Press Releases
04/08/2005
Interim Results for the six months ended 30 June 2005
Full announcement including financials in PDF format 
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(London – 4 August 2005) International Power today announces its financial results for the six month period ended 30 June 2005 and reports on key developments in the year to date.
Sir Neville Simms, Chairman of International Power, said, “The business has delivered a strong performance. Earnings and cash flow are up significantly, reflecting good contributions from the assets acquired in 2004 and the improving conditions in the UK and US merchant markets. Based on first half performance, and our view of the rest of the financial year , we are increasing our 2005 earnings per share guidance to 12.0p -13.0p.”
Highlights
- Profit from operations* (excluding exceptional items) of £233 million up 96% (H1 2004: £119 million)
- PBT (excluding exceptional items) of £142 million up 84% (H1 2004: £77 million)
- EPS (excluding exceptional items) of 6.7p up 40% (H1 2004: 4.8p)
- Free cash flow of £134 million (H1 2004: £41 million)
- Acquisition of 1,200 MW CCGT Saltend plant completed
- EME portfolio integration complete
Profit from operations* |
Six months ended 30 June |
Year ended 31 December |
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| 2005 | 2004 | 2004 | |
| £m | £m | £m | |
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| North America | 8 | (10) | (21) |
| Europe | 112 | 47 | 97 |
| Middle East | 13 | 11 | 20 |
| Australia | 65 | 59 | 98 |
| Asia | 53 | 28 | 60 |
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| Regional total | 251 | 135 | 254 |
| Corporate costs | (18) | (16) | (32) |
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| Profit from operations | 233 | 119 | 222 |
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*Profit from operations comprises the sum of profit before interest and tax (PBIT) of subsidiaries and profit after tax (PAT) of joint ventures and associates. Comparatives for 2004 have been presented on this basis.
North America
First half 2005 profit from operations in North America increased to £8 million, compared to a loss from operations of £10 million in the same period last year. This improvement is attributable to a better performance at our merchant assets, principally in Texas , profits from EcoEléctrica in Puerto Rico , and the return to service of our Hays plant in May 2005.
In Texas, our merchant plants benefited from the recent retirement of 5,000 MW of old and inefficient capacity, which has reduced the level of oversupply in this market. Spark spreads for our efficient plants in both ( Texas and New England ) markets increased due to higher gas prices and transmission constraints during periods of high demand. As 75% of the 2005 expected output in both markets is contracted, the uncontracted portion will benefit from this improvement. Overall, trading liquidity has also improved in both markets, and we are confident of market recovery in the period 2007 to 2009.
Europe
Profit from operations in Europe increased significantly to £112 million from £47 million last year. This is attributable to additional contributions from Turbogás and the EME plants acquired in 2004, a good overall performance across the rest of the European portfolio, and a £9 million cost recovery from the TXU administrators. In March, Rugeley received £53 million in relation to its TXU contract termination claim, of which £44 million has been recorded as an exceptional item.
In the merchant UK market, First Hydro and Rugeley performed well. Deeside's performance was marginally up on the first half of last year, although its earnings continue to experience the negative pressure of high gas prices. With high gas and carbon prices setting the price of power in the UK , coal fired generation is benefiting from its relatively stable fuel cost. As a result, spot and forward spreads for coal fired plants have increased significantly. For 2005, Rugeley remains highly contracted at spreads that offer a good return, and will benefit from these higher spreads in 2006 and beyond.
The cost of CO2 certificates has risen significantly from €7 per tonne in January to €26 per tonne in June this year. However, this higher cost of CO2 certificates has largely been reflected in the price of power.
On 28 July we completed the acquisition of the 1,200 MW CCGT Saltend Power Plant in the UK in a 70:30 partnership with Mitsui & Co., Ltd of Japan . Saltend was acquired from Calpine Corporation for a total consideration of £500 million, which includes the valuation of the plant and the associated gas and power contracts. Saltend is expected to be earnings enhancing in the first full year of ownership and immediately cash generative.
Middle East
Profit from operations in the Middle East increased to £13 million, from £11 million in 2004. All power and water plants delivered good operational and financial performance.
Overall, the construction programme in the region continues to make good progress. Following successful financing, construction of Ras Laffan B (1,025 MW; 60 MIGD) in Qatar has commenced, and 600 MW of new capacity is expected to be operational in H2 2006. The construction of the four Tihama sites (1,074 MW) in Saudi Arabia is also progressing well, with approximately 660 MW and 2.5 million lbs/hr of steam expected to commence operation towards the end of H1 2006, and the remainder in H2 2006.
Australia
The Australian business generated profit from operations of £65 million, up from £59 million last year. Canunda, our wind farm, and the assets acquired from EME, namely Loy Yang B, Kwinana and Valley Power, drove this increase in earnings. As expected, earnings at Hazelwood and Pelican Point were down due to lower achieved prices (although higher than prices in the underlying market) compared to 2004. While the supply demand balance remains favourable, forward prices are largely unchanged.
The retail partnership between EnergyAustralia and International Power Australia was completed in July 2005. Consideration of A$60 million (£25 million) was paid for the 50% share of the partnership. The number of power and gas accounts has increased from 175,000 in April to circa 200,000 at completion. This partnership gives us a direct channel to the retail market with an established energy retailer.
As agreed with the Australian Competition and Consumer Commission (ACCC) at the time of the EME acquisition, we have announced our intention to divest our 42% interest in the 300 MW Valley Power peaking plant in Victoria.
Asia
In Asia , profit from operations rose significantly to £53 million from £28 million in 2004. This was primarily driven by the contribution from Paiton, and a £4 million profit on the sale of Tri Energy, and a first time contribution from Uch.
Paiton, which is the largest power plant in Indonesia , performed well and again exceeded its PPA performance targets. Across the region, HUBCO, KAPCO, Malakoff and TNP all delivered a solid performance.
Interest
Net interest (excluding exceptional items) at £91 million is £49 million higher than 2004 due to the impact of the additional debt relating to the EME and Turbogás acquisitions.
Tax
The tax charge (excluding exceptional items) at £27 million is £12 million up on 2004. This is mainly due to higher profit before tax.
The effective tax rate for 2005 is expected to be in the order of 31%, which is 2% lower than our estimate at Q1 2005. This reduction reflects the recent clarification of the changes introduced in the UK budget, and a reassessment following the finalisation of the Finance Act.
Summary balance sheet
A summarised, reclassified Group balance sheet is set out below:
| As at 30 June 2005 |
As at 30 June 2004 |
As at 31 December 2004 |
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| £m | £m | £m | |
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| Non current assets | |||
| Intangibles and tangibles | 4,112 | 2,031 | 3,941 |
| Investments | 1,290 | 547 | 1,253 |
| Other long term receivables | 564 | - | 581 |
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| 5,966 | 2,578 | 5,775 | |
| Net current liabilities | (397) | (98) | (116) |
| Provisions and creditors > one year | (865) | (273) | (862) |
| Net debt | (2,625) | (678) | (2,739) |
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| Net assets | 2,079 | 1,529 | 2,058 |
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| Gearing | 126% | 44% | 133% |
| Debt capitalisation | 56% | 31% | 57% |
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The decrease in debt capitalisation since 2004 year end principally reflects the strong cash flow of the Group in the six months to 30 June 2005. The increase in net current liabilities to £397 million principally reflects the mark to market value of our hedging arrangements in accordance with IAS 39.
Cash Flow
A summary of the Group cash flow is set out below:
| Six months ended 30 June 2005 |
Six months ended 30 June 2004 |
Year ended 31 December 2004 |
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| £m | £m | £m | |
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| Profit for the period | 146 | 62 | 104 |
| Adjustment for non cash items | 53 | 45 | 89 |
| Dividends from joint ventures and associates | 41 | 45 | 69 |
| Movement in working capital | 13 | (21) | 5 |
| Capital expenditure – maintenance | (23) | (42) | (59) |
| Other cash movements | 3 | - | - |
| Tax and interest paid | (99) | (48) | (104) |
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| Free cash flow | 134 | 41 | 104 |
| Finance cost – exceptional | - | - | (26) |
| Refinancing costs capitalised on acquisition debt | - | - | (22) |
| Capital expenditure – growth | (95) | (81) | (158) |
| Capital expenditure – other financial investments | (5) | (27) | (61) |
| Acquisitions | (35) | - | (1,195) |
| Disposals | 137 | 17 | 17 |
| Exceptional receipt from TXU administrators | 44 | - | - |
| Proceeds from Rights Issue | - | - | 286 |
| Funding from minorities | 6 | 5 | 165 |
| Foreign exchange and other | (116) | 59 | 62 |
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| Decrease /(Increase) in net debt | 70 | 14 | (828) |
| Opening net debt | (2,739) | (692) | (692) |
| Transitional adjustment on first time adoption of IAS39 | 44 | - | - |
| Net debt on acquisition of subsidiaries | - | - | (1,219) |
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| Closing net debt | (2,625) | (678) | (2,739) |
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Free cash flow for H1 2005 at £134 million, up £93 million (2004: £41 million), reflects the impact of the assets acquired in 2004 and the improved UK and US merchant markets. This is offset by the £51 million increase in interest and tax payment, which reflects the additional debt associated with the EME and Turbogás acquisitions.
Dividends from joint ventures and associates at £41 million, down £4 million on 2004, reflect phasing of receipts between H1 and H2. Capital expenditure – maintenance, at £23 million is £19 million lower than 2004 due to higher levels of maintenance expenditure at Rugeley, Deeside and Hazelwood in 2004. Foreign exchange and other includes an exchange impact of £102 million on retranslation of net debt balances reflecting the strengthening of the US and Australian dollars.
Dividend
On 8 July 2005, we paid a dividend of 2.5p per share for the year ended 31 December 2004. For 2005 the Board expects to maintain a dividend pay-out ratio similar to the 30% level provided for the 2004 dividend. We expect then to move progressively towards a pay-out ratio of 40% in the medium-term.
Outlook
Based on a strong first half performance, the improvement in the US and the UK markets, and our positive view of the rest of the financial year , we are increasing our 2005 earnings per share guidance to 12.0p -13.0p.
For further information please contact:
Investor Contact:
Aarti Singhal
+44 (0)20 7320 8681
Media Contact:
Sara Richardson
+44 (0)20 7320 8619
About International Power
International Power plc is a leading independent electricity generating company with 16,372 MW (net) in operation and 1,706 MW (net) under construction. International Power has power plants in operation or under construction in Australia , the United States of America , the United Kingdom , the Czech Republic , Italy , Portugal , Spain , Turkey , Oman , Qatar , Saudi Arabia , the UAE, Indonesia , Malaysia , Pakistan , Puerto Rico and Thailand . International Power was listed on the London Stock Exchange and the New York Stock Exchange (as ADR's), on 2 October 2000. The ticker symbol on both stock exchanges is "IPR".
Company website: www.ipplc.com.
