International Power - 3rd Quarter Results.

(From AFX CNF)

RNS Number:7998L International Power PLC 09 November 2006 International Power plc Financial results for the nine months ended 30 September 2006 (London - 9 November 2006) International Power today announces its results for the nine months ended 30 September 2006 and reports on key developments to date. Sir Neville Simms, Chairman of International Power, said, "I am pleased to report significant growth in earnings and cash flow primarily driven by increased profitability in Europe and the US. Nine month results benefited from a strong performance at First Hydro and Saltend, a first time contribution from Coleto Creek and commissioning of additional capacity in the Middle East. We continue to expect 2006 to be a year of strong growth." Highlights a Acquisition of 436 MW Levanto onshore wind farm portfolio in Germany and France a Acquisition of 140 MW Indian Queens peaking plant (UK) a AGBP485 million non-recourse financing package raised at Rugeley, UK a Strong financial performance - Profit from operations(i) of AGBP564 million (2005: AGBP340 million) - up 66% - EPS(i) of 16.6p (2005: 9.2p) - up 80% - Free cash flow(ii) of AGBP339 million (2005: AGBP185 million) - up 83% 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) Nine months Year ended ended 30 September 31 December 2006 2005 2005 (restated)(i) (restated) (i) AGBPm AGBPm AGBPm North America 78 31 48 Europe 308 143 283 Middle East 37 18 24 Australia 100 109 140 Asia 75 72 100 Regional total 598 373 595 Corporate costs (34) (33) (59) Profit from operations 564 340 536 (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. The results for the nine months ended 30 September 2005 and for the year ended 31 December 2005 are also stated on this basis. (ii) Free cash flow is set out in note 4 to this statement. North America Profit from operations in North America improved significantly to AGBP78 million (2005: AGBP31 million) reflecting improved spark spreads and load factors in Texas and New England, and a first time contribution from Coleto Creek, which was acquired in July this year. Our contracted assets, EcoElectrica, Hartwell and Oyster Creek also operated well and delivered a consistent financial performance. In Texas, we benefited from significantly increased output and improving spark spreads. At Midlothian, the achieved spark spread increased from $12/MWh to $13/ MWh and the load factor was 65%, compared to 55% in the first nine months of 2005. The Hays plant which was mothballed until May 2005 delivered a good performance with an average achieved spark spread of $14/MWh at a 65% load factor. In New England, the achieved spark spread increased from $8/MWh to $11/ MWh and output increased significantly to a 65% load factor (2005: 40% load factor) contributing to the increased profitability in the region. Overall, Texas and New England power markets continue to progress towards a full market recovery, which is expected in the 2007 - 2009 timeframe. Europe Profit from operations in Europe increased considerably to AGBP308 million (2005: AGBP143 million) despite the major planned outage at Saltend in the third quarter. Performance in the nine month period was primarily driven by a robust performance at First Hydro, International Power Opatovice in the Czech Republic and strong contribution from Saltend in the first half. Following a failure at a third party location, after completing the planned outage at Saltend in Q3, the original equipment manufacturer advised us of a modification required to the gas turbine. We plan to make this modification on all three units at Saltend on a phased basis during Q4, and this work is expected to take approximately two weeks per unit. All contracted assets in Iberia, Italy and Turkey continue to deliver good operational and financial performance. In September, International Power raised a AGBP485 million non-recourse financing package at Rugeley. AGBP145 million of this financing will be used for the installation of Flue Gas Desulphurisation (FGD) equipment and other capital projects to both enhance the operational performance at Rugeley and significantly extend the life of the plant. The FGD equipment is expected to be operational in the second half of 2008. The 140 MW oil fired OCGT Indian Queens peaking plant in Cornwall, which was acquired from AES for AGBP32 million, has been integrated into our UK asset portfolio. Our experience in the balancing and reserve markets will enable us to create additional value from this acquisition. Earlier this month we announced the acquisition of the 436 MW Levanto onshore wind farm portfolio from Christofferson Robb & Company (CRC) for an enterprise value of a567 million (AGBP379 million). The Levanto wind farms comprise 286 MW of capacity in operation, 126 MW under construction, which is due to commence operation in 2007, and 24 MW of fully permitted capacity, which is planned to commence operation in 2008. This acquisition and our partnership with CRC provides us with an immediate, scale renewables business and access to a significant pipeline of development opportunities in Europe. Middle East In the Middle East, profit from operations increased to AGBP37 million (2005: AGBP18 million) mainly driven by capacity coming on line at Tihama in Saudi Arabia and Ras Laffan B in Qatar together with a first time contribution from Hidd in Bahrain. Other assets in the region, namely Al Kamil, Shuweihat and Umm Al Nar continue to deliver a good performance. Ju'aymah, the final of the four Tihama projects, is on track to commence operation in Q4 2006. At Ras Laffan B, the first phase of 600 MW and 15 MIGD is fully operational and the second phase is ahead of schedule, with operations planned to commence during Q2 2007. At Umm Al Nar, the 25 MIGD desalination extension is now operational and the first new power plant units are expected to enter commercial operation during Q4 2006. At Hidd in Bahrain, construction of the 60 MIGD desalination extension is well underway and this additional capacity is expected to be operational in two phases by the end of 2007. During October, we signed a Heads of Agreement with CIC Energy Corporation (CIC) for the development, construction and operation of a proposed coal-fired project in Botswana, at Mmamabula. It is envisaged that the plant will be between 2,400 - 3,600 MW and the power output from the plant will be sold under a Power Purchase Agreement, predominantly to Eskom Holdings Limited, South Africa's national electrical utility. This project is at early stages with financial close expected towards the end of 2007. Construction will commence post financial close. Australia Profit from operations in Australia at AGBP100 million decreased from AGBP109 million in 2005 due to the expected reduction in achieved prices at Hazelwood. 2005 benefited from contracts put in place in earlier years at higher electricity prices. Forward electricity prices for 2007 and 2008 in Victoria continue to show an improvement to some A$39/MWh - A$40/MWh (base load). Although our 2007 output is largely contracted, our uncontracted portion of output (mainly off peak) should benefit from this improvement. In October, Hazelwood was awarded an A$80 million non-refundable grant by the Federal and Victorian Governments to develop innovative retrofit low emission technology on one of its 200 MW generating units. The coal drying demonstration project is expected to reduce greenhouse gas emissions by an estimated 30%. The project also includes a pilot carbon dioxide capture scheme which is expected to be operational by early 2008. Asia Earnings in Asia increased from AGBP72 million to AGBP75 million mainly due to higher availability at Paiton and a full nine month contribution from Uch, which was acquired in February last year. However this was partly offset by a decrease in KAPCO's earnings as it became a full tax payer following the expiry of its tax holiday. The first 700 MW unit at Tanjung Bin Power Plant, a 2,100 MW coal fired power plant developed by Malakoff achieved commercial operation on 28 September 2006. The 23 MW expansion project at TNP also achieved commercial operation during the period. Following the announcement by MMC Corporation Berhad (MMC) in May 2006 that it intends to acquire Malakoff, the sale process is progressing with completion expected in Q2 2007. Interest Net interest expense has increased by AGBP35 million to AGBP179 million, reflecting the impact of additional debt relating to Saltend, Coleto Creek and Tihama. Interest cover increased to 2.7x in the nine months ended 30 September 2006 compared to 2.1x for the same period last year. Tax The Group tax charge for the first nine months was AGBP85 million (2005: AGBP32 million). The effective tax rate, based on our forecast rate for the full year, is 30% compared to 31% for the year ended 31 December 2005. Exceptional items and specific IAS 39 mark to market movements No exceptional items were recorded in the third quarter. In the first half year a net exceptional gain of AGBP19 million before tax was recorded. The specific IAS 39 mark to market movements reported in the nine months ended 30 September 2006 amounted to a profit before tax of AGBP22 million (2005: loss of AGBP6 million). Cash Flow A summary of the Group cash flow is set out below: Nine months Nine months Year ended ended ended 30 September 30 September 31 December 2006 2005 2006 AGBPm AGBPm AGBPm Profit for the period 337 210 330 Other adjusting items (i) 222 119 183 Dividends from joint ventures and associates 58 54 92 Movement in working capital 38 1 (21) Capital expenditure - maintenance (86) (33) (72) Tax and interest paid (230) (166) (227) Free cash flow 339 185 285 Receipt from TXU administrators - exceptional 14 58 58 Receipt of compensation - exceptional 5 - - Finance cost - exceptional - - (5) Refinancing costs capitalised on acquisition debt (15) (7) (7) Capital expenditure - growth (95) (144) (188) Returns from joint ventures and associates (net of investments) 18 33 48 Acquisitions (688) (566) (571) Disposals 1 138 211 Dividends paid (67) (37) (37) Proceeds from share issue 11 - 2 Funding from minority interests 1 72 80 Foreign exchange and other 150 (144) (181) Increase in net debt (326) (412) (305) Opening net debt (2,979) (2,745) (2,745) Transitional adjustment on first time adoption of IAS 39 - 44 44 Net funds on acquisition of subsidiaries 11 27 27 Closing net debt (3,294) (3,086) (2,979) (i) Other adjusting items are set out in Note 4 to the Accounts. They include income statement charges for interest, tax, depreciation, the share of profit of joint ventures and …