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Published bySharlene Mitchell Modified over 8 years ago
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1 Preliminary Results Year to 31 December 2003
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2 Sir Neville Simms Chairman
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3 Philip Cox Chief Executive Officer
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Group overview 2003 EPS in line with earnings guidance Earnings underpinned by good performance in all regions outside the US Impairment in US at £404m is the prudent approach Free cash flow positive Balance sheet liquidity 2003 EPS in line with earnings guidance Earnings underpinned by good performance in all regions outside the US Impairment in US at £404m is the prudent approach Free cash flow positive Balance sheet liquidity 20032002 EPS PBIT Free cash flow* 15.5p £388m £252m * Free cash flow is defined as operating cash flow, minus interest, tax and maintenance capex, but before growth capex 10.2 p £285m £121m All numbers are before exceptional items
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North America
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Key highlights 2003 Comprehensive review of options for US business underway Pre-emptive discussions with bank group to renegotiate non-recourse project debt - $900m Focussed cost reduction plan implemented – $12m saving in cash operating costs – creation of ‘in house’ outage teams Hays mothballed in early 2004 for indefinite period Alstom turbine performance on track – LD ‘buydowns’ £56m in 2003 Comprehensive review of options for US business underway Pre-emptive discussions with bank group to renegotiate non-recourse project debt - $900m Focussed cost reduction plan implemented – $12m saving in cash operating costs – creation of ‘in house’ outage teams Hays mothballed in early 2004 for indefinite period Alstom turbine performance on track – LD ‘buydowns’ £56m in 2003
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ERCOT market background Demand (peak) Capacity Reserve margin Demand growth (2.8%) In construction Mothballed / retired (inc Hays) Controlled by banks / distressed GW > 30 years Distressed GW > 30 years 60.2 81.2 35% 1.7 2.4 8.7* 32.7 22.6 7.3 GW Demand / Supply $1+$2+$4 Gas price $perBTUm North Zone premium $/MWh * of which 1.9 Reliability Must Run CCGT plant - 7200 heat rate - calendar average spreads - south zone prices 8 6 4 2 0 2002 actual 2003 actual 2004 Feb 04 forward curve $MWh Market spark spreads (peak hours) 3.155.305.00 - 5.50 + +
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ERCOT - market update North Zone redefined - positive for Midlothian – planned move to nodal pricing (a refined zonal system) in 2006, a further positive for Midlothian Transparent market mechanism required Plant retirement largest single variable - particularly older high heat rate plant – 8.7 GW mothballed to date - of which 1.9 GW Reliability Must Run Demand growth 3% pa North Zone redefined - positive for Midlothian – planned move to nodal pricing (a refined zonal system) in 2006, a further positive for Midlothian Transparent market mechanism required Plant retirement largest single variable - particularly older high heat rate plant – 8.7 GW mothballed to date - of which 1.9 GW Reliability Must Run Demand growth 3% pa Key factors for market recovery
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NEPOOL market background Demand (peak) Capacity Reserve margin Demand growth (1.5%) In construction Mothballed / retired Controlled by banks / distressed GW > 30 years Distressed GW > 30 years 25.4 31.4 24% 0.4 1.1 15.0 10.7 4.8 GW Market spark spreads* (peak hours) Demand / Supply 15 12 9 6 3 0 2002 actual 2003 actual 2004 Feb 04 forward curve Gas price $perBTUm CCGT plant- 7200 heat rate - calendar average spreads - excludes ICAP / UCAP $MWh $3.70$6.80$6.50 -7.00 *
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NEPOOL - market update Financial distress of incumbents (40%+) plus low asset prices = opportunities for market consolidation Age of plant: 30% over 30 years old - key driver for retirement Planned transmission links into Connecticut (higher prices due to congestion) should help Blackstone / Bellingham / Milford Environmental pressures - our assets well positioned Financial distress of incumbents (40%+) plus low asset prices = opportunities for market consolidation Age of plant: 30% over 30 years old - key driver for retirement Planned transmission links into Connecticut (higher prices due to congestion) should help Blackstone / Bellingham / Milford Environmental pressures - our assets well positioned Key factors for market recovery
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US strategy US debt negotiations the clear priority – comprehensive review of options – long term solution required Operate and trade current portfolio to maximum efficiency Growth opportunities – low asset prices in ERCOT and NEPOOL create merchant opportunities – contracted assets US debt negotiations the clear priority – comprehensive review of options – long term solution required Operate and trade current portfolio to maximum efficiency Growth opportunities – low asset prices in ERCOT and NEPOOL create merchant opportunities – contracted assets
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Europe
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Key highlights 2003 Record financial performance at EOP – power, district heating both strong performers - power forward contracted through 2004 Consistent high availability at Pego (Portugal) and Uni-Mar (Turkey) ensured strong financial results Flexible and responsive UK operations delivered improved H2 performance – successful and quick demothballing of Deeside 250 MW unit Record financial performance at EOP – power, district heating both strong performers - power forward contracted through 2004 Consistent high availability at Pego (Portugal) and Uni-Mar (Turkey) ensured strong financial results Flexible and responsive UK operations delivered improved H2 performance – successful and quick demothballing of Deeside 250 MW unit
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England & Wales market environment Demand (peak) Capacity Reserve margin Demand growth In construction Mothballed / retired Controlled by bank / distressed GW > 30 years Distressed GW > 30 years 55.9 68.0 22% 1.5% 1.4 2.4 17.5 23.2 5.9 GW Demand / Supply (1) (2) (3) (1) (2) (3) NGC Jan 2004 Seven Year Statement Update Includes only Spalding and Immingham CHP Includes High Marnham and Drakelow. 25 20 15 10 5 0 200220032004 £MWh 8 6 4 2 0 200220032004 £MWh Gas price Baseload power Coal price Baseload Spark Spreads Baseload Power and Fuel Prices Gas Coal
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UK 2005 forward power prices currently £4 MWh up on 2004 – starting to reflect cost of carbon Carbon allocations announced: – UK targets higher CO 2 emission reductions than EU – power industry bears disproportionate reduction - lobbying continues – gas plants advantaged vs coal - positive for Deeside; uncertainty for Rugeley Deeside and Rugeley allocations represent load factors of 65% and 47% respectively Carbon allocation and CO 2 prices also drive FGD decisions at coal fired plants – opt in LCPD = capex – opt out LCPD = lower load factor – decision by June 2004 European assets: – EOP has FGD installed - well positioned – PEGO expects to fit FGD (capex cost recovered through PPA) UK 2005 forward power prices currently £4 MWh up on 2004 – starting to reflect cost of carbon Carbon allocations announced: – UK targets higher CO 2 emission reductions than EU – power industry bears disproportionate reduction - lobbying continues – gas plants advantaged vs coal - positive for Deeside; uncertainty for Rugeley Deeside and Rugeley allocations represent load factors of 65% and 47% respectively Carbon allocation and CO 2 prices also drive FGD decisions at coal fired plants – opt in LCPD = capex – opt out LCPD = lower load factor – decision by June 2004 European assets: – EOP has FGD installed - well positioned – PEGO expects to fit FGD (capex cost recovered through PPA) Carbon update
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European strategy Support the drive for consolidation in UK power generation Opportunities in liberalising markets where we already have a presence – Portugal – Czech Republic – Turkey Support the drive for consolidation in UK power generation Opportunities in liberalising markets where we already have a presence – Portugal – Czech Republic – Turkey
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Middle East
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Middle East - highlights in 2003 Umm Al Nar - Abu Dhabi – 2,200 MW, 162 MIGD - brownfield project – bid, won and financed $2.1 bn project – partners - TEPCO and Mitsui – 23 year PPA with ADWEC Saudi Aramco - Saudi Arabia – 1,075 MW, + steam - 4 plants - greenfield project – bid, won and financed $700m project – partner - Saudi Oger – 20 year ECAs with Saudi Aramco Shuweihat - Abu Dhabi – 1,500 MW, 100 MIGD - greenfield project – successfully commissioned 2 gas turbines and desalination unit ahead of schedule – 20 year PPA with ADWEC Strong operational and customer focus to ensure assets perform to contract Strong growth region for IPR Umm Al Nar - Abu Dhabi – 2,200 MW, 162 MIGD - brownfield project – bid, won and financed $2.1 bn project – partners - TEPCO and Mitsui – 23 year PPA with ADWEC Saudi Aramco - Saudi Arabia – 1,075 MW, + steam - 4 plants - greenfield project – bid, won and financed $700m project – partner - Saudi Oger – 20 year ECAs with Saudi Aramco Shuweihat - Abu Dhabi – 1,500 MW, 100 MIGD - greenfield project – successfully commissioned 2 gas turbines and desalination unit ahead of schedule – 20 year PPA with ADWEC Strong operational and customer focus to ensure assets perform to contract Strong growth region for IPR
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Middle East strategy Continue to grow with focus on contracted assets in Gulf states - power and water projects Significant 2004 opportunities - over 4,000 MW+ desalination Leverage our development, market, technical and partnership skills - key IPR advantages Typical project profile – secure, high credit rated, sovereign backed offtakers – US$ denominated contracts – strong partners – significant non-recourse leverage – limited IPR investment - typically £50m - £75m per project Continue to grow with focus on contracted assets in Gulf states - power and water projects Significant 2004 opportunities - over 4,000 MW+ desalination Leverage our development, market, technical and partnership skills - key IPR advantages Typical project profile – secure, high credit rated, sovereign backed offtakers – US$ denominated contracts – strong partners – significant non-recourse leverage – limited IPR investment - typically £50m - £75m per project
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Australia
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Australia - achievements 2003 Strong forward contracted position in 2003 underpinned earnings SEA Gas 687km pipeline – construction completed 1 January 2004 - on time, and on budget Hazelwood mine – first coal delivered from new mine extension in early February 04 – long term security of supply Canunda wind farm (46 MW) – permitted, construction starts Q2 – 10 year offtake with AGL – commercial operation planned Q2 2005 Strong forward contracted position in 2003 underpinned earnings SEA Gas 687km pipeline – construction completed 1 January 2004 - on time, and on budget Hazelwood mine – first coal delivered from new mine extension in early February 04 – long term security of supply Canunda wind farm (46 MW) – permitted, construction starts Q2 – 10 year offtake with AGL – commercial operation planned Q2 2005
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Australia market background Demand GW (peak) Capacity GW * Reserve margin % Demand growth Demand GW (peak) Capacity GW * Reserve margin % Demand growth Victoria S Australia 2.8 3.7 32% 3.0% Reserve margin tightening in Victoria and SA but not yet reflected in forward curve 2004 and 2005 forward prices show progressive recovery from 2003 – but not yet to 2001 and 2002 levels Reserve margin tightening in Victoria and SA but not yet reflected in forward curve 2004 and 2005 forward prices show progressive recovery from 2003 – but not yet to 2001 and 2002 levels 8.5 9.5 12% 3.0% * Includes average interconnector availability of 50%
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Australia strategy Scale - largest privately owned generator Optimise forward contracted position Preserve position as low cost producer in both Victoria and South Australia Growth through acquisition – principal targets are contracted assets Scale - largest privately owned generator Optimise forward contracted position Preserve position as low cost producer in both Victoria and South Australia Growth through acquisition – principal targets are contracted assets
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Rest of the World
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Long term contracted assets – solid earnings and cash flow - HUBCO(Pakistan) - KAPCO (Pakistan) - Malakoff (Malaysia) - TNP (Thailand) Customer focus - all contractual agreements remain firm Monetise investments when appropriate – 5% HUBCO in 2003 realised £21m cash Long term contracted assets – solid earnings and cash flow - HUBCO(Pakistan) - KAPCO (Pakistan) - Malakoff (Malaysia) - TNP (Thailand) Customer focus - all contractual agreements remain firm Monetise investments when appropriate – 5% HUBCO in 2003 realised £21m cash
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26 Mark Williamson Chief Financial Officer
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Group Profit and Loss Account 1,1291,273Turnover - gross 256174PBT Year ended 31 December 15.5p 173 (6) 31% (77) 2.6x (132) 388 2002 (7)Minority interest 30%Effective tax rate 2.9xInterest cover 10.2pEPS (basic) 113Retained profit (54)Tax (111)Interest 285PBIT 2003£m Note: All numbers are pre-exceptional
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Exceptional items - (16)Capitalised financing charges write off -(404)US impairment -3China exit -7Czech Republic (sale of shares) ---- 17 35 HUBCO - sale of share - impairment reversal Year ended 31 December (60) 1 (61) 42 (58) (45) 2002 (332) 26 (358) - - - 2003 Tax effect Net Total KAPCO dividend Rugeley impairment Deeside impairment £m
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US Impairment Key assumptions: Whole life cash flow used Current forward curve in short term New entrant pricing assumed at market equilibrium for long term Discounted at WACC of the US business Key assumptions: Whole life cash flow used Current forward curve in short term New entrant pricing assumed at market equilibrium for long term Discounted at WACC of the US business 265600Current carrying value US installed merchant capacity is 4,050 MW (178) 443 $/kW (404)Impairment 1,004Book value of US assets pre impairment £m
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Geographic analysis Turnover and PBIT Year ended 31 December 4171,1293131,273Regional total * Pre-exceptional items. Pakistan is now included in Rest of the World 3881,1292851,273Total (29)-(28)-Corporate costs 10814884128Rest of the World 101226101224Australia 9-2333Middle East 100440103474Europe 993152414North America PBIT*TurnoverPBIT*Turnover£m 20022003
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Geographic analysis Turnover and PBIT Year ended 31 December 4171,1293131,273Regional total 3881,1292851,273Total (29)-(28)-Corporate costs 10814884128Rest of the World 101226101224Australia 9-2333Middle East 100440103474Europe 993152414North America PBIT*TurnoverPBIT*Turnover£m 20022003 * Pre-exceptional items. Pakistan is now included in Rest of the World
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Geographic analysis Turnover and PBIT Year ended 31 December 4171,1293131,273Regional total 3881,1292851,273Total (29)-(28)-Corporate costs 10814884128Rest of the World 101226101224Australia 9-2333Middle East 100440103474Europe 993152414North America PBIT*TurnoverPBIT*Turnover£m 20022003 * Pre-exceptional items. Pakistan is now included in Rest of the World
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Geographic analysis Turnover and PBIT Year ended 31 December 4171,1293131,273Regional total 3881,1292851,273Total (29)-(28)-Corporate costs 10814884128Rest of the World 101226101224Australia 9-2333Middle East 100440103474Europe 993152414North America PBIT*TurnoverPBIT*Turnover£m 20022003 * Pre-exceptional items. Pakistan is now included in Rest of the World
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Geographic analysis Turnover and PBIT Year ended 31 December 4171,1293131,273Regional total 3881,1292851,273Total (29)-(28)-Corporate costs 10814884128 101226101224Australia 9-2333Middle East 100440103474Europe 993152414North America PBIT*TurnoverPBIT*Turnover£m 20022003 Rest of the World * Pre-exceptional items. Pakistan is now included in Rest of the World
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Geographic analysis Turnover and PBIT Year ended 31 December 4171,1293131,273Regional total 3881,1292851,273Total (29)-(28)-Corporate costs 10814884128Rest of the World 101226101224Australia 9-2333Middle East 100440103474Europe 993152414North America PBIT*TurnoverPBIT*Turnover£m 20022003 * Pre-exceptional items. Pakistan is now included in Rest of the World
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Geographic analysis Turnover and PBIT Year ended 31 December 4171,1293131,273Regional total 3881,1292851,273Total (29)-(28)-Corporate costs 10814884128 101226101224Australia 9-2333Middle East 100440103474Europe 993152414North America PBIT*TurnoverPBIT*Turnover£m 20022003 Rest of the World * Pre-exceptional items. Pakistan is now included in Rest of the World
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Group operating cash flow 42 (25) ---- Exceptional items - KAPCO dividend - Hazelwood refinancing Year ended 31 December 252 (108) (48) 391 115 276 2002 121 Free cash flow (100)Interest and tax (64)Capex - maintenance 285 Operating cash flow 101Dividends – JV’s, associates and investments 184Operating cash flow from subsidiaries 2003£m
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Group net cash flow Year ended 31 December (812) (897) 85 75 - (144) - (98) 252 2002 -Acquisitions and greenfield developments (692) Closing external debt (812)Opening external debt 120 Net cash flow (35)Other (FX and share buy-back) 35Disposal of investments 56LD buy-downs (57)Capex – growth 121 Free cash flow 2003£m
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Balance sheet 31% Debt capitalisation (504)(712) Associates and JVs net debt As at 31 December 2,9812,587 1,7691,562 Net assets 2,4742,049 Intangible & tangibles 507538 Investments 46%44% Gearing (812)(692) Net debt (262)(243) Provisions and creditors > 1 year (138)(90) Net current liabilities Fixed assets 20022003£m
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Hedging strategy Foreign Exchange Balance sheet – translation exposure mitigated by matching currency profile of assets and debt Profit and loss account – 2003 PBT at 2002 FX rates would decrease PBT by £5m – 2003 PBT at $1.80 would decrease PBT by only £4m – transaction hedged on commitment (contractual) Interest Profit and loss account – target 40% to 75% of debt at fixed rate for medium to long term Foreign Exchange Balance sheet – translation exposure mitigated by matching currency profile of assets and debt Profit and loss account – 2003 PBT at 2002 FX rates would decrease PBT by £5m – 2003 PBT at $1.80 would decrease PBT by only £4m – transaction hedged on commitment (contractual) Interest Profit and loss account – target 40% to 75% of debt at fixed rate for medium to long term
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Financing accomplishments US$1.8 billion Umm Al Nar financing Issue of US$ 252 million senior convertible bonds Rugeley restructuring New US$450 million corporate revolver put in place US$510 million, 17 year term Saudi Aramco financing US$1.8 billion Umm Al Nar financing Issue of US$ 252 million senior convertible bonds Rugeley restructuring New US$450 million corporate revolver put in place US$510 million, 17 year term Saudi Aramco financing September July October February 2003 2004
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Net debt structure (1,026)334(692)Total net debt 2015 2017 2007 2008/current 2012/13 2006* 2023 2005 n/a Maturity (712) (110) (271) (198) - (52) (81) JV’s / Associates non-recourse off-balance sheet net debt (1,235) (25) (51) (44) (83) (531) (501) - - - 209 Subsidiaries -(1,235) (25) (51) (44) (83) (531) (501) (200) (138) (62) 743 Total - Europe - Middle East - RoW (200) - - - (138) (62) 534 IPR Corporate Australia UK * Reported as current debt US Non recourse debt Convertible bond (new) Convertible bond (old) Recourse debt Cash + liquid resources £m
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In summary: Low spark spreads in the US US assets written down Europe performed well Highly contracted in all other regions Cash flow positive Strong corporate liquidity Low spark spreads in the US US assets written down Europe performed well Highly contracted in all other regions Cash flow positive Strong corporate liquidity
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44 Philip Cox Chief Executive Officer
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IPR’s strategy remains... Focus on wholesale power generation - our core skill – plus complementary activities - desalination in ME and SEA Gas pipeline Strength and balance through geographic diversity - concentrated portfolio in 4 key regions; US, Europe, ME and Australia Growth in core regions – contracted assets - security of offtake and financial returns are the key priorities – existing merchant markets - heavily discounted asset prices - diversity in merit order and / or fuel - scale – acquisition and greenfield opportunities Focus on wholesale power generation - our core skill – plus complementary activities - desalination in ME and SEA Gas pipeline Strength and balance through geographic diversity - concentrated portfolio in 4 key regions; US, Europe, ME and Australia Growth in core regions – contracted assets - security of offtake and financial returns are the key priorities – existing merchant markets - heavily discounted asset prices - diversity in merit order and / or fuel - scale – acquisition and greenfield opportunities
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Outlook Clear strategy US restructuring number 1 priority Growth opportunities in our core regions Confirm 2004 earnings guidance of 7 - 9p EPS Clear strategy US restructuring number 1 priority Growth opportunities in our core regions Confirm 2004 earnings guidance of 7 - 9p EPS
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47 Preliminary Results Year to 31 December 2003
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