International Power PLC:

1
Business-case solution

• International Power PLC
• Financial performance in the global power
  industry

Kim Stanislav, Novichenko Stanislav, Petrov
Dmitry, Repnikov Mikhail.
2
Case definition

• First Class Financial company makes decisions for
  the client who is interested in taking a
  substantial equity position in International
  Power, that generates electricity from gas, oil,
  coal, wind, and water, and sells that electricity
  through merchant markets and long-term power
  purchase agreements.
• The decision is based on financial-statement data
  available

3
Our task

• Is it prospective to take a substantial equity
  position in International Power, taking into
  concern all pros and cons?

After analysis of available data we decided
Yes, if clients goal is a long-term profit, No,
if client is interested in a short-term deal.
4
Perspectives of stock acquisition in short-term

• Expectation of immediate stock price growth or
  decline (for the bear speculation)
• The whole of companys activities in recent years
  aim for the long-term outlook, for the future
  earnings and benefits.
• The stock price likely will not shows a intense
  volatility in short-term
• The most of companys stockholders commonly
  prefer to hold their assets than buy or sell them
  in feverish haste

5
Goals (McKinsey Tree)
6
Market Position Current situation

• Global company
• In 2004 International Power works in the
  following markets
• North American (8 MW)
• European (10 MW)
• Middle Eastern (3 MW)
• Australian (7MW)
• Asian (6MW)
• Net EBIT2004287 000 000

7
Market Position Key acquisitions

• International
• EME (3202 MW)
• Wise one 7 of 9 assets have long-term contracts.
• 2 of 9 in core markets (Australia and
  UK)
• Portugal
• TurboGas (990 MW)
• Provides a profitable Portuguese portfolio
  together with existing Pego (600 MW)
• Australia
• Wind farm
• SEA Gas pipeline
• __________________________________________________
  __
• The company is strengthening its positions in its
  core markets

8
Market Position Assets diversity

• Geographic dispersion
• Types of products and services
• Electricity
• Gas
• Oil
• Water
• Wind
• Coal
• Water desalting
• Coal mining
• Gas transportation
• Steam for heating systems
• __________________________________________________
  _______
• The company does not depend on single markets

9
Growth Potential

• Merchant market of power generation has a
  growth potential in long-term.
• Projection for the power consumption modest
  growth in the world

10
Growth Potential

• The International Power PLC has a good
  perspective according to the companys filings
• The financial data of International Power PLC
  indicates that the value of companys equity will
  have a rising trend in medium and long term.
• The statistic information also shows good
  positive trend in relation to the stock price

billions of dollars
Data from exhibits
11
Company Reputation

• Great top Management Experience
• Successive demerge of National Power in October
  2000
• The correct choice of new corporate strategy
  after demerger
• Reliable partnership
• Alliances enable us to implement our strategy
• Their partners have highly complementary skills
  and aligned objectives
• Secure long-term contracts
• Long-term orientation is the core of IPRs
  corporate strategy
• Environment and society
• They recognize their duty of care towards the
  environment and society
• __________________________________________________
  _____________
• The company has a good reputation both in
  business and society

12
Investment Risks

• Difficult situation in the US market
• Low margins in Texas and New England.
• Very modest improvement in prices.
• Large non-recourse dept 879 000 000 in US
• Can not be paid in cash
• Acquisitions may bring low profits

13
Stockholders Relationship

• Shareholders support during the hard times
• Companys shareholders are aimed at long-term
  profits, but not at speculative speculative
  short-term ones
• Directors are also shareholders
• Sir Neville Simms 125,377 shares
• Tony Isaac 15,483
  shares
• Adri Baan 25,483
  shares
• Jack Taylor 11,978
  shares
• (data from official website
  ipplc.com)
• Top-management is highly interested in effective
  company strategy

14

• Thank you for your attention