International Power plc Results for the Three Months ended 31 March 2004
International Power today announces its results for the three-month period ended 31 March 2004 and reports on key developments to date.
Sir Neville Simms, Chairman of International Power, said: "First quarter earnings are marginally up on last year, principally reflecting a better financial performance in Europe and Australia."
Our primary focus remains the restructuring of the non?recourse debt of our US business. We also continue to focus on opportunities to grow the business and increase shareholder returns," Sir Neville added.
- Earnings per share (excluding exceptional items) of 2.9p (2003: 2.8p)
- Profit before interest and tax (excluding exceptional items), of £84 million (2003: £75 million)
- Free cash flow of £46 million (2003: £17 million)
- Gearing 44%; Debt capitalisation 31%
- Interest Cover (excluding exceptional items) 2.5x
- Financing completed for 1,075MW Saudi Aramco projects and 46MW Canunda windfarm
Our contracted assets, Milford, Oyster Creek and Hartwell continue to perform well. However, as expected, due to the continuing weak spark spreads in Texas and New England, the financial performance of our merchant assets was poor. Overall, the North American business suffered a loss before interest and tax of £4 million compared to a loss of £5 million last year.
Compensation from Alstom at £1 million was down from £9 million in Q1 last year. However, this was offset by a lower depreciation charge following the £404 million impairment of the merchant assets at the end of 2003.
Discussions continue between our US subsidiary, ANP Funding 1, and its bank group to renegotiate the terms of the $890 million non-recourse US debt. We expect to provide an update to the market on the outcome of these negotiations by the time of our interim results in early August.
Profit before interest and tax in Europe increased to £37 million from £32 million in Q1 last year. This increase in earnings is mainly attributable to EOP and Rugeley. In the Czech Republic, another cold winter helped EOP deliver high profitability. At Rugeley, operating profit is higher than last year mainly because spark spreads were extremely low in the comparable period last year. Although spark spreads have shown some improvement over the winter period, they remain well below levels required to enable plants to generate sound financial returns. Contracted assets in Europe (Pego and Uni-Mar) performed well and in line with expectations.
As reported in the full year results, in February we sold our stake in Elcogas, Spain. This investment had been fully written down, and the release of a guarantee resulted in an exceptional gain of £11 million in Q1 2004.
Profit before interest and tax in the Middle East at £5 million was marginally down when compared to last year (2003: £6 million) mainly as last year’s profits included a one off gain of some £3 million at Al Kamil. In the first quarter of this year, both Umm Al Nar and Al Kamil delivered good operational performance and contributed positively to earnings.
At Shuweihat S1 in Abu Dhabi (1,500MW power, 100MIGD water) all gas turbines have been installed and the construction programme is nearing completion. The plant is expected to commence operation in the fourth quarter of this year.
Profit before interest and tax in Australia rose to £37 million from £34 million last year. The Australian business continues to benefit from a strong forward contracted position. First quarter results also included a first time contribution from the SEAGas pipeline, and benefited from a strong Australian dollar.
During the first quarter we secured and completed the financing for our first windfarm at Canunda in South Australia. The construction of this 46MW windfarm has begun and all 23 turbines are expected to be fully operational by early 2005.
Rest of the World (RoW)
The RoW segment generated profit before interest and tax of £16 million, up from £15 million. This is a result of improved financial performance at Malakoff, following the expansion in its generation capacity. For reference, we now equity account for KAPCO, but this has had no impact on our Q1 2004 results.
In April 2004, we sold part of our shareholding in HUBCO generating cash of £17 million and an exceptional profit of £5 million, which will be recorded in Q2. Our equity interest in HUBCO now totals 16.6%.
A summary of the Group cash flow is set out below:
||Year ended |
||31 December |
|Impairment of plant – exceptional
|Release of a guarantee on sale of Elcogas – exceptional
|Depreciation and amortisation
|Movement in working capital and provisions
|Dividends from JVs, associates and investments
|Operating cash flow
|Capital expenditure – maintenance
|Interest and tax
|Refinancing charges written off – exceptional
|Free cash flow
|Capital expenditure – growth
|Other financial investment
|Compensation for long-term performance shortfalls
|Acquisitions and disposals – exceptional
|Foreign exchange and other movements
|(Increase) / Decrease in net debt
|Opening net debt
|Closing net debt
Operating cash flow in 2004 increased by 60% to £85 million as compared to £53 million in 2003. This is primarily a result of improved operating profit performance in Europe and Australia together with a reduction in the working capital outflow compared with the previous period.
Capital expenditure (growth) to increase our operating capacity amounted to £62 million (2003: £25 million), reflecting spend on the build of the Saudi Aramco plants and the Canunda windfarm in Australia. Other financial investment principally comprises scheduled investment on our SEAGas pipeline in Australia.
As reported above, discussions continue with our US bank group to restructure the non?recourse debt on our US merchant assets.
In February, together with our partner Saudi Oger, we raised finance for the 1,075MW Saudi Aramco cogeneration projects in Saudi Arabia. The financing comprised a non-recourse US$510 million facility with a 17 year term. International Power has a 60% ownership interest in the project with a total equity investment of US$78 million.
In March, we raised A$62 million of non-recourse debt to fund the development and construction of the 46 MW Canunda windfarm in South Australia. International Power’s equity investment in this wholly owned project is AU$30 million.
Taking into account the short-term maturity of the outstanding 2% Senior Convertible Notes due in 2005, we redeemed 50% of the principal amount in March 2004. Approximately US$50 million of this convertible now remains outstanding.
The first quarter interest charge of £33 million is up from £27 million in Q1 2003, principally because last year’s charge benefited from exchange gains on our Euro deposits, and due to the addition of new operational assets to our portfolio in the Middle East.
Since we reported our full year results in February 2004, there has been no significant change in spark spreads, or the supply and demand fundamentals, in any of our key merchant markets. Our operational and financial performance remains on track and our earnings per share guidance for 2004 therefore remains in the range of 7p to 9p.
For further information:
Aarti Singhal, International Power plc
+44 (0)20 7320 8681
Morgan Bone, Finsbury Limited
+44 (0)20 7251 3801
About International Power
International Power plc is a leading independent electricity generating company with 11,072MW (net) in operation and 1,655MW (net) under construction. Among the countries where International Power has facilities in operation or under construction are Australia, the United States, the United Kingdom, the Czech Republic, the UAE, Portugal, Turkey, Malaysia, Pakistan and Thailand. International Power was listed on the London Stock Exchange and the New York Stock Exchange (as ADRs), on 2 October 2000. The ticker symbol on both stock exchanges is "IPR".
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