merchant assets in UK by 6Y0V811

VIEWS: 6 PAGES: 18

									Leaders in Energy 2008
Power: Bridging Europe’s Generation Gap
Mark Williamson
Chief Financial Officer,
International Power plc
    Agenda


     Brief introduction to International Power
     Overview of European business
     Bridging Europe’s generation gap
        – a review of key investment considerations for
                   merchant assets in UK
                   long-term contracted assets in Portugal
                   renewable assets across Europe
     Summary




page 3   Leaders in Energy   June 2008                        International Power
    International Power overview

     Multinational independent power producer      IPR portfolio by geography
     31,191MW (gross) capacity in operation
      worldwide
     Creating value through strong growth
     Risk mitigation across five core regions
        – in-depth regional market knowledge
        – balance of contracted and merchant
           markets
        – diversity of fuel type and technology
     Good access to growth opportunities
                                                  IPR portfolio by contract type*
       – acquisitions
       – greenfield




                                                                                     *Rolling one year average
                                                               All charts are presented based on net
                                                               operating MW

page 4   Leaders in Energy   June 2008                                           International Power
            Growth profile
                                                                                            Free cash flow (£m)
                                                                                                                    £653m
                                                                                *
                                                                                                            £456m

                                                                                                    £285m


                                                                                            £104m


                                                                                            2004    2005    2006    2007
 GW (Net)




                                                                                            Share price



                                                                                    Pence




            Note: As at 31 December
            * In 2007, IPR sold its interest in Malakoff and signed an
            agreement with Mitsui to align its percentage holdings in its UK
            subsidiary power stations. This resulted in the net sale of 935MW
            (net) during the year.


page 5          Leaders in Energy           June 2008                                                                  International Power
    International Power in Europe

     Over 50% of portfolio in
      UK merchant market
     Rest of Europe –
      contracted or                                                                         Saltend
                                                                            Deeside         5
      regulated tariffs                                                             1       Derwent
                                                                   First Hydro 3
                                                                                        42
                                                                                        Rugeley                           IP Opatovice
                                                                               6 Indian                                         7
                                                                                                                          13
                                                                                   Queens
                                                                                                                      IPR European
                                                                                                                      Wind Portfolio
                                                                                                  Turbogas 10                    13
                                                                                                                                                12   Unimar
                                                                                                                 11
                                                                                                     Pego 9
                                                                   Gross  IPR         Net       Fuel
                                                                                                                 Spanish            8
  Plant name               Country              Status               MW own %         MW        type             Hydro                  ISAB
  UK
  1. Deeside               Wales                Merchant             500     75%      375       Gas
  2. Derwent               England              PPA 2010             214     23%       49       Gas
  3. First Hydro           Wales                Merchant           2,088     75%    1,566       Pumped Storage
  4. Rugeley               England              Merchant           1,050     75%      788       Coal
  5. Saltend               England              Merchant           1,200     75%      900       Gas
  6. Indian Queens         England              Merchant             140     75%      105       Oil
      Sub-Total                                                    5,192            3,783
  Rest of Europe
  7. IP Opatovice          Czech Republic       Contracted            585   100%      585       Coal/Gas
  8. ISAB                  Italy                PPA 2020              562    34%      193       Gas
  9. Tejo Energia (Pego)   Portugal             PPA 2021              628    50%      314       Coal
  10. Turbogas             Portugal             PPA 2024            1,008    60%      605       Gas
  11. Spanish Hydro        Spain                Tariff 2030-65         86    67%       57       Hydro
  12. Unimar (Marmara)     Turkey               PPA 2020              488    33%      162       Gas
  13. IPR European         Germany/Italy/       Regulated Tariff    1,153   100%    1,153       Wind
      Wind Portfolio       France/Netherlands
  Sub-Total                                                        4,510            3,069

  GRAND TOTAL                                                      9,702            6,852



page 6   Leaders in Energy            June 2008                                                                                                International Power
    UK - overview of operations

     Merchant generator with interest in
      six assets
     6.5% share of UK generation
     Balanced portfolio                                                      Saltend
       – fuel diversity – gas, coal, oil and             Deeside              5

          pumped storage                           First Hydro   3
                                                                      1       Derwent
                                                                              2
       – assets across the merit order                                    4
                                                                     Rugeley
            - baseload, mid merit, peaking                   6   Indian
            - First Hydro well placed to capture                 Queens
              value in short term market
     Growth via acquisition                       IPR UK portfolio by fuel type
       – from 500MW in 2000 to over
          5,000MW (gross) today
     Strong financial performance in 2007
        – robust operational performance
        – optimisation of coal and gas
        – peaking plant flexible and available

                                                                     Chart presented based on net operating MW




page 7   Leaders in Energy   June 2008                                               International Power
    UK - market fundamentals


    Long-term fundamentals remain attractive
    Uncertainty on available capacity
      – restricted running of opted-out coal
         plant and potential closure before
         2015
      – further pressure on coal capacity due
         to rising coal price and carbon costs
      – ongoing retirement of nuclear plant                       UK Reserve Margin
      – potential unreliability of               %                                         Reserve margin
                                                                                           without early LCPD
         plant approaching closure               30    Reserve margin
                                                       with early LCPD                     retirements
      – wind generation - unpredictable          25    retirements

         load factors / availability             20

                                                 15
    Forward gas prices have strengthened                 Target Reserve
                                                 10
       – maintains upward pressure on
                                                  5
         UK wholesale prices
                                                  0
       – strong dark spreads in spite                 2008          2010             2012               2014              2016
         of higher coal prices
                                                             Notes:
                                                             • Peak demand estimate updated for lower winter 2007 demand

                                                             • Includes impact of 5,912 MW of Nuclear capacity lifetime extensions

                                                             • Wind generation assumed at 35% of installed capacity




page 8   Leaders in Energy   June 2008                                                                 International Power
   UK - key investment considerations

    UK merchant assets
     Stable regulatory framework
     Clarity on environmental legislation
        – phase III of EUETS and beyond
     Supply / demand balance
       – uncertain reserve margin
       – trending to new-entrant
       – future of nuclear / new technologies
     Availability of long-term offtake contracts
     Stability of input costs
        – volatile cost of fuel – gas, coal and oil
        – uncertain cost of carbon
     Rising Engineering Procurement and Construction (EPC) costs
           – new generation capacity needed worldwide
           – positive for incumbent generation
     Capital availability – optimal leverage


page 9   Leaders in Energy   June 2008                              International Power
    Portugal - market fundamentals

                        Demand Portugal                                      Generation Portugal (%)
      GWh
                                                             50,050
      50,000                                        49,188            100%
                                           47,945
                                                                                                                Imports
                                  45,500
      45,000
                         43,061                                       80%
                                                                                                                Hydro
               40,667
      40,000
                                                                      60%                                       Gas
      35,000
                                                                      40%                                       Oil
      30,000
                                                                                                                Coal
                                                                      20%
      25,000                                                                                                    Co-Gen &
                                                                                                                mini hydro
      20,000                                                           0%                                       Wind
               2002      2003 2004         2005     2006     2007            2003   2004   2005   2006   2007



       High demand growth
       Lowest per capita consumption in EU15
       Strong dependence on thermal plant
          – hydro generation varies year-on-year
       Iberian market in operation since July 2007


page 10   Leaders in Energy        June 2008                                                               International Power
    Portugal - overview of operations


    Interests in three long-term contracted assets – coal and gas
       – Pego, coal fired, 628MW (gross)
       – Turbogás, gas fired, 1,008MW (gross)
           – additional 40% acquired in 2008
       – Elecgas, gas fired, 830MW (gross) under construction           Turbogás
    Long-term presence in attractive market
       – strong demand growth
    Strong performance
       – financial underpinned by technical                           Pego
       – re-financings at very good terms
       – major investment for long-term                     Lisbon        Elecgas
         environmental compliance                            Office




                                                                      Asset in operation
                                                                      Under construction



page 11   Leaders in Energy   June 2008                                     International Power
    Portugal - key investment considerations

    Contracted assets in Portugal

     Stable regulatory framework
     Environmental legislation
       – carbon costs pass through
     Supply / demand balance
     Availability of secure long-term offtake contract
     Security of fuel supply
       – ability to pass through fuel cost
     Rising Engineering Procurement and Construction (EPC) costs
        – industrywide trend
        – ability to pass on increased cost
     Capital availability
       – high leverage




page 12   Leaders in Energy   June 2008                             International Power
    Elecgas, Portugal


     830MW CCGT, Portugal
     Located adjacent to existing Tejo
      coal plant
        – benefits from shared services
     Commissioning scheduled for 2011
     IPR and Endesa 50:50 partnership
        – 25 year tolling contract with Endesa
                                                                Existing
     EPC contractor – Siemens                                  Plant
                                                   New plant
     £443m project financing complete
       – IPR equity investment £34m
     Excellent organic growth opportunity from:
        – existing market presence
        – available site
        – access to finance




page 13   Leaders in Energy   June 2008                    International Power
    Europe - renewables


    Fastest growing sector in the European generation market
       – 52GW installed since 2000
    Growth driven by EU target of 20% contribution from renewables to
     energy mix by 2020
    Key        mechanisms for meeting CO2 targets:
      –         EU Emissions Trading Scheme
      –         high renewable targets
      –         underwritten by legislated support mechanisms
    Development has been dominated by specialist renewable energy
     companies
    Fragmented market – consolidating with power companies




page 14   Leaders in Energy   June 2008                                  International Power
   Renewables                        - key investment considerations

    Renewable assets in Europe

     Stable regulatory framework
     Transparency of incentive schemes
     Commitment to high targets for renewable generation
     Wind regime / historic performance
     Rising EPC costs
        – industry-wide trend
        – positive for incumbent generation
     Source of further growth opportunities
       – fostering relationships with developers and equipment suppliers
     Capital availability
       – high leverage




page 15   Leaders in Energy   June 2008                                International Power
    Europe - renewables
    Strong growth in renewables
    Significant scale in wind generation
       – 1,199MW now operational worldwide
             - 660MW of operational wind capacity acquired in 2007
             - 132MW under construction brought online in 2007
       – now a leading global wind generator
    Established market positions provide strong platform for growth
       – improved access to developers
         and turbine manufacturers
    Current focus                                                    Wind generation
      – growth opportunities                                          year-on-year growth
         across our core
         European markets                      2006                    407

      – deliver benefits of scale
                                          March 2008                                           1,199


                                                       0        300          600      900   1,200

                                                           Canunda       Maestrale

                                                           Levanto       Organic Growth



page 16   Leaders in Energy   June 2008                                                     International Power
    Summary


    Investment backdrop in Europe         International power focus
     Tightening reserve margins across    Multiple markets for capital
      Europe                                allocation
     Further liberalisation in certain    Selected markets in Europe for
      markets                               growth
     Impact of carbon unclear                – wide appetite for
                                                renewables
     Rapidly rising cost of equipment        – new build – long-term
     Debt available for high quality           contracts required
      projects                                – further expansion in
                                                existing markets
                                           Financial discipline is
                                            paramount




page 17   Leaders in Energy   June 2008                               International Power
Leaders in Energy 2008
Power: Bridging Europe’s Generation Gap

								
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