Shareholder Information
INTERNATIONAL POWER PLC
ANNUAL GENERAL MEETING
17 MAY 2005
CHAIRMAN’S SPEECH
SLIDE 1 - LOGO/INTERNATIONAL POWER/ANNUAL GENERAL MEETING
SLIDE 2 - SIR NEVILLE SIMMS, CHAIRMAN
Good afternoon ladies and gentlemen and welcome to the Park Lane Sheraton Hotel for International Power plc’s 2005 Annual General Meeting.
I think you will all recognise my colleagues here on the platform with me from last year, but perhaps I can introduce to you Struan Robertson, who joined the Board on 1 October last year.
Please allow me a few moments to advise on the order for today's proceedings. After a few words from me, Phil Cox will give a short presentation to you about your business. Following on from Phil’s presentation we will proceed directly to the formal business of the Meeting.
Before that, however, I want to comment briefly on our performance during the period to which the Accounts relate, and also to update you on our progress since the beginning of this year.
SLIDE: COMPARATIVE FIGURES IPR GROUP
PBIT: £287 MILLION
PBIT: £285 MILLION
EPS: 8.3 PENCE
EPS: 9.1 PENCE
For the year ended December 2004, the financial headlines for the Group as a whole were:
Profit before interest, tax and exceptional items of £287 million against £285 million in 2003 and earnings per share, before exceptional items, of 8.3 pence for 2004, against 9.1 pence in 2003, after adjusting for the Rights Issue.
Principal headlines for the regional businesses were:
SLIDE: COMPARATIVE FIGURES NORTH AMERICA
TURNOVER 2004: £260 MILLION
TURNOVER 2003: £414 MILLION
PBIT 2004: (£13 MILLION)
PBIT 2003: £2MILLION
In North America, a reduction in turnover to £260 million from £414 million, primarily due to the mothballing of our Hays plant and a loss, before interest and tax, of £13 million against a profit of £2 million for 2003, reflecting the continued weakness of the Texas and New England markets.
SLIDE: COMPARATIVE FIGURES EUROPE
TURNOVER 2004: £520 MILLION
TURNOVER 2003: £474 MILLION
PBIT 2004: £113 MILLION
PBIT 2003: £103 MILLION
Europe achieved a significant increase in both turnover and PBIT. Turnover was up to £520 million against £474 million in 2003 and PBIT was up to £113 million against £103 million in the previous year. This was on the back of a strong performance from EOP, an immediate contribution to earnings from Turbogas, and high availability at both Marmara and Pego.
SLIDE: COMPARATIVE FIGURES MIDDLE EAST
TURNOVER 2004: £54 MILLION
TURNOVER 2003: £33 MILLION
PBIT 2004: £29 MILLION
PBIT 2003: £23 MILLION
In the Middle East turnover increased to £54 million against £33 million in the previous year and PBIT increased to £29 million from £23 million in 2003 with higher contributions being received from Umm Al Nar and first time earnings being received from Shuweihat.
SLIDE: COMPARATIVE FIGURES AUSTRALIA
TURNOVER 2004: £231 MILLION
TURNOVER 2003: £224 MILLION
PBIT 2004: £104 MILLION
PBIT 2003: £101 MILLION
Australia achieved an increased turnover of £231 million against £224 million for 2003 and PBIT of £104 million against £101 million in the preceding year, with Hazelwood and Synergen once again benefiting from strong contractual positions. We also completed International Power’s first wind farm project at Canunda, South Australia.
SLIDE: COMPARATIVE FIGURES ASIA
TURNOVER 2004: £202 MILLION
TURNOVER 2003: £128 MILLION
PBIT 2004: £87 MILLION
PBIT 2003: £84 MILLION
Turnover in Asia increased markedly from £128 million in 2003 to £202 million in 2004, primarily from the inclusion of turnover from KAPCO, which had been accounted for as being a trade investment in previous years. PBIT rose only marginally to £87 million from £84 million, though this increase does reflect increased production capacity and higher earnings at Malakoff.
SLIDE – ANP DEBT RESTRUCTURING
In my Chairman’s statement last year I said to you that our number one priority was the restructuring of the non-recourse debt facility for our US merchant plant. I am pleased to report we achieved this thereby providing financial stability for our US assets until the expected market recovery.
SLIDE – ACQUISITIONS
With this debt restructuring behind us and upon the successful completion of the Rights Issue, we were able to convert selected growth opportunities into real shareholder value. We did this by acquiring, firstly, in November, a majority interest in Turbogas, a 990 MW gas fired power station in Portugal, and secondly, in December, in a 70:30 partnership with Mitsui & Co. of Japan, the Edison Mission international portfolio of plant.
The EME portfolio consists of 9 power generation projects in 6 countries and represents an excellent fit with our existing portfolio by adding quality assets in our core markets, particularly Australia, Europe and Asia. The acquired assets are also strongly contracted, with 7 of the projects under long-term PPA’s and hedge contracts. The two assets that operate on a merchant basis, First Hydro and Valley Power, fit very well into our existing portfolio in 2 of our core markets, the UK and Australia.
SLIDE – DIVIDEND
Having reviewed the impact of these acquisitions on our earnings and cash flow we now feel it is appropriate to begin paying dividends to shareholders and, subject to your approval, we are proposing that we pay a final dividend of 2.5 pence per share for the year ended 2004.
In future the Board will propose an annual dividend at the time of our preliminary results, taking into account the outlook for future earnings, free cash flow generation and the investment opportunities available to the Group to deliver further growth and shareholder value.
For the current financial year, to end in December 2005, the Board expects to maintain a dividend payout ratio similar to the 30% level provided for the 2004 dividend. We expect then to move progressively towards a payout ratio of 40% in the medium term.
SLIDE Q1 2005
Turning to the first quarter of this year, we released the results for the period from 1 January 2005 to 31 March 2005 to the London Stock Exchange on 12 May.
SLIDE – Q1 HIGHLIGHTS
The business has delivered a strong performance. Integration of the EME and Turbogás acquisitions has progressed well and the acquired assets have performed in line with expectations. Higher profitability in this quarter includes positive contributions from all new plants, benefiting in particular from a strong performance at First Hydro in the UK.
SLIDE GROUP COMPARATIVES
Financial Highlights for the quarter were: Earnings per share (excluding exceptional items) of 3.8p against 2.6p in 2004 and profit before tax and excluding exceptional items of £83 million, against £42 million in the corresponding period last year.
Looking at the regions:
SLIDE NORTH AMERICA
North America incurred a loss from operations of £7 million against a loss in 2004 of £5 million. Profit after tax from joint ventures and associates increased to £6 million from £2 million last year, reflecting earnings from EcoEléctrica in Puerto Rico, acquired as part of the EME transaction. However, this increase was more than offset by the contribution from the merchant fleet, which was down on last year principally due to IFRS mark‑to‑market adjustments on our hedging contracts.
Our Hays plant in South Texas, which was mothballed in January 2004, has returned to full commercial operation. and we continue to expect market recovery in Texas and New England in the period 2007 to 2009.
SLIDE EUROPE
Profit from operations increased significantly to £78 million (2004: £31 million) following the substantial increase in operational capacity in 2004. Total installed capacity in Europe has increased 92% to 4,904 MW since Q1 2004.
All assets acquired in Europe last year made positive contributions to profit. First Hydro delivered strong earnings due to a robust performance in the Ancillary Services and Balancing Mechanism market. First Hydro’s earnings are highly seasonal and performance in this quarter reflects a particularly strong demand for reserve capacity and rapid response services in the winter of 2004 /05. All other assets in the portfolio continued to perform to expectations.
In March, Rugeley received £53 million from the TXU Administrators in relation to its contract termination claim. The remainder of the claim, in the range of £20 million to £31 million, is expected to be received in the second half of 2005 and in early 2006. The majority of the settlement will be used to pay down project level debt.
SLIDE MIDDLE EAST
As in 2004, the Middle East region generated profit from operations of £4 million. The underlying operations showed growth in earnings attributable to Shuweihat in the UAE, which commenced operation in October last year. However, overall profit from operations was flat as the comparative period in 2004 included development fee income. All assets in the region continue to perform well.
The financing of the Ras Laffan B power and water plant in Qatar was completed in April 2005. This facility was strongly supported by a consortium of major local and international banks.
SLIDE AUSTRALIA
Overall profit from operations for the region rose to £39 million, against £36 million in 2004, reflecting the additional contribution from the assets acquired in 2004, particularly Loy Yang B. As expected, earnings from Hazelwood are down on the comparative period last year, which benefited from higher contracted prices. The Canunda wind farm successfully commenced operation at the end of March 2005 and has delivered a modest contribution to profit.
In April, International Power and EnergyAustralia signed an agreement to establish a 50:50 partnership to sell electricity and gas to retail customers in Victoria and South Australia. International Power will pay A$60 million (£24 million) for its 50 per cent share of this retail partnership. The retail business currently has 175,000 gas and electricity accounts. Completion of this acquisition is expected in July 2005.
SLIDE ASIA
Profit from operations in Asia increased considerably to £22 million, against £7 million in 2004, mainly reflecting additional earnings from Paiton in Indonesia. All assets in the region delivered a strong financial performance. In April 2005, Malakoff completed the acquisition of a further 19% shareholding in the 1,303 MW CCGT Lumut Power Plant. Malakoff’s net installed capacity now totals 3,108 MW, which translates to net capacity of 566 MW for International Power.
SLIDE LOOKING FORWARD
Looking forward, Integration of the EME and Turbogás acquisitions has progressed very well and these assets are contributing to profits and cash flow in line with expectations. The underlying financial performance of the portfolio is on track and our earnings per share guidance for 2005 remains in the range of 11.0p to 12.5p.
Ladies and Gentlemen, there are 10 separate resolutions being put forward for your consideration today. All 10 resolutions represent standard business at Annual General Meetings.
SLIDE - QUESTION PROCEDURE
As the various resolutions are put to you, you will of course want to ask questions. However it will help me greatly and will ensure that the meeting moves ahead smoothly if I take questions that relate specifically to each individual resolution at the time that I put the resolution to the meeting.
Those of you who have pre-registered questions are seated in the area at the front of the auditorium. To those of you sitting in the pre-registered question area, can I say thank you for your cooperation and I will take your questions first.
If you are seated elsewhere in the auditorium and wish to ask a question I would be grateful if you could wait until the appropriate resolution is being put forward to the Meeting and then raise your hand. A representative of the Company will then come to you with a roving microphone.
When asking a question please could you state your name clearly for the record. That will enable us to get back to you if any follow up is necessary, and can I remind the Meeting that only shareholders are able to ask questions.
Finally, any questions that relate specifically to your personal shareholding should be addressed to Lloyds TSB Registrars, representatives of whom are present here today and who will be available after the Meeting has ended.
Thank you.
SLIDE - NOTICE OF ANNUAL GENERAL MEETING
The Notice of the Annual General Meeting for 2005 was circulated to all shareholders during April of this year together with the Annual Report and the Summary Annual Report for the financial period ended 31 December 2004.
With your consent, I would like to take the Notice of Meeting as read.
Thank you very much.
SLIDE - RESOLUTION 1
The first resolution is to receive the Accounts for the financial period ended 31 December 2004. The auditors’ report on the Accounts is set out on page 69 of the Annual Report. No issues have been raised for your attention. Therefore, can we also please take the auditors’ statement as read?
Thank you.
I now propose the first Resolution:
“To receive the Accounts for the financial period ended 31 December 2004 and the Report of the Directors, the Directors’ remuneration report and the report of the auditors on those Accounts and on the auditable part of the Directors’ remuneration report.”
I will now take questions on this resolution. Can I take the first question please starting with those of you seated in the pre-registered question area at the front.
[Questions]
If those are all the questions, I will now put resolution 1 to the vote. Please indicate your vote by holding up your white voting card. Those in favour? Those against? Thank you. I declare the Resolution carried.
SLIDE SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the slide behind me. 99.84% of the proxy votes cast were in favour of the resolution.
SLIDE: APPOINTMENT OF DIRECTORS
Resolutions two to four are for the re-appointment of Directors of the Company. Having been appointed a director since the last Annual General Meeting, Struan Robertson is automatically put forward for re-appointment. In addition, in accordance with the Company’s Articles of Association and good corporate governance, both Phil Cox and Adri Baan are put forward for re-election this year.
SLIDE: TO REAPPOINT STRUAN ROBERTSON
Resolution 2 is for the re-appointment of Struan Robertson. Struan became a Non-Executive Director on 1 October 2004. Struan’s appointment was made following a recruitment exercise carried out by external consultants. He was Group Chief Executive of Wates Group Ltd until January 2004. Before that he had a 25-year international career with BP plc, during which time he held a number of senior roles. He is presently the Senior Independent Director at WS Atkins plc and a Non-Executive Director at Forth Ports plc and Henderson TR Pacific Investment trust plc. Along with his engineering background Struan also brings excellent international business experience gained at senior level within the energy sector at BP. Along with our other Non-Executive Directors he is a member of the Audit, Remuneration and Appointment Committees of the Board.
I propose the re-appointment of Struan Robertson as a Director. Are there any questions on Struan’s re-appointment?
I now put the Resolution to the Vote. Those in favour? Those against? Thank you. I declare the Resolution carried.
SLIDE SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the slide behind me. 99.08% of the proxy votes cast were in favour of the resolution.
SLIDE: TO REAPPOINT PHIL COX
Resolution 3 is for the re-appointment of Phil Cox as a Director. Phil is of course our Chief Executive Officer, having been appointed to that position in December 2003. Phil joined the Company in May 2000 and prior to his appointment as CEO, he was International Power’s Chief Financial Officer.
I propose the re-appointment of Philip Cox as a Director. Are there any questions on Phil’s re-appointment?
I now put the Resolution to the Vote. Those in favour? Those against? Thank you. I declare the Resolution carried.
SLIDE SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the slide behind me. 98.43% of the proxy votes cast were in favour of the resolution.
SLIDE: TO REAPPOINT ADRI BAAN
Resolution 4 is for the re-appointment of Adri Baan as a Director. Adri was appointed as a Non-Executive Director in June 2002 and is Chairman of the Remuneration Committee and a member of the Audit and Appointments Committee.
I propose the re-appointment of Adri Baan as a Director. Are there any questions on Adri’s re-appointment?
I now put the Resolution to the Vote. Those in favour? Those against? Thank you. I declare the Resolution carried.
SLIDE SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the slide behind me. 98.91% of the proxy votes cast were in favour of the resolution.
SLIDE: TO DECLARE A FINAL DIVIDEND
Resolution 5 which is an Ordinary Resolution, is to declare a final dividend. Are there any questions on this resolution?
I now put the Resolution to the Vote.
Those in favour? Those against? Thank you.
It gives me great pleasure to declare the Resolution carried.
SLIDE SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the slide behind me. 99.96% of the proxy votes cast were in favour of the resolution.
SLIDE: DIRECTORS’ REMUNERATION REPORT
Resolution 6 is an Ordinary Resolution requesting your approval of the Directors’ remuneration report. Are there any questions on this resolution?
Accordingly I propose:
“That the Directors’ remuneration report for the year ended 31 December 2004 as set out on pages 54 to 66 of the Annual Report and Accounts is approved. “
I now put the Resolution to the Vote. Those in favour? Those against? Thank you. I declare the Resolution carried.
SLIDE SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the slide behind me. 94.86% of the proxy votes cast were in favour of the resolution.
SLIDE: RE-APPOINTMENT OF AUDITORS
Resolution 7 is for the re-appointment of KPMG Audit Plc as auditors of the Company. KPMG Audit Plc have indicated their willingness to continue as auditors for International Power plc. Are there any questions on this resolution?
Accordingly I propose:
“To re-appoint KPMG Audit Plc as auditors of the Company to hold office from the conclusion of the AGM to the conclusion of the next meeting at which accounts are laid before the Company and to authorise the Directors to set their remuneration.”
I now put the Resolution to the Vote. Those in favour? Those against? Thank you. I declare the Resolution carried.
SLIDE SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the slide behind me. 98.28% of the proxy votes cast were in favour of the resolution.
We now move to those items described as special business.
SLIDE: GENERAL AUTHORITY TO ALLOT SHARES
Resolution 8 is an Ordinary Resolution requesting shareholders to give general authority to the Directors to allot Ordinary shares. The renewed authority, if given, will last until the 2006 Annual General Meeting of the Company, or 17 August 2006, whichever is the earlier. Are there any questions on this resolution?
I now put the Resolution to the Vote. Those in favour? Those against? I declare the Resolution carried.
SLIDE SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the slide behind me. 99.74% of the proxy votes cast were in favour of the resolution.
SLIDE: DISAPPLICATION OF PRE-EMPTION RIGHTS
Resolution 9 renews the authority given annually to the Directors to disapply shareholders existing pre-emption rights in respect of a proportion of the unissued shares of the Company. The number of unissued shares over which we are requesting you to disapply these pre-emption rights represents five per cent. of the issued share capital as at 31 December 2004. Are there any questions on this resolution?
I now put the Resolution to the Vote. Those in favour? Those against? I declare the Resolution carried as a Special resolution.
SLIDE SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the slide behind me. 99.11% of the proxy votes cast were in favour of the resolution.
SLIDE: PURCHASE OF OWN SHARES
Turning now to our last item of business, Resolution 10, which is a Special Resolution, renews the authority given annually to the Directors to purchase the shares of the Company on the London Stock Exchange. We ask you for this authority each year to provide us with the flexibility of undertaking such purchases should market conditions be such that it would be prudent for us to do so. This ability benefits all shareholders equally by increasing their stake in the company and also by increasing earnings per share. Are there any questions on this resolution?
I now put the Resolution to the Vote. Those in favour? Those against? I declare the Resolution carried as a Special resolution.
SLIDE SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the slide behind me. 99.84% of the proxy votes cast were in favour of the resolution.
SLIDE: HOLDING/CLOSING SLIDE
That concludes the business of the Meeting Ladies and Gentlemen. Could I thank you all for your attendance and wish you a safe journey home.
