Press Releases

09/08/2007

Interim results for the six months ended 30 June 2007

Full announcement including financials in PDF format .

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(London – 9 August 2007) International Power today announces its results for the six months ended 30 June 2007 and reports on key developments to date.

Sir Neville Simms, Chairman of International Power, said, "EPS⁽ⁱ⁾ is up 12.6% and free cash flow⁽ⁱⁱ⁾ is up 15.3% on the same period last year. Overall the business continues to perform in line with our expectations and we remain confident that 2007 will be a year of further growth. The Board is also pleased to announce that it is introducing an interim dividend."

Highlights

Excluding exceptional items and specific IAS 39 mark to market movements⁽ⁱ⁾
- Profit from operations⁽ⁱ⁾ of £416 million (2006: £392 million) – up 6.1% (9.7% at constant exchange rates)
- EPS⁽ⁱ⁾ of 13.4p (2006: 11.9p) – up 12.6% (16.8% at constant exchange rates)
- Free cash flow⁽ⁱⁱ⁾ of £309 million (2006: £268 million) – up 15.3%
Including exceptional items and specific IAS 39 mark to market movements⁽ⁱ⁾
- Loss from operations of £53 million (2006: profit of £458 million)
- EPS of 13.1p (2006: 14.9p) – down 12.1%
Interim dividend equivalent to 35% of the 2006 full year dividend, making this year’s interim dividend 2.77 pence per share
Awarded the 2,000 MW and 130 MIGD Fujairah F2 power and desalination project in the UAE
Signed agreement to acquire 648 MW Trinergy wind portfolio located in Italy and Germany

All reference to financial performance in this commentary is on a pre-exceptional and pre-specific IAS 39 mark to market movements basis (unless stated otherwise).

Profit from operations⁽ⁱ⁾	Six months ended 30 June		Year ended 31 December
Profit from operations⁽ⁱ⁾	2007 £m	2006 £m	2006 £m

North America	42	28	101
Europe	268	242	450
Middle East	29	24	52
Australia	46	64	124
Asia	55	56	91

Regional total	440	414	818
Corporate costs	(24)	(22)	(45)

Profit from operations	416	392	773

(i)	Excluding exceptional items and specific IAS 39 mark to market movements. For analysis and explanation of exceptional items and specific IAS 39 mark to market movements, please see notes 1 and 3 to this statement.
(ii)	Free cash flow is set out in note 4 to this statement.

North America

Profit from operations in North America at £42 million was up from £28 million last year principally due to the acquisition of Coleto Creek. Coleto Creek operated for four out of six months, with the asset returning to service in May following a two month planned outage for both general maintenance and the commissioning of dust emission control equipment. Planned outages were successfully completed at our contracted assets, namely EcoEléctrica, Hartwell and Oyster Creek. Our contracted assets all continue to perform well and improved availability resulted in higher profitability at EcoEléctrica.

In Texas, demand levels were lower than for the same period last year due to mild weather. This impacted the load factor and spark spread at Midlothian which were flat on H1 2006 at 55% and $12/MWh respectively. The load factor at Hays, which had an extended outage to repair defective welds on high pressure steam pipes, was down from 55% to 35%. The direct cost of this extension to the outage was a charge of £5 million in the first quarter. We are currently seeking to recover these costs through warranty claims on the original EPC contractor. Due to the timing of the extended outage Hays’ achieved spark spread fell to $7/MWh from $12/MWh in the first half of 2006. All four units at Hays are currently operational, and we will complete the remedial works on two units during a planned outage in Q4 this year.

In New England, profitability benefited from the introduction of the forward capacity market which more than offset the reduction in load factor, from 60% to 50%. The lower load factor is principally due to the mild weather in the first quarter.

For 2007 we have forward contracted 80% of our expected merchant CCGT output in Texas and New England and 95% of our expected output at Coleto Creek.

Europe

Profit from operations in Europe increased to £268 million from £242 million last year, reflecting strong contributions from Rugeley, Deeside and First Hydro. Rugeley and Deeside benefited from higher spreads, achieved as a result of our decision to forward contract Rugeley at higher price levels during 2006, and from improving spark spreads at our largely uncontracted Deeside plant. First Hydro’s earnings were up as the plant benefited from increased demand for reserve capacity. At Saltend, earnings have fallen as expected, due to lower spark spreads as a result of higher gas costs under the Gas Supply Agreement (GSA), and the accelerated amortisation of the GSA in the first quarter. For 2007, we have contracted 95% of expected output at Rugeley and Saltend and 55% at Deeside.

Indian Queens, which was acquired in the second half of 2006, delivered a first time half year contribution and our contracted assets in Iberia and Turkey continue to deliver good operational and financial performance. As anticipated, earnings are down at ISAB in Italy following a planned outage in the period and a revised fuel indexation methodology.

The Czech Republic experienced very mild weather during the first half of the year and as a consequence heat sales were lower than for the same period last year. In August, International Power Opatovice signed a new three year contract with the existing offtaker to secure 1.3 TWh per annum (65% of our expected output), until the end of 2010.

Levanto made a first time half year contribution following its acquisition in the second half of 2006. An additional 51 MW of wind farms that were under construction at acquisition started commercial operation during 2007, with a total of 412 MW currently in operation. On 4 August, International Power agreed to acquire the 648 MW Trinergy wind portfolio, located in Italy and Germany, for an enterprise value of €1,839 million (£1,243 million). The transaction, which includes 581 MW in operation and 67 MW currently under construction, is expected to reach financial close by the end of the third quarter 2007.

International Power signed an agreement in June to acquire the development rights for an 8 MW wind farm in Germany, which is scheduled to be commissioned in the first half of 2008. An additional 14 MW operational wind farm, located at Delfzijl-Zuid in the Netherlands, was acquired in July. Following the completion of these acquisitions, International Power will have 1,053 MW of operational wind turbines and a further 99 MW under construction.

Our 800 MW greenfield CCGT project at Pego, in Portugal, and our partnership with Eneco, for the construction of an 800 MW CCGT plant in the port of Rotterdam, continue to make good progress.

In June, International Power completed the joint venture with Mitsui to create a common ownership platform for its UK⁽ⁱ⁾ assets (held 75% International Power and 25% Mitsui), and equalised its returns from Paiton Indonesia with the returns of Mitsui⁽ⁱⁱ⁾.

Notes:
⁽ⁱ⁾Ownership in Derwent Cogeneration Limited, 33% held jointly by International Power and Mitsui, is unchanged as a result of this transaction.
⁽ⁱⁱ⁾This transaction has equalised the returns for International Power and Mitsui from Paiton (at 40% each) via the acquisition of an economic interest from Mitsui but has not entailed any transfer of shares or change of management structure.

Middle East

In the Middle East, profit from operations increased to £29 million (2006: £24 million), reflecting a full half year contribution from Tihama in Saudi Arabia and additional capacity coming online in the region, principally at Umm Al Nar in Abu Dhabi and Ras Laffan B in Qatar. Underlying profit growth in the region was strong given that first half 2006 profits benefited from a one-off development fee from the Hidd acquisition in Bahrain.

At Umm Al Nar, a further 460 MW of power entered commercial operation in April and the final 458 MW came online in July 2007. The plant, which now has an overall capacity of 2,200 MW and 143 MIGD, is operating under the first year of its 20-year Power and Water Purchase Agreement (PWPA). 650 MW and 48 MIGD of the original plant will be decommissioned in 2010. This decommissioning date was extended, at the request of the Abu Dhabi Water and Electricity Company (ADWEC), by an additional two years due to the good operational performance of the plant. After 2010 the plant will have a capacity of 1,550 MW and 95 MIGD until the end of the PWPA in 2027.

At Ras Laffan B, in Qatar, the second phase of construction has been completed with an additional two steam turbines providing 300 MW of capacity reaching commercial operation in June 2007. This brings the capacity of the plant to 900 MW and 15 MIGD, with completion of the final 125 MW and 45 MIGD expected in H1 2008.

At Hidd in Bahrain, construction of the 60 MIGD desalination extension continues to make good progress, and this additional capacity is expected to be operational by the end of the year.

In June, the non-recourse debt facility at Tihama was successfully refinanced for a total of US$550 million, achieving improved debt amortisation terms, lower margins and an increased distribution to International Power plc.

International Power (in a 50:50 partnership with Marubeni of Japan) was successful in its bid for a 40% interest in the 2,000 MW and 130 MIGD greenfield Fujairah F2 independent water and power project in the United Arab Emirates. A long-term PWPA has been signed with ADWEC for the sales of power and water. The project is expected to achieve financial close by the end of 2007 and be fully operational by the end of 2010.

In Botswana, the development of the Mmamabula power station (Phase One – up to 2,500 MW) with CIC Energy Corp. is proceeding well. Negotiations for the power purchase agreements with Eskom Holdings Limited (for the majority of Mmamabula’s output) and Botswana Power Corporation are progressing alongside the EPC tender process.

Australia

Profit from operations fell from £64 million in 2006 to £46 million. In the first quarter, earnings were impacted by a transmission constraint in Victoria, caused by a bushfire. In the second quarter earnings fell due to planned outages at Pelican Point, some short-term unplanned outages at both Loy Yang B and Hazelwood and increased inter-regional pricing differences. This meant that our portfolio had to purchase power on occasions to satisfy our contracted position, and this coincided with high electricity spot prices driven by the continuing drought.

The forward price curve has continued to increase throughout the period, for both peak and off peak prices principally due to the drought. As we are largely forward contracted for 2007, we expect the principal benefit from this price improvement to be realised from 2008 onwards. We entered 2007 with some 60% of Hazelwood’s 2008 expected output forward contracted and we have continued to forward contract into this improved market for 2008 and 2009. At present 2008 is around 75% contracted and we would expect the average achieved price for the year to be in the order of A$45 per MWh. In spite of the severity of the drought, we remain confident that Hazelwood and Loy Yang B can generate at full load throughout 2008 and into 2009.

In May, we exercised our option to acquire the remaining 50% of the Australian retail partnership. The transaction is expected to close in August 2007 with a payment of A$142 million (£59 million) to EnergyAustralia. Since the retail partnership was formed in July 2005, the number of power and gas accounts has increased from 175,000 to 435,000.

Hazelwood continues to make progress finalising the terms of the A$80 million grant from the Federal and Victorian Governments, to develop and retrofit innovative low emission technology to one of its 200 MW coal-fired generating units. The project includes coal drying, turbine and boiler efficiency improvements, and a pilot CO2 extraction scheme.

Asia

Profit from operations in Asia was broadly flat at £55 million (2006: £56 million). Strong operational and financial performances at Thai National Power, HUBCO and Uch were offset by lower earnings at KAPCO, due to the expiry of its tax holiday at the end of June 2006.

The sale of the Malakoff wholesale power generation business to MMC Corporation was completed and proceeds of £249 million were received during the period.

We continue to actively pursue the Paiton 3 and the Tanjung Jati A greenfield opportunities in Indonesia.

Interest

Net interest expense has increased by £28 million to £140 million for the period, primarily reflecting the Coleto Creek and Levanto acquisitions, which took place in the second half of 2006, and an increased interest expense at Tihama as the assets became fully operational in Q4 2006. Interest cover was 2.6x for the six months ended 30 June 2007 (2006: 3.0x).

Foreign exchange

The impact of the strengthening of sterling on the results of our overseas operations, compared to the same period in 2006, is a reduction in EPS of 0.5p. The majority of this impact relates to the translation of US dollar denominated operations.

Tax

The Group tax charge for the first six months has reduced by £23 million to £41 million (2006: £64 million). This includes the impact of reducing UK deferred tax balances, following the lowering of the standard rate of UK corporation tax from 30% to 28% with effect from 1 April 2008. Minority interests in our UK assets also benefit from this change in tax rate. The effective tax rate, excluding this impact, is 30% (2006: 30%).

Exceptional items and specific IAS 39 mark to market movements

Exceptional items for the first six months of 2007 produced a gain before tax of £259 million (2006: gain before tax of £19 million). This includes the following items:

Profit on the sale of Malakoff of £115 million
Profit on the partial disposal of UK subsidiaries to Mitsui of £153 million
Provision against the investment in BioX of £9 million

The specific IAS 39 mark to market movements reported in the period amount to a charge before tax of £479 million (2006: gain of £51 million), £433 million of which relates to significant increases in forward prices in Australia.

Cash Flow

A summary of the Group’s cash flow is set out below:

	Six months ended 30 June 2007 £m	Six months ended 30 June 2006 £m	Year ended 31 December 2006 £m

Profit for the period	158	267	477
Depreciation, amortisation and other movements ⁽ⁱ⁾	313	103	322
Dividends from joint ventures and associates	53	42	113
Capital expenditure – maintenance	(34)	(58)	(128)
Movement in working capital	5	41	(15)
Tax and interest paid	(186)	(127)	(313)

Free cash flow	309	268	456
Receipt from TXU administrators – exceptional	-	14	14
Receipt of compensation for breach of contract - exceptional	-	5	5
Debt financing costs capitalised on acquisition debt	-	-	(14)
Capital expenditure – growth	99	(52)	(142)
Returns (net of investments) from joint ventures, associates and investments	3	12	24
Acquisitions	(143)	(10)	(842)
Disposals	417	-	1
Dividends paid	(118)	(67)	(67)
Proceeds from share issue	10	8	15
Funding from minority interests	30	5	3
Foreign exchange and other	(59)	93	213

Decrease/(increase) in net debt	350	276	(334)
Opening net debt	(3,494)	(2,979)	(2,979)
Net debt on acquisition of subsidiaries	-	-	(181)

Closing net debt	(3,144))	(2,703)	(3,494)

(i)

Depreciation, amortisation and other movements are set out in note 4 to this statement. They include income statement charges for interest, tax, depreciation, specific IAS 39 mark to market movements, the share of profit of joint ventures and associates and the exceptional profit on the disposal of 25% of UK subsidiaries. In the year ended 31 December 2006 they also included the exceptional profit on the TXU settlement and the exceptional profit on compensation for breach of contract.

Free cash flow for the half year was £309 million, an increase of 15.3% compared to the previous year (2006: £268 million). This increase was driven by strong operational and financial performance across the Group, together with higher dividends from joint ventures and associates. This was partially offset by increased tax and interest payments (£59 million higher than 2006).

Disposals include the proceeds of £249 million from the sale of Malakoff and £168 million from the disposal of 25% of Deeside, Rugeley and Indian Queens to Mitsui. Acquisitions consist of the purchase of 5% of First Hydro and Saltend and the economic interest of 9.2% of Paiton from Mitsui.

Summary balance sheet

A summarised, reclassified Group balance sheet is set out below:

	As at 30 June 2007 £m	As at 30 June 2006 £m	As at 31 December 2006 £m

Property, plant and equipment and intangibles	4,894	4,214	4,860
Investments	1,380	1,456	1,290
Long-term receivables and others	1,448	763	1,270

	7,722	6,433	7,420
Net current (liabilities)/assets (excluding net debt items)	(729)	(219)	72
Non-current liabilities (excluding net debt items)	(1,345)	(921)	(1,258)
Net debt	(3,144)	(2,703)	(3,494)

Net assets	2,504	2,590	2,740


Gearing	126%	104%	128%
Debt capitalisation	56%	51%	56%
Net debt – JVs / Associates	(1,256)	(1,386)	(1,524)

Net debt has decreased since the 2006 year end as a result of the strong cash flow of the Group, including receipts from the disposals of Malakoff and a part share in the UK subsidiaries. However, the strong profitability of the Group and the profit on disposals have been more than offset by mark to market movements on derivatives, which increase both current and non-current liabilities. In addition, net current liabilities, excluding net debt, have also increased due to the disposal of Malakoff, which was shown as an asset held for sale at 31 December 2006.

Reporting update

On 28 June, International Power confirmed that the delisting of its ADRs from the New York Stock Exchange was complete. The Company also filed a deregistration form with the SEC to terminate its reporting obligations, and is awaiting confirmation, which we expect to receive by the end of September 2007.

Following the introduction of the EU Transparency Obligations Directive and our delisting from the New York Stock Exchange and deregistration under the US Securities Exchange Act of 1934, International Power will move to half yearly reporting from 1 January 2008. In addition to the Preliminary and Interim results statements, we will also provide Interim Management Statements in 2008.

Dividend and Shareholder returns

The Board regularly reviews the Group's policy regarding dividends and returns to shareholders. Given the number of growth initiatives being actively pursued across the portfolio, the Board considers it appropriate to maintain the Group's financial flexibility at the current time.

The Board is pleased to announce the introduction of an interim dividend which will be calculated as a fixed percentage (35%) of the previous year’s full year dividend. An interim dividend of 2.77 pence per ordinary share will be paid to shareholders registered on the Company share register on 5 October 2007, with payment being made on 30 October 2007. International Power’s dividend policy, of progressively moving towards a dividend pay-out ratio of 40%, remains unchanged.

Outlook

Overall the business continues to perform in line with expectations, with the second half operating performance expected to be above the first half. We remain confident that 2007 will be a year of further growth.

Achieved Spark and Dark Spreads for the six months ended 30 June 2007

North America

New England	H1 2007	H1 2006

Spark spread ($/MWh)	$15*	$8
Load factor	50%	60%

Texas (Midlothian)	H1 2007	H1 2006

Spark spread ($/MWh)	$12	$12
Load factor	55%	55%

Texas (Hays)	H1 2007	H1 2006

Spark spread ($/MWh)	$7	$12
Load factor	35%	55%

Texas (Coleto Creek)	H1 2007	H1 2006

Dark spread ($/MWh) **	$28	N/A
Load factor	60%	N/A

* Includes impact of Forward Capacity Market
** Excludes CO2 costs

United Kingdom

Rugeley	H1 2007	H1 2006

Dark spread (£/MWh) *	£34	£20
Load factor	65%	60%

Deeside	H1 2007	H1 2006

Spark spread (£/MWh) *	£25	£17
Load factor	60%	25%

** Excludes CO₂ costs

Australia

Hazelwood	H1 2006	H1 2005

Achieved power price (A$/MWh)	A$32	A$33
Load factor	80%	75%

For further information please contact:

Investor Contact:	Media Contact:
James Flanagan	Beth Akers
+44 (0)20 7320 8869	+44 (0)20 7320 8622

About International Power

International Power plc is a leading independent electricity generating company with 30,198 MW gross (18,326 MW net) in operation and 149 MW gross (74 MW net) under construction. International Power has power plants in operation or under construction in Australia, the United States of America, the United Kingdom, the Czech Republic, France, Germany, Italy, the Netherlands, Portugal, Spain, Turkey, Bahrain, Oman, Qatar, Saudi Arabia, the UAE, Indonesia, Pakistan, Puerto Rico and Thailand. International Power is listed on the London Stock Exchange with ticker symbol IPR.

Company website: www.ipplc.com