Financial Results for the Nine Months Ended 30 September 2002
(London – 19 November 2002) International Power announces its results for the nine-month period ended 30 September 2002 and reports on key developments to date.
"I am pleased to report that in the first nine months of this year, our earnings per share increased by 39% to 12.8p from 9.2p in 2001 although, as previously indicated, third quarter earnings were down on the same period last year," said Sir Neville Simms, Chairman of International Power.
Sir Neville added, "International Power has demonstrated again that it is a strong company with a fundamentally sound business model. Not only is it financially robust enough to overcome the current challenges in the power generation industry, but the company is also extremely well positioned to continue to deliver value enhancing growth in the future."
- Earnings per share (excluding exceptional items) up 39% to 12.8p from 9.2p last year
- Operating profit (earnings before interest and tax) excluding exceptional items up 30% to £312 million from £240 million last year
- Continuing balance sheet strength - Gearing 46%; Debt Capitalisation 32%
- Operating cash inflow of £317 million up from £202 million last year
In North America, operating profit for the nine months ended 30 September increased 22% to £88 million from £72 million last year, primarily due to the addition of new capacity and compensation payments from Alstom (the prime contractor) in respect of late commissioning and performance recovery.
Operating profit in the third quarter decreased to £29 million from £36 million last year, reflecting reduced compensation from Alstom and a weaker pricing environment in Texas and New England.
At our flagship US plant, Midlothian I, significant improvement in operating performance has been achieved by Alstom in the first 24 months of the 30 month performance recovery period. Alstom has elected to compensate International Power for the remaining incremental non-performance, through the payment of a lump-sum amount, which approximates the commercial value of such non-performance over the remaining life of the asset. The anticipated payment by Alstom, of not less than £32 million (US$ 50 million), will be used to reduce the carrying value of the fixed assets and will be applied to partial prepayment of the debt on our US merchant fleet.
Our 550MW Brookhaven site under development in Long Island, New York is now fully permitted. Discussions with both EPC contractors and potential customers for long-term power offtake are progressing and, subject to positive outcomes, we expect to commence construction in the first half of 2003.
Europe and Middle East
Operating profit in this region decreased to £89 million from £111 million in 2001 for the reasons reported in our interim announcement, namely, the partial mothballing of Deeside and the weak merchant market in the UK, together with the sale of our interest in UFG last year.
In the third quarter, operating profit decreased to £12 million from £28 million last year, mainly due to lower earnings from Deeside.
The uncertainty on the future of TXU Europe puts our tolling contract at Rugeley at risk. Nonetheless, TXU Europe has, to date, continued to make payments under the contract. We are ensuring that the plant is ready to operate in a merchant environment, if required.
On 9 November, there was a partial roof collapse at one of EOP’s combined heat and power plants in the Czech Republic. No one was injured in this incident, but it did result in the loss of power and heat supply to consumers. All efforts are focused on returning the plant to normal operation as quickly as possible with full operation anticipated by the end of 2002. The cost of repairs is estimated at £15 million to £20 million, which is covered by insurance. As the plant will be non-operational for a period of time, we estimate an earnings per share impact at 0.4p, all within 2002.
Our profitability in this region increased significantly from last year, principally driven by our contracted position at Hazelwood and Pelican Point. Through the efficient forward trading of power, we have consistently secured a premium to the average pool price. For the nine months ended 30 September operating profit increased 38% to £76 million from £55 million in the previous year.
Construction of the SEAGas pipeline (680km from Victoria to South Australia) has commenced and the project remains on track to commence commercial operation in the first quarter of 2004.
Rest of the World
Operating profit before exceptional items increased to £78 million from £25 million last year. The primary contributors to this growth were our two investments in Pakistan, Kot Addu Power Company (KAPCO) and Hub Power Company (HUBCO), both of which continue to perform well.
To date, the operational and financial performance of our assets has generally been good and we expect our earnings for 2002 to be closely in line with market expectations.
Although merchant prices in the UK and US (Texas and New England) remain weak, there have been encouraging announcements of capacity withdrawals in both markets. Such withdrawal of capacity is a necessary pre-condition to an upturn in prices, however, further capacity removals need to occur to correct the supply-demand imbalance in these markets.
With respect to 2003, on the basis of the same cautious assumptions set out in our interim announcement and prior to any financial impact that may result from potential changes to the tolling contract at Rugeley, our earnings per share guidance remains in the range of 11p to 13p.
Looking ahead, our regionally balanced and robust asset portfolio will enable us to deal with the current challenges in our industry. When coupled with our balance sheet and strong liquidity, we remain well positioned to benefit from the many opportunities in our markets and to deliver value-enhancing growth.
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Notes to Editors
International Power plc is a leading independent electricity generating company with 10,235MW (net) in operation, 910MW (net) under construction and approximately 6,000 MW (net) in advanced development. Among the countries where International Power has operating facilities are Australia, the United States, the United Kingdom, the Czech Republic, Portugal, Turkey, Malaysia, Pakistan, and Thailand. International Power was created from the demerger 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".
Full announcement including financials in PDF format.