Shareholder Information
INTERNATIONAL POWER PLC
ANNUAL GENERAL MEETING
17 MAY 2006
CHAIRMAN’S SPEECH
SLIDE 1 - LOGO/INTERNATIONAL POWER/ANNUAL GENERAL
MEETING
SLIDE 2 - SIR NEVILLE SIMMS, CHAIRMAN
Good morning ladies and gentlemen and welcome to the Lowry Hotel for International Power plc's 2006 Annual General Meeting. This is the second time we have held our AGM outside London and it's very pleasing to see so many of you here today.
Please allow me a few moments to advise on the order for today's proceedings. After a few words from me, Phil Cox will give a short presentation to you about your business. Following Phil's presentation we will proceed directly to the formal business of the Meeting.
Before that, today is Jack Taylor's last day as a Director of the Company as he retires with effect from the end of this Meeting. Jack has been a Director since the demerger in October 2000 and I would like to thank Jack personally, on behalf of the Board and on your behalf, for his outstanding contribution to the Board over that period.
We also have here with us today John Roberts who will be appointed a Non-Executive Director following this Meeting. John brings to the Board extensive FTSE-100 Board experience within the utilities sector which will be very valuable to the Group. John is not with us on the podium today as his appointment does not take effect until after this Meeting has concluded.
I want to comment briefly on our performance during the period to which the Accounts relate, and update you on our progress this year so far.
SLIDE: 2005 OBJECTIVES
You will recall that our overriding objectives for 2005 were to focus on the integration and consolidation of the assets acquired in 2004, principally the Edison Mission Energy international portfolio of assets and Turbogas in Portugal, whilst also ensuring we delivered on our commitments on earnings and dividends.
SLIDE: 2005 EPS
I am pleased to report that the Group reported Earnings per Share, excluding exceptional items, of 13.5 pence. This was a 57 per cent. increase over EPS of 8.6 pence per share in 2004. Additional to this, an increase of 174% in free cash flow from £104 million in 2004 to £285 million in 2005 demonstrated that these earnings were backed by robust cash flow. Alongside the successful integration of the acquired assets, this result also reflects significant improvements in both the UK and US merchant markets.
SLIDE: GROWTH IN 2005
During 2005 we continued to grow the business by acquiring a 70 per cent interest in the 1,200 MW Saltend CCGT power station and, in partnership with Energy Australia , by forming a retail business in Australia . At the beginning of this year, we also reported that we had agreed to acquire 40% of the Hidd power and water plant in Bahrain.
SLIDE: DIVIDEND
We began to make dividend payments in July 2005 and at that time we indicated that we expected to maintain a dividend pay-out ratio at around 30 per cent. However, on the back of 2005's very strong performance, the Board has recommended a final dividend for the year ended 31 December 2005 of 4.5 pence per share. This is an 80 per cent. increase over the dividend for 2004. This dividend, if approved, will be paid to you towards the end of June. Looking forward it remains our intention to progressively grow the dividend over the medium term towards a pay-out ratio of 40 per cent.
SLIDE: SHARE PRICE
I'm also pleased to report that as a consequence of our very strong performance, the share price recovered well throughout 2005, closing at 239.5 pence per share at the end of 2005, against 154.5 pence per share at end 2004 and at yesterday's close, International Power's shares were trading at [ ] pence per share.
SLIDE: CHANGE FROM UK GAAP TO IFRS
Turning specifically to the 2005 Report and Accounts, 2005 is the first year we have produced our accounts under International Financial Reporting Standards, commonly known as IFRS. This change from UK GAAP to IFRS has not made a material difference to our reported performance.
SLIDE: COMPARATIVE FIGURES IPR GROUP
On a Group basis, Revenues increased by 132 per cent. from £1,267 million in 2004 to £2,936 million in 2005. Profit from operations increased by 126 per cent to £501 million in 2005 from £222 million in 2004.
On a regional basis:
SLIDE: COMPARATIVE FIGURES NORTH AMERICA
North America reported a profit of £49 million for 2005 against a loss of £21 million in 2004. The region benefited from strong operating and financial performance in Texas at both Midlothian and Hays, with Hays returning to service in May 2005. A significant full year contribution came from Eco Electrica in Puerto Rico, acquired as part of the Edison Mission portfolio.
SLIDE: COMPARATIVE FIGURES EUROPE
In Europe , profit for 2005 before exceptionals was £260 million, against £97 million in 2004. Key contributors to growth were First Hydro and Saltend in the UK, ISAB in Italy and Turbogas in Portugal . The region was also supported by a strong improvement at Rugeley. The year also saw good performances from Spanish Hydro, International Power Opatovice in the Czech Republic and Uni-Mar in Turkey.
SLIDE: COMPARATIVE FIGURES MIDDLE EAST
The Middle East saw profits increase from £20 million in 2004 to £24 million in 2005. Shuweihat in the United Arab Emirates undertook its first full year of operations, and Umm Al Nar, also in the UAE delivered availability well in excess of its Purchase Agreement requirements. Full commercial operation is expected at Umm Al Nar in the second half of 2006. At Tihama in Saudi Arabia construction is progressing well and is on track to conclude in the last quarter of 2006. At Ras Laffan B in Qatar completion is expected in 2008. As I said earlier we have also signed an agreement to acquire 40% of the Hidd project in Bahrain.
SLIDE: COMPARATIVE FIGURES AUSTRALIA
Profits in Australia rose to £125 million in 2005 against £98 million in the prior year, reflecting contributions from acquisition and development projects, principally Loy Yang B, Kwinana, Energy Australia and Canunda. As expected earnings from Hazelwood were down due to the expiry of contracts, though Hazelwood's average market price achieved in 2005 was once again ahead of the underlying market.
SLIDE: COMPARATIVE FIGURES ASIA
Profits in Asia increased to £102 million in 2005 against £60 million in 2004, this growth primarily being due to the strong performance at Paiton in Indonesia.
SLIDE: Q1 2006
Turning to the first quarter of this year and to date, we released the results for the period from 1 January 2006 to 31 March 2006 to the London Stock Exchange on 11 May.
First quarter earnings and cash flow are up significantly, primarily driven by a robust performance for our European portfolio where our business in the UK has delivered a strong increase in profitability. Additionally our US merchant assets continue to show improvement in earnings, reflecting higher spark spreads and load factors in both Texas and New England .
SLIDE: GROUP PROFIT FROM OPERATIONS
Turning specifically to the financial figures, profit from operations over the quarter has increased by 63% from £133 million in 2005 to £217 million in 2006. Free cash flow for the quarter was £127 million against £54 million for 2005. Earnings per share were 6.6 pence, an increase of 61 percent. over 4.1 pence for Q1 2005.
Highlights for each of the regions were:
SLIDE: NORTH AMERICA
In North America profit improved to £4 million in 2006 against a loss of £6 million in 2005, driven mainly by an improved performance at the merchant assets. Contracted assets continued to perform well.
SLIDE: COLETO CREEK
In April we announced the acquisition of Coleto Creek, a 632 MW coal fired plant in Texas . Coleto Creek will provide fuel diversity for our Texas portfolio and is expected to be immediately earnings and cash flow enhancing. This acquisition is expected to complete in the third quarter of this year.
SLIDE: EUROPE
Profits in Europe increased significantly from £83 million to £158 million, reflecting mainly a strong contribution from our UK portfolio, including a first time contribution from Saltend and an excellent performance from First Hydro. IPR Opatovice in the Czech Republic was also a strong performer, benefiting from improved margins, strong demand and robust operational performance during a cold and extended winter.
SLIDE: OPUS ENERGY
Earlier this month we acquired a 30% equity interest in Opus Energy, an independent supplier of electricity in the UK that focuses on the small business sector.
SLIDE: MIDDLE EAST
In the Middle East profits rose to £5 million from £4 million last year. All assets performed well. Construction projects at Saudi Arabia , Qatar and Abu Dhabi continue to make good progress. Following the agreement in January to acquire the Hidd 910 MW and 30 MIGD power and desalination facility in Bahrain, the plant is operating well and construction of the 60 MIGD desalination extension has commenced.
SLIDE: AUSTRALIA
Profits in Australia were down from £38 million in Q1 2005 to £33 million this year, mainly due to the expected reduction in prices at Hazelwood. Since the beginning of this year power prices have remained stable and we continue to expect average prices in 2006 to be slightly lower than in 2005. Loy Yang B and other contracted assets continue to perform well and the retail partnership with EnergyAustralia continues to increase its customer base.
SLIDE: ASIA
In Asia , profits increased to £28 million from £23 million. There has been a particularly strong performance from KAPCO in Pakistan and from Paiton in Indonesia.
SLIDE: – PHIL COX PRESENTATION
Thank you very much ladies and gentlemen. Now, as I said earlier, Phil Cox will make a short presentation to you.
Phil Cox – Thank you Neville.
Phil Cox - Thank you very much indeed ladies and Gentlemen, I now pass back to Neville for the formal business of the Meeting.
SLIDE: – ANNUAL GENERAL MEETING
Sir Neville Simms - Thank you Phil.
Ladies and Gentlemen, there are 12 separate resolutions being put forward for your consideration today.
SLIDE: - QUESTION PROCEDURE
As the various resolutions are put to you, you will of course want to ask questions. However it will help me greatly and will ensure that the meeting moves ahead smoothly if I take questions that relate specifically to each individual resolution at the time that I put the resolution to the meeting.
If you wish to ask a question I would be grateful if you could wait until the appropriate resolution is being put to the Meeting and then raise your hand. A steward will then come to you with a roving microphone.
When asking a question please could you state your name clearly for the record. That will enable us to get back to you if any follow up is necessary, and can I remind the Meeting that only shareholders are able to ask questions.
Finally, any questions that relate specifically to your personal shareholding should be addressed to Lloyds TSB Registrars, representatives of whom are present here today and who will be available after the Meeting has ended.
Thank you.
SLIDE: - NOTICE OF ANNUAL GENERAL MEETING
The Notice of the Annual General Meeting for 2006 was circulated to all shareholders during April of this year together with the Annual Report and the Summary Annual Report for the financial period ended 31 December 2005.
With your consent, I would like to take the Notice of Meeting as read.
Thank you very much.
SLIDE: - RESOLUTION 1
The first resolution is to receive the Accounts for the financial period ended 31 December 2005. The auditors' report on the Accounts is set out on page 78 of the Annual Report. No issues have been raised for your attention. Therefore, can we also please take the auditors' statement as read?
Thank you.
I now propose the first Resolution:
“To receive the Accounts for the financial period ended 31 December 2005 and the Report of the Directors, the Directors' remuneration report and the report of the auditors on those Accounts and on the auditable part of the Directors' remuneration report.”
I will now take questions on this resolution. Can I take the first question please.
[Questions]
If those are all the questions, I will now put resolution 1 to the vote. Please indicate your vote by holding up your white voting card. Those in favour? Those against? Thank you. I declare the Resolution carried.
SLIDE: SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the SLIDE: behind me. 99.37 % of the proxy votes cast were in favour of the resolution.
SLIDE: APPOINTMENT OF DIRECTORS
Resolutions two to four are for the re-appointment of Directors of the Company. Having been appointed a director since the last Annual General Meeting, Bruce Levy is automatically put forward for re-appointment. Additionally, in accordance with best practice both Mark Williamson and Tony Isaac are put forward for re-election this year.
SLIDE: TO REAPPOINT BRUCE LEVY
Resolution 2 is for the re-appointment of Bruce Levy. Bruce joined us as Regional Director of our North American business in December 2004 and was appointed a Director on 1 June 2005, having previously worked for US power company GPU, where he was senior Vice-President and Chief Financial Officer.
I propose the re-appointment of Bruce Levy as a Director. Are there any questions on Bruce's re-appointment?
I now put the Resolution to the Vote. Those in favour? Those against? Thank you. I declare the Resolution carried.
SLIDE: SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the SLIDE: behind me. 98.11 % of the proxy votes cast were in favour of the resolution.
SLIDE: TO REAPPOINT MARK WILLIAMSON
Resolution 3 is for the re-appointment of Mark Williamson as a Director. Mark is our Chief Financial Officer having been appointed to that position in December 2003.
I propose the re-appointment of Mark Williamson as a Director. Are there any questions on Mark's re-appointment?
I now put the Resolution to the Vote. Those in favour? Those against? Thank you. I declare the Resolution carried.
SLIDE: SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the SLIDE: behind me. 98.46 % of the proxy votes cast were in favour of the resolution.
SLIDE: TO REAPPOINT TONY ISAAC
Resolution 4 is for the re-appointment of Tony Isaac as a Director. Tony became a Non-Executive Director of the Company in October 2000. He is the senior independent Director and Chairman of the Audit Committee. Tony is also a member of both the Remuneration and Appointments Committees.
I propose the re-appointment of Tony Isaac as a Director. Are there any questions on Tony's re-appointment?
I now put the Resolution to the Vote. Those in favour? Those against? Thank you. I declare the Resolution carried.
SLIDE: SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the SLIDE: behind me. 99.05 % of the proxy votes cast were in favour of the resolution.
SLIDE: TO DECLARE A FINAL DIVIDEND
Resolution 5 which is an Ordinary Resolution, is to declare a final dividend of 4.5 pence per share. Are there any questions on this resolution?
I now put the Resolution to the Vote.
Those in favour? Those against? Thank you.
I declare the Resolution carried.
SLIDE: SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the SLIDE: behind me. 99.58 % of the proxy votes cast were in favour of the resolution.
SLIDE: RE-APPOINTMENT OF AUDITORS
Resolution 6 is for the re-appointment of KPMG Audit Plc as auditors of the Company. KPMG Audit Plc have indicated their willingness to continue as auditors for International Power plc. Are there any questions on this resolution?
Accordingly I propose:
“To re-appoint KPMG Audit Plc as auditors of the Company to hold office from the conclusion of the AGM to the conclusion of the next meeting at which accounts are laid before the Company and to authorise the Directors to set their remuneration.”
I now put the Resolution to the Vote. Those in favour? Those against? Thank you. I declare the Resolution carried.
SLIDE: SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the SLIDE: behind me. 98.82 % of the proxy votes cast were in favour of the resolution.
We now move to those items described as special business.
SLIDE: DIRECTORS' REMUNERATION REPORT
Resolution 7 is an Ordinary Resolution requesting your approval of the Directors' remuneration report. Are there any questions on this resolution?
Accordingly I propose:
“That the Directors' remuneration report for the year ended 31 December 2005 as set out on pages 64 to 75 of the Annual Report and Accounts is approved.“
I now put the Resolution to the Vote. Those in favour? Those against? Thank you. I declare the Resolution carried.
SLIDE: SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the SLIDE: behind me. 98.15 % of the proxy votes cast were in favour of the resolution.
SLIDE: GENERAL AUTHORITY TO ALLOT SHARES
Resolution 8 is an Ordinary Resolution requesting shareholders to give general authority to the Directors to allot Ordinary shares up to about one-third of the issued share capital as at 31 December 2005. The renewed authority, if given, will last until the 2007 Annual General Meeting of the Company, or 17 August 2007, whichever is the earlier. Are there any questions on this resolution?
I now put the Resolution to the Vote. Those in favour? Those against? I declare the Resolution carried.
SLIDE: SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the SLIDE: behind me. 96.14 % of the proxy votes cast were in favour of the resolution.
SLIDE: DISAPPLICATION OF PRE-EMPTION RIGHTS
Resolution 9, which is a Special Resolution, renews the authority given annually to the Directors to disapply shareholders existing pre-emption rights in respect of a proportion of the unissued shares of the Company. The number of unissued shares over which we are requesting you to disapply these pre-emption rights represents five per cent. of the issued share capital as at 6 March 2006. Are there any questions on this resolution?
I now put the Resolution to the Vote. Those in favour? Those against? I declare the Resolution carried as a Special resolution.
SLIDE: SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the SLIDE: behind me. 98.70 % of the proxy votes cast were in favour of the resolution.
SLIDE: PURCHASE OF OWN SHARES
Resolution 10, which is a Special Resolution, renews the authority given annually to the Directors to purchase up to a maximum of 10 per cent. of the shares of the Company on the London Stock Exchange. We ask you for this authority each year to provide us with the flexibility of undertaking such purchases should market conditions be such that it would be prudent for us to do so. This ability benefits all shareholders equally by increasing their stake in the company and also by increasing earnings per share. Are there any questions on this resolution?
I now put the Resolution to the Vote. Those in favour? Those against? I declare the Resolution carried as a Special resolution.
SLIDE: SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the SLIDE: behind me. 99.26 % of the proxy votes cast were in favour of the resolution.
SLIDE: AMENDMENT TO ARTICLES OF ASSOCIATION
Resolution 11, which is a Special Resolution, is to amend the Articles of Association of the Company following recent changes in legislation which permit the company to indemnify its directors and officers against liabilities to a greater extent than was previously possible.
Are there any questions on this resolution?
I now put the Resolution to the Vote.
Those in favour? Those against? I declare the Resolution carried as a Special Resolution.
SLIDE: SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the SLIDE: behind me. 98.78 % of the proxy votes cast were in favour of the resolution.
SLIDE: AMENDMENT TO PERFORMANCE SHARE PLAN
Resolution 12, an Ordinary Resolution, is to amend the Rules of the Company's 2002 Performance Share Plan. The background and rationale for this amendment are set out in the Notice of AGM and also in the Directors' Remuneration Report in the Report and Accounts.
Are there any questions on this resolution?
I now put the Resolution to the Vote.
Those in favour? Those against? I declare the Resolution carried as a Special Resolution.
SLIDE: SHOWING PROXY VOTING FIGURES TO BE SHOWN AFTER THE VOTE IS DECLARED
Proxy votes are shown on the SLIDE: behind me. 98.13 % of the proxy votes cast were in favour of the resolution.
SLIDE: HOLDING/CLOSING SLIDE:
That concludes the business of the Meeting Ladies and Gentlemen. Could I thank you all for your attendance and wish you a safe journey home.
