Financial Results for the Three Months Ended 31 March 2003
(London - 13 May 2003) International Power today announces its financial results for the three-month period ended 31 March 2003.
Sir Neville Simms, Chairman of International Power, said: "Our portfolio of contracted assets continued to perform well, providing a solid earnings platform for the group, despite the challenging merchant pricing environment in the UK and the US."
"We are very aware that cash returns are an increasingly important element of total shareholder return, and I am pleased to announce today that, alongside our continued commitment to a long-term growth strategy, we are initiating a share repurchase programme." Sir Neville added.
Financial and Operational Summary
- Operating profit of £75 million
- Earnings per share of 2.8p
- Operating cash flow of £53 million
- Gearing 46.1%; Debt Capitalisation 31.6%
- Initiation of a share repurchase programme
During January and February, our US operations were adversely affected by unusual conditions impacting the supply and transportation of gas to our plants during periods of extreme weather. Although shortcomings have been identified and corrected, and the performance of the assets improved in March, that improved performance failed to make up for the weak early start. As a consequence of this and a lower level of compensation payments from Alstom, our North American business suffered an operating loss of £5 million in the first quarter.
In Europe and Middle East, we generated an operating profit of £38 million with all contracted assets continuing to perform well. In particular, our EOP plant in the Czech Republic delivered robust financial performance as it returned to full capacity in time to capture high winter prices. In the UK, most of the winter peak demand was met without difficulty, leading to only short-lived peaks in winter prices, and these were insufficient to have any significant positive impact on the financial performance of Rugeley and Deeside.
Construction of the Shuweihat S1 power and water plant in Abu Dhabi continues to progress well. The first two (of five) gas turbines have now been installed. Construction and installation of the desalination units also remains on track, and initial commissioning and testing of the units is expected to commence in the third quarter of this year.
In April, we announced the signing of an agreement with the Abu Dhabi Water and Electricity Authority to acquire and expand the Umm Al Nar power and water plant. The financing for this project, which is backed by a 23-year power and water purchase agreement, is underway.
In Australia, our operating profit increased 17% to £34 million from £29 million last year, owing to higher prices secured through forward contracts. Our contracted position in Australia remains healthy for the remainder of this year and into 2004.
Construction of the SEAGas pipeline continues to progress well and approximately 315km (out of the total 680km) of pipe has now been installed.
In our Rest of the World segment, the solid operational and commercial performance of all investments led to an increase in operating profit of 15% to £15 million from £13 million last year.
Complementary to our growth strategy, and in light of the continued strength of our balance sheet, free cash flow and liquidity, we are announcing today the commencement of a share repurchase programme, using a proportion of our available capital. We will keep our shareholders informed on the progress of this programme through stock exchange announcements which will follow actual repurchases.
In the US, we have signed the waiver agreement with the bank group that provides the non-recourse ANP Funding I, LLC credit facility. As part of that agreement, the bank group has waived all claimed technical defaults, which will allow International Power to re-designate, in its half-year results, the maturity of the debt to its original repayment date of June 2006.
As previously reported, the termination of our tolling contract at Rugeley that followed the collapse of TXU Europe was an event of default under the terms of our non-recourse Rugeley credit facility of £160 million. We continue to make good progress with the lenders to this facility to resolve the issues that arose from the early termination of the tolling agreement.
With regard to the competitive environment, liquidity issues remain the dominant feature in the US and, to a lesser but growing extent, in the UK and continental European power generation markets. In the first quarter, industry participants were successful in rolling over all or a major portion of their near-dated debt. One of the effects of these debt extensions has been to defer the immediate need for the forced sale of assets which had been widely anticipated. However, it has in no way altered the fundamentally strong competitive position which we are in, and we continue to see a broad range of attractive acquisition and development opportunities in all of our core regions.
There has been no material change in the near term outlook in any of our merchant markets since our last results announcement. Accordingly, using the same assumptions that were provided in the 2002 full year results announcement, we reconfirm our stated earnings guidance of 9p to 11p per share for 2003.
For further information please contact:
+ 44 (0)207-320-8619
Notes to editors
International Power plc is a leading independent electricity generating company with 10,890MW (net) in operation and 300MW (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 created from the de-merger of National Power, and its shares began trading independently on the London Stock Exchange and as ADRs on the New York Stock Exchange on 2 October 2000. The ticker symbol on both stock exchanges is "IPR".
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