International Power plc (International Power) has reported group revenue of GBP3.8 billion for the year-end 2008, compared with the group revenue of GBP2.3 billion in the previous year-end. It has also reported profit of GBP759 million, or 34.7 pence per diluted share, for the year-end 2008, compared with the profit of GBP529 million, or 31.8 pence per diluted share, in the previous year-end.

Sir Neville Simms, chairman of International Power, said: I am pleased to report a 20% increase in EPS(i) to 32.4p driven by higher profit from operations in Australia and North America, a record year at First Hydro in the UK, and good performance from our long-term contracted asset base. The Board is pleased to recommend a full-year dividend of 12.15p per share, up 20%. Looking ahead, in the absence of a significant improvement in pricing in the US and the UK, it is likely that Group profitability in 2009 will be lower than in 2008. However, the long-term fundamentals of our markets remain attractive and this together with our strong financial position means International Power is well placed for the future.”


Corporate costs at GBP49 million (2007: GBP52 million) are GBP3 million lower than 2007.


Net interest expense at GBP368 million is GBP60 million higher than 2007; mainly due to the interest expense relating to acquisitions made during 2007 and 2008.


The Group tax charge has increased by GBP10 million to GBP123 million. The effective tax rate for the year was 22% (2007: 26%) after the release of provisions relating to prior year tax, following the satisfactory resolution of some historic tax issues. Excluding these items, the effective tax rate would have been 27%. In 2007, the effective rate benefited from the impact of tax rate changes in the UK, Czech Republic, Germany and Italy.

Foreign exchange

The weakening of sterling, principally against the Czech koruna, US dollar and euro, on the retranslation of profits from foreign operations has benefited EPS by 1.9p in comparison with 2007.

Exceptional items and specific IAS 39 mark to market movements

Exceptional losses before and after tax of GBP57 million comprise the impairment of our Milford plant by GBP37 million and a GBP20 million charge for Australian stamp duty arising from our acquisition of the Loy Yang B and Valley Power plants in 2004.

The specific IAS 39 mark to market movements reported in profit before tax for the year are gains of GBP290 million (2007: losses of GBP346 million), GBP163 million of which relates to decreases in forward commodity prices in the UK, US and Australia, GBP150 million to fair value gains on the 3.25% and 4.75% convertible euro bonds, and GBP23 million to losses on interest rate swaps.

Tax on mark to market movements during the year was a charge of GBP92 million (2007: a credit of GBP96 million).

The Group has US tax losses of $593 million (GBP412 million). As a result of the acquisition of IPA Central (the portfolio of four peaking plants in PJM and MISO in North America), certain of these tax losses have now been recognised as deferred tax assets on the balance sheet. This has resulted in an exceptional tax credit of GBP59 million.

Free cash flow for the year ended 31 December 2008 was GBP513 million, a decrease of GBP140 million compared with 2007. This decrease is driven by an increase in maintenance capital expenditure of GBP37 million, principally at Rugeley, Hazelwood and Saltend; and an increase in net interest paid of GBP87 million. In addition, there was a working capital increase in the year of GBP109 million due to stock building at Rugeley and a reversal of some one-off working capital benefits in 2007.

Specific IAS 39 mark to market movements and exceptional items, as described on the previous page, have been reversed out of the profits for the year in calculating free cash flow.

Growth capital expenditure was GBP156 million in the year (2007: GBP160 million) and mainly related to fitting FGD at Rugeley, the west field mine extension at Hazelwood and further construction in our European wind portfolio.

Acquisitions of GBP614 million in 2008 include the four peaking facilities in North America and additional shareholdings in Turbogás and Uch.

Net debt has increased by GBP1,656 million between 2007 and 2008, of which GBP1,282 million is attributed to currency translation impacts. Overall, over 85% of International Power’s total debt is represented by non-recourse project finance.

Goodwill and intangibles, property, plant and equipment, and investments have increased by GBP2,344 million during the year, with the majority of this increase relating to the weakening of sterling. The acquisition of the portfolio of North American peaking plants in July also contributed an increase in property, plant and equipment of GBP480 million at that time.

The financial position of the Group remains strong, with good liquidity and strong free cash flow generation. At 31 December 2008 the business had GBP354 million of cash (30 June 2008: GBP357 million, 31 December 2007: GBP290 million) at the corporate level and GBP775 million (30 June 2008: GBP1,129 million, 31 December 2007: GBP871 million) at the asset level. Debt within the Group comprises three convertible bonds with a book value of GBP900 million and GBP6,547 million of project level debt.

The Group has a corporate revolver of US$850 million which is predominantly used for letters of credit, bid bonds and short-term liquidity requirements.

Debt capitalisation has decreased marginally to 60% (31 December 2007: 61%).

During 2008, International Power and its partners raised a total of GBP919 million (gross), GBP516 million (net) of project finance to fund acquisitions and greenfield development projects in North America and Europe. In addition International Power issued EUR700 million (GBP550 million) of senior convertible bonds, due in 2015. These significant financings were successfully completed in a challenging banking market in 2008, with all deals completed on attractive terms.