energy for a better world - posco energy

1969-2018

Energy for a Better World

Corporate Citizenship Report 2018

About this Report

This carries the meaning of POSCO ENERGY’s passion to create a more sustainable and beauti-

ful environment by providing cleaner energy. POSCO ENERGY has been publishing Sustainability

Reports since 2012 and the seventh report is being published in 2019, which marks the 50th

anniversary since founding. In this '2018 POSCO ENERGY Corporate Citizenship Report', Mate-

riality Analysis was conducted to select 10 issues that are important to the internal and external

stakeholders and relevant performances are described in accordance with the management vi-

sion - Business, Society, and People With POSCO.

Reporting Standard: This report is written in accordance with the core reporting guidelines of the

GRI(Global Reporting Initiative) Standard, EUSD(Electric Utilities Sector Disclosures), and takes

into account the ISO 26000, the international standard for corporate social responsibility, as well

as the principles of the UN Global Compact. The financial information included in the report fol-

lows the K-IFRS(Korea-International Financial Reporting Standards).

Reporting Scope: This report mainly covers the data and performances of POSCO ENERGY's

Seoul Headquarters, and domestic business sites in Incheon, Pohang and Gwangyang. Some

data from a subsidiary(POSPOWER) and overseas business sites are also included.

Reporting Period: This report was prepared based on sustainability activities and achievements

from January 1, 2018 to December 31, 2018 and contains data from the previous three years for

comparison of the quantitative achievements. Partial data until March of 2019 is also included.

Reporting Verification: This report was verified by an independent assurance agency, Korea Pro-

ductivity Center(KPC), to ensure accuracy and credibility of the contents. Sustainability perfor-

mances of all business sites were verified based on the International Standard on Assurance

Engagements(ISAE) 3000 and Type Ⅱ of the Accountability Assurance Standard(AA1000AS).

Stakeholder Communication: This report has been published in both Korean and English and

can be downloaded from POSCO ENERGY's website. For any inquiries or concerns, please contact

POSCO ENERGY through the website, e-mail, phone, or mail.

Address 16F POSCO Center, 440, Teheran-ro, Gangnam-gu, Seoul, Republic of Korea

Phone 82-2-3457-2295

Website www.poscoenergy.com

E-mail [email protected]

C o n t e n t s

Overview

04 CEO Message

06 About POSCO ENERGY

07 Message from the Executives

08 50th Anniversary

10 Business Overview

Commitment Preparing for 100 years

17 Risk Management

19 Sustainability Management System

20 Sustainability Performance

22 Creating Social Value

22 UN SDGs

24 Materiality Analysis

Corporate Citizenship Activities

27 Management Philosophy

Business With POSCO30 Financial Soundness

32 Controlling Air Pollutants

36 Creating Economic Value

39 Business Ethics

42 Responding to Energy Policy

45 New & Renewable Energy Business

47 Cost Efficiency Competitiveness

Society With POSCO52 Social Contribution Activities

People With POSCO58 Safety & Health Management

62 Creating a Healthy Workplace Environment

Appendix

73 Independent Auditor's Report

74 Financial Information

79 GRI Index

81 Independent Assurance Report

83 UN Global Compact Index

84 Membership in Associations

84 Participants

Activities and Performance

66 Corporate Governance

67 Recruitment and Talent Cultivation

69 Supply Chain Management

70 Customer Satisfaction

71 Innovation

1969-2018


54 Overview Commitment Preparing for 100 years Corporate Citizenship Activities Activities and Performance AppendixCORPORATE CITIZENSHIP REPORT 2018

CEOMESSAGE

Dear Stakeholders of POSCO ENERGY,

This year celebrates POSCO ENERGY's 50th anniversary of founda-tion, and it is preparing big changes for the next 50 years to come. Being the first in Korea to successfully engage in Independent Power Project by launching the construction of the Incheon Power Plant in 1969, POSCO ENERGY has contributed to Korea’s rapid in-dustrialization in a short period of time. As Korea's first and largest independent power producer with continued growth over the last 50 years, POSCO ENERGY, has overcome the recent years of difficulty and will make changes for a new leap forward.

The ‘POSCO ENERGY Corporate Citizenship Report 2018’ includes the achievements of business re-structuring in 2018 to turn crisis into opportunity as well as the plans to step forward into 2019 while celebrating the 50th anniversary.

In 2018, changes in the energy paradigm including the nuclear-power policy, suspension of aged coal power, and expansion of new and renewable energy were accelerated. Given these changes, POSCO ENERGY is seeking various strategic directions to advance into a ‘Global Eco-friendly Energy Company focused on Gas & Power'. Based on the current global market size and future growth potential of gas business, in the first-half of 2018, POSCO ENERGY has decided to import gas directly which will enhance synergy with LNG power plant operation. Also, in an effort to expand into relevant industries POSCO ENERGY has established a LNG trading firm in Singapore and prepared to acquire the Gwangyang LNG terminal. In 2019, POSCO ENERGY plans to reorganize the energy business model through forming of a new gas infrastructure through early stabilization, construction of new tanks, and expansion of the Gwangyang LNG terminal operations. POSCO ENERGY will secure cost competitiveness through direct operation of Gwangyang LNG terminal, and grow into a globally recognized comprehensive energy pro-vider through terminal lease, as well as expanding POSCO ENERGY's business into ship bunkering and overseas liquefaction terminal in the long term. On top of that, POSCO ENERGY pledges to continue fulfilling the management philosophy of 'corporate citizenship: Building a Better Futuer Together'. In January 2019, POSCO ENERGY's "Energy Dream" project was introduced on the UN SDGs(Sustainable Development Goals) website. POSCO ENERGY has contributed to resolving social problems by reducing the cost of energy for vulnerable groups since 2012, creating warmer and brighter residential environments.

A corporate’s sustainability should start from the employees and expand to partners, local communities and the country. POSCO ENERGY is committed to creating a healthy work/life balance, a family-friendly working environment that provides confidence and loyalty for the company, and to providing a variety of benefits to its partners. In addition, POSCO ENERGY strives to provide support by strengthening sport activities for the local community through the operation of a table tennis volunteer group.

POSCO ENERGY begins to take on a new challenge towards building a corporate history of 100 years. I ask for your continuous interest and support in accomplishing the group's manage-ment vision 'With POSCO' for all of the major stakeholders such as Business, Society, and People. Thank you.

June 2019President and CEO

Park Kihong


Message from the Executives

Risk management through thorough analysis and creation of new business opportunities

In May last year, after POSCO ENERGY’s fuel purchase contract with KOGAS has expired, it signed a contract for

direct LNG import for use in its Incheon Combined Cycle Power Plant. Since the end of 2018, POSCO ENERGY has been directly importing LNG, and has been operating Unit 3 in the Incheon Power Plant using mid-term contract

volumes and SPOT volumes, improving the company’s profit and contributing to the electricity market on a na-tional level. In the process of importing LNG directly, POSCO ENERGY thoroughly analyzed risks and established

strategies to overcome those risks. To overcome the risk of shortage and surplus of LNG, POSCO ENERGY re-viewed businesses such as those related to the terminal which can create new opportunities. POSCO ENERGY will continue to increase the company’s sustainability by identifying risk factors regarding new changes and cre-ating new opportunity factors.

Shin Changdong, Senior Executive Vice President, Head of Business Development Division

Promoting an integrated safety management system by setting the safety of employees and partners as the top priority

The safety and health of all executives and employees are issues that should not only be guaranteed by law, but should be prioritized in order to become a sustainable business and corporate citizen. POSCO ENERGY focus-es on the safety of not only its executives and employees at workplaces, but also that of the local communities and partners. This year, POSCO ENERGY included the 'Zero Accident' goal to its management indicator to build a more responsible and integrated company-wide safety management team, whereas in the past safety was managed by each worksite. In particular, POSCO ENERGY plans to continuously strengthen its safety and health management system through three key managerial improvements: ‘expanding the operation of safety system for co-prosperity with partners', ‘strengthening employee responsibility for safety activities', and ‘conducting diagno-sis for compliance of Occupational Safety and Health Act amendment'.

Jeong Kiseop, Senior Executive Vice President, Head of Corporate Planning Division

Smartization of power plants to enable high efficiency, zero outage, and zero accident operation

Power plants are extremely sensitive facilities that collect and store massive amounts of data every second from tens of thousands of sensors, and operators manage facilities by responding to emergency situations based on application of their experiences. Based on big data analysis technology and the experiences of operators, smart power plants, which proactively identify factors of outage and efficiency improvements and take actions, have been promoted to realize ‘high efficiency, zero outage, zero accident power plants'. In this process, POSCO ENERGY established its unique smart power plants that combine external softwares with internal engineers' experiences, and based on the success of the implementation of Incheon Units 7 to 9, the establishments have expanded to Units 5 and 6 of the Incheon power plant as well as Gwangyang/Pohang Off-Gas power plants.

Park Jinwon, Executive Vice President, Head of Power Plant Development Division

About POSCO ENERGY

CEO Park Kihong Assets(Consolidated) KRW 4155.2 billion

Date of Establishment November 3rd, 1969 Liabilities(Consolidated) KRW 2803.2 billion

Number of Employees 836 Credit Ratings Corporate Bond AA-, Corporate Bill A1

Company POSCO ENERGY Co., Ltd.

Head Office 440 Teheran-ro, Gangnam-gu, Seoul, Korea

Power Plants and Offices

Incheon LNG Combined Cycle Power Plant: 314, Jungbong-daero 405 beon-gil, Seo-gu, Incheon, KoreaGwangyang Off-Gas Combined Cycle Power Plant: 1800, Jecheol-ro, Gwangyang-si, Jeollanam-do, KoreaPohang Off-Gas Combined Cycle Power Plant: 6262, Donghaean-ro, Nam-gu, Pohang-si, Gyeongsangbuk-do, KoreaIndonesia Off-Gas Power Plant: Cilegon, IndonesiaVietnam Coal-Fired Thermal Power Plant: Quang Ninh, Vietnam

Business Areas Power Generation Business(94.64%), Fuel Cell Business(4.76%), Others(0.60%)

Founded in 1969, POSCO ENERGY has contributed to Korea's industrialization by securing a stable power supply in the 90s to meet the increased demands. As of 2019, POSCO ENERGY holds about 10% of the power generation capability in the Seoul Capital area and contributes to the stabilization of the power system. As of March 2019, POSCO ENERGY is operating three domestic power plants in Incheon, Gwangyang, and Pohang, as well as two overseas plants in Indonesia and Vietnam.

2016

1,703

2017

1,621

2018

1,882

Operating Profits (Unit: KRW billion)

2016

90

2017

166

2018

47LNG Combined

Cycle

3,412MW

Off-Gas Combined

Cycle

574MW

Solid Refuse Fuel(SRF)

24.8MW

Photovoltaic

14.5MW

Wind Farm

62.7MW

Overseas

1,400MW

Sewage Heat Energy Utilization

200,000 Gcal/year

Total 5,488MW, 200,000 Gcal/year

Power Generation Capacity

Mission/Vision/Core Values

Mission

Vision

Core Values

Overcome Limits by Challenges

Secure Top-level Expertise

Pursuing Unlimited Growth

Expanding Global Business

To advance into a global eco-friendly energy company focused on gas & power

To make a brighter world by providing cleaner energy.

PassionOwnership/ Challenge/

Professionalism

CommunicationTrust/

Consideration/Cooperation

Green InnovationEco-friendly

Growth/Creativity and

Innovation

Co-SuccessProsperous

ecosystem/Social Responsibility

Agenda for Vision Accomplishment

Revenues (Unit: KRW billion)


2018Launched the commercial operation of

Jeonnam Onshore Wind Farm

2015 Completed the construction of

MongDuong II Coal-Fired Thermal Power Plant in

Vietnam

1969Established Kyung-In

Energy Development Co., Ltd

2005Renamed to

POSCO POWER Co., Ltd

1972Completed the construction of Incheon

LNG Power Plant

2014Completed the Shinan

Photovoltaic Power Complex

POSCO ENERGY

TH

2010Completed the construction of

the Gwangyang Off-Gas Combined Cycle Power Plant

50th Anniversary

1969-2004

1969. Nov Established Kyung-In Energy Development Co., Ltd

(Cooperation between Hanwha and U.S. Union Oil)

1970. Mar Renamed to Kyung-In Energy Co., Ltd

1972. Apr Completed the construction of Incheon

LNG Power Plant

1994. Oct Renamed to Hanwha Energy Corporation

2000. Oct Renamed to Korea General Energy Co., Ltd

2002. Jan Completed the expansion of Incheon LNG Combined Cycle

Power Plant(Complex units 1, 2, 3, 4/total 1,800MW)

2012-2014

2012. Feb Renamed to POSCO ENERGY Co., Ltd

2013. Nov Completed the construction of Busan SRF Power Plant(24.8MW)

2014. Jan Completed the construction of Off-Gas Power Plant in Indonesia(total 200MW)

2014. Jul Completed the construction of Pohang Off-Gas Combined Cycle Power Plant(total 290MW)

2014. Aug Completed the construction of Shinan Photovoltaic Power Complex(total 14.5MW)

2014. Sep Advanced into the Samcheok coal-fired thermal power generation business(total 2,100MW)

2014. Dec Completed the district heat supply facility utilizing sewage heat

2005-2011

2005. Sep Renamed to POSCO POWER Co., Ltd

2008. Sep Completed the construction of fuel cell

BOP manufacturing plant(Pohang)

2010. Dec Completed the construction of Gwangyang Off-Gas

Combined Cycle Power Plant(total 284MW)

2011. Mar Completed the construction of the fuel cell stack

manufacturing facility(Pohang)

2011. Sep Completed the construction of Units 5 and 6 at

Incheon LNG Combined Cycle Power Plant(1,252MW)

2015-

2015. Apr Completed the construction of Units 7, 8, and 9 of Incheon LNG Combined Cycle Power Plant (1,260MW/total 3,412MW)

2015. Oct Completed the construction of MongDuong II Coal-fired Thermal Power Plant in Vietnam(1,200MW)

2015. Dec Completed the construction of fuel cell manufacturing facility in Pohang(50MW/year)

2016. Dec Contract signed for the Coal-Fired Thermal Power Plant Constriction and Purchase Agreement in Butswana(300MW)

2017. May Approved to Implement Feasibility Study from Prime Minister for Quynh Lap Ⅱ Coal-Fired Thermal Power Plant in Vietnam(1,200MW)

2018. May Began the Commercial Operation of Shinan Onshore Wind Farm(62.7MW)

Completion ceremony of Incheon LNG Power Plant(324.8MW)

2014Completed the construction of Off-Gas

Power Plant in Indonesia

2012Renamed to POSCO ENERGY Co., Ltd

2014 Completed Tancheon Sewage Heat

Energy Utilization Facility

Gwangyang Off-Gas Power Plant Units 5 and 6, Incheon Power Plant

Indonesia Off-Gas Power Plant Units 7 to 9, Incheon Power PlantShinan Photovoltaic Complex Jeonnam Onshore Wind Farm


LNG Storage Tank

Gwangyang Terminal

Tanks 1, 2, 3 and 4

• 530,000 kl

• June, 2005(Units 1 and 2), September, 2010, May, 2013

Tank 5(Under construction)

• 200,000 kl

• Scheduled to be completed in November, 2019

LPG Tank

• 86,000 kl

• June, 2016

Strengthening power generation business and midstream competitiveness of gas businesses by operating LNG terminal with a capacity of 730,000 kl

Incheon PlantUnits 3 and 4 • 900MW(450MWX2) • January, 2002

Units 5 and 6 • 1,252MW(626MWX2) • September, 2011

Units 7, 8, and 9 • 1,260MW(420MWX3) • April, 2015

Provide stable power based on 50 years of experience 3,412MW of capacity, about 10% of the total electricity supplied to the metropolitan area.

LNG Combined Cycle Power Plant


Off-Gas Combined Cycle Power Plant

Gwangyang Plant

• The first off-gas combined cycle power plant in Korea

• 284MW(142MWX2)

• December, 2010

Pohang Plant

• The world's first BFG and FOG combined fuel

• 290MW(145MWX2)

• July, 2014

※ BFG : Blast Furnace Gas ※ FOG : FINEX Off Gas

Eco-friendly power plant that recycles off-gas from steelmaking process

New and Renewable Energy

Shinan Photovoltaic Power Complex

• Eco-friendly power plant by utilizing abandoned salt pond

• Capacity: 14.5MW

• Expected effect: Provide power to about 5,300 households Tree planting effect of 2,200,000 evergreen trees/year CO2 reduction of 7,600 tons

Jeonnam Onshore Wind Farm

• Expand the domestic wind power market

• Capacity: 62.7MW Project development of offshore wind farm with a capacity of 300MW

• Expected effect : Generate 120,000MWh of electricity Tree planting effect of 14,000,000 evergreen trees/year CO2 reduction of 49,000 tons

Commit to the low carbon green growth with photovoltaic and wind power generation projects


Samcheok Plant

• 2,100MW(1,050MWX2)

• Scheduled to be completed by 2024

Application of highly advanced environmental facility

Coal-fired Thermal Power Generation Indonesia Off-Gas Power Plant

• First off-gas power plant in Southeast Asia

• 200MW(100MWX2)

• January, 2014

Vietnam MongDuong II Coal-fired Thermal Power Plant

• First coal-fired independent power producer in Vietnam

• 1,200MW(600MWX2)

• October, 2015

Grow into a global energy company by expanding business in Indonesia, Vietnam, and Africa

Global Business

Overview Commitment Preparing for 100 years Corporate Citizenship Activities Activities and Performance Appendix 171616

Waste to Energy

Busan SRF(Solid Refuse Fuel) Power Plant

• Korea's first integrated(fuel conversion + power generation) SRF facility

• Produces electricity for 57,000 households a year

• Fuel conversion: 900 tons/day

• Electricity generated: 24.8MW

District Heating Supply Business that Utilizes Heat Generated from Tancheon Used Water

• Joint promotion of the largest private and public institutions in Korea

• Produces energy for 20,000 households a year

• Heat pump: 63Gcal/hour

• Heat production: 200,000 Gcal/year

Generate energy by recovering

renewable resources such as

daily waste and heat from sewage water

The Independent LNG Combined Cycle Power Plant, which was considered a stable business, experienced a lower rate of operation resulting from the base load power generation expansion of nuclear power and coal-fired thermal power. Due to the changing environment caused by LNG direct im-port of competitors, POSCO ENERGY faced an unprecedent-ed crisis. To turn crisis into opportunity, POSCO ENERGY re-alized risk management is a crucial factor for sustainability and established integrated risk management to respond swiftly to the internal and external risks. The company is now working on a system to minimize risk, starting with defining the role and responsibility of the ERM Group and the specialized departments(relevant division) by risk type.

Integrated Risk Management SystemThe risks of a company can be divided into external risks and internal risks. External factors include changes in ex-ternal management conditions and external corporate im-age, whereas internal factors include finance, human re-sources, information security, and safety. The ERM group looks at all risk factors, excluding risk types that are clear and dealt with by the relevant departments. It looks main-ly into investment management, which is new investment verification and monitoring of investments in progress. Over the past several years, POSCO ENERGY has focused on internal risk management for business normalization, but now the company plans to expand its roles to moni-toring external risks and establishing management re-sponse systems jointly with the risk-specific department.

Financial Risk ManagementPOSCO ENERGY operates an efficient risk management system that encompasses all finance areas including ac-counting, taxation, and funding. In particular, the company minimizes volatilities of exchange and interest rates with hedge trading of foreign currency loans through derivatives contract of Swap, Forward, and MAR(market average rate).

Investment Risk ManagementIn the power generation business, there are two types of investments: current investment, which includes mainte-nance, and new business investment. Maintenance is di-rectly related to the operation rate of power plants, that is, profit. As a result, a thorough review of investment sched-ules, budgets, and effect is necessary. Current investment focuses on the company's internal capability while new business investment focuses on the company's growth. However, Renewable Portfolio Standard obligations and the coal phase-out generation trend is causing subdued growth with factors such as the saturated domestic independent LNG power generation market. In the past, the focus was mainly on quantitative growth by increasing generation ca-pacity and the number of operating projects but now is the time to shift to qualitative growth. While enhancing the val-ue of the LNG combined cycle power generation, POSCO ENERGY will create a business portfolio centering on new businesses that strategically respond to the changes of the external environment and promote internal stability. The ERM group identifies risks regarding new businesses and monitors the process while managing mutual investment companies by conducting Gate Reviews.

Mutual Investment Company Management

• POSPOWER: Monitoring of the EPC process for timely completion, the Board of Directors∙KPI∙standard investment cost management

• AES-VCM: Inspection of financial contract fulfillment, BOD∙KPI Management

• PSC Energy Global: planning, manage financial balance, deposit/withdrawal operation instruction, settlement of accounts and taxation, operation of council, etc.

• Shared Service for Subsidiaries

Risk Management

Index 2016 2017 2018

Total Ratio in USD(%) 664 527 66

Total Hedge in USD(1,000) 396,920 398,575 233,887

USD Hedge(1,000) 59,787 75,589 81,266

EUR Hedge(1,000) 117,767 112,556 81,107

JPY Hedge(1 million) 6,742 6,817 6,833

Gate Review

Implementation of Gate Review on business: 2 cases

Feasibility study for external investment: 17 cases

Revised regulations for investment management

The feasibility study for current investment: 49 cases

Status of Hedging by Currency

CORPORATE CITIZENSHIP REPORT 2018

Overview Commitment Preparing for 100 years Corporate Citizenship Activities Activities and Performance Appendix 1918 CORPORATE CITIZENSHIP REPORT 2018

toring of security activities by security managers have been strengthened, and the restricted area set according to the company’s defense plan, restricting the entrance of any per-son unrelated to the joint preparation during the integrated defense plan of the military and police to prevent physical or human damage. Fifth, improvement factors are identified and managed by establishing a spot check system of inte-grated defense factors and conducting regular visits from a government organization, local government and military unit.

Information ProtectionPOSCO ENERGY's information protection activities are op-erated based on the Information Security Management System(ISMS) led by the Ministry of Science and ICT. After participating in the voluntary certification in 2015, POSCO ENERGY renewed the certification for three years and es-tablished a systemized management standard. Based on this, POSCO ENERGY is putting effort into compliance with relevant laws and regulations and operations of Information Security Management System. For information protection policy, POSCO ENERGY is actively reflecting the charac-teristics of a power generation business and implement-ing corporate information protection through regulations and guidelines. For Critical Assets and IT Security, POSCO ENERGY is protecting information assets through manage-ment and risk assessment and action. As of March 2019, POSCO ENERGY was able to safely protect company infor-mation assets without any incidents. Security conscious-ness of employees and partners is being strengthened and an information protection campaign is launched more than twice a month to increase security awareness. POSCO EN-ERGY is sharing key points regarding information protec-tion through in-house bulletin boards and when issues of malicious email inflow arise POSCO ENERGY immediately informs all employees to prevent information leakage and infectious incidents. With the PI3.0 Project(Nov. 2012 - Jul. 2014), POSCO ENERGY implemented an optimized enter-prise integration system to replace the division focused system. POSCO ENERGY is also operating an integrated ERP system of sales, production, and finance through a systematic management of enterprise integration system. IT operations such as change in regulations and systems, authority change from job rotation, and system access, are managed throughout the company to guarantee the highest user satisfaction and security. In addition, with the operation of Service Level Agreement, POSCO ENERGY is striving to enhance service quality and user satisfaction.

Non-Financial Risk ManagementPOSCO ENERGY's 37 corporate citizen communicators define risk factors that needs management each year and allows management that suits the rapidly changing exter-nal and internal business factors. There are 117 risk factors derived from benchmarking 29 major power producers and excellent risk management companies. Each communica-tor categorizes the risk in three categories: Critical, Mod-erate, and Minor, based on financial impact and probability. Risks such as currency, capital, credit rating, new business investment and affiliates while non-financial risks such as ethics, safety of business sites, and environmental issues are managed proactively.

Emergency Response SystemThe Incheon power plant is designated as a national securi-ty facility and a major national facility to supply stable pow-er to the Metropolitan Area. The plant built an emergency response system to counter activities that fundamentally restrict the situations that have serious impact on nation-al security and people's lives. In case of an emergency, the plant effectively responds to the infiltration, provocation, and threat of suspicious people, averting damage to per-sonnel, facilities and equipment and is working to establish a full-fledged work defense system. First, to ensure com-plete workplace protection, POSCO ENERGY has signed agreements with the heads and chiefs of military units, police stations, fire stations, local governments, and major national facilities, to cooperate in an integrated defense op-eration. Internally, POSCO ENERGY is prioritizing the estab-lishment and execution of a workplace protection measures and protection support plans as well as the operation, cul-tivation, and support for workplace reserve forces. Second, the Emergency Preparedness Officer and the Reserve Unit Commander collaborate with the Workplace Reserve, Civil Defense Units, and the Special Security Guards, and have created a comprehensive situation room where a unified defense system is built to combine portable obstructions such as fixed barriers on barbed wire, barricades, wire fenc-es, and scientific surveillance equipment. Third, to create preparations for an integrated defense system, trainings on identifying suspicious intruders and reporting are conduct-ed regularly along with education and promotional activities regarding infiltration strategy. Also, POSCO ENERGY pro-vides generation facility security and protection training and response method training to employees for quick response in emergency situations. Fourth, the guidance and moni-

In 2011, POSCO ENERGY set a strategic goal to become a beloved company that harmonizes economic, social and en-vironmental performance pursuing its will for sustainable management in the TOP(Tomorrow of POSCO ENERGY) Council with the CEO as the chairman. Since that year, the company established a new department and has been con-ducting various activities to internalize sustainable manage-ment through organic cooperation with the departments by sector. In 2018, POSCO group announced new management philosophy, "Corporate Citizenship: Building a Better Future Together", and POSCO ENERGY is preparing for change by re-assessing and developing its corporate citizenship activities.

Corporate Citizenship CommitteeTOP council was renamed to Sustainable Management Committee and has been operating as the top deci-sion-making organization of POSCO ENERGY in the sus-tainable management sector. The committee has been

Sustainability Management System

Become a beloved company that balances economic, social and environmental performanceStrategic Goal

Stake-holders

Customers Shareholders & Investors Environment Society Employees Partners

- KEPCO, KPX- New and renewable energy producer such as Power producer subsidiaries, and Independent power producers

- POSCO - Private equity funds

- Relevant government agencies such as the Ministry of Environment

- Municipalities and residents where business sites are located

- NGO

- Executives and employees of POSCO ENERGY

- Domestic and overseas power producers

- Facilities, fuel, EPC, maintenance materials, parts suppliers

Commitment

Supply stable power and improve customer satisfaction

Secure financial soundness and improve profitability

Expand eco-friendly power generation business

Promote social contribution projects customized to local communities

Provide support for competency development and create a smart working environment

Maximize synergy through sharing growth

Principle

- Stable power supply- Strengthen quality and price competitiveness

- Identify core growth engines

- Enhance corporate competitiveness

- Risk management and response

- Establish green management

- Respond to Climate Change

- Social contribution activities

- Minimize environmental impact

- Support Local Development

- Work/life balance- Develop professional competency

- Strengthen safety of business sites

- Establish the infrastructure for partners

- Share mid to long-term business plans

- Ensure fair evaluation and selection

Communi

-cation Channel

- KEPCO workshop- New customer consultation

- Customer seminar

- Board of directors- Investment council- Corporate disclosure

- Policy Meetings - Blue Sky Committee- Public Hearing for the Resident Association

- Working committee for four power plants in Incheon

- Development Fund Review Committee

- Company-wide Business Briefing

- P-GWP- Grievance resolution system

- Labor Management Council

- Occupational Health and Safety Committee

- Technical information exchange and training

KPI

- Outage Rate Units 3, 4: 0% Units 5, 6: 0.27% Units 7, 8 and 9: 0.14%

- Sales : KRW 1,882.2 billion

- Environmental Investment : KRW 1.105 billion

- Social Contribution Fund : KRW 1.185 billion

- Volunteer Hours per Employee : 24.6 hours

- P-GWP: 67 points- Training hours per person: 60 hours

- Number of accidents: 0

- Purchase by small and medium-sized businesses(SMBs) : KRW 33 billion

renamed to Corporate Citizen Committee in 2019. POSCO ENERGY includes customers, stakeholders and investors, the environment, the society, employees and partners as major stakeholders regarding the group's management vi-sion 'Business With POSCO', ‘Society With POSCO', ‘People With POSCO' and run the Corporate Citizenship Committee with relevant executives to respond to related issues.

Corporate Citizenship CommunicatorPOSCO ENERGY has renamed sustainability facilitator, con-sisting of senior managers related to issues of corporate citizenship activities, to Corporate Citizenship Communica-tor. About 40 of the communicators perform roles such as collecting opinions from related stakeholders, diagnosing and responding to external and internal sustainability, and operating performance tasks to improve corporate citizen-ship activities.


Index Unit 2016 2017 2018Fuel Consumption LNG Nm3 1,826,905,941 1,595,670,062 1,853,529,118

BFG Nm3 7,621,717,399 7,918,242,651 6,684,204,794

COG Nm3 42,195,207 37,689,452 23,745,712

FOG Nm3 1,621,842,610 1,290,360,141 1,092,632,405

Power Generation & Transmission

Power Generation MWh 15,421,058 13,830,854 15,357,725

Power Transmission MWh 15,078,768 13,509,264 15,014,299

Outage Rate Unit 3, 4 % 0.07 0 0

Unit 5, 6 % 3.04 0.23 0.27

Unit 7, 8, 9 % 0.13 0.19 0.14

R&D Human Resources and Investments

R&D Expenses KRW 100 million 155 98 1,769

R&D Expense to Revenue Ratio % 0.01 0.01 0.09

Corporate Ratings(Corporate bond)

Korea Investors Service Rating AA-(Stable) AA-(Stable) AA-(Stable)

Korea Ratings Rating AA(Negative) AA-(Stable) AA-(Stable)

NICE Investors Service Rating AA-(Stable) AA-(Stable) AA-(Stable)

Rate of Mandatory Supply of Renewable Portfolio Standards(RPS) % 3.5 4.0 5.0

Energy Consumption Total TJ 111,754 100,849 112,805 └ Direct Energy TJ 110,985 99,987 111,989 └ Indirect Energy TJ 769 862 816

GHG Emissions Total tCO2e 12,163,257.291 11,322,155.238 11,697,000.000 └ Scope 1 tCO2e 12,126,375.992 11,281,575.263 11,657,000.000 └ Scope 2 tCO2e 36,881.299 40,579.975 40,000.000

NOx Emissions Total Ton 2,327.5 2,347.4 2,439.9 └ Incheon LNG Combined Cycle Power Plant Ton 833.0 660.0 734.0 └ Gwangyang Off-Gas Power Plant Ton 1,028.5 1,204.3 1,195.1 └ Pohang Off-Gas Power Plant Ton 465.9 481.1 508.8 └ Pohang Fuel Cell Plant Ton 0.1 2.0 2.0

Water Consumption Total Ton 2,629,266 2,492,837 2,734,262 └ Incheon LNG Combined Cycle Power Plant Ton 912,227 784,429 969,962 └ Gwangyang Off-Gas Power Plant Ton 584,574 612,841 629,162 └ Pohang Off-Gas Power Plant Ton 1,075,527 1,015,295 1,074,985 └ Pohang Fuel Cell Plant Ton 56,938 80,272 60,153

Water Recycling Total Ton 566,656 508,371 795,483 └ Incheon LNG Combined Cycle Power Plant Ton 172,767 196,065 403,665 └ Gwangyang Off-Gas Power Plant Ton 117,379 127,914 125,678 └ Pohang Off-Gas Power Plant Ton 276,510 184,392 266,140 └ Pohang Fuel Cell Plant Ton 0 0 0

Water Discharge Total Ton 2,149,472 1,938,742 2,051,541 └ Incheon LNG Combined Cycle Power Plant Ton 477,324 338,260 433,231 └ Gwangyang Off-Gas Power Plant Ton 589,750 616,246 595,161 └ Pohang Off-Gas Power Plant Ton 1,082,201 983,861 1,022,976 └ Pohang Fuel Cell Plant Ton 197 375 173

Environmental Investments KRW 1 million 193 1,295 1,105

Activities of Board of Directors

No. of Meetings no. 7 8 9

No. of Items Handled no. 15 18 24

Rate of Attendance % 100 94 100

Ethics Training No. of Meetings(Total) no. 199 193 202 └ Internal no. 164 162 187 └ External no. 14 9 10 └ Others no. 21 22 5

No. of Trainees(Total) persons 2,988 2,366 2,601 └ Internal persons 2,963 2,345 2,409 └ External persons 25 21 30 └ Others persons 0 0 162

Sustainability Performance

Index Unit 2016 2017 2018Total Volunteer Hours hours 25,710 21,671 19,756

Voulunteer Hours per Employee hours 24.9 26.5 24.6

Social Contribution Fund Total KRW 1 million 1,609 1,345 1,185 └ Donation by POSCO ENERGY KRW 1 million 855 731 598 └ Fund for Nearby Power Plants KRW 1 million 613 485 475 └ Employee 1 % Sharing Fund KRW 1 million 141 129 112

Society With POSCOBusiness With POSCO

Index Unit 2016 2017 2018No. of Employees Regional persons 926 874 836

└ Seoul persons 213 220 206 └ Incheon persons 300 270 250 └ Pohang persons 343 322 301 └ Gwangyang persons 43 40 42 └ Overseas persons 16 15 15 └ Others persons 11 7 22

Gender persons 926 874 836 └ Male persons 831 783 758 └ Female persons 95 91 78

Type of Employment persons 926 874 836 └ Full-time persons 878 835 808 └ Temporary or Part-time persons 48 39 28

Type of Work persons 926 874 836 └ General(Male) persons 533 496 467 └ General(Female) persons 67 67 74 └ Technicians(Male) persons 263 259 267 └ Technicians(Female) persons 1 1 1 └ Others(Male) persons 35 28 24 └ Others(Female) persons 27 23 3

No. of Employees with Disabilities persons 11 11 11

Rate of Employees with Disabilities* % 1 1 1 New Hires Male persons 12 3 16

Female persons 6 1 4 No. of Turnover Employees persons 158 65 45 Turnover Rate % 17.1 7.4 5.4 No. of Parental Leave Male persons 8 2 0

Female persons 9 10 6

No. of Return-to-work Eligible Employee after Parental Leave persons 6 14 11

No. of Return-to-work Employee after Parental Leave persons 3 11 9 Return-to-work Rate after Parental Leave Total % 50 78 82

Male % 0 40 0

Female % 75 88 100

Usage rate of Flexible Work System % 13.1 9.7 6.0

Labor Union Membership Rate % 67.6 74.6 67.2

Rate of Temporary Closing 1 million/hour 0 0.9 0

Working Hours hours 2,241,600 2,121,600 2,018,400

Occupational Accidents(Average) cases 0 2 0

Total Training Hours hours 66,665 57,641 50,160

Total Training Cost KRW 100 million 7 6 8

Training Hours per Person hours 72 66 60

Training Expense per Person KRW 1,000 762 729 945

P-GWP Index points 70 68 67

Years of Continuous Service years 9 10 11

Certification of Family-Friendly Company yes/no yes yes yes

People With POSCO

* Field of business site + standard business site for employees with disabilities


(Unit : 10 million KRW)

The UN Sustainability Development Goals(SDGs) are the 17 goals the U.N. has set for addressing social problems and the sustainable development of our planet. POSCO ENERGY supports the UN and the UN SDGs international community implementations and pledges to pay attention and address the universal problems of mankind. In particular, as an energy company, POSCO ENERGY will find opportunities to contribute to society by focusing on three goals: Affordable and Clean Energy(#7), Industry Innovation and Infrastructure #9), and Sustainable Cities and Communities(#11). In January 2019, POSCO ENERGY's representative social contribution project, 'Energy Dream', having been implemented since 2012, was introduced on the UN SDGs website.

UN SDGs

• Plant Smartization with average outage rates

0.13%(1.08% in 2016)

• New and renewable energy generation capacity

87.2MW(2016, 38.5MW → 2017, 56.5MW)

• Promotion of LNG direct import business and rationalization of power generation cost

• Since the start of business in 2012, 391 households and 53 facilities have been supported with energy efficiency

• Cumulative energy savings of about KRW 125.7 million, saving KRW 2.8 million on average per year

While pursuing economic development, a company should also create social values as a member of the society and grow together with the society. Along with the traditional values of management, such as increased financial perfor-mance and profit, social and environmental responsibilities are also important for a company. POSCO ENERGY plans to focus on creating social values as a corporate citizen to build a better future together. As the importance of social responsibility and sustainabil-ity intensify, companies are starting to focus on their sus-tainability and are systematically managing it. This is call-ing forth a greater effort to accurately recognize the social values that a company is creating by measuring sustain-ability performance. POSCO ENERGY also pursued an in-depth approach regarding the economic, social and envi-ronmental activities of the company with its publication of the 2018 corporate citizenship report. POSCO ENERGY will strive to manage and measure social effects from a broad-er perspective by expanding its social value management indicators. As of 2018, the company’s social value totals KRW 112.37 billion based on the K-IRFS standard, in which indirect economic contribution including interest paid and corporate tax, social contribution, sustainable management including environmental effect, and corporate citizenship performance are reflected for measurement.

Creating Social Value

Affordable and Clean Energy POSCO ENERGY pursues a universal approach to modern energy through the advance-ment of Combined Cycle Power Generation, the company's unique business, and strive to secure competitiveness for cost and efficiency in power production and facility by in-creasing the operational efficiency. Furthermore, POSCO ENERGY is responding to the government's ‘New and re-newable energy 3020 policy' by continuously increasing the portion of new and renewable energy business, such as wind & photovoltaic power business.

Industry, Innovation and Infrastructure UNIDO emphasiz-es in the 'Inclusive and sustainable industrial development' report that the use of clean energy and increasing energy efficiency are critical factors to sustainable growth. POSCO ENERGY strives to improve the business sustainability of power generation through the introduction of clean technol-ogy and improvement of utilization efficiency.

Sustainable Cities and Communities Under the social contribution slogan 'Energy for a better world', the com-pany is implementing various businesses. POSCO ENERGY strives for environmental improvement and residential pub-lic service provision through the 'Energy Dream' project for energy-vulnerable groups, which involves improvements in energy efficiency, electrical equipment inspection, and lo-cal government welfare facilities support with photovoltaic power facilities.

7,959

Paid Interest POSCO ENERGY Social Value

2,162

Corporate Tax

6,555

Employee Wage and Welfare

74

EmploymentEffects

132

Purchase of Partners

149

Social Contribution

8,889

Reduction of Greenhouse Gas Effects

-485

Water Use and Waste Water

Discharge

-16

Disposal of Waste

-2,957

Sulfur Dioxide Emissions

-11,226

Nitrogen Oxide Emissions

-10

Fine Dust Emissions

11,237

Indirect Economic Contribution Performance

Social Contribution Performance

Environmental Contribution Performance

Total Social Value


POSCO ENERGY discloses sustainability activities and achievements in accordance with the global GRI standards to the stakeholders. Every year, reporting topics are selected through a materiality analysis and the content is created. In 2019, POSCO ENERGY selected the top 10 material issues focusing on business impact and stakeholders’ interest based on internal and external environment analyses and stakeholder surveys. The materiality analysis for this report was conducted in April, 2019.

Materiality Analysis

5 Selection of Reporting Issues Derived from the analysis, the material issues and reporting scope that should be reported primarily on the corporate citizenship report are as follows:

Implications from Materiality Analysis• International Initiative Compliance: Some issues that consider POSCO ENERGY's

industry characteristics and the relevance to national policy may deviate from the global initiative economy indicators, but this is due to industry characteristics.

• Same Industry Benchmark: Companies of the same industry as POSCO ENERGY try to add various issues in their reports; in particular, the majority of the 25 benchmark companies include air pollution related issues from the environmental aspect and HR issues from the social aspect.

• Media Research: According to the analysis of POSCO ENERGY's media report overview in 2018, reports tend to focus on management performance(283 cases, 20.43%) and social contribution(289 cases, 20.87%) while the media’s interest in the environment was relatively low(60 cases out of a total of 1,385, 4.33%).

• Stakeholders Survey: According to the POSCO ENERGY's stakeholders survey in 2018, ethical management, creating economic value, air pollutant control and strengthening financial soundness were analyzed as issues of high interest of stakeholders. In particular, ethical management was selected to be of highest importance.

4 Verification The material issues from the materiality matrix are reported to management(executives) to confirm the va-lidity. POSCO ENERGY identified 10 issues with high stakeholder interest and high business impact. They, along with the derivation process, were reported during the management interview and were confirmed as the final material issues.

3 Composition of Materiality Matrix To derive material issues, a matrix was formed based on business impact and stakeholders’ interest.

The stakeholders’ interest was measured through ①Media Research, and ②Stakeholder Surveys

Stakeholders’ Interest

Media Research Measurement of compliance of the 32 issue pools and a weighted evaluation of multiple articles referencing 1,385 POSCO ENERGY published on/off-line between January to December 2018.

Stakeholder Surveys Survey completed by 362 people, including investors, customers, the environment, local community, partners, and employees of POSCO ENERGY.

Business impact measurement was done in 4 stages; ①Compliance to International Initiatives, ②Identification of Issues in the Same Industry ③Analysis of past reports(3 years), and ④Analysis of Internal data.

Business Impact

Measuring Compliance to International Initiatives The compliance of 32 issue pools, such as GRI Standards, EUSD, ISO 26000, DJSI, and UNGC, etc., to international initiatives

Identification of Issues in the Same Industry Sustainability issues reported in 2018 by 25 companies, such as global Top10 power producers, DJSI World Companies, and domestic competitor companies, etc.

Analyzing Past Reports Material issues that were reported in the past three years regarding POSCO ENERGY’S Sustainability

Analyzing Internal Data The agenda of the board meeting and company-wide operational meeting attended by executives, the CEO New Year’s speech, the Inaugural address, and an analysis of POSCO TODAY articles from January to December, 2018.

Material Issue

Specific Ranking Reporting Scope

Linked GRI Specific indicators to corresponding GRI

Report-ing page

Stake

-holders’

Interest

Business

Impact

Internal External

Employees Shareholders/Investors Customers Partners Environment Society

Financial Soundness 2 6 201-1 Creation and Allocation of Direct Economic Values 31Controlling Air Pollutants 4 4 305-1,

305-2Direct GHG emissions(Scope 1)/(Scope 2) 33~35

Creating Economic Value 1 10 203-1 Infrastructure investments and services supported for public interests

37~38

Business Ethics 3 9 412-2 Employee training on human rights policies or procedures

40~41

Responding to Energy Policy 5 8 203-2 Significant indirect economic effects and impacts 43~44

Social Contribution Activities 8 3 413-1 Operation rate with local community engagement, impact assessments, and regional development programs

53~55

New and Renewable Energy Business 6 7 203-1 Infrastructure investments and services supported for public interests

46

Safety & Health Management 9 1 403-1 Participation of labor representatives and holding joint labor-management health and safety committees

59~61

Creating a Healthy Workplace Environment 7 5 401-2 Rewards provided to employees 63~64

Cost Efficiency Competitiveness 10 2 204-1 Proportion of spending on local suppliers 48~49

Implementing Soundness Labor Culture and Assuring Freedom of Collective Bargaining

Securing Biodiversity

Prohibiting and Managing of Child Labor and Forced Labor in Supply Chain

Stak

ehol

ders

’ Int

eres

t

Preventing Infringement of Local Residents' Rights Near the Local Business Sites

Securing Quality of Product and Price Competitiveness

Respecting for Human Rights and Diversity

Using Efficient Resource

Waste Discharge Management

Developing Competency of Employees

Efforts to Employing Local Talent and Promoting Regional Economy

Managing Water ResourcesInformation Protection for Customer

Customer Satisfaction

Strengthening Partner Competitiveness

Implementing Efficient Business Process(Innovation)

Securing R&D Investment and Technology Competitiveness

Managing Transparency in Partner Selection(Fair Trade, Co-prosperity, etc).

Responding to Climate Change

Securing New Growth Engines

Expanding Global Markets

Financial Soundness

Controlling Air PollutantsResponding to Energy Policy

New and Renewable Energy Business

Social Contribution Activities

Cost Efficiency Competitiveness

Safety & Health Management

Strengthening Transparency and Independence in Corporate Governance

Creating a Healthy Workplace Environment

Business Impact

Creating Economic Value

Business Ethics

Revising the Issue Pool Based on the 29 issues from last year's report, POSCO ENERGY derived 32 sustainability issues(Economy 12, Environment 6, Society 14) by applying the changes in international standards and sustainability trends, revised definitions, and new issues.

Identifying issues Based on business impact and stakeholders' interest, the pool of 32 issues were measured for importance to POSCO ENERGY's sustainable management.

Fairness in Personnel Allocation and Performance Evaluation

2

1


Win-Win Management

Innovation Management

Management Philosophy

POSCO pursues 'Corporate Citizenship: Building a Better Future Together'. POSCO will become a valued member of soci-ety, grow alongside various stakeholders, such as employees, shareholders, customers, suppliers, partners and local com-munities, and pursue the values of consideration, coexistence and symbiosis. POSCO made 'With POSCO' its vision, and it is building a better future with 'Business With POSCO', by creating values with business partners, 'Society With POSCO', by shaping a better tomorrow with the community, and 'People With POSCO', by building a culture of trust and creativity.

Management Philosophy 27

Business With POSCOFinancial Soundness 30 Controlling Air Pollutants 32 Creating Economic Value 36 Business Ethics 39 Responding to Energy Policy 42 New & Renewable Energy Business 45 Cost Efficiency Competitiveness 47

Society With POSCOSocial Contribution Activities 52

People With POSCOSafety & Health Management 58Creating a Healthy Workplace Environment 62

Corporate Citizenship Activities

Business is one of the three reform tasks of POSCO that focuses on

creating economic value. This area emphasizes operation of programs to improve business

competitiveness, strengthen environment management,

and promote win-win with partners.

Society is the core area in realizing the management

philosophy of corporate citizenship. This activity aims

to add value in resolving social problems and take the lead in

making meaningful changes by expanding the scope of social

contribution.

People focuses on building trust by listening to the voices

of all the stakeholders and sharing sympathy towards the issues to come up with bright ideas that align with economic

and social values.

Corporate Citizenship: Building a Better Future Together

Business With POSCOCreating value together with business partners

People With POSCOBuilding a culture of trust and creativity

Society With POSCOShaping a better tomorrow

with the community

가가가가

Value Creation Management

Safety Win-Win Ethics Creativity

Substance Execution Practical

Core Value

Code of Conduct

Management Philosophy

Management Principle

Management Vision

Shiljil Shilhaeng Shilli


Business With POSCO

POSCO ENERGY aims to provide the best products and services to promote shared development with partners including customers and suppliers through environmental management and win-win management. This is represented by creating economic profit, promoting fair competition, and achieving customer satisfaction. Equally importantly, all employees must work towards fair, transparent, and ethical management by respecting all stakeholders such as partners, customers, and suppliers to promote the management vision: Business With POSCO.

Interview with Stakeholders

Professor Shin Hyundon, Inha University

Q1 | With the vision to grow into a 'Global Eco-Friendly Energy Company focused on Gas & Power', POSCO ENER-GY is expanding the business portfolio to new industries. Please share your opinion on the way POSCO ENERGY's management strategy is contributing to the national power policy and energy mix as well as your thoughts on the fu-ture direction POSCO ENERGY should aim for.

A1 | By reducing fossil fuels and increasing new and renewable energy, I believe POSCO ENERGY is moving in the right direction towards a cleaner and safer energy source, which is necessary for the well-being of the citizens and industries. Also, I believe that increasing the proportion of gas in power generation while improv-ing efficiency and eco-friendliness is a valid mid- to long-term strategy. As for my thoughts on POSCO ENERGY's future strategical direction, I suggest an active pur-suit of securing low-carbon energy sources after a thorough evaluation of the gov-ernment's energy policies and their applicability and enforceability considering our situation, rather than simply complying with the government’s direction of energy

mix policy. From a long-term perspective, it could be advantageous for the company to go beyond the direct importation of LNG and take steps to secure energy sources directly.

Q2 | What commitments do you think POSCO ENERGY should make in order to cre-ate social values and pursue its management philosophy of 'Corporate Citizenship: Building a Better Future Together' towards establishing a sustainable corporate history of 100 years?

A2 | POSCO ENERGY should redirect passive policies that avoid responsibility to establish a corporate culture of pursuing mutual profit and social values. To ac-complish this, a practical and transparent operation of the board is crucial. More-over, it is pivotal that POSCO ENERGY establish a sustainable management system that allows it to pursue responsible management in its mid-to long-term vision, which will enhance corporate value. I believe that POSCO ENERGY can grow into a more sustainable company by reshaping its top-down corporate culture to promote more effective communication. Furthermore, taking part in volunteering for the lo-cal communities and actively cultivating future talent will allow POSCO ENERGY to become a more sustainable company.


Financial StatusIn 2018, the global economy maintained a stable growth rate, but due to expectations on prolonged trade disputes between the U.S. and China and increased U.S. interest rates resulting in economic unrest in emerging economies, there is a growing concern of the weakening the global economy. Although private consumption increased, South Korea recorded a 2.7 % growth due to reduced investment in construction and facilities. Further-more, performance of the IPP Sector in the electricity market showed significant contrasts among companies and although coal power plants and direct LNG import power plants with high cost competitiveness showed tangible improvements, IPPs that rely on KOGAS LNG suffered from an increased reverse margin loss due to a misstatement in the fuel cost settlement structure. Moreover, profitability per unit decreased compared to the same peri-od last year. POSCO ENERGY's revenue of 2018 recorded KRW 188.2 billion, which is a 26.1 billion increase from 2017 but due to the environmental change in the fuel cell industry, loss on valuation of inventories pulled down operating profits to KRW 47.1 billion in 2018, a decrease of 119.1 billion from 2017. According to the consolidated financial statements, the total assets are KRW 4,155.2 billion as of 2018, which is a decrease compared to that of 2017. The total liabilities are KRW 2,803.2 billion, and debt-to-equity ratio is 207%, a 17%p increase compared to last year. After the completion of the large-scale investment con-struction of Incheon power plants unit 7, 8, and 9, POSCO ENERGY is focusing on current investments and strengthening financial soundness.

Credit RatingIn 2018, credit rating companies graded POSCO ENERGY's credit rating as AA-(Stable), which is relatively higher than the average IPP in Korea. The rationale behind the grading took into consideration the diversified power generators as the largest IPP in Korea, sta-ble management structure based on Power Purchase Agreement(PPA) and Cost-Based Pool(CBP), improved cost competitiveness from direct import for unit 3 which will offset the downturn of lower usage rate due to oversupply of the electricity market, stable profit structure, and trend of improvement in financial soundness.

Transparent DisclosurePOSCO ENERGY is fulfilling the duty of disclosure activities related to the major manage-ment status in accordance with ‘the Act on External Audit of Stock Companies’ and ‘the Capital Markets Act and the Fair Trade Act’. POSCO ENERGY communicates with stake-holders such as investors through Data Analysis, Retrieval, and Transfer System(DART) of the Financial Supervisory Service(FSS). In 2018, POSCO ENERGY made a total of 18 disclo-sures.

Financial Soundness

Feasibility of Selecting Material IssuesA company's financial soundness is an indicator that measures its financial stability. It en-hances the attractiveness of investment for the external investors and is an important factor in determining a company's trust and reputation. Thus, a company should put various efforts into maintaining its financial soundness.

Management ApproachPOSCO ENERGY is focusing on increasing the liquidity ratio and lowering the debt ratio to improve financial soundness and is maintaining a stable credit rating. In addition, POSCO ENERGY is pursuing transparency and faithfully disclosing its management performance to investors and stakeholders.

01Finance

StrategyReputation

Correlation to Business

100

80

40

60

20

0

Material Issue Navigator

Management


Feasibility of Selecting Material IssuesThe world is facing environmental challenges from fine dust, greenhouse gases, abnormal climate and natural disasters. A company should promote eco-friendly management ac-tivities to prevent risks from environmental issues and work towards sustainable manage-ment. This is one of the most important corporate social responsibilities.

Management ApproachPOSCO ENERGY identifies various possible environmental hazards in business sites in advance and seeks methods to alleviate their negative effects. The company continuously pursues environmental management activities such as establishing an environmental man-agement system, optimizing the environmental management process, and implementing environmental certifications based on ISO 14001. In addition, POSCO ENERGY is striving to create an eco-friendly environment by saving resources and promoting eco-friendly products.

02Environmental Policies and RegulationsIn accordance with the Framework Act on Low Carbon, Green Growth and the Act on the Allocation and Trading of Greenhouse Gas Emissions, power generation companies are subject to release greenhouse gas emissions within their allowances. Any leftover greenhouse gas emission allowances can be sold or purchased in the market with other companies. POSCO ENERGY responds to climate change according to the national goal of reducing greenhouse gas emissions by 2030. The company takes a systematic approach to the Emissions Trading Scheme including policy responses, emissions management, and trading emission allowances. The LNG combined cycle power plant, which POSCO ENERGY operates, is a high efficiency generation facility that can generate electricity by utilizing low amounts of energy. It recovers the heat from gas turbines and operates steam turbines. In 2018, the amount of energy consumption was 112,805 TJ, greenhouse gas emissions were 11,697,326 tCO2, the greenhouse gas emission base unit was at 0.69 CO2/MWh, and direct emissions from fuel combustion accounts for 99.6 %. In 2018, POSCO ENERGY did not re-ceive any sanctions due to violations of environmental laws and regulations.

Implementation StrategiesAs the allowance of the energy transition sector is 228,061,000 KAU, POSCO ENERGY needs to strategically manage the GHG emission. Therefore, POSCO ENERGY is improv-ing efficiency in power generation facilities, establishing a greenhouse gas inventory that lists emissions by source, and managing carbon emissions through the Emissions Trading Scheme.

Environmental Management SystemPOSCO ENERGY has established an environmental management strategy that aligns with the corporate vision and mission while implementing detailed application strategies such as the green system, green operation, green business and green communication. At each business site, there are organizations that focus on environmental management, and the environmental policy group at the headquarters is in charge of company-wide environ-mental management. The group responds to amendments of environmental laws and regulations, modifies and reflects execution plans after evaluating its impacts, discloses the information to stakeholders, and responds to internal and external environmental ex-aminations.

Controlling Air Pollutants

100

80

40

60

20

0



Management

Finance

StrategyReputation

Environmental Management PolicyPOSCO ENERGY, a leading company in the energy business, understands that the environment is the key element of management strategy. POSCO ENERGY will secure sound environment management based on the development of technology and communication. POSCO ENERGY is practicing the following commitments as a leader in the low carbon green growth.

ㆍ�Secure global leadership by setting up an environmental management system based on ISO14001 and pursue sustainable management.

ㆍ�Comply with environmental laws and regulations and improve the environment throughout the entire production. ㆍ�Strive to reduce environmental pollutants through the implementation of clean production

processes and application optimal prevention technologies.ㆍ�Run an audit system for regular evaluations of environmental performance.ㆍ�Lead low-carbon, green growths by reducing greenhouse gas emissions through utilizing

clean energy and applying green technology. ㆍ�Achieve transparent management by disclosing environmental management performances

and striving to fulfill corporate social responsibility.


Air Quality ControlAs POSCO ENERGY automatically measures air pollutant emissions through the Tele Monitoring System, POSCO ENERGY manages emissions of air pollutants such as NOx, and SOx by establishing a reinforced standard of its own. The company installed air pollution prevention facilities such as low NOx burners, Selective Catalytic Reduction(SCR), and electrostatic precipitators to moni-tor air pollutant emissions 24 hours through a CleanSYS monitoring system. POSCO ENERGY reports the data in real time to the Korea Environment Corporation(KEC) and transparently manage the air quality near business sites. In particular, the LNG power plant in Incheon, a site in the ‘Total Air Pollutant Load Management System’ which has been implemented since 2008 by Metropolitan Air Quality Management Office, puts in effort to reduce pollutants and improve the air quality of the Metropolitan Area to the level of advanced countries. In April 2018, POSCO ENERGY has signed the 'Voluntary Agreement for Reducing Fine Dust at Business Sites' with the Ministry of Environment(MOE) to cooperate in protecting public health by reducing fine dust levels in the Metropolitan Area. Furthermore, in May, POS-CO ENERGY signed a 'Voluntary Agreement for Reducing Air Pollutants in Seoul Metropolitan Area' with the Metro-politan Air Quality Management Office. POSCO ENERGY is committed to emitting fewer pollutants than the NOx al-lowances for the next three years and taking a leading role in improving public happiness and environmental welfare.

Other Environmental ManagementWater Quality Control | POSCO ENERGY utilizes water in the power generation process of steam production and fa-cility operations. The Gwangyang power plant uses both the water supply and industrial water and the other busi-ness sites use 100%water supply as the source of water.POSCO ENERGY recognizes the importance of water re-sources and is actively engaging in reducing water con-sumption through reuse and recycling of water. POSCO ENERGY sets its own water pollutant discharging stan-dard significantly lower than that of the legal mandatory standard. Through TMS, the company monitors pollutant emissions and abnormalities in discharge/pollutant pre-

ISO Certification and MaintenanceIn order to achieve environmental soundness and lead low carbon green growth, POSCO ENERGY has been operat-ing an environmental management system in accordance with ISO 14001 since 2011. POSCO ENERGY is responding to necessary improvements identified through yearly in-ternal assessments and expert organization post-assess-ment and working towards improving the environmental performance. Moreover, POSCO ENERGY is participating in environmental examinations at business sites to manage environmental risks from a group level, and carrying out theme-based inspection focused on material issues of risk and environmental impacts. The results are reported to the POSCO Environmental Management Committee and are reflected immediately on site. Business sites in Incheon, Gwangyang and Pohang acquired ISO 14001 certification in accordance with the revision to ISO 14001:2015 in De-cember of 2017. In accordance with the revised certification standards, the environmental risk management system has been enhanced to evaluate the environmental impact of POSCO ENERGY's overall production activities on the en-vironment. Moreover, by improving the communication sys-tem of environment-related stakeholders, POSCO ENERGY plans to grow into a sustainable and eco-friendly company.

GHG ManagementPOSCO ENERGY manages air pollutant emissions and progress through the established systematic air environ-ment management system. Moreover, POSCO ENERGY prevents excessive emissions of air pollutants through constant monitoring and immediate response. Having es-tablished a greenhouse gas inventory system, POSCO EN-ERGY is annually assessing and reporting the emissions at the headquarters and business sites in accordance with ‘the Guidelines on Greenhouse Gas/Energy Target Manage-ment Operation and Others’. In addition, POSCO ENERGY

Campaign to 'Reduce the Use of Disposables'

As an environmentally friendly energy company that actively responds to social and environmental risks, POSCO ENERGY launched a campaign in 2018 to encourage employees to join the global trend in domestic and foreign movements of reducing the use of disposables. To encourage voluntary and active participation, the company posted two video clips on EP showing the negative environmental impacts of using disposables and micro plastics. By identifying disposable usage within the company, POSCO ENERGY now provides water in glass bottles at business meetings, and additionally stock reusable cups in order to facilitate an eco-friendly working environment without inconvenience. Cafes at POSCO ENERGY aimed to phase out the use of plastic straws ahead of the government's regulations, and began to offer discounts to employees who bring their own cups. In this way, all employees of POSCO ENERGY are working towards creating a sustainable environment for future generations. This year, POSCO ENERGY plans to enhance the convenience of recyclable cup usage by installing sinks nearby the cafes.

Index 2016 2017 2018

Wastes Generation (Ton)

Total 1,111.6 1,584.9 1,561.2

└ LNG Combined Cycle Power Plant 557.3 545.6 696.5

└ Gwangyang Off-Gas Power Plant 92.1 120.7 116.0

└ Pohang Off-Gas Power Plant 67.7 54.6 73.7

└ Pohang Fuel Cell Plant 394.5 864.0 675.0

Total 1,111.6 1,584.9 1,561.2

└ General Waste 1,028.9 981.4 1,047.4

└└ LNG Combined Cycle Power Plant 530.9 507.6 663.0

└└ Gwangyang Off-Gas Power Plant 74.6 100.9 91.6

└└ Pohang Off-Gas Power Plant 66.1 52.9 70.8

└└ Pohang Fuel Cell Plant 357.3 320.0 222.0

└ Designated Waste 82.7 603.5 513.8

└└ LNG Combined Cycle Power Plant 26.4 38.0 33.5

└└ Gwangyang Off-Gas Power Plant 17.5 19.8 24.4

└└ Pohang Off-Gas Power Plant 1.6 1.7 2.9

└└ Pohang Fuel Cell Plant 37.2 544.0 453.0

WastesDischarge (Ton)

Total 740.8 1,288.0 1,288.0





WastesRecycling (Ton)

Total 370.8 296.9 273.2





Waste Recycling Rate(%) 0.33 0.19 0.18

vention facilities in real time. Therefore, POSCO ENERGY is equipped with the system that allows POSCO ENERGY to identify and respond immediately to air pollution indi-ces, such as chemical oxygen demand(COD), suspended solid(SS), and potential of hydrogen(pH) abnormalities. In the case of wastewater treatment, the Incheon power plant reuses less polluted water in the generation process and discharges water pollutants according to its own stan-dard that is significantly lower than that of the legal man-datory standard. Off-Gas combined cycle power plants in Pohang and Gwangyang discharge wastewater by trans-ferring it to the steel mill, which is then treated along with the wastewater produced in the steel mill. No waste water is being produced at the Pohang fuel cell plant.

Waste Control | The waste generated in power plants in-cludes general waste, such as sludge from wastewater, waste synthetic resins, and waste adsorbents, as well as designated wastes including liquid oil waste and solid oil

waste. With the 'Allbaro System' of Korea Environment Corporation(KEC), POSCO ENERGY managesre transpar-ently the entire waste treatment process from generation, storage, transfer to final disposal, and minimizes waste discharge by saving resources and promoting recycling. The waste produced is treated legally from outsourcing agencies. Furthermore, wastepaper and scrap iron are handled by waste discharging companies.

Chemical Substance Control | POSCO ENERGY manages chemical substances used in the demineralized water production process and the air/water quality control pro-cess in compliance with relevant laws and regulations including the Chemicals Control Act, and Occupational Safety and Health Act. POSCO ENERGY focuses on pre-venting chemical accidents by installing over-injection preventive facilities and conducting regular training ses-sions to make sure workers are capable of safely han-dling any possible chemical leakage accidents.

operates the Enterprise Resource Planning(ERP) system to manage greenhouse gas emissions and implement Re-newable Portfolio Standards while providing important in-formation for the management's decision-making process through EIS.


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Restructuring the Energy BusinessPOSCO is aiming to strengthen its group-wide LNG mid-stream and downstream business structure as one of the top 100 reform tasks. To maximize synergy between group businesses, POSCO ENERGY will operate Gwangyang LNG terminal and transfer the Gwangyang and Pohang Off-Gas Combined Cycle Power Plants to POSCO. It is expected that POSCO ENERGY will be able to improve efficiency by not only using directly imported LNG for its own power plant, but also and expanding the business to processing and dis-tribution of LNG. On the other hand, POSCO will be able to strengthen the stability of electric power supply to steel mills by integrating Off-Gas combined cycle power plant with existing power generation facilities. In April 2019, the BOD approved the contract for 'Take over of Gwangyang LNG Terminal,' and in early September, POSCO ENERGY will start the LNG Terminal business.The Gwangyang LNG terminal, constructed by POSCO in 2005, was the first private LNG terminal to be constructed in Korea. It has five LNG tanks – four in operation(units 1 to 4) and one currently under construction(unit 5), of which total storage capacity is approximately 730,000 kl. By 2026, with the expansion of unit 6~9 tanks, the total storage capacity will reach 1.53 million kl which will create an additional KRW 100 billion increase in profit. In May 2018, POSCO ENERGY initiated the direct import of LNG for Incheon Combined Cycle Power Plants units 3 and 4. The surplus in the global LNG market has enabled POSCO ENERGY to directly import LNG with a price that is around 70% of the average LNG import price of KOGAS, which contributed in drastically reducing the company's cost. These effects are expected to increase further with LNG busi-ness restructuring. By assuming the LNG terminal, the core asset of LNG business, POSCO ENERGY is now able to hedge the surplus/deficit risks of direct imported LNG while advancing its midstream business – which involves developing LNG terminal into one of Northeast Asia’s largest energy hubs, LNG bunkering and exporting LNG to close distances. Also, Gas to Power business will be pursued along with POSCO Group, which will link overseas IPP business with gas infrastructure business(LNG receiving terminal).

Creating Economic Value

Feasibility of Selecting Material IssuesThe word "Corporate Social Responsibility" implies many things, but the most basic re-quirement for a business is economic responsibility. A company's economic viability direct-ly affects the stakeholders' lives as well as the society and the national economy.

Management ApproachPOSCO ENERGY is directing its effort to the restructuring of the business in order to re-spond to changes in the external management environment and is focusing on promoting development projects such as overseas IPP and construction of clean power plants. POS-CO ENERGY will continue to actively respond to the rapid changes in management environ-ment as a global integrated energy company.

03

Hanoi

Mong Duong II

Quynh Lap II

Major Business Schedule



2017.11

20194Q

2021.3Q

2023.1Q

2027.2Q

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Overseas Power Generation BusinessVietnam Quynh Lap II Coal-Fired Thermal Power Plant | Followed by the construction of Mong Duong II Coal-fired Thermal Power Plant, POSCO ENERGY is pursuing the es-tablishment of a second coal-fired thermal power plant. The Quynh Lap II project will al-low eco-friendly ultrasuper-critical pressure generation with a capacity of 1,200MW in the NgheAn province 270 km south from Hanoi. In May 2017, POSCO ENERGY acquired the power plant business rights from the Prime Minister’s Office in Vietnam. With regard to this business, a combined feasibility study report, including basic planning, environmental effects evaluation, and economic analysis, was submitted to the Vietnamese government in November 2018, and is now being evaluated by relevant Vietnam authorities.

Obtain the Power Plant Business Right and Execute DPA

Implement FS and Approve

Negotiateand Sign Major Contracts

Sign FinancialContracts and StartConstruction

Engineering Procurement Construction(EPC)


Samcheok Coal-Fired Thermal Power PlantPOSPOWER is constructing a differentiated power plant with the capacity of 1,000MW in Samcheok, Gangwon-do, which will be the first plant in the world to be built on an aban-doned mine. For 30 years, the region was used to mine limestones and produced pollutants such as fine dust and leachate. To curb the environmental challenges, POSPOWER will promote greenery and create an eco-friendly power plant to ensure the prosperity with the local community by increasing the land’s utilization. The Samcheok power plant can create economic benefits from development funds and business participation within the region and is also expected to vitalize the regional economy in Samcheok by utilizing 1,500 workers a day and 2.3 million workers a year during the construction period. Once the con-struction is completed, the plant is expected to create 1,200 direct and indirect employment opportunities. As South Korea is designated by the UN as a water-stressed country and the risk of securing generation water is gradually increasing, POSPOWER will protect local wa-ter resources and secure stable water supply for power generation by proactively establish-ing seawater desalination facilities. Moreover, the power plant will provide a stable produc-tion and supply of electricity through the application of eight new technologies and facilities.

Fuel Cell BusinessSince 2007, POSCO ENERGY has been promoting the fuel cell business, which generates electricity and heat energy through electric chemical reactions of hydrogen and oxygen. Fuel cell plants directly convert chemical energy to electric power without emitting air pol-lutants and have low energy loss. Unlike other new and renewable energy sources like pho-tovoltaic and wind power, fuel cell is an eco-friendly energy source that can stably produce energy without being subjected to weather conditions. The fuel cell plant in Noeul Park in Seoul , has high spatial efficiency which enables normal operation even in the center of the city where price of land is high, and uses dispersed power generation source that has an effect of reducing fine dust in the air. POSCO ENERGY is operating a plant with a production capacity of 50MW in Pohang for technology development, manufacturing, installation and construction to maintenance.

Business Ethics

Feasibility of Selecting Material IssuesThe essential purpose of a company is to maximize profit, but through heightened aware-ness of corporate citizenship, ethical management is increasing both domestically and abroad. POSCO prioritizes ethical management as a core value of corporate activity as well. Regardless of the management performances, losing social trust is highly detrimental to the company. Thus, companies should put in effort for transparency and fair management and recognize the importance of corporate ethics.

Management ApproachPOSCO ENERGY engages in various training sessions and practices regarding ethical man-agement in order to internalize ethical awareness. POSCO ENERGY will continue to work together to establish a transparent fair trade culture by implementing a system of internal checks based on independence, ethics, and reporting channels, and effective prevention measures. Moreover, POSCO ENERGY will continue to engage in practical activities for the improvement of ethical awareness of the stakeholders as well as the practical activities for the establishment of human rights management system.

04


Business Overview

LocationSamcheok-si, Gangwon-do, Republic of

Korea

Investmentaround

KRW 5.2 Trillion

Construction 2018.8~2024.4

(69 months)Unit 1 Complete:

October, 2023

Vietnam Mong Duong II Coal-Fired Thermal Power Plant | POSCO ENERGY is operating a coal-fired power plant with a capacity of 1,200MW in Quang Ninh province of North Vietnam. The first IPP business in the coal-fired power plant field in Vietnam will be operated jointly with AES(U.S). for 25 years. Later, the operation rights will be transferred to the Vietnamese government. Having been completed in April 2015, five months ahead of the schedule, it is the first overseas coal-fired ther-mal power plant of POSCO ENERGY and accounts for 2.7% of Vietnam's total power generation capacity.

Botswana Morupule Coal-Fired Thermal Power Plant | In 2016, POSCO ENERGY was selected as a co-licenser with Marubeni Corporation of Japan for the project ‘Morupule B Phase II Units 5 and 6 Project(300MW)’ granted by Botswana’s MMGE through competitive international bidding. This project was planned to serve as a foothold in the South African power generation market for POSCO ENERGY by supplying more than 30% of total power demand in Botswana through eco-friendly power generation system including circulating fluidized bed combustion boiler. In December 2016, all project agreements including the PPA, CSA and IPP License was signed by the relevant authorities of Botswana, except for the GSA(Government Support Agreement) which GoB(Government of Botswana) confirmed to provide. The GSA by GoB and the implementation of the Project are delayed to date.

Indonesia Off-Gas Power Plant | As the first overseas power generation project of POSCO ENERGY, Indonesia off-gas power plant was built in Cilegon, Indonesia with the capacity of 200MW(100MW X 2 units) in January 2014. The power plant gener-ates 200,000 KW/h of electricity(enough for 600,000 households to use for a year).

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Ethical Management SystemPOSCO ENERGY regards business ethics as an obligation that must be fulfilled at any cost. To internalize the ethi-cal management that places the ultimate importance on principles, POSCO ENERGY is providing the employees with various activities and education programs on ethics and fair trade. The Corporate Audit Division is run directly under the CEO to highlight the top management’s will to practice ethical management. The General Management Audit Group directs ethical management and fair trade. POSCO ENERGY complies with a code of ethics that was set by POSCO in 2003 on a group-wide level, and all em-ployees fully comply with the “One Strike Out” system to eradicate four major unethical behaviors: bribery, embez-zlement, sexual harassment, and information fabrication. Also, POSCO ENERGY is engaging in various activities to fundamentally improve daily tasks and systems that are more vulnerable to ethical risks. In an effort to implement ethical management in the organization, executives en-courage employees to implement ethical management organization.

Ethics TrainingPOSCO ENERGY is performing tailored ethics training for each job position and department to internalize ethical awareness. Each quarter, ethics training program is host-ed by the leaders and the meetings hosted by the standing auditor are carried out to emphasize self-governance of the managers. Through ethics level diagnosis, POSCO EN-ERGY is providing ethics training to improve the employees' ethical standards. Moreover, the standing auditor visits subsidiaries and overseas branches to facilitate ethical awareness training and strives to vitalize training in an effort to raise ethical awareness. POSCO ENERGY expand-ed its ethical training programs in 2018 to a wider range of vulnerable groups including the women’s table tennis team, the dispatch employess as well as temporary and young employees.

Human Rights ManagementIn accordance with the group's Code of Ethics, POSCO ENERGY respects and advocates globally recognized international standards on human rights including the Universal Declaration of Human Rights, United Nations Guiding Principles on Business and Human Rights, the 10 Principles of the United Nations Global Compact, and the OECD Guidelines for Multinational Enterprises. POS-CO ENERGY takes prompt actions against the risk factors identified through its counseling and reporting system in order to protect the human rights of employees. Moreover, POSCO ENERGY is operating an online reporting system, such as Sinmungo Cyber Petition, allowing all employees as well as external stakeholders to file anonymous reports related to violation of human rights, ethics, mutual growth, fair trade and sexual harassment. POSCO ENERGY has re-organized the consultation and reporting channels to take prompt actions against sexual harassment and it is striving to strengthen personnel action and secure fairness. In an effort to improve the consultation process regarding sexual harassment, POSCO ENERGY is promoting prevention ac-tivities by providing on-site sexual harassment prevention education, running grievance committees in councils, and offering expert counseling. POSCO ENERGY provides on/offline sexual harassment prevention education for 2.5 hours for each employee. POSCO ENERGY is setting guide-lines in separate manner to create an organization free from harassment by eradicating the abuse of power and proactively resolve possible harassment. Moreover, POS-CO ENERGY is conducting annual surveys to monitor and prevent human rights violation among employees. Ethical training by business site, job position, or department is conducted to prevent workplace harassment. By running a consultation and reporting center, POSCO ENERGY is also strengthening HR actions to prevent secondary damage.

Operation of the Fair Trade Compliance Program

Registered cases of recommendation and solicitation

2016 2017 2018 Total

16 cases 4 cases 0 cases 20 cases

Fair Trade Compliance ProgramSince 2009 when the CEO of POSCO ENERGY announced the introduction of voluntary fair trade compliance, POS-CO ENERGY has been successfully implementing the Fair Trade Compliance Program. POSCO ENERGY is provid-ing operational guidelines in writing and various training sessions for employees to improve fair trade awareness. Moreover, POSCO Energy is offering diverse training ses-sions in and out of the company to the Procurement group to help applications in the field, and is posting the series of ‘easy-to-understand fair trade’ on the company’s bulletin board to raise the awareness among employees. POSCO ENERGY is distributing compliance manuals to enhance the employees’ awareness and assign the standing auditor as the supervisor of fair trade compliance to emphasize its will to practice fair trade. In addition, in the company-wide compliance council, issues regarding fair trade are shared to implement a fairer trading system in the company. Moreover, consultations regarding the Fair Trade Act are also offered to prevent potential risks.

Management of Fair Trade with PartnersPOSCO ENERGY may not be a company in the Mutual Growth Index, but it voluntarily signed the ‘Fair Trade and Mutual Growth Agreement of Large Conglomerates and SMEs’ with about 270 primary suppliers and companies in the Mutual Growth index. POSCO ENERGY is a leader in expanding the scope of the agreement to secondary suppliers, contributing to mutual growth. In 2019, POSCO ENERGY will establish the Power Abuse Report Center that eliminates the overuse of power and creates a mutually respected and trusted environment with partners.

Clean POSCO SystemPOSCO ENERGY records all data related to recommen-dations and solicitations to implement a ‘solicitation-free’ corporate culture. With this system, refusing solicitations will become easier for executives and the recordings are expected to eradicate future solicitations. This system aims to protect good employees by facilitating a trustworthy and transparent corporate culture with the whistle blower spirit. It allows employees to avoid consequences from possible problems that might arise by voluntarily record-ing all solicitations in advance. All employees related to any recommendation or solicitation are eligible to register with the Clean POSCO system. Beginning this year, POSCO ENERGY monitors abnormal contracts between retiring employees and partners to create a transparent contract culture in the company and dispose all related information of the contracts for retiring employees. 2010

01 Organized the Compliance Program Committee

08 Concluded Fair Trade and Co-prosperity Cooperation Agreement (including 1st and 2nd partners)

11 Enhanced Fair Trade Business with Fair Trade Academy

2011

01 Provided Company-Wide Fair Trade Training Sessions

06 Distributed the Compliance Manual

2012

07 Promoted Co-Prosperity Collaboration with Partners through Mutual Growth Committee Operations

10 Established the 'Standard for Selecting Trading Partners' regarding facilities, construction, and operational regulations of the Order Review Committee.

2015 06 Acquired "Good" rating from the Assessment of

Mutual Growth Agreement

2016

01 CP grade "A" certification (Certification Organization: Fair Trade Commission)

2017 08 Implemented the Fair Trade Review System

2018 01 Signed Fair Trade Compliance Oath for All

Employees

04 Conducted Group affiliates fair trade joint check

2019

01 Implemented the Private purchase contract pre-audit system

03 Signed Fair Trade Compliance Oath for All Employees


Responding to Energy Policy

Feasibility of Selecting Material IssuesThe power generation business is closely related to the national energy policy. 'The 3rd Na-tional Energy Master Plan' and the ‘Five Key Tasks’ under the plan aim to promote sustain-able growth and improve the quality of life of the citizens through energy transition. POSCO ENERGY proposes to commit to this plan.

Management ApproachThe policies included in 'The 3rd National Energy Master Plan' of Korea mainly aim to con-tinuously increase the proportion of LNG and new and renewable energy generation. To that end, POSCO ENERGY is promoting direct LNG import business and expanding new busi-ness, which is a response to the national electricity industry policy and strategy for sustain-able development of the company.

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Understanding the Electricity IndustryAccording to the 8th Basic Plan for long-term power supply and demand announced by the Ministry of Trade, Industry and Energy(MOTIE) in 2017, the amount of electricity consump-tion in 2030 is expected to be 579.9 TWh and the maximum electricity is expected to reach 100.5 GW. With this plan, the government intends to secure economic feasibility to create safe and clean power generation sources while focusing on a stable supply and demand of electricity.

Structure of Electricity Industry | In the current structure of the Korean electricity indus-try, the power generation companies equipped with power generators produce electric-ity, and Korea Electric Power Corporation(KEPCO) sells electricity to regular customers through the power transmission and distribution network. KEPCO purchases electricity either from Korea Power Exchange(KPX) or directly from power generation companies. Power generation companies include 6 subsidiaries of KEPCO and IPPs. Since its first commercial operation as Korea’s only Independent Power Producer in February 1972, POS-CO ENERGY has enhanced the LNG Power Plant to satisfy the electricity stabilization policy of the Korean Government, and as of 2018, it holds about 10% of the power generation fa-cilities in the seoul capital area and supplies balanced power to the region.

Power Exchange System | The System Marginal Price(SMP), which refers to the electricity price in the wholesale electricity market, is decided based on the power generator with the highest variable cost at a selected time. Variable cost is mainly determined by fuel cost, allowing the LNG Power Plant, which has a higher fuel cost than nuclear power or coal, to determine the price. Apart from the electricity market, the Vesting Contract(VC) approved by the government is another way of making a contract between power producers and KEPCO.


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Changing Energy PoliciesThere are various laws related to power generation companies such as POSCO ENER-GY: Energy Act, Electric Utility Act, and Act on the Promotion of the Development, Use and Diffusion of new and renewable energy, etc. The government, in accordance with the Framework Act on Low Carbon, Green Growth, will announce an Energy Master Plan every 5 years for 20 years. This plan is a blueprint of the energy industry of Korea and includes management, prospects of domestic and overseas energy supply and demand, a secure-ment of energy sources, plans for improving utility efficiency, and new and renewable en-ergy policies. Announced by the Korean Government in April 2019, the 3rd Energy Master Plan includes policy tasks regarding energy transition and proposes a mid-to long-term vision. The Electric Utility Act sets general regulations with regards to the electricity indus-try covering power generation to sales and includes contents related to permission to elec-tricity projects, regulations of electricity supply and quality, measures of stable electricity supply, and the formation of the electricity market. In accordance with this act, the Korea Power Exchange(KPX) and the Electricity Regulatory Commission(KOREC) are established as organizations to operate the electricity market. The Ministry of Trade, Industry and En-ergy(MOTIE) formulates Basic Plans for long-term power supply and demand every 2 years for a 15-year period based on the Electric Utility Act, and the 8th Basic Plan includes: fore-cast and management of electricity supply and demand; power generation facilities plans; harmony of economic and environmental dispatches of power; plans for expanding dis-


Renewable Portfolio Standards | The Renewable Portfolio Standards(RPS) of Korea enforces power generation busi-nesses with 500MW or higher capacity to supply a certain rate of their total power generation with new and renewable energy. As shown in the table above, the mandatory supply amounts are set for each year, and for this year, 6% of 2018’s total power generation amount must be supplied. There are two ways to supply new and renewable energy: self-produc-tion and outsourcing. POSCO ENERGY fulfilled the amount of mandatory self-supply in 2018 through its own facilities of photovoltaic power generation and fuel cell facilities and effectively responded to the Renewable Portfolio Standards.

Prospects of the Electricity IndustryAccording to the 8th Basic Plan for Electricity Supply and Demand, the capacity ratios of each power source by 2031 are expected to be: 12% of nuclear power; 23% of coal; 27% of LNG; and 34% of new and renewable energy. Fol-lowed by the public concerns on the safety of nuclear pow-er plants, social issues related to high-density fine dust and fulfillment to GHG reduction goals, the importance of new and renewable energy and LNG power generation is expected to grow. In 2018, POSCO ENERGY signed a con-tract for direct LNG import at the Incheon Combined Cycle Power Plant whose fuel purchase contract with KOGAS

expired. The direct import of LNG adopted in early 2019 is expected to improve profitability by reducing power gener-ation costs. POSCO ENERGY will secure additional profit by implementing direct LNG import in other power plants in 2020 as well.

Energy Transition and New IndustryRecently, the Korean government established the Energy Transition Roadmap and announced to promote the future energy industry. Energy transition refers to the restructur-ing of energy consumption from conventional fossil fuels to cleaner fuels that are safer, cleaner and more efficient. The government plans to establish a Big Data Platform and the Internet of Energy(IoE) System throughout the power grid to create new energy services. In addition, the government announced that it will provide continued support to new business in the energy industry for job creation and indus-trial innovation. New Business for Energy Industries refers to a new business area of combining new technologies such as Information and Communications Technology(ICT) in the energy industry. In particular, the electricity industry includes new and renewable energy generation and sales, Energy Storage System(ESS), Energy Prosumers, Electric Vehicle(EV) and EV charging infrastructure. If the New Business for Energy Industries develops, it will become an interactive market where consumers can equip themselves with batteries and new and renewable energy generation facilities to produce and sell electricity directly. In addition, a variety of suppliers, including large ESS, EV, and small-scale dispersed power, are expected to join the market. POSCO ENERGY is promoting New Business for Energy Industries in accordance with government policies and en-couraging technological development of electricity trading platforms.

Annual Goals for the Mandatory Supply of RPS

Source: Enforcement Decree of the Act on the Promotion of the Development, Use and Diffusion of New and Renewable Energy

2017

4%

2018

5%

2019

6%

2020

7%

2021

8%

2022

9%

2023

10%

2030

10%

New & Renewable Energy Business

Feasibility of Selecting Material IssuesNew and Renewable energy is becoming a core part of the global energy transition, not only in environmental factors such as response to climate change and reducing fine dust, but also in economic revitalization and job creation. The importance of the new and renewable energy business is growing in South Korea as the government announced ‘New and renew-able energy 3020 Plan’ that aims to generate more than 20% of electricity from renewable sources by 2030.

Management ApproachPOSCO ENERGY is actively pursuing the government's energy transition policy by promoting wind and photovoltaic power generation. Also, the company is exerting great effort into the waste to energy business by generating power from solid refused fuel and sewage heat. POSCO ENERGY will continue promoting this eco-friendly, renewable power generation business.

06


persed generations; and power transmissions and trans-formation facility plans. Lastly, the Act on the Promotion of the Development, Use and Diffusion of new and renewable energy provides the Renewable Portfolio Standards(RPS), greenhouse gas emissions allocation, and Emissions Trad-ing Scheme. Other laws directly related to POSCO ENER-GY are the Energy Use Rationalization Act for enhancing reasonable and efficient use of energy, and the Urban Gas Business Act regarding the supply and demand of LNG.

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Wind Power GenerationPOSCO ENERGY is promoting an on&offshore wind farm in Shinan-gun, Jeollanam-do, where wind resources are abundant. POSCO ENERGY began construction in February 2015 near Jaeundo Island and launched the commercial operation of 24MW in December 2016, 18MW in June 2017 followed by 20.7MW in May, Operation is steady, with a to-tal capacity of 62.7MW. The company is also promoting a 300MW of wind project near west Jaeundo Island. POSCO ENERGY is expanding the new and renewable energy busi-ness in accordance with the government's energy Policy.

Photovoltaic Power GenerationPOSCO ENERGY is producing energy with a photovoltaic complex with the capacity of 14.5MW utilizing the aban-doned salt pond in Shinan-gun, Jeollanam-do. By utilizing this disused area for photovoltaic power generation, the company can minimize environmental damages that can result from the construction of a new power plant while also producing eco-friendly energy. Also, POSCO ENERGY is actively responding to the RPS and securing stable prof-its by creating 2.8MW of photovoltaic power capacity using factory roofs, a floating photovoltaic system with a capacity of 50MW in the Gwangyang steel works slag landfill, and photovoltaic power generation in salty reclaimed land.

Virtual Power Plant(VPP)With the national project of developing the technology for a VPP operational platform, POSCO ENERGY is investigat-ing the feasibility of an electric power trading business. POSCO ENERGY was selected as a pilot company for electric power trading in October 2016 by the Korea Power Exchange. In May 2017, the company began technological

development with expert organizations using public R&D. In May 2018, the Electric Utility Act passed a bill allowing POSCO ENERGY to secure the power trading business in the market. In 2020, POSCO ENERGY plans to conduct a large-scale demonstration and feasibility check with the operational platform.

SRF Power PlantPOSCO ENERGY operates a Solid Refuse Fuel(SRF) Power Plant which recycles and treats daily waste and produc-es energy. As the first and largest SRF Power Plant built in Busan in 2013, it now produces 24.8MW of electricity per day for 57,000 households while treating 900 tons of waste. The amount of electricity produced is equivalent to replacing 70 million Nm3 of LNG annually, and has the same effect as eliminating about 174,000 tons of CO2. In the past, household wastes were incinerated and land-filled, causing a large amount of environmental pollution during their disposal. The SRF Power Plant separates and identifies combustible and incombustible wastes from daily waste, and only combustible waste is converted into fuel in the exclusive boiler for combustion to generate and sell electricity. In addition, the steam generated in the process has been supplied to the sewage sludge drying system near since January 2017, creating an additional profit of KRW 4.2 billion every year. Busan SRF Power Plant is pro-moting the expansion of steam supply to New International City and the Eco-Delta City of Busan. Busan SRF Power Plant set standards below the legal limit for treatment of major air pollutants. Moreover, It was awarded the Min-ister of Environment’s award for the efforts in pursuing green growth for Korea’s energy industry such as by re-placing fossil fuels, reducing greenhouse gas emissions, and dealing with the treatment of increased amounts of waste, thereby resolving environmental problems.

Sewage Heat Energy UtilizationThe Tancheon Sewage Treatment Center in Seoul process-es and discharges 1.1 million tons of sewage into the Han River every day. The water maintains a temperature of 12 degrees, even in the winter. POSCO E&E is collecting and recovering the heat energy generated from sewage water through heat pumps and supplying enough heat ener-gy(200,000 Gcal) to nearby local district heating corpora-tions to cover 20,000 households a year, replacing the use of 17 million Nm3 of LNG(fossil fuel) on an annual basis and reducing greenhouse gas emissions by 47,000 tons.

Major Performances of Technology Development

Develop platform for integrated operation of distributed resources(Monitoring-Electric Power Exchange-Payment)

Conduct demonstration for electric power trading business by collecting distributed resources of new and renewable

energy for a capacity of 50MW or higher.

Achieve a 20% error rate by developing a power generation prediction system for photovoltaic energy

(based on previous day's bid, near the global best rate of 18%)※ The target error rate for the R&D project is 18%

Feasibility of Selecting Material IssuesHuge initial investments are required in the power generation business and uncertainty is high due to the possibility of changes in the management environment such as future elec-tricity demands and fuel prices. To overcome this uncertainty, it is all the more crucial to effectively operate facilities, establish optimal facilities and provide stable power. This leads to improvements in cost effectiveness and profitability.

Management ApproachPOSCO ENERGY recognizes power generation costs and efficiency of facilities as core fac-tors in strengthening competitiveness. For this, POSCO ENERGY is striving to provide stable fuel and efficiently operated facilities and establish smart power plants. In particular, direct LNG imports and stable fuel balancing are expected to have a great impact.

07Cost Efficiency Competitiveness


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Stabilization of Facility OperationsStable Fuel Supply | In the power generation business, As fuel costs account for most of the power generation costs, stable fuel supply has a great impact on profitability and fa-cilities operation. POSCO ENERGY works to improve profitability and secure a stable LNG supply for the Incheon LNG combined cycle power plant by directly importing low cost LNG from overseas and signing long term supply agreements with KOGAS. In addition, in the case of the coal-fired power plant in Samcheok, it will secure global sourcing capabilities by using POSCO International, a general trading company within the group, as well as securing cost-effective and stable supplies through resources produced by overseas coal mines that a group affiliate, such as POSCO, has already invested in. POSCO ENERGY seeks to improve profitability by increasing the competitiveness of the Incheon Power Plant Unit 3 to the level of the most recent units, 7 and 9. In order to do so, POSCO ENERGY has signed a contract to directly import low-cost LNG for Unit 3 after the expiration of the current PPA(Power Purchase Agreement) and the entry into the CBP(Coast Based Pool) market.

Zero Outage(Trouble Free) | POSCO ENERGY prevents unexpected failures and eliminates waste factors through monitoring activities including QSS+(Quick Six Sigma Plus, innova-tive activity to increase quality, stability, and safety), and My Machine(facility performance restoration) in order to maintain facilities in an optimized condition. Moreover, POSCO ENERGY focuses on managing vulnerable factors through regularly planned prevention maintenance, a VMS(Vibration Monitoring System), and an online inspection system for high-voltage motors in order to control forced outages. At the same time, the company will continue to strengthen the commitment to maximizing facility efficiency and achieve zero outages through plant smartization.

Strengthening Operational Capacity | LNG combined cycle power plants require sophis-ticated technology to operate due to the nature of peaking power generation, where oper-ation is started and stopped frequently to respond to peaking electricity demand. As such, POSCO ENERGY is continuously striving to enhance the technology. Based on the 50 years of experience in power plant operations, POSCO ENERGY has some of Korea's top-level ex-perts and expertise in operation and maintenance. Moreover, POSCO ENERGY is conduct-ing tailored technique training to pursue the mid-to long-term goal of nurturing global level technicians. POSCO ENERGY is providing training and seminars to facilitate the vitalization of young employees in shut-down facilities, enabling organic collaboration between em-ployees to share operational experience, technology, and maintenance, thereby improving facility soundness.

Improving Profitability | POSCO ENERGY will promote improvement activities to increase efficiency in Gwangyang and Pohang off-gas power plants in various ways. When high vi-brations occur in the high-capacity rotating equipment of off-gas power plants, seawater pumps, boiler water supply pumps, equipment coolant pumps, gas coolant pumps or their motors, the power plant is shut down automatically. In order to prevent this, POSCO ENERGY developed the Pre-Diagnostic Smart Application for the abnormal signs in high-capacity ro-tating equipment. By cooperating with group affiliate, POSCO ICT, POSCO ENERGY analyzes the Big Data on past operational information of 17 units of pumps and motors, which makes it possible to take action before any failure occurs by identifying abnormal vibration and temperature signs. In addition, POSCO ENERGY will make efforts for improvement regard-ing heat control that affects the efficiency of off-gas power plants. In line with similar efforts made since 2016, the company implemented an optical H2 analyzer in March 2019 that works like the 'Optical CO analyzer’ developed in 2017 to take immediate and delicate action on the rapidly changing BFG heat when a furnace failure occurs in a steel mill.

High-Efficiency in Power GenerationSmartization of Power Plants | To stay abreast of the age of the Fourth Industrial Revo-lution, POSCO ENERGY implements smartization of power plants through the operation of Big Data facilities with an aim to create a 'High Efficiency, Zero Outage and Zero Accident Operation'. Using the accumulated experience and Big Data, POSCO ENERGY is promot-ing step-by-step, progressive changes in the management of the facilities for real-time performance analysis and power outage prediction. By utilizing signals from smart power plant applications, POSCO ENERGY will reduce fuel costs by maximizing the efficiency of facility operations. Moreover, the company plans to decreases outages by 50%, realizing accident-free business sites by implementing CBM(Condition Based Maintenance). This year, POSCO ENERGY will strengthen Smart Safety and refine the Smart Application which has been already built, and eventually expand Smartization to all business sites after 2020. POSCO ENERGY has established smart power plants for Incheon power plant units 7 to 9 and successfully decreased forced outages by 50% in 2018 compared to 2017(0.29%, 2017 → 0.14%, 2018 based on units 7-9).

Data Driven SMART POWER PLANT

High Efficiency, Zero Outage, Zero Accident Operation

IoT. Sensing, Big Data Analytics

Maximize efficiency through optimized operation of power generation facilities

Achieve zero outage through failure forecast and CBM

Realize zero accidents of human and material resources

Fuel Cost Reduction by 1% Outage 50% or Below than now Accident-free Worksites

Overview of Strengthening Operational Capacity Education

2016 2017 2018

Number of Courses 34 33 33

Number of Lectures 32 20 10

Total Number of Trainees 273 110 57

Average Number of Trainees 8.5 5.5 5.7


Society With POSCO

POSCO ENERGY aims to engage in resolving social problems and promoting co-success with society and local communities. To pursue the management vision, 'Society With POSCO', POSCO ENERGY participates in resolving social problems, and all employees actively take part in POSCO 1% Share Foundation donation and volunteer work.


Team Manager Kim Jisun , Habitat for Humanity Korea

Q1 | Habitat Korea works with POSCO ENERGY's 'Ener-gy Dream', a social contribution project, and strives to im-plement energy welfare and strengthen daily safety. Please share the social value points of the 'Energy Dream' project as well as Habitat Korea's values and the project's excellence in terms of social contribution.

A1 | First of all, the 'Energy Dream' project is closely related to POSCO ENERGY's business and is a project in which POSCO ENERGY can provide its expertise. I believe it was uploaded on the UN SDGs website because it is an ideal social contribution proj-ect which encourages active volunteer work among employees. In addition, Energy Dream is meaningful in that the project identifies risk factors in deteriorated living en-vironments in advance through electricity inspections and provides the beneficiaries with proactive measures to prevent accidents. POSCO ENERGY particularly focuses on providing a beneficiary-focused project. In the early stages, the project focused on providing electricity inspections. Now its scale has gotten bigger and it has evolved into an efficient energy construction project. Though the number of beneficiaries has been reduced slightly, POSCO ENERGY focuses on improving people's quality of life by expanding the scope of support for each household and improving the environment of poor neighborhoods, thus providing a better housing environment. 'Energy Dream' is

a sustainable project that supports people's self-reliance. This is in line with Habitat Korea's core values. I could say that it is a sustainable and meaningful project, not a one-time support, in that it establishes a foundation for local communities through efficient energy construction by cutting energy cost consumption.

Q2 | What commitments do you think POSCO ENERGY should make in order to create social value and pursue its management philosophy of 'Corporate Citizenship: Building a Better Future Together' for establishing a sustainable corporate history of 100 years?

A2 | There are three major areas to work on for a company to create social value. These areas are authenticity, sustainability and partnership. Even if a project is evaluated as a necessary social contribution, I have witnessed many cases where they are canceled or reduced in scale due to internal circumstances of the companies. That is why there are companies that do not engage in social contribution activities, and even for those that do, most of the projects are short-term and unsustainable. If there is an agreement within a company that it should take part in social contribution activities, the overall approach to the project, changes, including project scale and selection of beneficiaries and partnerships. These changes affect the performance of the project. In addition, there is a huge difference between designing and carrying out a project from a long-term perspective and accomplishing a short-term goal. Lastly, harmonious partnerships between stakeholders such as business executors are equally important. I believe the 'Energy Dream' project can be sustained for seven years and positively affect our society because POS-CO ENERGY successfully takes on the three roles of authenticity, sustainability and partnership. These efforts are important factors for realizing social value and leading POSCO ENERGY to become a more sustainable company.


Social Contribution Activities

Feasibility of Selecting Material IssuesPOSCO ENERGY is now ushering in an era of producing social value by embracing social re-sponsibilities, a change from the era of economic value which focused on creating profit and promoting efficiency. Communicating with local communities and promoting co-success through social contribution activities is becoming more important for companies.

Management ApproachFor POSCO ENERGY, a company that promotes business all around the world, local com-munities are now one of the most important stakeholders. Thus, POSCO ENERGY wants to achieve co-existence with local communities by going beyond providing formal support and promoting regionally focused social contribution projects based on active participation. In order to do so, POSCO ENERGY strives to create social value by establishing a strategic so-cial contribution system that reflects the nature of business.

08POSCO ENERGY has established a social contribution strategies that includes the social contribution program and employee volunteer activities in 2013, and promotes social contri-bution activities to resolve social problems and create shared value. The Motto 'Energy for a Better World' conveys the company's will to make a brighter and warmer society by pro-viding energy to local communities. The logo, depicting a person with both arms wide open, visualizes POSCO ENERGY's will to create value with stakeholders and create a beautiful world by expanding its business into the global market. The tree stands for POSCO ENER-GY, and the six-colored leaves stand for local communities, partners, investors, customers, employees, and the environment.

Social Contribution Motto


Energy DreamSince 2012, POSCO ENERGY has implemented the 'Energy Dream' project to provide energy welfare to energy-vulnerable groups, estimated to be around 1.78 million households. POSCO ENERGY aims to provide a brighter, warmer, and safer en-vironment to energy-vulnerable groups in Incheon, Pohang and Gwangyang. For energy welfare, the company donated KRW 140 million in 2018 to the Community Chest of Korea, which contributed to improving efficient energy construction and sup-porting electricity inspections and photovoltaic installations. As a result, the company reduced energy costs by KRW 15.56 million a year, equivalent to the reduction of 138,450 Kg of CO2, or the planting of 49,840 trees.

Major Program

Category Details 2018 Achievements

Warmer Improve Energy Efficiency

• Provided support for 6 energy vulnerable households located in Incheon, Pohang, and Gwangyang. - Energy Cost Reduction(1,000 KRW/year): 13,003 - CO2 Reduction(kg/year): 125,670 - Tree Planting Effect(trees/year): 45,240

Cleaner Supported New and Renewable Energy

• Supported photovoltaic power generation facility(10 KW) in Gwangyang social welfare facility - Energy Cost Reduction(1,000 KRW/year): 1,212 - CO2 Reduction(kg/year): 5,571 - Tree Planting Effect(trees/year): 2,005

Safer Conducted ElectricityInspections

• Replaced LED lights and inspected aged electrical equipment for 30 energy vulnerable households, 1 facility in Incheon, Pohang, Gwangyang. - Energy Cost Reduction(1,000 KRW/year): 1,345 - CO2 Reduction(kg/year): 7,209 - Tree Planting Effect(trees/year): 2,595

Brighter Created Safer Communities

• Applied crime prevention design murals to 4 locations in Incheon and Pohang * Crime prevention mural collaboration with association of Incheon Seobu Police Station:

Awarded 1st place in the '3rd Korea Crime Prevention Awards' by the National Police Agency

• Improve safety at night by installing LED logo lights in Incheon Sinseok Sports Park and improving local community environments

Direction

Implementation Strategies

Communication with Local Communities Sharing Green Value

Motto

Representative Programs

BEST Activity


Energy Dream Community Child Center

BasicSharing Saturday

EntertainingThema

VoulunteerActivity

StrategicEnergy

Volunteer Activity

TogetherFamily

Volunteer Work

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Community Child Center that Brightens the WorldPOSCO ENERGY is consistently running projects to im-prove the educational environment of energy-vulnera-ble groups in local communities around power plants. Since 2013, POSCO ENERGY's project 'Community Child Center that Brightens the World' has supported a com-munity child center located about 10 km away from the LNG plant in Incheon. To cultivate global talent, POSCO ENERGY sends the university students volunteer group named 'Heemang Energy(means Energy of Hope)' to 10 community child centers. And POSCO ENERGY of-fers a productive learning environment for children. In 2018, 40 students participated as mentors for 8 months from April to November. The project supported 255 children from 10 community child centers for 1,862 hours. In 2019, the university student volunteer group has started to provide mentoring as corporate Citizens.

1% Sharing FundIn 2012, POSCO ENERGY established the Bright World Fund through the voluntary participation of the employees. Also, POSCO Group established the 1% Sharing Fund to pursue mutual growth with the local communities. The 1% Sharing Fund began in October 2011 with executives of group affiliates, and in April 2013, POSCO ENERGY ex-panded the 1% wage sharing to leaders. As of 2018, exec-utives and leaders are sharing 1% of their wages and em-ployees are donating voluntarily starting from KRW 5,000. POSCO ENERGY is also matching the donations to the 1% Sharing Fund at the end of the year, which creates a cor-porate culture of sharing between labor and management. All projects that use the 1% Sharing Fund go through a preliminary review by the represents employees, and the results are reported to the 'Sharing Fund Committee'.

BEST Volunteer ActivitiesEmployees at POSCO ENERGY contribute to local commu-nities through four different types of volunteer work. The BEST Volunteer activities include [Basic], a company-wide monthly volunteer activity on saturdays volunteer activities [Entertainment] where families of employees participate together, volunteer activities [Strategic] that engage in rep-resentative social contribution programs, and collaborative POSCO group activities [Together].

'Energy Dream', a social contribution project of POSCO EN-ERGY was listed on the UN website. The UN set 17 goals in 2015 as SDGs with 193 countries to resolve universal global challenges in society and the economy. In particular, 'Energy Dream' is corresponding with SDGs 7: Affordable and Clean Energy and SDGs 11: Sustainable cities and Communities

Energy Dream, Introduced on the UN SDGs Website

In December 2018, POSCO ENERGY launched a table tennis talent sharing volunteer group in Incheon. Sixteen members volunteered and provided table tennis lessons to 150 students from 4 elementary schools. POSCO ENERGY’s women's ta-ble tennis team provides coaching once a month to volunteer group members, and the members coach elementary stu-dents in an after-school program. In March 2019, the team relocated its training center to Incheon, thereby revitalizing sports for all and contributing to corporate citizenship. POS-CO ENERGY has been supporting table tennis since 2011 in an effort to nurture unpopular sports. Three months into its foundation, the table tennis team won the National Men’s and Women’s Team Championship. It has been producing national athletes for eight consecutive years. In addition, the team won a bronze medal as part of a combined South-North Korean team which was formed for the first time in 27 years. POSCO ENERGY's support for the table tennis team has expanded to local communities, and now it is promoting corporate citizenship values by actively taking part in the revitaliza-tion of sports for all for residents and espcially students, who are the future generation.

Promotion of Health Activities in Local Communities through Talent Donation

In December 2018, POSCO group launched a campaign, ‘Small Sharing Campaign to Create a Beautiful World'. At yearend, this campaign, had encouraged small, voluntary sharing by employees to marginalized local residents, and served as an opportunity to pursue the new management philosophy, 'Corporate Citizenship: Building a Better Fu-ture Together'. To support this campaign, POSCO ENER-GY distributed Sharing Packages to all employees that in-clude KRW 50,000 in cash and a message from the company.

Sharing Campaign to Create a Beautiful World

Activity No. of Activity

Food sharing with local communities(Orphans and the elderly)

4

House remodeling and repair, painting, clean up of surroundings and reservoirs(Mosques and schools)

6

Educational Support(Korean Language classes, local kindergarten support and volunteer work)

1

CSR collaboration with KDL and religious holiday support

2

Contribution to Local CommunitiesPOSCO ENERGY's domestic/overseas business sites are working on a variety of social contribution activities to improve the quality of life of local residents. The profes-sional women's table tennis team has not only had great achievements in competitions but also participates in local community sharing and talent donation activities. Moreover, POSCO ENERGY's Sinseok Sports Park provides sports facilities and amenities to promote the health of local residents. Having entered into an MOU with Seo-gu, Incheon, to engage in activities related to Incheon Unit-ed and Incheon Seo-gu Youth Football Academy POSCO ENERGY is providing opportunities to young athletes and revitalizing sports for all. The dompany is aware of the importance of environmental sustainability and are con-tinuously investing in eco-friendly facilities and supporting middle and high schools in local communities by providing air-purifiers. Moreover, POSCO ENERGY is contributing to the creation of a healthy environment for students. The company planted 500 trees, creating a 'tree wall' around Incheon Dangha Elementary School to decrease fine dust levels, and air-purifying trees were donated to each classroom. POSCO ENERGY is expanding the sus-tainable social contribution activities beyond domestic locations to Indonesia. Such activities include remodeling and repairing old houses, sharing food with children at orphanages, and supporting Korean language educa-tion. Notably, POSCO ENERGY allocated IDR 218,890,000 of its budget for social contribution activities in 2018.


People With POSCO

POSCO ENERGY aims to establish a creative organization, improve the quality of life of employees, and pursue safety management in order to achieve mutual growth with all employees of the group. To pursue the management vision, 'People With POSCO', POSCO ENERGY promotes a fair personnel management system, advanced HR system, improved employee welfare and safety management. All employees promote creative thinking, show mutual respect for each other, comply with business etiquette, and participate in safety activities.


O&M Director Mr. Tyas, Indonesia PT Krakatau POSCO ENERGY(KDL)

Q1 | Please share your experience working in POSCO ENERGY and your thoughts about its corporate culture and various wel-fare systems. Also, please share your opinion about which area POSCO ENERGY should work on.

A1 | PT Krakatau POSCO ENERGY(KPE) was founded in 2011, and it is a power plant that generates electricity from Krakatau

POSCO steel mill utilizing off-gas as fuel. Most of the power plants in Indonesia gener-ate electricity from coal of natural gas, so an off-gas power plant is a new technology in the country. The Suggestion System that is currently being operated is an innovative activity that encourages employees to improve technology. Furthermore, employees are satisfied with working for the company with the corporate culture of safety-first as well as decent wages and good employee welfare. What POSCO ENERGY needs to work on now is boosting the morale of younger employees, especially millennials. There are few opportunities for younger employees to embrace challenges because of the industrial recession in Indonesia that has been going on since 2017. I hope that POSCO ENERGY will harness these existing systems which employees are satisfied with and find a solution to the challenges it is facing.

Q2 | What commitments do you think POSCO ENERGY should make in order to cre-ate social value and pursue its management philosophy of 'Corporate Citizenship: Building a Better Future Together' for establishing a sustainable corporate history of 100 years?

A2 | The company's CSR program is operating well due to financial support to im-prove public facilities and employees' efforts. The regional community education-al support system provides monetary support to talented students while POSCO ENERGY strives to harmonize with the local communities. These valuable efforts, recognized by both local communities and local governments, will contribute to the company's sustainable future while enabling effective communication and improving relationships.


Safety & Health Management

Feasibility of Selecting Material IssuesSocial awareness about the safety of employees, members of partners and local commu-nities is increasing. The importance of complying with strengthened domestic and inter-national safety regulations and coming up with standards that meet the requirements of stakeholders is growing as well.

Management ApproachSafety management issues at work sites can cause human injuries as well as negative effects on corporate image and financial or non-financial performances. Therefore, safety issues should be well managed. POSCO ENERGY works to improve the safety awareness of all employees by thoroughly managing the safety of its facilities, providing training and launching campaigns. In addition, POSCO ENERGY is making efforts to create a safe work-place for all employees and members of the partners.

09Strengthen ing the Safety and Health Management SystemIn 2018, POSCO ENERGY achieved ‘accident free’ status at all business sites through preliminary responses to changing laws and regulations while maintaining a thorough management system. In accordance with a pre-announcement of amendments to the Oc-cupational Safety and Health Act, POSCO ENERGY integrated 55 new regulations into the existing 158 safety and health management regulations. POSCO ENERGY is working with KOSHA 18001 certified companies and mandate a safety management plan. POSCO EN-ERGY has established a system to monitor the partners' safety capabilities and promote activities to ensure the safety of employees and stakeholders by distributing safety videos tailored to individual jobs. Apart from that, safety managers from business sites host volun-tary safety meetings and send out monthly safety letters to employees that include selected safety themes. POSCO ENERGY has systemized safety activities through feedback from monthly safety reports by the top-level executives. To strengthen the responsibility for safe-ty activities, in 2019 POSCO ENERGY plans to have accident-free items make up more than 10% of individual MBOs and also strengthen the incentive and punishment system regard-ing all safety activities and disaster liability.

Safety Management Major Indices: Operational Capability Improvement Education Overview

2017

100

2018

100

2019

100Pass rate of Occupational Safety and Health Training for all employees(%)

75100 100

Adoption rate of safety and health management system certification (KOSHA 18001, OHSAS 18001)(%)

34 4

No. of business sites with a certified safety and health management

system(KOSHA 18001, OHSAS 18001)

4 4 4Total No. of business sites


Near MissNo. of implementations: 265

No. of improvements: 242

Improvement rate 91%

(All employees)

Risk TopNo. of implementations: 80

No. of improvements: 80

Improvement rate 100%

(5 cases per department/quarter)

SAO

No. of implementations: 972

No. of employees 61

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Self-Driven Safety CulturePOSCO ENERGY has established an improvement system for autonomous risk discovery by promoting safety improvement activities such as Near Miss(cases that did not lead to actual accidents could have), Risk TOP system(improvement by es-tablishing quarterly plans for facilities with risk factors), and SAO(Safety Action Observation, a monitoring system that en-courages employees to self-monitor and make improvements in work practices). The employees voluntarily engage in and actively manage operations through self-directed Safety Spread activities and the partners support safety management in the field by following POSCO ENERGY's management standards. The key promotional activities derived from Near Miss analysis in 2018 focused on conduction, crash and falling accidents. In 2019 POSCO ENERGY will promote three basic safe-ty activities to achieve Zero Accidents, a part of company-wide KPIs. The plan is to strengthen the safety measures for three high-risk work activities(high, sealed, heavy work) in facility repair and operate safety training 10 minutes before the start of operations through an app from the Occupational Safety and Health Agency.


Though it is not a legal obligation, POSCO ENERGY is expanding safety management to the partners and overseas business sites. POSCO EN-ERGY is strengthening Facility Safety Management by applying a Risk Top 10 system identical to that of the headquarters and also planning to support the autonomous safety culture standards. In the case of PT Krakatau in Indonesia, proper safety management and environmental improvements have enabled a zero accident workplace. PT Krakatau plans to establish a safety culture to achieve zero accidents 24/7 through 'Habituation', 'Localization', 'Simplification', and 'Integration'. POSCO ENERGY has selected 'high temperature/high pressure equipment fa-cilities', 'toxic chemicals', 'toxic/asphyxiated gas', 'high-voltage electricity', and 'high-altitude facilities' as the 5 Core Safety Management Items and it is regularly inspecting high-risk electrical room, cable bundle, high-pressure gas storage, and firefighting facilities. Furthermore, considering that generation facilities mostly consist of precision/high-speed/high-voltage electrical equipment, POSCO ENERGY ensures a clean work environment 'New Factory Cultivation', 5S, and 'My Machine' activities every Friday morning. These activities have changed the perception of government offices and financial firms that power plants are hazardous facilities, and are having positive effects on the management environment.

Operation of a Safety CouncilIn accordance with the Industrial Safety and Health Act, POSCO ENERGY holds a quar-terly meeting of the Industrial Safety and Health Council to vote on major issues related to the safety and health of employees. Related programs are operated at business sites for all employees. Also, POSCO ENERGY holds monthly autonomous safety meetings for employees as well as monthly partner safety meetings for 13 resident partners to provide a safer working environment and to ensure the same level of safety as POSCO ENERGY. POSCO ENERGY looked at the safety equipment of 20 partners. Beginning February 2019, POSCO ENERGY is providing 7 major pieces of safety equipment, including safety helmets and safety boots, and taking action immediately if anything is damaged during operation. In addition, through risk evaluations, expansion of work environment measurements, and support for special physical examinations, POSCO ENERGY will expand the safety system for mutual growth. POSCO ENERGY plans to make revisions in guidelines for the work-place and working standards to put itself in line with the Industrial Safety and Health Act Sub-Legislation Legislative notice. Lastly, POSCO ENERGY will run an internal diagnosis of 32 PSM items that are closely related to the revisions.

Employee Health Promotion ActivitiesPOSCO ENERGY offers a weekly stretching session for all employees to prevent musculo-skeletal disorders, and mandate all employees, including the 268 engineers in the power plants, to wear proper safety equipment. Moreover, an intensive prevention activity for met-abolic syndrome is performed twice a year by health center employees. Employees who need care are offered fitness coaching and a tailored health care program including diet plans. In 2017, the '3W Campaign' was launched to create a healthy corporate culture. 3W stands for 'Water: Drinking more than 2L of water a day', 'Walking: Walking over 30 minutes a day', and 'Well-being: Following healthy diet plans such as low-salt meals', From June 2018, POSCO ENERGY has been encouraging employees to walk more in their daily lives through the mobile app, 'Walk on'. With this app, employees can set their own goals and accomplish them. The 'Walking Challenge' rewards employees with good performances, which leads to a more active participation of employees in health-promoting activities. As of March 2019, the number of participants was 347, a 171% increase from June 2018(202). The average number of steps taken was 9,494, a 148% increase from 6,419 in June. Seoul City presented POSCO ENERGY with an award in October 2018 for launching the Walking Campaign.

PT Krakatau Safety Management System

Habituating Safety Procedures

•On/Off line safety training and small-group meetings

•Increasing safety awareness through contests

• Rapid response through repeated training (KP collaboration training and natural disaster response training)

Understanding and Respecting Indonesian Culture (Islam/tropical weather)

•Safety activities abiding by Indonesian laws and regulations

•Working plan that suits local environment and conducting TBM (On-site personnel > SV in charge > O&M G.M)

•Tailored training sessions to enhance understanding of local workers(theory,

laws and regulations, cases, video)

Establish safety culture in the field

•Flexible operation of ILS suitable for generation facilities

•Eliminating simple risk factors first through Near Miss

•Preliminary management of items with high feasibility

through Risk TOP 10

Establish Integrated Safety System

• Systematic allocation of work and roles of the departments

• Provides safety protective equipment to partners and applies the same principles

•�Encourages active protection through rewards, and motivates autonomous activities

LocalizationHabituation

SimplificationIntegration

Inspection Overview of High-Risk Sites

Location Inspection of vulnerable sites Frequency

Basement Electrical Room Damage(rats), Water leak, Cleanliness, Resistance Half-yearly

Cable Bundle Damage(rats), Water leak, Cleanliness, Resistance Half-yearly

High-pressure Gas Storage Cleanliness, Gas leak, Ignition factors inspection Monthly

Firefighting Facility Fire detection facility, Hydrant, Pump movement inspection Quarterly

Accident Free

365Establishing

a safety culture that respects life



Feasibility of Selecting Material IssuesProviding a happy work environment and a better quality of life to the employees is the key to securing sustainable corporate competitiveness. Implementing the '52-hour work week' system and 'Work & Life Balance' shows that our society values a more balanced life.

Management ApproachPOSCO ENERGY engages in various activities to strengthen employee communication in order to establish a cooperative corporate culture. Moreover, POSCO ENERGY is striving to create ‘a place where employees want to work' by organizing a work and life balance sys-tem while strengthening employee welfare.

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Communication with EmployeesPOSCO ENERGY is promoting various activities to cultivate a collaborative management culture and effective commu-nication. The CEO provides opportunities for direct sug-gestions from employees to high-level executives through meetings across business sites, departments, and divi-sions and 'Walking Seonjeongneung with the CEO'. POSCO ENERGY also provides many opportunities for communica-tion through organization vitalization, lectures in human-ities, workshops, Hope(Hof) day, and sports days. In 2019, POSCO ENERGY is continuing to promote communication activities such as a company history quiz event and story contests in celebration of the 50th anniversary of the foun-dation.

Labor-Management CultureLabor-management culture is one of the key indica-tors that determine a company's competitiveness. The WEF(World Economic Forum) considers the labor-man-agement cooperation index to be a major indicator when determining a nation's competitiveness in the labor market sector. At times where corporate competition is growing, promoting global-level labor-management cooperation is no longer a matter of choice. POSCO ENERGY encourag-es an advanced labor-management culture with its labor union and three labor-management councils, the power generation council, fuel cell council and energy council. POSCO ENERGY strives to improve employee welfare and the working environment through biennial negotiations to conclude collective agreements and by engaging in efforts such as improving human resources and labor systems, staffing and training plans. Moreover, POSCO ENERGY is running Grievance Resolution Committees under the councils of each business site to deal with employee griev-ances. The Grievance Resolution Committee guarantees confidentiality regarding employee grievances and sugges-tions while establishing a system to deal with grievance issues in the regular labor-management council meetings every quarter. Furthermore, POSCO ENERGY encourages the communication and trust-building of labor-manage-ment by regularly opening labor-management workshops. POSCO ENERGY's Indonesian power plant runs monthly work councils and recognizes union free management. In Indonesia, POSCO ENERGY is working to stabilize la-bor management relations by holding biannual meetings


Finance

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where family members of married employees are invited to attend(68 percent of the workforce), and listening to em-ployee opinions and suggestions through a wish box. Along with this, POSCO ENERGY is strengthening the sense of bonding among employees through various activities such as a Korean culture experience program, POSCO field trips, an organization vitalization program and sports day in which all employees participate, visitations to workers by on-site supervisors, support for one club activity per per-son, picnic meetings, employee birthday parties, congratu-latory letters and presents for anniversaries, and exchange programs between Korean and Indonesian employees.

Employee BenefitsThe employee welfare system is the key to managing em-ployee happiness. Happy employees lead to happy custom-ers, and this eventually leads to a sustainable and sound corporate culture. To create 'a company where employees want to work' has become the aim of many companies as more employees begin to value a balance between work and life. POSCO ENERGY focuses on maternity protection and child care support in order to foster a family-friendly management. POSCO ENERGY offers a maternal care pro-gram that includes a reduction of working hours for preg-nant women, parking tickets for better convenience, and an in-house maternity lounge. Moreover, POSCO ENERGY offers parental leave for a maximum of two years and make sure employees are not disadvantaged in promotions or employee evaluations due to parental leave. On top of the parental leave guaranteed by law, employees receive celebratory gifts for birth and pregnancy. Moreover, POS-CO ENERGY supports the employees with a 'psychological counseling center' and the 'family counseling program', while providing various forms of support to promote the leisure and welfare of employees such as health check-ups for spouses, medical expenses, congratulatory gifts, and tuition for the children of employees. To help solve the so-cial issue of low fertilitrates, POSCO ENERGY plans to build more in-house kindergartens. Since 2013, POSCO ENERGY has been running an in-house kindergarten in Incheon Seo-gu to support childcare. POSCO ENERGY will expand and relocate this kindergarten in 2019 to accommodate 10 more children, hence accommodating 30 children in to-tal, and improve the facility. In 2012, POSCO ENERGY was certified by the Ministry of Gender Equality and Family as a 'family-friendly company' for the first time among domestic IPPs, and in 2015 and 2017 acquired recertification.


Activities and AchievementsCorporate Governance 66

Recruitment and Talent Cultivation 67

Supply Chain Management 69

Customer Satisfaction 70

Innovation 71

Work-Life Balance

The 52-hour work week POSCO ENERGY strives to strike a balance between work and life among its employ-ees. To start with, POSCO ENERGY has implemented a flexible working hour system. In compliance with the government's '52-hour work week' policy, POSCO ENERGY has implemented flexible working hours for the power generation division where most of the work is planned ahead, and selective working hours for the fuel cell division and headquarters where most of the work is spontaneous. Furthermore, employees have the freedom to choose when to come to work between 7am and 11am. POSCO ENERGY aims to support the employees' self-development, childcare, and education through this flexible working hour system. In addition, the working hours saving system, which is gaining support from employees, allows employees to save up overtime working hours and use them later. Employees are content with the implementation of 'family day', which allows them to leave work one hour early every Friday. To promote the work & life balance of employees, POSCO ENERGY came up with a 'work & life day' system that encourages employees to take leave during bridge holidays. Moreover, a pop-up window appears on employee's screens every day when it is time to leave the office.

By implementing efficient working methods to minimize ineffectiveness in management, POSCO ENERGY is encouraging management-level improvements giving directions, reporting, and meetings. In 2018, POSCO ENERGY selected a pilot department to come up with methods of efficient management by ▷minimizing re-ports(e-mails, verbal reporting principle) ▷promoting business manners for communication vitalization ▷ and standardizing reporting methods. This year, POSCO ENERGY plans to promote ▷ working without team(includ-ing group/department section/division) unit reports ▷ and the Real Name Report System(RAI*), in order to change the executive-led management system. With these efforts to improve inefficient work systems, POSCO ENERGY aims to promote work & life balance and allow employees to focus on work that holds intrinsic value, hence bringing real change for all employees. At the end of the working day, POSCO ENERGY notifies workers through pop-up windows to leave the office, and employees who wish to work overtime can register for overtime work in advance. This prevents employees from unnecessarily working overtime and allows them to plan their working hours if they are to work overtime. * RAI: Responsible, Accountable, Informed

Work System

• Shift work: Alternative work once a week in principle

• Driving workers: Implementation of flexible working hours

• Office workers: Implementation of selective working hours, flexible work hours system, and working hours savings system

Education/Innovation

• Education: Conversion of staff on shift TL training to e-learning, and shortening training schedules by focusing on core courses

• Innovation: Simplifying innovation activities(My Machine, QSS+, daily tasks), reducing the size of improvement leaders, etc.

Selective/Flexible Working Hours

Selective working hours• Setting the number of working hours for the month in advance and

allowing latitude for employees to decide specific work hours (within 40 hours a week on average)

• Minimum 4 hours a day(between 9 am – 6 pm) to maximum 12 hours a day

• For resident staff• Duration: within the month • Maximum working hours a week: No limit

Flexible working hours• Setting the duration to a maximum three months and allowing latitude

for employees to decide specific weekly work days and daily working hours(within 40 hours a week on average)

• Working hours cannot exceed 52 hours a week, or 12 hours a day


Composition of the BOD and AuthorityPOSCO ENERGY’s board of directors has the highest au-thority to make decisions on matters set forth by the laws and articles of incorporation and important matters of company management. The BOD works hard to increase shareholder value and enhance the interests of the stake-holders. In accordance with Commercial Law and the pro-cedures set forth in the laws and articles, the company appoints 3 internal directors, 3 non-executive directors and 2 financial experts from a pool of recommended directo-rial candidates. The BOD's evaluation and reward system follows company regulations wherein the remuneration of directors and auditors must fall within the remuneration limit. Both appointment and remuneration are confirmed upon approval of the general meeting of the stakehold-ers. Rewards are provided based on performance, which is monitored by the company, considering the quantitative and qualitative management objectives set at the begin-ning of the year as well as attendance at board meetings.

Corporate Governance

Title Name Managing work

CEO Park Kihong President and CEO

Internal Director

Shin Changdong Head of Business Development Division

Jeong Kiseop Head of Corporate Planning Division

Non-executive Director

Do Yonghwan Founder and Chairman of STIC Investments

Kim Hagdong Head of Production Division of POSCO

Lee Jeonhyeok Head of the Global Infrastructure Business Management Division of POSCO

Standing Auditor Lee Joyoung Head of Corporate Audit Division

Non-executive Auditor

Min, Hyunki President of SkyLake Investment

Shareholder Status

Strengthening the Independence of AuditorsIn the 2018 annual stockholders meeting, the current stand-ing auditor and non-standing auditor were appointed, there-by strengthening the deterrence role of audits.

'The World's Best Energy Leader Focusing on the Value of Challenge and Trust' is defined by four core values: passion, communication, co-success and green creation. Based on a mid-to long-term strategy for sustainable growth and se-curing global competitiveness, POSCO ENERGY is aware equal opportunities in talent recruitment. Also, POSCO EN-ERGY is running various programs to cultivate 'world-class experts', 'trusted talents' and 'ethical talents'.In addition, POSCO ENERGY is recruiting creative talents with commitment to practice and consideration in accor-dance with the management philosophy of corporate citi-zenship and striving to become 'The POSCO'.

Recruitment and Talent Cultivation

Concept of Talent The World's Best Energy Leader Focusing on the Value of Challenge and Trust

World-leading expertsTalent that combines global competence and leadership

Trusted talentsTalents who recognize the

differences between each other and communicate with each other

Ethical talentsTalents who prepare for the future

with creativity and passion and lead to green creation

Talent Design

AreaBusiness Expertise Ethical Humanity Momentum for Innovation

Characteristic of Talent for a Corporate Citizen

Action

Talent who takes the initiative ahead of others by demonstrating determination with a sense of ownership and responsibility

ConsiderationTalent who practices co-success and pursues sacrifices and service with a mind of humility and respect

CreativityTalent who is immersed in the core of a task and takes the lead in applying new ideas to solve problems

Total 53,837,999 shares

POSCO Co., Ltd. 74.7 %(40,234,508 shares)

BL Energie, etc.(RCPS) 16.1 %(8,643,193 shares)

STIC Investments, Inc. 7.8 %(4,218,182 shares)

SkyLake Incuvest Co. 1.4 %(742,116 shares)

The main agenda of the board of directors

01.23 Approval of 19th financial closing

02.21 Convocation of general meeting of shareholders and approval of agenda

03.12 Appointment of CEO Assignment of internal director position Adjustment of executive compensation standard Donation to social contribution

04.26 LNG direct import for Incheon Power Plant Unit 3 Equity participation in Group's Singapore LNG Trading Incorporation

06.05 Signing contract for the sale of POSPOWER shares and PF

06.20 Approval of Aldur 2 Gas Combined Desalination Project in Bahrain

07.25 Repayment of new capital securities

11.12 Sale of FCE shares

12.19 Donation to social contribution Contribution to the work welfare fund

Fostering ExpertsPOSCO ENERGY is aware that employees are at the cen-ter of corporate competitiveness. As such, POSCO ENERGY provides programs for 'strengthening the training of glob-al players', 'systematic training of experts', 'improving the leadership of trust and communication', and 'career acti-vation development system'. Furthermore, POSCO ENERGY engages in support activities to strengthen the job compe-tency of employees through overseas expert training and innovation activities.

Study Abroad Support SystemPOSCO ENERGY is running a 'study abroad support sys-tem' to cultivate creative and adventurous leaders who will lead to future growth. Beneficiaries of the study abroad support system are selected through in-house recruitment and through a combined work-study program that provides graduate degrees from top domestic universities, they are able to immediately apply what they have learned to en-hancing work performance. In addition, POSCO ENERGY offers full scholarships during the program to motivate em-ployees and promote active self-development.

Overseas Experience TrainingPOSCO ENERGY selects excellent employees and offers programs to experience overseas culture, inspects indus-tries in anticipated markets, and visits leading companies. The plan is to develop the programs into self-driven pro-grams with enhanced satisfaction and effectiveness, which will allow employees to select the countries they want to visit and coordinate the experience.

Operation of the Board of DirectorsThe BOD holds general meetings, and according to the company regulations and articles, the CEO appointed by

the BOD is also the chairperson of the BOD. In principle, BOD meetings are called by the CEO and resolutions can be made with more than half of the BOD members in at-tendance and a majority vote of the attending members. To prevent any conflicts of interests, it is indicated in the corporate bylaws that no BOD members with a special stake in the company can exercise voting rights at relevant meetings. In 2018, POSCO ENERGY held nine BOD meet-ings, all of which had a 100% attendance rate, and a total of 24 items were approved, including the direct import of LNG for Incheon Unit 3, sales of shares of POSPOWER, management plans, and social contribution donations. In January 2019, POSCO ENERGY set up the Management System Improvement TF and reviewed company regula-tions, processes, councils and committees to enhance work efficiency at a company-wide level, reduce managerial and facilitate the decision-making process of the manageri-al. In April, POSCO ENERGY established the Management Committee, which consists of the CEO, head of division, and auditor, and strengthened the process for all relevant departments to review all agendas of the BOD in order to support committee resolutions and reduce various risks.


Fair Evaluation and RewardsFor rational HR management and fair compensation, POSCO ENERGY is implementing an evaluation process based on stan-dards and principles. By establishing a rational performance evaluation process that treats all employees equally, regardless of gender, through independent and objective evaluations, the employees are able to attain their full potential.

Evaluation Process

Feedback

Employee Connection with HR

First evaluation

Achievement evaluation

Competency evaluation

Second evaluation

Achievement evaluation

Competency evaluation

Feedback

Total Rewards

Salary

•Basic pay•Bonus• Other benefits(research subsidy,

license pay, etc).

Performance incentive

• Operating profit• Annual salary based on

individual's performance

Other welfare benefits

• Communication expenses• Welfare Card• Summer resort• Telephone foreign language

study/Foreign language study after work

Bonus/Encouragement pay

A Fair and Transparent TransactionPOSCO ENERGY has adopted a transparent procedure from selecting, contracting and paying for a purchase to assessing partners to create a fair and transparent transaction culture. POSCO ENERGY utilizes the e-Procurement system in concluding contracts, and the executive in charge of purchasing supervises and runs the Subcontracting Deliberation Committee when needed to self-evaluate compliance with the Subcontractor Act. Through POSCO's SRM(Supplier Relationship Management) system, POSCO ENERGY is able to en-hance fairness in the assessment of partners while encouraging them to fulfill their social responsibilities in the areas of environment and safety during registration and assessment. For partners who comply with the system voluntarily, POSCO ENERGY offers incentives in an effort to strengthen the competitiveness of the outstanding partners.POSCO ENERGY conducts yearly evaluations and collects supplier's opinions(or objections), thereby evaluating the SG(Sourcing Group) and suppliers as Excellent, Good or Poor. More-over, to promote mutual growth, POSCO ENERGY operates a bidding system that prevents excessively under-bidding and reflects a fair margin. To prevent a decrease the supply quali-ty of partners due to excessive bidding competition, POSCO ENERGY uses either the market price competitive bidding system or the price restriction bidding system rather than the op-timum bidding system for certain items. Partner Support ProgramTo provide help for small-and medium-sized partner companies in dealing with financial difficulty, POSCO ENERGY makes purchase payments in 100% cash, twice a week, so that payment can be received a maximum of five days after the receipt of a product. In 2019, for simple services, minimum wage will be paid and the contract term will be lengthened to 3-5 years from 1 year to secure employment stability. Moreover, quality assurance assessments will improve the purchasing system to promote co-success with suppliers. In addition, POS-CO ENERGY promotes mutual growth by providing in-house funeral service support and sports facilities, both of which are available the to the employees of suppliers.

Supply Chain Management

Multiple EvaluationsTo improve the top-down evaluation system where one senior employee evaluates team members, POSCO ENERGY has implemented a multiple evaluation system that includes evaluations from a senior employee, a subordinate employee, a fellow employee, and cus-tomers. This process involves various evaluators and can improve the fairness and objectivity of employee performance assessments.

RewardsThrough a performance-linked annual salary system, a compensation system based on roles and jobs has been implemented, and fair compensation is achieved through a perfor-mance incentive system based on competence and degree of experience.

Introductory Training

OJT(6 months)

OJT 6 weeks

Online training on core values

Regular new employee

Experienced new employee

Professional technology employee

In-house training(2 weeks)

In-house training(1 week)

In-house training(1 week)

Group-affiliate joint training for new employees(2-3 weeks)

Job training(2 months)

Group-affiliate joint training for new employees(1 week)

Matrix Manager

Direct Superior

Evaluated Employee

Internal Customer

Team Member

Global Capability

ㆍ Developing Cultural Understanding and Language Abilitiesㆍ Foreign Expatriate Training Coursesㆍ Overseas Experience

Job Competencies

ㆍ Fostering a Professional Workforce for each Businessㆍ Study Abroad Systemㆍ Thesis Presentation

ㆍ Internalizing the Core Values of the Groupㆍ Developing Basic Skills

Common Competencies

ㆍ QSS Education/Activityㆍ Six Sigma Belt Acquisition

Support

Innovation Capability

Foundations of Talent Development


Customer Satisfaction

QSS Support for Subsidiaries | POSCO ENERGY supports the innovation activities of subsidiaries and related companies. Busan E&E generates electricity from domestic waste in a generation facility, and POSCO ENERGY offers customized in-novation consulting to discover improvement tasks. Busan E&E is the first SRF power plant in Korea and is located in the Saenggok Industrial Complex, Busan. It generates power by incinerating waste and focusing on activities to reduce odor and dust. To do so, a group of senior and new employees promoted My Machine Model Making Activities. The goal of the 2019 QSS activity was turning Waste-to Energy business sites into sight-seeing destinations, and all employees engaged in With My Machine to achieve the goal.PT. KPE(KRAKATAU POSCO ENERGY)is a thermal power plant with a capacity of 200MW located in Indonesia. POSCO ENER-GY conducts facility diagnosis in the field and provides innovation training to managers and expatriates.

Moreover, to promote self-driven improvement activities in the field, QSS+ Improvement Leadership Courses have been available since 2013 and 181 employees have taken the courses. QSS improvement leaders implement corrective ac-tions by benchmarking the POSCO group and following the best practices in Japan to create extraordinary performances.

Achievements

Enhancement of capacity • March, 2014(1st term)

~ Current 16th term ended• Trained 128/265 Improvement

Leaders(48 %)

Performance and safety improvements• Improved facility performance: 59 cases• Improved working environment safety

: 12 cases

Financial performance• Increase in profits and cost

reduction. KRW 3.42 billion• 1 patent application

Innovation

Operation Purposes and Roles of the Operation Technology Center

Customers

Fuel Cell Plant

PlantEngineer

Technology Engineer

Operation & Monitoring

Data & Alarm reception

Real-time response to customers

Provide instructions for work & remote support

Share Countermeasures

Request for Technological Support

Technological support & Improved design

Operation Technology Center• 24-hour technical support for

repair and maintenance• Maintain optimal operational status• Prevent failure in advance• Manage an integrated history of

operational status

• Conduct prompt responses to emergencies

• Support real-time technological service for customers

• Synchronize organic service operations

Improve usage rate

Improve service quality

Immediate responses for maintenance needs

Strengthening Communication with CustomersOperation of a Real-Time Information Sharing System | POSCO ENERGY established the RIS: Fuel Cell Real-time Information Sharing System to enhance communication with the customers and provide convenient services. With the RIS, customers can check real-time operational sta-tus and operational data and reports, and POSCO ENER-GY can receive customers’ requests. The RIS includes an information protection function covering everything from the design phase to customer facilities and POSCO EN-ERGY is putting in efforts to ensure the confidentiality of customers' facility data such as changing the password regularly. POSCO ENERGY is striving to respond actively to customer requests and to improve trust and satisfaction.

Conducting Customized Technology Seminars | POSCO ENERGY is expanding technology seminars to meet the various training requirements of customers such as train-ing for fuel cell operation and control technology and situ-ational counter measures according to alarm type. Annual technology training is provided to strengthen communica-tion with the customers; in 2018, five technology training sessions were provided. POS-CO ENERGY will continue to develop diverse technology training programs to meet customer expectations and strengthen training quality.

Reinforcing Responsiveness to Customer ContactsReal-Time Technology Support | POSCO ENERGY is current-ly running an Operational Technology Center in the Pohang Fuel Cell Plant. In 2015, POSCO ENERGY newly integrated

the existing technology support organization with operational engineering experts, and in 2018 operational inspection re-search experts were transferred to the service group to en-hance its operational technology support function. As POSCO ENERGY continues to cultivate engineers with expertise in operational technology, the Operational Technology Center is maximizing customer satisfaction and securing stable fuel cell operation by implementing optimum operational con-ditions through facility operations and technology sharing.

Offering Customized Regional Services | The customized service centers are located in three regions, Gyeongin, Jung-bu, and Nambu to respond to customers quickly. By offering these services, POSCO ENERGY is focusing on stable fuel cell operations, enhancing operational rates, and quickly re-sponding to customer needs.

Safety and Health Impact Management Safety and Health Activities | POSCO ENERGY operates customer facilities in accordance with LTSAs(Long-Term Service Agreement) while preventing safety and health is-sues that can arise in fuel cell operations through employee training. Operation and Maintenance Manuals on safety and health risks of products and related information are provided through customer training.

The Internalization of Original Technology | Through the internalization of original technology, such as product engi-neering and operational inspections, POSCO ENERGY has established a precise specification system for fuel cells. By deriving optimized operational conditions, precise specifica-tion can be checked and by performing regular updates on construction, test operations and maintenance and opera-tion manuals, product quality can be enhanced.

QSS activities_Together, Steadily, and CorrectlyDevelop QSS Activities Centered on Facility Stability | QSS+(Quality Stability Safety Plus) activities that focus on facility stability means maintenance and constant improvement of facilities and equipment. POSCO ENERGY operates QSS activities according to the characteristics of the task and purpose of the activity, and utilizes it as a tool to communicate with employees and field staff.

Daily activities to restore facility performance

Activities for enhancingprimary differences in core facilities

Promotion of QSS activities in daily work for part leaders and chief units

Enhancement of facilities based on QSS, linked with maintenance and investment

Making Innovation Factory

(factory unit)

Model Plant(process/facility unit)

Daily work

Making improve-ments

Daily check

Discovery of inefficiency

Maintenance management

Maintenance Support

Rationalization and maintenance investment

Improvement of maintenance by managerial unit

Standardize work

instructions

With My Machine

Task activities

Understanding the training needs of customers

Developing technology training programs

Enhancing training quality

Overview Commitment Preparing for 100 years Corporate Citizenship Activities Activities and Performance Appendix 7372 CORPORATE CITIZENSHIP REPORT 201872 2018 POSCO ENERGY Citizenship Report

Based on a report originally in Korean

The Board of Directors and ShareholdersPOSCO ENERGY Co., Ltd.:

Opinion We have audited the consolidated financial statements of POSCO ENERGY Co., Ltd. and it`s subsidiaries(the “Group”), which comprise the consolidated statements of financial posi-tion as of December 31, 2018 and 2017, the consolidated state-ments of comprehensive income(loss) change in equity and cash flows for the years then ended, and notes, comprising sig-nificant accounting policies and other explanatory information.In our opinion, the accompanying consolidated financial state-ments present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2018 and 2017, and its consolidated financial performance and its con-solidated cash flows for the year then ended in accordance with Korean International Financial Reporting Standards(“K-IFRS”)

Basis for Audit Opinion We conducted our audits in accordance with Korean Standards on Auditing(KSAs). Our responsibilities under those standards are further described in the Auditors` Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are rel-evant to our audit of the consolidated financial statements in Republic of Korea, and we have fulfilled our other ethical re-sponsibilities in accordance with these requirements. We be-lieve that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Matter The procedures and practices utilized in the Re-public of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presen-tation of the consolidated financial statements in accordance with K-IFRS, and for such internal control as management de-termines is necessary to enable the preparation of consolidated financial statement that are free from material misstatement, whether due to fraud or error.In preparing the consolidated financial statement, management is responsible for assessing the Group`s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basic of accounting unless management either intends to liquidate the Group or to cease operation, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group`s financial reporting process.

Auditor`s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable

Independent Auditor's Report

Appendix

Independent Auditor's Report 73

Financial Information 74

GRI Index 79

Independent Assurance Report 81

UN Global Compact Index 83

Membership in Associations 84

Participants 84

assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors` report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reason-ably be expected to influence the economic decision of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with KSAs, we exercise profes-sional judgment and maintain professional skepticism through-out the audit. We also:• Identify and assess the risks of material misstatement of the

consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group`s internal control.

• Evaluate the appropriateness of accounting policies used in the preparation of the consolidated financial statements and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management`s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group`s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors` report to the related disclosures in the consolidated financial statements or, if such disclosure are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors` report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regard-ing, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant de-ficiencies in internal control that we identify during our audit.

March 08, 2019Seoul, Korea


Classification 20th period 19th period 18th period

Assets I. Current assets 899,807,713,586 1,139,655,130,291 827,231,236,928

1. Cash and cash equivalents 303,775,911,749 494,132,909,485 263,382,828,151

2. Accounts receivable 248,393,296,062 234,965,815,868 218,042,541,728

3. Other financial assets 83,139,789,035 90,487,853,547 61,051,919,895

4. Inventories 206,164,225,549 255,919,955,063 231,019,082,489

5. Other current assets 56,947,484,809 64,138,983,468 48,946,331,287

6. Income tax assets for the year 608,759,921 9,612,860 1,772,000,380

7. Assets held for sale 778,246,461 - 3,016,532,998

II. Non-current assets 3,255,432,189,413 3,883,737,958,745 4,100,628,522,784

1. Long-term accounts receivables 234,678,964,841 237,983,134,292 292,106,187,630

2. Other financial assets 40,213,408,396 45,535,262,171 32,375,630,847

3. Investments in associates 391,110,441,329 163,219,843,464 188,562,273,903

4. Property, plants and equipment 2,425,965,724,197 2,698,739,631,893 2,836,046,356,927

5. Intangible assets 38,455,695,709 593,033,960,842 598,569,349,327

6. Other non-current assets 45,997,483,598 51,005,727,946 52,881,448,200

7. Deferred tax assets 79,010,471,343 94,220,398,137 100,087,275,950

Total asset 4,155,239,902,999 5,023,393,089,036 4,927,859,759,712

Liabilities I. Current liabilities 1,226,744,931,487 822,345,978,437 980,807,380,671

1. Accounts payable 45,059,624,121 133,674,201,912 121,310,949,449

2. Short-term borrowings 150,000,000,000 120,000,000,000 50,000,000,000

3. Current portion of long-term debt 755,720,752,078 389,135,469,067 666,647,838,043

4. Current portion of other payables 97,693,130,499 102,748,680,273 98,159,636,655

5. Income tax liabilities for the year 3,161,144,029 16,439,035,771 8,279,959,298

6. Current portion of provisions 152,684,753,943 24,621,007,903 25,285,676,440

7. Other financial liabilities 15,975,540,644 26,664,344,741 1,532,664,127

8. Other current liabilities 6,449,986,173 9,063,238,770 9,590,656,659

II. Non-current liabilities 1,576,529,832,138 2,472,275,591,326 2,478,505,921,614

1. Long-term borrowings 543,475,144,002 930,547,891,716 970,601,925,455

2. Debentures 918,807,189,744 1,227,959,153,494 1,247,633,835,768

3. Other financial liabilities 11,684,819,469 10,503,705,025 24,529,296,328

4. Defined benefit liabilities 3,076,166,480 839,039,730 7,544,744,269

5. Provisions 69,161,560,006 157,461,308,435 87,826,614,554

6. Deferred tax liabilities 20,048,487,979 138,070,158,177 137,155,513,950

7. Non-current portion of other liabilities 10,276,464,458 6,894,334,749 3,213,991,290

Total liabilities 2,803,274,763,625 3,294,621,569,763 3,459,313,302,285

Equity I. Equity attributable to owners of the parent company 1,337,902,543,430 1,715,425,025,694 1,454,287,038,825

1. Share capital 269,189,995,000 269,189,995,000 225,974,030,000

2. Hybrid bonds 139,571,096,000 498,468,200,000 498,468,200,000

3. Capital surplus 566,741,905,584 567,816,941,889 367,600,251,307

4. Capital adjustments (216,864,557) (216,864,557) (216,864,557)

5. Other components of equity (37,012,904,813) (29,075,451,318) (1,408,422,054)

6. Retained earnings 399,629,316,216 409,242,204,680 363,869,844,129

II. Non-controlling interests 14,062,595,944 13,346,493,579 14,259,418,602

Total equity 1,351,965,139,374 1,728,771,519,273 1,468,546,457,427

Total liabilities and equity 4,155,239,902,999 5,023,393,089,036 4,927,859,759,712

Consolidated Statements of Financial Position(Unit: KRW)

Financial Information20th period, as of December 31, 201819th period, as of December 31, 201718th period, as of December 31, 2016


I. Revenue 1,882,154,075,431 1,621,325,224,062 1,702,837,972,114

II. Cost of sales 1,768,452,924,054 1,390,162,190,139 1,521,455,455,580

III. Gross profit 113,701,151,377 231,163,033,923 181,382,516,534

IV. Sales and administrative expenses 66,559,740,408 64,947,777,545 91,357,214,781

V. Operating profit 47,141,410,969 166,215,256,378 90,025,301,753

VI. Gain(loss) from equity method in associates 36,282,951,182 20,186,170,200 33,445,145,426

1. Gain from equity method in associates 38,340,948,720 20,794,637,749 34,340,828,762

2. Loss from equity method in associates (2,057,997,538) (608,467,549) (895,683,336)

VII. Financial income(expenses) (86,439,647,268) (81,250,404,790) (127,764,040,981)

1. Financial income 23,013,616,025 37,310,194,886 22,382,985,395

2. Financial cost (109,453,263,293) (118,560,599,676) (150,147,026,376)

VIII. Other non-operating income(expenses) (25,207,585,007) (3,155,790,262) (77,028,026,974)

1. Other non-operating income 40,880,756,691 3,933,666,579 3,074,207,591

2. Other non-operating expenses (66,088,341,698) (7,089,456,841) (80,102,234,565)

IX. Profit before income taxes(loss) (28,222,870,124) 101,995,231,526 (81,321,620,776)

X. Income tax expense 21,621,830,055 31,608,048,462 19,305,345,328

XI. Net income(loss) for the year (49,844,700,179) 70,387,183,064 (100,626,966,104)

XII. Other comprehensive income(loss) 9,651,657,646 (28,814,149,447) 19,556,915,824

1. Other comprehensive income items not to be reclassified to profit or loss subsequently (3,514,170,424) 521,378,019 2,195,613,077

(1) Remeasurement of defined benefit plans (1,750,900,700) 521,378,019 2,195,613,077

(2) Other comprehensive income – fair value profit or loss of equity instruments (1,763,269,724) - -

2. Items to be reclassified to profit or loss subsequently 13,165,828,070 (29,335,527,466) 17,361,302,747

(1) Net changes in fair value of available-for-sale financial assets - 802,368,741 8,356,950

(2) Change of equity from equity method 9,010,172,769 (13,862,127,195) 12,809,634,195

(3) Change of earned surplus from equity method (1,650,016,700) (97,535,999)

(4) Foreign currency translation differences 5,805,672,001 (16,178,233,013) 4,543,311,602

XIII. Total comprehensive income(loss) for the year (40,193,042,533) 41,573,033,617 (81,070,050,280)

XIV. Net income attributable for the year (49,844,700,179) 70,387,183,064 (100,626,966,104)

1. Owners' equity attributable to parent company (51,238,158,357) 69,130,740,329 (102,044,368,799)

2. Non-controlling interests 1,393,458,178 1,256,442,735 1,417,402,695

XV. Total comprehensive income attributable for the year (40,193,042,533) 41,573,033,617 (81,070,050,280)

1. Owners' equity attributable to parent company (42,182,066,933) 41,923,502,664 (82,546,105,616)

2. Non-controlling interests 1,989,024,400 (350,469,047) 1,476,055,336

XVI. Earnings per share(loss)

1. Basic earnings per share(loss) (1,596) 989 (2,633)

2. Diluted earnings per share(loss) (1,596) 967 (2,633)

Consolidated Statements of Comprehensive Income(Unit: KRW)

20th period, as of December 31, 201819th period, as of December 31, 201718th period, as of December 31, 2016


ClassificationOwners' equity attributable to parent company Non-

controlling interests

Total equity

Share capital Hybrid bonds Capital surplusCapital

adjustmentsOther components

of equityRetained earnings

Subtotal

Balance as of January 1, 2017(Beginning of prior period)

225,974,030,000 498,468,200,000 368,039,198,437 (5,322,133,824) (19,149,843,916) 484,007,213,926 1,552,016,664,623 27,130,283,592 1,579,146,948,215

Total comprehensive income:Net income(loss) for the year - - - - - (102,044,368,799) (102,044,368,799) 1,417,402,695 (100,626,966,104)Remeasurement of defined benefit plans

- - - - - 2,195,788,451 2,195,788,451 (175,374) 2,195,613,077

Net changes in fair value of available-for-sale financial assets

- - - - 8,356,950 - 8,356,950 - 8,356,950

Change of equity from equity method

- - (438,947,130) - 13,248,581,325 - 12,809,634,195 - 12,809,634,195

Foreign currency translation differences

- - - - 4,484,483,587 - 4,484,483,587 58,828,015 4,543,311,602

Transaction with shareholders:Hybrid bond dividends -Incorporation of new consolidation and change of range

- - - - - - - (9,617,280,380) (9,617,280,380)

Others - - - 5,105,269,267 - 3,964,476,296 9,069,745,563 (4,729,639,946) 4,340,105,617Balance as of December 31, 2016 225,974,030,000 498,468,200,000 367,600,251,307 (216,864,557) (1,408,422,054) 363,869,844,129 1,454,287,038,825 14,259,418,602 1,468,546,457,427Balance as of January 1, 2017(Beginning of prior period)

225,974,030,000 498,468,200,000 367,600,251,307 (216,864,557) (1,408,422,054) 363,869,844,129 1,454,287,038,825 14,259,418,602 1,468,546,457,427

Total comprehensive income:Net income(loss) for the year - - - - - 69,130,740,329 69,130,740,329 1,256,442,735 70,387,183,064Remeasurement of defined benefit plans

- - - - - 526,156,213 526,156,213 (4,778,194) 521,378,019

Net changes in fair value of available-for-sale financial assets

- - - - 802,368,741 - 802,368,741 - 802,368,741


- - 31,171,385 - (13,893,298,580) - (13,862,127,195) - (13,862,127,195)


- - - - - (97,535,999) (97,535,999) - (97,535,999)

Transaction with shareholders: - - - - (14,576,099,425) - (14,576,099,425) (1,602,133,588) (16,178,233,013)Capital increase with considerationHybrid bond dividends 43,215,965,000 - 200,185,519,197 - - - 243,401,484,197 - 243,401,484,197Dividends payable -Balance as of December 31, 2017(End of prior period)

- - - - - - - (562,455,976) (562,455,976)

Balance as of January 1, 2018(Beginning of current period)

269,189,995,000 498,468,200,000 567,816,941,889 (216,864,557) (29,075,451,318) 409,242,204,680 1,715,425,025,694 13,346,493,579 1,728,771,519,273

Effect of accounting policy changes

269,189,995,000 498,468,200,000 567,816,941,889 (216,864,557) (29,075,451,318) 409,242,204,680 1,715,425,025,694 13,346,493,579 1,728,771,519,273

Balance as of January 1, 2018(after revision)

- - - - (54,016,079,045) 97,153,388,368 43,137,309,323 - 43,137,309,323

Total comprehensive income: 269,189,995,000 498,468,200,000 567,816,941,889 (216,864,557) (83,091,530,363) 506,395,593,048 1,758,562,335,017 13,346,493,579 1,771,908,828,596Net income(loss) for the yearRemeasurement of defined benefit plans

- - - - - (51,238,158,357) (51,238,158,357) 1,393,458,178 (49,844,700,179)

Other comprehensive income – fair value profit or loss of equity instruments

- - - - - (1,756,870,673) (1,756,870,673) 5,969,973 (1,750,900,700)

Other comprehensive income – fair value disposal profit or loss of equity instruments

- - - - (1,763,269,724) - (1,763,269,724) - (1,763,269,724)


- - - - 33,643,506,448 (34,157,409,673) (513,903,225) - (513,903,225)

Change of earned surplus from equity method

- - 27,859,695 - 8,982,313,074 - 9,010,172,769 - 9,010,172,769


- - - - - (1,650,016,700) (1,650,016,700) - (1,650,016,700)

Transaction with shareholders: - - - - 5,216,075,752 - 5,216,075,752 589,596,249 5,805,672,001Repayment of hybrid bond dividendsHybrid bond dividends - (358,897,104,000) (1,102,896,000) - - - (360,000,000,000) - (360,000,000,000)Dividends payable - - - - - (18,448,008,214) (18,448,008,214) - (18,448,008,214)Other - - - - - - - (788,735,250) (788,735,250)Balance as of December 31, 2018(End of current period)

- - - - - 484,186,785 484,186,785 (484,186,785) -

December 31, 2018 (the end of this term)

269,189,995,000 139,571,096,000 566,741,905,584 (216,864,557) (37,012,904,813) 399,629,316,216 1,337,902,543,430 14,062,595,944 1,351,965,139,374

Summary of Consolidated Statements of Changes in Equity(Unit: KRW)



I. Changes in cash flows resulting from operations 163,823,199,740 298,481,540,889 215,211,246,039

1. Cash flows from operating activities 230,100,016,024 366,555,797,579 279,281,323,722

A. Net income(loss) for the year (49,844,700,179) 70,387,183,064 (100,626,966,104)

B. Adjustment for: 376,724,691,076 336,113,207,116 448,199,726,378

Depreciation 167,326,563,131 162,143,587,097 168,952,112,455

Intangible asset amortization 7,573,746,149 7,931,571,468 9,030,489,257

Contribution to Provisions 30,327,238,386 60,584,665,939 51,848,849,564

Bad debt expense(purchase return) 2,040,672,603 (1,268,166,765) 1,080,633,444

Loss from valuation of inventories(purchase return) 63,824,405,871 7,630,755,071 21,848,646,562

Loss from disposal of inventories 103,342,849 - -

Retirement benefits 6,082,733,248 4,511,353,075 9,046,724,729

Interest expense 79,593,270,627 88,881,753,992 104,635,242,646

Loss on foreign currency translation 12,560,820,695 2,427,502,490 14,626,784,915

Loss on derivative valuation 10,461,930,463 17,419,959,497 8,247,767,438

Loss on derivative transactions 155,138,269 1,912,853,359 3,101,513,058

Impairment loss on available-for-sale securities - 1,800,417,360 -

Loss on disposition of investment in associates - 129,366,904 87,680,000

Loss on securities valuation 5,544,000 - -

Impaired loss on investment assets - 9,487,973,288

Loss on disposition of tangible assets 1,163,229 891,758,467 1,767,946,774

Impairment loss on tangible assets 54,250,386,767 927,275,820 64,004,555,651

Expenses on assets not in use 2,389,706,016 3,829,695,954 1,114,190,109

Loss on disposition of intangible assets 376,902,930 53,241,818 307,492,499

Impairment loss on intangible assets 8,304,228,257 - 8,455,474,329

Other amortization expenses (87,473,785) 483,397,583 56,000,000

Loss from equity method in associates 2,057,997,538 608,467,549 895,683,336

Other expenses 86,052,083 272,237,189 217,180,362

Income tax expense 21,621,830,055 31,608,048,462 19,305,345,328

Interest income (10,142,194,226) (7,379,983,511) (2,347,571,111)

Dividend income (48,024,120) (33,030,600) (11,115,280)

Gain on foreign currency translation (1,834,743,111) (23,223,285,762) (2,415,393,782)

Gain on derivative valuations (6,744,368,187) (2,283,702,838) (6,349,235,562)

Gain on derivative transactions (1,918,979,361) (1,142,661,406) (2,823,432,541)

Gain on securities valuation (15,952,500) - -

Gain on disposition of tangible assets (968,347,147) (764,808,471) (964,551,443)

Purchase return on impairment loss of tangible assets (6,451,647,459) - -

Purchase return on impairment loss of intangible assets - (950,000,000) (115,137,544)

Gain on disposition of investment in subsidiaries and associates (25,866,303,474) (94,424,876) -

Gain from equity method in associates (38,340,948,720) (20,794,637,749) (34,340,828,762)

Gain on financing guarantee - - (228,732,285)

Gain on disposition of assets for sales - - (96,044,776)

Gains from assets contributed - - (226,516,280)

Consolidated Cash Flow Statement(Unit: KRW)




C. Changes in assets and liabilities resulting from operations (96,779,974,873) (39,944,592,601) (68,291,436,552)

2. Interest received 11,744,123,868 5,948,440,959 2,279,492,363

3. Dividend received 26,155,851,090 30,831,428,635 28,564,059,830

4. Interest paid (83,627,579,659) (86,815,966,665) (87,835,995,432)

5. Income taxes paid (20,549,211,583) (18,038,159,619) (7,077,634,444)

II. Cash flows from investing activities 370,495,307,813 (43,923,092,599) (33,796,363,128)

1. Decrease in deposits for rent 88,675,554 1,217,270,652 5,282,057,354

2. Disposition of tangible assets 1,179,074,970 966,242,528 2,517,638,866

3. Disposition of intangible assets 360,000,000 181,818,182 423,308,501

4. Disposition of estimated assets of sale 19,893,000,000 - 18,062,417,410

5. Disposition of available assets for sale - 44,779,439

6. Increase in short term financial instruments (246,785,004) (26,274,607,666) (34,381,587,969)

7. Decrease in short term financial instruments 21,622,446,505 21,382,867,225 12,420,000,000

8. Increase in long-term financial instruments (5,459,963,254) (19,825,825,895) (103,687,577)

9. Decrease in long-term financial instruments 8,108,289,529 279,666,192 -

10. Decrease in investment in associates - 1,124 -

11. Increase in investment in associates (751,115,390) - (200,000,000)

12. Increase in guarantee deposits (666,520,475) (839,212,892) (1,154,588,943)

13. Acquisition of tangible assets (24,571,907,513) (21,011,312,049) (35,995,295,526)

14. Acquisition of other intangible assets (1,748,964,027) - (711,404,683)

15. Net cash inflow from the consolidation scope fluctuation 351,634,627,643 - -

16. Other comprehensive - disposition of fair value financial assets 1,054,449,275 - -

III. Cash flows from financing activities (725,086,527,090) (21,507,731,125) (78,388,390,182)

1. Increase in short-term borrowings 300,000,000,000 320,000,000,000 50,000,000,000

2. Issuance of corporate bond - 219,384,840,000 18,329,188

3. Increase in long-term borrowings 50,338,200,000 98,485,000,000 285,000,000,000

4. Capital increase with consideration - 243,401,484,197 -

5. Increase in rent deposit 261,250,000 215,000,000 -

6. Repayment of preference shares loan - (279,435,916,891) -

7. Repayment of short-term borrowings (270,000,000,000) (250,000,000,000) -

8. Repayment of current portion of long-term liabilities (390,155,226,008) (338,918,743,725) (368,321,188,171)

9. Repayment of long-term borrowings (6,720,000,000) - (15,225,150,000)

10. Decrease in rent deposit (827,935,000) (636,250,000) -

11. Payment of hybrid bond dividends (19,812,654,788) (24,183,120,540) (24,378,038,348)

12. Provision of dividends (788,735,250) (562,455,976) -

13. Acquisition and settlement of derivatives (16,881,426,044) (9,257,568,190) (5,482,342,851)

14. Repayment of hybrid bond dividends (360,000,000,000) - -

15. Capital reduction with consideration (10,500,000,000) - -

IV. Effect of exchange rate changes on cash held 411,021,801 (2,300,635,831) (1,157,958,553)

V. Net increase(decrease) in cash and cash equivalents(I+II+III+IV) (190,356,997,736) 230,750,081,334 101,868,534,176

VI. Cash and cash equivalents at the beginning of year 494,132,909,485 263,382,828,151 161,514,293,975

VII. Cash and cash equivalents at the end of year 303,775,911,749 494,132,909,485 263,382,828,151

TOPIC No. Standard item Page Note ISO26000

Overview of organization

102-1 Name of the organization 1, 6 6.3.10,6.4.1 ~6.4.5,6.8.5,7.8

102-2 Activities, brands, products, and services 6, 10~16

102-3 Location of headquarters 6

102-4 Location of operations 6, 9~16

102-5 Ownership and legal form 6, 66

102-6 Markets served 6, 9~16

102-7 Scale of the organization 6, 21

102-8 Information on employees and other workers 21

102-9 Supply chain of the organization 6, 10~16, 37~38

102-10 Significant changes to the organization and its supply chain

5, 37

102-11 Precautionary Principle or approach 17~18

102-12 External initiatives 22~23, 55, 83 4.7, 7.8

102-13 Membership of associations 84 4.7, 7.8

Strategy 102-14 Statement from senior decision-maker 4~5 6.4.5, 7.4.2

Ethics and integrity 102-16 Values, principles, standards, and norms of behavior 27, 40~41 4.4, 6.6.3

Corporate Governance 102-18 Corporate Governance 66 6.2, 7.4.3

Stakeholder engagement

102-40 List of stakeholder groups related to the organization 19 5.3

102-41 Collective bargaining agreements 21, 63

102-42 Identifying and selecting stakeholders 19

102-43 Approach to stakeholder engagement 19, 24, 28, 50, 56

102-44 Key topics and concerns raised from stakeholder engagement

19, 25 7.5.3

Reporting in practice 102-45 Entities included in the consolidated financial statements 2, 6, 10~16 7.3.3

102-46 Defining report content and topic boundaries 24~25 7.3.3

102-47 Material Topics List 24~25 7.3.2, 7.3.4

102-48 Restatements of information - No rewritten matters 7.5.3,7.6.2102-49 Changes in reporting - No changes regarding

the report

102-50 Reporting period 2

102-51 Date of most recent report 2

102-52 Reporting cycle 2

102-53 Contact point for questions regarding the report 2

102-54 Claims of reporting in accordance with the GRI Standards 2

102-55 GRI content index 79~80

102-56 External assurance 81~82

Universal Standards(GRI 100)

TOPIC No. Standard item Page ISO26000

Strengthening Financial Soundness

103 Management Approach 30 -

201-1 Creation and Allocation of Direct Economic Values 31 6.8.7

Controlling Air Pollutants 103 Management Approach 32 -

305-1 Direct GHG emissions(Scope 1) 20, 33 6.5.3, 6.5.5

305-2 Direct GHG emissions(Scope 1) 20, 33

Creating Economic Value 103 Management Approach 36 -

203-1 Infrastructure investments and services supported for public interest 37~38 6.8.1, 6.8.2, 6.8.9

Material Issues

GRI Index



Ethical Management 103 Management Approach 39 -

412-2 Employee training on human rights policies or procedures 20, 40~41 6.3.5

New & Renewable Energy Business


203-1 Investment in infrastructure for the public interest and service support activities

46 6.8.1, 6.8.2, 6.8.9

Responding to Energy Policy Change


203-2 Significant indirect economic effects and impacts 22~23, 43~44 6.6.6, 6.7.8

Securing competitiveness for power generation/facilities


204-1 Proportion of spending on local suppliers 48 6.8.7

Social contribution activities for resolving social problems


413-1 Operational rate with local community engagement, impact assessments, and regional development programs

21, 53~55 6.8

Safety Management for Power Plants and Employees


403-1 Participation of labor representatives and holding joint labor-management health and safety committees

61 6.3.10, 6.4.4



401-2 Rewards provided to employees 63~64 6.8.7

To the stakeholders of POSCO ENERGY Co., LtdThe Korea Productivity Center(hereinafter the 'assurer') was appointed by POSCO ENERGY Co., Ltd(hereinafter, 'reporting organization') to provide third party assurance(hereinafter, 'assurance activity') of its 'POSCO ENERGY Corporate Citizenship Report 2018'(hereinafter, the 'report') and hereby presents the following assurance statement(hereinafter, 'assurance opinion').

Responsibility and Independence The information and opinions described in this report were written directly by the reporting organization. This assurer has not been involved in writing reports as an independent assurance organization, and is responsible for assurance opinion of the content in the report in accordance with assurance activity objectively. The assurer is not involved in any conflicts of interest that may undermine its independence in providing assurance activity to the reporting organization.

Assurance Standard and MethodThe assurer has been reviewed the compliance with four principles of the AA1000 Accountability Principles(2018): Inclusiv-ity, Materiality, Responsiveness and Impact. Based on the format of four principles1), the assurance activity was conducted in accordance with the Type 2 method. The balance, comparability, accuracy, timeliness, clarity, and reliability of indicators and information stated in the report was verified through information based on documents and on-site interviews with the reporting organization.

This assurance activity was conducted through the following methods. •Verified if the requirements for Core criteria of GRI Standards In Accordance2) Criteria were fulfilled.

•Verified the compliance with the principles of report content and quality based on GRI Standards.

•Verified whether the contents of the report cover material issues of the reporting organization and stakeholders.

•Verified the basis of data and information through on-site inspection, and reporting indicator process through manager interview.

•Verified the suitability of the contents and any errors in expression through comparison analysis with other sources.

Limitations • The scope and boundaries of the assurance activity are in accordance with the boundaries of the time period, region and value chain of the report.

Therefore, the scope of the assurance activity meets 100 % coverage of the consolidated revenue, and data regarding the supply chain has not been

included unless specified.

• For environmental and social performance data, measured data was verified through data collection and calculation of process reliability and data

accuracy, and calculated data was verified for assumption and calculation process reasonability. Financial data in the report was verified by cross

checking financial statements that were audited by an auditor with disclosed information.

• The on-site verification was carried out at the headquarters of POSCO ENERGY in Seoul, and the result of this assurance is subject to change if any

additional verification is conducted in the future.

Findings and ConclusionThe assurer's opinion regarding the AA1000 Accountability Principles(2018) of Inclusivity, Materiality, Responsiveness and Impact is presented below.

Inclusivity: Stakeholder Engagement The reporting organization engages in comprehensive stakeholder engagement re-garding sustainable management issues.

1) Format: AA1000AP(2018) presents the four principles(Inclusivity, Materiality, Responsiveness, and Impact) in the following format: Principle Statement, Key Definitions, Discussion, and Required Adherence Criteria.

2) In accordance criteria of GRI: GRI Standards present two options, Core and Comprehensive. In Accordance - Core option is met by partial general disclosure, Management approach(MA) of Material Topics, and specific disclosure of one or more topics.

Independent Assurance Report


Economic performance 201-2 Risks and opportunities from financial impacts and business activities due to climate change

33 6.5.5

Anti-Corruption 205-1 Operations assessed for risks related to corruption 69 6.6.1, 6.6.2, 6.6.3205-2 Communication and training about anti-corruption policies and procedures 40

Topic Specific StandardsEconomic Standards(GRI 200)


Raw material 301-1 Materials used by weight or volume 20 6.5.4

Energy 302-1 Energy consumption within the organization 20 6.5.4

302-2 Energy consumption outside of the organization 20 6.5.4

302-4 Reduction of energy consumption 48~49 6.5.4, 6.5.5

Water 303-1 Water intake by source 20 6.5.4

303-3 Recycling and reuse of water 20, 34 6.5.4

GHG 305-4 GHG emissions intensity 33 6.5.5

305-5 Reduction of GHG emissions 34 6.5.5

305-7 Nitrogen oxides(NOX), sulfur oxides(SOX), and other significant air emissions 20 6.5.3

Waste water and waste

306-1 Water discharge by quality and destination 20, 34 6.5.3

306-2 Waste by type and disposal method 20, 34~35

306-4 Transport of hazardous waste 35

Environment Standards(GRI 300)


Employment 401-1 New employee hires and employee turnover 21 6.4.3

401-3 Parental leave 21, 63 6.4.4

Occupational Health and Safety

403-2 Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities

21 6.4.1, 6.4.2, 6.4.4

403-4 Health and safety topics covered in formal agreements with trade unions 61

Education and Training

404-1 Health and safety topics covered in formal agreements with trade unions 21 6.4.7

404-2 Programs for upgrading employee skills and transition assistance programs 67~68

Health and Safety of Customers

416-1 Assessment of the health and safety impacts of product and service categories 70 6.7.4, 6.8.8

Personal Information of Customers

418-1 Substantiated complaints concerning breaches of customer privacy and losses of customer data

18 6.7.1, 6.7.2

Social Standards(GRI 400)


Materiality: Identification and Reporting of Material Issues It was verified that the reporting organization selected 32 sus-tainable management issues through global sustainability standards including GRI standards, ISO 26000, industry issues, media analysis and internal management strategy. It was also confirmed that 10 material issues were selected through internal and external stakeholder survey and opinion analysis, ensuring that core issues were reflected in each page of the report.

Responsiveness: Organization's Response to Issues The reporting organization identifies major expectations that affect the stakeholders' performance and takes necessary measures in response. It was verified that such matters were fully dis-closed in the report.

Impact: Consideration of the Social Impact of the Organization The reporting organization monitors the impact of manage-ment activities on the broader ecosystem. We recommend POSCO ENERGY to advance the measurement of social impact on the economy, society, and environment by making further efforts to identify impact measure indicators.

The assurer verified that the report fully meets the requirements of the GRI Standards Core Option. General Disclosures was reported in accordance with the GRI Standards. It was verified that Topic-Specific Disclosures was identified through system-atic decision process of a Materiality Test.

Recommendation The assurer suggests the following to the reporting organization• The assurer recognizes the enhanced quality of report through the establishment of clear standard by implementing the non-financial information

standard which has changed to GRI Standards, and suggests reflection of the advanced specific indicators.

• The assurer highly evaluates the efforts made to measure and manage the socio-environmental impact of the company and implement quantitative

procedures. The assurer suggests the company to set socio-environmental impact mid-to long-term sustainable management goals and share the

achievements of the goal and implementation efforts with the stakeholders.

June 2019Chairman Kyoo-sung Noh of Korea Productivity Center

Managing Director Dong-su KimTeam Manager Yang-ho Lee

Researcher Hyeon-su Kim

Materiality Issue Corresponding GRI Topic Topic-specific Disclosures

Strengthening Financial Soundness 201: Economic Performance 201-1: Creation and Allocation of Direct Economic Value

Controlling Air Pollutants 305: Air Emissions 305-1: Direct GHG emissions(Scope 1)305-2: Indirect GHG emissions(Scope 2)

Creating Economic Value 203: Indirect Economic Impacts 203-1: Infrastructure investments and services supported for public interest

Ethical Management 412: Human Rights Assessment 412-1: Employee training on human rights policies or procedures

Responding to Energy Policy Changes 203: Indirect Economic Impacts 203-2: Significant indirect economic effects and impacts

Social Contribution Activities to Resolve Social Problems 413: Local Communities 413-1: Operation rate with local community engagement, impact

assessments, and regional development programs

Promoting Business for New and Renewable Energy 203: Indirect Economic Impacts 203-1: Infrastructure investments and services supported for

public interest

Safety Management for Power Plants and Employee 403: Occupational Health and Safety 403-1: Participation of labor representatives and holding joint

labor-management health and safety committees

Creating a Healthy Workplace Environment 401: Employment 401-2: Rewards provided to employees

Securing Competitiveness for Power Generation Costs and Facilities Efficiency 204: Procurement Practices 204-1: Proportion of spending on local suppliers

UN Global Compact IndexSince joining the UN Global Compact in 2012, POSCO ENERGY is complying with the 10 principles of human rights, labor, environment, anti-corruption, and submitting a COP(Communication On Progress) every year.

Category Principle GRI Page

Human Rights 1. Businesses should support and respect the protection of internationally proclaimed human rights; and

406-1, 407-1, 408-1, 409-1, 412-2, 412-3, , 414-1

41

2. Make sure that they are not complicit in human rights abuses. 406-1, 410-1

Labour Standards 3. Businesses should uphold freedom of association and the effective recognition of the right to collective bargaining;

102-41, 402-1, 407-1 63

4. The elimination of all forms of forced and compulsory labor; 408-1, 409-1 41

5. The effective abolition of child labor; and

6. The elimination of discrimination in respect to employment and occupation.

401-1, 404-1, 405-1, 405-2, 406-1

40, 41

Environment 7. Businesses should support a precautionary approach to environmental challenges;

102-11, 307-1, 308-1, 308-2 33

8. Undertake initiatives to promote greater environmental responsibility; and

304-2, 304-3, 305-5, 306-1, 306-2

33~35

9. Encourage the development and diffusion of environmentally friendly technologies.

302-4, 302-5, 303-3, 305-5 33, 44, 46

Anti-Corruption 10. Businesses should work against corruption in all its forms, including extortion and bribery.

205-1, 205-2, 205-3 40

84 CORPORATE CITIZENSHIP REPORT 2018

Membership in Associations

Participants

Kang Jisoo

Kwon Kyoungrok

Kim Dongeon

Kim KyuRi

Kim Areum

Kim Youngtae

Kim Yunmi

Kim Jongmyung

Kim Jinseon

Kim Hyeongsik

Kim Heedong

Nam Seungho

Mun Byeongil

Park Yeongsu

Bu Myeongok

Seo Bongman

Son Heungrok

Song Jinho

Shin Kwangcheol

An Jiyoung

Yang Sanggeun

Won Meeyeon

Yoon Seokkyu

Yoon Jaewoong

Yoon Hyeongcheol

Lee Sanghun

Lee Seokhyeong

Lee Soyoung

Lee Seungmok

Lee Wujin

Lee Eunju

Lee Jaehwan

Lee Jihun

Lim Byoungdong

Jang Hyohun

Manager Cho Chungrae

Cha Byeonghak

Choi Dongchan

Heo Jeong

Heo Jeonghaeng

Hong Seongcheol

Headquarters 16F, POSCO Center West Wing, 440 Teheran-ro, Gangnam-gu, Seoul

Future Energy Campus 363 Jungbong-daero, 405 Beon-gil, Seo-gu, Incheon

Incheon LNG Combined Cycle Power Plant 314 Jungbong-daero, 405 Beon-gil, Seo-gu, Incheon

Gwangyang Off-Gas Combined Cycle Power Plant Within Gwangyang Steelworks, 1800 Jecheol-ro, Gwangyang, Jeollanam-do

Pohang Off-Gas Combined Cycle Power Plant Within Pohang Steelworks, 6262 Donghaean-ro, Nam-gu, Pohang, Gyeongsangbuk-do

Pohang Fuel Cell Manufacturing Facility/Fuel Cell Technology Institute 153-154, Yeongilmansandan-ro, 88 Beon-gil, Heunghae-eup, Buk-gu, Pohang, Gyeongsangbuk-do

EnvironmentKRX Global Premier Exchange

Kyungbuk Dongbu Environmental Engineers Conference

Daegu Gyeongbuk Korea Environmental Protection Association

Seo-gu Autonomous Environmental Purification Council

Incheon Green Korea United

Incheon Federation for Environmental Movement

Incheon Federation for Environmental Movement Seo-gu Branch

Chung Ryong Environment Corporation

Chunghak Environmental Movement Headquarter

Korea Chemicals Management Association

Korea Environmental Engineers Association

SocietyCSV Foruam

UN GLOBAL COMPACT

Daegu Gyeongbuk Public Safety Management Council

Korean Industrial Safety Association

Business Institute for Sustainable Development of KCCI

Korea Table Tennis Association

Seo-gu Fire Safety Committee

Korea Fire Safety Institute

Sinhyeonwonchang-dong Citizen Autonomy Committee

BEST SM Forum

Korea Personnel Improvement Association

Saemaul Undong Center Incheon Seo-gu Branch

Incheon Public Safety Management Council

Incheon National Security Facility Committee

Human Resources Education Center

Korea CSR Society

Korea Fire Safety Institute

Korean Business Table Tennis Federation

Korean Japanese Culture Association

EconomyGwangyang Chamber of Commerce and Industry

Korea Management Association

Korean Institute of Electrical Engineers

Korea Electric Association

Samsung Economic Research Institute

Seo-Gu Office(Seogu Sports Council)

Korea Chamber of Commerce and Industry

Seoul Economist Club

Association of the Electricity Supply Industry of East Asia and Western Pacific

Association of Energy Future Forum

Incheon Citizens’ Coalition for Economic Justice

Federation of Korean Industries International Management Institute

Jeonnam 5GW Wind Power Industry Association

The Korea Institute of Power Electronics

Steel Convergence Technology Research Association

POSTECH Research and Business Development Foundation(PLC)

Korea Construction Engineers Association

Korea New and Renewable Energy Association

Korea Engineering & Consulting Association

Korea Electric Engineers Association

Korea Electrical Contractors Association

Korea Electric Power Engineers Association

Korea Photovoltaic Industry Association

Korea Wind Energy Industry Association

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