Press Releases

21/08/2000

Proposed Demerger to Create Innogy Holdings plc and International Power plc and Related Transactions

National Power PLC Windmill Hill Business Park
Whitehill Way Swindon Wiltshire SN5 6PB

KEY POINTS

Proposed demerger to create Innogy Holdings and International Power is on track for completion on 2 October 2000.
Following extensive restructuring during the last nine months, Innogy is now positioned as an integrated energy company in the UK with a balanced portfolio of production and retail to 2.8 million customers, bridged by a top-class trading capability. This core business is complemented by new businesses in international operations and engineering and in energy technology, as well as a UK cogeneration and renewables business
International Power will be one of the world's largest international independent power developers with resources and skills to play an active role in all phases of the power generation value chain, including development, construction and operation
Documents relating to the proposed demerger are to be filed with the UK Listing Authority and are expected to be published, posted to shareholders and made available to bondholders from today
The calling of an Extraordinary General Meeting of National Power's shareholders for 29 September 2000 to approve the proposed demerger
The calling of separate meetings of holders of National Power's outstanding Sterling Bonds for 13 September 2000 to approve resolutions to change the obligor of these bonds to Innogy.

INNOGY Innogy comprises an integrated UK energy business consisting of:

A production and trading business with a flexible, low-cost portfolio of almost 7,700 MW of UK gas, coal and oil fired generating plant.
An energy trading capability which bridges production and retail to maximise value.
business built from the combination of the MEB, Energy Direct and Calortex supply businesses.
A leading UK cogeneration and renewables business with the potential to capitalise on global trends in favour of environmental protection and on government incentives.
An international engineering and operations business, which leverages Innogy's experience and expertise managing power stations in one of the world's most advanced deregulated energy markets.
A new energy technology business, including Regenesys, Innogy's revolutionary technology about to be brought to the commercial market.

Innogy's dividend policy will be consistent with its strategy of growth and investment. Accordingly, while it will seek to provide real growth in dividends per share, it will also aim to maintain an appropriate level of dividend cover so as to allow management to pursue its investment plans. With this in mind, the proposed directors of Innogy currently expect to recommend a dividend for the financial year ending 31 March 2001 of 7.5 pence per share.

Innogy has been advised by Standard & Poor's and Moody's that they expect its senior debt obligations will be rated BBB+ and Baa1 respectively. These indicative ratings are subject to confirmation by Standard & Poor's and Moody's based upon the actual net debt and capital structure of Innogy in place at the time of the proposed demerger.

INTERNATIONAL POWER

International Power will be one of the world's largest international independent power developers and will have its headquarters in London and its principal regional offices in Houston, Prague, Madrid, Istanbul, Kuala Lumpur and Sydney. At demerger, International Power will have:

A broad spread of interests in operating power plants with capacity totalling 15,582 MW gross (6,363 MW net).
Seven wholly-owned plants in construction, principally in the United States, with a capacity of 4,487 MW. When these become operational in 2000/01, they will increase International Power's operational portfolio to 20,069 MW gross (10,850 MW net).
Interests in twelve projects in advanced development in five countries representing a further approximately 8,000 MW of net capacity.

International Power is primarily focusing its expansion strategy on the US, Europe and Australia, where it sees the opportunity for healthy returns in growing markets which enjoy a relatively low risk profile. Investment decisions regarding both the current portfolio and future development opportunities will depend purely on the fulfilment of rigorous financial criteria, in order to maximise returns. As an independent power producer, International Power has the entrepreneurial culture and empowered local management structure, supported by tight financial controls, to make swift and judicious investment decisions. International Power does not expect to pay any dividends in the foreseeable future but rather intends to retain earnings to fund the development and growth of its business. It is also prohibited under the terms of certain of its credit facilities from paying any dividends during the term of such facilities. International Power has been advised by Standard & Poor's and Moody's that it is likely to be assigned long-term credit ratings of BB and Ba3 respectively. These indicative ratings are subject to confirmation by Standard & Poor's and Moody's based upon the actual net debt and capital structure of International Power in place at the time of the proposed demerger.

STATEMENTS FROM THE CHAIRMEN

Sir John Collins, Chairman of National Power said:

"Nine months ago, we announced our proposal to demerge the UK business of National Power and create two new, highly focused, substantial companies. We have now completed the significant amount of work necessary to prepare National Power for the proposed demerger while continuing to drive both businesses hard for value. We are ready to seek formal approval from our shareholders to effect the transactions that will enable the proposed demerger to be completed and to launch Innogy and International Power into an independent and exciting future."

Ross Sayers, Chairman designate of Innogy said:

"Today we are launching a dynamic new UK energy company, Innogy. It combines a balanced core business of production, trading, and retail, and new businesses in international services and energy technology. These provide a strong platform for growth and delivery of returns to shareholders."

Sir Neville Simms, Chairman designate of International Power said:

"International Power is already strongly placed to benefit from the growth in the global power market. We have the depth of expertise, the entrepreneurial mindset, and the asset base to succeed in delivering real earnings growth for our shareholders."

DETAILS OF THE PROPOSED DEMERGER

The proposed demerger will be implemented by way of a dividend in specie to National Power's shareholders. It is expected that, for every ordinary share they hold in National Power, shareholders on the register on the demerger record date will receive one share in Innogy Holdings and retain one share in National Power. National Power will then be renamed International Power. If shareholders approve the proposed demerger, it is expected that it will become effective and that trading in Innogy Holdings and International Power shares will commence on 2 October 2000. Innogy and International Power are expected to be traded on both the London and New York Stock Exchanges. Shares and ADRs in Innogy Holdings are expected to be listed and trade under the symbol IOG on both exchanges and shares and ADRs in International Power are expected to be listed and trade under the symbol IPR on both exchanges.

PROPOSALS TO HOLDERS OF NATIONAL POWER'S STERLING BONDS

In respect of National Power's outstanding publicly traded Sterling Bonds (£200,000,000 10 5/8 per cent. Bonds due 2001, £300,000,000 8.375 per cent. Notes due 2006 and £200,000,000 8.125 per cent. Bonds due 2022), the Company is calling separate meetings of these bondholders for 13 September 2000 to seek approval, inter alia, to change the obligor of these bonds from National Power to Innogy, thereby following the key UK assets against which these bonds were originally issued and, based on the expected ratings of Innogy and International Power following the proposed demerger, maintaining their investment grade status. A special committee of the Association of British Insurers has examined the Company's proposals to change the obligor of these bonds to Innogy and finds them acceptable.

ADR PROGRAMME

In advance of the proposed demerger, National Power has, with effect from 18 August 2000, changed its ADR ratio from 4:1 to 10:1. A new CUSIP number has been assigned due to the ratio change. The new CUSIP number for National Power's ADRs is 637194705. Both Innogy and International Power will have ADR ratios of 10:1.

SHAREHOLDER AND BONDHOLDER DOCUMENTATION

The documents to be sent to shareholders will include:

National Power Shareholder Circular - containing information on the proposed demerger and other related proposals. This document also includes the Notices calling National Power's Annual General Meeting and the Extraordinary General Meeting to approve the proposed demerger.
Innogy Holdings Listing Particulars - containing a detailed description of Innogy together with supporting financial information. This document has been produced in connection with Innogy Holdings' application for listing on the Official List of the UK Listing Authority. A version of the document will also be filed with the Securities and Exchange Commission.
International Power Information Memorandum - containing a detailed description of International Power together with supporting financial information.

The documents to be made available to bondholders will include:

National Power Bondholder Circular - containing information on the proposals to change, inter alia, the obligor of National Power's outstanding Sterling Bonds to Innogy. This document also contains the notices calling the meetings of holders of these bonds to approve these proposals.
Innogy Bonds Prospectus - containing a detailed description of Innogy together with supporting financial information. This document has been produced in connection with Innogy's applications for listing of the bonds, of which it may become obligor, on the Official List of the UK Listing Authority.

EXPECTED TIMETABLE

The expected timetable for the proposed demerger is as follows:
Publication of documents for shareholders and bondholders	21 August 2000
Meetings of holders of National Power's Sterling Bonds	13 September 2000
Annual General Meeting of National Power shareholders	29 September 2000
Extraordinary General Meeting of National Power shareholders	29 September 2000
Demerger Record Date	2 October 2000
Commencement of dealings in Innogy Holdings and International Power shares on the London Stock Exchange and ADRs on the New York Stock Exchange	2 October 2000

The expected timetable is subject to approval by the UK Listing Authority of the documents relating to the proposed demerger and related transactions to be sent to shareholders and bondholders.

ENQUIRIES

National Power	Lynda Ashton	44 (0) 20 7615 3912
Innogy
Investor	Steve Cronin	44 (0) 20 7615 3615
Media	Rollo Head, Mark Harris	44 (0) 20 7251 3801
International Power
Investors	Grant Jones	44 (0) 20 7615 3129
Media	Morgan Bone, Edward Orlebar	44 (0) 20 7251 3801

Salomon Brothers International Limited ("Schroder Salomon Smith Barney") is adviser to National Power PLC and Innogy Holdings plc on the proposed demerger and the introduction of Innogy Holdings plc to the Official List of the UK Listing Authority (the "Introduction"). Schroder Salomon Smith Barney, which is regulated by The Securities and Futures Authority Limited, is acting for National Power PLC and Innogy Holdings plc and no-one else in connection with the proposed demerger and the Introduction and will not be responsible to anyone other than National Power PLC and Innogy Holdings plc for providing the protections afforded to their customers or for providing advice in relation to the proposed demerger and the Introduction or any other matter referred to herein. This announcement does not constitute an offer or invitation to purchase or subscribe for any securities of National Power PLC or of the new companies, Innogy Holdings plc, International Power plc or Innogy plc.