Interim Results Six months ended 30 June 2010. Philip Cox Chief Executive Officer.
Preliminary Results Year ended 31 December 2008. Philip Cox Chief Executive Officer.
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Transcript of 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
Preliminary Results March 2009 International Power5
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
Preliminary Results March 2009 International Power6
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
Preliminary Results March 2009 International Power7
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*
Profit from operationsup 1%
£574m £581m
£500m£521m
£81m£53m
* First Hydro Holdings reports PBIT of £176m (2007: £133m) under UK GAAP
2007 2008
Share of JVs and associates Subsidiaries
Preliminary Results March 2009 International Power8
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
Preliminary Results March 2009 International Power9
Middle East
Profit from operationsup 1%
£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
Share of JVs and associates Subsidiaries
Preliminary Results March 2009 International Power10
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
Profit from operationsup 105%
£82m
£168m
£164m
£83m
£4m(£1m)
2007 2008
Share of JVs and associates Subsidiaries
Preliminary Results March 2009 International Power11
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
Profit from operationsup 8%
£96m
£89m
£14m
2007 2008
£82m
£15m
£104m
Share of JVs and associates Subsidiaries
Preliminary Results March 2009 International Power12
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%
Preliminary Results March 2009 International Power13
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
Preliminary Results March 2009 International Power14
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
Preliminary Results March 2009 International Power15
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)
Preliminary Results March 2009 International Power16
Net debt structure
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
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
Preliminary Results March 2009 International Power17
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%
Preliminary Results March 2009 International Power18
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%)
Preliminary Results March 2009 International Power19
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
Preliminary Results March 2009 International Power20
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
Preliminary Results March 2009 International Power22
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
Preliminary Results March 2009 International Power23
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
Preliminary Results March 2009 International Power24
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
Preliminary Results March 2009 International Power25
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
Preliminary Results March 2009 International Power26
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
Preliminary Results March 2009 International Power27
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
Preliminary Results March 2009 International Power28
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
Preliminary Results March 2009 International Power29
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
Preliminary Results March 2009 International Power30
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
Preliminary Results March 2009 International Power31
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%
Preliminary Results March 2009 International Power32
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
Preliminary Results March 2009 International Power33
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
Preliminary Results March 2009 International Power34
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
Preliminary Results March 2009 International Power35
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
Preliminary Results March 2009 International Power37
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
Preliminary Results March 2009 International Power38
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