SOURCE: International Power PLC

November 09, 2006 02:27 ET

International Power - 3rd Quarter Results

London, UK -- (MARKET WIRE) -- November 9, 2006 --International Power plc

Financial results for the nine months ended 30 September 2006

(London - 9 November 2006) International Power today announces its results for the nine months ended 30 September 2006 and reports on key developments to date.

Sir Neville Simms, Chairman of International Power, said, "I am pleased to report significant growth in earnings and cash flow primarily driven by increased profitability in Europe and the US. Nine month results benefited from a strong performance at First Hydro and Saltend, a first time contribution from Coleto Creek and commissioning of additional capacity in the Middle East. We continue to expect 2006 to be a year of strong growth."


- Acquisition of 436 MW Levanto onshore wind farm portfolio in 
  Germany and France
- Acquisition of 140 MW Indian Queens peaking plant (UK)
- GBP485 million non-recourse financing package raised at 
  Rugeley, UK
- Strong financial performance
- Profit from operations(i) of GBP564 million (2005: GBP340 million) 
  - up 66%
- EPS(i) of 16.6p (2005: 9.2p) - up 80%
- Free cash flow(ii) of GBP339 million (2005: GBP185 million) - up 83%

All reference to financial performance in this commentary is on a pre-exceptional and pre-specific IAS 39 mark to market movements basis (unless stated otherwise).

Profit from operations(i)      Nine months            Year ended
                           ended 30 September        31 December
                           2006           2005              2005
                                  (restated)(i)    (restated) (i)
                         GBPm             GBPm              GBPm
North America              78               31                48
Europe                    308              143               283
Middle East                37               18                24
Australia                 100              109               140
Asia                       75               72               100
Regional total            598              373               595
Corporate costs           (34)             (33)              (59)
Profit from operations    564              340               536

(i) Excluding exceptional items and specific IAS 39 mark to market movements.

For analysis and explanation of exceptional items and specific IAS 39 mark to market movements, please see notes 1 and 3 to this statement. The results for the nine months ended 30 September 2005 and for the year ended 31 December 2005 are also stated on this basis. (ii) Free cash flow is set out in note 4 to this statement.

North America

Profit from operations in North America improved significantly to GBP78 million (2005: GBP31 million) reflecting improved spark spreads and load factors in Texas and New England, and a first time contribution from Coleto Creek, which was acquired in July this year. Our contracted assets, EcoElectrica, Hartwell and Oyster Creek also operated well and delivered a consistent financial performance.

In Texas, we benefited from significantly increased output and improving spark spreads. At Midlothian, the achieved spark spread increased from $12/MWh to $13/MWh and the load factor was 65%, compared to 55% in the first nine months of 2005. The Hays plant which was mothballed until May 2005 delivered a good performance with an average achieved spark spread of $14/MWh at a 65% load factor. In New England, the achieved spark spread increased from $8/MWh to $11/MWh and output increased significantly to a 65% load factor (2005: 40% load factor) contributing to the increased profitability in the region.

Overall, Texas and New England power markets continue to progress towards a full market recovery, which is expected in the 2007 - 2009 timeframe.


Profit from operations in Europe increased considerably to GBP308 million (2005: GBP143 million) despite the major planned outage at Saltend in the third quarter. Performance in the nine month period was primarily driven by a robust performance at First Hydro, International Power Opatovice in the Czech Republic and strong contribution from Saltend in the first half. Following a failure at a third party location, after completing the planned outage at Saltend in Q3, the original equipment manufacturer advised us of a modification required to the gas turbine. We plan to make this modification on all three units at Saltend on a phased basis during Q4, and this work is expected to take approximately two weeks per unit.

All contracted assets in Iberia, Italy and Turkey continue to deliver good operational and financial performance.

In September, International Power raised a GBP485 million non-recourse financing package at Rugeley. GBP145 million of this financing will be used for the installation of Flue Gas Desulphurisation (FGD) equipment and other capital projects to both enhance the operational performance at Rugeley and significantly extend the life of the plant. The FGD equipment is expected to be operational in the second half of 2008.

The 140 MW oil fired OCGT Indian Queens peaking plant in Cornwall, which was acquired from AES for GBP32 million, has been integrated into our UK asset portfolio. Our experience in the balancing and reserve markets will enable us to create additional value from this acquisition.

Earlier this month we announced the acquisition of the 436 MW Levanto onshore wind farm portfolio from Christofferson Robb & Company (CRC) for an enterprise value of EUR567 million (GBP379 million). The Levanto wind farms comprise 286 MW of capacity in operation, 126 MW under construction, which is due to commence operation in 2007, and 24 MW of fully permitted capacity, which is planned to commence operation in 2008. This acquisition and our partnership with CRC provides us with an immediate, scale renewables business and access to a significant pipeline of development opportunities in Europe.

Middle East

In the Middle East, profit from operations increased to GBP37 million (2005:GBP18 million) mainly driven by capacity coming on line at Tihama in Saudi Arabia and Ras Laffan B in Qatar together with a first time contribution from Hidd in Bahrain. Other assets in the region, namely Al Kamil, Shuweihat and Umm Al Nar continue to deliver a good performance.

Ju'aymah, the final of the four Tihama projects, is on track to commence operation in Q4 2006. At Ras Laffan B, the first phase of 600 MW and 15 MIGD is fully operational and the second phase is ahead of schedule, with operations planned to commence during Q2 2007. At Umm Al Nar, the 25 MIGD desalination extension is now operational and the first new power plant units are expected to enter commercial operation during Q4 2006.

At Hidd in Bahrain, construction of the 60 MIGD desalination extension is well underway and this additional capacity is expected to be operational in two phases by the end of 2007.

During October, we signed a Heads of Agreement with CIC Energy Corporation (CIC) for the development, construction and operation of a proposed coal-fired project in Botswana, at Mmamabula. It is envisaged that the plant will be between 2,400 - 3,600 MW and the power output from the plant will be sold under a Power Purchase Agreement, predominantly to Eskom Holdings Limited, South Africa's national electrical utility. This project is at early stages with financial close expected towards the end of 2007. Construction will commence post financial close.


Profit from operations in Australia at GBP100 million decreased from GBP109 million in 2005 due to the expected reduction in achieved prices at Hazelwood. 2005 benefited from contracts put in place in earlier years at higher electricity prices.

Forward electricity prices for 2007 and 2008 in Victoria continue to show an improvement to some A$39/MWh - A$40/MWh (base load). Although our 2007 output is largely contracted, our uncontracted portion of output (mainly off peak) should benefit from this improvement.

In October, Hazelwood was awarded an A$80 million non- refundable grant by the Federal and Victorian Governments to develop innovative retrofit low emission technology on one of its 200 MW generating units. The coal drying demonstration project is expected to reduce greenhouse gas emissions by an estimated 30%. The project also includes a pilot carbon dioxide capture scheme which is expected to be operational by early 2008.


Earnings in Asia increased from GBP72 million to GBP75 million mainly due to higher availability at Paiton and a full nine month contribution from Uch, which was acquired in February last year. However this was partly offset by a decrease in KAPCO's earnings as it became a full tax payer following the expiry of its tax holiday.

The first 700 MW unit at Tanjung Bin Power Plant, a 2,100 MW coal fired power plant developed by Malakoff achieved commercial operation on 28 September 2006. The 23 MW expansion project at TNP also achieved commercial operation during the period.

Following the announcement by MMC Corporation Berhad (MMC) in May 2006 that it intends to acquire Malakoff, the sale process is progressing with completion expected in Q2 2007.


Net interest expense has increased by GBP35 million to GBP179 million, reflecting the impact of additional debt relating to Saltend, Coleto Creek and Tihama. Interest cover increased to 2.7x in the nine months ended 30 September 2006 compared to 2.1x for the same period last year.


The Group tax charge for the first nine months was GBP85 million (2005: GBP32 million). The effective tax rate, based on our forecast rate for the full year, is 30% compared to 31% for the year ended 31 December 2005.

Exceptional items and specific IAS 39 mark to market movements

No exceptional items were recorded in the third quarter. In the first half year a net exceptional gain of GBP19 million before tax was recorded.

The specific IAS 39 mark to market movements reported in the nine months ended 30 September 2006 amounted to a profit before tax of GBP22 million (2005: loss of GBP6 million).

Cash Flow

A summary of the Group cash flow is set out below:

                                     Nine      Nine
                                   months    months     Year
                                 ended 30  ended 30 ended 31
                                September September December
                                     2006      2005     2006
                                     GBPm      GBPm     GBPm
Profit for the period                 337       210      330
Other adjusting items (i)             222       119      183
Dividends from joint 
ventures and associates                58        54       92
Movement in working capital            38         1      (21)
Capital expenditure - maintenance     (86)      (33)     (72)
Tax and interest paid                (230)     (166)    (227)

Free cash flow                        339       185      285
Receipt from TXU administrators -
exceptional                            14        58       58
Receipt of compensation - exceptional   5         -        -
Finance cost - exceptional              -         -       (5)
Refinancing costs capitalised on
acquisition debt                      (15)       (7)      (7)
Capital expenditure - growth          (95)     (144)    (188)
Returns from joint ventures and
associates (net of investments)        18        33       48
Acquisitions                         (688)     (566)    (571)
Disposals                               1       138      211
Dividends paid                        (67)      (37)     (37)
Proceeds from share issue              11         -        2
Funding from minority interests         1        72       80
Foreign exchange and other            150      (144)    (181)

Increase in net debt                 (326)     (412)    (305)

Opening net debt                   (2,979)   (2,745)  (2,745)
Transitional adjustment on 
first time adoption of IAS 39           -        44       44
Net funds on acquisition of
subsidiaries                           11        27       27

Closing net debt                   (3,294)   (3,086)  (2,979)

(i) Other adjusting items are set out in Note 4 to the Accounts. They include income statement charges for interest, tax, depreciation, the share of profit of joint ventures and associates, the exceptional profit on the TXU settlement, and the exceptional profit on compensation for breach of contract.

Free cash flow in the first nine months of 2006 increased from GBP185 million to GBP339 million reflecting the strong profitability in the period. This strong performance was partially offset by a GBP64 million increase in interest and tax payments. The significant year on year increase in maintenance capital expenditure is principally a function of the timing of planned outages. Acquisitions payments in the period include consideration for Coleto Creek and Indian Queens. Foreign exchange movements represent the translation differences arising in the period on foreign currency net borrowings.

Dividends from JVs and associates in the nine months show a small increase despite strong growth in profitability, reflecting phasing of receipts. Dividends from JVs and associates are expected to be significantly ahead of 2005, by the year end.

Summary balance sheet

A summarised, reclassified Group balance sheet is set out 

                               As at 30  As at 30 As at 31
                              September September December
                                   2006      2005     2005
                                   GBPm      GBPm     GBPm
Property, plant and equipment and
intangibles                       4,923     4,545    4,590
Investments                       1,428     1,331    1,379
Long-term receivables and others    858       630      623
                                -------- --------- --------
                                  7,209     6,506    6,592
Net current liabilities 
(excluding net debt items)         (163)     (321)    (327)
Non-current liabilities 
(excluding net debt items)       (1,155)     (877)    (911)
Net debt                         (3,294)   (3,086)  (2,979)
                                -------- --------- --------
Net assets                        2,597     2,222    2,375
                                ======== ========= ========
Gearing                             127%      139%     125%
Debt capitalisation                  56%       58%      56%

(i) In accordance with IFRS 3, the fair values of certain assets and liabilities acquired in 2004 have been revised following the completion of the initial accounting during the year ended 31 December 2005. Please see notes 1 and 5 to this statement.

The increase in property plant and equipment and intangible assets principally reflects the addition of Coleto Creek. The increase in long-term receivables reflects the commencement of operations at Tihama at which time the associated property, plant and equipment was reclassified as a finance lease receivable.


We continue to expect 2006 to be a year of strong growth in 
line with market expectations.

Achieved Spark Spreads for the nine months ended 
30 September 2006

North America

New England                   Nine months    Nine months
                                     2006           2005
Spark spread ($/MWh)                  $11             $8
Load factor                            65%            40%

Texas (Midlothian)            Nine months    Nine months
                                     2006           2005
Spark spread ($/MWh)                  $13            $12
Load factor                            65%            55%

Texas (Hays)                  Nine months    Nine months
                                     2006           2005
Spark spread ($/MWh)                  $14            n/a
Load factor                            65%           n/a

United Kingdom

Rugeley                       Nine months    Nine months
                                     2006           2005
*Dark spread (GBP/MWh)              GBP19          GBP13
Load factor                            55%            55%

Deeside                       Nine months    Nine months
                                     2006           2005
*Spark spread (GBP/MWh)             GBP18           GBP8
Load factor                            35%            65%
*Excludes CO2 costs


Hazelwood                     Nine months    Nine months
                                     2006           2005
Achieved power price (A$/MWh)        A$34           A$35
Load factor                            80%            80%

For further information please contact:
Investor Contact:
Aarti Singhal
+44 (0)20 7320 8681

Media Contact:
Andrew Mitchell, Finsbury
+44 (0)20 7320 8619

About International Power

International Power plc is a leading independent electricity generating company with 18,543 MW (net) in operation and 1,042 MW (net) under construction. International Power has power plants in operation or unde construction in Australia, the United States of America, the United Kingdom, France, Germany, the Czech Republic, Italy, Portugal, Spain, Turkey, Bahrain, Oman, Qatar, Saudi Arabia, the UAE, Indonesia, Malaysia, Pakistan, Puerto Rico and Thailand. International Power is listed on the London Stock Exchange and the New York Stock Exchange (as ADR's) with ticker symbol IPR. Company website:

To view the full document, please click on the link below:

                 This information is provided by RNS
      The company news service from the London Stock Exchange