Preliminary Results March 2008 International Power Preliminary Results Year ended 31 December 2007

Preliminary Results March 2008 International Power

Preliminary Results Year ended 31 December 2007


This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any International Power plc shares.

This presentation contains certain forward-looking statements with respect to the financial condition, results, operations and businesses of International Power plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts.

Past performance is no guide to future performance and persons wishing to invest in International Power should consult an independent financial advisor before doing so.

Disclaimer


Philip Cox Chief Executive Officer


Highlights

Good financial performance– profit from operations of £904 million - up 17% – EPS of 27.1p - up 21%– strong free cash flow of £653 million - up 43%– 29% increase in full year dividend recommended from 7.9p to

10.16p

Regional headlines– strong performance in Europe– disappointing performance in Australia – cool US summer– good performance in Middle East and Asia

Portfolio growth continues– Maestrale, Fujairah F2, Elecgas and Uch

Active portfolio management– Malakoff disposal and common ownership platform for UK

assets Expect 2008 to be another year of growth


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

North AmericaEuropeMiddle EastAustraliaAsiaCorporate costsProfit from operationsInterestPBTTaxMinority interestProfit for the year

EPS Total DPSDividend payout ratio

136 574

68 82 96

(52)904 (308)596 (113)

(77)406

27.1p10.16p37.5%

2007 2006changeYear ended 31 December

101 450

52 124

91 (45)

773 (248)525 (122)

(71)332

22.4p7.9p35%

35% 28% 31%

(34%)5%

17%

14%

22%

21% 29%

£m £m


Profit from operations up 17%

500

£m

£904m

£773m£35m

£124m £16m

(£42m)

£5m

(£7m)

600

700

800

900

1,000

2006PFO

NorthAmerica

Europe MiddleEast

Australia Asia CorporateCosts

2007PFO


North America

Texas Full year contribution from

Coleto Creek– dust emissions control

installation complete

Mild weather Hays extended outage complete

New England Forward capacity market

Profit from operationsup 35%

PAT of JVs and associates PBIT of subsidiaries

£101m

£136m

2006 2007

£108m

£73m

£28m£28m


Europe

Strong contribution from Deeside, Rugeley and First Hydro

First full year contributions from Levanto and Indian Queens

Four month contribution from Maestrale in 2007

ISAB impacted by change of fuel indexation and planned outage


£450m

£574m

2006 2007

£521m

£381m

£69m £53m



First Hydro performance

Another excellent year

2006 benefited from:– high gas prices– high power price volatility– unreliable capacity from coal

and nuclear

2007 benefited from: – fewer coal plants to provide

frequency response– increased water availability– gas and power price volatility– 2007 peak/off peak

differential helped by low phase 1 CO2 prices

PFOup 12%

£119m

£133m

2006 2007

(1) First Hydro Company reported results are under UK GAAP

(1)


Additional capacity on-line at Tihama, Ras Laffan B and Umm Al Nar

Hidd development fee in H1 2006

Fujairah F2 development fee in H2 2007

Middle East


£68m

2006 2007

£44m

£32m

£52m

£20m £24m



Planned outages at Pelican Point and Hazelwood

Unplanned outages at Loy Yang B and Hazelwood

Interconnector constraint due to bushfire

Inter-regional pricing differences 2008 pricing significantly

stronger

Profit from operationsdown 34%

£124m

£82m

2006 2007

£83m

Australia

£121m



Asia

KAPCO impacted by end of tax holiday

Strong operational performances and high load factors led to generation and availability bonuses

Completed sale of Malakoff


£91m£3m

£96m

£14m

2006 2007

£88m£82m

PAT of JVs and Associates PBIT of subsidiaries


Effective tax rate and interest cover

PFOJVs and associates Interest Tax Minority interest

PBITTotal interest Subsidiaries JVs and associates Interest coverProfit before total taxTotal tax Subsidiaries JVs and associates

Effective tax rate

2.7x2.6x

904

91 60 -

151 1,055

(308)(91)

(399)

656

(113)(60)

(173)

26%

773

99 55

1 155 928

(248)(99)

(347)

581

(122)(55)

(177)

30%

2007 2006Year ended 31 December £m £m


Exceptional items

Profit on disposal of Malakoff

Profit on partial disposal of UK subsidiaries

Impairment of Saltend gas contract

Provision against investment in Biox

Impairment reversal of Deeside

Compensation in respect of TXU tolling contract

Compensation for breach of contract

Exceptional gain – pre tax

Remeasurement of net deferred tax liabilities of Maestrale

Taxation on impairment of Saltend gas contract

Taxation on Deeside impairment reversal

Taxation on compensation from TXU

Exceptional gain – post tax

-

-

-

-

36

14

5

55

-

-

(11)

(4)

40

115

174

(47)

(9)

-

-

-

233

49

14

-

-

296

2007 2006£mYear ended 31 December £m


Free cash flow

Operating cash flow from subsidiaries

Dividends - JVs and associates

Capex - maintenance

Cash generated from operations

Interest paid

Tax paid

Free cash flow

£m

784

113

(128)

769

(256)

(57)

456

992

145

(71)

1,066

(312)

(101)

653

2007 2006Year ended 31 December

39%

43%

% change

2007 free cash flow enhanced by: Working capital reductions, including reduced margining

and investment deposits with counter parties Lower than average maintenance capital expenditure in

2007

£m


Includes only subsidiaries

Intervals between major maintenance varies between three and four years. 2007 was a year of low spend

Average annual cost of current portfolio c.£120m

Capital expenditure - maintenance

Maintenance capex

£72m

2005 2007

£128m

2006 2008e

£71m

c£130m


Movement in net debt

Free cash flow

Growth capex

Acquisitions and investments

Disposals

Exceptional receipts

- TXU and contract compensation

Dividend paid

FX & other

Dividends paid to minorities

Increase in net debt

Opening net debt

Acquired net debt

Closing net debt

456

(142)

(818)

1

19

(67)

271

(54)

(334)

(3,060)

(181)

(3,575)

653

(160)

(842)

418

-

(160)

(250)

(35)

(376)

(3,575)

(711)

(4,662)

2007 2006Year ended 31 December £m £m


Balance sheet

Non-current assets

Goodwill and intangibles

PP&E

Investments

Other long-term assets

Net current (liabilities)/assets

Non-current liabilities

Net debt

Net assets

Gearing

Debt capitalisation

Net debt of JVs and associates

425

4,435

1,290

1,270

7,420

14

(1,119)

(3,575)

2,740

130%

57%

(1,524)

901

5,721

1,292

1,530

9,444

(355)

(1,420)

(4,662)

3,007

155%

61%

(1,297)

2007 2006£mAs at 31 December £m


Capital structure and funding

Robust capital structure Non recourse debt markets open for business

– project refinancing – new project financing

Fixed interest rate is a significant portion of gross debt


Net debt structure

Cash and cash equivalentsRecourse debt Convertible bond (2023)(2)

Convertible bond (2013)(2)

Non recourse debt IPM - acquisition debt IPM - Mitsui preferred equity North America Europe Middle East Australia Asia

Total net cash/(debt)

1,161

(115)(140)(255)

(243)(151)(876)

(2,913)(315)

(1,035)(35)

(5,568)

(4,662)

Total£m

IPRCorpora

te

(1) Project debt is secured solely on the assets and cash flow of the project concerned (non recourse)(2) The convertible bonds are shown at their final maturity date although they can be converted earlier

As at 31 December 2007

Project cash/(debt) (1)

290

(115)(140)(255)

- - - - - - - -

35

871

- - -

(243)(151)(876)

(2,913)(315)

(1,035)(35)

(5,568)

(4,697)

JVs and associatesoff-balance sheet

net debt(1)

- -

(158)(195)(612)(62)

(270)(1,297)

(1,297)

Maturity

20232013

20122008

2010-20132010-20262016-20252008-2019

2020

Maturity

2013-20192009-20202021-2030

2009 -20122008-2018

£m £m £m


65-110bp 110-165bpMargin 23 year term20 year termTenor US$2,140mUS$1,330mAmount

Fujairah F2 (December 2007)Umm Al Nar (June 2003)

115 – 140bp120-180bpMargin 10 year term TrA: 15 year term/TrB 9 year termTenor A$190mA$240mAmount

Pelican Point (February 2008)Pelican Point (May 1999)

Pricing reduced by 25bpConfidentialMargin 20102008 (later extended to 2009)Tenor US$850mUS$640mAmount

Extended facility (October 2007)Initial facility (June 2005)Corporate revolver

Debt market updatePost credit crunchPre credit crunch

65-100bp50 – 65bpMargin 27 year term14 year termTenor €494m€420mAmount

Elecgas (March 2008)Tejo (June 2006)


Interest rate exposure

% of Debt Fixed

Policy is to keep fixed interest rate on approximately 70% of gross debt

Cash on deposit is held at variable interest rates At 70% fixed, a 100 basis points change in interest rates

equates to approximately a 0.3p change in EPS

0

20

40

60

80

100

2007 2008 2009 2010 2011 2012


PFO (£m)£773m

£536m

£222m

2004 2005 2006

Free cash flow (£m)

£456m

£285m

£104m

2004 2005 2006

Earnings per share (pence)

22.4p

14.6p

8.6p

2004 2005 2006

Dividend per share (pence)

7.9p

4.5p

2.5p

2004 2005 2006

Recommended dividend

(1)

(1)

£904m

2007 2007

£653m

27.1p

2007 2007

10.16p

Financial summary


Philip Cox Chief Executive Officer


ERCOT Reserve Margin

US

Market fundamentals remain strong

Steady growth in demand Natural gas price firming –

positive for wholesale power prices

2007 summer was cooler than average year

– lower peak demand / market heat rates

– lower fuel demand also softened prices

‘Normal’ summer weather will bring increased market heat rates

Margins for coal remain good– Powder River Basin coal price

attractive for Coleto

Texas

4

6

8

10

12

14

16

2008 2009 2010 2011 2012 2013

Q1 2008 Projection

Q4 2007 Projection

%

Notes:• Oak Grove 1,634 MW brought forward to 2010• 293 MW of net new capacity additions• Wind generation assumed at 8.7% of installed capacity

Target Reserve Margin


US

Market fundamentals are good Forward Capacity Market

- first auction in February– auction oversubscribed

- capacity price $4.25/kW month (2010/2011)

– capacity requirements to be met mainly through demand side management

New England

0

4

8

12

16

20

2008 2010 2012 2014 2016

With new demand-sideresources

Without new demand-side resources

New England Reserve Margin

%

IPR’s modern efficient CCGTs well positioned – no significant new build– demand side management initiatives add uncertainty– more reliance on existing higher heat rate plant

RGGI emissions trading system planned to commence in January 2009

– timetable and structure uncertain– IPR CCGTs highly efficient compared to average plant– lightly contracted for 2009


Notes:• First FCM auction for 2010/2011 resulted in - 1,188 MW of new demand side resources - 626 MW of new supply additions


IPR forecast% of anticipated output for the full yearIncludes FCM receiptsExcludes SO2 costs

(1)

(2)

(3)

Commercial summary

US

Achieved dark spread ($/MWh)

Load factor

Forward contracted

Coleto Creek

2007

29

75%

n/a

29

90%

95%

2008

(2)

Full Year(1)

Midlothian

Achieved spark spread ($/MWh)

Load factor

Forward contracted

14

55%

n/a

15

55%

70%(2)

Hays


Load factor

Forward contracted

10

45%

n/a

14

55%

70%(2)


Load factor

Forward contracted

New England 2007

16

60%

n/a

18

55%

90%

2008

(2)

Full Year

(3)

(1)(3)

(4)

(4)


Europe

Long-term fundamentals remain attractive

Uncertainty on available capacity – restricted running of opted-

out coal plant and potential closure before 2015

– further pressure on coal capacity due to rising coal price and carbon costs

– ongoing retirement of nuclear

– potential unreliability of plant approaching closure

– wind generation – unpredictable load factors / availability

Forward gas prices have strengthened

– maintains upward pressure on UK wholesale prices

UK market fundamentals

UK Reserve Margin

0

5

10

15

20

25

30

2008 2010 2012 2014 2016

Reserve margin without earlyLCPD retirementsReserve margin

with early LCPD retirements

Target Reserve

%

Notes:• Peak demand estimate updated for lower winter 2007 demand• Includes impact of 5,912 MW of Nuclear capacity lifetime extensions• Wind generation assumed at 35% of installed capacity


Europe

Reduced output and lower margins at Rugeley– FGD installation in 2008 – together with planned outage, Rugeley will be off for 4

months– insulated from higher coal costs due to forward contracting– higher CO2 costs in Phase II

Deeside - relatively light contracted position provides upside from improved market conditions

– recent (2008) contracting has locked in improved spreads– high coal price may result in switching from coal to gas

First Hydro– reduction in peak / off peak differential driven by higher overnight prices– continued strong performance from both ancillary and balancing mechanism

markets

% of anticipated output for the full year(2)Pre cost of CO2

(1)IPR forecast

(3)

UK commercial summary

Spread £/MWh

Load factor

Forward contracted

23

70%

60%

23

50%

n/a

Rugeley Deeside2007

27

55%

85%

34

65%

n/a

2008 20072008

(3)

Full Year(2) n/a

90%

95%

n/a

90%

n/a

Saltend20072008(1) (1) (1)


Europe

830 MW CCGT, Portugal IPR and Endesa 50:50 partnership

– 25 year tolling contract with Endesa

£443m financing complete– IPR equity investment £34m

EPC contractor – Siemens Commissioning in 2011 Located adjacent to existing Tejo coal

plant– benefits from shared services

Excellent organic growth opportunity from:

– existing market presence– available site– access to finance

New plantNew plantExistingPlantExistingPlant

Elecgas, Portugal


Significant scale in wind generation– 1,199 MW now operational worldwide

- 660 MW of operational wind capacity acquired in 2007 - 132 MW under construction brought online

– IPR now a leading global wind generator

Established market positions provide strong platform for growth

– improved access to developers and turbine manufacturers

Current focus– growth opportunities across

our core markets– balanced portfolio

approach

Strong growth in renewables

Europe

Canunda

Levanto DZ1

Maestrale Schkortleben

DZ11

1,199

407

Wind generationyear-on-year growth

2006

March 2008

1,200

Kardstadt 11

Horn

9006003000


Strong operational performance with high plant availability Umm Al Nar all new capacity on line

– current total capacity 2,450 MW, 143 MIGD– decommissioning date for original capacity (795 MW)

extended to 2010

Ras Laffan B – 920 MW, 30 MIGD operational– 135 MW, 30 MIGD expected

in H1 2008

Hidd desalination extension – 12 MIGD operational

– 48 MIGD expected in H1 2008

Fujairah F2 2,000 MW, 130 MIGD

Middle East

Al Kamil

Umm Al Nar Tihama

Shuweihat Ras Laffan B

Hidd

7,300

5,540

2,817

Middle Eastyear-on-year gross capacity growth

2005

2006

2007

As at 31 December each year

Gross MW

1,000 2,000 3,000 4,000 5,000 6,000 7,000


Middle East

Awarded Fujairah F2 greenfield IWPP - 2,000 MW and 130 MIGD water

– IPR 20%, Marubeni 20%, ADWEA 60%

Successful signing of EPC contract and project financing on attractive terms

– 20 year Power and Water Purchase Agreement (PWPA)

Close relationships with technology providers – Alstom and SIDEM

Full commercial operation expected by in 2010 Key project to help Abu Dhabi meet growing power demand

– forecast average demand growth 8.1% per annum– demand growth driven by over $170 billion* of major

residential, commercial and industrial projects over the next 6-8 years

* Abu Dhabi Water and Electricity Company (ADWEC) estimate

Fujairah F2, UAE


Australia

Forward market still good – recent rainfall resulted in some

reduction in 2008 forward prices - but low liquidity

– but key hydro reservoirs remain at low levels

Portfolio largely contracted for 2008 Australia ratified the Kyoto Protocol in

December 2007– emission trading scheme expected to

commence in 2010– design details expected by end of

2008

Hazelwood low emissions project– key government grant contracts

signed– turbine efficiency upgrade / coal

drying– pilot CO2 capture plant

Notes:• Planned capacity additions 1,153 MW by 2011/12• Inter-connector assumed at 85% of total capacity• Wind generation assumed at 10%

10

15

20

25

5

0

Victoria and South Australia Reserve Margin

07/08


09/10 11/12 13/14 15/16

%


Australia

(1)IPR forecast

% of anticipatedoutput for the full year

(2)

Achieved average price ($/MWh)

Victoria, Hazelwood 2007

3245

2008Full Year

(1)

Load factor

Forward contracted

95%

85%

95%

n/a

Hazelwood Loy Yang B2007

80%

80%

80%

n/a

2008 20072008Full Year

(2)

75%

95%

75%

n/a

Pelican Point20072008(1) (1) (1)

Commercial summary


Asia

Strong growth in power demand– Pakistan > 10%– Indonesia 5%– Thailand 6%

Robust commercial and technical performance

Focus on high availability– bonus at Paiton - availability 93%

High load factors - record generation in Pakistan

– generation bonus at HUBCO - load factor 72%


Asia

In-principle agreement to acquire additional 31% of Uch

– total IPR shareholding 71%– acquisition price £44m– 572 MW plant, PPA till 2023– strengthens long-term contracted

earnings and cash flow– strong positioning using

indigenous Pakistan gas Power demand growing strongly

in Pakistan– over 10% per annum– shortage of capacity

Pakistan economy growing at 7% per annum

Uch, Pakistan


Delivering growth

Opportunity flow Significant opportunities in existing markets

– driven by demand growth and capacity retirements

– greenfield development and acquisitions New markets subject to detailed analysis

Rising EPC costs Industry wide development – not a competitive

disadvantage Good long-term relationships with key EPC suppliers Return levels maintained – evidenced by recent

projects Positive read across for IPR’s existing assets

Availability of finance Project finance available Continue to execute major projects on attractive terms

IPR well positioned


Multiple growth opportunities

North America 650 MW Coleto Creek plant expansion New England peaking units for FCM bids Acquisition opportunities

– over 6,000 MW of existing capacity currently on the market

Europe 840 MW Eneco CCGT in Netherlands Acquisition opportunities 100 MW expansion at Opatovice, Czech Republic Renewables Opportunities in new markets


Middle East Bids due in 2008

– 1,600 MW, 100 MIGD Shuweihat S2, UAE

– 400 MW, 15 MIGD Salalah, Oman– 1,200 MW, 50 MIGD Ad Dur 1,

Bahrain– 400 MW, Al Qatrana, Jordan– 1,000 MW 220 MIGD Raz az Zawr,

Saudi Arabia Strong medium and longer term

project pipeline

Australia 12,500 MW NSW privatisation 350 MW peaker, NSW Renewable opportunities

Asia 800 MW Paiton III, Indonesia 1,320 MW West Java,

Indonesia 450 MW KAPCO expansion,

Pakistan 225 MW HUBCO expansion,

Pakistan 400 MW Uch expansion,

Pakistan 100 MW Thailand Opportunities in new markets

Africa Up to 2,500 MW (Phase I)

Mmamabula, Botswana Opportunities in new markets

Multiple growth opportunities


Summary

Good financial performance with strong free cash flow– performance in 2007 reflects portfolio strength

Expect 2008 to be a year of growth– reduced output at Rugeley and lower coal spreads– subdued summer spreads in the US

Continued access to finance and EPC contractors/turbines IPR well positioned to grow the portfolio

– multiple opportunities– greenfield development and acquisitions


Appendix


Year ended 31 December

North AmericaEurope Middle EastAustralia AsiaRegional totalCorporate PFODisposals (see below) - Malakoff sale - Disposal to MitsuiNet finance expense(Loss)/profit before taxIncome tax credit/(expense)(Loss)/profit for the year

SpecificIAS 39 MTM

ExceptionalItems

(21)(135)

- (173)

(1)(330)

- (330)

- -

(16)(346)

96 (250)

- (56)

- - -

(56)-

(56)

115 174

- 233

63 296

(21)(191)

- (173)

(1)(386)

- (386)

115 174 (16)

(113)159 46

2006

10 110

- (50)

- 70 -

70

- -

(26)44

(10)34

- 55 - - -

55 -

55

- - -

55 (15)40

10 165

- (50)

- 125

- 125

- -

(26)99

(25)74

TotalSpecific

IAS 39 MTMExceptional

Items Total

Exceptional items and specific IAS 39 MTM

2007

£m £m £m £m £m £m


North America

Europe

Middle East

Australia

Asia

Regional total

Corporate costs

Profit from operations

12

159

14

26

29

240

(12)

228

2007 2006

Q1

4

158

5

33

28

228

(11)

217

Profit from operations

62

109

17

20

22

230

(12)

218

2007 2006

Q3

50

66

13

36

19

184

(12)

172

30

109

15

20

26

200

(12)

188

2007 2006

Q2

24

84

19

31

28

186

(11)

175

32

197

22

16

19

286

(16)

270

2007 2006

Q4

23

142

15

24

16

220

(11)

209

Quarterly breakdown

Geographic analysis

£m £m £m £m £m £m £m £m

Documents

Preliminary Results March 2008 International Power Preliminary Results Year ended 31 December 2007