Download ppt - Preliminary Results Year ended 31 December 2008. Philip Cox Chief Executive Officer

Preliminary ResultsYear ended 31 December 2008

Philip CoxChief Executive Officer

Preliminary Results March 2009 International Power3

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

All numbers in this presentation exclude exceptional items and specific IAS 39 mark to market movements, unless stated otherwise

Mark WilliamsonChief Financial Officer

Financial Review


North AmericaEuropeMiddle EastAustraliaAsiaCorporate costsProfit from operationsInterestPBTTaxMinority interestProfit for the year

EPSDPS

177 581

69 168 104 (49)

1,050 (368)682 (123)

(69)490

32.4p12.15p

Year ended 31 December

136 574

68 82

96 (52)

904 (308)596 (113)

(77)406

27.1p10.16p

30% 1% 1%

105% 8%

(6%)16% 19% 14%

9% (10%)21%

20% 20%

2008£m

2007£m

% change

Income statement

Constantcurrency

9%

13%

Reported


North America

Profit from operationsup 30%

£136m

£177m

£148m

£108m

£29m£28m

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

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

2007 2008

Share of JVs and associates Subsidiaries


Europe

Significant reduction in Rugeley’s earnings

– record achieved dark spreads in 2007

– extended outage and delayed FGD in 2008

Saltend – high load factor

Strong performance at First Hydro and Deeside

– benefiting from low plant availability in the UK

– record performance from First Hydro*


£574m £581m

£500m£521m

£81m£53m

* First Hydro Holdings reports PBIT of £176m (2007: £133m) under UK GAAP

2007 2008



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


Middle East


£68m £69m

£43m£44m

£26m£24m

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

2007 2008



Australia

Significantly improved contributions from Hazelwood and Loy Yang B

Synergen able to capture high spot prices

Simply Energy 100% owned– additional route to market

Other assets performed well

Stamp duty agreed on Loy Yang B– £20m exceptional charge


£82m

£168m

£164m

£83m

£4m(£1m)

2007 2008



Asia

Malakoff sold in May 2007

Strong performance from Paiton

Acquisition of additional 31% of Uch

Pakistan overdue receivable is US$149m

– no earnings impact


£96m

£89m

£14m

2007 2008

£82m

£15m

£104m



Interest cover and effective tax rate

PFOJVs 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

2.6x2.5x

1,050

99 31

130 1,180

(368)(99)

(467)

713

(123)(31)

(154)

559

904

91 60

151 1,055

(308)(91)

(399)

656

(113)(60)

(173)

483

2008 2007Year ended 31 December £m £m

22% 26%


Free cash flow

Operating cash flow from subsidiaries

Dividends - JVs and associates

Capex - maintenance

Cash generated from operations

Net interest paid

Tax paid

Free cash flow

£m

992

145

(71)

1,066

(312)

(101)

653

971

135

(108)

998

(399)

(86)

513

2008 2007Year ended 31 December £m

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


Movement in net debt

Free cash flow

Growth capex

Acquisitions and investments

Disposals

Dividend paid

FX & other

Net receipts from / (payment to) minorities

Change in net debt

Opening net debt

Debt acquired

Closing net debt

653

(160)

(842)

418

(160)

(250)

(35)

(376)

(3,575)

(711)

(4,662)

513

(156)

(680)

-

(166)

(1,193)

28

(1,654)

(4,662)

(2)

(6,318)

2008 2007£m £mYear ended 31 December

2008 closing net debt at 2007 FX rates £4,998m


Balance sheet

Non-current assets

Goodwill and intangibles

PP&E

Investments

Other long-term assets

Net current liabilities

Non-current liabilities

Net debt

Net assets

Gearing

Debt capitalisation

991

5,961

1,480

1,626

10,058

(644)

(1,473)

(4,934)

3,007

164%

62%

1,137

7,318

1,803

1,943

12,201

(137)

(1,611)

(6,318)

4,135

153%

60%

31 December 2008£m £m

30 June 2008

Net debt of JVs and associates £1,820m (30 June 2008: £1,336m)


Net debt structure

Cash and cash equivalents

Recourse debt

Convertible bond (2023)



Non-recourse debt

IPM - acquisition debt

North America

Europe

Middle East

Australia

Asia

Total net debt

1,129

(149)

(560)

(191)

(900)

(306)

(1,457)

(3,227)

(410)

(1,103)

(44)

(6,547)

(6,318)

Total£m

IPRCorporate

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

As at 31 December 2008

Project cash/(debt)

354

(149)

(560)

(191)

(900)

-

-

-

-

-

-

-

(546)

775

-

-

-

-

(306)

(1,457)

(3,227)

(410)

(1,103)

(44)

(6,547)

(5,772)

JVs and associatesoff-balance sheet

net debt

-

(197)

(297)

(864)

(68)

(394)

(1,820)

(1,820)

Maturity

2023

2015

2013

2012

2010-2015

2010-2026

2016-2025

2010-2019

2020

Maturity

2010-2019

2009-2035

2021-2030

2009

2011-2018

£m £m £m


2008 project debt financings

PelicanPoint Elecgas IPA Central T-Power

Month February March July December

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

Merchant/PPA Merchant PPA Merchant PPA

Region Australia Europe North America Europe

Fixed underlyingswap rate

7.4% 4.6% 3.5-5.0% 4.0%


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%)


Project refinancings

No material refinancings in 2009

Corporate revolver renewable in October 2010

Projectrefinancing

Amount(local currency) Due Comments

2009SEA Gas A$140m December 2009

Infrastructure project with contracted income

2010US CCGT US$769m July 2010

Low leverage Previously refinanced in

challenging times

Hazelwood A$445m February 2010 Awaiting details of CPRS


PFO (£m)

£773m

£536m

£222m

2004 2005 2006

Free cash flow (£m)

Earnings per share (pence)

22.4p

14.6p

8.6p

2004 2005 2006

Dividendper share (pence)

7.9p

4.5p

2.5p

2004 2005 2006

Proposed dividend(1)

£904m

2007

27.1p

2007 2007

10.16p

Financial summary

2008

£1,050m

2008

32.4p

2008

12.15p (1)

£456m

£285m

£104m

2004 2005 2006 2007

£653m

£513m

2008

Philip CoxChief Executive Officer


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

Market update - Texas

Downside case reflects demand reduction in 2009 and 2010

20090

5

10

15

20%

ERCOT reserve margin

2010 2011 2012 2013 2014 2015 2016

Base case Downside case

Target reserve


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 on demand side management

– cumulative demand side management 3GW

– represents 9% of reservemargin

– reliance on older, less efficient capacity

– increased volatility on high demand days

– majority of new-build in Connecticut– 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

Reserve margin reflects reduced demand growth and additional supply following latest capacity auction

20090

10

20

30

40%

New England reserve margin

2010 2011 2012 2013 2014 2015 2016

Including demandresources

Target reserve

Excluding demandresources


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


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

Jan40

50

60

70

80GW

Plant Availability

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2008

Headline availability

Weekdaypeak demand

Week ahead availability

Outturn availability


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


20090

10

20

40%

UK reserve margin

2010 2011 2012 2013 2014 2015 2016

30

2017 2018

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

Our flexible, diverse portfolio will maximise value in the UK

Forecast reserve margin updatedto reflect reduced demand growth

Includingfirm new-build

Including firm new-build, approved &

applied projects


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


Europe - update on growth

T-Power

Elecgas

Turbogás

Wind

Enecogen

420MW, CCGT under construction in Belgium

Backed by long-term offtake contract, secure contracted earnings and cash flow stream

Attractive return on investment

Increased ownership of existing asset High quality asset with strong operational and

financial track record

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

1,008MW, CCGT acquisition in Portugal

81MW brought online in Italy, Germany, France

30MW under construction, Italy

840MW, CCGT under development in the Netherlands

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


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


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:

Marafiq 2 - Yanbu

SEC IPP2 (Riyadh)

Ras Tanura IWSPP

Taweelah C/Shuweihat S3

Tarfaya (Wind Farm)

Safi

1,700MW, 35 MIGD

2,000MW

1,000MW

1,500MW, 100 MIGD

300MW

1,320MW

Saudi Arabia

Saudi Arabia

Saudi Arabia

Abu Dhabi

Morocco

Morocco

Country CapacityProjectPotential IPR

share %

30%

20%

60%

20%

50%

37.5%


2009

0

10

20

30%

Victoria and South Australiareserve margin

2010 2011 2012 2013 2014 2015 2016 2017 2018

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 With new-build

Without new-build


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


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


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

Appendix


Analysis of net debt

2008Net debt

32%40%16%

3%1%

92%8%

100%

%

By currency US dollar Euro Australian dollar Czech koruna OtherForeign currencySterling Total

Closing net debt at 2007 FX rates £4,998m

2,0262,5171,038

16743

5,791527

6,318

£m2007

31%35%21%

2%1%

90%10%

100%

%

1,4271,651

978103

304,189

4734,662

£m


Year ended 31 December

North America

Europe

Middle East

Australia

Asia

Regional total

Corporate

PFO

Disposals

- Malakoff sale

- disposal to Mitsui

Net finance income / (expense)

Profit /(loss) before tax

Income tax (charge) / credit

Profit for the period

SpecificIAS 39

MTMExceptional

Items

2007

Total

SpecificIAS 39

MTMExceptional

Items Total

Exceptional items and specific IAS 39 MTM

2008

£m £m £m £m £m £m

16

77

(1)

71

-

163

-

163

-

-

127

290

(92)

198

(21)

77

(1)

51

-

106

-

106

-

-

127

233

(33)

200

(37)

-

-

(20)

-

(57)

-

(57)

-

-

-

(57)

59

2

(21)

(135)

-

(173)

(1)

(330)

-

(330)

-

-

(16)

(346)

96

(250)

(21)

(191)

-

(173)

(1)

(386)

-

(386)

115

174

(16)

(113)

159

46

-

(56)

-

-

-

(56)

-

(56)

115

174

-

233

63

296