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Bruce Levy North America Regional Director

Bruce Levy North America Regional Director . International Power. International Power - overview. A leading independent global power plant developer and operator with expertise in closely linked businesses such as desalination and energy retail

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Bruce Levy North America Regional Director

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  1. Bruce LevyNorth America Regional Director International Power

  2. International Power - overview A leading independent global power plant developer and operator with expertise in closely linked businesses such as desalination and energy retail Our objective is to deliver growth in shareholder value through investment in power generation and closely related businesses ensuring a balanced international portfolio in terms of markets, fuel, contract type and technology We create value by the efficient operation, financing, and trading of our power generation fleet maintaining the highest levels of safety and environmental performance

  3. An international portfolio Gross capacity in operation 32,949MWNet capacity in operation 21,239MWNet capacity under construction 1,028MW

  4. A portfolio approach Risk mitigation across regions, fuel type, and technology Balance of merchant and long-term contracted assets Stable financial performance from long-term contracted assets overlaid by merchant market returns In-depth regional market knowledge Knowledge/skill share across portfolio

  5. Portfolio breakdown Asia Asia North America MiddleEast MiddleEast North America 8 10 12 12 7 31 21 15 Australia Australia 50 34 Europe Europe Net MW bycontracted position* (%) Pumped storage 7 21 Uncontracted 38 Long-term contracted 34 Short-term contracted Net MW byGeography* (%) H1 2009 PFO by Geography(%) * As at 10 August 2009

  6. International Power – key strengths Regional knowledge and expertise access to growth opportunities across all regions Key skills development and commercial structuring of new projects project finance M&A management of EPC contracts trading operations and maintenance partnering Rigorous capital allocation Investment Committee process only the best projects succeed flexibility to deploy capital within the portfolio where we see the best returns financial discipline

  7. Capital structure - overview Very secure capital structure strong liquidity at parent – as at 30 June 2009 corporate cash of £368m and free cash flow of £326m proceeds from assets sales will further strengthen corporate liquidity low debt at parent level 88% of total debt non-recourse at asset level Project finance still available for high-quality sponsors and projects similar tenors for long-term contracted assets, debt term matches PPA length shorter tenors for merchant assets club deals instead of syndication higher margins lower base rates means similar all-in costs Successful agreement of revolving credit facility US$780m in place to October 2012 19 banks participated

  8. Refinancings SEA Gas (Australia) A$425m refinancing signed on 28 October 2009, to run to October 2012 Hazelwood (Australia) A$445m tranche due in February 2010 in discussions with lenders linked to outcome of Carbon Pollution Reduction Scheme (CPRS) US CCGT Fleet US$769m due in July in discussions with lenders evaluating variety of options Strong corporate liquidity gives IPR leverage in negotiations with lenders Experienced teams in place across the Group and strong relationship with banking group No refinancings in 2011

  9. US gas market outlook Current View shale gas production - likely to influence forward gas prices market fundamentals remain in over supply with storage at capacity gas prices remain subject to production levels, weather load Trend early 2008: gas and oil markets strong, new supplies brought on line mid 2008: recession impacts, gas demand/price fall demand stabilized: small rally due to cold start to winter in the Northeast Supply rig count reacted to lower prices with 60% drop in drilling supply has begun to reduce slowly new exploration focus in on shale gas supply • Natural gas sets marginal price of power much of the time in Texas and New England • Power prices are set by less efficient plant than IPR US fleet, therefore gas price is the primary driver to power price in the short-term US Gas Price Movements • Demand • gas demand down, particularly industrial, due to recession • gas demand for electricity generation stable • at lower gas prices CCGTs in some regions displace coal adding to gas demand

  10. Markets affected by gas prices, economic downturn and weather conditions Pricing environment spot prices higher than forward prices, however little sign of improved pricing in 2010 Long-term fundamentals remain strong even with overall demand reduction, peak demand reached record levels in June some cancellation of new-build (primarily wind) and little evidence of planned new-build Texas

  11. Lower peak demand low temperatures and record rainfall economic downturn ISO-New England capacity payments currently over 50% of 2009 revenue mitigates effect of mild weather and reduced peak demand auction for 2012/2013 cleared at minimum price of US$2.95/kW-month with 4,487MW of excess supply Increasing dependence on potentially unreliable demand response and imports in 2011 reserve margin only 17% without demand response and imports New England Full Year (1) New England 2008

  12. PJM Primary revenue source is capacity payments Pricing levels set through 2013 2010/2011 = $174/MW-day 2011/2012 = $110/MW-day 2012/2013 = $16/MW-day 2.5% holdback for demand response price separation within region new capacity resources included 5,700MW of demand response low prices do not encourage new-build Anticipate changes to be introduced prior to the 2013/14 auction (May 2010) various changes supported by generators, utilities and PJM First Energy joining PJM market will tighten supply/demand balance in western region beneficial to IPR

  13. AIM PowerGen acquisition Portfolio of wind assets in Canada 40MW in operation in Ontario 40MW under construction in Ontario (Harrow) COD expected H1 2010 advanced development pipeline throughout Canada of 1,200MW Ontario Feed-In Tariff programme introduced in October 2009 20-year feed-in tariff of C$0.135/kWh streamlined approval process and interconnection priority supports Ontario’s goal of eliminating coal-fired generation by 2014 C$82 million of non-recourse project finance raised for Harrow 20-year term with fixed interest rate Gain strong local management team with 15 employees supplemented by IPR global expertise strong platform to organically grow the business

  14. US CO2 cap and trade legislation House of Representatives: Waxman Markey Bill 17% reduction of 2005 greenhouse gas emissions by 2050 allowances for 90% of generation industry’s CO2 emissions provides specific protection for merchant coal Senate: two separate bills proposed Bingaman Murkowski Bill no cap and trade provisions targets 15% of US demand from renewables Kerry Boxer bill 20% reduction of 2005 greenhouse gas emissions by 2050 similar allocation formulae as Waxman Markey but overall amount yet to be determined Senate must agree one bill, then negotiate final bill with House Legislation unlikely to be passed prior to 2010 Impact on IPR fleet minimal impact on efficient gas-fired assets Coleto Creek coal-fired asset expected to receive allowances

  15. Europe - UK market update Market affected by reduced demand and low gas prices Looking forward 12,200MW of thermal retirement by 2016 5,600MW of nuclear retirement by 2017 system not as volatile as 2008 however ageing fleet creates potential for short-term pricing volatility IPR balanced and flexible portfolio well-positioned to optimise returns Saltend: excellent performance/beneficial gas contract strongly contracted for 2010 Deeside: flexibility to capture price volatility, strong performer in a low gas price environment Rugeley: FGD operational June 2009, now has improved operating flexibility 80% forward contracted for 2010 at a dirty spread of £27/MWh First Hydro: unlikely to repeat strong H2 2008 performance, well-positioned for any unplanned short-term volatility

  16. Europe - Czech business Agreed to sell Czech business to J&T Group for net cash proceeds of some £590m unsolicited offer Attractive price represents excellent shareholder value High performing asset, but risk profile includes: security and pricing of long-term coal supply less beneficial CO2 allowances in Phase III of the EU Emissions Trading Scheme significant capital expenditure to comply with environmental regulations declining market for district heating limited growth potential

  17. Australia market update Significant improvement in results across the portfolio improved availability higher prices price spikes from extreme weather events Small increase in reserve margin reduced demand forecast in 2010 no material change on supply side Some reduction in forward prices mild winter increased trading activity following CPRS delay, but still below historic levels Hazelwood 30% forward contracted for 2010

  18. Australia - CPRS Changes to proposed CPRS announced by Government in May implementation delayed by one year to 1 July 2011 price of carbon will be fixed at A$10/tonne for first year Outstanding issues number of emission permits made available with no charge transition period - currently five years CO2 reduction target by 2020 IPR very actively engaged Next steps defeated in Senate vote in August due to opposition from Liberals and Greens Liberal opposition pushing for emissions trading scheme that includes improved compensation for generators increased allocation of free permits longer transition period legislation scheduled for second debate in Senate in November “double dissolution” of Parliament if defeated a second time

  19. History of successful growth Operational capacity more than doubled since 2000 Experienced development and financing teams in place in each of our five regions 8.3 2000 North America 2001 8.9 10.5 Europe 2002 10.6 2003 Middle East 15.3 2004 Australia 15.9 2005 18.5 2006 Asia 18.8 2007* 21.3 2008 0 5 10 15 20 25 International Power’s Net GW * In 2007, IPR sold its interest in Malakoff and signed an agreement with Mitsui to align its percentage holdings in its UK subsidiary power stations. This resulted in the net sale of 935MW (net) during the year.

  20. Growth opportunities IPR continues to actively pursue wide range of growth opportunities long-term contracted greenfield projects renewables - acquisitions and organic growth expansion of existing assets merchant assets in key markets North America Canada - organic growth of renewables portfolio on back of AIM PowerGen acquisition US - new legislation creates incentives for investment in renewables option to expand Coleto, subject to clarity on carbon and off-take Middle East bid submitted - Tarfaya 300MW wind in Morocco in near-term bids expected in Oman, Saudi Arabia, Morocco, Tunisia and Abu Dhabi region still expects growth of 50GW of power and 2,000MIGD of water in medium-term potential new markets - northern and southern Africa

  21. Growth opportunities Asia Paiton 3 expected to close shortly economies still experiencing strong growth potential new markets - Vietnam, Philippines Europe continue organic growth of renewables portfolio seek out opportunities for long-term contracted assets potential to increase existing capacity (UK, Portugal) Australia New South Wales privatisation clarity on CPRS required before further investment decisions can be made

  22. Financial summary PFO (£m) Free cash flow (£m) £1,050m £904m £653m £773m £513m £456m £536m £285m £222m £104m 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Earnings per share (pence) Dividendper share (pence) 12.15p 32.4p 10.16p 27.1p 22.4p 7.9p 14.6p 4.5p 8.6p 2.5p 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008

  23. Summary Leading global power plant developer and operator deep experience across most technologies high quality asset portfolio International portfolio approach continues to deliver significant benefits balance of merchant and long-term contracted assets excellent access to growth opportunities Fundamentals in our markets remain attractive Proven track record of delivering growth and value underpinned by strong capital structure good liquidity with £368m cash at corporate at half year strong free cash flow generation

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