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."
Highlights
- 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.
Europe
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.
Australia
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.
Asia
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.
Interest
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.
Tax
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
below:
As at 30 As at 30 As at 31
September September December
2006 2005 2005
(restated)
(i)
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.
Outlook
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) $14 n/a
Load factor 65% n/a
United Kingdom
Rugeley Nine months Nine months
2006 2005
*Dark spread (GBP/MWh) GBP19 GBP13
Load factor 55% 55%
Deeside Nine months Nine months
2006 2005
*Spark spread (GBP/MWh) GBP18 GBP8
Load factor 35% 65%
*Excludes CO2 costs
Australia
Hazelwood Nine months Nine months
2006 2005
Achieved power price (A$/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:
www.ipplc.com
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