Transcript Slide 1

Interim Results
Six months ended 30 June 2008
Interim Results
Philip Cox, CEO
Highlights
 Profit from operations £495m - up 19%
 EPS 14.3p - up 7%
 Interim dividend 3.56p per share up 29%
 Portfolio growth continues
– 3,105MW (net) new capacity additions announced
– five new projects - new build / acquisitions
– embedded growth - four opportunities crystallised via
existing projects
– strong pipeline of further growth opportunities
 One off issues impact Rugeley H2 profit by £45m
 Locking in attractive spreads in the UK in 2009/2010
3
Interim Results August 2008
International Power
All numbers in this presentation exclude exceptional items and
specific IAS39 mark to market movements, unless stated otherwise
Financial Review
Mark Williamson, CFO
Income statement
2008
£m
2007
£m
North America
Europe
Middle East
Australia
Asia
Corporate costs
Profit from operations
Interest
PBT
Tax
Minority interest
Profit for the year
76
299
32
70
42
(24)
495
(182)
313
(63)
(35)
215
42
268
29
46
55
(24)
416
(140)
276
(41)
(34)
201
Reported EPS
FX benefit
UK tax reduction
- deferred tax release
14.3p
(0.6)p
13.4p
7%
(1.2)p
12.2p
12%
Six months ended 30 June
13.7p
5
Interim Results August 2008
change
81%
12%
10%
52%
(24%)
19%
13%
7%
International Power
North America
Profit from operations
up 81%
£76m
£61m
£42m
£29m
£13m
£15m
H1 2007
H1 2008
Share of JVs and associates
Texas
 Coleto Creek dust emissions control
equipment installed H1 2007
 Midlothian’s load factor reduced
– cooler weather in April and May
– increased wind generation
 Hays benefited from:
– warmer weather
– congestion in South Zone
New England
 Higher peak and lower offpeak
generation
Subsidiaries
6
Interim Results August 2008
International Power
Europe
Profit from operations
up 12%
£299m
£268m
£239m
£238m
£60m
£30m
H1 2007
H1 2008
 Continued strong performance
at First Hydro
 First time contribution from
Maestrale
 Reduction in Rugeley’s
contribution:
– FGD installation at Rugeley
– record achieved dark spreads
in 2007
 Good performance from Saltend
and Deeside
Share of JVs and associates
Subsidiaries
7
Interim Results August 2008
International Power
Middle East
Profit from operations
up 10%
£29m
£20m
 All assets achieved high
operational performance
£32m
 Full contribution from
Umm Al Nar in H1 2008
£20m
 Completed construction at
Ras Laffan B in June
 Hidd achieved full commercial
operation in May 2008
£12m
£9m
H1 2007
H1 2008
Share of JVs and associates
Subsidiaries
8
Interim Results August 2008
International Power
Australia
Profit from operations
up 52%
 Improved contributions from
Hazelwood and Loy Yang B
 Unplanned outage at Hazelwood
– £16m H1 impact
£70m
£68m
 Synergen able to capture high
spot prices
£46m
£45m
£1m
H1 2007
£2m
H1 2008
Share of JVs and associates
Subsidiaries
9
Interim Results August 2008
International Power
Asia
Profit from operations
down 24%
 Planned outage at Paiton
£55m
£8m
£42m
£6m
£47m
H1 2007
 Malakoff sold in May 2007 for
£249m (profit on disposal - £115m)
£36m
 Acquisition of additional 31%
of Uch
 Delayed payments by offtaker
to Pakistan projects
– no impact on earnings
H1 2008
Share of JVs and associates
Subsidiaries
10
Interim Results August 2008
International Power
Interest cover and effective tax rate
Six months ended 30 June
PFO
JVs and associates
Interest
Tax
PBIT
Total interest
Subsidiaries
JVs and associates
Interest cover
Profit before total tax
Total tax
Subsidiaries
JVs and associates
Effective tax rate
11
Interim Results August 2008
2008
£m
2007
£m
495
416
47
26
47
27
73
568
74
490
(182)
(47)
(229)
(140)
(47)
(187)
2.5x
2.6x
339
303
(63)
(26)
(89)
(41)
(27)
(68)
26%
22%
International Power
Free cash flow
2008
£m
2007
£m
503
476
39
53
Capex - maintenance
(63)
(34)
Cash generated from operations
479
495
(202)
(155)
Tax paid
(49)
(31)
Free cash flow
228
309
Six months ended 30 June
Operating cash flow from subsidiaries
Dividends - JVs and associates
Net interest paid
12
Interim Results August 2008
(3%)
(26%)
International Power
Movement in net debt
2008
£m
2007
£m
Free cash flow
228
309
Growth capex
(80)
(99)
(167)
(140)
Six months ended 30 June
Acquisitions and investments
Disposals
417
Dividend paid
(112)
(118)
FX & other
(122)
(18)
(19)
(31)
Payment to minorities
Change in net debt
13
-
(272)
320
Opening net debt
(4,662)
(3,575)
Closing net debt
(4,934)
(3,255)
Interim Results August 2008
International Power
Balance sheet
30 June
2008
£m
Non-current assets
Goodwill and intangibles
991
901
5,961
1,480
5,721
1,292
1,626
10,058
1,530
9,444
Net current liabilities
Non-current liabilities
(601)
(1,516)
(355)
(1,420)
Net debt
Net assets
(4,934)
3,007
(4,662)
3,007
164%
155%
62%
61%
(1,336)
(1,297)
PP&E
Investments
Other long-term assets
Gearing
Debt capitalisation
Net debt of JVs and associates
14
31 December
2007
£m
Interim Results August 2008
International Power
Net debt structure
As at 30 June 2008
Project cash/
(debt) (1)
£m
Cash and cash equivalents
Recourse debt
IPR facility (revolver)
Convertible bond (2023)(2)
Convertible bond (2015)(2)
Convertible bond (2013)(2)
Total net debt
(1)
(2)
15
Total
£m
1,129
357
1,486
-
(29)
(117)
(453)
(153)
(29)
(117)
(453)
(153)
(752)
(752)
Non recourse debt
IPM - acquisition debt
(243)
IPM - Mitsui preferred equity
(151)
North America
(888)
Europe
(2,927)
Middle East
(305)
Australia
Asia
IPR
Corporate
£m
(1,120)
(34)
(5,668)
(4,539)
JVs and associates
off-balance sheet
net debt (1)
Maturity
£m
2023
2015
2013
-
(243)
(151)
(888)
(2,927)
(305)
2012
2008
2010-2013
2010-2026
2017-2025
(145)
(210)
(604)
-
(1,120)
(34)
(5,668)
2010-2019
2020
(68)
(309)
(1,336)
(395)
(4,934)
Maturity
2013-2019
2009-2020
2021-2030
2009-2012
2008-2018
(1,336)
Project debt is secured solely on the assets and cash flow of the project concerned (non recourse)
The convertible bonds are shown at their final maturity date although they can be converted earlier
Interim Results August 2008
International Power
Financial summary
 PFO up 19%
– all regions up, except Asia
– Asia reflects sale of Malakoff in 2007
 EPS up 7%
 Interim dividend of 3.56 pence per share
 Free cash flow remains strong
 Funding of growth continues
– Convertible bond – May 2008
– US peaking plants – July 2008
16
Interim Results August 2008
International Power
Interim Results
Philip Cox, CEO
US - Texas
 Load continues to grow
– little signs of economic
downturn in Texas
– economy benefiting from oil
industry / demographics
Full Year
Achieved dark spread ($/MWh)
18
Interim Results August 2008
(2)
Load factor
Forward contracted
 Shift in supply balance between
Texas Zones
– STP nuclear plant moved to
Houston Zone resulting in
congestion in South Zone
– increased wind generation
resulted in extra offpeak
supply to North Zone
 Pricing environment
– strong prices in South Zone
in H1
– late start to North Zone peak
season, lower off peak pricing
2008 (1) 2007
Coleto Creek
(3)
30
29
95%
75%
95%
n/a
Full Year
2008 (1) 2007
Midlothian
Achieved spark spread ($/MWh)
Load factor
Forward contracted
(3)
15
14
40%
55%
80%
n/a
Full Year
2008 (1) 2007
Hays
Achieved spark spread ($/MWh)
Load factor
Forward contracted
(1)
IPR forecast
(2)
Excludes SO2 costs
(3)
(3)
21
10
70%
45%
80%
n/a
% of anticipated output for the full year
International Power
US - New England
 Fundamentals remain strong
Full Year
New England
2008
2007
– capacity market provides
stable earnings
Achieved spark spread ($/MWh)
27
16
Load factor
40%
60%
– energy prices remain strong
Forward contracted
85%
n/a
on peak
– off peak pricing affected by
IPR forecast
Includes FCM receipts
increased imports from Canada and New York
% of anticipated output
(1)
(2)
(3)
(1)
(2)
(3)
for the full year
 Load growth continues at modest levels
– new supply from demand resources should increase energy
margins
– new peakers planned in Connecticut will have little effect on
IPR plant energy margins
 Regional Greenhouse Gas Initiative (RGGI)
– CO2 rules take effect January 2009
– quarterly auction of credits beginning in September
– not all RGGI State ready in time – may cause price volatility
– IPR CCGT plants well positioned
19
Interim Results August 2008
International Power
US peaking plant acquisition
 Four peaking plants totalling 1,857MW
 Location: PJM, MISO
– attractive long term supply demand fundamentals
 Modern, efficient plant at significant (over 30%) discount to new build
 Attractive return on investment - underpinned by capacity payments
 Opportunity for further expansion
– large sites allow conversion to CCGT and/or additional
peaking units
Armstrong
Calumet
Troy
Pittsburgh
Chicago
Columbus Pleasants
Charleston
MISO
PJM
Plant
Armstrong
Pleasants
Calumet
Troy
20
Interim Results August 2008
Capacity
625MW
313MW
303MW
616MW
Fuel type
Dual - gas/oil
Dual - gas/oil
Gas
Dual - gas/oil
Location
Pennsylvania, PJM
West Virginia, PJM
Illinois, PJM
Ohio, MISO
International Power
Europe - UK 2008
 Significant overhaul and construction work (FGD) at Rugeley during 2008
– final FGD commissioning – phased in December 2008/early 2009
– LCPD sulphur limits to be met via use of low sulphur coal and
derogated hours running
– extended outage at Rugeley - failure of a new component on
recommissioning on one unit
 Total PFO impact £45m in H2 2008
 Spark spreads holding up despite sharp recent decline in spot market gas
– short-term benefit for Deeside un-contracted capacity
 Strong performance at First Hydro
– tight market conditions due to supply shortfalls
– strong performance in balancing mechanism and short term markets
– continued demand for reserve capacity
Rugeley
(1)
Full Year
2008
2007
2008
18
34
45%
95%
(2)
Spread £/MWh
Load factor
Forward contracted
(3)
(1)
21
Interim Results August 2008
Deeside
(1)
Saltend
(1)
2007
2008
28
23
n/a
n/a
65%
70%
50%
90%
90%
n/a
55%
n/a
99%
n/a
IPR forecast
(2)
Pre cost of CO2
(3)
2007
% of anticipated output for the full year
International Power
Europe - UK outlook
 Locking in attractive dark spreads in the UK in 2009/2010
– Rugeley:
– 2009: 6.7TWh contracted @ spread £29/MWh
– 2010: 4.3TWh contracted @ spread £28/MWh
– Saltend:
– 2009: 75% forward contracted
– 2010: 45% forward contracted
– Deeside:
– fundamentals not fully reflected in forward spark spreads
 UK market fundamentals remain strong
22
Interim Results August 2008
International Power
Europe - continental assets
 Elecgas construction programme on track
– commercial operation in 2011
 Building on existing platform of wind portfolio
– 55 new MW added year to date
– pipeline of further projects across Europe / UK
– Maestrale, Levanto operating well
 All long term contracted assets performing well
– good performances in Iberia/Turkey
– particularly strong performances at ISAB, Czech Republic
Elecgas - Schematic
23
Interim Results August 2008
International Power
Middle East - construction programme
Ras Laffan B - Qatar
 Key elements constructed ahead of time and on budget
– three of four desalination units entered commercial
operation ahead of schedule
 High plant availability and output
 Another excellent project delivery adds to strong track
record in region
Hidd - Bahrain
 Build programme successfully completed:
– now fully available with full power
1,006MW (gross) and water 90 MIGD
– strong plant availability 92.4%
Fujairah F2 - UAE
 Construction programme underway
 Full commercial operation - 2010
Fujairah F2 - Schematic
The facility will be constructed by an EPC consortium of
Alstom and SIDEM
.
24
Interim Results August 2008
International Power
Australia
 Significant improvement in achieved prices
 Availability at Hazelwood in H1 constrained by boiler issues - now fixed
 Some softening of forward pricing (approximately 10% down on
last month):
– mild winter weather
– high plant availability
– main hydro-electric reservoirs remain at low levels in Victoria and
Tasmania
– Hazelwood 2008 average achieved price estimated at A$44MWh
 Long term fundamentals attractive
– record demand in March 2008
Full Year
Victoria, Hazelwood
2008
Achieved average price ($/MWh)
Hazelwood
2008
Full Year
Load factor
Forward contracted
(2)
(1)
Loy Yang B
2007
2008
75%
80%
85%
n/a
(1)
25
Interim Results August 2008
(1)
(1)
44
2007
32
Pelican Point
(1)
2007
2008
99%
95%
80%
75%
85%
n/a
99%
n/a
IPR forecast
(2)
2007
% of anticipated output for the full year
International Power
Australia - emissions trading update
 Emissions trading scheme planned for implementation July 2010
 Government consultation Green Paper published in July 2008
 Proposes emissions reduction (carbon pollution reduction scheme)
across multiple sectors
– wider burden sharing - covering 77% of emissions
– 5 year time horizons for annual emission limits
– ultimate target: 60% reduction from 2000 levels by 2050
 Government recognises importance of coal fired generation (brown
and black)
– security of supply
– benefit to Australian economy
– Green paper proposes specific assistance
 Detailed consultation process continues
– IPR closely involved at all levels
 Further clarification on scheme expected via White Paper by
December 2008
26
Interim Results August 2008
International Power
Asia - Paiton 3 expansion
 815MW expansion at existing Paiton site
– super-critical coal fired plant
– IPR ownership 40.5%*
– location: Java-Bali grid with high power demand
 30 year PPA signed with PLN, state utility
 Commercial operation targeted for 2012
– equipment supplier - MHI
– fixed price contract
– shared infrastructure with existing plant
 Total project cost £732m
– funding structure in line with long term PPA projects
– financing underway and expected to close in early 2009
 Excellent embedded growth opportunity
*includes holding via 9.2% economic interest
27
Interim Results August 2008
International Power
Portfolio growth continues
 Multiple sources of growth
– new build expansion at existing assets
– increased ownership of existing assets
– greenfield development projects
– acquisitions
 Five new projects totalling 3,105MW (net) announced year to date
– across North America, Europe and Asia
– continued growth in line with investment criteria despite tightening EPC
market and the credit crunch
 Five investments total over £1billion in enterprise value
– all projects financed on attractive terms
– and expected to deliver good returns
Project
Country
Peaking plants x 4
US
Uch
Net Capacity
(MW)
Fuel
Contract
Type
1,857
Gas/Oil
Merchant
Pakistan
177
Gas/Oil
Contracted
Turbogas
Portugal
403
Gas
Contracted
Elecgas
Portugal
415
Gas
Contracted
Paiton 3*
Indonesia
253
Coal
Contracted
3,105
* In addition to the above holding International Power also has the rights to additional returns from
Paiton equivalent to a further 9.2% ~ which would equate to a 40.5% interest and 331MW net
28
Interim Results August 2008
International Power
Update on growth opportunities
North America
 Acquired four US peaking plants - 1,857MW - in targetted market
 Coleto expansion - Texas environmental permit application
submitted
Europe
 Construction at Elecgas, 830MW CCGT on track
 Acquired additional 40% of Turbogas
 Renewables - 55MW of wind projects brought online, further
pipeline of projects
 Eneco 840MW CCGT - EPC and offtake negotiations continue
 New markets - ongoing
29
Interim Results August 2008
International Power
Update on growth opportunities
Middle East
 Three bids submitted in H1 2008
– outcome on one awaited
 Strong medium and long term project pipeline
– four further bids in 2008
- totalling 3,300MW/35 MIGD (gross)
- Saudi Arabia, Abu Dhabi, Morocco
– longer term outlook remains very strong
 Exploring alternative options for Mmamabula
30
Interim Results August 2008
International Power
Update on growth opportunities
Australia
 Full consents for
– 300MW expansion consent at Pelican Point (South Australia)
– 120MW peaking site in NSW
 Wind development opportunities
Asia
 Signed long term PPA for 815MW Paiton III expansion
 Development projects in existing markets - Indonesia, Pakistan
and Thailand - remain active and continue to progress
– West Java 1,320MW coal-fired, Indonesia
– Pakistan - Kapco 450MW CCGT, Hubco 225MW oil, Uch 400MW
gas/oil
– TNP 2 Cogeneration (120MW gas), Thailand
 Vietnam
– pre-qualified to bid for Nghi Son 2 (1,200MW IPP)
– progressing development of two other coal-fired plants
31
Interim Results August 2008
International Power
Summary
 Solid H1 2008 financial performance
 Performance in 2008 impacted by Rugeley and Hazelwood outages
 Fundamentals in our markets remain attractive
– UK: locking in attractive dark spreads for 2009/2010
– US: our markets remain attractive
– Australia: market fundamentals remain robust
– Middle East and Asia: strong demand growth and multiple
growth opportunities
 Well positioned to finance and deliver on growth opportunities
32
Interim Results August 2008
International Power
Appendix
Exceptional items and specific IAS 39 MTM
Six months ended 30 June
North America
Europe
34
2008
Specific
IAS 39 Exceptional
MTM
Items
Total
£m
£m
£m
Specific
IAS 39
MTM
£m
2007
Exceptional
Items
Total
£m
£m
(93)
-
(93)
(3)
(269)
-
(269)
(24)
(9)
(33)
-
-
-
Middle East
-
-
-
Australia
62
-
62
Asia
-
-
-
(433)
-
-
-
(3)
(433)
-
Regional total
Corporate
(300)
-
-
(300)
-
(460)
-
(9)
-
(469)
-
PFO
Disposals
(300)
-
(300)
(460)
(9)
(469)
- Malakoff sale
-
-
-
-
115
115
- Disposal to Mitsui
-
-
-
-
153
153
Net finance expense
(Loss)/profit before tax
(25)
(325)
-
(25)
(325)
(19)
(479)
259
(19)
(220)
Income tax credit
(Loss)/profit for the period
61
(264)
-
61
(264)
143
(336)
259
143
(77)
Interim Results August 2008
International Power