- Division of the Sector

The distribution/retail sector of KEPCO will be divided into six local distribution companies.
The groups were divided so that fair competition would be possible.

- Trial Period of One Year

There will be a simulation period of one year, during which the distribution/retail sector will be divided into six internal business entities. Legal separation and the establishment of the
subsidiaries will follow after the simulation period.

- Cost-Based Pool is the current electricity market structure, but along with the restructuring of the industry, a market in which market prices are determined by bids from generation companies, suppliers and wholesale consumers will be created (Two Way Bidding Pool).

- Opening of TWBP is scheduled for 2004 (After the separation of distribution/retail sector from KEPCO)

- Introducing TWBP will create a market environment in which electricity is traded as a commodity and market clearing prices are set by the balance between supply and demand.

- IT installation for the electricity market structure After definition of details of specifications based on the market rules and selection of operation system installer, system installation follows System installer was selected on January 7, 2002. Currently, system installation
is in process; completion is scheduled for December 2002.

- Current Electricity Tariff Structure

ㅇ The current tariff structure is based on end-user groups ; six categories of consumers are defined

- Reforming the Current Tariff Structure

ㅇA cost-reflective tariff policy necessary for compatibility with a competitive market

ㅇGuidelines for reform

Narrow down gap among different categories of consumers: cross-subsidization among various end-user groups must be reduced Redefine consumer categorization
High progressive rates for residential consumers need modification, tariffs must mirror actual costs Expand consumer's range of choice for tariffs

- Implementing Changes
Changes must be implemented gradually, Social considerations will be taken into account as well

- Privatization of SouthEast Generation Co.

- KEPCO will start negotiations with few potential buyers for the sale of SouthEast Gen Co. and close a deal by January 2003.

- Method of Privatization
The privatization process consists of transfer of majority ownership and initial public offerings.

- Privatization of Remaining Gencos
After the sale of two generation companies, which is the first step of the privatization plan, the remaining three will be sold, the process for which will begin in 2005.

- KEPCO's existing subsidiaries are being privatized pursuant to 『Second Plan for Privatization and Management Reform of Public-Owned Enterprises』 (August, 1998)

- Korea Power Engineering Co. Ltd and Korea Power Plant Service & Engineering Co., Ltd
: Both will be privatized through initial public offering and transfer of majority ownership.

- Korea Electric Power Industrial Development Co.
: Planning privatization through majority ownership disposal of 51%, allowing a transfer of management rights.

- Powercomm
: Planning ownership disposal of 30%, the remaining shares will be disposed of through initial public offerings.