Investor Presentation

1
Investor Presentation June 2006
2
IPR in the Industry Value Chain
Seawater Desalination
Fuel Supply
Wholesale Generation
Transmission
Distribution
Supply
Customer
Retail
Gas transportation Coal mining
Combined heat power (CHP)
Indicates IPR presence in the value chain
3
Core capabilities
Greenfielddevelopmentand constructionmanagement
Existing assetmanagement
Acquisitions
Financing
Plant operation
Long-termcontracts
Trading
4
Asset portfolio overview

• Focussed international portfolio of power plants
• Geographic spread provides access to multiple
  growth opportunities and risk mitigation
• Balance of contracted and merchant assets
• visible earnings and cash flow from long term
  contracted assets
• significant upside potential from merchant
  markets
• In depth operational experience across different
  fuel types and technologies

5
Portfolio analysis by capacity
Notes 2006 positionExcludes assets under
constructionAll MW numbers are based on
International Powers net ownership
6
Asset portfolio
Europe
First Hydro
Saltend
North America
Deeside
Derwent
Rugeley
IPR Opatovice
Milford
Spanish Hydro
Blackstone
Turbogás
Uni-Mar
Bellingham
Hays
Pego
Hartwell
ISAB
Hidd
Ras Laffan
Midlothian I II
KAPCO
Tihama
Oyster Creek
Asia
UAN
Uch
Shuweihat
HUBCO
EcoEléctrica
Middle East
Al Kamil
Pluak Daeng
Key Hydro Coal Gas Other
Malakoff
Paiton
Australia
Synergen
Kwinana
Pelican Point
SEAgas pipeline
Note This map shows net capacity for IPRand
excludes assets under construction
Canunda
Loy Yang B
Hazelwood
Gross capacity in operation 29,419 MWNet
capacity in operation 17,018 MWNet capacity
under construction 1,359 MW
7
Portfolio growth
Growth in Power Generation Capacity
IPR net GW
20
17.0
16.2
15.7
Asia
15
Portfolio evolution to date (MW)
Australia
11.1
10.9
Middle East
9.1
10
8.4
Added throughgreenfielddevelopment
Europe
5
Addedthroughacquisition
North America
0
2003
2002
2001
2000
2004
2005
2006
38
A growing portfolio of desalination assets in the
Middle East
62
Gross MIGD
450
400
Al Hidd
90
350
90
300
Ras Laffan B
60
30
15
15
250
25
25
25
Umm Al Nar Extension
100
100
200
100
100
100
Shuweihat
150
162
162
162
100
118
118
118
Umm Al Nar
50
2003
2004
2005
2006
2007
2008
8
Future growth opportunities

• Multiple embedded growth opportunities within
  current portfolio
• Organic growth/greenfield opportunities,
  primarily in the Middle East
• the Middle East region needs 50,000MW of new
  capacity by 2014
• greenfield developments in other regions to be
  based on earnings visibility/long term off take
  contracts
• Acquisition opportunities across all regions
• Growth in new markets - greenfield plus
  acquisition opportunities

9
Organisation structureSupports value
maximisation growth

• Highly experienced management team with in depth
  sector and regional market knowledge
• Regular and robust technical, commercial and
  financial reviews by corporate HQ and regional
  offices
• performance monitoring to maximise value and
  extract synergies
• Knowledge/skills transfer across
  regions/functions a key competitive advantage
• Growth opportunities driven by regional teams and
  corporate MA
• supported by cross regional teams and Corporate
  functions project finance, Operations Eng.,
  Trading Marketing

10
Investment process

• Detailed DCF valuation long term cash flow key
• verification through industry and financial
  multiples
• Rigorous risk analysis
• financial (capital structure)
• commercial
• operational / technology
• political/legal
• Rewards measured by key metrics including
• cash returns on equity
• return on capital
• earnings visibility, quality and growth
• pay back
• Final decision made by investment committee and
  company board
• investment committee includes CEO, CFO, all
  regional directors and corporate function heads

11
Acquisition track record
MW by Region
MW by Fuel Type
North America Europe Middle East Australia Asia
Gas Hydro Pumped storage Coal
183 3,184 364 758 619 5,108
2,504 57 1,462 1,085 5,108

• All acquisitions characterised by
• smooth integration
• robust operational performance
• strong cash flow and commercial performance

Includes net MW from acquisitions since
November 2004
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• Regional Overview

13

• North America

14
North America
15
Operations overview

• Portfolio of merchant and long term contracted
  assets
• plants performing well improved load factors in
  all markets
• completing major overhaul cycle at all units
• tightening supply improving market dynamics and
  pricing
• expanding hedging opportunities will provide
  longer term earnings stability
• Expanded capabilities
• internal outage team increases operating
  flexibility and performance
• coal asset acquisition improves ability to
  optimize margins
• updated trading and risk management systems
  provides access to more opportunities

16
ERCOT market developments

• A series of positive developments for merchant
  generators . . .
• Increased awareness of supply limitations
• updated view of reserve margins tighter market
• realization that mothballed plants are unlikely
  to return
• continued strong load growth
• congestion driven regional premiums increase
• Increased discussion of new capacity additions
• TXU announcement of up to 6,000 8,000 MW of
  coal units
• NRG announcement of up to 3,000 4,000 MW of
  nuclear, coal, gas capacity
• Regulatory
• shift to nodal energy market
• continued concern/action regarding price spikes
• ERCOT changing system management procedures for a
  tighter market

17
NEPOOL market developments

• A series of positive developments for merchant
  generators . . .
• Increased awareness of supply limitations
• updated view of reserve shortage
• continued steady load growth
• winter gas supplies expensive
• Increased discussion of new capacity needs
• LICAP debate, lack of new plant construction
• early discussion of capacity additions - little
  real action
• announced concerns of load serving entities
• Regulatory
• agreement on FCM/LICAP settlement, effective
  December 2006
• implementation of market based payments for
  ancillary services

18
ERCOT generation supply

• Growing demand in our regions
• 5 GW of mothballed capacity unlikely to re-start
• Several large expansion plans announced (TXU,
  NRG)
• Reserve margin likely to remain at low levels due
  to timing of planned build

19
ERCOT market trends

• Summer spark spread continues to increase as
  demand grows
• New proposed generation additions will offset
  retirement of mothballed units
• Expect reserve margin to remain tight over the
  medium term
• Significant portion of 2006 output hedged under
  forward contracts

Market position ERCOT forecast
2006
2010
61.1 70.5 14.9 2.7 0
68.5 77.1 12.5 2.7 6.5
Peak demand (GW) Available capacity (GW)
Reserve margin Demand growth Capacity additions
(GW)
based on highest demand day of the year
with 8.2 GW of capacity addition reserve
margin reaches 15
20
NEPOOL generation supply

• Growing demand and limited new construction
• Expected shutdown of older coal units in 2009 -11
  timeframe will put further pressure on supply
• FCM will provide mechanism for new capacity
  additions
• Limited fuel supply in winter complicates
  solutions

21
NEPOOL market trends

• Summer spark spread remain strong
• Spark spread expansion in non-summer months
  driving growth
• New FCM will increase short term margins
• Provides opportunity for growth
• Significant portion of 2006 output hedged under
  forward contracts

Market position System operator forecast
2006
2010
Peak demand (GW) Available capacity (GW)
Reserve margin Demand growth Capacity additions
(GW)
26.9 31.0 15.4 1.9 0
29.0 31.0 6.9 1.9 0
based on highest demand day of the year
With 2.3 GW of capacity additions reserve
margin reaches 15
22
Forward capacity market - NEPOOL

• Multi-year FERC/ISO-NE process
• methodology to encourage new capacity additions
• current market design does not provide sufficient
  pricing signals until market is in shortage
• recommendation for non-market based locational
  capacity pricing model (LICAP) developed after
  multi-year process
• strong opposition to LICAP resulted in negotiated
  settlement on a market based capacity pricing
  approach
• Forward capacity market
• annual bidding for capacity to compensate
  existing and new plant capacity
• bidding process to assure sufficient pricing
  signals for new build investment
• transition to 2010 of defined capacity payments

23
Hedging strategy

• Implement hedging and trading plan to
  assure/optimize margins
• target hedges for 70 80 of expected generation
  - within year
• seek a combination of medium and short term
  hedges
• participate in the day-ahead and real time
  markets to improve hedged position and sell
  un-hedged generation.
• Enhanced credit support allows for additional
  hedging
• established trading relationships with multiple
  counterparties - cross commodity hedging for
  minimal credit support - use of IPR Parent
  Guarantees to expand trading credit - plan
  refinancing to allow for additional credit
  through assets liens

24
Optimising performance

• Hedging strategy to maximise earnings
• provide predictable, reliable margin levels
• lock in higher market prices as supply tightens
• Improving plant performance and availability
• constant focus on operational performance,
  predictable maintenance
• Hays, Midlothian gt 97 availability during peak
  season
• upgrading systems, redundancy to further increase
  reliability
• Reducing operating costs
• in-house Outage group reduces cost, timing for
  major gas turbine overhauls
• amended Alstom Parts Agreement to extend
  operating periods between outages

25
Coleto Creek

• 632 MW Pulverized Coal Unit
• Located in ERCOT South Zone
• Burns low sulfur PRB Coal
• Off take agreements through 2009
• Additional hedging through 2013

• Acquiring plant from Topaz for 1.14 billion
• Funding 935 million loan and equity
• Other facilities include trading support L/C and
  working capital line
• Expected closing shortly
• Will immediately contribute to earnings and free
  cash flow

26
Coleto Creek

• Strategic benefits of acquisition
• provides fuel diversity to gas based fleet
• expands asset base in growing ERCOT market
• establishes relationships in PRB, other coal
  infrastructure
• potential expansion potential
• Economic benefits of acquisition
• power and fuel hedges provide strong, reliable
  cash flow and earnings
• long term coal transportation contract provides
  economic advantage
• financing package supports favorable equity
  return, significant trading collateral support

27
Opportunities for growth

• Expansion of existing facilities
• NEPOOL opportunities for mid- long term contracts
  (FCM, State Initiatives)
• expansion provides cost advantages to new build
  alternatives
• opportunities available at each existing facility
  for additional capacity
• Opportunities in new markets
• consider acquisition of assets in similar markets
  such as PJM, NYPP
• opportunities for development in certain
  constrained areas

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Europe
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Europe

• Portfolio of merchant and long term contracted
  assets
• Largest region by capacity and profitability
• significant growth in earnings and cash flow
  following successful implementation of
  acquisitions and UK market improvement
• Contracted assets
• Portugal good market share / ready for
  liberalisation
• assets in Italy, Spain, Turkey and Czech Republic
• key focus operational performance

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UK

• Key merchant market
• Strong growth in profitability driven by
• robust performance at First Hydro, Saltend
  Rugeley
• improving market conditions
• Spreads for gas fired generation currently low -
  but market expected to be in balance 2010/2011
• Environmental-carbon position/LCPD
• CO2 treated like commodity (e.g. fuel)
• decision to install FGD at Rugeley
• Robust portfolio
• benefiting from fuel diversity

Saltend
Deeside
Derwent
First Hydro
Rugeley
Continent
33
UK
67
European capacity (MW)
31
Middle East
32
Middle East

• Creation of new region since 2000
• six projects in six years power water
• portfolio of long-term contracted assets
• Excellent reputation
• delivered assets on time and within budget
• Robust relationships
• clients, partners and contractors
• Experienced development, construction management
  and operational team in place
• Opportunity rich markets
• strong demand growth for power and water
• pipeline of further projects total EV 15
  billion

33
Australia
34
Australia

• Largest private power generator in Australia
• scale player in Victoria and South Australia
• Integrated portfolio with blend of fuel
  types/dispatch mix
• No major short term change in electricity price
  environment
• supply/demand balance remains attractive
• demand peaks required to expedite price increases
• EnergyAustralia retail partnership
• increased access to domestic market

35
Asia
36
Asia

• All long term contracted assets
• IPR plant operator for most assets
• Operational performance - key for contracted
  assets
• robust performance
• high availability and high reliability
• Malakoff MMC offer underpins intrinsic value
• All assets delivering solid financial performance
  
• good cash flow

37

• Financial

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Capital structure

• Non-recourse project debt the fundamental
  building block
• Liquid resources at IPR corporate
• cash
• headroom
• borrowing capacity
• Free cash flow generation strong and consistent
• Debt capitalisation 52 (at 31 March 2006)

39
Shareholder return

• Balance between capital appreciation and dividend
• Dividend policy to move progressively towards
  and EPS pay-out ratio of 40
• 2005 dividend up 80 on 2004 payment

40
2005 highlights

• Strong financial performance
• EPS at 14.6p up 70
• profit from operations 536 m up 141
• free cash flow 285m
• dividend 4.5p per share
• Profit from operations up in all regions
• UK and US merchant markets continue recovery
• acquisitions performing well
• 2006 expected to show further growth

An excellent year
41
Income statement
Year ended 31 December m
2005 2004
change
PBIT from subsidiaries PAT from JVs and
associates Profit from operations Interest PBT Tax
Minority interest Profit for the periodEPS
(basic, pre-exceptional) Dividend per share
345 191 536 (202) 334 (68) (52) 214
14.6p 4.5p
141 130 9170 80
109 113 222 (77) 145 (25) (8) 112 8.6p 2.5p
All numbers exclude exceptional items
42
2005 earnings growth - drivers
m
Profit from operations up 141
43
Free cash flow
Year ended 31 December
m
2005
2004
change
Operating cash flow from subsidiaries Dividends -
JVs and associates Capex - maintenance Cash
generated from operations Interest paid Tax
paid Free cash flow
198 69 (59) 208 (84) (20) 104
33 146 174
492 92 (72) 512 (196) (31) 285
44
Capital expenditure - maintenance

• Includes only subsidiaries
• Intervals between major maintenance vary between
  3 and 6 years. 2005 was unusually low
• Average annual cost of current portfolio c.100m
• Operational excellence and availability paramount

Maintenance capex
m
c150m
72m
2005a
2006e
Estimate on basis of current committed projects
45
Capital expenditure - growth

• Includes current commitments only
• currently focused on Middle East projects
• excludes spend on acquisitions and potential new
  projects

Growth capex
m
188m
120m
2005a
2006e
Estimate on basis of current committed projects
46
Balance sheet

As at 31 December m
2005 2004
4,590 1,379 623 6,592 (327) (911) (2,979) 2,3
75 125 56(1,625)
Fixed assets Intangible and tangibles
Investments Other long-term assets Net
current liabilities Provisions and creditors gt 1
year Net debt Net assetsGearing Debt
capitalisation Net debt of Associates and JVs
3,748 1,255 664 5,667 (116) (748) (2,745) 2,0
58 133 57(1,285)
47
Net debt structure
JVs / Associatesoff-balance sheetnet debt
As at 31 March 2006
IPRCorporate
Project cash(debt)
Total
m
Cash and cash equivalents Recourse debt
Convertible bond (2023) Non recourse debt
IPM - acquisition debt IPM - Mitsui preferred
equity North America Europe Middle
East Australia Asia Total new debt
675 (124) (124) (294) (172) (512) (1,161) (275)
(935) (32) (3,381) (2,830)
274 (124) (124) - - - - - -
- - 150
401 - - (294) (172) (512) (1,161) (275) (
935) (32) (3,381) (2,980)
- - - - (217) (259) (392) (51) (557) (
1,476) (1,476)
Project debt is secured solely on the assets of
the project concerned (non recourse)
48
First quarter results - highlights

• Strong financial performance with EPS 6.6p up
  61
• Profit from operations up 63 to 217m (2005
  133m)
• strong performance in Europe
• significant increase in UK profitability
• improvement in US merchant markets
• Free cash flow up significantly at 127m (2005
  54m)
• 2006 expected to show further growth

49
Geographic analysisRegional split of Q1 profit
from operations
m
158
Q1 2005 Q1 2006
83
38
33
28
23
4
5
4
-6
NorthAmerica
Europe
MiddleEast
Australia
Asia
All numbers exclude exceptional items
andspecific IAS 39 Mark to Market movements
50
Summary

• A leading global power generator
• Strong performance across the portfolio
• good operational performance
• growth in profitability and cash flow
• Core competencies
• greenfield development
• acquisitions
• financing
• plant operations and asset management
• trading and commercial structuring
• Asset management
• delivery of results
• International portfolio robust platform for
  future growth
• embedded growth opportunities
• greenfield opportunities
• acquisition opportunities

51

• Appendix

52
Stock data

• Market cap 4bn
• Shares outstanding 1,482m
• Average daily trading vol. 11 million shares
• as at 21 June 2006
• based on quarter ended 31 March 2006

• Interest cover 3.3x
• Credit rating B2 (Moodys), BB- (SP), BB (Fitch)

(1)
(2)
IPR Share Price
Pence
(1)
325
(2)
300
275
250
225
200
175
150
125
Jan
Feb
Mar
Apr
May
Jun
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Aug
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Jan
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2005
2006