Philip Cox CFO, International Power

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Philip CoxCFO, International Power
The Portfolio Approach
38th Annual EEI ConferenceOrlando, 28 October
2003
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A leading independentpower generator
Operational excellence and positioned for growth

• A world leading power generator with a global
  portfolio of high quality assets
• A blend of contracted and merchant assets
• Earnings underpinned by strong operating free
  cash flow
• A solid balance sheet and ready liquidity
• Multiple opportunities for growth through
  acquisitions and greenfield developments

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Key strengths
Operations

• Plant availability 11,000 MW (net)
• Fuel diversity gas, coal, oil
• Environmental and health safety
• Power desalination
• Trading in merchant markets
• asset backed
• tightly controlled proprietary trading
• asset hedging approved by Local Risk Committees -
  US, Australia, UK with participation of CEO /
  CFO / Head of Global Trading and Risk
• PPA/tolling/offtake structuring

Commercial
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Key strengths
Liquidity / balance sheet

• Available liquidity for selected growth
• Contracted assets
• Merchant markets - scale in existing markets

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Geographic spread
Geographic diversity and balance
Interests in 28 power stations in 12 countries
Europe 2,525 MW
North America 4,415 MW
Middle East 1,300 MW
Australia 2,315 MW
Gross in operation Net in operation
16,570 MW 10,990 MW
Gross under construction Net under construction
3,050 MW 610 MW
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Geographic diversity and balance
Geography and contracted position
2003 contracted position MW
GeographyMW
NorthAmerica
Contracted
Rest ofWorld
Merchant
4
38
37
37
20
Australia
22
26
16
Europe
Long termPPA
Middle East
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Geographic spread
North America
NEPOOL
NYPP
MAPP
MAAC /PJM / PJMW
ECAR
WSCC
MAIN
SPP
SERC
ERCOT
Net MW
Gross MW
State
Asset
Fuel
Texas Texas Texas Massachusetts Massachusetts Mass
achusetts Georgia
210 1,650 1,100 160 570 570 155
Gas Gas Gas Gas Gas Gas Gas
Oyster Creek Midlothian Hays Milford Blackstone Be
llingham Hartwell
425 1,650 1,100 160 570 570 310
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Market environment
Weak pricing conditions
ERCOT
(In Gigawatts)
NEPOOL
25.4 (Aug 2002) 31.0 0.4 1.1 11.8 15.0
60.2 (Aug 2003) 81.1 2.4 7.5 1.3 31.2
Peak demand Peak supply Construction
overhang Announced mothballing and
retirements Megawatts controlled by
banks Megawatts controlled by distressed or near
distressed players

• Both markets are over supplied
• Wholesale prices are low
• Substantial portion of capacity in each market is
  in distress

22.6 7.3 6.8 2.3
Total MW gt 30 years Distressed MW gt30 years Total
MW gt40 years Distressed MW gt40 years
10.7 4.8 4.0 1.8
Our calculation of distressed assets in Texas
does not include TXU generation portfolio of
19.9 GW of which 9.1 GW is gt30 years old, and 2.7
GW is gt 40 years old
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US market - Texas
No signs of recovery yet, pricing remains weak
and fundamentals unchanged
ERCOT 2Q 03 and Summer Spark Spread History (7
Heat Rate)
/MWh
30
25
Aug
20
May
15
10
Jun
Apr
Jul
5
0
Jan
Feb
Mar
May
Jun
Jul
Aug
Apr

• Jul / Aug show large decrease in actuals compared
  to forwards
• Use of out of market energy and capacity
  depressed balancing and daily market prices

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US market - New England
No signs of recovery yet, pricing remains weak
and fundamentals unchanged
/MWh
NEPOOL 2Q 03 and Summer Spark Spread History (7
Heat Rate)
30
25
20
Jul
15
Aug
Apr
10
Jun
May
5
0
-5
-10
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug

• Jul / Aug show large decrease in actuals compared
  to forwards

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Foundations for price recovery
Texas

• Prices at or below cost of production for CCGTs
  for a significant part of the year
• Increased pressure and evidence of mothballing
• Load growth approx. 4 per year
• Changes to market rules should provide greater
  price transparency
• Retail market competition
• Prices at or below cost of production for CCGTs
  for a significant part of the year
• Enforcement of environmental regulations should
  lead to retirement of old and inefficient plant
• NEPOOL ISO intends to reduce the number of
  Reliability Must Run (RMR) contracts assigned to
  low efficiency plant

New England
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Competitive cost advantage
The key to success in the merchant generation
market is in acquiring generating assets at low
cost

Electricity Price Cycle Over Time
Return in excess of WACC
Price
Excellent Return
ExcellentReturn
Return
Return
Return
NegativeReturn
NegativeReturn
Time
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Scale in merchant markets
The benefits of scale in a merchant generator
market are obvious . . .

• Plant operations can be optimised to support the
  trading position
• Plant can support each other in the event of
  outages
• Market knowledge is greater
• Market strength vis-à-vis the retail load
  providers is greater

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Geographic spread
Europe
Net MW
Gross MW
Asset
Country
Fuel
EOP
Czech Republic
580
Lignite
585
Deeside
UK
500
Gas
500
Rugeley
UK
1,000
Coal
1,000
Pego
Portugal
270
Coal
600
Marmara
Turkey
160
Gas
480
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UK market environment
Dynamic supply-demand analysis
England Wales distressed plants
(In Gigawatts)
EW

Peak demand Peak supply Construction
overhang Announced mothballing and
retirements Gigawatts controlled by
banks Gigawatts controlled by distressed or near
distressed players
54.5 (10 Dec 02) 65.8 1.4 4.6 1.8 17.5
Teesside

Drax

Saltend
Killingholme
Ferrybridge
Eggborough
Fiddlers Ferry


Ffestiniog Dinorwig
Derwent CHP
DEESIDE


IPR Assets Gas CCGT Coal P Storage Merchant MW
RUGELEY


Brimsdown
Fifoots Point

Coryton

DamheadCreek
Barking



Total GW gt 30 years Distressed GW gt30 years
23.6 5.9
Shoreham

Excludes all plant owned by vertically integrated
players, contracted assets, nuclear plant and
plant owned by oil companies
Peak supply does not include renewables or small
CHP
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European markets
Our current focus is on the UK market
Is the recent uptick in wholesale electricity
prices sustainable? (Is it enough?)
UK Spark Spread (Gas)
/MWh
15
New entrant
12
October
9
6
August
3
June
0
2003
2004
2005
All spreads based upon heat rate of 7194GJ/GWh
(50 HHV efficiency). New-Entrant spreads assumed
at 90 load factor.
Too early to tell
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Middle East Region
Net MW
Gross MW

• PPA market
• Sovereign offtakers
• Power plus desalination
• Greenfield orientated
• High annual demand growth
• US based contracts

Name
Country
MIGD
Fuel
Operating
Gas Gas Oil Gas Gas Gas
285 170 270 575 300 310
Al Kamil Umm Al Nar Hub Power Kot
Addu Shuweihat Umm Al Nar
Oman Abu Dhabi Pakistan Pakistan Abu Dhabi Abu
Dhabi
285 850 1,290 1,600 1,500 1,550
n/a 157 n/a n/a 100 25
Construction
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Desalination
Combining power generation and desalination

• Lower cost of production
• increase in cycle efficiency
• spread of capital cost
• virtual base load operation of desalination plant
• Approximately 40 additional revenues from water
  in an IWPP with power/water ratio of 151
• Integration of power and water becoming a
  standard of the IPP process in Mid East countries
• Good precedent for development elsewhere

Plant
Power
Desalination
Operating
Shuweihat S1 Umm Al Nar Umm Al Nar
1,500 MW 805 MW 1,550 MW
100 MIGD 162 MIGD 25 MIGD
Under Construction
part of operating capacity to be decommissioned
in 2008
IPR has desalination capability at five assets in
its portfolio. At Shuweihat, the worlds largest
distillers are currently under construction (16.8
MIGD each)
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A portfolio approach
Balance within core regions

• Australia - the leading private power generator
  in the National Electricity Market
• A model regional portfolio in a merchant market
• Balance in terms of fuel and merit order
• Scale and market presence
• Integrated operations and trading

Operating
Gas pipeline (construction near completion)
Net MW
Gross MW
Type
Operating Assets
Lignite Various CCGT
Hazelwood, Victoria Synergen, S Australia Pelican
Point, S Australia SEAGas - 680km Pipeline
1,470 360 485
1,600 360 485
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Securing fuel supply
The SEA Gas Pipeline, Australia

• Security of long-term fuel supply
• Cost savings expands profit potential beyond
  spark spread
• 680 km gas pipeline (with 18 diameter) from
  Victoria to South Australia
• International Power, Origin Energy and TXU
  Australia as equal shareholders
• Gas will be supplied to Pelican Point Power under
  a 10 year GSA with BHP Billiton
• Energy corridor opportunities

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Geographic diversity and balance
Asset spread smoothes cycles in merchant markets

• Price cycles in IPRs key markets not in sync
• Continued strength of Australian merchant
  portfolio, which remains substantially contracted
  over the next 1-2 years, helps to offset weakness
  in US and UK wholesale markets
• IPRs long term contracted assets provide a
  measure of steady cash flow and a foundation for
  the merchant business

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Earnings backed by cash
2000
2002
2001
H1 2003
EPS PBIT Free cash flow
15.5p 388m 252m
12.3p 326m 179m
6.6p 221m (79)m
5.1p 138m 45m
Free cash flow is defined as operating cash
flow, which includes exceptionals (plus or
minus), minus interest, tax and maintenance
capex, but before growth capex
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Balance sheet
30 June2003
31 Dec2002
m
Fixed assets Intangibles tangibles
Investments Net current liabilities Provisions
and creditors gt 1 yr Net debt Net
assets Gearing Debt capitalisation Net debt
Cash liquid resources Recourse debt and
convertible bond Non-recourse debt Total net
debtOff balance sheet debt (JVs and associates)
2,562 500 3,062 (81) (278) (834) 1,869 45
31 859 (264)(1,429) (834)(536)
2,474 507 2,981 (138) (262) (812) 1,769
46 31 842 (268)(1,386) (812)(503)
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IPR - corporate pro-forma capital structure
Payment ofexistingbonds
Rugeleydebtrestructuring
ANPdowngrade
30 June2003
Newconvertible
Revisedpro-forma
NewRevolver
m
Cash Short term maturities Convertible Bond
NP Eurobonds Letters of Credit ANP Trading
Other Bank revolver facility Gross funds available
651 (228) (36) - (210) 350 527
(264) 228 36 - - - -
(70) - - - 50 - (20)
- - - (90)- - (90)
158 - - - - - 158
475 - - (90)(160) 271 496
- - (79) (79)
Gross available funds approximately 500m
Total of actual and potential trading support
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In conclusion
As a wholesale power generator, the keys to our
continued success are . . .

• Our broad but regionally focused geographic
  distribution
• Our expertise in operating a balanced portfolio
  of high quality assets
• Our solid base of long term contracted output and
  our trading expertise in merchant markets
• Our demonstrated ability to leverage off our
  portfolio to continue to grow the business
• Our liquidity, cash flow and balance sheet
  strength that underpin our performance and our
  prospects

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