Transcript Slide 1

Preliminary Results
Year ended 31 December 2008
Philip Cox
Chief Executive Officer
2008 highlights
 Strong financial performance
– profit from operations of £1,050m (2007: £904m)
– EPS of 32.4p (2007: 27.1p)
– free cash flow of £513m (2007: £653m)
– full-year dividend of 12.15p per share proposed - up 20%
 Profit from operations up in all regions
– strong growth in Australia and North America
– good performance of European assets offsets Rugeley outage
– consistent performance from Middle East and Asia
 Continued growth
– 3GW (net) of capacity additions announced in 2008
– acquisitions: US peaking plants, Turbogás, Uch
– greenfield: Elecgas, T-Power, wind
3 Preliminary Results March 2009
International Power
Financial Review
Mark Williamson
Chief Financial Officer
All numbers in this presentation exclude exceptional items and specific IAS 39 mark to market movements, unless stated otherwise
Income statement
% change
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
177
581
69
168
104
(49)
1,050
(368)
682
(123)
(69)
490
136
574
68
82
96
(52)
904
(308)
596
(113)
(77)
406
EPS
DPS
32.4p
12.15p
27.1p
10.16p
Year ended 31 December
5 Preliminary Results March 2009
Constant
Reported currency
30%
1%
1%
105%
8%
(6%)
16%
19%
14%
9%
(10%)
21%
20%
20%
9%
13%
International Power
North America
Profit from operations
up 30%
£177m
£136m
£148m
 Improved contribution from Hays
– higher south zone demand in
Q2 2008
– congestion in south zone
– outage in 2007
 Reduced load factor at Midlothian
– mild weather in H1 2008
 Coleto Creek higher load factor
– dust emissions control equipment
installed 2007
£108m
£28m
£29m
2007
2008
Subsidiaries
Share of JVs and associates
 Reduced load factor at New England
– lower off peak running and
cooler summer
– capacity payments underpin PFO
 IPA Central first time contribution
– capacity payments underpin PFO
 Milford PPA expired January 2009
– exceptional charge of £37m
6 Preliminary Results March 2009
International Power
Europe
Profit from operations
up 1%
£574m
£581m
£521m
£500m
 Significant reduction in Rugeley’s
earnings
– record achieved dark spreads
in 2007
– extended outage and delayed FGD
in 2008
 Saltend – high load factor
£53m
2007
£81m
2008
Subsidiaries
Share of JVs and associates
7 Preliminary Results March 2009
 Strong performance at First Hydro and
Deeside
– benefiting from low plant
availability in the UK
– record performance from
First Hydro*
* First Hydro Holdings reports PBIT of £176m
(2007: £133m) under UK GAAP
International Power
Europe
 Maestrale
– first full-year contribution – acquired August 2007
– low wind levels in 2008
 ISAB
– benefited from a rise in oil prices
– limited impact of major incident in October 2008
– CIP6 tariff step down in November 2008
 Czech Republic
– strong performance as power prices tracked high
German power prices
 All other European assets delivered a consistent performance
8 Preliminary Results March 2009
International Power
Middle East
Profit from operations
up 1%
£68m
£69m
£44m
£43m
£24m
2007
£26m
 Strong operational performance
across Middle East portfolio
 Completed construction at
Ras Laffan B in June 2008
 Hidd achieved full commercial
operation in May 2008
 2007 benefited from
development fee for Fujairah F2
2008
Subsidiaries
Share of JVs and associates
9 Preliminary Results March 2009
International Power
Australia
Profit from operations
up 105%
 Synergen able to capture high spot
prices
£168m
£164m
 Simply Energy 100% owned
– additional route to market
£82m
 Other assets performed well
£83m
(£1m)
£4m
2007
 Significantly improved contributions
from Hazelwood and Loy Yang B
 Stamp duty agreed on Loy Yang B
– £20m exceptional charge
2008
Subsidiaries
Share of JVs and associates
10 Preliminary Results March 2009
International Power
Asia
Profit from operations
up 8%
£96m
£14m
£104m
£15m
£82m
£89m
2007
2008
 Malakoff sold in May 2007
 Strong performance from Paiton
 Acquisition of additional 31%
of Uch
 Pakistan overdue receivable is
US$149m
– no earnings impact
Subsidiaries
Share of JVs and associates
11 Preliminary Results March 2009
International Power
Interest cover and effective tax rate
Year ended 31 December
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
Profit after tax
12 Preliminary Results March 2009
2008
£m
2007
£m
1,050
904
99
31
91
60
130
1,180
151
1,055
(368)
(99)
(308)
(91)
(467)
(399)
2.5x
713
656
(123)
(31)
(113)
(60)
(154)
559
22%
(173)
2.6x
26%
483
International Power
Free cash flow
2008
£m
2007
£m
Operating cash flow from subsidiaries
971
992
Dividends - JVs and associates
135
145
(108)
(71)
Year ended 31 December
Capex - maintenance
Cash generated from operations
Net interest paid
998
1,066
(399)
(312)
Tax paid
(86)
(101)
Free cash flow
513
653
 2007 free cash flow enhanced by:
– one-off timing benefit of working capital reductions (including
early US cash receipts)
– lower than average maintenance capital expenditure in 2007
 2008 free cash flow impacted by:
– build up of coal stock at Rugeley (£70m)
– interest increased – FX and acquisitions
 Maintenance capital expenditure for 2009 estimated at £160m
13 Preliminary Results March 2009
International Power
Movement in net debt
2008
£m
2007
£m
513
653
Growth capex
(156)
(160)
Acquisitions and investments
(680)
(842)
Year ended 31 December
Free cash flow
Disposals
Dividend paid
FX & other
Net receipts from / (payment to) minorities
Change in net debt
Opening net debt
Debt acquired
Closing net debt
-
418
(166)
(160)
(1,193)
(250)
28
(35)
(1,654)
(376)
(4,662)
(3,575)
(2)
(711)
(6,318)
(4,662)
 2008 closing net debt at 2007 FX rates £4,998m
14 Preliminary Results March 2009
International Power
Balance sheet
31 December 2008
£m
Non-current assets
Goodwill and intangibles
PP&E
Investments
Other long-term assets
30 June 2008
£m
1,137
991
7,318
1,803
5,961
1,480
1,943
12,201
1,626
10,058
Net current liabilities
Non-current liabilities
(137)
(1,611)
(644)
(1,473)
Net debt
Net assets
(6,318)
4,135
(4,934)
3,007
153%
164%
60%
62%
Gearing
Debt capitalisation
 Net debt of JVs and associates £1,820m (30 June 2008: £1,336m)
15 Preliminary Results March 2009
International Power
Net debt structure
Project cash/
(debt)
As at 31 December 2008
£m
Cash and cash equivalents
Recourse debt
Convertible bond (2023)
Convertible bond (2015)
Convertible bond (2013)
Non-recourse debt
IPM - acquisition debt
North America
Europe
Middle East
Australia
Asia
Total net debt
IPR
Corporate
£m
Total
£m
JVs and associates
off-balance sheet
Maturity
net debt Maturity
£m
775
354
1,129
-
(149)
(560)
(191)
(900)
(149)
(560)
(191)
(900)
2023
2015
2013
(306)
(1,457)
(3,227)
(410)
(1,103)
-
(306)
(1,457)
(3,227)
(410)
(1,103)
2012
2010-2015
2010-2026
2016-2025
2010-2019
(197)
(297)
(864)
(68)
(44)
(6,547)
-
(44)
(6,547)
2020
(394)
(1,820)
(5,772)
(546)
(6,318)
2010-2019
2009-2035
2021-2030
2009
2011-2018
(1,820)
Notes
• Project debt is secured on the assets and cash flow of the related project (non-recourse)
• The convertible bonds are shown at their final maturity date although they can be converted earlier
16 Preliminary Results March 2009
International Power
2008 project debt financings
Pelican
Point
Elecgas
IPA Central
T-Power
Month
February
March
July
December
Region
Australia
Europe
North America
Europe
Merchant/PPA
Merchant
PPA
Merchant
PPA
Project debt
A$190m
€494m
US$400m term
€391m
Tenor
10 year term
27 year term
7 year term
23 year term
Margin
115 – 140bp
65 – 100bp
325bp
170 – 220bp
Fixed underlying
swap rate
7.4%
4.6%
3.5-5.0%
4.0%
17 Preliminary Results March 2009
International Power
T-Power case study
 Financial close 19 December 2008
 420MW CCGT power plant in Belgium
 €391m of non-recourse debt raised with margin of 170 – 220bp
and underlying swap rate of 4.0% achieved given:
– full turn-key EPC contract
– 15-year (option for five year extension) tolling agreement with
Essent Trading International S.A.
 Success factors
– strong relationship with banks
– reputation for operational excellence
– high quality partners – Siemens Project Ventures (33%) and
Tessenderlo Chemie (33%)
18 Preliminary Results March 2009
International Power
Project refinancings
Project
refinancing
Amount
(local currency)
Due
Comments
2009
SEA Gas
A$140m
December 2009
 Infrastructure project
with contracted income
2010
US CCGT
US$769m
July 2010
Hazelwood
A$445m
February 2010
 Low leverage
 Previously refinanced in
challenging times
 Awaiting details of CPRS
 No material refinancings in 2009
 Corporate revolver renewable in October 2010
19 Preliminary Results March 2009
International Power
Financial summary
PFO (£m)
£1,050m
Free cash flow (£m)
£904m
£653m
£773m
£513m
£456m
£536m
£285m
£222m
£104m
2004 2005 2006
2007 2008
Earnings per share (pence)
32.4p
2004
2005 2006
Dividend
per share (pence)
12.15p
(1)
7.9p
22.4p
14.6p
4.5p
8.6p
2.5p
2005
2006
2007
2008
2004 2005 2006 2007
(1)
20 Preliminary Results March 2009
2008
10.16p
27.1p
2004
2007
2008
Proposed dividend
International Power
Philip Cox
Chief Executive Officer
Market update - Texas
 Significant decline in spot and forward prices since H2 2008
– economic downturn
– rapid decline in gas prices
– reduced trading liquidity
 Long-term market fundamentals
attractive
– TXU filed to retire an additional
3,836MW of capacity
– south zone supply and transmission
constraints
– limited new-build
– wind generation – low load factors
 2009 contracted position
– gas plant lightly contracted
– Coleto Creek highly contracted
in 2009
– quoted spreads for 2009 assume
no recovery in forward market
22 Preliminary Results March 2009
ERCOT reserve margin
%
20
Downside case
15
Base case
10
Target reserve
5
0
2009 2010 2011 2012
2013 2014 2015 2016
Downside case reflects demand reduction in 2009 and 2010
International Power
Market update - New England
 Capacity payments - an important and secure income stream
– capacity payments accounted for some 50% of Blackstone
and Bellingham 2008 PFO
– payment levels fixed through May 2012
 Reserve margin increasingly dependent
New England reserve margin
on demand side management
40
Including demand
– cumulative demand side
%
resources
30
management 3GW
– represents 9% of reserve
20
Excluding demand
margin
resources
10
– reliance on older, less efficient
Target reserve
capacity
0
2009 2010 2011 2012 2013 2014 2015 2016
– increased volatility on high
demand days
Reserve margin reflects reduced demand growth and
– majority of new-build in Connecticut
additional supply following latest capacity auction
– limited impact on our plants
– could lead to shut down of 2,660MW RMR plants
– CO2 – RGGI auctions held
– latest auction cleared at $3.38/ton
– IPR portfolio well positioned
23 Preliminary Results March 2009
International Power
Market update - PJM
 1,857MW modern portfolio of peaking plants acquired in 2008
– all assets integrated into existing portfolio and delivering a good
operational performance
 PJM capacity auction expected to reflect lower demand growth forecasts
– however impact to be offset by
– 3,300MW of Duquesne demand which rejoined PJM
– anticipated approval of higher Cost of New Entrant (CONE)
level by FERC
 Overall, smaller impact of weaker market conditions on peaking plants
due to low load factors - generally <5%
 Returns largely underpinned by capacity payments
– fixed until mid 2012
24 Preliminary Results March 2009
International Power
UK market update
 Very tight market conditions in 2008 driven by
– significant plant outages
– delays in fitting FGD to coal plants
 Record performance at First Hydro, strong performance at Deeside in 2008
 Supply constraints expected to ease in 2009
– nuclear and coal plant on outage in 2008 returns to service
– additional new capacity comes online
 Longer-term - general plant availability/reliability concerns remain
Plant Availability
80
GW
Headline availability
70
Week ahead availability
60
50
40
Weekday
peak demand
Outturn availability
Jan Feb Mar Apr May Jun Jul
Aug Sep Oct Nov Dec
2008
25 Preliminary Results March 2009
International Power
UK 2009 commercial summary
 Reduction in forward market spreads
– significant capacity returned to service late 2008/early2009
– but First Hydro and Deeside well positioned to benefit from short-term
market volatility
 Rugeley 2009 expected clean spread revised from £18/MWh to £15/MWh
(£20/MWh pre-carbon)
– delay in FGD installation the primary factor
– higher costs through extended use of ultra-low sulphur coal
– impact significantly offset by reduction in carbon price
– output and availability maintained despite FGD delay
– some reduction in gas hedge profitability – reduced spark spreads
– gas hedges primarily used when liquidity is low in forward power
market
– 2010 clean spread now expected at £21/MWh
– includes some benefit from rescheduling of coal deliveries
 Saltend continues to benefit from high availability and favourable
gas contract
26 Preliminary Results March 2009
International Power
UK market long-term outlook
 Attractive long-term market fundamentals
– increasing unreliability of aging fleet
– restricted running of opted-out 8GW coal plant and
4GW oil fired plant
– potential closure well before 2016
– ongoing retirement of nuclear capacity
– wind generation – limited contribution to reserve margin
– forward spreads do not provide
economic signal for new-build
UK reserve margin
 Our flexible, diverse portfolio will
maximise value in the UK
%
40
30
20
10
0
Including
firm new-build
2009 2010 2011 2012
Including firm newbuild, approved &
applied projects
2013 2014 2015 2016 2017 2018
Forecast reserve margin updated
to reflect reduced demand growth
27 Preliminary Results March 2009
International Power
Europe - continental assets
 Strong performance in Czech Republic
– 2008 achieved prices up on previous year
– 65% of 2009 output contracted - at price levels largely similar to 2008
– carbon - sufficient allocations for phase II
– phase III – derogation for Czech Republic, full auctioning may not apply
 Iberia
– strong operational performance from Turbogás and Pego
– benefit of increased ownership at Turbogás
– FGD and SCR at Pego complete
– construction of Elecgas on track
 Wind
– good operational performance
– lower than expected load factors
– new Italian decree underpins CV prices
– confirms government drive to maintain attractive economics for
renewable generation
28 Preliminary Results March 2009
International Power
Europe - update on growth
T-Power
Elecgas
Turbogás
Wind
Enecogen
29 Preliminary Results March 2009
420MW, CCGT under
construction in Belgium
 Backed by long-term offtake contract, secure
contracted earnings and cash flow stream
 Attractive return on investment
830MW, CCGT under
construction in Portugal
 Third major asset in attractive Portuguese market
 Excellent example of growth opportunity sourced
from existing asset
 Construction programme on track
 Secure offtake contract with Endesa
1,008MW, CCGT
acquisition in Portugal
 Increased ownership of existing asset
 High quality asset with strong operational and
financial track record
81MW brought online in
Italy, Germany, France
30MW under
construction, Italy
840MW, CCGT under
development in the
Netherlands
 European wind portfolio now at 1,179MW
 Leveraging acquired skills and relationships to
drive organic growth
 Financing discussions proceeding well
 Tolling contract still under negotiation
International Power
Middle East
 Strong operational performance across portfolio
– average commercial availability of 97.3%
– 100% commercial availability at Umm Al Nar, UAE
 Construction completed at Ras Laffan B, Qatar
– 1,055MW power, 60MIGD water; IPR ownership 40%
– desalination capacity commissioned ahead of schedule
– can deliver 26% of Qatar’s peak power demand and 29% of peak
water demand
 60MIGD desalination expansion completed at Hidd, Bahrain
– total desalination capacity now 90MIGD; IPR ownership 40%
– Hidd supplied 50% of Bahrain’s total water demand in 2008
 Construction programme on track at Fujairah F2, UAE
– 2,000MW power; 130MIGD desalination; IPR ownership 20%
– first gas turbine, generator and desalination unit delivered to site
– full commercial operation expected Q3 2010
30 Preliminary Results March 2009
International Power
Middle East - market backdrop
 Limited impact of global financial crisis
 IPR present in stronger markets – UAE (Abu Dhabi & Fujairah), Oman,
Qatar, Saudi Arabia, Bahrain
 Power/water demand growth rates still attractive, driven by
– continued economic and population growth
– diversification of economies
 Substantial new power and water capacity required over the next 6-8 years
– 50GW power and 2,000MIGD desalinated water
 Expected bids in 2009:
Potential IPR
share %
Project
Country
Capacity
Marafiq 2 - Yanbu
Saudi Arabia
1,700MW, 35 MIGD
30%
SEC IPP2 (Riyadh)
Saudi Arabia
2,000MW
20%
Ras Tanura IWSPP
Saudi Arabia
1,000MW
60%
Taweelah C/Shuweihat S3
Abu Dhabi
1,500MW, 100 MIGD
20%
Tarfaya (Wind Farm)
Morocco
300MW
50%
Safi
Morocco
1,320MW
31 Preliminary Results March 2009
37.5%
International Power
Australia market update
 Significant improvement in results across the portfolio
 Forward prices holding up
– impact of severe heat wave in
Q1 2009
– demand exceeded total supply
on two occasions
– trading liquidity post mid 2010
remains low
 Overall, no major change in
supply/demand fundamentals
%
30
Victoria and South Australia
reserve margin
With new-build
20
10
Without new-build
0
2009 2010 2011 2012
32 Preliminary Results March 2009
2013 2014 2015 2016 2017 2018
International Power
Australia - carbon legislation
 White Paper published in December 2008 with further details on emissions
trading scheme
– scheme to be launched in July 2010
– proposal to reduce CO2 emissions between 5% and 15% by 2020
(from 2000 levels)
– White Paper recognised importance of brown coal generation
– A$3.9bn assistance package announced
– Hazelwood and LYB eligible to receive emission permits with no
charge applied
 CPRS - draft legislation published yesterday
– no obvious change to principles in White Paper
– final legislation targeted mid 2009
 Major uncertainties remain
– final target and trajectory for reduction of CO2
– auction design for emission permits
– quantum and term of permits with no charge applied
– forward price curves – very limited trading
33 Preliminary Results March 2009
International Power
Asia - performance and growth
 Assets in Indonesia and Thailand continue to perform well
 Pakistan
– good operational performance – high load factors
– overdue receivables $149m
– majority of current receivables being paid
– significant support package to clear overdues
– key IMF condition for Government to implement plan to clear energy
sector overdue receivables
 Indonesia - Paiton 3 development project progressing well
– financial close expected Q2 2009
 Vietnam
– Nghi Son II (1,200MW – coal-fired IPP) and other coal-fired
opportunities
34 Preliminary Results March 2009
International Power
Summary and outlook
 Strong performance in 2008
– EPS of 32.4p up 20%
– full-year dividend of 12.15p proposed - up 20%
– continued growth with 3GW (net) of capacity additions announced
in 2008
 2009
– long-term contracted assets continue to perform well
– absent significant recovery in the US and the UK, profitability in
2009 likely to be lower than in 2008
– expect to deliver strong free cash flow in 2009
 Strong financial position with robust capital structure
35 Preliminary Results March 2009
International Power
Appendix
Analysis of net debt
2008
Net debt
By currency
US dollar
Euro
Australian dollar
Czech koruna
Other
Foreign currency
Sterling
Total
£m
%
2,026
2,517
1,038
167
43
5,791
527
6,318
32%
40%
16%
3%
1%
92%
8%
100%
2007
%
£m
1,427
1,651
978
103
30
4,189
473
4,662
31%
35%
21%
2%
1%
90%
10%
100%
 Closing net debt at 2007 FX rates £4,998m
37 Preliminary Results March 2009
International Power
Exceptional items and specific IAS 39 MTM
2008
Year ended 31 December
Specific
IAS 39 Exceptional
MTM
Items
Total
£m
£m
£m
Specific
IAS 39
MTM
£m
Exceptional
Items
Total
£m
£m
North America
16
(37)
(21)
Europe
77
-
77
(135)
(56)
(191)
Middle East
(1)
-
(1)
-
-
-
Australia
71
(20)
51
(173)
-
(173)
Asia
-
(1)
-
(1)
-
-
(21)
2007
-
(21)
Regional total
Corporate
163
-
(57)
-
106
-
(330)
-
(56)
-
(386)
-
PFO
Disposals
163
(57)
106
(330)
(56)
(386)
- Malakoff sale
-
-
-
-
115
115
- disposal to Mitsui
-
-
-
-
174
174
Net finance income / (expense)
Profit /(loss) before tax
127
290
(57)
127
233
(16)
(346)
233
Income tax (charge) / credit
Profit for the period
(92)
198
59
2
(33)
200
96
(250)
63
296
38 Preliminary Results March 2009
(16)
(113)
International Power
159
46