LONDON, Sept. 4, 2003 (PRIMEZONE) -- International Power plc (NYSE:IPR) (Other OTC:IPRWF) today announces its financial results for the six-month period ended 30 June 2003 and reports on key developments to date.
"As expected, 2003 has been challenging, particularly in North America and the UK, where wholesale power prices and spark spreads remained low. However, the rest of our portfolio continued to perform well and we remain on track to deliver earnings in line with our guidance for this year," said Sir Neville Simms, Chairman of International Power.
"In the first half of this year, we have been able to capitalise on the current market environment and have executed selected business and financial transactions that will enhance shareholder value," Sir Neville added.
Highlights
- Profit before interest and tax of GBP138 million (pre
exceptional items)
- Operating cash flow of GBP131 million
- Earnings per share of 5.1p (pre exceptional items)
- Successful placement of US$252 (GBP158) million senior
convertible bond
- US$1.77 billion financing of Umm Al Nar completed
- Achieved exclusivity to acquire interest in 4,000 MW Drax
power plant
Financial Summary Six months ended 30 June
2003 2002
GBPm GBPm
Profit on ordinary activities before interest
and tax
Excluding exceptional items 138 229
Including exceptional items 146 208
Profit on ordinary activities before taxation
Excluding exceptional items 88 162
Including exceptional items 96 141
Earnings per share - Basic (EPS)
Excluding exceptional items 5.1p 9.9p
Including exceptional items 5.8p 8.6p
Operating cash flow from ordinary activities 131 221
North America
In North America, losses in the first quarter attributable to the unusual weather conditions in Texas and the high cost of gas transportation in New England, together with the continued weak pricing conditions in both markets in the second quarter, resulted in poor financial performance for the half year, with profit before interest and tax of GBP1 million. Due to improved plant availability, compensation for lost income from our main contractor (Alstom) was lower in the first half of 2003 compared to the equivalent period last year. In New England, power prices remained low during the third quarter due to soft demand and mild weather. In Texas, prices continued to be below expectations through August, notwithstanding a short period of record demand.
Near-term improvement in power prices in both markets remains dependent on withdrawal of inefficient capacity in order to effect a fundamental shift in the supply-demand balance. A high degree of uncertainty continues to impact the generation sector in both of our North American markets, with four of the largest portfolio generators in New England in Chapter 11, and two of the largest generation companies in Texas in the process of being sold. As a result, a certain inertia has existed on the supply side in both markets since we last reported. In the absence of withdrawal of some existing capacity, current forward prices are likely to remain low for the foreseeable future.
Europe & Middle East
All contracted assets, namely Pego, EOP, Marmara and Al Kamil, delivered robust financial and operational performance, and the Europe and Middle East region generated profit before interest and tax of GBP49 million. Earnings are lower in comparison to the same period last year, primarily due to the termination of the tolling contract with TXU Europe at Rugeley in late November 2002, and weak wholesale power prices in the UK during the first half of this year.
However, electricity prices in the UK have recently shown modest improvement, and although a portion of our UK generation capacity is contracted until March 2004, our uncontracted capacity remains well positioned to capture higher peak prices.
We have entered into an exclusive arrangement with AES Drax Holdings Limited (Drax) to participate in Drax's restructuring in order to acquire debt and equity, for maximum total cash cost of GBP130 million. We look forward to a successful conclusion of this process and our eventual participation in the ownership and management of Drax.
In Italy, our 800MW CCGT Paduli project near Naples, which is being developed in association with Ansaldo Energia, has received a key environmental authorisation (VIA) from the Italian Ministry of Environment. This authorisation is an important step towards obtaining complete approval to commence construction. Alongside the permitting process, we continue to work towards securing viable tolling or offtake contracts for Paduli and our other Italian projects.
In the Middle East, despite the backdrop of uncertainty associated with the conflict in Iraq, together with our partners Tokyo Electric, Mitsui and ADWEA, we successfully secured a US$1.77 billion financing package for the acquisition and associated expansion of the Umm Al Nar power and water plant in Abu Dhabi. As the principal operator, we have taken over control of plant operations (both power and water desalination) and in the first month the plant has delivered good performance. Preliminary construction related work on the expansion site has also commenced. Our total equity commitment to Umm Al Nar is approximately GBP56 million for our 20% shareholding.
With over 6,000 people working on site, construction of the Shuweihat S1 power and water plant in Abu Dhabi continues to make good progress. The first two (of a total of five) gas turbines have been successfully synchronised with the power grid and have been tested on full load. The plant is expected to commence commercial operation in Q3 2004.
Australia
Profit before interest and tax in Australia increased by 12% to GBP55 million from GBP49 million last year. This increase was attributable to a combination of the contractual prices secured together with tight control of operating expenditure. Looking ahead, although forward prices have weakened, we remain largely contracted through 2004 and moderately into 2005.
Construction of the SEAGas pipeline (650 km gas pipeline from Victoria to South Australia) continues. Over 580 km of pipe has now been laid.
Rest of the World (ROW)
All assets in our ROW business segment performed well and generated profit before interest and tax of GBP46 million.
We continue to monitor the value of all our investments in order to take advantage of opportunities to realise value as they arise. In line with this approach, we have monetised part of our investment in Hubco (in Pakistan) and have generated cash of GBP21 million and a profit of GBP8 million, through the sale of a 5% stake. Our equity interest in Hubco now totals 20.7%.
Interest
Interest at GBP50 million has benefited from a combination of lower interest rates on our floating debt and the impact of exchange translation gains on monetary assets.
Tax
The tax rate is 32%, compared to 30% last year, primarily reflecting the expiry of some overseas tax holidays.
Capital Structure
In July, we announced the successful issue of a US$252 million (GBP158 million) convertible bond, which has a minimum seven year term at a highly attractive coupon of 3.75%. We expect to use the proceeds from this bond to refinance in part the potential 'put' of the Company's 2% Convertible Bond in November 2003, and to repay the US$60 million Euro-Dollar Bond, due in December 2003.
In May, we initiated a share buyback programme. To date we have purchased, for cancellation, 5.5 million shares at a total cost of GBP6.7 million at prices ranging from 114p per share to 132p per share. The share buyback programme remains in effect.
In relation to the non-recourse US credit facility, which was raised to finance International Power's merchant power plant construction programme in the US, all technical defaults previously claimed by the US bank group were waived in May. The outstanding debt of GBP615 million has therefore been re-designated in the balance sheet from current debt to long term debt, reflecting its maturity date of June 2006.
We have now completed the restructuring of the Rugeley credit facility, which was in default as a consequence of the collapse of TXU Europe. The revised terms include a reduction in debt from GBP160 million to GBP90 million, through a GBP70 million repayment by International Power, offset by the cancellation of a GBP70 million letter of credit that we had previously provided.
Cash Flow
A summary of the Group cash flow is set out below:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
GBPm GBPm GBPm
Operating profit (pre 51 86 105
JVs and associates)
Impairment - 45 103
------ ------ ------
51 131 208
Depreciation and 54 46 112
amortisation
Movement in working (34) (35) (44)
capital and provisions
Dividends from JVs/ 60 79 115
associates/
investments
------ ------ ------
Operating cash flow 131 221 391
Capital expenditure - (39) (29) (48)
maintenance
Interest and tax (47) (58) (108)
Exceptional items
- Kapco dividend - 24 42
- Hazelwood - (25) (25)
refinancing
------ ------ ------
Free cash flow 45 133 252
Capital expenditure - (37) (60) (96)
growth
Acquisitions and 21 (133) (144)
disposals
Share buy back (6) - -
Foreign exchange and (35) 38 85
hedging
Other (10) (2) (12)
------ ------ ------
Movement in net debt (22) (24) 85
net debt
Opening net debt (812) (897) (897)
------ ------ ------
Closing net debt (834) (921) (812)
====== ====== ======
The group has generated positive operating and free cash flow at GBP131 million and GBP45 million respectively. However, cash flow performance is down in the half year, principally due to the reduced profitability of our subsidiaries in the US and the UK.
Balance Sheet
A summarised, reclassified presentation of the Group balance sheet is set out below:
As at As at As at
30 June 30 June 31 December
2003 2002 2002
GBPm GBPm GBPm
Fixed assets
Intangibles and tangibles 2,562 2,633 2,474
Investments 500 513 507
------ ------ ------
3,062 3,146 2,981
Net current liabilities (81) (145) (138)
Provisions and (278) (271) (262)
creditors greater than one
year
Net debt (834) (921) (812)
------ ------ ------
Net assets 1,869 1,809 1,769
====== ====== ======
Gearing 45% 51% 46%
Debt capitalisation 31% 34% 31%
Net assets at 30 June 2003 have increased by GBP100 million since 31 December 2002. This increase is due to the profitability of the group in the period, of GBP65 million, together with exchange gains of GBP35 million reflecting the impact of foreign exchange on the net investment in foreign entities and their related borrowings.
Corporate Social Responsibility
Pego (600MW coal fired plant) in Portugal, has for the sixth consecutive year received a gold award from the Royal Society for the Prevention of Accidents (ROSPA) for continuous improvement in occupational safety management.
Hub (1,290MW oil fired plant) in Pakistan, which is operated and maintained by International Power, has also received an award from ROSPA for outstanding performance in the area of health and safety.
Outlook
The lack of liquidity in our markets in the US means that current forward prices cannot be relied upon to predict the ultimate level of future prices. In the UK wholesale prices over the short term have shown some signs of improvement. Nonetheless, we believe that it is still too early to make any solid assumptions regarding prices in 2004. We can, however, reaffirm our stated earnings per share guidance for 2003 of 9p to 11p.
While these uncertain conditions prevail in two of our key markets, we continue to focus on maximising value from our existing asset base and pursuing a wide range of new investment opportunities within our existing markets.
Note:
With effect from 1 July 2003, in order to better reflect the nature of our business around the world and the way in which our operations will be managed, we will change the format of the geographic segmental analysis within our financial reports. Included in the Interim Announcement is the geographical segmental analysis in both the current and proposed formats, together with details of the composition of the current and proposed segments by plants in operation.
About International Power:
International Power plc is a global independent power producer with 10,990MW (net) in operation and 610MW (net) under construction. Among the countries where International Power has facilities in operation are Australia, the United States, the United Kingdom, the Czech Republic, Oman, the UAE, Portugal, Turkey, Malaysia, Pakistan, and Thailand. International Power was created in October 2000 and its shares are traded on the London Stock Exchange, and as ADRs on the New York Stock Exchange under the ticker symbol "IPR".
International Power plc
Consolidated Profit and Loss Account
For the six months ended 30 June 2003
Six months ended 30 June Six months ended 30 June
Exclud- Except- Includ- Exclud- Except- Includ-
ing ional ing ing ional ing
except- items except- except- items except-
ional ional ional ional
items items items items
2003 2003 2003 2002 2002 2002
Note GBPm GBPm GBPm GBPm GBPm GBPm
Turnover: 2 639 - 639 568 - 568
Group and
share of
joint
ventures
and
associates
Less: share (74) - (74) (63) - (63)
of joint
ventures'
turnover
Less: share (145) - (145) (161) - (161)
of
associates'
turnover
------ ------ ------ ------ ------ ------
Group 420 - 420 344 - 344
turnover
Net 3 (369) - (369) (213) (45) (258)
operating
costs
------ ------ ------ ------ ------ ------
Operating 51 - 51 131 (45) 86
profit
Share of
operating
profit of:
Joint 19 - 19 18 - 18
ventures
Associates 50 - 50 63 - 63
Income from 18 - 18 17 24 41
fixed asset
investments
------ ------ ------ ------ ------ ------
Operating 138 - 138 229 (21) 208
profit and
investment
income
Non 3 - 8 8 - - -
operating
exceptional
items
------ ------ ------ ------ ------ ------
Profit on 2 138 8 146 229 (21) 208
ordinary
activities
before
interest
and
taxation
------ ------ ------ ------ ------ ------
Net
interest
and similar
charges
Group (32) - (32) (50) - (50)
Joint (18) - (18) (17) - (17)
ventures
and
associates
------ ------ ------ ------ ------ ------
(50) - (50) (67) - (67)
------ ------ ------ ------ ------ ------
Profit on 88 8 96 162 (21) 141
ordinary
activities
before
taxation
Taxation (28) - (28) (48) 6 (42)
------ ------ ------ ------ ------ ------
Profit on 60 8 68 114 (15) 99
ordinary
activities
after
taxation
Minority (3) - (3) (3) - (3)
interests -
equity
------ ------ ------ ------ ------ ------
Profit for 57 8 65 111 (15) 96
the
financial
period
====== ====== ====== ====== ====== ======
Earnings
per
share
Basic 5.1p 0.7p 5.8p 9.9p (1.3)p 8.6p
====== ====== ====== ====== ====== ======
Diluted 5.1p 0.7p 5.8p 9.6p (1.3)p 8.3p
====== ====== ====== ====== ====== ======
Consolidated Profit and Loss Account
For the year ended 31 December 2002
Year ended 31 December
Excluding Exceptional Including
exceptional items exceptional
items items
2002 2002 2002
Note GBPm GBPm GBPm
Turnover: Group 2 1,129 - 1,129
and share of
joint ventures
and associates
Less: share of (122) - (122)
joint ventures'
turnover
Less: share of (290) - (290)
associates'
turnover
------ ------ ------
Group 717 - 717
turnover
Net operating 3 (509) (103) (612)
costs
------ ------ ------
Operating 208 (103) 105
profit
Share of
operating profit
of:
Joint ventures 26 - 26
Associates 123 - 123
Income from 31 42 73
fixed asset
investments
------ ------ ------
Operating profit 388 (61) 327
and investment
income
Non operating 3 - - -
exceptional
items
Profit on 2 388 (61) 327
ordinary
activities
before interest
and taxation
Net interest and
similar charges
------ ------ ------
Group (97) - (97)
Joint ventures (35) - (35)
and associates
------ ------ ------
(132) - (132)
------ ------ ------
Profit on 256 (61) 195
ordinary
activities
before taxation
Taxation (77) 1 (76)
------ ------ ------
Profit on 179 (60) 119
ordinary
activities after
taxation
Minority (6) - (6)
interests -
equity
------ ------ ------
Profit 173 (60) 113
for the
financial year
====== ====== ======
Earnings
per share
Basic 15.5p (5.4)p 10.1p
====== ====== ======
Diluted 15.5p (5.4)p 10.1p
====== ====== ======
Consolidated Balance Sheet
As at 30 June 2003
30 June 30 June 31 December
2003 2002 2002
Note GBPm GBPm GBPm
Fixed assets
Intangible assets 2 (1) 1
Tangible assets 2,560 2,634 2,473
Investments 500 513 507
------ ------ ------
Total fixed 3,062 3,146 2,981
assets
------ ------ ------
Current assets
Stocks 61 30 55
Debtors 153 159 134
Investments 63 71 43
Cash at bank and in 796 734 799
hand
------ ------ ------
Total current assets 1,073 994 1,031
Creditors: amounts
falling due within
one year
------ ------ ------
Secured loans 4 (225) (87) (810)
without recourse
Other current (559) (334) (595)
liabilities
------ ------ ------
Creditors: amounts (784) (421) (1,405)
falling due within
one year
------ ------ ------
Net current 289 573 (374)
assets/ (liabilities)
------ ------ ------
Total assets 3,351 3,719 2,607
less current
liabilities
Creditors: amounts (1,209) (1,647) (583)
falling due after
more than one year
Provisions for (273) (263) (255)
liabilities and
charges
------ ------ ------
Net assets 1,869 1,809 1,769
employed
====== ====== ======
Capital and
reserves
Shareholders' funds 1,834 1,780 1,740
- equity
Minority interests - 35 29 29
equity
------ ------ ------
Total equity 1,869 1,809 1,769
====== ====== ======
Net debt (834) (921) (812)
Gearing 44.6% 50.9% 45.9%
Debt capitalisation 30.9% 33.7% 31.5%
The gearing percentage represents net debt as a proportion of net assets employed. The debt capitalisation percentage represents net debt as a percentage of net assets employed plus net debt.
Consolidated Cash Flow Statement
For the six months ended 30 June 2003
Six Six Year
months months ended
ended ended
30 June 30 June 31 December
2003 2002 2002
Note GBPm GBPm GBPm
Net cash inflow from 5 71 142 276
operating activities
Dividends received 42 62 84
from joint ventures
and associates
Dividends received 18 17 31
from fixed asset
investments Ordinary
------ ------ ------
Cashflow from 131 221 391
ordinary operating
activities
Dividends received - 24 42
from fixed asset
investments
Exceptional
------ ------ ------
Returns on
investments and
servicing of finance
Ordinary (37) (46) (88)
Exceptional - (25) (25)
------ ------ ------
(37) (71) (113)
Taxation (10) (12) (20)
Capital (79) (89) (159)
expenditure and
financial investment
Acquisitions and 21 (133) (144)
disposals
------ ------ ------
Net cash 26 (60) (3)
inflow/ (outflow)
before management of
liquid resources and
financing activities
Management of liquid (14) (21) -
resources
------ ------ ------
Financing
activities
Share buy back (6) - -
Debt financing (21) 206 210
------ ------ ------
(27) 206 210
------ ------ ------
(Decrease)/ (15) 125 207
increase in cash in
period
====== ====== ======
Consolidated Reconciliation of Net Cash Flow to Movement in Net Debt
For the six months ended 30 June 2003
GBPm GBPm GBPm
(Decrease)/ increase in cash in (15) 125 207
period
Cash outflow/ (inflow) from 21 (206) (210)
decrease/(increase)
in debt financing
Cash outflow from increase in 14 21 -
liquid resources
------ ------ ------
Change in net debt resulting 20 (60) (3)
from cash flows
Translation differences (35) 38 98
Other non-cash movements (7) (2) (10)
------ ------ ------
Movement in net debt in the (22) (24) 85
period
Net debt at the start of the (812) (897) (897)
period ------ ------ ------
Net debt at the end of the (834) (921) (812)
period
====== ====== ======
Consolidated Statement of Total Recognised Gains and Losses
For the six months ended 30 June 2003
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
GBPm GBPm GBPm
Profit for the 65 96 113
financial period
Exchange differences 35 14 (42)
on the retranslation
of net investments
and borrowings
Share of - - (1)
recognised loss of
associated
undertaking
------ ------ ------
Total recognised 100 110 70
gains and losses for
the period
====== ====== ======
Reconciliation of Movements in Shareholders' Funds - Equity
For the six months ended 30 June 2003
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2003 2002 2002
GBPm GBPm GBPm
Profit for 65 96 113
the financial period
Other recognised 35 14 (43)
gains and losses
relating to the
period (net)
Share buy back (6) - -
------ ------ ------
Net addition 94 110 70
to shareholders' funds
Opening shareholders' 1,740 1,670 1,670
funds
------ ------ ------
Closing 1,834 1,780 1,740
shareholders' funds
====== ====== ======
Notes to the Accounts
For the six months ended 30 June 2003
1. Basis of preparation
The accounts for the six months ended 30 June 2003 have been prepared under the historical cost convention and in accordance with applicable Accounting Standards, using the same accounting policies as those adopted for the year ended 31 December 2002. Minor adjustments have been made to comparative figures to make them consistent with the current period.
The financial statements are unaudited but have been reviewed by the auditors and their report is set out on page 16. These statements do not constitute statutory accounts of the group within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2002 have been filed with the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain statements under Section 237 of the Companies Act 1985.
2. Geographical segmental analysis
Current segmentation
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2003 2002 2002
GBPm GBPm GBPm
Group turnover
North America 224 130 315
Europe and Middle 229 242 440
East
Australia 116 110 226
Rest of World 70 86 148
------ ------ ------
639 568 1,129
Less: turnover of (74) (63) (122)
joint ventures
Less: turnover of (145) (161) (290)
associates
------ ------ ------
420 344 717
====== ====== ======
Profit before
interest and
taxation (excluding
exceptional items)
North America 1 59 99
Europe and Middle 49 77 109
East
Australia 55 49 101
Rest of World 46 56 108
------ ------ ------
151 241 417
Corporate costs (13) (12) (29)
------ ------ ------
138 229 388
====== ====== ======
Notes
1. North America profit before interest and taxation includes other income in respect of the late commissioning and performance recovery of new power plants amounting to GBP14 million (six months ended 30 June 2002: GBP61 million; year ended 31 December 2002: GBP102 million).
2. During the six months ended 30 June 2003, we also received GBP34 million (US$52 million) from contractors in relation to compensation for plants not achieving the long-term performance levels specified in the original contracts. These amounts have been recorded as a reduction in the cost of the plant and therefore not included in income.
2. Geographical segmental analysis (continued)
With effect from 1 July 2003, we will change the geographical segmental analysis to better represent how we manage our business following a reallocation of the responsibilities between our regional teams. The table below presents our results under the proposed segmentation, our Q3 results will be presented in this regional grouping. Appendix II details the composition of the current and proposed segments by operating plant.
Proposed segmentation
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2003 2002 2002
GBPm GBPm GBPm
Group turnover
North America 224 130 315
Europe 219 242 440
Middle East 38 40 63
Australia 116 110 226
Rest of World 42 46 85
------ ------ ------
639 568 1,129
Less: turnover of (74) (63) (122)
joint ventures
Less: turnover of (145) (161) (290)
associates
------ ------ ------
420 344 717
====== ====== ======
Profit before
interest and
taxation (excluding
exceptional items)
North America 1 59 99
Europe 43 67 100
Middle East 36 49 86
Australia 55 49 101
Rest of World 16 17 31
------ ------ ------
151 241 417
Corporate costs (13) (12) (29)
------ ------ ------
138 229 388
====== ====== =====
Notes
1. North America profit before interest and taxation includes other income in respect of the late commissioning and performance recovery of new power plants amounting to GBP14 million (six months ended 30 June 2002: GBP61 million; year ended 31 December 2002: GBP102 million).
2. During the six months ended 30 June 2003, we also received GBP34 million (US$52 million) from contractors in relation to compensation for plants not achieving the long-term performance levels specified in the original contracts. These amounts have been recorded as a reduction in the cost of the plant and therefore not included in income.
3. Exceptional items
Six months Six Year ended
ended months
ended
30 June 30 June 31 December
2003 2002 2002
GBPm GBPm GBPm
Net operating exceptional
items charged
Deeside impairment - (45) (45)
Rugeley impairment - - (58)
------ ------ ------
Net operating - (45) (103)
exceptional items
====== ====== ======
Exceptional income from
investments
Backlog dividend received - 24 42
from Kapco
====== ====== ======
Non-operating exceptional
items credited
Profit on disposal of a 8 - -
5% holding in Hubco
------ ------ ------
Non-operating 8 - -
exceptional items
====== ====== ======
Total exceptional items 8 (21) (61)
before attributable
taxation
Taxation on exceptional - 6 1
items
------ ------ ------
Total exceptional items 8 (15) (60)
after attributable
taxation
====== ====== ======
4. Secured bank loans without recourse
Secured bank loans without recourse are those where the obligation to repay lies solely with the subsidiary and are secured solely on the assets of the subsidiary concerned.
At 31 December 2002, we were in discussions with bank groups in relation to non-recourse debt for Rugeley and the US merchant asset portfolio. As these issues were not formally resolved and documented at 31 December 2002, the debt at Rugeley and ANP was reported as current non-recourse debt in our accounts.
In May 2003, our US bank group waived all claimed technical defaults on our US non-recourse financing and therefore this debt has now been redesignated to its original maturity.
As previously reported, the termination of the tolling contract between Rugeley and TXU Europe triggered an event of default under the terms of our non-recourse term debt facility of GBP160 million. On 29 August 2003, we reached formal agreement with our bank group resolving these issues and therefore the debt at Rugeley will be redesignated to its contractual maturity at our next reporting date.
5. Reconciliation of operating profit to net cash inflow from operating activities
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2003 2002 2002
GBPm GBPm GBPm
Operating profit 51 86 105
Impairment - 45 103
------ ------ ------
51 131 208
Depreciation and 54 46 112
amortisation
Movement in working (31) (36) (47)
capital
Movement in (3) 1 3
provisions
------ ------ ------
Net cash 71 142 276
inflow from
operating activities
====== ====== ======
6. Annual Report and Accounts
Copies of the full Annual Report and Accounts for the year ended 31 December 2002 are available from the company's website http://www.ipplc.com/ or by calling or writing to International Power plc, Senator House, 85 Queen Victoria Street, London EC4V 4DP or sending an e-mail to mailto:ipinvestor.relations@ipplc.com. Telephone: 020 7320 8600.
Independent review report by KPMG Audit Plc to International Power plc
Introduction
We have been engaged by the company to review the financial information set out on pages 7 to 15 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.
This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Listing Rules of the Financial Services Authority. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where they are to be changed in the next annual accounts in which case any changes, and the reasons for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4: Review of interim financial information issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2003.
KPMG Audit Plc Chartered Accountants 8 Salisbury Square London EC4Y 8BB 3 September 2003
International Power plc
Consolidated Profit and Loss Account
For the quarter ended 30 June 2003
Quarter to 30 June Quarter to 30 June
Exclud- Except- Includ- Exclud- Except- Includ-
ing ional ing ing ional ing
except- items except- except- items except-
ional ional ional ional
items items items items
2003 2003 2003 2002 2002 2002
Note GBPm GBPm GBPm GBPm GBPm GBPm
Turnover: 2 308 - 308 298 - 298
Group and
share of
joint
ventures and
associates
Less: share (31) - (31) (25) - (25)
of joint
ventures'
turnover
Less: share (71) - (71) (87) - (87)
of
associates'
turnover
------ ------ ------ ------ ------ ------
Group 206 - 206 186 - 186
turnover
Net 3 (189) - (189) (124) (45) (169)
operating
costs
------ ------ ------ ------ ------ ------
Operating 17 - 17 62 (45) 17
profit
Share of
operating
profit of:
Joint 6 - 6 6 - 6
ventures
Associates 23 - 23 37 - 37
Income from 17 - 17 17 24 41
fixed asset
investments
------ ------ ------ ------ ------ ------
Operating 63 - 63 122 (21) 101
profit and
investment
income
Non 3 - 8 8 - - -
operating
exceptional
items
------ ------ ------ ------ ------ ------
Profit on 2 63 8 71 122 (21) 101
ordinary
activities
before
interest and
taxation
Net interest
and similar
charges
------ ------ ------ ------ ------ ------
Group (13) - (13) (28) - (28)
Joint (10) - (10) (8) - (8)
ventures and
associates
------ ------ ------ ------ ------ ------
(23) - (23) (36) - (36)
------ ------ ------ ------ ------ ------
Profit on 40 8 48 86 (21) 65
ordinary
activities
before
taxation
Taxation (13) - (13) (25) 6 (19)
------ ------ ------ ------ ------ ------
Profit on 27 8 35 61 (15) 46
ordinary
activities
after
taxation
Minority (1) - (1) (1) - (1)
interests -
equity
------ ------ ------ ------ ------ ------
Profit 26 8 34 60 (15) 45
for the
financial
period
====== ====== ====== ====== ====== ======
Earnings
per
share
Basic 2.3p 0.7p 3.0p 5.3p (1.3)p 4.0p
====== ====== ====== ====== ====== ======
Diluted 2.3p 0.7p 3.0p 5.2p (1.3)p 3.9p
====== ====== ====== ====== ====== ======
Consolidated Balance Sheet
As at 30 June 2003
30 June 30 June
2003 2002
GBPm GBPm
Fixed assets
Intangible assets 2 (1)
Tangible assets 2,560 2,634
Investments 500 513
------ ------
Total fixed assets 3,062 3,146
------ ------
Current assets
Stocks 61 30
Debtors 153 159
Investments 63 71
Cash at bank and in hand 796 734
------ ------
Total current assets 1,073 994
Creditors: amounts falling due within one
year
------ ------
Secured loans without recourse (225) (87)
Other liabilities (559) (334)
------ ------
Creditors: amounts falling due within one (784) (421)
year
------ ------
Net current assets 289 573
------ ------
Total assets less current 3,351 3,719
liabilities
Creditors: amounts falling due after more (1,209) (1,647)
than one year
Provisions for liabilities and charges (273) (263)
------ ------
Net assets employed 1,869 1,809
====== =======
Capital and reserves
Shareholders' funds - equity 1,834 1,780
Minority interests - equity 35 29
------ ------
Total equity 1,869 1,809
====== ======
Net debt (834) (921)
Gearing 44.6% 50.9%
Debt capitalisation 30.9% 33.7%
The gearing percentage represents net debt as a proportion of net assets employed. The debt capitalisation percentage represents net debt as a percentage of net assets employed plus net debt.
Consolidated Cash Flow Statement
For the quarter ended 30 June 2003
Quarter to Quarter to
30 June 30 June
2003 2002
GBPm GBPm
Net cash inflow from operating 40 68
activities
Dividends received from joint 21 30
ventures and associates
Dividends received from fixed asset 17 17
investments - ordinary
------ ------
Cashflow from ordinary 78 115
operating activities
Dividends received from fixed asset - 24
investments - exceptional
Returns on investments and servicing (18) (24)
of finance
Taxation (5) (10)
Capital expenditure and (41) (48)
financial investment
Acquisitions and disposals 21 -
------ ------
Net cash inflow before 35 57
management of liquid resources and
financing activities
Management of liquid resources 12 22
------ ------
Financing activities
Share buy back (6) -
Debt financing 29 167
------ ------
23 167
------ ------
Increase in cash in period 70 246
====== ======
Consolidated Reconciliation of Net Cash Flow to Movement in Net Debt
For the quarter ended 30 June 2003
GBPm GBPm
Increase in cash in period 70 246
Cash inflow from increase in debt financing (29) (167)
Cash inflow from decrease in liquid (12) (22)
resources
------ ------
Change in net debt resulting from 29 57
cash flows
Translation differences (3) 86
Other non-cash movements (4) (5)
------ ------
Movement in net debt in the period 22 138
Net debt at the start of the period (856) (1,059)
------ ------
Net debt at the end of the period (834) (921)
====== ======
Consolidated Statement of Total Recognised Gains and Losses
For the quarter ended 30 June 2003
Quarter to Quarter to
30 June 30 June
2003 2002
GBPm GBPm
Profit for the financial period 34 45
Exchange differences on the (18) (27)
retranslation of net investments and
borrowings
Share of recognised loss of - -
associated undertaking
------ ------
Total recognised gains and losses for 16 18
the period
====== ======
Reconciliation of Movements in Shareholders' Funds - Equity
For the quarter ended 30 June 2003
Quarter to Quarter to
30 June 30 June
2003 2002
GBPm GBPm
Profit for the financial 34 45
period
Other recognised gains and losses (18) (27)
relating to the period (net)
Share buy back (6) -
------ ------
Net addition to 10 18
shareholders' funds
Opening shareholders' funds 1,824 1,762
------ ------
Closing shareholders' funds 1,834 1,780
====== ======
Notes to the Accounts
For the quarter ended 30 June 2003
1. Basis of preparation
The accounts for the three months ended 30 June 2003 have been prepared under the historical cost convention and in accordance with applicable Accounting Standards, using the same accounting policies as those adopted for the year ended 31 December 2002. Minor adjustments have been made to comparative figures to make them consistent with the current period.
2. Geographical segmental analysis
Quarter to Quarter to
30 June 30 June
2003 2002
GBPm GBPm
Group turnover
North America 120 78
Europe and Middle East 100 117
Australia 54 55
Rest of World 34 48
------ ------
308 298
Less: turnover of joint ventures (31) (25)
Less: turnover of associates (71) (87)
------ ------
206 186
====== ======
Profit before interest and taxation
(excluding exceptional items)
North America 6 28
Europe and Middle East 11 36
Australia 21 20
Rest of World 31 43
------ ------
69 127
Corporate costs (6) (5)
------ ------
63 122
====== ======
Notes 1. North America profit before interest and taxation includes other income in respect of the late commissioning and performance recovery of new power plants amounting to GBP5 million (quarter ended 30 June 2002: GBP29 million).
With effect from 1 July 2003, we will change the geographical segmental analysis to better represent how we manage our business following a reallocation of the responsibilities between our regional teams. The table below presents our results under the proposed segmentation, our Q3 results will be presented in this regional grouping. Appendix II details the composition of the current and proposed segments by operating plant.
Proposed segmentation
Quarter ended Quarter ended
30 June 30 June
2003 2002
GBPm GBPm
Group turnover
North America 120 78
Europe 97 117
Middle East 16 23
Australia 54 55
Rest of World 21 25
------ ------
308 298
Less: turnover of joint ventures (31) (25)
Less: turnover of associates (71) (87)
------ ------
206 186
====== ======
Profit before interest and
taxation (excluding exceptional
items)
North America 6 28
Europe 11 26
Middle East 23 43
Australia 21 20
Rest of World 8 10
------ ------
69 127
Corporate costs (6) (5)
------ ------
63 122
====== ======
Notes 1. North America profit before interest and taxation includes other income in respect of the late commissioning and performance recovery of new power plants amounting to GBP5 million (quarter ended 30 June 2002: GBP29 million).
3. Exceptional items
Quarter to Quarter to
30 June 30 June
2003 2002
GBPm GBPm
Net operating exceptional items
charged
Deeside impairment - (45)
------ ------
Net operating exceptional - (45)
items
====== ======
Exceptional income from investments
Backlog dividend received from Kapco - 24
====== ======
Non-operating exceptional items
credited
Profit on disposal of a 5% holding in 8 -
Hubco
------ ------
Non-operating exceptional 8 -
items
====== ======
Total exceptional items before 8 (21)
attributable taxation
Taxation on exceptional items - 6
------ ------
Total exceptional items after 8 (15)
attributable taxation
====== ======
4. Annual Report and Accounts
Copies of the full Annual Report and Accounts for the year ended 31 December 2002 are available from the company's website http://www.ipplc.com/ or by calling or writing to International Power plc, Senator House, 85 Queen Victoria Street, London EC4V 4DP or by sending an e-mail to ir@ipplc.com. Telephone: 020 7320 8600.
Current segmentation Proposed segmentation
Composition of segment by Composition of segment by
operating plant: operating plant:
North America North America
Hartwell, Georgia, USA Hartwell, Georgia, USA
Oyster Creek, Texas, USA Oyster Creek, Texas, USA
Hays, Texas, USA Hays, Texas, USA
Midlothian I and II, Texas, USA Midlothian I and II, Texas, USA
Blackstone, Massachusetts, USA Blackstone, Massachusetts, USA
Milford, Massachusetts, USA Milford, Massachusetts, USA
Bellingham, Massachusetts, USA Bellingham, Massachusetts, USA
Australia Australia
Hazelwood, Victoria Hazelwood, Victoria
Synergen, South Australia Synergen, South Australia
Pelican Point, South Australia Pelican Point, South Australia
Europe and Middle East Europe
EOP, the Czech Republic EOP, the Czech Republic
Deeside, United Kingdom Deeside, United Kingdom
Rugeley, United Kingdom Rugeley, United Kingdom
Elcogas, Spain Elcogas, Spain
Pego, Portugal Pego, Portugal
Marmara, Turkey Marmara, Turkey
Al Kamil, Oman
Umm Al Nar, UAE
Shuweihat S1, UAE
Middle East
Al Kamil, Oman
Umm Al Nar, UAE
Shuweihat S1, UAE
Hubco, Pakistan
Kapco, Pakistan
Rest of World Rest of World
Hubco, Pakistan Malakoff, Malaysia
Kapco, Pakistan Pluak Daeng, Thailand
Malakoff, Malaysia
Pluak Daeng, Thailand
This information is provided by RNS. The company news service from the London Stock Exchange