#1K water INVESTOR PRESENTATION Korea Water Resources Corporation FEB 2019 | STRICTLY PRIVATE & CONFIDENTIAL#2Table of Contents 1. Overview of K-water 2. Relationship with the Government 3. Financial Profile 4 9 14 K water#3Disclaimer THIS PRESENTATION AND ITS CONTENTS ARE CONFIDENTIAL AND ARE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES OF AMERICA. This presentation is highly confidential and has been prepared by Korea Water Resources Corporation (the "Company") solely for your information and for your use during the presentation. By attending this presentation, you are agreeing (i) that you have read and agree to comply with the contents of this disclaimer and (ii) to maintain absolute confidentiality regarding this presentation and the information disclosed in this presentation. Any failure to comply with these restrictions may constitute a violation of applicable securities laws. This presentation may not be copied, distributed, reproduced or passed on, directly or indirectly, in whole or in part, or disclosed by any recipient, to any other person (whether within or outside such person's organisation or firm) or published in whole or in part, for any purpose or under any circumstances. In particular, the distribution of this presentation in certain jurisdictions may be restricted by law and persons into whose possession this presentation comes should inform themselves about, and observe, any such restrictions. The presentation has not been independently verified and no representation or warranty, express or implied, is made or given by or on behalf of the Company or any of its parent or subsidiary undertakings, or the subsidiary undertakings of any such parent undertakings, or any of such person's respective directors, officers, employees, agents, affiliates or advisers, as to, and no reliance should be placed on, the accuracy, completeness or fairness of the information or opinions contained in this presentation and no responsibility or liability is assumed by any such persons for any such information or opinions or for any errors or omissions. All information presented or contained in this presentation is subject to verification, correction, completion and change without notice. In giving this presentation, neither the Company nor any of its parent or subsidiary undertakings, or the subsidiary undertakings of any such parent undertakings, or any of such person's respective directors, officers, employees, agents, affiliates or advisers, undertakes any obligation to amend, correct or update this presentation or to provide the recipient with access to any additional information that may arise in connection with it. It is not the intention to provide, and you may not rely on this presentation as providing, a complete or comprehensive analysis of the Company's financial or trading position or prospects. The information contained in this presentation should be considered in the context of the circumstances prevailing at the time and has not been, and will not be, updated to reflect material developments which may occur after the date of the presentation. This presentation does not constitute or form part of, and should not be construed as an offer to sell or issue, or the solicitation of an offer to buy or acquire, or an invitation to purchase or subscribe, for any securities of the Company or any of its subsidiaries or affiliates in any jurisdiction, or an inducement to enter into investment activity. No part of this presentation should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Company or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with the presentation. 1 K water#4Disclaimer (Continued) To the extent available, the industry data contained in this presentation has come from official or third party sources. Third party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of the accuracy or completeness of such data. While the Company believes that each of these publications, studies and surveys has been prepared by a reputable source, the Company has not independently verified the data contained therein. In addition, certain of the industry data contained in this presentation come from the Company's own internal research and estimates based on the knowledge and experience of the Company's management in the market in which the Company operates. While the Company believes that such research and estimates are reasonable and reliable, they, and their underlying methodology and assumptions, have not been verified by any independent source for accuracy or completeness and are subject to change without notice. Accordingly, undue reliance should not be placed on any of the Industry data contained in this presentation. This presentation includes forward-looking statements. The words "expect", "anticipate", "intends", "plan", "estimate", "aim", "forecast", "project" and similar expressions (or their negative) identify certain of these forward-looking statements. These forward-looking statements are statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which the Company operates. The forward-looking statements in this presentation are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future. Forward-looking statements involve inherent known and unknown risks, uncertainties and contingencies because they relate to events and depend on circumstances that may or may not occur in the future and may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward looking statements. Many of these risks and uncertainties relate to factors that are beyond the Company's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of regulators and other factors such as the Company's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions. Past performance should not be taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance. The Company expressly disclaims any obligation or undertaking to release any updates or revisions to these forward-looking statements to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based after the date of this presentation or to update or to keep current any other information contained in this presentation. Accordingly, undue reliance should not be placed on the forward-looking statements, which speak only as of the date of this presentation. This presentation includes measures of financial performance which are not a measure of financial performance under the Korean Government-owned and Quasi- government Accounting Regulations and Standards ("Government Accounting Standards") or K-IFRS, such as "EBITDA". These measures are presented because the Company believes they are useful measures to determine the Company's financial condition and historical ability to provide investment returns. "EBITDA" and the other measures of financial performance in this presentation should not be considered as an alternative to cash flows from operating activities, a measure of liquidity or an alternative to net profit or indicators of the Company's operating performance on any other measure of performance derived in accordance with Government Accounting Standards or K-IFRS, as the case may be. Because "EBITDA" is not a Government Accounting Standards or K-IFRS measure, "EBITDA" may not be comparable to similarly titled measures presented by other companies. This presentation speaks as of the date hereof. Neither the delivery of this presentation nor any further discussions of the Company with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since that date. By attending the meeting where this presentation is made or by accepting a copy of this presentation, you agree to be bound by the foregoing limitations. 2 K water#5Investment Highlights Strong Link with the Government 100% Government-invested corporation (1) Government to maintain a minimum 50% ownership and control on budget and investment Regular and on-going Government financial support through capital injection, subsidies, Gov't agencies • Credit ratings equivalent to the Government: (Aa2 by Moody's / AA by S&P) • Pivotal Policy Role Importance of water resources to the national economy • Korea's policy arm in national water management Dominant market share in water-related businesses throughout nation's water system K water Solid Financial Profile (Debt/Capitalization (2): 60.7%) Sound Capital Structure • Strong Profitability (Operating Margin (3): 14.0%) Ample Liquidity (Credit Line of KRW 290 bn, Kwater As of 2018YE Cash & Cash Equivalents of KRW 399 bn) Sustainable and Eco-friendly Management Social responsibility and sustainable growth management Leads sustainable development in the water-related field aligning closely to UN Sustainability Development Goals Green Bond Eligible Projects: - Expand waterway - Improve water supply infrastructure Renewable energy Source: Company information, As of December 31, 2018. Note: (1) The Government (92.8%), The Korea Development Bank (7.1%), Local Governments (0.1%). (2) Total Debt/ (Total Debt + Total Shareholders' Equity). (3) Operating profit / Revenue. 3 K water#61. Overview of K-water#7Introduction to K-water Company Overview • Established in 1967 with its vision to become "Global Water Professional❞ • Ownership: Government directly and indirectly owns 100% • Relevant Government Office: The Ministry of Environment ("ME") • Organization: - HQ: 5 Divisions, 27 Departments Regional Offices: 3 Regional Head Offices, 5 Divisions, 62 Departments - Total Employees: 4,856 Mandated Policy Role Developing and managing water resources Improving water quality Ensuring flood control capacity K water Korea's Policy Arm in National Water Management Source: Company information, As of December 31, 2018. Note: (1) KDB stands for "The Korean Development Bank" 4 Ownership Structure(1) 7.1% 0.1% K water KRW 8.5 tn ■ Government ■ KDB ■Local Gov't 92.8% The Government owns, directly or indirectly, 100% of K-water Article 4 of the K-water Act - Contributions to its capital may only be made by local governments, The Korea Development Bank and the Government with at least 50% of its outstanding capital being directly owned by the Government. Annual Paid-in Capital (Accumulative) (KRW bn) 8,486 8,109 7,688 7,194 7,016 6,899 6,816 6,695 '11 '12 '13 '14 '15 '16 '17 18 K water#8Key Policy Role in the Water System K-water plays an important and strategic public policy role in Korea's water system. Flood Control Clean Energy Production Flood control through dams Renewable energy such as tidal power Water Source Construction of the Waterfronts Water resources Waterfront secured through dams cities development Re-use Water Intake Water Supply Water supplied through dam operations Water quality management of the water intake resources Source: Company information. 5 Re-use Sewage Treatment Wastewater management Use of Water Production of Tap Water (Water Treatment) Water processing Tap water and raw water supplied Supply of Raw Water Water supplied to local governments, enterprises, etc. before intake and treatment 周周周周 K water#9Business Overview K-water maintains a diversified business mix with water resources and water supply businesses as the predominant sources of revenue apart from the private investment business. Water Resources Business • Multi-purpose dam management • Flood prevention • Dam water supply . Hydro-electric power generation • Four River facility management Waterfront Development Business Development of industrial complexes, special areas and waterfront areas • Sales of lots at logistics center (Kyung-In Canal) Source: Company information, As of December 31, 2018. CO 6 FY2018 Revenue Breakdown (KRW bn) 1,790 53% 680 20% 607 18% 314 9% Water Supply Business Multi-regional waterworks (Wholesale) • Industrial waterworks • Local waterworks • Sewerage Other Business • Renewable energy • Overseas • Other consignment K water#10Operations Overview Operation of Water Resources Management System across the Nation • The HQ Water Management Center manages the operation of all multi-purpose and water supply dams • Three regional head offices manage the operation of waterworks system Han River Regional HQ Geum River Yeongsan River Regional HQ III I שר HQ TH III . TH E Nakdong River Regional HQ Multi-purpose dam W Flood control dams Dams under construction Water-only dams TH Multi-purpose reservoirs for irrigation Overseas Projects Multi-regional and industrial water supply systems Local water supply systems Others Georgia Equatorial Guinea Pakistan Thailand Morocco Bangladesh The Philippines (2) Cambodia (2) Mozambique Indonesia Indonesia Solomon Botswana Source: Company information, As of December 31, 2018. Note: (1) Project Management. (2) Official Development Assistance. 7 H Current Operations under K-water 39 20 20 16 14 23 14 1 Multi- Dam Estuary Water purpose Barrage Supply Dam functional regional Waterworks Multi- Multi- Industrial Local Waterworks Waterworks Weir Construction in Progress 6 4 4 1 Investment Projects (4) IPM(1) Projects (2) IODA(2) Projects (9) Multi-regional Waterworks Industrial Waterworks Multi-functional Complexes Waterfront Area K water#11Leading Market Share in Korea K-water's key policy role extends to flood control and hydro-power generation. Ground Water 16% River Water 6% Total Water Use • 25.1 bn m³/yr (Exclude ecological river flow) Other K-water Dams 53% • Other Dams: Include KRC, local governments 25% Source: Long Term Master Plan for Water Resources (2001-2020), MOLIT; Others 5% K-water 95% Others 63% Others K-water 52% 48% Flood Control • 5.3 bn m³/yr (Total flood control) • Others: Include KHNP, KRC Others 40% K-water 60% Source: Long Term Master Plan for Water Resources (2001-2020), MOLIT; National Industrial Complex Development K-water 37% • 789 mm m² (Total designated area as of 2017YE) • Others Include LH Others 85% Source: National Industrial Statistics, MOLIT. K-water 15% Waterworks Supply Capacity • 36.7 mm m³/day (Total capacity as of 2017YE) • Others: Include local governments Source: Waterworks Statistics, ME; K-water. Hydro Power Generation 1,785 MW/yr (Total capacity as of 2017YE) Others Include KHNP Source: Power Exchange System, Korea Power Exchange. Renewable Energy Capacity • 9,284 MW/yr (Total capacity as of 2017YE) •⚫ Others: Include KHNP Source: Power Exchange System, Korea Power Exchange. Note: KRC refers to Korea Rural Community Corporation; MOLIT refers to the Ministry of Land, Infrastructure and Transport; ME refers to the Ministry of Environment; KHNP refers to Korea Hydro & Nuclear Power; LH refers to Korea Land & Housing Corporation. 8 K water#122. Relationship with the Government#13Credit Ratings in Line with the Sovereign MOODY'S INVESTORS SERVICE Aa2 K water A Moody's Affilate Local Ratings KOREA INVESTORS SERVICE KOREA RATINGS NI CE S&P Global Ratings K AA K water AAA K water "Korea Water Resources Corporation's (K-water) Aa2 issuer rating reflects our assessment of a very high likelihood of support from the Government of Korea (Aa2 stable) to K- water in a distressed situation... This high likelihood of support stems from the company's important strategic role in water management, Our view of strong government support is also underpinned by the government's ability to provide such support, as reflected by its Aa2 rating and stable outlook" Moody's Investors Service, May 2017 "Our business risk profile assessment reflects K-Water's strong position as the sole government-owned national scale builder and operator of wholesale water supply infrastructure. We view K-Water as playing an essential role of providing stable water supply in Korea, ... The ratings on K-Water reflect our opinion that there is an almost certain likelihood that the government of Korea will provide the company with timely and sufficient extraordinary support in the event of financial distress" S&P Global Ratings, June 2017 Source: Moody's Investors Service, S&P Global Ratings. 9 Relationship with the Government K water#14Legal Framework for Government Support • Article 13: The Government may provide guarantees on bonds issued by K-water • Article 37: The Government may wholly or partially subsidize expenses necessary for K-water's business as prescribed by the Presidential Decree • Article 4: Contributions to its capital may only be made by local governments, The Korea Development Bank and the Government with at least 50% of its outstanding capital being directly owned by the Government K-water ACT Water Supply ACT Dam ACT • Article 15: The management of dams constructed by ME or K-water is entrusted to K-water • Article 23: Local governments may entrust the operation and management of waterworks facilities to a specialized institution appointed in accordance with the Presidential Decree • Article 43: ME may entrust the management of waterworks facilities to K-water Source: Company information. 10 K water#15Integral Link with the Government K-water acts as the central agency for the management of water resources in Korea. Oversees K-water's business in general, including the business plan, execution plan and budget Approves water tariffs (together with the MOSF) Checks water quality for dams and water supply system ME Oversees National rivers MOLIT MOTIE Oversees hydropower tariff related issues Local Governments Responsibility K water ME MOLIT MAFRA MIS MOTIE Multipurpose dams ✓ ✓ (Hydropower) Dams Water supply dams ✓ v Flood control dams ✓ ✓ Water Supply Multi-regional/Industrial ✓ ✓ (Waterworks) Local ✓ ✓ √ Agricultural Agricultural Water Supply Sewerage Sewerage ✓ V National rivers V ✓ River Management Local rivers ✓ √ ✓ Source: Company information, As of December 31, 2018. Note: MOSF refers to the Ministry of Strategy and Finance; MOLIT refers to the Ministry of Land, Infrastructure and Transport; ME refers to the Ministry of Environment; MOTIE refers to the Ministry of Trade, Industry and Energy; MAFRA refers to the Ministry of Agriculture, Food and Rural Affairs; MIS refers to the Ministry of Interior and Safety. K water 11#16Strong Financial Support from the Government K-water has historical track record of receiving regular financial support from the Government in forms of capital injection, subsidies and Government agency. Financial Support from the Government (KRW bn) 1,200 1,000 909 1,000 836 849 802 771 800 643 619 561 536 600 417 400 200 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ■Capital Injection 31 14 89 10 121 109 118 179 496 416 377 ■ Subsidies 7 3 1 246 291 302 305 305 ■ Gov't Agency Total 380 518 554 515 424 499 378 516 352 203 184 417 536 643 771 836 909 802 1,000 849 619 561 Support Type ⚫ Capital Injection: Businesses that involve production of public goods that the Government invests in (i.e., construction of waterworks, Kyung-In Canal project) Includes financing costs and repayment of a portion of the principal amount associated with the Four River Restoration Project from 2016 and onwards Subsidies: National projects funded by the state (i.e., financing cost of the Four River Restoration Project) → Subsidies for financing costs of the Four River Project until 2015 Government Agency: Projects implemented by an entity on behalf of the state, funded with national treasury (i.e., dam construction, expansion of dam capacity) Source: Company information, As of December 31, 2018. 12 K water#17Positive Long-term Tariff Outlook K-water will continue to closely cooperate with the Government for sufficient cost recovery under the current tariff mechanism. Overview of Mechanism for Setting Water Tariffs K-water ME MOSF K-water Request Approval Cost Calculation Reviewed by Tariff Deliberation Committee Public Utility Tariff Advisory Committee Execution of Rates • The Government has continuously pushed for full cost realization of water tariffs by raising water tariffs by at least 10% every year since 1995. A water tariff freeze was imposed by the Government in 2005 in order to offset inflation on cost of basic necessities • Tariff was raised by 4.9% in January 2013 and further by 4.8% in September 2016 Current Status • After the tariff increase in 2016, revenue in 2017 increased by KRW 81 bn Outlook • The Government continues to focus on setting water tariffs to fully recover costs • According to the "Mid-to Long-term Financial Plan of Public Entities" published by the Ministry of Strategy and Finance, public utility tariffs will be raised in order to improve public institutions' financial structure • In line with the plan, K-water will strive to raise multi-regional and dam water tariffs to achieve sufficient cost recovery • Regardless of changes in tariffs, K-water anticipates sustained revenue growth from an increase in demand Source: Company information. 13 K water#183. Financial Profile#19Prudent Financial Policy & Risk Management K-water employs a prudent financial policy and strict risk management framework in accordance with the K-water Act. Borrowing Policies Financial Risk Management Liquidity Management • The Government may guarantee payment of principal and interest issued by K-water (Article 13, K-water Act) • Total outstanding debt may not exceed twice the sum of paid-in capital and reserves (Article 13, K-water Act) • Maintain strong international and domestic credit ratings Diversify funding sources and debt maturity profile • • Financial Risk Committee (5 standing members and 6 outside experts) in accordance with Financial Risk Management Guidelines The financial risk limit (VaR, EaR) is set regularly (2017 limit was 20% of targeted operating income, KRW 55.9 bn) 100% hedging policy on FX risk (fully hedged by cross currency swap and interest rate swap) Close monitoring and weekly reports of the financial market . Maintain sufficient credit lines to ensure liquidity level (KRW 290 bn with 6 financial institutions, no credit lines have been used) Retained cash and cash equivalents of KRW 399 bn as of 2018YE Operate a capital balance forecast system for liquidity management Others Conservative accounting standards Establishment of efficient frontier analysis Operate an internal control system Source: Company information, As of December 31, 2017. 14 K water#20Financial Highlights Revenue (KRW bn) Operating Profit (KRW bn) OP Margin 14.0% Net Income (KRW bn) 3,777 3,618 12.7% 3,376 3,392 476 10.1% 9.3% 428 240 185 364 350 (117) 2015 2016 2017 2018 2015 2016 2017 2018 (5,796) 2015 2016 2017 2018 Total Assets (KRW bn) Total Debt (KRW bn) 21,797 11,640 11,774 11,725 12,029 20,867 20,299 19,551 Total Liabilities / Total Shareholders' Equity 211.4% 204.8% 188.5% 179.9% 2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018 Source: Company information, As of December 31, 2018. Note: consolidated basis and all items under Korean Government-owned and Quasi-government Accounting Regulations and Standards ("Government Accounting Standards") and K-IFRS, as the case may be. 15 K water#21Debt Profile Type of Borrowing Debt Type Fiscal Loan 5% Maturity Profile (KRW bn) Coupon Type FRN Currency Type CHF USD 5% 2% 7% Corporate Bond 95% FXD 95% KRW 89% 3,000 2,722 2,500 112 2,000 1,655 1,492 1,500 1,178 1,213 563 1,054 2,610 1,000 391 731 690 700 1,492 1,178 500 1,054 1,092 822 201 731 690 700 201 0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028+ ■Domestic Currency ■Foreign Currency Source: Company information, As of December 31, 2018. 16 K water#2217 THANK YOU K water