means. Any filings we make electronically will be available to the public over the Internet at the Commission’s web site at http://www.sec.gov.
Subsidiary Information
Annual Report to Security Holders
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market risk exposures are to fluctuations in exchange rates, interest rates and fuel prices. We are exposed to foreign exchange risk related to foreign currency-denominated liabilities. As of December 31, 2025, 16.9% of our long-term debt (including the current portion but excluding original issue discounts and premium), without taking into consideration of swap transactions, was denominated in foreign currencies, principally U.S. dollar. However, a substantial portion of our revenues is denominated in Won. As a result, changes in exchange rates, particularly between the Won and the U.S. dollar, significantly affect us due to our significant amounts of foreign currency-denominated debt and the effect of such changes on the amount of funds required by us to make interest and principal payments on such debt. In order to reduce the impact of foreign exchange rate fluctuations on our results of operations, we have entered into currency swaps and other hedging arrangements with respect to our foreign currency denominated debt.
We are also exposed to foreign exchange risk related to our purchases of fuel since we obtain substantially all of our fuel materials (other than anthracite coal) directly or indirectly from sources outside Korea. Prices for
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such fuel materials are quoted based on prices stated in, and in many cases are paid for in, currencies other than Won. In 2025, fuel costs represented 20.1% of our sales.
We are exposed to interest rate risk due to significant amounts of debt. Upward fluctuations in interest rates increase the cost of additional debt and the interest cost of outstanding floating rate borrowings. We are also exposed to fluctuations in prices of fuel materials. In 2025, for electricity generation, uranium accounted for 48.7% of our fuel requirements, coal accounted for 37.4%, LNG accounted for 9.9%, oil accounted for 0.1%, and others accounted for 3.9%, measured in each case by the amount of electricity we generated. In 2024, for electricity generation, uranium accounted for 48.1% of our fuel requirements, coal accounted for 35.9%, LNG accounted for 11.9%, oil accounted for 0.0%, and others accounted for 4.1%, measured in each case by the amount of electricity we generated.
For additional discussions of our market risks, see Item 3.D. “Risk Factors” and Item 5.B. “Liquidity and Capital Resources—Liquidity.”
We have entered into various swap contracts to hedge exchange rate risks arising from foreign currency-denominated debts. Details of currency swap contracts outstanding as of December 31, 2025 are as follows:
Counterparty
(In millions of won and thousands of foreign currencies except contract exchange rate information)
<Trading>
Standard Chartered
Woori Bank
Kookmin Bank
Korea Development Bank
Hana Bank
JP Morgan
Shinhan Bank
Bank of America
IBK Securities Co., Ltd.
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Nonghyup Bank
Export-Import Bank of Korea
Credit Agricole
<Cash flow hedge>
Nomura
Under these currency swap contracts, we recognized net valuation gain of Won 26 billion in 2025.
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Details of interest rate contracts outstanding as of December 31, 2025 are as follows:
In millions of won and thousands of foreign currencies
Nomura (*1)
Nomura (*2)
Nomura (*3)
MUFG
Mizuho Capital Markets LLC
NORD LB Bank
Rabobank
ING Bank
BNP Paribas
KFW
SMTB
Depending on the counterparty exercising the right, the contract may be early settled on the same date every year from June 15, 2023.
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1.84% of the contract paying interest rate is applied for five years from the date of issuance, and 3M CMT+0.35% is applied thereafter.
1.87% of the contract paying interest rate is applied for five years from the date of issuance, and 3M CMT+0.35% is applied thereafter.
Under these interest rate swap contracts, we recognized net valuation gain of Won 45 billion in 2025.
We engage in transactions denominated in foreign currencies and consequently become exposed to fluctuations in exchange rates. The carrying amounts of our foreign currency-denominated monetary assets and monetary liabilities as of December 31, 2024 and 2025 were as follows:
Type
AED
AUD
BDT
BWP
EGP
CAD
CHF
DOP
EUR
GBP
HKD
IDR
INR
JOD
JPY
KZT
MGA
MMK
MYR
PHP
PKR
RON
SAR
SEK
SGD
USD
UYU
VND
ZAR
The following analysis sets forth the sensitivity of our consolidated net income before income taxes (our “pre-tax income”) to changes in exchange rates, interest rates, electricity rates and fuel costs. For purposes of this section, we and our related parties are deemed one entity. The range of changes in such risk categories represents our view of the changes that are reasonably possible over a one-year period, although it is difficult to predict such changes as a result of adverse economic developments in Korea. See Item 3.D. “Risk Factors—Risks Relating to Korea and the Global Economy—Unfavorable financial and economic conditions in Korea and globally may have a material adverse impact on us.” The following discussion only addresses material market risks faced by us and does not discuss other risks which we face in the normal course of business, including country risk, credit risk and legal risk. Unless otherwise specified, all calculations are made under IFRS.
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If the Won depreciates against the U.S. dollar and all other foreign currencies held by us by 10%, and all other variables are held constant from their levels as of December 31, 2025, we estimate that our unrealized foreign exchange translation losses will increase by Won 1,885 billion in 2025. Such sensitivity analysis is conducted for monetary assets and liabilities denominated in foreign currencies other than functional currency as of December 31, 2024 and 2025, without taking into consideration of the hedge effect of swap transactions. To manage our foreign currency risk related to foreign currency-denominated receivables and payables, we have a policy of entering into currency forward agreements. In addition, to manage our foreign currency risk related to foreign currency-denominated expected sales transactions and purchase transactions, we enter into cross-currency swap agreements.
We are exposed to interest rate risk due to our borrowings with floating interest rates. If interest rates increase by 1% on all of our borrowings and debentures bearing variable interest, and all other variables are held constant as of December 31, 2025, we estimate that our profit before income taxes will decrease by Won 152 billion (not reflecting the fact that a portion of such interest may be capitalized under IFRS) in 2025. Such sensitivity analysis does not take into consideration of the hedge effect of interest rate swap transactions. To manage our interest rate risks, we, in addition to maintaining an appropriate mix of fixed and floating rate loans, have entered into certain interest rate swap agreements.
We are exposed to electricity rates risk due to the rate regulation by the Government, which considers the effect of electricity rate changes on the national economy. If the electricity rate rises by 1% and all other variables are held constant as of December 31, 2025, we estimate that our profit before income taxes will increase by Won 930 billion in 2025.
We are exposed to fuel price risks due to the heavy influence of fuel costs on our sales and cost of sales. If the fuel prices of anthracite and bituminous coal, oil, LNG and others used for generation by us and our generation subsidiaries rise by 1% and all other variables are held constant as of December 31, 2025, we estimate that our profit before income taxes will decrease by Won 191 billion in 2025.
The above discussion and the estimated amounts generated from the sensitivity analyzes referred to above include “forward-looking statements,” which assume for analytical purposes that certain market conditions may occur. Accordingly, such forward-looking statements should not be considered projections by us of future events or losses.
See Note 45 of the notes to our consolidated financial statements included in this annual report for further related information.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Debt Securities
Warrants and Rights
Item 12.C. Other Securities
Item 12.D. American Depositary Shares
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Under the terms of the Deposit Agreement in respect of our ADSs, the holder and beneficiary owners of ADSs, any party depositing or withdrawing or surrendering ADSs or ADRs, whichever applicable, may be required to pay the following fees and charges to Citibank, N.A., whose principal executive office located in 388 Greenwich St. New York, NY 10013, acting as depositary for our ADSs:
Item
Services
Fees
Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary by the brokers (on behalf of their clients) receiving the newly-issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs to the depositary for cancellation. The brokers in turn charge these transaction fees to their clients.
Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary to the holders of record of ADSs as of the applicable ADS
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record date. The depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions other than cash (i.e., stock dividends, rights offerings), the depositary charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or un-certificated in direct registration), the depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts via the central clearing and settlement system, the Depository Trust Company (“DTC”), the depositary generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the depositary.
In the event of refusal to pay the depositary fees, the depositary may, under the terms of the Deposit Agreement, refuse the requested service until payment is received or may set-off the amount of the depositary fees from any distribution to be made to the ADS holder.
The fees and charges the ADS holders may be required to pay may vary over time and may be changed by us and by the depositary. The ADS holders will receive prior notice of such changes.
Depositary Payments for the Fiscal Year 2025
The following table sets forth our expenses incurred in 2025, which were reimbursed by Citibank, N.A. in the aggregate:
Reimbursement of legal fees
Contributions towards our investor relations and other financing efforts (including investor conferences, non-deal roadshows and market information services)
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PART II
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
CONTROLS AND PROCEDURES
Disclosure Control
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2025. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives. Based upon our evaluation, our chief executive officer and chief financial officer concluded that the design and operation of our disclosure controls and procedures as of December 31, 2025 were effective in providing reasonable assurance that information required to be disclosed by us in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decision regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for our company. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we have evaluated the effectiveness of our internal control over financial reporting as of December 31, 2025 based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with generally accepted accounting principles and 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 a company’s assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of a company’s management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to consolidated financial statement preparation and presentation and 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.
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Following the overhaul in May 2013 by the Committee of Sponsoring Organization of the Treadway (“COSO”) of the COSO Framework relating to internal controls and adoption of the 2013 Integrated Framework of the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework (2013)”), we have, effective January 1, 2014, adopted the COSO Framework (2013) and incorporated it into our internal control system for us and our subsidiaries in order to comply with the Sarbanes Oxley Act and to standardize our internal control system. As required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules as promulgated by the Securities and Exchange Commission, management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025 using criteria established by the COSO Framework (2013). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2025 based on the criteria established by the COSO Framework (2013).
Audit Report of the Independent Registered Public Accounting Firm
KPMG Samjong Accounting Corp. has issued an audit report on the effectiveness of our internal control over financial reporting as of December 31, 2025, which is included elsewhere in this annual report.
Changes in Internal Controls
During the fiscal year ended December 31, 2025, the Company evaluated changes in its information technology environment that could have affected internal controls over financial reporting, including the ERP system transition implemented in August 2025. Based on this evaluation, management concluded that the changes to the IT environment during the fiscal year did not have a material adverse effect on the design or operating effectiveness of the Company’s internal control over financial reporting, nor is it reasonably likely that such changes will have a material impact on internal control over financial reporting.
In connection with the ERP system transition implemented in August 2025, the Company refined and applied necessary control procedures based on its existing internal control framework. The ERP transition was planned and executed in accordance with the Company’s established change management and internal control procedures. Following the transition, controls relevant to financial reporting across key functional areas, including human resources, accounting, procurement, construction, and facilities maintenance, continue to operate effectively.
In addition to the ERP system, the Company operates enterprise-wide management systems, including data integration systems, management information systems, and business planning and simulation systems. These systems are managed within the scope of the Company’s internal control over financial reporting. The ERP system, which serves as a core information infrastructure, is managed under the Company’s internal control and IT governance framework.
[RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that we have at least one “audit committee financial expert” as such term is defined by the regulations of the Securities and Exchange Commission issued pursuant to Section 407 of the Sarbanes-Oxley Act of 2002. Our audit committee financial experts are Kim, Sung-Eun. Such members are independent within the meaning of the Korea Exchange listing standards, the regulations promulgated under the Enforcement Decree of the Korean Commercial Act and the New York Stock Exchange listing standards.
CODE OF ETHICS
We have adopted a code of ethics for our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions as required under Section 406 of the Sarbanes-Oxley Act of 2002, together with an insider reporting system in compliance with Section 301 of the
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Sarbanes-Oxley Act. The code of ethics is available on our website www.kepco.co.kr. We have not granted any waiver, including an implicit waiver, from a provision of the code of ethics to any of the above-mentioned officers during our most recently completed fiscal year.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees billed for each of the years ended December 31, 2024 and 2025 for professional services rendered by our principal accountant for such year, for various types of services and a brief description of the nature of such services. KPMG Samjong Accounting Corp., an independent registered public accounting firm, was our principal accountant for the year ended December 31, 2025, while EY Han Young (formerly, Ernst & Young Han Young) served as our principal accountant for the year ended December 31, 2024.
Aggregate Fees Billed During
Nature of Services
Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
The U.S. law and regulations in effect since May 6, 2003 generally require all service of the principal accountant to be pre-approved by an independent audit committee or, if no such committee exists with respect to an issuer, by the entire board of directors. We have adopted the following policies and procedures for consideration and approval of requests to engage our principal accountant to perform audit and non-audit services. If the request relates to services that would impair the independence of our principal accountant, the request must be rejected. If the service request relates to audit and permitted non-audit services for us and our subsidiaries, it must be forwarded to our audit committee and receive pre-approval.
In addition, the U.S. law and regulations permit the pre-approval requirement to be waived with respect to engagements for non-audit services aggregating no more than five percent of the total amount of revenues we paid to our principal auditors, if such engagements were not recognized by us at the time of engagement and were promptly brought to the attention of our audit committee or a designated member thereof and approved prior to the completion of the audit.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Neither we nor any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Exchange Act, purchased any of our equity securities during the period covered by this annual report.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
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ITEM 16G. CORPORATE GOVERNANCE
We are committed to high standards of corporate governance. We are in compliance with the corporate governance provisions of the KEPCO Act, the Act on the Management of Public Institutions, the Korean Commercial Act, the Financial Investment Services and Capital Markets Act of Korea and the Listing Rules of the Korea Exchange. We, like all other companies in Korea, must comply with the corporate governance provisions under the Korean Commercial Act, except to the extent the KEPCO Act and the Act on the Management of Public Institutions otherwise require. Our corporate governance is also affected by various regulatory guidelines, including those promulgated by the Ministry of Finance and Economy. In addition, as a company listed on the Korea Exchange, we are subject to the Financial Investment Services and Capital Markets Act of Korea, unless otherwise provided by the Financial Investment Services and Capital Markets Act of Korea.
The Act on the Management of Public Institutions
General Provisions
On April 1, 2007, the Act on the Management of Public Institutions took effect by abolishing and replacing the Government-invested Enterprise Management Basic Act, which was enacted in 1984. Unless stated otherwise therein, the Act on the Management of Public Institutions takes precedence over any other laws and regulations in the event of inconsistency. On April 2, 2007, pursuant to this Act the Minister of the Ministry of Finance and Economy designated us as a “market-oriented public enterprise” as defined under this Act, and we became subject to this Act accordingly. We incorporated the applicable provisions of this Act into our Articles of Incorporation by amendment thereto in September 2007.
The Act on the Management of Public Institutions sets out the rules for corporate governance for entities that are subject to this Act, including the appointment of their respective president and directors. Under this Act as it applies to us as a “market-oriented public enterprise”, (i) a senior non-standing director as appointed by the Minister of the Ministry of Finance and Economy becomes the chairperson of our board of directors following the review and resolution of the Committee for Management of Public Institutions; (ii) our president and our standing directors who concurrently serve as members of our audit committee are appointed by the President of Korea upon the motion of the Ministry of Climate, Energy and Environment (in the case of our president) or of the Ministry of Finance and Economy (in the case of standing directors who concurrently serve as members of our audit committee), following the nomination by such enterprise’s director nomination committee, the review and resolution of the Committee for Management of Public Institutions pursuant to the Act on the Management of Public Institutions and an approval at the general meeting of our shareholders; (iii) our standing directors other than the president and those who also serve as audit committee members must be appointed by our president with the approval at the general meeting of our shareholders from a pool of candidates recommended by our director nomination committee; and (iv) our non-standing directors must be appointed by the Minister of the Ministry of Finance and Economy following the review and resolution of the Committee for Management of Public Institutions from a pool of candidates recommended by the director nomination committee, and must (a) have ample knowledge and experience in business management who cannot be public service personnel other than a public educational official at national or public schools or (b) have held their offices in us for at least three years and either (x) be recommended by the representative of our employees (or the representative of the labor union if there is a labor union comprising the majority of our employees) or (y) obtain consent from the majority of our employees. We are required to appoint at least one non-standing director who qualifies the requirement (b) above.
The Committee for Management of Public Institutions is established pursuant to the Act on the Management of Public Institutions and is comprised of one chairperson who is the Minister of the Ministry of Finance and Economy and the following members: (i) one Vice Minister-level public official from the Office for Government Policy Coordination as nominated by the Minister of the Office for Government Policy Coordination; (ii) one Vice Minister, Deputy Administrator or an equivalent public official of the related administrative agency as prescribed by Presidential Decree; (iii) one Vice Minister, Deputy Administrator, or an equivalent public official of the competent agency who does not fall under sub-clause (ii); and (iv) 11 or fewer persons commissioned by
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the President based on the recommendation of the Minister of the Ministry of Finance and Economy from among persons in various fields including law, economy, press, academia, labor, who have good knowledge and experience in the operation and business administration of public institutions as well as good reputation for impartiality.
Our director nomination committee, which is also known as the Committee for Recommendation of Executive Officers, is comprised of non-standing directors and members appointed by the board of directors. The number of members ranges from five to 15 persons and must be decided by a resolution of the board of directors; provided that, the number of members appointed by the board of directors must be less than half of the total number of members of our director nomination committee.
Under the Act on the Management of Public Institutions and our Articles of Incorporation, the term of office is three years for our president and two years for our directors (standing and non-standing) other than our president. Our directors (including the president) may be reappointed for one or more additional terms of one year. In order to be reappointed, the president must be evaluated on the basis of his management performance; a standing director, on the basis of the performance of the duties for which he was elected, or if the standing director has executed an incentive bonus contract, on the basis of his performance under the contract; and a non-standing director, on the basis of his performance of the duties for which he was elected.
Under the Act on the Management of Public Institutions and our Articles of Incorporation, a recommendation from the director nomination committee is required for the appointment of our executive officers, except in the case of reappointments. The director nomination committee consists of five to fifteen members, including private-sector members appointed by the board of directors. Non-standing directors must comprise at least a majority of the director nomination committee. One of the private-sector members must be able to represent our opinion and must not be currently employed by us. As required under the Act on the Management of Public Institutions, we established an audit committee. At least two-thirds of the audit committee members must be non-standing directors, and at least one committee member must be an expert in finance or accounting. According to the Act on the Management of Public Institutions, our president’s term cannot be terminated unless done so by the President of Korea pursuant to the Act on the Management of Public Institutions or upon an event as specified in our Articles of Incorporation.
As required under Act on the Management of Public Institutions, we submit to the Government by October 31 every year a report on our medium to long-term management goals. Under the Act on the Management of Public Institutions, we are also required to give separate public notice of important management matters, such as our budget and financial statements, status of directors and annual reports. In addition, for purposes of providing a comparison of the management performances of Government agencies, we are required to post on a designated website a notice on a standard form detailing our management performance. Following consultation with the Minister of the Ministry of Climate, Energy and Environment and the review and resolution of the Committee for Management of Public Institutions, the Ministry of Finance and Economy must examine the adequacy and competency of Government agencies and establish plans on merger, abolishment, restructuring and privatization of public agencies. In such case, the Minister of the Ministry of Climate, Energy and Environment must execute these plans and submit a performance report to the Ministry of Finance and Economy.
Under certain amendments to the Act on the Management of Public Institutions that became effective as of July 1, 2019, our president is required to establish a plan to appoint directors and senior management based on the gender equality, endeavor to follow such plan, and submit an annual report on our gender equality plan regarding appointment of directors and senior management to the Ministry of Finance and Economy.
Application of the Act to Our Generation Subsidiaries
On January 24, 2011, the Ministry of Finance and Economy changed the designation of our six generation subsidiaries from “other public institutions” to “market-oriented public enterprises”, each as defined in the Act on the Management of Public Institutions, and all of our generation subsidiaries accordingly amended their
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respective articles of incorporation in 2011 to be in compliance with this Act. As “other public institutions”, our generation subsidiaries previously were not subject to the same regulations under the Act on the Management of Public Institutions applicable to us with regards to corporate governance matters such as the appointment and dismissal of directors and the composition of the boards of directors. However, as “market-oriented public enterprises”, our generation subsidiaries are currently subject to the same such regulations that are applicable to us.
Specifically, prior to such designation, (i) our president appointed the presidents and the statutory auditors of our generation subsidiaries; (ii) the selection of non-standing directors of each such subsidiary was subject to approval by our president; (iii) the president of each such subsidiary entered into a management contract with our president; and (iv) our evaluation committee conducted performance evaluation of such subsidiaries. However, following such designation, akin to the appointment process applicable to us, (i) the President of Korea appoints the presidents and standing directors of our generation subsidiaries that concurrently serve as members of the audit committees; (ii) the selection of non-standing directors of these subsidiaries is subject to approval by the Minister of the Ministry of Finance and Economy; (iii) the president of each such generation subsidiary is required to enter into a management contract directly with the Minister of the Ministry of Climate, Energy and Environment; and the Committee for Management of Public Institutions conducts performance evaluation of such subsidiaries.
Our Control over the Generation Subsidiaries
Designation of our generation subsidiaries as “market-oriented public enterprises” was intended to promote responsible management by and improve operational efficiency of Government-affiliated electricity companies by fostering competition among them so as to provide improved service to the general public. Such designation also has had the effect of the Government exercising greater direct control over the appointment of the governing body of our generation subsidiaries (in ways that are similar how the Government exercises such control over us as our majority shareholder as well as our regulator).
In addition, the Government has imposed a number of regulations that further affect the respective operational boundaries between us and our generation subsidiaries, including as follows:
In August 2010, in furtherance of the Act on the Management of Public Institutions, the Ministry of Finance and Economy announced the Proposal for the Improvement in the Structure of the Electric Power Industry, which was designed to promote responsible management by and improve operational efficiency of Government-affiliated electricity companies by fostering competition among them. Key initiatives of the proposal included the following: (i) maintain the current structure of having six generation subsidiaries and designate the six generation subsidiaries as market-oriented public enterprises under the Act on the Management of Public Institutions in order to foster competition among the generation subsidiaries and promote efficiency in their operations, and (ii) clarify the scope of the business of us and the six generation subsidiaries (namely, that we shall manage the financial structure and governance of the six generation subsidiaries and nuclear power plant and overseas resources development projects, while the six generation subsidiaries will have greater autonomy with respect to construction and management of generation units and procurement of fuel, among others).
In January 2011, the Ministry of Finance and Economy created a “joint cooperation unit” consisting of officers and employees selected from the five thermal power generation subsidiaries in order to reduce inefficiencies in areas such as fuel transportation, inventories, materials and equipment and construction, etc. and allow the thermal power generation subsidiaries to continue utilizing the benefits of economy of scale after split off of our generation business units into separate subsidiaries. The purpose of the joint cooperation unit was to give greater autonomy to the generation subsidiaries with regard to power plant construction and management and fuel procurements, and thereby enhance efficiency in operating power plants. The main functions of the joint cooperation unit are as follows: (i) maintain inventories of bituminous coal through volume exchanges and joint purchases, (ii) reduce shipping and demurrage expenses through joint operation and distribution of dedicated vessels,
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(iii) reduce costs by sharing information on generation material inventories and (iv) sharing human resources among the five thermal power generation subsidiaries for construction projects, among other things.
In June 2016, the Government announced the Proposal for Adjustment of Functions of Public Institutions (Energy Sector) for the purpose of streamlining the operations of Government-affiliated energy companies by discouraging them from engaging in overlapping or similar businesses with each other, reducing non-core assets and activities and improving management and operational efficiency. The initiatives contemplated in this proposal that would affect us and our generation subsidiaries include the following: (i) the generation companies should take on greater responsibilities in overseas resource exploration and production projects as these involve procurement of fuels necessary for electricity generation while fostering cooperation among each other through closer coordination, (ii) KHNP should take a greater role in export of nuclear technology, and (iii) the current system of retail sale of electricity to end-users should be liberalized to encourage more competition.
However, notwithstanding these developments, we, also a government-controlled entity, remain as the sole shareholder of our generation subsidiaries and continue to exercise significant control over them in such capacity as the sole shareholder well as through other practical means as further described below.
First, as the sole shareholder, we continue to have the right, under the Act on the Management of Public Institutions, to approve or disapprove the appointment of key members of the governing body of our generation subsidiaries (namely, the president, the standing directors, and the non-standing directors) by way of a vote at the general shareholders meeting before such appointments are ultimately approved and made by the President of Korea (in the case of the presidents and standing directors concurrently serving as audit committee members of the generation subsidiaries) or by the president of each generation subsidiary (in the case of other standing directors of such generation subsidiary). Our right to exercise such voting right as a shareholder is also protected by the Commercial Act of Korea.
Second, in practice we retain significant control over our generation subsidiaries through the following means:
We are the sole purchaser of electricity produced by the generation subsidiaries and continue to have near monopoly in terms of transmitting and distributing electricity in Korea. Accordingly, we continue to have significant influence over our generation subsidiaries in the electricity industry.
Our president holds regular meetings (known as “CEO Meetings”) with the presidents of our generation subsidiaries for which our president determines whether and when to convene such meetings, sets the agenda for such meetings and chairs such meetings. Since significant issues that jointly affect us and our generation subsidiaries are often discussed and decided at these meetings, the leadership role exercised by our president in such meetings is significant in setting the policies and direction for us and our generation subsidiaries as a whole.
We maintain and operate the Affiliated Company Management Team within the parent company organizational structure. The purpose of this team is to support and coordinate the management of the generation subsidiaries. Activities of the Affiliated Company Management Team include preparation of the CEO meetings, deliberation on major issues to be discussed at CEO Meetings, convening a general meeting of shareholders of the generation subsidiaries and coordination on the decision-making process for the general meeting of shareholders of the generation subsidiaries.
Ultimately, our control over our generation subsidiaries is derived from the fact that the Government owns the majority of our shares and effectively controls us as the supervisor and regulator in a heavily regulated industry, and in effect also exercises the same degree of control over our generation subsidiaries through our sole share ownership over our generation subsidiaries as well as its statutory power of direct appointment of the governing bodies of our generation subsidiaries. In effect, we are acting as an intermediate holding company in a vertical control structure involving the Government, us and our generation subsidiaries, where the Government
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holds the ultimate control over both us and our generation subsidiaries and exercises its control over our generation subsidiaries in part through us acting as the sole shareholder and the parent company.
Differences between Korean and New York Stock Exchange Corporate Governance Practices
We are a “foreign private issuer” (as such term is defined in Rule 3b-4 under the Exchange Act), and our ADSs are listed on the New York Stock Exchange, or NYSE. Under Section 303A of the NYSE Listed Company Manual, NYSE-listed companies that are foreign private issuers are permitted to follow home country practice in lieu of the corporate governance provisions specified by the NYSE with limited exceptions. Under the NYSE Listed Company Manual, we as a foreign private issuer are required to disclose significant differences between NYSE’s corporate governance standards and those we follow under Korean law. The following summarizes some significant ways in which our corporate governance practices differ from those followed by U.S. companies listed on the NYSE under the listing rules of the NYSE.
Majority of Independent Directors on the Board
Under the NYSE listing rules, U.S. companies listed on the NYSE must have a board, the majority of which is comprised of independent directors satisfying the requirements of “independence” as set forth in Rule 10A-3 under the Exchange Act. No director qualifies as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with us). The NYSE rules include detailed tests for determining director independence. As a foreign private issuer, we are exempt from these requirements.
Under the Act on the Management of Public Institutions, the number of standing directors including our president must be less than one-half of incumbent directors. For a discussion on qualifications of non-standing directors, see Item 6.A. “Directors and Senior Management—Board of Directors.” Under the Act on the Management of Public Institutions, a non-standing director is appointed by the Ministry of Finance and Economy following the review and resolution of the Committee for Management of Public Institutions from a pool of candidates recommended by the director nomination committee, and must (i) have ample knowledge and experience in business management or (ii) have held his or her offices for at least three years and either (a) be recommended by the representative of the employees (or the representative of the labor union if there is a labor union comprising the majority of the employees) or (b) obtain consent from the majority of the employees. We are required to appoint at least one non-standing director who qualifies the requirement (ii) above. Government officials that are not part of the teaching staff in national and public schools are ineligible to become our non-standing directors.
Executive Session
Under the NYSE listing rules, non-management directors of U.S. companies listed on the NYSE are required to meet on a regular basis without management present and independent directors must meet separately at least once per year. While no such requirement currently exists under applicable Korean law, listing standards or our Articles of Incorporation, executive sessions were held from time to time in order to promote the exchange of diverse opinions by non-standing directors.
Under the NYSE listing rules, listed companies must have an audit committee that has a minimum of three members, and all audit committee members must satisfy the requirements of independence set forth in Section 303A.02 of the NYSE Listed Company Manual and Rule 10A-3 under the Exchange Act. Our audit committee members meet the requirements of independence set forth in Section 303A.02 of the NYSE Listed Company Manual and Rule 10A-3 under the Exchange Act. The audit committee must be directly responsible for the appointment, compensation, retention and oversight of the work of the independent registered public accountants. Our audit committee performs the roles and responsibilities required of an audit committee under the Sarbanes-Oxley Act, including the supervision of the audit by the independent registered public accountants.
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Under the Korea Exchange listing rules and the Korean Commercial Act, a large listed company must also establish an audit committee of which at least two-thirds of its members must be non-standing directors and whose chairperson must be a non-standing director. Under the Act on the Management of Public Institutions, the Korean Commercial Act, the amended Articles of Incorporation and the Korea Exchange listing rules, we are required to maintain an audit committee consisting of three members, of which not less than two members are required to be non-standing directors. In addition, pursuant to certain amendments to the Act on the Management of Public Institutions that became effective as of January 1, 2021, in appointing the standing member of the audit committee, the director nomination committee shall recommend the person who is qualified in any of the followings: (i) a person who is qualified as a certified public accountant or an attorney and has a minimum of three years of experience in work related to such qualification, (ii) a person who has served as an assistant professor or at a higher position for at least three years in areas directly related to audit, investigation and judicial affairs, budget and accounting, investigation, planning and evaluation, etc. (hereinafter referred to as “audit related works”) at a school under subparagraphs 1 through 5 of Article 2 of the Higher Education Act), (iii) a person who has been in charge of audit-related works for at least three years at a public institution, stock-listed corporation or research institute under Article 9(15)3 of the Financial Investment Services and Capital Markets Act and has experience prescribed by Presidential Decree, (iv) person who has been in charge of audit-related works for at least three years at the state or a local government and has served as a public official at the level prescribed by Presidential Decree, or (v) person with other expertise in accordance with the affairs of the relevant institution and qualified as prescribed by Presidential Decree.
Our audit committee is in compliance with the foregoing requirements under the Act on the Management of Public Institutions, the Korean Commercial Act, the amended Articles of Incorporation and the Korea Exchange listing rules.
On April 2, 2021, we amended our Articles of Incorporation to incorporate an amendment to the Commercial Act implemented on December 29, 2020, which requires at least one director who will serve as a member of the audit committee to be appointed separately from other directors at the meeting of shareholders. Our amended Articles of Incorporation requires all three directors who will serve as a member of the audit committee to be appointed separately from other directors at the meeting of shareholders.
On November 7, 2022, we amended our Articles of Incorporation to incorporate an amendment to the Commercial Act implemented on December 29, 2020, which requires the affirmative votes of at least a majority of the voting rights of the shareholders present at the shareholders meeting for appointment of a member of the audit committee in lieu of the affirmative votes of (i) at least a majority of the voting rights of the shareholders present at the shareholders meeting and (ii) at least one-fourth (1/4) of the total number of shares with the voting rights issued and outstanding if the shareholders are permitted to exercise a vote by electronic means at such shareholders meeting by the resolution of our board of directors.
Nomination/Corporate Governance Committee
Under the NYSE listing rules, U.S. companies listed on the NYSE must have a nomination/corporate governance committee composed entirely of independent directors. In addition to identifying individuals qualified to become board members, this committee must develop and recommend to the board a set of corporate governance principles. Under the Act on the Management of Public Institutions, we are required to have a director nomination committee which consists of non-standing directors and ad hoc members appointed by our board of directors. Our standing directors and executives as well as governmental officials that are not part of the teaching staff in national and public schools are ineligible to become a member of our director nomination committee. There is no requirement to establish a corporate governance committee under applicable Korean law.
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Pursuant to the NYSE listing standards, non-management directors must meet on a regular basis without management present and independent directors must meet separately at least once per year. No such requirement currently exists under applicable Korean law.
Compensation Committee
Under the NYSE listing rules, U.S. companies listed on the NYSE are required to have a compensation committee which is composed entirely of independent directors. In January 2013, the SEC approved amendments to the listing rules of NYSE and NASDAQ regarding the independence of compensation committee members and the appointment, payment and oversight of compensation consultants. The listing rules were adopted as required by Section 952 of the Dodd-Frank Act and rule 10C-1 of the Exchange Act, which direct the national securities exchanges to prohibit the listing of any equity security of a company that is not in compliance with the rule’s compensation committee director and advisor independence requirements. Certain elements of the listing rules became effective on July 1, 2013 and companies listed on the NYSE must comply with such listing rules by the earlier of the company’s first annual meeting after January 15 or October 31, 2014.
No such requirement currently exists under applicable Korean law or listing standards, and we currently do not have a compensation committee.
Corporate Governance Guidelines and Code of Business Conduct and Ethics
Under the NYSE listing rules, U.S. companies listed on the NYSE are required to establish corporate governance guidelines and to adopt a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. As a foreign private issuer, we are exempt from this requirement. Pursuant to the requirements of the Sarbanes-Oxley Act, we have adopted a code of ethics applicable to our President and Chief Executive Officer and all other directors and executive officers including the Chief Financial Officer and the Chief Accounting Officer, as well as all financial, accounting and other officers that are involved in the preparation and disclosure of our consolidated financial statements and internal control of financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We have also adopted an insider reporting system in compliance with Section 301 of the Sarbanes-Oxley Act. The code of ethics applicable to our executive officers and financial officers are available on www.kepco.co.kr.
Shareholder Approval of Equity Compensation Plans
Under the NYSE listing rules, shareholders of U.S. companies listed on the NYSE are required to approve all equity compensation plans. Under Korean law and regulations, stock options can be granted to employees to the extent expressly permitted by the articles of incorporation. We currently do not have any equity compensation plans.
Annual Certification of Compliance
Under the NYSE listing rules, a chief executive officer of a U.S. company listed on the NYSE must annually certify that he or she is not aware of any violation by the company of NYSE corporate governance standards. As a foreign private issuer, we are not subject to this requirement. However, in accordance with rules applicable to both U.S. companies and foreign private issuers, we are required to promptly notify the NYSE in writing if any executive officer becomes aware of any material noncompliance with the NYSE corporate governance standards applicable to us. In addition, foreign private issuers, including us, are required to submit to the NYSE an annual written affirmation relating to compliance with Sections 303A.06 and 303A.11 of the NYSE listed company manual, which are the NYSE corporate governance standards applicable to foreign private issuers. All written affirmations must be executed in the form provided by the NYSE, without modification. An annual written affirmation is required to be submitted to the NYSE within 30 days of filing with the SEC our annual report on Form 20-F. We have been in compliance with this requirement in all material respects and plan to submit such affirmation within the prescribed timeline.
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Whistle Blower Protection
On May 25, 2011, the SEC adopted final rules to implement whistleblower provisions of the Dodd-Frank Act, which are applicable to foreign private issuers with securities registered under the U.S. securities laws. The final rules provide that any eligible whistleblower who voluntarily provides the SEC with original information that leads to the successful enforcement of an action brought by the SEC under U.S. securities laws must receive an award of between 10 and 30 percent of the total monetary sanctions collected if the sanctions exceed US$1,000,000. An eligible whistleblower is defined as someone who provides information about a possible violation of the securities laws that he or she reasonably believes has occurred, is ongoing, or is about to occur. The possible violation does not need to be material, probably or even likely, but the information must have a “facially plausible relationship to some securities law violation”; frivolous submissions would not qualify. The final rules also prohibit retaliation against the whistleblower. While the final rules do not require employees to first report allegations of wrongdoing through a company’s corporate compliance system, they do seek to incentivize whistleblowers to utilize internal corporate compliance first by, among other things, (i) giving employees who first report information internally the benefit of the internal reporting date for purposes of the SEC program so long as the whistleblower submits the same information to the SEC within 120 days of the initial disclosure; (ii) clarifying that the SEC will consider, as part of the criteria for determining the amount of a whistleblower’s award, whether the whistleblower effectively utilized the company’s corporate compliance program or hindered the function of the program; and (iii) crediting a whistleblower who reports internally first and whose company passes the information along to the SEC, which would mean the whistleblower could receive a potentially higher award for information gathered in an internal investigation initiated as a result of the whistleblower’s internal report.
In addition, the final rules address concerns that the whistleblower rules incentivize officers, directors and those with legal, audit, compliance or similar responsibilities to abuse these positions by making whistleblower complaints to the SEC with respect to information they obtained in these roles by generally providing that information obtained through a communication subject to attorney-client privilege or as a result of legal representation would not be eligible for a whistleblower award unless disclosure would be permitted by attorney conduct rules. Accordingly, officers and directors, auditors and compliance personnel and other persons in similar roles would not be eligible to receive awards for information received in these positions unless (x) they have a reasonable basis to believe that (1) disclosure of the information is necessary to prevent the entity from engaging in conduct that is likely to cause substantial injury to the financial interests of the entity or investors; or (2) the entity is engaging in conduct that will impede an investigation of the misconduct, for example, destroying documents or improperly influencing witnesses; or (y) 120 days have passed since the whistleblower provided the information to senior responsible persons at the entity or 120 days have passed since the whistleblower received the information at a time when these people were already aware of the information.
In Korea, under the Financial Investment Services and Capital Markets Act, anyone may provide or furnish the Financial Services Commission or the Securities and Futures Commission with information on unfair trading or any other violation of the Financial Investment Services and Capital Markets Act. The Financial Services Commission shall keep the identity of the whistleblower confidential, and any institution, organization or company to which the whistleblower belongs may not treat the whistleblower unfavorably, directly or indirectly. In addition, the Financial Services Commission may also reward the whistleblower within the limit of the budget of the Financial Services Commission.
MINE SAFETY DISCLOSURE
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
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PART III
FINANCIAL STATEMENTS
We have responded to Item 18 in lieu of responding to this item.
Reference is made to Item 19(a). “Exhibits” for a list of all financial statements filed as part of this annual report.
EXHIBITS
Exhibits filed as part of this Annual Report
See Index of Exhibits beginning on page 185 of this annual report.
Financial Statements filed as part of this Annual Report
See Index to Financial Statements on page F-1 of this annual report.
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Incorporated by reference to the Registrant’s annual report on Form 20-F (No. 001-13372) previously filed on April 28, 2025.
Incorporated by reference to the Registrant’s annual report on Form 20-F (No. 001-13372) previously filed on April 30, 2024.
Incorporated by reference to the Registrant’s Registration Statement on Form F-6 with respect to the ADSs, registered under Registration No. 333-196703.
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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.
/s/ Kim, Dong-Cheol
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