Important position in electricity supply in Korea, accounting for 8%-9% of national power capacity. Low cyclicality of demand. Lack of transparency in the mechanism to adjust wholesale electricity prices between KEPCO and its power generating subsidiaries (Gencos). More profitable coal-fired power generation capacity additions will gradually improve operating cash flow. Favorable wholesale electricity prices from KEPCO with more reasonable cost recovery. Gradual reduction of capital expenditure (capex) from 2017. Narrowing negative free operating cash flow as the company completes capacity additions. The stable outlook on our ratings on Korea-based power generation company Korea Midland Power Co. Ltd. (KOMIPO) reflects the outlook on its parent, Korea Electric Power Corp. (KEPCO), given that the ratings on KOMIPO are closely related to KEPCO
