Philip CoxCFO, International Power

Maximising Returns ThroughPortfolio Management

Morgan StanleyEuropean Power & Utility SummitLondon, 9 October 2003

A leading independentpower generatorA leading independentpower generator

A world leading power generator with a global portfolio of high quality assets

A blend of contracted and merchant assets

Earnings underpinned by strong operating & free cash flow

A solid balance sheet and ready liquidity

Multiple opportunities for growth through acquisitions and greenfield developments

Operational excellence and positioned for growthOperational excellence and positioned for growth

Key strengthsKey strengths

Plant availability – 11,000 MW (net)

Fuel diversity – gas, coal, oil

Environmental and health & safety

Power & desalination

Trading in merchant markets– asset backed– tightly controlled proprietary trading– asset hedging approved by Local Risk

Committees - US, Australia, UK with participation of CEO / CFO / Head of Global Trading and Risk

PPA/tolling/offtake structuring

OperationsOperations

CommercialCommercial

Key strengthsKey strengths

Available liquidity for selected growth– Contracted assets– Merchant markets - scale in existing

markets

Liquidity / balance sheetLiquidity / balance sheet

Key strengthsKey strengths

Global portfolio: 10,990 MW (net) in operation; 610 MW (net) under construction

Australia

StateState NameName Net MWNet MW FuelFuelTexasTexasTexasMassachusettsMassachusettsMassachusettsGeorgia

2101,6501,100

160570570155

GasGasGasGasGasGas Gas

Oyster CreekMidlothianHaysMilfordBlackstoneBellinghamHartwell

NameCountry Net MW FuelPluak DaengThailand 110 GasMalakoffMalaysia 325 GasHub PowerPakistan 270 OilKot AdduPakistan 575 Gas

NameCountry Net MWFuelEOPDeesideRugeleyPegoMarmara

Czech RepublicUKUKPortugalTurkey

5805001,000270160

LigniteGasCoalCoalGas

NameCountry Net MW Fuel

ShuweihatAl Kamil

Umm Al NarAbu DhabiOman

Abu Dhabi300285

480GasGas

Gas

Europe

Rest of World

Middle East

North America

Interests in 28 power stations in 12 countries

Interests in 28 power stations in 12 countries

Geographic diversity and balanceGeographic diversity and balance

State Net MW FuelVictoriaS AustraliaS AustraliaSEA Gas Pipeline 680 km

1,470360485

LigniteVariousCCGT

NameHazelwood SynergenPelican Point

Price cycles in IPR’s key markets not in sync

Continued strength of Australian merchant portfolio, which remains substantially contracted over the next 1-2 years, helps to offset weakness in US and UK wholesale markets

IPR’s long term contracted assets provide a measure of steady cash flow and a foundation for the merchant business

Asset spread smoothes cycles in merchant marketsAsset spread smoothes cycles in merchant markets

Geographic diversity and balanceGeographic diversity and balance

2003 contracted position MW

2003 contracted position MW

GeographyMW

GeographyMW

Geography and Contracted PositionGeography and Contracted PositionGeographic diversity and balanceGeographic diversity and balance

Rest ofWorld

Rest ofWorld

Middle EastMiddle East

AustraliaAustralia

EuropeEurope

NorthAmericaNorthAmerica ContractedContracted

Long termPPALong termPPA

MerchantMerchant

North America

Europe

Middle East

Australia

Rest of World

Regional total

Corporate costs

Total

North America

Europe

Middle East

Australia

Rest of World

Regional total

Corporate costs

Total

£m£m

224

219

38

116

42

639

-

639

1

43

36

55

16

151

(13)

138

TurnoverTurnover PBIT*PBIT*

* Pre-exceptional items

315

440

63

226

85

1,129

-

1,129

99

100

86

101

31

417

(29)

388

130

242

40

110

46

568

-

568

59

67

49

49

17

241

(12)

229

Turnover PBIT* Turnover PBIT*20032003 2002

Six months ended 30 JuneSix months ended 30 June Year ended31 Dec 2002

Geographic analysisGeographic analysisTurnover & PBITTurnover & PBIT

A portfolio approach #1 A portfolio approach #1

Australia - the leading private power generator in the National Electricity Market

A model regional portfolio in a merchant market

Balance in terms of fuel and merit order

Scale and market presence

Integrated operations and trading

Balance within core regions Balance within core regions

1,470360485

Net MWNet MW

LigniteVariousCCGT

Hazelwood, VictoriaSynergen, S AustraliaPelican Point, S AustraliaSEAGas - 680km Pipeline

TypeTypeOperating AssetsOperating Assets

OperatingOperatingGas pipeline (construction near completion)Gas pipeline (construction near completion)

A portfolio approach #2A portfolio approach #2

For example:

Synergies with other processes eg. desalination

Reducing risk by securing fuel supply eg. SEA Gas

Cost saving and environmental initiatives eg. biomass co-firing

Seeking benefits through integrationSeeking benefits through integration

DesalinationDesalinationCombining power generation and desalinationCombining power generation and desalination

Lower cost of production – increase in cycle efficiency – spread of capital cost – virtual base load operation

of desalination plant

Approximately 40% additional revenues from water in an IWPP with power/water ratio of 15:1

Integration of power and water becoming a standard of the IPP process in Mid East countries

Good precedent for development elsewhere

Shuweihat S1Umm Al Nar*

Umm Al Nar

1,500 MW805 MW

1,550 MW

100 MIGD162 MIGD

25 MIGD

*part of operating capacity to be decommissioned in 2008

IPR has desalination capability at five assets in its portfolio. At Shuweihat, the world’s largest distillers are currently under construction (16.8 MIGD each)

Under Construction

Operating

Plant Power Desalination

Securing fuel supplySecuring fuel supply

Security of long-term fuel supply

Cost savings – expands profit potential beyond ‘spark spread’

680 km gas pipeline (with 18” diameter) from Victoria to South Australia

International Power, Origin Energy and TXU Australia as equal shareholders

Gas will be supplied to Pelican Point Power under a 10 year GSA with BHP Billiton

‘Energy corridor’ opportunities

The SEA Gas Pipeline, Australia The SEA Gas Pipeline, Australia

Bio-fuel trials ongoing

Up to five bio-fuels to be trialled inc. sawdust and olive products

All necessary consents in place for trials

Registered with Ofgem for ROC and LEC’s (during trials)

Encouraging results so far

Moving towards commercial operation before end of 2003

Co-firing trials at Rugeley underwayCo-firing trials at Rugeley underwayBiomass co-firing Biomass co-firing 

A portfolio approach #3A portfolio approach #3

O&M best practice

HR efficiencies

Procurement efficiencies

Technology efficiencies

Financing

Cash management

Tangible cost savings and other efficienciesTangible cost savings and other efficiencies

Sharing of personnel and practices around a global portfolio

Opportunities for portfolio financing; global and regional banking relationships

The cookie cutter approach

A portfolio approach #4A portfolio approach #4

Growth though acquisition and greenfield / brownfield development

Optimising the balance of merchant and contracted assets

And maintaining fuel diversity and spread across the merit order

By leveraging off our presence in regional markets

A springboard for growth A springboard for growth

20022002 20012001 20002000

EPS

PBIT

Free cash flow*

EPS

PBIT

Free cash flow*

15.5p

£388m

£252m

12.3p

£326m

£179m

6.6p

£221m

£(79)m

* Free cash flow is defined as operating cash flow, which includes exceptionals (plus or minus), minus interest, tax and maintenance capex, but before growth capex

H1 2003H1 20035.1p

£138m

£45m

Earnings backed by cashEarnings backed by cash

Balance sheetBalance sheet

Fixed assets Intangibles & tangibles Investments

Net current liabilitiesProvisions and creditors > 1 yrNet debtNet assets

GearingDebt capitalisation

Net debt Cash & liquid resources Recourse debt and convertible bond Non-recourse debtTotal net debt

Off balance sheet debt (JV’s and associates)

Fixed assets Intangibles & tangibles Investments

Net current liabilitiesProvisions and creditors > 1 yrNet debtNet assets

GearingDebt capitalisation

Net debt Cash & liquid resources Recourse debt and convertible bond Non-recourse debtTotal net debt

Off balance sheet debt (JV’s and associates)

£m£m

2,562 500

3,062 (81)

(278)(834)

1,869

45% 31%

859 (264)

(1,429)(834)

(536)

2,474 507

2,981 (138)(262)(812)

1,769

46%31%

842 (268)

(1,386)(812)

(503)

30 June2003

30 June2003

31 Dec2002

Our broad but regionally focused geographic distribution

Our expertise in operating a balanced portfolio of high quality assets

Our solid base of long term contracted output and our trading expertise in merchant markets

Our demonstrated ability to leverage off our portfolio to continue to grow the business

Our liquidity, cash flow and balance sheet strength that underpin our performance and our prospects

As a wholesale power generator, the keys to our continued success are . . .As a wholesale power generator, the keys to our continued success are . . .

In conclusion

In conclusion

Morgan StanleyEuropean Power & Utility Summit