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International Power (IPR)

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Tuesday 10 August, 2010

International Power

Half Yearly Report

RNS Number : 8105Q
International Power PLC
10 August 2010
 



International Power plc

Interim Report for the six months ended 30 June 2010

 

(London - 10 August 2010) International Power today announces its results for the six months ended 30 June 2010 and reports on key developments to date.

 

Sir Neville Simms, Chairman of International Power, said: "I am pleased to report that the business has performed well during the first half of the year. Underlying EPS* after adjusting for the sale of the Czech business is up 7% driven by good operational performance across the portfolio and a significantly improved contribution from Rugeley. The Board is pleased to announce an interim dividend of 4.39 pence. Overall the business continues to perform in line with our expectations, is generating good free cash flow and our financial position remains strong."

 

Financial highlights - excluding exceptional items and specific IAS 39 mark to market movements*

·   Profit from operations of £524 million (2009: £550 million) - down 5% (down 9% at constant currency)

·   EPS of 14.1 pence (2009: 15.4 pence) - down 8% (down 14% at constant currency)

·   After adjusting for the sale of the Czech business, underlying profit from operations at constant currency is up 2% and underlying EPS at constant currency is up 7%

·   Free cash flow** of £398 million (2009: £326 million) - up 22%

·   Interim dividend of 4.39 pence per share (2009: 4.25 pence) - up 3%

·   Issued €250 million senior unsecured notes, due 2017

·   Net debt at £4,835 million (31 December 2009: £5,059 million) - down 4%

 

Profit from operations*



Six months

ended 30 June

Year ended 

31 December 




2010 

2009 

(restated)

2009 

(restated)




£m 

£m 

£m 


 

 

 

 

 

 

North America


49 

58 

134 


Europe


265 

299 

647 


Middle East


49 

41 

85 


Australia


133 

120 

233 


Asia


53 

54 

101 


Regional total


549 

572 

1,200 


Corporate costs


(25)

(22)

(52)


Profit from operations


524 

550 

1,148 














 

Financial highlights - including exceptional items and specific IAS 39 mark to market movements

·   Profit from operations of £443 million (2009: £799 million)

·   EPS of 13.1 pence (2009: 25.9 pence)

 

Notes:

*

Excluding exceptional items and specific IAS 39 mark to market movements. For analysis and explanation of exceptional items and specific IAS 39 mark to market movements, please see notes 1 and 4 to the interim financial statements.

**

Free cash flow is set out in the consolidated statement of cash flows on pages 17 and 18.


All reference to financial performance in this commentary excludes the impact of exceptional items and specific IAS 39 mark to market movements (unless stated otherwise).

Following the Group's  adoption of IFRIC 12 - Service Concession Arrangements, following its endorsement by the European Union, the comparatives for the six months ended 30 June 2009 and the year ended 31 December 2009 have been restated. The results for the six months ended 30 June 2009 have also been restated for the change in accounting policy relating to retirement benefit obligations, which was reflected in the Group's consolidated financial statements for the year ended 31 December 2009 (refer to notes 1 and 5).

 

 

North America

Profit from operations in North America decreased 16% to £49 million compared to £58 million for the same period last year (down 14% at constant currency). The reduction in profit from operations was primarily due to a major planned outage and a lower write back of fair value provisions at Coleto Creek. Our peaking plants delivered an improved contribution reflecting higher capacity payments, and the wind assets in Canada, which were acquired in October 2009, made a first-time contribution. Our contracted assets in the region, EcoEléctrica and Oyster Creek, operated well and delivered a good financial performance.

 

In ERCOT, market conditions remain weak. The South Zone, where our Hays plant is located, experienced reduced congestion and lower pricing following some capacity additions. Consequently, the achieved spark spread at Hays was down at US$10/MWh (H1 2009: US$13/MWh), at a load factor of 30% (H1 2009: 55%). Midlothian achieved a spark spread of US$8/MWh, down from US$11/MWh in the first half of 2009, and a load factor of 20% compared to 30% for the same period last year. For the full year, we expect Hays to run at a load factor of 35% and Midlothian at 25%. We have forward contracted 60% of the expected output of these plants for 2010. A planned reduction in operating costs should help offset some of the fall in the 2010 expected spark spreads at Hays and Midlothian.

 

In New England, Bellingham and Blackstone achieved a spark spread of US$28/MWh (H1 2009: US$32/MWh) at a higher load factor of 30%, compared to 20% in 2009, due to warmer weather particularly in May and June. Earnings in New England continue to be underpinned by capacity payments under the Forward Capacity Market. For 2010 we have forward contracted 80% of our expected output in New England.

 

Coleto Creek achieved an increased dark spread of US$33/MWh (H1 2009: US$26/MWh), but at a reduced load factor of 65% (H1 2009: 95%) as the plant underwent a major planned outage and successfully completed an upgrade to the steam turbine, improving output by 10MW and heat rate by 2%. Coleto Creek's full-year results in 2009 benefited from a £30 million non-cash write back of fair value provisions made against power contracts in place at acquisition, and there is no material write back in 2010. For 2010 we expect a load factor of 80% and have forward contracted 95% of expected output.

 

The peaking plants in PJM and MISO delivered an improved contribution reflecting an increase in capacity payments during the period. The capacity price for the period June 2013 to May 2014 cleared at an improved price of US$27.73/MW-day (compared to US$16.46/MW-day for the previous period) during a capacity auction held in May. This price reflects significant demand side response and a one-year delay to an expected transmission line that will increase transmission capacity from west PJM, where our assets are located, to high demand areas in east PJM.

 

In Canada, construction has been completed on the 40MW Harrow project, located in Ontario. In May, International Power announced that it has signed power purchase agreements for 76MW of new wind generation capacity under the Ontario Transmission Authority's Feed-in Tariff programme. The projects are expected to commence operation in 2011. Once operational, the output from this capacity will be sold under a 20-year feed-in tariff to the Ontario Power Authority.

 

 

Europe

Profit from operations in Europe decreased 11% to £265 million from £299 million in the same period for 2009 (down 12% at constant currency). Adjusting for the sale of the Czech business, profit from operations was up 10%. Performance at Rugeley improved significantly, however this was partially offset by an expected reduction in contribution from First Hydro in the UK. Our contracted plants in Iberia and Turkey operated well.

 

Rugeley in the UK, where the FGD plant was commissioned in 2009, delivered an increased contribution achieving a dark spread of £58/MWh during the period (H1 2009: £13/MWh) at a relatively low load factor of 35% (H1 2009: 75%). Deeside achieved a spark spread of £12/MWh (H1 2009: £19/MWh), at an increased load factor of 85%, compared to 50% in the first half of 2009 when the plant had a planned C-inspection. Saltend achieved a consistent spark spread of £24/MWh at a slightly higher load factor of 85% (H1 2009: 80%), due to its highly contracted position, which was locked-in during the high power price environment in 2008. For 2010 we have forward contracted 85% of our expected output at Deeside, and 95% at Rugeley and Saltend.

 

In the UK, wholesale prices have been affected by reduced volatility and new CCGT plants coming online. These weaker conditions impact First Hydro's balancing mechanism and trading revenue streams and as a result, First Hydro's performance was down significantly on the same period in 2009, in line with our expectations. The plant has maintained its ancillary service volumes, and prices in the contracted reserve markets showed some improvement.

 

At ISAB in Italy the second unit returned to production in May. In addition, the plant benefited from a full settlement of property damage and business interruption insurance associated with the 2008 incident.

 

Construction of the 830MW Elecgas plant in Portugal and the 420MW T-Power plant in Belgium continues to make good progress. These two gas-fired projects are both on schedule to reach commercial operation in the first half of 2011.

 

 

Middle East

In the Middle East, profit from operations increased 20% to £49 million, up from £41 million last year (up 22% at constant currency) reflecting a good operational performance from all the assets in the region, with high availability levels.

 

At Fujairah F2, in the UAE, construction of the 2,000MW, 130MIGD plant is progressing and the project is expected to reach full commercial operation during 2010. The plant is being commissioned in three stages and, following a short delay, is expected to be fully commissioned in the second half of this year.

 

 

Australia

Profit from operations was up 11% at £133 million compared to £120 million in the previous year (down 11% at constant currency). Improved performances at Loy Yang B and Simply Energy, where customer numbers were higher with improved retail margins, were offset by a lower contribution from Hazelwood due to planned major outages on two units.

 

Hazelwood's first half load factor was 80% compared to 85% in the first half of 2009, with an achieved price of A$48/MWh (H1 2009: A$46/MWh). For the full year, we have forward contracted 70% of Hazelwood's expected output (at a load factor of 80%) and expect to achieve an average price of A$43/MWh.

 

In January 2010, the total existing non-recourse debt of A$742 million of Hazelwood power station was restructured. The previous two-tranche structure (comprising A$445 million Tranche B, maturing in February 2010, and A$297 million Tranche A maturing in 2014) was merged into a single facility with a maturity date of 30 June 2012 and a margin of 400 basis points.

 

In May the Australian Government announced a delay to the proposed Carbon Pollution Reduction Scheme (CPRS) until after the end of the first Kyoto Protocol Commitment Period (end of 2012).

 

Construction of the additional 24MW peaking unit at Port Lincoln (Synergen) in South Australia is progressing well and the unit is expected to be in operation in the third quarter of 2010 taking the total capacity of the plant to 72MW. The plant is now operating under a new ten-year ancillary services agreement providing transmission support to the Port Lincoln area.

 

 

Asia

Profit from operations in Asia was down 2% at £53 million compared to £54 million in 2009 (up 2% at constant currency). Our assets in the region continued to deliver a strong operational performance and expect to benefit from availability bonuses this year.

 

Construction of the 815MW super-critical coal-fired Paiton 3 plant in Indonesia and the 110MW TNP2 gas-fired cogeneration plant in Thailand is progressing well, and both plants are on schedule to reach commercial operation by the end of 2012.



Corporate costs

Corporate costs at £25 million have increased by £3 million compared to last year (2009: £22 million), primarily due to a one-off income item in 2009 and additional project development costs in 2010.

 

 

Interest

Net interest expense at £191 million is £25 million lower than 2009. The principal driver of the reduction is the pay down of US$769 million of debt secured on five US merchant plants, located in Texas and New England, in December 2009.

 

 

Foreign exchange

The impact of the weakening of sterling on the results of our overseas operations, compared to the same period in 2009, is an increase in EPS of 0.8 pence. The impact relates primarily to the translation of the profits of Australian dollar denominated operations.

 

 

Tax

The Group tax charge has increased by £5 million to £64 million (2009: £59 million). The effective rate of tax used in preparing these results is 22% (2009: 23%). As in 2009, the tax rate has benefited from the resolution of some historic tax issues.

 

 

Exceptional items and specific IAS 39 mark to market movements

Exceptional items after tax amount to a loss of £15 million (2009: £nil) representing an impairment to the carrying value of the Derwent plant due to the end of its steam offtake contract in 2011.

 

The specific IAS 39 mark to market movements reported in the period amount to a net loss of £33 million before tax (2009: gain of £240 million). £57 million of the loss relates to power and gas contracts, principally arising from settlements in the period (2009: gain of £243 million which primarily related to a reduction in forward prices in our merchant market regions), offset principally by mark to market gains of £36 million (2009: net loss of £11 million) relating to the convertible bonds.

 

Tax on total specific IAS 39 mark to market movements during the year was a credit of £9 million (2009: charge of £51 million).



Cash Flow

A summary of the Group's cash flow and a reconciliation to net debt is set out below:

 

 

Six months ended

30 June


Year ended 

31 December 

 

2010 


2009 

(restated)


2009 

(restated)

 

£m 


£m 


£m 

 






Profit for the period

230 


464 


1,132 

Depreciation and amortisation

227 


173 


374 

Non-cash items and other movements (i)

192 


(155)


(327)

Dividends from joint ventures and associates

39 


21 


146 

Capital expenditure - maintenance

(72)


(72)


(148)

Sale of property, plant and equipment



Net (purchase)/sale of intangible assets

(23)


42 


47 

Movement in working capital

49 


83 


101 

Tax and net interest paid

(244)


(232)


(535)

 






 






Free cash flow

398 


326 


791 

Australian stamp duty - exceptional



(6)

Capital expenditure - growth

(69)


(43)


(115)

Investments in (net of returns from) joint ventures,
associates and investments

 

(16)


 

(13)


 

(18)

Acquisitions

(3)


(5)


(76)

Disposals

(7)



638 

Dividends paid

(126)



(195)

Proceeds from share issue



Net payments to non-controlling interests

(6)


(78)


(110)

Other movements in debt

(3)


(17)


(36)

 






 






Decrease in net debt

170 


172 


876 

 






Opening net debt

(5,059)


(6,318)


(6,318)

Net debt reclassified as assets and liabilities held for sale


156 


Net debt on acquisition of subsidiaries



(49)

Net debt on disposal of subsidiaries



121 

Effect of foreign exchange thereon

54 


569 


311 

 






 






Closing net debt

(4,835)


(5,421)

 

(5,059)

 






 






 

(i)

Non-cash items and other movements are set out in the consolidated statement of cash flows. They include income statement charges for interest, tax, specific IAS 39 mark to market movements and the share of profit of joint ventures and associates.

 

Free cash flow for the first six months of 2010 at £398 million is £72 million higher than for the first half of 2009. Most of this improvement reflects the settlement of hedges on the UK portfolio. Dividends from joint ventures and associates are up £18 million between years, while tax paid and interest paid have also increased and decreased respectively. Growth capex is £26 million higher in 2010, principally due to the refitting of the Maestrale wind farms in Italy.



Summary statement of financial position

The Group's net assets can be analysed as follows:

 


 

As at 

30 June 

2010 


As at 

30 June 

2009 

(restated)


As at 

31 December 

2009 

(restated)


 

£m 


£m 


£m 








Goodwill and intangibles


1,039 


1,008 


1,053 

Property, plant and equipment


6,988 


6,652 


6,959 

Investments


1,689 


1,533 


1,627 

Long-term receivables and others


1,638 


1,712 


1,749 















Non-current assets


11,354 


10,905 


11,388 








Net current (liabilities)/assets excluding net debt items


(187)


96 


(131)

Non-current liabilities excluding net debt items


(1,441)


(1,525)


(1,437)

Net debt


(4,835)


(5,421)


(5,059)















Net assets


4,891 


4,055 


4,761 








Gearing


99%


134%


106%

Debt capitalisation


50%


57%


52%








Net debt - JVs/Associates

 

(1,919)


(1,636)


(1,684)


 

 


 


 

 

The decrease in goodwill and intangibles assets since 31 December 2009 mostly reflects the strengthening of sterling against the euro. The increase in other non-current assets also reflects this foreign exchange movement which is more than offset by the impact of a weakening of sterling against the US dollar and a reduction in derivative financial assets.

 

The increase in liabilities excluding net debt items since December 2009 comprises a number of offsetting working capital movements. Net debt has fallen from £5,059 million to £4,835 million following strong cash generation by the business and the strengthening of sterling against the euro.

 

The Group remains in a robust financial position with strong free cash flow generation. At 30 June 2010 cash at the project level and corporate level amounts to £709 million and £737 million respectively. Debt at the project level and corporate level is £5,268 million and £1,013 million respectively. The increase in corporate level debt, rising from £845 million at 31 December 2009 to £1,013 million predominantly reflects the issue of the €250 million Senior Notes. As a consequence of the reduction in net debt, debt capitalisation has declined to 50% from 52%.

 

 

 

 

 

Dividend

The Board is pleased to announce an interim dividend of 4.39 pence per ordinary share (which is calculated as 35% of the previous year's full-year dividend). This will be paid to shareholders registered on the Company share register on 1 October 2010, with payment being made on 28 October 2010.

 

 

Outlook

The business has performed well in the first half of 2010. Our merchant assets remain well positioned to capture value from any recovery or volatility in market conditions and our long-term contracted assets continue to operate in line with expectations. Overall, our outlook for the year remains unchanged from that stated in the 2009 preliminary results announcement.

 

 


Achieved Spreads and Load Factors for the six months ended 30 June 2010

 

 

Year ending

31 December

Six months ended

30 June

 

2010

2010

2009


 

North America

Forecast

Actual

Actual

 

ISO-NE (Bellingham/Blackstone)

 

 

 

 

Spark spread ($/MWh)

$29

$28

$32


Load factor

30%

30%

20%


Contracted position

80%




Texas (Hays)





Spark spread ($/MWh)

$10

$10

$13


Load factor

35%

30%

55%


Contracted position

60%




Texas (Midlothian)





Spark spread ($/MWh)

$11

$8

$11


Load factor

25%

20%

30%


Contracted position

60%




Texas (Coleto Creek)





Dark spread ($/MWh)

$33

$33

$26


Load factor

80%

65%

95%


Contracted position

95%









United Kingdom





Rugeley





Dark spread (£/MWh)

£43

£58

£13


Load factor

45%

35%

75%


Contracted position

95%




Deeside





Spark spread (£/MWh)

£13

£12

£19


Load factor

65%

85%

50%


Contracted position

85%




Saltend





Spark spread (£/MWh)

£22

£24

£24


Load factor

90%

85%

80%


Contracted position

95%









Australia





Hazelwood





Achieved power price (A$/MWh)

A$43

A$48

A$46


Load factor

80%

80%

85%


Contracted position

70%









 

Notes:

-

Forward contracted positions represent the total contracted generation as a % of forecast generation for the year, where the proportion of the year elapsed is included as fully contracted.

North America

-

ISO-NE spark spreads include income from the Forward Capacity Market and exclude the cost of CO2.

-

The forward contracted positions at Coleto Creek include sales via gas hedges.

-

Dark spreads at Coleto Creek exclude the cost of SO2 credits and non-cash write back of fair value provisions.

Europe

-

The forward contracted positions at Rugeley and Saltend include sales via gas hedges.

-

Spreads at Rugeley, Deeside and Saltend exclude the cost of CO2 and are adjusted to reflect the fuel optimisation achieved by trading our coal and gas assets as a portfolio.


International Power plc

Condensed Interim Financial Statements

Consolidated Income Statement

For the six months ended 30 June 2010

 



Six months ended

30 June 2010


Six months ended

30 June 2009



 

Results 

excluding 

exceptional 

items and 

specific 

IAS 39 mark 

to market 

movements 

 

Exceptional 

items and 

specific 

IAS 39 mark 

to market 

movements 

Results for  

the period  


 

Results  

excluding  

exceptional  

items and  

specific  

IAS 39 mark  

to market  

movements  

 

Exceptional  

items and  

specific  

IAS 39 mark  

to market  

movements  

Results for  

the period  



(i) 

(i) 



(i) 

(Restated) 

(ii), (iii) 

(i) 

 

 

(Restated) 

(ii), (iii) 


Note

£m 

£m 

£m  


£m 

£m  

£m 










Revenue: Group and share of joint

   ventures and associates

2

2,466  

(102) 

2,364  


2,499  

196  

2,695  

Less: share of joint ventures' revenue


(146) 

-  

(146) 


(232) 

-  

(232) 

Less: share of associates' revenue


(600) 

-  

(600) 


(543) 

-  

(543) 

Group revenue

2

1,720  

(102) 

1,618  


1,724  

196  

1,920  

Cost of sales


(1,267) 

45  

(1,222) 


(1,285) 

47  

(1,238) 

Gross profit

 

453  

(57) 

396  

 

439  

243  

682  

Other operating income


69  

-  

69  


82  

-  

82  

Other operating expenses


(111) 

-  

(111) 


(102) 

-  

(102) 

Share of results of joint ventures and

   associates


113  

(24) 

89  


131  

6  

137  

Profit from operations

2

524  

(81) 

443  


550  

249  

799  

Finance income


17  

-  

17  


21  

21  

Finance expenses


(208) 

33  

(175) 


(237) 

(9) 

(246) 

Net finance costs


(191) 

33  

(158) 


(216) 

(9) 

(225) 

Profit before tax


333  

(48) 

285  


334  

240  

574  

Taxation


(64) 

9  

(55) 


(59) 

(51) 

(110) 

Profit for the period


269  

(39) 

230  


275  

189  

464  

Attributable to:









Non-controlling interests


54  

(23) 

31  


41  

29  

70  

Equity holders of the parent


215  

(16) 

199  


234  

160  

394  










Earnings per share:









Basic

5

14.1p  


13.1p  


15.4p 


25.9p 










Diluted

5

13.5p  


11.1p  


14.8p 


24.1p 










All results are from continuing operations.

 

(i)      The Group separately presents certain items as exceptional. These are items which, in the judgement of the Directors, need to be disclosed separately by virtue of their size or incidence in order for the reader to obtain a proper understanding of the financial information. In addition, in order to assist the reader in understanding the underlying business performance, the Group separately discloses within the income statement specific IAS 39 mark to market movements (refer to notes 1 and 4).

(ii)     The Group has adopted IFRIC 12 - Service Concession Arrangements, following its endorsement by the European Union (refer to notes 1 and 5).

(iii)    The results for the six months ended 30 June 2009 have also been restated for the change in accounting policy relating to retirement benefit obligations, which was reflected in the Group's consolidated financial statements for the year ended 31 December 2009.

 



International Power plc

Condensed Interim Financial Statements

Consolidated Income Statement

For the year ended 31 December 2009

 



Year ended

31 December 2009



 

Results 

excluding 

exceptional 

items and 

specific 

IAS 39 mark 

to market 

movements 

 

Exceptional 

items and 

specific 

IAS 39 mark 

to market 

movements 

Results for  

the year  



(i)

(Restated) 

(ii) 

(i)

 

 

(Restated) 

(ii) 


Note

£m 

£m 

£m  






Revenue: Group and share of joint ventures and associates

2

4,925  

195  

5,120  

Less: share of joint ventures' revenue


(384) 

-  

(384) 

Less: share of associates' revenue


(1,053) 

-  

(1,053) 

Group revenue

2

3,488  

195  

3,683  

Cost of sales


(2,551) 

46  

(2,505) 

Gross profit

 

937  

241  

1,178  

Other operating income


217  

-  

217  

Other operating expenses


(237) 

(25) 

(262) 

Share of results of joint ventures and associates


231  

26  

257  

Profit from operations

2

1,148  

242  

1,390  

Disposals of interests in businesses


-  

449  

449  

Finance income


39  

-  

39  

Finance expenses


(478) 

(107) 

(585) 

Net finance costs


(439) 

(107) 

(546) 

Profit before tax


709  

584  

1,293  

Taxation


(115) 

(46) 

(161) 

Profit for the year


594  

538  

1,132  

Attributable to:





Non-controlling interests


101  

50  

151  

Equity holders of the parent


493  

488  

981  






Earnings per share:





Basic

5

32.4p  


64.5p 






Diluted

5

31.9p  


61.8p 






All results are from continuing operations.

 

(i)      The Group separately presents certain items as exceptional. These are items which, in the judgement of the Directors, need to be disclosed separately by virtue of their size or incidence in order for the reader to obtain a proper understanding of the financial information. In addition, in order to assist the reader in understanding the underlying business performance, the Group separately discloses within the income statement specific IAS 39 mark to market movements (refer to notes 1 and 4).

(ii)     The Group has adopted IFRIC 12 - Service Concession Arrangements, following its endorsement by the European Union (refer to notes 1 and 5).

 



International Power plc

Condensed Interim Financial Statements

Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2010

 



Six months

ended

30 June

2010


Six months 

ended 

30 June 

2009 

Year 

ended 

31 December 

2009 





(Restated)

(Restated)


Note

£m


£m 

£m 








Profit for the period


230 


464 


1,132 

 







Other comprehensive income:







 







Net (loss)/gain on cash flow hedges


(112)


153 


205  

Net exchange gain recognised on

   net investment hedges


 

61 


 

92 


 

58  

Exchange gains/(losses) arising on translation of

   foreign operations


 

84 


 

(452)


 

(233) 

Reclassification adjustments relating to foreign operations

   disposed of during the period


 


 


 

(94) 

Actuarial losses on defined benefit plans


(11)


(4)


(13) 

Tax relating to components of other comprehensive income




(3) 















Other comprehensive income for the period, net of tax

10

31 


(202)


(80) 















Total comprehensive income for the period


261 


262 


1,052  















Attributable to:














Non-controlling interests


29 


65 


162  

Equity holders of the parent


232 


197 


890  















 


261 


262 


1,052  

 







 



International Power plc

Condensed Interim Financial Statements

Consolidated Statement of Financial Position

As at 30 June 2010



30 June

2010 


30 June 

2009 


31 December 

2009 





(Restated)


(Restated)


Note 

£m 


£m 


£m 

Non-current assets







Goodwill


850  


853  


887  

Other intangible assets


189  


155  


166  

Property, plant and equipment


6,988  


6,652  


6,959  

Investments in joint ventures and associates


1,593  


1,502  


1,564  

Other investments


96  


31  


63  

Service concession receivables


1,196  


1,171  


1,266  

Finance lease receivables


334  


314  


315  

Other long-term receivables


66  


105  


103  

Deferred tax assets


42  


92  


65  

Derivative financial assets


-   


30  


-  

Total non-current assets


11,354  


10,905  


11,388  

Current assets







Inventories


266  


253  


251  

Trade and other receivables


682  


676  


812  

Service concession receivables


37  


35  


35  

Finance lease receivables


12  


9  


10  

Derivative financial assets


271  


551  


442  

Cash and cash equivalents


1,446  


1,121  


1,193  



2,714  


2,645  


2,743  

Assets classified as held for sale


-  


398  


-  

Total current assets


2,714  


3,043  


2,743  

Total assets

2

14,068  


13,948  


14,131  

Current liabilities







Loans and bonds


497  


505  


745  

Derivative financial liabilities


349  


404  


429  

Trade and other payables


752  


811  


875  

Current tax liabilities


327  


379  


354  

Provisions


27  


37  


23  



1,952  


2,136  


2,426  

Liabilities directly associated with assets classified as

   held for sale


 

-  


195  


 

-  

Total current liabilities


1,952  


2,331  


2,426  

Non-current liabilities







Loans and bonds


5,784  


6,037  


5,507  

Derivative financial liabilities


282  


393  


302  

Other payables


41  


51  


41  

Retirement benefit obligations


104  


86  


97  

Provisions


99  


57  


68  

Deferred tax liabilities


915  


938  


929  

Total non-current liabilities


7,225  


7,562  


6,944  

Total liabilities

2

9,177  


9,893  


9,370  

Net assets


4,891  


4,055  


4,761  

 







Equity







Share capital


761  


761  


761  

Share premium account


438  


435  


436  

Capital redemption reserve


145  


145  


145  

Capital reserve


422  


422  


422  

Revaluation reserve


(1) 


(2) 


(1) 

Hedging reserve


(283) 


(208) 


(176) 

Translation reserve


686  


471  


536  

Retained earnings


2,412  


1,813  


2,351  

Total equity attributable to equity holders

   of the parent


4,580  


3,837  


4,474  

Non-controlling interests


311  


218  


287  

Total equity


4,891  


4,055  


4,761  



International Power plc

Condensed Interim Financial Statements

Consolidated Statement of Changes in Equity

For the six months ended 30 June 2010

 

 

 

Share  capital 

Share  premium  account 

Capital  redemp- 

tion  reserve 

Capital  reserve 

Reval- 

uation  reserve 

Hedging  reserve 

Trans- 

lation  reserve 

Retained  earnings 

Attributable to equity holders of the parent 

Non-controlling interests 

Total 

equity 


£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

At 1 January 2010

761 

436 

145 

422 

(1)

(176)

536 

2,351 

4,474 

287 

4,761 













Changes in equity for 2010












Net loss on cash flow hedges

(109)

(109)

(3)

(112)

Exchange gains

    recognised on net

    investment hedges

61 

61 

61 

Exchange (losses)/gains

   arising on translation of

   foreign operations

(6)

89 

83 

84 

Actuarial losses on

   defined benefit plans

(11)

(11)

(11)

Tax on items taken

   directly to equity

Net (loss)/income

   recognised

   directly in equity

(107)

150 

(10)

33 

(2)

31 

Profit for the period

199 

199 

31 

230 

Total recognised income

   and expense for

   the period

(107)

150 

189 

232 

29 

261 

Issue of shares

Distributions

(126)

(126)

(9)

(135)

Other movements

(2)

(2)

Total movements for the period

(107)

150 

61 

106 

24 

130 

At 30 June 2010

761 

438 

145 

422 

(1)

(283)

686 

2,412 

4,580 

311 

4,891 

 

 

 

Share  capital 

Share  premium  account 

Capital  redemp- 

tion  reserve 

Capital  reserve 

Reval-  

uation   reserve  

Hedging  reserve 

Trans- 

lation  reserve 

Retained  earnings 

Attributable to equity holders of the parent 

Non-controlling interests 

Total 

equity 


£m 

£m 

£m 

£m 

£m  

£m 

£m 

£m 

£m 

£m 

£m 

At 1 January 2009 *

759 

431 

145 

422 

(2)

(376)

859 

1,570 

3,808 

233 

4,041 

Impact of adopting

   IFRIC 12 (note 1)

(26)

(15)

(41)

(2)

(43)

Restated balance

759 

431 

145 

422 

(2)

(376)

833 

1,555 

3,767 

231 

3,998 













Changes in equity for 2009












Net gain on cash flow hedges

143 

143 

10 

153 

Exchange gains recognised

   on net investment hedges

91 

91 

92 

Exchange gains/(losses)

   arising on translation of

   foreign operations

30 

(471)

(441)

(11)

(452)

Actuarial losses on

   defined benefit plans

(4)

(4)

(4)

Tax on items taken directly

   to equity

(5)

18 

14 

(5)

Net income/(loss)

   recognised

  directly in equity

168 

(362)

(3)

(197)

(5)

(202)

Profit for the period

394 

394 

70 

464 

Total recognised

   income and

   expense for the period

168 

(362)

391 

197

65 

262 

Issue of shares

Distributions

(131)

(131)

(78)

(209)

Other movements

(2)

(2)

(2)

Total movements for the period

168 

(362)

258 

70 

(13)

57 

At 30 June 2009

761 

435 

145 

422 

(2)

(208)

471 

1,813 

3,837 

218 

4,055 

 

* As set out in note 1, the comparative period for the six months ended 30 June 2009 has been restated to reflect the change in accounting policy relating to retirement benefit obligations. The impact of this restatement on total equity at 1 January 2009 was to decrease retained earnings by £40 million to £1,570 million and to decrease non-controlling interests by £4 million to £233 million.



International Power plc

Condensed Interim Financial Statements

Consolidated Statement of Changes in Equity (continued)

For the six months ended 30 June 2010

 

 

 

Share  capital 

Share  premium  account 

Capital  redemp- 

tion  reserve 

Capital  reserve 

Reval- 

uation   reserve  

Hedging  reserve 

Trans- 

lation  reserve 

Retained  earnings 

Attributable to equity holders of the parent 

Non-controlling interests 

Total 

equity 


£m 

£m 

£m 

£m 

£m  

£m 

£m 

£m 

£m 

£m 

£m 

At 1 January 2009

759 

431 

145 

422 

(2)

(376)

859 

1,570 

3,808 

233 

4,041 

Impact of adopting

   IFRIC 12 (note 1)

(26)

(15)

(41)

(2)

(43)

Restated balance

759 

431 

145 

422 

(2)

(376)

833 

1,555 

3,767 

231 

3,998 













Changes in equity for 2009












Net gain on cash flow hedges

192 

192 

13 

205 

Exchange gains/(losses)

    recognised on net

     investment hedges

59 

59 

(1)

58 

Exchange gains/(losses)

    arising on translation

    of foreign operations

26 

(262)

(236)

(233)

Reclassification

    adjustments relating

    to foreign operations

   disposed of during the

    year

(94)

(94)

(94)

Actuarial losses on

   defined benefit plans

(13)

(13)

(13)

Tax on items taken directly

   to equity

(21)

22 

(4)

(3)

Net income/(loss)

    recognised directly

    in equity

197 

(297)

(91)

11 

(80)

Profit for the year

981 

981 

151 

1,132 

Total recognised income

    and expense for the

    year

197 

(297)

990 

890 

162 

1,052 

Issue of shares

Distributions

(195)

(195)

(106)

(301)

Other movements

Transfer to retained earnings

(1)

Total movements for the year

200 

(297)

796 

707 

56 

763 

At 31 December 2009

761 

436 

145 

422 

(1)

(176)

536 

2,351 

4,474 

287 

4,761 



International Power plc

Condensed Interim Financial Statements

Consolidated Statement of Cash Flows

For the six months ended 30 June 2010

 

 





Six months  

ended  

30 June  

2010  


Six months  

ended  

30 June  

2009  


Year  

ended  

31 December  

2009  







(Restated) 


(Restated) 





£m   


£m   


£m   

Cash flows from operating activities









Profit for the period




230   


464   


1,132   










Adjustments for:









Tax expense




55   


110   


161   

Net finance costs




158   


225   


546   

Profit on disposals of interests in businesses




-   


-   


(449)  

Share of profit of joint ventures and associates




(104)  


(137)  


(257)  

Impairment of Derwent - exceptional




15   


-   


-   

Impairment of available-for-sale investment - exceptional




-   


-   


25   

Impairment of Levanto wind farms - exceptional




-   


-   


70   

Specific IAS 39 mark to market movements




57   


(243)  


(311)  

Profit on sale of property, plant and equipment




-   


(1)  


-   

Profit on sale of intangible assets




(5)  


(39)  


(47)  

Other non-cash movements




(3)  


10   


(19)  

Decrease in provisions




(4)  


(54)  


(51)  

Decrease in service concession receivables

     (excluding maintenance and

     growth expenditure)




 

17   


 

19   


 

37   

Decrease in finance lease receivables




5   


4   


9   

Other cash movements




1   


(49)  


(41)  





192   


(155)  


(327)  

Adjustment for depreciation of property, plant

     and equipment and amortisation of

     intangible assets




 

227   


 

173   


 

374   

Dividends received from joint ventures and associates




39   


21   


146   

Purchase of property, plant and equipment - maintenance




(68)  


(68)  


(137)  

Service concession expenditure - maintenance




(4)  


(4)  


(11)  

Proceeds from disposal of property, plant and equipment




-   


2   


1   

Purchase of intangible assets




(64)  


-   


(22)  

Sale of intangible assets




41   


42   


69   

Operating cash flow before movements in working capital




593   


475   


1,225   

(Increase)/decrease in inventories




(10)  


1   


9   

Decrease in trade and other receivables




65   


213   


151   

Decrease in trade and other payables




(6)  


(131)  


(59)  










Cash generated from operations




642   


558   


1,326   

Taxes paid




(45)  


(19)  


(105)  

Interest paid




(206)  


(230)  


(455)  

Interest received




7   


17   


25   

Free cash flow




398   


326   


791   

Cash flows relating to exceptional items:









Payment of Australian stamp duty - exceptional




-   


-   


(6)  

Net cash inflow from operating activities




398   


326   


785   

 



International Power plc

Condensed Interim Financial Statements

Consolidated Statement of Cash Flows (continued)

For the six months ended 30 June 2010

 

 






Six months  

ended  

30 June  

2010  


Six months  

ended  

30 June  

2009  


Year  

ended  

31 December  

2009  








(Restated) 


(Restated) 



Note



£m  


£m   


£m  











Net cash inflow from operating activities





398  


326   


785  











Cash flows from investing activities










Purchase of property, plant and equipment - growth





(45) 


(41)  


(94) 

Service concession expenditure - growth





(24) 


(2)  


(21) 

Acquisitions (net of cash and cash equivalents

     acquired), and increase in stake, of

     subsidiaries





-  


-   


(34) 

Acquisitions of joint ventures, associates and investments





(3) 


(5)  


(6) 

Payments relating to disposal of a subsidiary


4



(7) 


-   


-   

Proceeds from disposal of a subsidiary


4



-  


-   


563  

Proceeds from disposal of investment in joint

     ventures and associates


4



-  


-   


33  

Investments in, net of returns from, joint

     ventures, associates and investments





(16) 


(13)  


 

(18) 

Net cash (outflow)/inflow from investing activities





(95) 


(61)  


423  











Cash flows from financing activities










Dividends paid


6



(126) 


-   


(195) 

Proceeds from share issue





2  


2   


3  

Proceeds from new loans and bonds





282  


116   


187  

Repayment of loans and bonds





(217) 


(303)  


(1,076) 

Funding from non-controlling interests





3  


39   


39  

Funding repaid to non-controlling interests





-  


(3)  


(7) 

Distributions paid to non-controlling interests





(9) 


(78)  


(110) 

Net cash outflow from financing activities





(65) 


(227)  


(1,159) 

 










Net increase in cash and cash equivalents





238  


38   


49  

Cash and cash equivalents at beginning of the period





1,193  


1,129   


1,129  

Amounts reclassified as assets held for sale





-  


(3)  


-  

Effect of foreign exchange rate changes thereon





15  


(43)  


15  

Cash and cash equivalents at end of the period





1,446  


1,121   


1,193  

 



International Power plc

Notes to the Condensed Interim Financial Statements

For the six months ended 30 June 2010

 

 

1.           Basis of preparation

 

General information

 

These condensed interim financial statements have been prepared in accordance with IAS 34 (Interim Financial Reporting) as adopted by the European Union ('EU'). They were approved by the Board of Directors and authorised for issue on 9 August 2010.

 

The condensed interim financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's Annual Report and consolidated financial statements for the year ended 31 December 2009 (the 'Annual Report').

 

These condensed interim financial statements are unaudited and do not constitute statutory accounts of International Power plc and its subsidiaries ('the Group') within the meaning of Section 434 of the Companies Act 2006. The auditors have reviewed the condensed interim financial statements and their report in respect of the six months ended 30 June 2010 is set out in the Independent review report on page 37.

 

The comparative figures for the financial year ended 31 December 2009 are not the statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

Going concern basis

 

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out on pages 10 to 35 of the Business and financial review of the Annual Report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are also described in the Business and financial review on pages 54 to 63. In addition, the Group's Annual Report and consolidated financial statements include the Group's objectives, policies and processes for financial risk management, which continue to be applied for the interim period under review.

 

As described on pages 58 to 59 of the Annual Report, the Group meets its funding requirements through a combination of non-recourse project finance debt secured on project companies' assets together with convertible debt and a corporate revolver facility at International Power plc ('the Company'). Following the refinancing of the corporate revolver facility in July 2009, the repayment of the US$769 million debt at its US combined cycle gas turbine fleet in December 2009, and the restructuring of the A$742 million debt at its Hazelwood facility in January 2010, the Group does not have any material refinancings falling due in 2010 or 2011.

 

The Group's forecasts and projections, taking into account reasonably possible changes in trading performance, show that the Group has sufficient financial resources, together with assets that are expected to generate free cash flow to the Group due to the relatively inelastic demand for the Group's primary product, electricity. As a consequence the Directors have a reasonable expectation that the Company and the Group are well placed to manage their business risks and to continue in operational existence for the foreseeable future, despite the continuing uncertain global economic outlook. Accordingly, the Directors continue to adopt the going concern basis in preparing the condensed interim financial statements.

 



International Power plc

Notes to the Condensed Interim Financial Statements (continued)

For the six months ended 30 June 2010

 

 

1.           Basis of preparation (continued)

 

Exceptional items and specific IAS 39 mark to market movements

 

The condensed interim financial statements have been prepared using the historical cost convention, modified for certain items carried at fair value, as stated in the Group's accounting policies.

 

In order to allow a better understanding of the financial information presented, and specifically the Group's underlying business performance, the Group presents its income statement in three columns such that it identifies (i) results excluding exceptional items and specific IAS 39 mark to market movements, (ii) the effect of exceptional items and specific IAS 39 mark to market movements and (iii) results for the period. For the purposes of clarity, in the explanation of the basis of preparation applied in the consolidated financial statements, these columns are described as the 'left hand column', the 'middle column' and the 'right hand column' respectively.

 

Those items that the Group separately presents as exceptional are items which, in the judgement of the Directors, need to be disclosed separately by virtue of their size or incidence in order to obtain a proper understanding of the financial information. The Group discloses exceptional items in the middle column.

 

The Group enters into derivative contracts to economically hedge certain of its physical and financial exposures. In relation to commodities trading, the Group considers economic hedges to be those which are asset backed, i.e. where the Group is either forward selling electricity from its own generation capacity or forward buying fuel for its own generation capacity. In respect of interest rate swaps and other treasury related derivatives, the Group considers economic hedges to be those which hedge existing assets, liabilities and firm commitments.

 

Some of these economic hedges achieve own use treatment under IAS 39 and are accounted for on an accruals basis. Some are accounted for as cash flow hedges under IAS 39 with fair value gains and losses recorded in other comprehensive income and accumulated in the hedging reserve. Where derivative contracts do not achieve own use treatment and the Group could not, or has not sought to, apply cash flow hedge accounting, IAS 39 requires the derivative contract to be measured at fair value (marked to market) with fair value gains and losses recognised in the income statement. The Group separately presents these mark to market movements on economic hedges, in the middle column, to assist the reader's understanding of underlying business performance and to provide a more meaningful presentation.

 

For economic hedges, where fair value gains and losses are recorded in the income statement, in the period in which the economically hedged transaction settles, the settlement amount of the derivative, being the cumulative fair value gains and losses recognised in the current and prior periods, is presented in the left hand column so that the transaction is measured at its contracted price (i.e. the spot price less the fair value gain or loss on the derivative contract at that date).

 

As the cumulative mark to market movements have already been recognised in the middle column in the current and prior periods, an equal but opposite amount is presented in the middle column so that cumulatively the amount recognised in the middle column in respect of such economic hedges is zero.

 

By presenting fair value gains and losses in this manner, the left hand column is not affected by mark to market movements and therefore reflects the underlying business performance at contracted prices.

 

The amortisation of derivatives, which are acquired with a fair value other than zero, is always recorded in the left hand column. This is achieved by presenting an equal but opposite amount in the middle column, such that specific IAS 39 mark to market movements presented in the middle column are shown net of the amortisation during the period.

 

Ineffectiveness in qualifying cash flow hedges under IAS 39 can arise from business combinations, where the fair value of the derivatives at acquisition is not equal to zero, or as a result of the difference between the contractual profile of the economic hedge and the profile of transactions defined as the hedged item. IAS 39 requires ineffectiveness in qualifying cash flow hedges to be recorded in the income statement, and therefore the Group records this ineffectiveness in the middle column when it relates to an economic hedge.

 



International Power plc

Notes to the Condensed Interim Financial Statements (continued)

For the six months ended 30 June 2010

 

 

1.           Basis of preparation (continued)

 

Exceptional items and specific IAS 39 mark to market movements (continued)

 

Mark to market movements of the fair value of embedded derivatives in convertible bonds, which relate to conversion features where the functional currency of the parent company and other factors preclude the conversion feature being treated as equity in the consolidated financial statements, are treated as specific IAS 39 mark to market movements and as such are presented in the middle column. The Directors consider the fair value gains and losses of these embedded derivatives should be appropriately disclosed within specific IAS 39 mark to market movements, in the middle column, so as to separately identify a non-cash movement which, if the conversion option is exercised, will ultimately be extinguished by the issue of equity.

 

Mark to market movements relating to proprietary trading activities, the revaluation of assets held for trading and amortisation of derivatives which are acquired with a fair value other than zero comprise part of the Group's underlying business performance and are appropriately, in the judgement of the Directors, included within the left hand column.

 

The right hand column presents the results for the period, showing all gains and losses recorded in the consolidated income statement.

 

To the extent that exceptional items are separately identified in the income statement, they are also separately identified in the statement of cash flows under the respective heading to which they relate.

 

Changes in accounting policies

 

In the preparation of the condensed interim financial statements, the Group has applied the same accounting policies as those presented in the Group's consolidated financial statements for the year ended 31 December 2009, as set out on pages 116 to 123 of the Annual Report, as adjusted for the effects of the following:

 

Adoption of International Financial Reporting Interpretations Committee - Interpretation 12 (Service Concession Arrangements) ('IFRIC 12')

 

IFRIC 12 was endorsed by the EU on 25 March 2009 and is applicable for annual periods beginning on or after 29 March 2009.

 

Service concessions are arrangements whereby a government or other public sector entity grants contracts for the supply of public services-such as roads, airports, prisons and energy and water supply and distribution facilities-to private sector operators. Control of the assets remains in public hands but the private sector operator is responsible for construction activities, as well as for operating and maintaining the public sector infrastructure. IFRIC 12 addresses how service concession operators should apply existing International Financial Reporting Standards (IFRSs) to account for the obligations they undertake and rights they receive in service concession arrangements.

 

IFRIC 12 draws a distinction between two types of service concession arrangement. In one, the operator receives a financial asset, i.e. an unconditional contractual right to receive cash or another financial asset from the government in return for constructing or upgrading the public sector asset. In the other, the operator receives an intangible asset, i.e. no more than a right to charge for use of the public sector asset that it constructs or upgrades. A right to charge users is not an unconditional right to receive cash because the amounts are contingent on the extent to which the public uses the service. IFRIC 12 allows for the possibility that both types of arrangement may exist within a single contract: to the extent that the government has given an unconditional guarantee of payment for the construction of the public sector asset, the operator has a financial asset; to the extent that the operator has to rely on the public using the service in order to obtain payment, the operator has an intangible asset.

 



International Power plc

Notes to the Condensed Interim Financial Statements (continued)

For the six months ended 30 June 2010

 

 

1.           Basis of preparation (continued)

 

Changes in accounting policies (continued)

 

Adoption of IFRIC 12 (continued)

 

The Group has several service concession arrangements in place across the Group, principally in Asia, mainland Europe and the Middle East, through contracts entered into by its subsidiaries, joint ventures and associates. Typically these arrangements are in the form of long-term power purchase agreements (agreements to sell electrical capacity and electrical output over an extended period) with government controlled offtakers.

 

As a consequence of the nature of the contractual arrangements in which the Group is participating, all the Group's service concession arrangements result in the recognition of service concession receivables because the Group has unconditional contractual rights to receive cash or other financial assets from the governments in return for constructing or upgrading the public sector assets. The Group has not recognised any service concession intangible assets as a direct result of the adoption of IFRIC 12.

 

For the arrangements within the Group which are affected by the adoption of IFRIC 12, these were previously accounted for as contracts which were, or contained, finance leases, following the requirements of IFRIC 4 (Determining whether an Arrangement contains a Lease) and IAS 17 (Leases).

 

In accordance with the requirements of IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors) the change in accounting policy in relation to service concession arrangements, following a change required by IFRS, has been made retrospectively and the comparatives have been restated accordingly.

 

The impact of adoption of IFRIC 12 is to replace finance lease receivables and property, plant and equipment, with service concession receivables. To the extent that taxable or deductible temporary differences arise on these adjustments, deferred tax assets or liabilities have also been recognised. The carrying amounts of our investments in joint ventures and associates in the statement of financial position have also been changed to recognise the cumulative impact on earnings arising from the consequence of adopting IFRIC 12 in those entities.

 

As a consequence of the restatement, at 30 June 2009 total finance lease receivables decreased by £1,174 million (31 December 2009: decreased by £1,202 million), property, plant and equipment decreased by £20 million (31 December 2009: decreased by £82 million), investments in joint ventures and associates decreased by £59 million (31 December 2009: decreased by £70 million), and deferred tax liabilities decreased by £3 million (31 December 2009: decreased by £3 million).

 

At 30 June 2009 service concession receivables of £1,206 million (31 December 2009: £1,301 million) were recognised.

 

As a result of the Group's adoption of IFRIC 12, the consolidated income statement in the comparative period for the six months ended 30 June 2009 has been restated to increase Group revenue by £7 million (year ended 31 December 2009: increase by £17 million), increase cost of sales by £2 million (year ended 31 December 2009: increase by £7 million), decrease share of results of joint ventures and associates by £11 million (year ended 31 December 2009: decrease by £19 million), and to increase tax expense by £1 million (year ended 31 December 2009: increase by £2 million).

 

The impact on earnings per share for the prior periods is outlined in note 5.

 

In the consolidated statement of cash flows for the six months ended 30 June 2009 the movement in finance lease receivables has decreased by £22 million (year ended 31 December 2009: decreased by £43 million) and the adjustment for depreciation of property, plant and equipment and amortisation of intangible assets decreased by £2 million (year ended 31 December 2009: decreased by £4 million).

 

For the six months ended 30 June 2009 the decrease in service concession receivables was £19 million (year ended 31 December 2009: £37 million).



International Power plc

Notes to the Condensed Interim Financial Statements (continued)

For the six months ended 30 June 2010

 

 

1.           Basis of preparation (continued)

 

Retirement benefit obligations

 

For the six months ended 30 June 2009, the year ended 31 December 2008 and prior periods, the Group's policy in relation to defined benefit pension plans was to apply the corridor method in the recognition of actuarial gains and losses, as set out in IAS 19 (Employee Benefits). Gains and losses in an individual scheme were recognised to the extent they exceeded the greater of 10% of the gross assets or gross liabilities of the scheme. The amount recognised in the following year was the excess amortised over the remaining average service lives of the employees in the scheme and was recognised in the income statement. The net defined benefit obligation recognised in the statement of financial position represented the present value of the defined benefit obligations adjusted for unrecognised actuarial gains and losses and unrecognised service costs and as reduced by the fair value of the plan assets.

 

In the consolidated financial statements for the year ended 31 December 2009 the Group changed its policy. Now the Group recognises an amount in the statement of financial position in respect of defined benefit pension plans which is the present value of the defined benefit obligations at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognised past service costs. Actuarial gains and losses are recognised in the statement of comprehensive income in the period in which they arise. Past service costs are recognised immediately in income to the extent that benefits have vested, otherwise costs are amortised on a straight-line basis over the vesting period.

 

As the interim financial statements for the six months ended 30 June 2009 were presented based on the earlier policy, the comparative period for the six months ended 30 June 2009 has been restated to remove the pension charge relating to the amortisation of actuarial gains and losses which were outside the corridor, and recorded in other operating expenses, of £1 million, to increase the retirement benefit obligation as at 30 June 2009 by £65 million and to decrease net deferred tax liabilities by £18 million at the same date (refer also to note 5).

 

The impact of this restatement on total equity at 1 January 2009 was to decrease retained earnings by £40 million to £1,570 million and to decrease non-controlling interests by £4 million to £233 million. The results and financial position for the year ended 31 December 2009 have not been restated as they reflected the new policy.

 

Adoption of International Financial Reporting Standard 3 (Business Combinations) (revised 2008) ('IFRS 3') and International Accounting Standard 27 (Consolidated and Separate Financial Statements) (revised 2008) ('IAS 27')

 

Following their adoption by the EU, the Group has adopted IFRS 3 and IAS 27 in the current year. The revised standards apply prospectively to business combinations effected by the Group after 1 January 2010. Business combinations which took place before 1 January 2010 do not need to be restated as a result of the adoption of these standards. The most significant changes to the Group's previous accounting policies for business combinations are as follows:

 

·      acquisition related costs which previously would have been included in the cost of a business combination are expensed in the income statement as they are incurred;

 

·      any pre-existing equity interest in the entity acquired is remeasured to fair value at the date of obtaining control, with any resulting gain or loss recognised in the income statement;

 

·      any changes in the Group's ownership interest subsequent to the date of obtaining control are recognised directly in equity, with no adjustment to goodwill; and

 

·      any changes to the cost of an acquisition, including contingent consideration, resulting from events after the date of acquisition are recognised in the income statement. Previously, such changes resulted in an adjustment to goodwill.

 

The revised standards have been applied to the acquisition of development companies by IPA Wind Development, LLC, as outlined in note 9.



International Power plc

Notes to the Condensed Interim Financial Statements (continued)

For the six months ended 30 June 2010

 

 

2.           Segment reporting

 

The Group is a global energy business that focuses on power generation. The international operations are managed as five separate geographic regions, namely North America, Europe, Middle East, Australia and Asia, and this reflects the different characteristics within each region. The segment disclosures are based on the components that the Board monitors in making decisions about operating matters. Such components are identified on the basis of internal reports that the Board reviews regularly in allocating resources to segments and in assessing their performance, which are prepared on a basis which excludes exceptional items and specific IAS 39 mark to market movements. As the Group is structured and managed as five regions, the segment results, assets and liabilities are presented in this way. The accounting policies applied in the presentation of results of the five reportable segments are the same as the Group's accounting policies described in the notes to the consolidated financial statements included in the Annual Report as adjusted for the changes in policies outlined in note 1.

 

a)                Revenue (excluding exceptional items and specific IAS 39 mark to market movements)

 

All five reportable segments derive their revenue from electricity generation. There is no inter-segment revenue, therefore only revenue obtained from customers external to the Group is presented. The results presented reflect the geographical location of both the businesses and their customers, i.e. there are no material cross-border sales.

 


Six months ended 30 June 2010


Six months ended 30 June 2009


Year ended 31 December 2009

 


Subsidiaries 

 

Share of joint 

ventures and 

associates 

 

Total 

 


Subsidiaries 

(Restated)

Share of joint 

ventures and 

associates 

(Restated)

Total 

(Restated)


Subsidiaries 

(Restated)

Share of joint 

ventures and 

associates 

(Restated)

Total 

(Restated)

 


£m 

£m 

£m 


£m 

£m 

£m 


£m 

£m 

£m 

 

North America

282 

93 

375 


326 

99 

425 


669 

202 

871 

 

Europe

880 

187 

1,067 


913 

292 

1,205 


1,833 

435 

2,268 

 

Middle East

51 

114 

165 


50 

101 

151 


99 

193 

292 

 

Australia

481 

488 


412 

418 


841 

12 

853 

 

Asia

26 

345 

371 


23 

277 

300 


46 

595 

641 

 

 

1,720 

746 

2,466 


1,724 

775 

2,499 


3,488 

1,437 

4,925 

 

Exceptional items

and specific IAS 39

mark to market

movements

 

 

 

(102)




196 




195 

Revenue: Group

and share of joint

ventures and

associates

 

 

2,364 




2,695 




5,120 

 

Exceptional items and specific IAS 39 mark to market movements are outlined in note 4.

 

Segment revenue (including exceptional items and specific IAS 39 mark to market movements) for the six months ended 30 June 2010 for North America is £394 million, Europe £878 million and Australia £556 million (six months ended 30 June 2009 for North America is £432 million, Europe £1,320 million and Australia £492 million; year ended 31 December 2009: North America £820 million, Europe £2,395 million and Australia £972 million).

 

 



International Power plc

Notes to the Condensed Interim Financial Statements (continued)

For the six months ended 30 June 2010

 

 

2.           Segment reporting (continued)

 

b)                Profit from operations (excluding exceptional items and specific IAS 39 mark to market movements)

 


Six months ended 30 June 2010


Six months ended 30 June 2009


Year ended 31 December 2009


Subsidiaries 

 

Share of joint 

ventures and 

associates 

 

Total 

 


Subsidiaries 

(Restated)

Share of joint 

ventures and 

associates 

(Restated)

Total 

(Restated)


Subsidiaries 

(Restated)

Share of joint 

ventures and 

associates 

(Restated)

Total 

(Restated)


£m 

£m 

£m 


£m 

£m 

£m 


£m 

£m 

£m 

North America

24 

25 

49 


43 

15 

58 


100 

34 

134 

Europe

235 

30 

265 


244 

55 

299 


571 

76 

647 

Middle East

27 

22 

49 


28 

13 

41 


51 

34 

85 

Australia

132 

133 


118 

120 


229 

233 

Asia

18 

35 

53 


46 

54 


18 

83 

101 


436 

113 

549 


441 

131 

572 


969 

231 

1,200 

Corporate

(25)

(25)


(22)

(22)


(52)

(52)


411 

113 

524 


419 

131 

550 


917 

231 

1,148 

Exceptional items

and specific IAS 39

mark to market

movements

(81)




249 




 

242 

 

Profit from operations

(including exceptional

items and specific

IAS 39 mark to

market movements)

443 




799 




 

 

1,390 

 

Disposals of interests

    in businesses -exceptional

-  




-  




449 

 

Net finance costs -

excluding exceptional

items and specific

IAS 39 mark to

market movements

(191)




(216)




 

 

 

(439)

 

Net finance costs -

exceptional items and

specific IAS 39 mark

to market movements

33 




(9)




 

 

(107)

Profit before tax


285 




574 




1,293 

 

Exceptional items and specific IAS 39 mark to market movements are outlined in note 4.

 

Segment profit from operations (including exceptional items and specific IAS 39 mark to market movements) for the six months ended 30 June 2010 for North America is a profit of £63 million, Europe profit of £109 million, Australia profit of £201 million and Asia profit of £46 million (six months ended 30 June 2009 for North America is a profit of £78 million, Europe profit of £448 million, Australia profit of £196 million and Asia profit of £58 million; year ended 31 December 2009: North America profit of £149 million, Europe profit of £733 million, Middle East profit of £86 million, Australia profit of £353 million and Asia profit of £121 million).



International Power plc

Notes to the Condensed Interim Financial Statements (continued)

For the six months ended 30 June 2010

 

 

2.           Segment reporting (continued)

 

c)                Segment assets

 

 

30 June 2010


30 June 2009


31 December 2009

 

Segment  assets 

Investments  in joint  ventures and  associates 

Total 


Segment  assets 

Investments  in joint  ventures and  associates 

Total 


Segment  assets 

Investments  in joint  ventures and  associates 

Total 

 





(Restated)

(Restated)

(Restated)


(Restated)

(Restated)

(Restated)

 

£m 

£m 

£m 


£m 

£m 

£m 


£m 

£m 

£m 

North America

2,593 

258 

2,851 


2,300 

214 

2,514 


2,369 

232 

2,601 

Europe

5,780 

287 

6,067 


6,357 

309 

6,666 


6,363 

297 

6,660 

Middle East

510 

89 

599 


467 

122 

589 


471 

140 

611 

Australia

2,775 

2,781 


2,498 

2,503 


2,752 

2,760 

Asia

111 

953 

1,064 


95 

852 

947 


101 

887 

988 

 

11,769 

1,593 

13,362 


11,717 

1,502 

13,219 


12,056 

1,564 

13,620 

Corporate

706 

706 


729 

729 


511 

511 


12,475 

1,593 

14,068 


12,446 

1,502 

13,948 


12,567 

1,564 

14,131 

 

At 30 June 2009 the North America region included non-current assets classified as held for sale amounting to £11 million, relating to the Group's investment in Hartwell Energy, and the Europe region included the assets classified as held for sale relating to International Power Opatovice A.S., in the Czech Republic.

 

d)                Segment liabilities

 

 

30 June 2010


30 June 2009


31 December 2009

 

Segment 

liabilities 

Investments in joint ventures and associates

Total 


Segment 

liabilities 

Investments in joint ventures and associates

Total 


Segment 

liabilities 

Investments in joint ventures and associates

Total 

 





(Restated)


(Restated)


(Restated)


(Restated)

 

£m 

£m 

£m 


£m 

£m 

£m 


£m 

£m 

£m 

North America

1,084 

1,084 


1,446 

1,446 


1,001 

1,001 

Europe

3,884 

3,884 


4,327 

4,327 


4,285 

4,285 

Middle East

440 

440 


409 

409 


406 

406 

Australia

1,758 

1,758 


1,742 

1,742 


1,835 

1,835 

Asia

105 

105 


104 

104 


94 

94 

 

7,271 

7,271 


8,028 

8,028 


7,621 

7,621 

Corporate

1,906 

1,906 


1,865 

1,865 


1,749 

1,749 


9,177 

9,177 


9,893 

9,893 


9,370 

9,370 

 

At 30 June 2009 the Europe region included the liabilities directly associated with assets classified as held for sale of International Power Opatovice A.S., in the Czech Republic.

 

 

3.           Changes in inventories

 

Included within cost of sales are £98 million of inventories recognised as an expense during the period (six months ended 30 June 2009: £194 million; year ended 31 December 2009: £309 million). No inventories were written off during the period (six months ended 30 June 2009: £nil; year ended 31 December 2009: £2 million and recorded as an expense in cost of sales in the income statement).

 



International Power plc

Notes to the Condensed Interim Financial Statements (continued)

For the six months ended 30 June 2010

 

 

4.           Exceptional items and specific IAS 39 mark to market movements

 

In accordance with the basis of preparation outlined in note 1, the following exceptional items and specific IAS 39 mark to market movements are recorded within the consolidated income statement.

 



Six months 

ended 


Six months 

ended 


Year 

ended 



30 June 


30 June 


31 December 



2010 


2009 


2009 










£m  


£m  


£m  








Specific IAS 39 mark to market movements


(102) 


196  


195  

Amounts recognised in revenue


(102) 


196  


195  








Impairment of Levanto wind farms


-  


-  


(70) 

Specific IAS 39 mark to market movements


45  


47  


116  

Amounts recognised in cost of sales


45  


47  


46  








Impairment of available-for-sale investment


-  


-  


(25) 

Amounts recognised in other operating expenses


-  


-  


(25) 








Impairment of Derwent


(15) 


-  


-  

Specific IAS 39 mark to market movements


(9) 


6  


26  

Amounts recognised in share of results of joint ventures

      and associates


(24) 


6  


26  








Disposal of International Power Opatovice


-  


-  


427  

Disposal of Hartwell


-  


-  


22  

Amounts recognised in disposals of interests in businesses


-  


-  


449  








Specific IAS 39 mark to market movements on:







      3.75% convertible US dollar bonds 2023


8  


(17) 


(80) 

      3.25% convertible euro bonds 2013


12  


(12) 


(25) 

      4.75% convertible euro bonds 2015


16  


18  


(4) 

Other specific IAS 39 mark to market movements


(3) 


2  


2  

Amounts recognised in finance expenses


33  


(9) 


(107) 








Taxation on impairment of Levanto wind farms


-  


-  


19  

Taxation on disposal of Hartwell


-  


-  


(8) 

Taxation on specific IAS 39 mark to market movements


9  


(51) 


(57) 

Taxation on exceptional items and specific IAS 39

      mark to market movements


9  


(51) 


(46) 








Total exceptional items and specific IAS 39 mark to market movements after attributable taxation


(39) 


189  


538  

 

Exceptional items recognised in cost of sales

 

On 31 December 2009 the Group assessed whether there had been any objective evidence that the service concession receivable, relating to the Levanto portfolio of onshore wind farms, had been impaired. Using observed historical wind volumes, in order to determine more reliable forecasts of future wind volumes, and updated forecasts of operating costs, the impact on future cash flows was estimated. The result of this impairment test valuation was to impair, within cost of sales, the service concession receivable of £70 million, and within the total taxation charge for the year an associated deferred tax credit of £19 million. This impairment is recorded within the Europe region in the segment reporting.



 

 

International Power plc

Notes to the Condensed Interim Financial Statements (continued)

For the six months ended 30 June 2010

 

 

4.           Exceptional items and specific IAS 39 mark to market movements (continued)

 

Exceptional items recognised in other operating expenses

 

On 31 December 2009 the Group assessed whether there had been any objective evidence that the carrying amount of its available-for-sale investments had been impaired. The result of this impairment test valuation was to recognise within other operating expenses an impairment of £25 million to the carrying amount of an investment pertaining to the Eggborough power plant, in the United Kingdom. There was no tax credit associated with this impairment. The impairment is recorded within the Europe region in the segment reporting.

 

Exceptional items recognised in share of results of joint ventures and associates

 

The Group owns 33% of Derwent Cogeneration Limited, a 214MW gas fired power station which operates under a long-term steam offtake contract. On 30 June 2010, following the confirmation that the existing steam offtake contract would not be renewed, the Group assessed whether there had been any objective evidence that the carrying amount of its investment in Derwent Cogeneration Limited had been impaired. The result of this impairment test valuation was to recognise an impairment of £15 million, which is recorded within the Europe region in the segment reporting.

 

Exceptional items recognised in disposals of interests in businesses

 

On 13 November 2009 the Group completed the sale of International Power Opatovice, and its interests in its joint ventures Pražská Teplárenská and Energotrans, to the Czecho-Slovak investment firm J&T Group. Net consideration from the disposal, after costs, was £593 million and the profit on disposal was £427 million. There was no tax charge associated with this disposal. In the year ended 31 December 2009 the net cash inflow to the Group from the sale was £563 million, being net consideration of £593 million, £12 million costs not paid at the end of the reporting period, less £42 million cash held by International Power Opatovice at the date of sale. During the six months ended 30 June 2010 costs of £7 million have been paid.

 

On 14 October 2009, International Power, together with its joint venture partner, completed the sale of Hartwell Energy, a 318MW gas and oil-fired peaking facility located in Georgia, US, to Oglethorpe Power Corporation. Proceeds from the 50% stake in Hartwell Energy amounted to £33 million and the profit on disposal was £22 million, including a reclassification adjustment of £1 million from the translation reserve. A tax charge of £8 million was also recognised.

 

Specific IAS 39 mark to market movements

 

For the six months ended 30 June 2010 the impact of specific IAS 39 mark to market movements on profit before tax is a loss of £33 million and on tax expense a credit of £9 million (six months ended 30 June 2009: profit of £240 million and on tax expense a charge of £51 million; year ended 31 December 2009: profit of £230 million and on tax expense a charge of £57 million).



International Power plc

Notes to the Condensed Interim Financial Statements (continued)

For the six months ended 30 June 2010

 

 

5.           Earnings per share

 

Earnings per Ordinary Share has been calculated by dividing profit attributable to equity holders of the parent for the period by the average number of Ordinary Shares. The weighted average number of Ordinary Shares for the basic earnings per share calculation for the six months ended 30 June 2010 is 1,522.8 million (six months ended 30 June 2009: 1,520.4 million; year ended 31 December 2009: 1,521.3 million) and for the diluted earnings per share calculation is 1,768.7 million (six months ended 30 June 2009: 1,709.7 million; year ended 31 December 2009: 1,669.3 million).

 

Reconciliations of earnings per share before and after exceptional items and specific IAS 39 mark to market movements are as follows:

 


Six months ended

30 June 2010


Six months ended

30 June 2009


Year ended

31 December 2009





(Restated)

(Restated)


(Restated)

(Restated)


£m  

pence  


£m  

pence  


£m  

pence  

Basic earnings per share









Profit attributable to equity holders of the parent

    before exceptional items and specific IAS 39

    mark to market movements

215  

14.1  


234  

15.4  


493  

32.4  

Exceptional items and specific IAS 39

    mark to market movements (net of tax

    and non-controlling interests)

(16) 

(1.0) 


160  

10.5  


488  

32.1  

Profit attributable to equity holders of the

    parent after exceptional items and specific

    IAS 39 mark to market movements

199  

13.1  


394  

25.9  


981  

64.5  










Diluted earnings per share









Profit attributable to equity holders of the parent

    before exceptional items and specific IAS 39

    mark to market movements

215  

12.2  


234  

13.7  


493  

29.5  

After tax dilutive effect of interest on

    convertible bonds

23  

1.3  


19  

1.1  


40  

2.4  

Profit attributable to equity holders of the parent

    before exceptional items and specific IAS 39

    mark to market movements for the purposes

    of diluted EPS

238  

13.5  


253  

14.8  


533  

31.9  

Exceptional items and specific IAS 39

    mark to market movements (net of tax

    and non-controlling interests)

(16) 

(0.9) 


160  

9.4  


488  

29.2  

After tax dilutive effect of specific IAS 39 mark

    to market movements on convertible bonds

(26) 

(1.5) 


(1) 

(0.1) 


11  

0.7  

Profit attributable to equity holders of the

    parent after exceptional items and specific

    IAS 39 mark to market movements for the

    purposes of diluted EPS

196  

11.1  


412  

24.1  


1,032  

61.8  

 

In the accounting periods presented, the dilutive impact of the Group's convertible bonds has been treated as follows when calculating dilutive earnings per share after exceptional items and specific IAS 39 mark to market movements.

 


Six months ended  

30 June 2010  


Six months ended  

30 June 2009  


Year ended  

31 December 2009  

3.75% convertible US dollar bonds 2023

Dilutive  


Dilutive  


Anti-dilutive  

3.25% convertible euro bonds 2013

Dilutive  


Anti-dilutive  


Dilutive  

4.75% convertible euro bonds 2015

Dilutive  


Dilutive  


Dilutive  

 



International Power plc

Notes to the Condensed Interim Financial Statements (continued)

For the six months ended 30 June 2010

 

 

5.           Earnings per share (continued)

 

The treatment of whether potential Ordinary Shares are dilutive or anti-dilutive in the calculation of diluted earnings per share before exceptional items and specific IAS 39 mark to market movements is applied consistently with its determination in the calculation of diluted earnings per share after exceptional items and specific IAS 39 mark to market movements.

 

Impact of change in accounting policies

 

As outlined in note 1, the comparatives for the six months ended 30 June 2009 have been restated for the effects of the changes in accounting policies relating to the adoption of IFRIC 12 and the treatment of defined benefit retirement plans, and the comparatives for the year ended 31 December 2009 have been restated solely for the effects of IFRIC 12:

 


Six months ended 30 June 2009


Profit for the  

period excluding  

exceptional items  

and specific IAS 39  

mark to market  

movements  

£m  


Profit for the  

period including  

exceptional items  

and specific IAS 39  

mark to market  

movements  

£m  





As previously presented

281  


470  

Change in accounting policy relating to:




IFRIC 12 (Service Concession Arrangements)

(7) 


(7) 

Defined benefit retirement plans

1  


1  

Restated

275  


464  

 

 


Year ended 31 December 2009


Profit for the  

year excluding  

exceptional items  

and specific IAS 39  

mark to market  

movements  

£m  


Profit for the  

year including  

exceptional items  

and specific IAS 39  

mark to market  

movements  

£m  





As previously presented

605  


1,143  

Change in accounting policy relating to:




IFRIC 12 (Service Concession Arrangements)

(11) 


(11) 

Restated

594  


1,132  

 

As a consequence of adopting the changes in accounting policies the weighted average numbers of Ordinary Shares for the basic earnings per share calculation and the diluted earnings per share calculation remain unchanged for the six months ended 30 June 2009 and the year ended 31 December 2009.

 

As a result of the changes in accounting policies, the basic earnings per share before exceptional items and specific IAS 39 mark to market movements for the six months ended 30 June 2009 decreased by 0.5 pence (year ended 31 December 2009 decreased by 1.0 pence). The basic earnings per share after exceptional items and specific IAS 39 mark to market movements for the six months ended 30 June 2009 has decreased by 0.5 pence (year ended 31 December 2009 has decreased by 1.0 pence). The diluted earnings per share before exceptional items and specific IAS 39 mark to market movements for the six months ended 30 June 2009 has decreased by 0.5 pence (year ended 31 December 2009 has decreased by 0.9 pence). The diluted earnings per share after exceptional items and specific IAS 39 mark to market movements for the six months ended 30 June 2009 has decreased by 0.5 pence (year ended 31 December 2009 has decreased by 0.9 pence).

 

 

 



International Power plc

Notes to the Condensed Interim Financial Statements (continued)

For the six months ended 30 June 2010

 

 

6.           Dividends

 

At the Company's Annual General Meeting held on 18 May 2010, shareholders approved the payment of a final dividend of 8.28 pence per Ordinary Share to shareholders registered on the Company share register on 28 May 2010. This dividend amounted to £126 million and was paid on 24 June 2010. In respect of the year ended 31 December 2009 the total dividend per Ordinary Share was 12.53 pence (2008: 12.15 pence) and the total dividend paid was £190 million (2008: £185 million).

 

The Directors propose an interim dividend of 4.39 pence per Ordinary Share to be paid on 28 October 2010 to shareholders registered on the Company share register on 1 October 2010.

 

 

7.           Property, plant and equipment

 

During the six months ended 30 June 2010 additions amounted to £105 million, with major expenditure occurring at Hazelwood in Australia and at the wind portfolio in Europe (six months ended 30 June 2009: £101 million; year ended 31 December 2009: £218 million).

 

 

8.           Equity, loans and bonds

 

Loans and bonds

 

Draw downs and repayments of borrowings are presented in the consolidated statement of cash flows.

 

€250 million Senior Notes due 2017

 

On 11 May 2010, International Power Finance (2010) plc, a wholly owned subsidiary of International Power plc, received the proceeds from its €250 million 7.25% senior notes due 2017. The proceeds from the issue of the senior notes, before deducting debt issue costs, were €248 million (£213 million).

 

The senior notes are guaranteed on a senior unsecured basis by International Power plc and are listed on the official list of the UK Listing Authority for trading on the Professional Securities Market of the London Stock Exchange.

 

Upon a change of control, the senior notes may be redeemed at the holder's option at 101% of the principal amount plus accrued interest to the date fixed for redemption. Unless previously redeemed, the outstanding senior notes will be subject to a redemption price equivalent to their principal amount on maturity date of 11 May 2017.

 

Hazelwood Power Partnership

 

On 27 January 2010, Hazelwood Power Partnership, which owns the 1,688MW coal-fired Hazelwood power station located in Victoria, Australia completed the restructuring of its non-recourse debt of A$742 million (£415 million). The restructured facility has a maturity date of 30 June 2012.

 

ANP Funding 1

 

In December 2009, ANP Funding 1, a wholly owned subsidiary of International Power plc, repaid US$769 million (£464 million) of debt secured on the US merchant plants located in Texas and New England.

 

Share issues

 

Issues of International Power plc's Ordinary Shares are presented in the consolidated statement of cash flows. The Company has issued shares under employee share schemes during the period. The average number of shares during the period is presented in note 5.

 



International Power plc

Notes to the Condensed Interim Financial Statements (continued)

For the six months ended 30 June 2010

 

 

9.           Acquisitions

 

Acquisition of development companies by IPA Wind Development, LLC

 

On 2 June 2010, IPA Wind Development, LLC. ('IPA Wind'), a wholly owned subsidiary of International Power plc, completed the acquisition of the entire issued and outstanding membership interests in nine nascent companies from Element Markets, LLC. The vendor has a call option over 30% of the project companies' equity. On completion, IPA Wind owned a development pipeline of wind businesses concentrated in Texas and Illinois. The results of the businesses have been consolidated as subsidiaries with effect from the date of completion using the acquisition method.

 

Other than an immaterial upfront cash payment, the purchase price is wholly contingent on future events. Transaction costs, which have been expensed, were immaterial.

 

The development pipeline of wind projects acquired has been classified as an intangible asset and fair valued at US$50 million (£33 million). The terms of the acquisition include consideration to be paid to the vendor contingent upon completion of identified milestones. These milestones include execution of interconnections agreements, receipt of proceeds from project financing, execution of power purchase agreements, and achievement of commercial operations. A liability of US$50 million (£33 million) was recognised for this contingent consideration at the date of acquisition based on an estimate of the probability of achievement of each of these milestones multiplied by the contractual payment obligation discounted to present value. Due to the proximity of the date of acquisition to the end of the reporting period, the fair values attributed to the acquired assets and liabilities are provisional and may be revised.

 

In the period from 2 June 2010 to 30 June 2010, IPA Wind did not contribute any revenue to the Group. It incurred an immaterial loss, which is included in the Group's results for the period. If the acquisition had taken place on 1 January 2010 the business would also not have contributed any revenue to the Group. It would also have incurred an immaterial loss.

 

 

10.         Note to the statement of comprehensive income

 


Six months ended 

30 June 2010 


Six months ended 

30 June 2009 


Year ended 

31 December 2009 


Before  

tax  

amount  

Tax  

(expense)/ 

benefit  


Before  

tax  

amount  

Tax  

(expense)/ 

benefit  


Before  

tax  

amount  

Tax  

(expense)/ 

benefit  





(Restated) 

(Restated) 


(Restated) 

(Restated)


£m  

£m  


£m  

£m  


£m  

£m  










Net (loss)/gain on cash flow hedges

(112) 

8  


153  

(10) 


205  

(25) 










Net exchange gain recognised on net

   investment hedges

61  

(17) 


92  

(26) 


58  

(16) 










Exchange gains/(losses) arising on translation of

   foreign operations

84  

15  


(452) 

44  


(233) 

34  










Reclassification adjustments relating to foreign

   operations disposed of during the period

-  

-  


-  

-  


(94) 

-  










Actuarial losses on defined benefit plans

(11) 

3  


(4) 

1  


(13) 

4  










Movements in other comprehensive income

   for the period

22  

9  


(211) 

9  


(77) 

(3) 

 

 



International Power plc

Notes to the Condensed Interim Financial Statements (continued)

For the six months ended 30 June 2010

 

 

11.         Commitments

 

Fuel purchase and transportation commitments

At 30 June 2010 the Group had commitments for the purchase of fuel and transportation services, some of which have minimum purchase undertakings, to which the own use treatment is applied under IAS 39, i.e. accounted for on an accruals basis. Based on contract provisions, which consist of fixed prices, subject to adjustment clauses in some cases, these minimum commitments are estimated to aggregate to £555 million expiring within one year, £1,980 million expiring between one and five years and £1,076 million expiring after more than five years (30 June 2009: £603 million, £1,756 million and £681 million respectively; 31 December 2009: £566 million, £1,817 million and £416 million respectively).

 

Fuel and transport contracts, which are not treated as own use, are accounted for as derivative contracts.

 

Capital expenditure related commitments

Commitments relating to upgrade services under service concession arrangements, which are contracted but not provided and which will be recognised in costs of sales when the expenditure is incurred, at 30 June 2010 is £76 million (30 June 2009: £3 million; 31 December 2009: £24 million).

 

Capital commitments contracted but not provided, which will be recognised as property, plant and equipment when the expenditure is incurred, at 30 June 2010 is £239 million (30 June 2009: £241 million; 31 December 2009: £173 million).

 

 

12.         Contingent liabilities

 

There have been no changes in the contingent liabilities relating to legal proceedings or taxation matters to those reported in the Annual Report.

 

Various growth and expansion projects are supported by bonds, letters of credit and guarantees issued by the Group totalling £644 million (30 June 2009: £563 million; 31 December 2009: £551 million). Energy trading activities relating to merchant plant are supported by bonds, letters of credit and guarantees issued by the Group totalling £390 million (30 June 2009: £493 million; 31 December 2009: £282 million).

 

The Group's joint ventures and associates also have various growth and expansion projects that are supported by bonds, letters of credit and guarantees. The Group's share of these bonds, letters of credit and guarantees is £86 million (30 June 2009: £97 million; 31 December 2009: £82 million). These obligations are normally secured by the assets of the respective joint venture or associate. Any amounts guaranteed by International Power plc or any other Group subsidiary are included within bonds and guarantees disclosed above.



International Power plc

Notes to the Condensed Interim Financial Statements (continued)

For the six months ended 30 June 2010

 

 

13.         Related party transactions

 

Compensation of key management personnel

The key management personnel of International Power plc comprise the Chairman, Executive Directors and Non-Executive Directors. During the six months ended 30 June 2010 the components of remuneration of key management personnel have not changed significantly from those reported for 2010 included in the Directors' remuneration report in the Annual Report.

 

Operations and maintenance contracts

In the normal course of business the Group has contracted to provide power station operation and maintenance services to joint ventures and associates. During the period the Group derived income of £42 million (six months ended 30 June 2009: £40 million; year ended 31 December 2009: £85 million) from these arrangements. Included in trade receivables is £3 million (30 June 2009: £2 million; 31 December 2009: £7 million) in relation to these contracts.

 

Retail supply contracts

In the normal course of business the Group has contracted to provide power and gas to joint ventures and associates involved in retail supply. During the period the Group derived income of £43 million (six months ended 30 June 2009: £43 million; year ended 31 December 2009: £82 million) from these arrangements. Included in trade receivables is £1 million (30 June 2009: £nil; 31 December 2009: £1 million) in relation to these contracts.

 

Transportation contracts

In the normal course of business the Group has contracts in place in relation to fuel transportation with one of its jointly controlled entities. During the period the Group incurred costs of £6 million (six months ended 30 June 2009: £5 million; year ended 31 December 2009: £10 million) in relation to these contracts.

 

Emission certificates

In the normal course of business the Group has contracted to provide emission certificates to one of its associates. During the period the Group derived revenue of £5 million (six months ended 30 June 2009: £3 million; year ended 31 December 2009: £12 million) from these arrangements.

 

Development fee income

During the six months ended 30 June 2010 the Group received £11 million in development fees from one of its associates (six months ended 30 June 2010: £nil; year ended 31 December 2009: £nil).

 

 

14.         Events after the reporting period

 

The Finance Bill 2010 containing draft legislation for some of the proposals announced by the Chancellor in his 22 June 2010 Budget was published on 1 July 2010.  The Finance Bill 2010 introduces a reduction in the rate of corporation tax from 28% to 27% from 1 April 2011.

 

As deferred tax assets and liabilities are measured at tax rates that are enacted or substantively enacted at the end of the reporting period, the reduction in the corporate tax rate from 28% to 27% has not been taken into account in the calculation of the effective tax rate applied in these condensed interim financial statements.

 

 

15.         Annual report and accounts

 

Copies of the Annual Report are available from the Company's website www.ipplc.com or by calling or writing to International Power plc, Senator House, 85 Queen Victoria Street, London EC4V 4DP or sending an email to ipr.relations@ipplc.com. Telephone: +44 (0)20 7320 8600. 

 



International Power plc

Disclosure and Transparency Rules

For the six months ended 30 June 2010

 

 

Principal Risks and Uncertainties

 

Section 4.2.7R of the Disclosure and Transparency Rules, requires an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed interim financial statements and a description of the principal risks and uncertainties for the remaining six months of the year.

 

An indication of important events and their impacts are outlined on pages 1 to 9 of the Interim Report and the description of principal risks and uncertainties for the remaining six months are set out below.

 

The principal risks and uncertainties for the remaining six months of the year continue to be those identified earlier in the year, and are set out under the heading 'Our approach to risk and risk management' on pages 18 to 28 of the Annual Report (available on www.ipplc.com).

 

International Power's principal activities are the development, acquisition and operation of power generation plants together with closely related activities, such as desalination and retail. These principal activities are supported by our network of local, regional and corporate offices which carry out activities such as trading, financial management and treasury operations. All of these activities have inherent risks.

 

The key risks to the Group are summarised as follows:

 

·      financial risks

·      market and trading risks

·      fuel supply risks

·      country and political risks

·      construction and operational risks

·      health, safety and environment risks

·      staffing and human resources risks

 

Our approach to risk management and governance during 2010 remains the same as previously reported in the Annual Report.



International Power plc

Disclosure and Transparency Rules (continued)

For the six months ended 30 June 2010

 

 

Responsibility statement of the Directors in respect of the Interim Report

 

We confirm that to the best of our knowledge:

 

·      The Condensed Interim Financial Statements have been prepared in accordance with IAS 34 (Interim Financial Reporting) as adopted by the EU;

 

·      The Interim Report includes a fair review of the information required by:

 

a)     DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the Condensed Interim Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

 

b)    DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions to those described in the last set of annual financial statements.

 

On behalf of the Board

 

 

 

 

 

 

 

 

 

 

 

 

Philip Cox

Mark Williamson

Chief Executive Officer

Chief Financial Officer

9 August 2010

9 August 2010

 

 



Independent review report to International Power plc

 

Introduction

 

We have been engaged by the Company to review the Condensed Interim Financial Statements in the Interim Report for the six months ended 30 June 2010 which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the Condensed Interim Financial Statements.

 

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ('the DTR') of the UK's Financial Services Authority ('the UK FSA'). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

 

Directors' responsibilities

 

The Interim Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report in accordance with the DTR of the UK FSA. As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union ('the EU'). The Condensed Interim Financial Statements included in this Interim Report has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU.

 

Our responsibility

 

Our responsibility is to express to the Company a conclusion on the Condensed Interim Financial Statements in the Interim Report based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the Condensed Interim Financial Statements in the Interim Report for the six months ended 30 June 2010 are not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

 

 

 

 

Richard Pinckard

For and on behalf of KPMG Audit Plc

Chartered Accountants

8 Salisbury Square

London EC4Y 8BB

 

9 August 2010



International Power plc

Additional information for shareholders that does not form part of the

Condensed Interim Financial Statements

For the six months ended 30 June 2010

 

Effective tax rate and interest cover ratio (excluding exceptional items and specific IAS 39 mark to market movements)

 

The following table shows the effective tax rate and interest cover ratio for the Group (excluding exceptional items and specific IAS 39 mark to market movements) after adjusting for the presentation of results of joint ventures and associates in the consolidated income statement:

 



Six months 

ended 


Six months 

ended 


Year 

ended 



30 June 


30 June 


31 December 



2010 


2009 


2009 





(Restated)


(Restated)



£m 


£m 


£m 








Profit from operations

    (excluding exceptional items and specific

    IAS 39 mark to market movements)


524 


550 


1,148 

Add back:







Share of JVs' and associates' interest


50 


54 


99 

Share of JVs' and associates' taxation


11 


33 


62 

Profit before total interest and taxation


585 


637 


1,309 

Total interest expense

   (including share of JVs and associates)


(241)


(270)


(538)

Profit before total tax expense


344 


367 


771 

Total income tax expense

   (including share of JVs and associates)


(75)


(92)


(177)

Profit after tax


269 


275 


594 

Non-controlling interests


(54)


(41)


(101)

Profit attributable to the equity holders

    (excluding exceptional items and specific

    IAS 39 mark to market movements)


215 


234 


493 

 

Effective tax rate


 

22%


 

25%


 

23% 

 

Interest cover ratio


 

2.4x


 

2.4x


 

2.4x 

 

Tax for the six month period ended 30 June 2010 is charged at 22% (six months ended 30 June 2009: 25%; year ended 31 December 2009: 23%) representing the best estimate of the average annual effective tax rate expected for the full year, applied to the pre-tax income of the six month period. As discussed in note 14, the proposed reduction in the corporate tax rate from 28% to 27%, as set out in the July 2010 Finance Bill, has not been taken into account in the calculation of the effective tax rate applied in these condensed interim financial statements.

 

 

 


Disclaimer

This announcement includes certain forward-looking statements. These statements are based on current expectations and projections of the Group about future events. However, by their nature forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors including, but not limited to, the economic and business circumstances occurring from time to time in the countries in which the Group operates, changes in trends in the general, global or regional economies, changes in trends in the global energy sector, changes in regulation and natural disasters or other calamities. The Company undertakes no obligation to update any forward-looking statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For further information please contact:

Investor Contact:

Aarti Singhal

+44 (0)20 7320 8681

Media Contact:

Beth Akers

+44 (0)20 7320 8622

 

 

About International Power

International Power plc is a leading independent electricity generating company with 34,408MW gross (20,949MW net) in operation and 4,502MW gross (1,393MW net) under construction. International Power has power plants in operation or under construction in Australia, the United States of America, the United Kingdom, Belgium, Canada, France, Germany, Italy, the Netherlands, Portugal, Spain, Turkey, Bahrain, Oman, Qatar, Saudi Arabia, the UAE, Indonesia, Pakistan, Puerto Rico and Thailand. International Power is listed on the London Stock Exchange with ticker symbol IPR. Company website: www.ipplc.com 


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