1 London 10 August 2006 Interim Results 6 months ended 30 June 2006.

1

London10 August 2006

Interim Results6 months ended 30 June 2006

2

Philip CoxChief Executive Officer

3

Highlights Strong financial performance

– profit from operations of £392m up 69% (H1 2005: £232m)

– EPS of 11.9p - up 83% (H1 2005: 6.5p)

Significant growth in European earnings– key drivers - Saltend (acquired in H2 2005)– higher earnings at First Hydro, Rugeley & IPO (Czech

Republic)

Continued improvement in US earnings – particularly Texas Free cash flow doubled

– £268m up from £134m in H1 2005

Coleto Creek acquisition (Texas) complete Expect 2006 to be a year of strong growth

4

Mark WilliamsonChief Financial Officer

Financial Review

5

All numbers exclude exceptional items and specific IAS39 mark to market movements

Income statement

Six months ended 30 June

20052006£m

Year ended31 December

2005

PBIT from subsidiaries

PAT from JVs and associates

Profit from operations

Interest

PBT

Tax

Minority interest

Profit for the period

EPS (basic, pre-exceptional)

137

95

232

(89)

143

(30)

(17)

96

6.5p

345

191

536

(202)

334

(68)

(52)

214

14.6p

275

117

392

(112)

280

(64)

(40)

176

11.9p

6

Effective tax rate and interest cover


20052006£m


2005


PBIT from JVs and associates

PBIT

Total interest*Interest cover

Profit before total tax

Total tax*

Effective tax rate*

137

172

309

(140) 2.2x

169

(55)

33%

345

342

687

(299) 2.3x

388

(121)

31%

275

191

466

(156) 3.0x

310

(94)

30%

*Includes tax and interest charges for subsidiaries and JVs and associates

7

Income statement

All numbers exclude exceptional items and specific IAS39 mark to market movements


20052006£m


2005


PAT from JVs and associates


Interest

PBT

Tax

Minority interest

Profit for the period

EPS (basic, pre-exceptional)

137

95

232

(89)

143

(30)

(17)

96

6.5p

345

191

536

(202)

334

(68)

(52)

214

14.6p

275

117

392

(112)

280

(64)

(40)

176

11.9p

8

Geographic analysis


20052006£m


2005

North America

Europe

Middle East

Australia

Asia

Regional total

Corporate costs


8

116

13

70

46

253

(21)

232

48

283

24

140

100

595

(59)

536

28

242

24

64

56

414

(22)

392

Note: Profit from operations = PBIT from subsidiaries plus PAT from JVs and AssociatesAll numbers exclude exceptional items and specific IAS39 mark to market movements


9

0

10

20

30

8

28

North America

Market responding to tightening reserve margin

Improvement in off peak spreads and load factors in both markets

Hays returned to service May 2005

H1 2006 H1 2005

Profit from operations up 250%£m

Achieved spark spread ($/MWh)

Load factor

New England H1 2006

$8

60%

$8

30%

H1 2005


Load factor

Texas - Midlothian H1 2006

$12

55%

$8

40%

H1 2005


Load factor

Texas - Hays H1 2006

$12

55%

n/a

n/a

H1 2005

Merchant markets

10

Europe

0

100

200

300

116

242

Profit from operations up 109%

£m Achieved dark spread (£/MWh)

Load factor

Rugeley H1 2006

£20

60%

£13

60%

H1 2005

Achieved spark spread (£/MWh)

Load factor

Deeside H1 2006

£17

25%

£8

60%

H1 2005

UK merchant markets*

* Spreads exclude the cost of CO2

Strong performance from all plants Full six month contribution from

Saltend First Hydro – high demand for

reserve and response capacity Saltend has major planned outage in

Q3 2006

H1 2006 H1 2005

11

Middle East

0

10

20

30

13

24

Profit from operations up 85%

£m

First time contributions from:

– Tihama – two sites of four operational in H1

– Ras Laffan B – two units operational in H1

– Hidd – acquired in January

Development fee received for Hidd acquisition H1 2006 H1 2005

12

Australia

0

20

40

60

80

7064

Profit from operations down 9%

£m

Achieved price (A$/MWh)

Load factor

Hazelwood H1 2006

A$33

75%

A$36

80%

H1 2005

Merchant markets

Higher availability at Loy Yang B

Hazelwood contracts placed in prior years roll off

Loy Yang B refinancing improves debt amortisation profile

H1 2006 H1 2005

13

Asia

0

15

30

45

60£m

46

56

Profit from operations up 22% Strong performance from all assets

Increased payments under PPA due to higher availability at Paiton

KAPCO – tax holiday expires June 2006

H1 2006 H1 2005

14

Free cash flow


20052006£m


2005

Operating cash flow from subsidiaries

Dividends - JV’s and associates

Capex - maintenance

Cash generated from operations

Net interest paid

Tax paid

Free cash flow

215

41

(23)

233

(91)

(8)

134

492

92

(72)

512

(196)

(31)

285

411

42

(58)

395

(109)

(18)

268

15

Movement in net debt


20052006£m


2005

Free cash flowGrowth capexAcquisitions, disposals & investmentsTXU recovery - exceptional Receipt of compensation - exceptional Refinancing costs - exceptional Funding from minorities, FX & otherDecrease/(increase) in net debtOpening external debtTransitional IAS32/39 adjustmentAcquired cash Closing net debt

134 (95)102

44 - -

(115)70

(2,745)44 -

(2,631)

285 (188)(360)

58 -

(5)(95)

(305)(2,745)

44 27

(2,979)

268 (52)(10)14

5 -

51 276

(2,979)- -

(2,703)

16

Balance sheet

Fixed assets

Intangible and tangibles

Investments

Other long-term assets

Net current liabilities

Provisions and creditors > 1 year

Net debt

Net assets

Gearing

Debt capitalisation

Net debt of Associates and JVs

4,214

1,421

791

6,426

(212)

(921)

(2,703)

2,590

104%

51%

(1,386)

4,590

1,379

623

6,592

(327)

(911)

(2,979)

2,375

125%

56%

(1,625)

2006£m 200531

December30 June

Proforma debt capitalisation post Coleto Creek acquisition at 56%

17

Net debt structure

Cash and cash equivalents

Recourse debt

Convertible bond (2023)

Non recourse debt

IPM - acquisition debt

IPM - Mitsui preferred equity

North America

Europe

Middle East

Australia

Asia

Total net cash/(debt)

729

(117)

(117)

(279)

(161)

(481)

(1,159)

(286)

(917)

(32)

(3,315)

(2,703)

Total£mIPR

Corporate

* Project debt is secured solely on the assets and cash flow of the project concerned (non recourse)

As at 30 June 2006Project cash

(debt)*

313

(117)

(117)

-

-

-

-

-

-

-

-

196

416

-

(279)

(161)

(481)

(1,159)

(286)

(917)

(32)

(3,315)

(2,899)

JVs / Associatesoff-balance sheet

net debt*

-

-

(194)

(221)

(400)

(53)

(518)

(1,386)

(1,386)

Maturity

2023

2012

2008

2010

2007- 2021

2017- 2026

2009 - 2013

2008 - 2020

18

Corporate liquidity - proforma

Cash and cash equivalents

Recourse debt



Non recourse debt

IPM - acquisition debt

IPM - Mitsui preferred equity

North America

Europe

Middle East

Australia

Asia

Corporate net cash/ (debt)

£mConverti

ble Bond

IPRCorporate

30 June 2006

313

(117)

-

(117)

-

-

-

-

-

-

-

-

196

ColetoCreek Proforma

159

-

(159)

(159)

-

-

-

-

-

-

-

-

-

(160)

-

-

-

-

-

-

-

-

-

-

-

(160)

312

(117)

(159)

(276)

-

-

-

-

-

-

-

-

36

Maintains liquidity at Corporate post Coleto Creek

Accesses convertible market at opportune time

Achieved low coupon (3.25%) and high conversion price (391p/share)

Issue of Convertible bond

19

Financing activity Loy Yang B refinancing (March 2006)

– replaced amortising tranche with a bullet repayment, improving project distributions

– decrease in margins – A$617m, 6 year term

Hidd financing (April 2006)– acquisition and construction facility– US$990m, 20 year term

Pego refinancing (June 2006)– eliminates cash sweep and extends term, improving project

distributions – FGD construction facility included – €646m, 14 year term

Coleto Creek financing (July 2006)– acquisition facility - US$935m, 7 year term – also US$230m letter of credit/working capital facilities

Convertible bond (July 2006)– replenished corporate funds following acquisition of Coleto Creek – Coupon rate of 3.25% and conversion price of 391p– €230m, 7 year term

20

Financial summary Strong financial performance in H1

– profit from operations of £392m, up 69% – EPS of 11.9p, up 83%

Strong positive cash flow in H1 – free cash flow of £268m, up 100%

Key H2 drivers– first time contribution from Coleto Creek – major planned outage at Saltend– First Hydro performance depends on market

volatility

Continue to expect strong growth in full year 2006

21

Philip CoxChief Executive Officer

22

Texas Commercial update Strong demand growth

– new peak demand of 62,396 MW – up 3.5% on 2005

5,500 MW of mothballed capacity unlikely to return

– 1,100 MW of mothballed plant recently approved for retirement

New proposed capacity – required to maintain

sufficient reserve margin

– will offset retirement of mothballed units

We remain confident of market recovery


Load factor

Forward contracted

Texas - North Zone 2005

12

55%

n/a

16

55%

85%

2006


Load factor

Forward contracted

Texas - South Zone 2005

11

65%

n/a

14

50%

85%

2006 (1)

IPR forecast

% of anticipated output for the full year

Hays was mothballed till May 2005

(2)

(2)

(3)

(1)

(2)

Full Year

Full Year

(3)

(1)

23

Texas Reserve margin analysis

ERCOT reserve margin analysis

0

2

4

6

8

10

12

14

16

18

2007 2008 2009 2010 2011 2012 2013 2014 2015

Reserve Margin %

15% Reserve margin

(1) Adjusted for low wind load factor and non load-serving cogen

2006 peak demand:Demand growth:2006 installed capacity:Capacity under construction:New build announcements:Mothballed:

62,396 MW2.7% 80,998 MW (1)

3,142 MW operational by 2010 –phased build out of all known projects 14,200 MW – TXU, NRG, other5,174 MW progressively retired by 2010

Assumptions

24

Coleto CreekAcquisition highlights Acquisition successfully completed in July 632 MW Pulverized Coal Unit

– located in ERCOT – South Zone

Purchase price $1.14 billion– 75:25 debt equity ratio– financing package supports favourable equity return– includes significant collateral support

Attractive long-term return and immediately earnings and free cash flow enhancing

Earnings and cash flow secured through long-term contracts

– 90% contracted through to 2009– 75% contracted in 2010– 50% contracted from 2011 to mid 2013

25

Access to low cost and low sulphur coal from Powder River Basin (PRB)

– a clear economic advantage– coal transportation agreement in place till 2012

Investing in emission control system to enable 100% use of PRB coal

– good for compliance under future mercury emission standards

Acquisition provides fuel diversity and expanded presence in Texas

– immediate access to Texas market recovery

Option to expand– site designed to accommodate a second 600 MW plant

Coleto CreekAcquisition highlights

26

New EnglandCommercial update Strong load growth in 2006

– new peak demand of 27,971 MW – up 4.2% on 2005

Forward Capacity Market Settlement approved by FERC in June

Defined capacity payments during a transition period from December 2006 to mid 2010

Annual bidding for capacity

beyond 2010– pricing signal for

new plant

IPR forecast% of anticipated output for the full year


Load factor

Forward contracted

2005

6

40%

n/a

12

55%

95%

2006 New England

(2)

Full Year

December 2006 to May 2008

June 2008 to May 2009

June 2009 to May 2010

3.05

3.75

4.10

Forward Capacity Market($/kW month)Period

(1)

(2)

(1)

27

Europe

Excellent growth in earnings UK merchant portfolio delivering a robust performance

– earnings driven by Saltend, First Hydro and Rugeley – spark spreads for merchant gas generation (Deeside)

below new entrant level - calendar 2006 baseload spread at £9/MWh*

Contracted assets performing well– Turbogás continues to deliver a good financial

performance– FGD equipment being installed at Pego

*pre cost of CO2

28

UK - key contributors

High quality asset– indexed gas contract with BP

through to 2015– base load operation with H1

load factor 92%– high availability - 94% in H1– good health and safety record

Major planned outage in Q3– major overhaul on all 3 units– major outages undertaken

once every six years

2006– 90% of anticipated output

contracted– H2 expected load factor of

75%*

* Takes Q3 outage into account

Ancillary Services and Balancing Mechanism

– strong demand for reserve and response capacity

– increased utilisation and margins driven by tight system conditionsand unpredictable weather

Trading revenue (short term contracts)

– driven by market volatility and wide peak/off-peak pricing differential

Saltend First Hydro

29

EuropeUK

Spread

Load factor

Forward contracted

16

40%

45%

12

60%

n/a

Rugeley Deeside2005

25

65%

95%

15

60%

n/a

2006 (1)

Phase I CO2 trading at €16.50/t– price relatively stable

Phase II– CO2 allowances currently estimated at

75%-80% of Phase I (for IPR portfolio)– current price circa €18.50/t

20052006 (1)

% of anticipated output for the full year

(2)

(3)

Full Year

(2)

Pre cost of CO2

(1)IPR forecast

(3)

30

Middle East

Construction programme on plan– 600 MW operational at Ras Laffan B, Qatar– 616 MW in operation at Tihama Power– UAN extension to commence operation in Q3 2006– Hidd desalination expansion on track

Continue to see pipeline of further projects– 2 bids currently under evaluation (decisions expected

Q3 2006) - 2,000 MW Mesaieed IPP, Qatar - 2,500 MW, 185 MIGD Marafiq IWPP, Saudi Arabia - future pipeline remains strong

31

4 cogeneration facilities supplying power and steam to Saudi Aramco

– under 20 year Build Own Operate Transfer, Energy Conversion Agreement

Major construction management project for IPR– single turnkey Engineer Procure Construct (EPC) contract

with Mitsui for all four plants

– 3,000 people at work during peak construction period

International Power - value addition through an active role– led $640 million project financing– O&M service provider + 20 year technical services

agreement - generating additional revenue– recruited and trained operational staff from the Middle East

and Asia

Tihama Power - a solid platform for future growth in Saudi Arabia

Middle EastTihama - a successful launch in Saudi Arabia

32

Australia

Financial performance in line with expectations Strong operational performance by Loy Yang B

– forced outage rate less than 0.5%– $617m of debt refinanced in

March 2006

All consents secured for next phase of Hazelwood mine development

Retail partnership continues to grow

Achieved price (A$/MWh)

Victoria

Hazelwood 2006 (1)

33 34

2005

Load factor

Forward contracted

2006 (1)

80%

n/a

80%

65%

20052006 (1)

95%

n/a

90%

80%

2005

Hazelwood Loy Yang B2006 (1)

35%

n/a

40%

70%

2005

Pelican Point

Full Year

Full Year

(1)IPR forecast

(1)IPR forecast

33

Australia

Base-load (and peak) prices show modest increases Recent rise predominantly driven by robust winter demand

during 2006

31

3335

3739

41

4345

4749

51

A$/MWh

January2006

Q1 2007

Calendar 2007

Victoria Baseload Power

February March April May June July

34

Asia

Strong operational performance at Paiton– high availability triggered incentive payments

TNP (Thailand) - 23 MW - plant expansion on track for completion in Q4 2006

High levels of generation at IPR’s assets in Pakistan – driven by high demand and low availability of hydro– Hubco - direct transmission connection to Karachi

load centre operational since May 2006

Malakoff – update– MMC offer - opportunity to monetise investment– offer at RM10.35 per share equates to £250m for IPR– completion expected in Q2 2007

- subject to shareholder, regulatory and other approvals

35

Summary and outlook

Portfolio performing well Improving returns in key merchant markets of the US

and the UK Coleto Creek acquired and integrated Earnings underpinned by free cash flow We expect 2006 to be a year of strong growth

36

Interim Results6 months ended 30 June 2006

37

Appendix

38

Updated Asset List

39

IAS 39 regional analysis


20052006£m


2005

North America

Europe

Middle East

Australia

Asia

Specific IAS39 impact on PFO

-

(4)

-

1

-

(3)

1

(23)

-

(15)

2

(35)

(2)

43

-

6

-

47

IAS 39 impact

Specific IAS39 mark to market movements on economic hedge contracts are presented separately to allow an understanding of the underlying business performance

Specific IAS39 movements are presented separately where own use treatment could not be applied, cash flow hedging could not be achieved or has not been applied

Mark to Market movements relating to proprietary trading activities continue to be included within the underlying business results.

1 London 10 August 2006 Interim Results 6 months ended 30 June 2006.

Documents

Transcript of 1 London 10 August 2006 Interim Results 6 months ended 30 June 2006.