Press releases

Interim Report for the six months ended 30 June 2011

Full announcement including financials in PDF format.

(London – 9 August 2011) International Power today announces its interim results for the six months ended 30 June 2011 and reports on key developments to date.

Dirk Beeuwsaert, Chairman of International Power, said “I am pleased to report that performance in the first half is up on last year, benefiting from a higher contribution from Latin America and North America, together with outperformance on committed synergies from the combination. The Board is pleased to announce an interim dividend of 4.40 euro cents per share.

Several projects under construction have successfully commenced operation in 2011 and we are on track to deliver over 2GW of new capacity in the full year. We have a strong pipeline of committed projects and continue to develop a range of new opportunities, positioning us to deliver sustained growth in shareholder value.”

Pro Forma¹ Financial Highlights

• Revenue €8,104 million (2010: €7,660 million) – up 6%
• EBITDA² €2,170 million (2010: €1,973 million) – up 10%
• Adjusted Current Operating Income² €1,471 million (2010: €1,350 million) – up 9%
• Underlying Earnings Per Share²
• Before purchase price allocation adjustments 13.9 cents per share, 12.1 pence per share (2010: 13.4 cents per share, 11.7 pence per share) – up 4% (up 4% at constant currency)
• After purchase price allocation adjustments 13.3 cents per share (2010: 12.9 cents per share) – up 3% (up 3% at constant currency)
• Free cash flow³ of €1,048 million (2010: €1,336 million)
• working capital outflow of €335 million in H1 2011
• Interim dividend 4.40 cents per share – 3.82 pence per share
• Synergies of €46 million delivered in H1 2011 and full-year target increased by €13 million to €103 million

Outlook

We continue to expect growth in 2011 with performance in the second half anticipated to be similar to the first half, despite the current economic backdrop. Overall our construction programme is progressing well and is on plan to deliver the anticipated EBITDA growth in 2013, despite the delay at our Jirau hydro project in Brazil. Greater integration in our merchant markets, in particular through LNG and retail activities, provides more resilience to our portfolio. We are confident of delivering sustained growth in shareholder value from our significant pipeline of development projects in emerging markets, coupled with our strong competitive position and future recovery in merchant markets.

Note 1	The pro forma results presented within this interim report assume that the Combination of GDF SUEZ Energy International and International Power, which completed on 3 February 2011, occurred at the beginning of each respective six month reporting period ended 30 June 2010 and 30 June 2011. The financial information is presented including the impacts of purchase price allocation adjustments in both the current and prior periods and excludes the impacts of exceptional items and specific IAS 39 mark to market movements, unless otherwise stated. A reconciliation of the pro forma consolidated income statement, including exceptional items and specific IAS 39 mark to market movements, to the pro forma consolidated income statement, excluding exceptional items and specific IAS 39 mark to market movements, is included in Appendix 1 to the interim report on pages 56 to 57.
Note 2	EBITDA and Adjusted Current Operating Income are defined in note 3 to the condensed interim financial statements as set out and reconciled on pages 36 and 37. The explanation and definition of underlying earnings per share (which excludes exceptional items and specific IAS 39 mark to market movements) are set out in notes 4 and 8 of the condensed interim financial statements on pages 38, 39 and 43. The reconciliation of pro forma earnings per share to pro forma underlying earnings per share excluding exceptional items and specific IAS 39 mark to market movements is set out in Appendix 1 on pages 56 and 57. A reconciliation of reported earnings per share (including exceptional items and specific IAS 39 mark to market movements) to earnings per share (excluding exceptional items and specific IAS 39 mark to market movements) is set out in note 8 to the condensed interim financial statements on page 43.
Note 3	Pro forma free cash flow is set out on page 58. A reconciliation of pro forma cash flow from operating activities to pro forma free cash flow is set out in Appendix 1 on page 58. A reconciliation of reported cash flow from operating activities to free cash flow is set out in note 12 to the condensed interim financial statements on page 47.

Group Overview - Reported

Reported⁴ Financial Highlights

• Revenue €7,771 million (2010: €5,377 million)
• EBITDA €2,056 million (2010: €1,187 million)
• Adjusted Current Operating Income €1,401 million (2010: €841 million) – up 67% (up 67% at constant currency)
• EPS of 13.7 euro cents per share (2010: 18.6 cents) excluding exceptional items and specific IAS 39 mark to market movements – down 26% (down 26% at constant currency)
• EPS of 16.6 euro cents per share (2010: 19.5 cents) including exceptional items and specific IAS 39 mark to market movements – down 15% (down 15% at constant currency)
• Free cash flow of €1,084 million (2010: €758 million)

Note 4

The reported results have been prepared in accordance with IAS 34 – Interim Financial Reporting which reflects the reverse acquisition of International Power by GDF SUEZ Energy International on 3 February 2011. Accordingly, the reported results represent the continuation of the financial statements of GDF SUEZ Energy International, and reflect the acquisition of International Power by applying the ‘acquisition method’ of accounting to the International Power identifiable assets acquired and liabilities assumed. The reported results for the period under review comprise those of the former GDF SUEZ Energy International business for the six months ended 30 June 2011, and the results of the former International Power business, from the date of the Combination for the five months ended 30 June 2011, which reflect the impacts of the purchase price allocation adjustments. The comparative financial information presented relates only to the former GDF SUEZ Energy International business.

Reported Adjusted Current Operating Income and EPS

Adjusted Current Operating Income and earnings per share for the six months ended 30 June 2011 are as follows:

Reported Adjusted COI and EPS	Six months ended 30 June
	2011 €m	2010 €m	Total Change5	Fx Change5	Scope Change5	Organic Change5
Latin America North America UK-Europe META Asia Australia	663 264 122 169 160 77	504 155 39 94 88 -	32% 70% 213% 80% 82% -%	3% (2)% -% (5)% 1% -%	-% 17% 273% 88% 79% -%	29% 55% (60)% (3)% 2% -%
Regional total	1,455	880	65%	-%	41%	24%
Corporate costs	(54)	(39)	(38)%	-%	(124)%	86%
Adjusted COI	1,401	841	67%	-%	38%	29%
	€ cents	€ cents
EPS	16.6	19.5	(15)%	-%
EPS excluding exceptional items and specific IAS 39 mark to market movements	13.7	18.6	(26)%	-%

The principal reason for the significant increase in reported revenue, EBITDA, Adjusted Current Operating Income and net income between periods is the scope change, which principally relates to the contribution of the former International Power business from the date of the Combination⁶ to 30 June 2011. The reported results in H1 2011 also benefited from strong organic growth in Latin America and higher profitability in the LNG business in North America, partially offset by lower results between periods in UK-Europe.

Reported earnings per share in H1 2010 is based solely on the former GDF SUEZ Energy International business as set out in the Circular to shareholders. Reported earnings per share fell from 19.5 cents to 16.6 cents principally reflecting the significant cash contributions made by the wider GDF SUEZ group to the business in accordance with the Merger Deed, the relative profitability of the two legacy businesses and the premium paid.

Note 5	The total change between periods is divided into: ‘FX change’ which reflects the impact of different foreign exchange rates between periods; ‘scope change’ which reflects impact of acquired and divested businesses; and ‘organic change’ which reflects the movement in underlying performance.
Note 6	The Combination of International Power and GDF SUEZ Energy International, which completed on 3 February 2011.

Group Overview - Pro Forma

The financial information within the remainder of this financial review of the business is presented on a pro forma basis, as defined above, unless otherwise stated. Throughout this text net capacity represents International Power’s ownership and gross capacity represents 100% of plant capacity irrespective of the level of International Power’s ownership.

Pro Forma Adjusted Current Operating Income and EPS
Pro forma Adjusted Current Operating Income and earnings per share for the six months ended 30 June 2011 are as follows:

Pro forma Adjusted COI and EPS	Six months ended 30 June
	2011 €m	2010 €m	Total Change6	Fx Change6	Scope Change6	Organic Change6
Latin America North America UK-Europe META Asia Australia	663 264 149 179 178 97	504 173 269 185 161 126	32% 53% (45)% (3)% 11% (23)%	3% (4)% -% (5)% (2)% 9%	-% -% -% -% 2% -%	29% 57% (45)% 2% 11% (32)%
Regional total	1,530	1,418	8%	-%	-%	8%
Corporate costs	(59)	(68)	13%	-%	-%	13%
Adjusted COI	1,471	1,350	9%	-%	-%	9%
	€ cents	€ cents
Underlying EPS	13.3	12.9	3%	-%
Underlying EPS (excluding the impact of purchase price allocation adjustments)	13.9	13.4	4%	-%

Total Adjusted COI in H1 2011 increased 9% from last year, driven by a strong increase in Latin America and North America, which benefited from organic growth and higher profitability in the LNG business respectively. As expected, Adjusted COI in UK-Europe reflects the lower achieved spreads in the UK. In META (Middle East, Turkey and Africa) and Asia, the portfolios of largely long-term contracted assets performed in line with expectations with Asia also benefiting from an improved performance at Senoko in Singapore. In Australia, Adjusted COI decreased, principally reflecting lower demand for power due to mild weather. Corporate costs, at €59 million, were 13% lower than last year. Overall, the portfolio has delivered a solid operational and financial performance with 4% growth in EPS (excluding the impact of purchase price allocation adjustments).

Combination update

The Combination of International Power and GDF SUEZ Energy International on 3 February 2011, has created a leading global independent power generator that is well positioned to expand in fast growing emerging markets and to benefit from a recovery in the merchant markets. The enlarged Group has strong positions across all major regional markets, a large development pipeline of committed projects, and the financial strength, local presence and expertise to develop further projects to deliver sustained growth in shareholder value.

In addition to significant growth opportunities, the Combination is generating operational and financial synergies. Progress towards achieving these synergies is ahead of schedule and additional synergies have also been identified. As a result, the 2016 target is now at €215 million, up from the previous target of €197 million. In H1 2011 €46 million of synergies have been achieved and the total target for 2011 is now estimated to be €103 million (up from €90 million) and for 2012 €167 million, up from €154 million. The cost of implementing these synergies remains €155 million.

Construction programme

Of the 7.6GW (net) construction programme announced in August 2010, a number of new projects have successfully commenced operation and overall we are on track to deliver the 2013 EBITDA estimate of £872 million (€1,042 million) included in our August 2010 disclosure.

Update on Jirau

International Power owns 50.1% of the project company Energia Sustentavel do Brasil (ESBR) that is building a 3,450MW (46 units of 75MW each) hydro project on the Madeira river in Brazil. International Power’s net ownership in the project represents 1,728MW of capacity. The asset is expected to be transferred to Tractebel Energia.

Following the incident in March, negotiations are underway with the construction contractor on project timing and costs. The phased commissioning of units at this major project is now expected to start in H2 2012, with the project reaching its maximum assured energy level in H2 2013. The EBITDA contribution from this project is expected to be reduced by some €100 million in 2012, but we do not expect a material impact on 2013 projected EBITDA.

70% of the project’s total assured energy (of 1,975MW corresponding to 44 units) has been sold under a long-term regulated contract and the balance will be sold in the free market, principally to industrial customers (“free market”). Two further units (75MW each) committed for build have recently been allocated a minimum assured energy level of 69.8MW with a potential for this level to be increased. In addition, another four units (75MW each) that are under investment analysis have also been allocated 139.5MW of minimum assured energy.

In the longer term there are several factors and actions which are expected to contribute positively to the project: the potential to optimise the uncontracted capacity through the strong commercial track record of Tractebel Energia, a potential increase in the level of assured energy for the new units, the potential for expansion of the free market, and Clean Development Mechanism (CDM) revenues. In addition, demand growth in Brazil remains strong and is expected to put upward pressure on pricing. This is accentuated by the continued importance of thermal generation in Brazil, which has a higher marginal cost of production.

Update on other construction projects
Several new projects totalling 3,159MW gross (998MW net) have commenced operation to date in 2011 (the following MW numbers are presented on a net ownership basis):

• in Latin America,
• two units at the Estreito hydro plant in Brazil (74MW)
• the Monte Redondo extension wind farm in Chile (10MW)
• the CT Andina (79MW) and CT Hornitos (47MW) coal fired plants in Chile
• the repowering of Bahia las Minas in Panama (4MW incremental capacity)
• part of the Dos Mares hydro plant (19MW) in Panama
• in North America, the Astoria Energy II plant (173MW)
• in Europe, the Crimp wind farm in the UK (2MW), and the T Power CCGT plant in Belgium (140MW) and the Elecgas gas-fired plant in Portugal (210MW)
• in META, the Ras Laffan C gas-fired plant in Qatar (179MW) is in final stages of commissioning
• in Asia, the HUBCO Narowal oil-fired plant in Pakistan (37MW)
• in Australia, the Synergen gas/distillate plant (24MW incremental capacity)

By the end of 2011, a further 1.1GW of new capacity is expected to be commissioned taking the total for 2011 to just over 2GW.

New projects and further growth
In addition to the programme outlined in August 2010, we have won and started construction on further projects with total capacity of 1,426MW gross (1,181MW net ownership). Total projected capex for these projects is €1.6 billion.

• a 375MW gross (375MW net ownership) gas/oil CCGT plant in Pakistan – Uch 2.
• a 524MW gross (324MW net ownership) dual fuel OCGT plant being developed by Enersur in Ilo, Peru
• a 145MW gross (100MW net ownership) wind farm being developed by Tractebel Energia in Brazil
• 184MW gross (184MW net ownership) wind farms in Canada (Cape Scott 1 99MW, Pointe-Aux-Roches 58MW and Plateau 27MW)
• Most recently, we have been awarded two new 20-year PPAs for the 99MW gross (99MW net ownership) Erieau and the 99MW gross (99MW net ownership) East Lake St. Clair projects in Ontario, Canada.

The Combination has further strengthened our development teams and expanded our development pipeline to more than 17GW gross. The majority of these development projects are located in Latin America, META, Asia and North America.

Purchase Price Adjustments
As a result of the Combination, the assets acquired and liabilities assumed of the pre-Combination International Power have been fair valued. Overall, step-up adjustments have been made principally to the carrying amounts of property, plant and equipment, intangible assets and debt. Goodwill on consolidation amounts to approximately €2.6 billion.

In comparison with projected pre-acquisition earnings, the actual post-Combination earnings are adversely impacted by the total step-up adjustments to intangible assets and property, plant and equipment due to increased amortisation and depreciation.

Conversely, the post-Combination earnings are improved by the fair value step-up adjustments to debt through reduced interest expense.

Derivatives on the balance sheet at the date of the Combination principally comprise in-the-money derivative commodity contracts and out-of-the money interest rate swaps. The favourable derivative commodity contracts have a negative impact on post-Combination underlying earnings as they unwind, because the commodity prices are effectively reset to market prices at the date of the Combination. This has a more significant impact in 2011 than in future periods.

Out-of-the-money interest rate swaps will reduce post-Combination underlying interest expense and improve underlying earnings as they unwind. This is because forward curves for interest rates were generally lower at the date of the Combination than at the date of inception for these instruments. The underlying earnings reflect the ‘resetting’ of the interest rates under these agreements to market rates at the date of the Combination.

In the pro forma income statement results presented, the fair value adjustment impacts are reflected in both periods, resulting in minimal impact between periods.

Uncertainty remains in Australia as to the outcome of the Climate Change Plan and its impact, in particular, on the valuations of Hazelwood and Loy Yang B. The fair value adjustments of these and all other assets and liabilities are provisional and will be finalised during H2 2011.

Regional Review

Latin America

Revenues in Latin America increased 29% to €1,843 million compared to €1,426 million for the same period last year (up 29% at constant currency). EBITDA in Latin America increased 33% to €863 million compared to €649 million for the same period last year (up 31% at constant currency).

Adjusted Current Operating Income in Latin America increased 32% to €663 million compared to €504 million for the same period last year (up 29% at constant currency). The region benefited from strong organic growth in Brazil, Chile and Panama, together with the first time contributions from projects in Brazil, Chile and Central America.

In Brazil, higher power sales prices were achieved due to long-term contract price escalation in line with inflation and the renewal of expiring contracts at higher prices. In addition, costs fell due to portfolio optimisation and lower purchases of power from external sources as new plants came on line.

In Chile, performance has benefited from a full six months of contribution from the GNLM LNG terminal, which commenced operation in April last year.

In Central America, the 108MW (gross) (55MW net) BLM coal conversion project in Panama restarted commercial operation in March 2011, following an extended outage that began in March 2010. Liquidated damages of US$36 million relating to the delays are included in the results for the current period.

In Peru, performance improved following contract sales price indexation and marginally higher volumes sold.

The region continues to experience strong growth in demand driven by a growing population and increasing residential and industrial demand for power. The majority of expected output from our Latin American assets has been contracted in the medium to long-term with contracts that benefit from inflation protection.

North America

Revenues in North America increased 1% to €2,540 million compared to €2,523 million for the same period last year (up 6% at constant currency). EBITDA in North America increased 21% to €502 million compared to €415 million for the same period last year (up 26% at constant currency).

Adjusted Current Operating Income in North America increased 53% to €264 million compared to €173 million for the same period last year (up 57% at constant currency). This increase was primarily driven by higher profitability in the LNG business and a stronger performance in the retail business.

The LNG business benefited from higher volumes than last year and an increase in the gas price differential between Henry Hub and New England. In addition, the diversion of LNG cargoes contributed to improved performance, with twelve diversions to higher priced markets primarily in Europe and Asia in the first half of 2011 compared to two in the first half of 2010.

The retail operation also performed well, with high delivered volumes and lower costs due to lower volatility in the wholesale power market and lower ancillary costs.

In ERCOT, results improved with higher load factors at our CCGTs and higher availability at Coleto Creek, which underwent a planned outage in H1 2010. Peak heat rates have increased in the period, offsetting lower gas prices and resulting in higher power prices and spark spreads. For the balance of the year, our expected output in ERCOT is largely hedged.

In PJM, our peaking plants benefited from higher volatility as a result of extreme weather conditions, particularly in June where price spikes of US$900/MWh were recorded. Although the profit impact of this in H1 2011 is marginal, when taken with higher capacity prices, the outlook for this region has improved. The forward capacity auction price for the period June 2014 to May 2015 in the RTO region cleared at the significantly higher price of US$125.99/MW-day compared to US$27.73/MW-day for the previous year.

In New England, performance was affected by continued weak market conditions, together with low rainfall that reduced output at our hydro plant. This was offset by receipt of an initial US$30 million insurance payment for the 2010 outage at Northfield Mountain pumped storage plant. As anticipated, the New England Forward Capacity Auction for the June 2014 to May 2015 period cleared at the floor at $3.21/kW-month. For the balance of the year our expected output in New England and New York is almost fully hedged.

Our other contracted thermal plants performed well due to favourable fuel costs at West Windsor, Canada and high energy sales in Mexico, although these improvements were offset by an unplanned outage at our Red Hills plant in Mississippi. Our Canadian wind portfolio benefited from high load factors and an additional 49MW of new capacity that entered service since H1 2010. Construction will shortly commence at Cape Scott 1, a 99MW wind farm in British Columbia with a 20-year contract with British Columbia Hydro and Power Authority. The project is estimated to cost approximately CAD$300 million and is anticipated to be in operation in 2013. In addition, we have secured 20-year PPAs with the Ontario Power Authority for all of the output from the 99MW Erieau and the 99MW East Lake St. Clair wind projects in southwestern Ontario. Each project is estimated to cost approximately CAD$300 million, with commissioning of both facilities expected in 2013.

On 30 June 2011 we completed the sale of our 17.6% equity interest in Noverco, which owned 71% of Gaz Metro Limited Partnership, to Caisse de depot et placement de Quebec for cash proceeds of CAD$272 million along with loan repayment proceeds of CAD$99 million.

On 1 July 2011 the 575MW gross (173MW net) Astoria Energy II plant in New York City commenced commercial operation, with 100% of its output sold to the New York Power Authority under a 20‐year contract.

UK-Europe

Revenues in Europe decreased 6% to €1,758 million compared to €1,867 million for the same period last year (down 6% at constant currency). EBITDA in Europe decreased 19% to €336 million compared to €416 million for the same period last year (down 19% at constant currency).

Adjusted Current Operating Income in UK-Europe decreased 45% to €149 million from €269 million in the same period for 2010 (down 45% at constant currency). As expected, performance in the region was reduced by weaker achieved spreads in the UK.

In the UK, performance at Saltend and Rugeley was lower following the roll-off of contracts signed in the higher price environment prior to 2010, partially offset by lower carbon purchase requirements across the portfolio as the load factor at Rugeley reduced. First Hydro profitability was marginally below H1 2010 reflecting lower supply/demand tension and therefore lower volatility in the UK market.

As a result of the weak UK market conditions, we have temporarily reduced the declared capacity of the Teesside CCGT from 1,875MW to 45MW. However, the plant can be brought back online to capture upside when the market recovers.

For 2011 we have forward contracted 95% of our expected output at Rugeley and Saltend and 70% at Deeside and Shotton.

The UK Retail Business, supplying the Commercial and Industrial market, has seen increases in the volume of gas delivered and stable electricity volumes. Strong contributions from green related products resulted in a performance marginally ahead of the first half in 2010.

On 12 July the UK Government published a White Paper outlining its proposed Electricity Market Reform. The Paper brought greater clarity to a number of widely anticipated initiatives to promote low carbon generation. We are encouraged by the capacity payment mechanism proposals, and the Government’s recognition of the importance of supporting a liquid wholesale trading market. We await further detail regarding the implementation of these proposals and will continue to engage with the UK Government throughout its consultation and implementation process.

In Continental Europe, overall our thermal plants continue to perform in line with our expectations, although lower wind yields have reduced the contribution from our wind assets in Italy. The contribution from ISAB in the first half was lower than that achieved in H1 2010, which included insurance recoveries.

In May, we agreed the sale of our 33.3% equity interest in the 420MW T-Power CCGT power plant in Belgium for €48 million to Itochu. Completion of this sale will satisfy the undertakings made to the European Commission as part of gaining clearance from the European Commission for International Power’s Combination with GDF SUEZ Energy International.

Middle East, Turkey and Africa

Revenues in the Middle East, Turkey and Africa increased 16% to €591 million compared to €508 million for the same period last year (up 22% at constant currency). EBITDA in the Middle East, Turkey and Africa decreased 13% to €158 million compared to €182 million for the same period last year (down 8% at constant currency).

In the META region, Adjusted Current Operating Income decreased 3% to €179 million, down from €185 million last year (up 2% at constant currency). The region had a good operational performance, first time contribution from new projects and an improved performance from the gas business in Turkey. However, these improvements were more than offset by a reduction in development fees following the receipt of the Riyadh IPP fee in H1 2010.

In Turkey lower temperatures during the winter months have driven gas sales higher, contributing to an improved contribution from Izgas.

Further development activity continues across the region with bids for greenfield opportunities in the Middle East as well as Morocco, South Africa and Turkey.

Asia

Revenues in Asia increased 6% to €831 million compared to €784 million for the same period last year (up 5% at constant currency). EBITDA in Asia increased 9% to €172 million compared to €158 million for the same period last year (up 9% at constant currency).

Adjusted Current Operating Income in Asia increased by 11% to €178 million from €161 million for the same period in 2010 (up 13% at constant currency). Our assets in the region continued to deliver a strong operational performance in primarily long-term contracted markets.

In Singapore, Senoko delivered a strong performance compared to 2010 due to improved retail pricing and favourable spot market prices in Q2.

Glow Energy’s performance was reduced by the declaration of 2011 as a drought year for its Houay Ho hydro subsidiary in Laos and a lower electricity tariff for industrial customers in Thailand for the first four months of the year.  This was partially offset by the first-time contribution from the 115MW CFB3 coal plant that was commissioned in November.

In Indonesia, Paiton Energy improved its performance following higher availability and dispatch in the first six months of 2011.

In June, we announced that the Thai National Power plant, which was wholly owned by International Power, will be transferred to Glow Energy for US$55 million, thereby consolidating our electricity generation activities in one entity. Following this transaction, International Power will continue to own 69% of the enlarged Glow Energy.

Australia

Revenues in Australia decreased 2% to €541 million compared to €552 million for the same period last year (down 11% at constant currency). EBITDA in Australia decreased 9% to €196 million compared to €215 million for the same period last year (down 18% at constant currency).

Adjusted Current Operating Income was down 23% at €97 million compared to €126 million in the previous year (down 32% at constant currency). Overall performance has been affected by an unplanned outage at Hazelwood, as well as a low pricing environment due to a mild summer and an end to the drought, which has increased hydro capacity on the system. The reduction in contribution also reflects the disposal of the SEA Gas pipeline in November 2010.

In June, Hazelwood Unit 5 returned to service following an extended unplanned outage following a generator failure. The loss of contribution from this unit was largely offset by insurance proceeds. For the full year, we have forward contracted 95% of Hazelwood’s expected output.

Pelican Point delivered lower performance primarily due to lower prices driven by the mild summer. Similarly, performance at Synergen has also been impacted by lower price volatility compared to the first half of 2010.

On 10 July the Government of Australia announced its long-awaited Climate Change Plan (Plan), which is expected to commence on 1 July 2012. International Power announced on 11 July that the proposed Plan is expected to be cash flow positive and broadly earnings neutral over the initial five year period. However, beyond this period the cash flow and profitability of the region could be significantly impacted unless power prices increase substantially or the emission intensity of our plants is reduced.

In September, we expect the Australian Government to commence a voluntary ‘contract for closure’ process which is targeting 2,000MW of higher emission power plant to close by 2020 and this could include Hazelwood. This could provide more certainty and reduce the overall impact of the Plan on the business.

Depreciation, Amortisation and Provisions

Depreciation, amortisation and provisions at €833 million for H1 2011 is €96 million higher than H1 2010. This is mainly due to the commissioning of new projects, principally the LNG terminal in Chile, Estreito in Brazil and also CFB3 in Thailand. The assets in Northern Chile were fair valued in 2010 which has also increased depreciation.

Interest

Net interest expense of €317 million is €12 million lower than H1 2010. This is mainly due to planned principal repayments and refinancing variable rate loans at lower margins at IPA Central and Coleto Creek.

Tax

The Group tax charge (including share of associates’ tax) for the six months ended 30 June 2011 is €306 million. The effective tax rate for the period is 26% compared with 22% for H1 2010 which benefited from the resolution of some historic tax issues.

Exceptional items and specific IAS 39 mark to market movements included in reported results

Presented in the consolidated income statement on page 22, are mark to market on commodity contracts other than trading instruments amounting to a net gain of €158 million before tax (2010: net loss of €24 million) which primarily relates to the Saltend gas supply agreement.

During 2011, the Group recognised restructuring costs of €19 million (2010: €nil), principally relating to the integration of International Power with GDF SUEZ Energy International.

Changes in scope of consolidation during the period amount to a net gain of €55 million before tax (2010: gain of €184 million). This net gain includes the profit on disposal of the investment in Noverco.

Pro Forma Cash Flow

A reconciliation of pro forma EBITDA to pro forma cash flow from operating activities, and to pro forma free cash flow is as follows:

Pro Forma Cash Flow	Six months ended
	30 June 2011 €m	30 June 2010 €m
EBITDA	2,170	1,973
Change in working capital requirements	(335)	165
Payments relating to long term employee benefits	(42)	(13)
Restructuring costs	(46)	-
Tax paid	(294)	(303)
Dividends received from associates	46	29;
Other items	-	(6)
Cash flow from operating activities	1,499	1,845
Interest paid on net debt	(263)	(344)
Maintenance capex	(214)	(198)
Other financial items – cash impact	26	33
Free cash flow	1,048	1,336

EBITDA is up €197 million year-on-year mainly driven by the strong operational performance of Latin America and North America, partly offset by low prices and wind conditions in UK-Europe and low prices and volumes due to mild and wet weather conditions in Australia.

Working capital movements were €335 million adverse for the half year compared to €165 million favourable for the same period last year. The adverse movement during 2011 predominately relates to Latin America, Asia and Australia. Latin America was impacted by additional capital requirements due to the start of operations in Bahia Las Minas in Panama and the timing of fuel payments across the region. Asia had adverse working capital movements of €85 million relating mainly to the timing of receivables collection in Thailand. Australia had a negative movement of €68 million resulting primarily from timing differences on contracts with the Sydney Futures Exchange.

Tax paid is in line with last year. The majority of the tax paid was in Latin America, primarily by Tractebel Energia.

Dividends from associates at €46 million are up €17 million year-on-year. Interest paid on net debt is €81 million lower than in the first half of 2010 principally due to repayments of debt. Maintenance capex is €16 million up year-on-year.

Reported Cash Flow

Reported cash flow from operating activities is €512 million up year-on-year due to the inclusion of the cash generated by assets acquired as part of the Combination. Similarly, interest paid on net debt and maintenance capex has increased by €76 million and €105 million respectively. Free cash flow on a reported basis of €1,084 million is up €326 million year-on-year.

Statement of financial position

The Group’s net assets are analysed as follows:

		As at 30 June 2011		As at 31 December 2010  (pro forma)		As at 31 December 2010 (reported)
		€m		€m		€m
Goodwill and intangibles		4,785		5,011		2,122
Property, plant and equipment		26,888		28,137		16,675
Investments		1,393		1,672		373
Long-term receivables and others		3,260		3,424		1,613
Non-current assets		36,326		38,244		20,783
Net current assets excluding net debt items		458		187		799
Non-current liabilities excluding net debt items		(4,137)		(4,467)		(2,317)
Net debt excluding the impact of derivative instruments, cash collateral and amortised cost		(12,111)		(12,864)		(6,246)
Net assets		20,536		21,100		13,019
Gearing		59%		61%		48%
Debt capitalisation		37%		38%		32%
Net debt – associates		€m 3,653		€m 3,812		€m 2,110

The decrease in property, plant and equipment primarily arises on retranslation due to the weakening of the euro against the US dollar and Brazilian real, offset by capex in excess of depreciation in the period.

Investments have decreased from €1,672 million to €1,393 million, mostly reflecting the disposal of the equity interest in Noverco.

Net debt has fallen from €12,864 million to €12,111 million following strong cash generation by the business.

The Group’s assets and liabilities are predominately larger in the pro forma statement of financial position, as at 31 December 2010, in comparison with the reported statement of financial position, as at 31 December 2010, due to the inclusion of the International Power assets acquired and liabilities assumed within the pro forma statement, even though the Combination was not effected until 3 February 2011.

Presentation currency

As previously announced, International Power has changed the currency in which it reports to the euro. Reporting in euros has aligned our presentation currency with GDF SUEZ following completion of the Combination.

Hedging policy

The Group’s current foreign currency hedging policy is to hedge transactional exposures as they arise. In addition, the Group hedges its investments in foreign operations by funding borrowings in the same currency as the underlying investment. Following the Combination, the Group has considered utilising foreign exchange derivatives and other financial instruments to further hedge its net investment in foreign operations into euro. However, the Board has decided not to extend its hedging programme beyond funding borrowings in the same currency as the underlying investment. This policy will be kept under review, particularly in relation to those currencies considered to be at risk of depreciation.

Dividend policy

The Directors have approved an interim dividend for 2011 of 4.40 cents per ordinary share (3.82 pence per ordinary share). This is equal to 35% of the Company’s preceding full year dividend of 10.91 pence per ordinary share, using a euro to sterling exchange rate of 1.1506, determined on 8 August 2011. The dividend will be paid in sterling on 27 October 2011 to members on the register at the close of business on 23 September 2011.

The latest date for making an election in respect of the Company’s DRIP (Dividend Reinvestment Plan) is 7 October 2011.

Principal risks and uncertainties

Section 4.2.7R of the Disclosure and Transparency Rules, requires an indication of important events that have occurred during the first six months of the financial year, their impact on the condensed interim financial statements and a description of the principal risks and uncertainties for the remaining six months of the year.

An indication of important events and their impacts are outlined on pages 1 to 17 of the Interim Report and the description of principal risks and uncertainties for the remaining six months are set out below. The principal risks and uncertainties for the remaining six months of the year continue to be those identified earlier in the year, and are set out under the heading ‘Our approach to risk and risk management’ on pages 18 to 31 of the 2010 Annual Report (available on www.iprplc-gdfsuez.com).

In summary, International Power’s principal activities are the development, acquisition and operation of power generation plants together with closely related activities, such as LNG, desalination and retail. These principal activities are supported by our network of local, regional and corporate offices which carry out activities such as trading, financial management and treasury operations. All of these activities have inherent risks.

In order to compare risks across the Group on a systematic basis, the key principal risks to the Group are categorised as detailed below. However, in reality, certain risk exposures interact and other exposures apply to more than one category. Such cross-category risks are assessed in each of the areas in which they occur.

• Financial risks
• Market and trading risks
• Fuel supply risks
• Country, political and regulatory risks
• Construction and operational risks
• Health, safety and environmental risks
• Staffing and human resources risks
• Information technology and information management risks
• Combination Integration risks

Disclaimer

This announcement includes certain forward-looking statements. These statements are based on current expectations and projections of the Group about future events. However, by their nature forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors including, but not limited to, the economic and business circumstances occurring from time to time in the countries in which the Group operates, changes in trends in the general, global or regional economies, changes in trends in the global energy sector, changes in regulation and natural disasters or other calamities. The Company undertakes no obligation to update any forward-looking statements.

For further information please contact:

Investor Contact: Aarti Singhal +44 (0)20 7320 8681

Media Contact: Sally Hogan +44 (0)20 7320 8678

About International Power

International Power plc is a leading independent electricity generating company with 70,196MW (gross) (41,550MW net) in operation and 17,249MW (gross) (6,826MW net) under construction. International Power has power plants in operation or under construction in six core regions worldwide. International Power is listed on the London Stock Exchange with ticker symbol IPR. Company website: www.iprplc-gdfsuez.com