Philip Cox CFO, International Power

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Philip CoxCFO, International Power

• Maximising Returns ThroughPortfolio Management

Morgan StanleyEuropean Power Utility
SummitLondon, 9 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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Key strengths
Geographic diversity and balance
Europe
North America
Rest of World
Australia
Middle East
Interests in 28 power stations in 12 countries
Global portfolio 10,990 MW (net) in operation
610 MW (net) under construction
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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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Geographic diversity and balance
Geography and Contracted Position
2003 contracted position MW
GeographyMW
NorthAmerica
Contracted
Rest ofWorld
Merchant
Australia
Europe
Long termPPA
Middle East
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Geographic analysis
Turnover PBIT
Six months ended 30 June
Year ended31 Dec 2002
2003
2002
m
Turnover
PBIT
Turnover
PBIT
Turnover
PBIT
North America Europe Middle East Australia Rest
of World Regional total Corporate costs Total
224 219 38 116 42 639 - 639
1 43 36 55 16 151 (13) 138
315 440 63 226 85 1,129 - 1,129
99 100 86 101 31 417 (29) 388
130 242 40 110 46 568 - 568
59 67 49 49 17 241 (12) 229

Pre-exceptional items
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A portfolio approach 1
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)
Type
Net MW
Operating Assets
1,470 360 485
Lignite Various CCGT
Hazelwood, Victoria Synergen, S Australia Pelican
Point, S Australia SEAGas - 680km Pipeline
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A portfolio approach 2
Seeking benefits through integration

• For example
• Synergies with other processes eg. desalination
• Reducing risk by securing fuel supply eg. SEA Gas
• Cost saving and environmental initiatives eg.
  biomass co-firing

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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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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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Biomass co-firing 
Co-firing trials at Rugeley underway

• Bio-fuel trials ongoing
• Up to five bio-fuels to be trialled inc. sawdust
  and olive products
• All necessary consents in place for trials
• Registered with Ofgem for ROC and LECs (during
  trials)
• Encouraging results so far
• Moving towards commercial operation before end of
  2003

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A portfolio approach 3
Tangible cost savings and other efficiencies
Sharing of personnel and practices around a
global portfolio

• OM best practice
• HR efficiencies
• Procurement efficiencies
• Technology efficiencies
• Financing
• Cash management

The cookie cutter approach
Opportunities for portfolio financing global and
regional banking relationships
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A portfolio approach 4
A springboard for growth

• Growth though acquisition and greenfield /
  brownfield development
• Optimising the balance of merchant and contracted
  assets
• And maintaining fuel diversity and spread across
  the merit order
• By leveraging off our presence in regional markets

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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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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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