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Leaders in Energy 2008

Leaders in Energy 2008. Power: Bridging Europe’s Generation Gap. Mark Williamson Chief Financial Officer, International Power plc. Agenda. Brief introduction to International Power Overview of European business Bridging Europe’s generation gap a review of key investment considerations for

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Leaders in Energy 2008

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  1. Leaders in Energy 2008 Power: Bridging Europe’s Generation Gap

  2. Mark WilliamsonChief Financial Officer, International Power plc

  3. Agenda • Brief introduction to International Power • Overview of European business • Bridging Europe’s generation gap • a review of key investment considerations for • merchant assets in UK • long-term contracted assets in Portugal • renewable assets across Europe • Summary

  4. International Power overview IPR portfolio by geography • Multinational independent power producer • 31,191MW (gross) capacity in operation worldwide • Creating value through strong growth • Risk mitigation across five core regions • in-depth regional market knowledge • balance of contracted and merchant markets • diversity of fuel type and technology • Good access to growth opportunities • acquisitions • greenfield IPR portfolio by contract type* *Rolling one year average All charts are presented based on net operating MW

  5. Growth profile Free cash flow (£m) £653m * £456m £285m £104m 2004 2005 2006 2007 GW (Net) Share price Pence Note: As at 31 December * 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.

  6. International Power in Europe • Over 50% of portfolio in UK merchant market • Rest of Europe – contracted or regulated tariffs Saltend 5 Deeside Derwent 1 First Hydro 3 2 4 IP Opatovice Rugeley 6 7 IndianQueens 13 IPR European Wind Portfolio Unimar 12 Turbogas 10 13 11 Pego 9 8 SpanishHydro GrossMW IPRown % NetMW Fueltype ISAB Plant name Country Status UK 1. Deeside 2. Derwent 3. First Hydro 4. Rugeley 5. Saltend 6. Indian Queens Sub-Total Rest of Europe 7. IP Opatovice 8. ISAB 9. Tejo Energia (Pego) 10. Turbogas 11. Spanish Hydro 12. Unimar (Marmara) 13. IPR European Wind Portfolio Sub-Total GRAND TOTAL Wales England Wales England England England Czech Republic Italy Portugal Portugal Spain Turkey Germany/Italy/France/Netherlands Merchant PPA 2010 Merchant Merchant Merchant Merchant Contracted PPA 2020 PPA 2021 PPA 2024 Tariff 2030-65 PPA 2020 Regulated Tariff 500 214 2,088 1,050 1,200 140 5,192 585 562 628 1,008 86 488 1,153 4,510 9,702 75% 23% 75% 75% 75% 75% 100% 34% 50% 60% 67% 33% 100% 375 49 1,566 788 900 105 3,783 585 193 314 605 57 162 1,153 3,069 6,852 Gas Gas Pumped Storage Coal Gas Oil Coal/Gas Gas Coal Gas Hydro Gas Wind

  7. Merchant generator with interest in six assets 6.5% share of UK generation Balanced portfolio fuel diversity – gas, coal, oil and pumped storage assets across the merit order - baseload, mid merit, peaking - First Hydro well placed to capture value in short term market Growth via acquisition from 500MW in 2000 to over 5,000MW (gross) today Strong financial performance in 2007 robust operational performance optimisation of coal and gas peaking plant flexible and available UK - overview of operations Saltend Deeside 5 Derwent 1 First Hydro 3 2 4 Rugeley 6 IndianQueens IPR UK portfolio by fuel type Chart presented based on net operating MW

  8. Long-term fundamentals remain attractive Uncertainty on available capacity restricted running of opted-out coal plant and potential closure before 2015 further pressure on coal capacity due to rising coal price and carbon costs ongoing retirement of nuclear plant potential unreliability of plant approaching closure wind generation - unpredictable load factors / availability Forward gas prices have strengthened maintains upward pressure on UK wholesale prices strong dark spreads in spite of higher coal prices UK - market fundamentals UK Reserve Margin % Reserve margin without early LCPD retirements Reserve marginwith early LCPD retirements 30 25 20 15 Target Reserve 10 5 0 2008 2010 2012 2014 2016 • Notes: • Peak demand estimate updated for lower winter 2007 demand • Includes impact of 5,912 MW of Nuclear capacity lifetime extensions • Wind generation assumed at 35% of installed capacity

  9. UK - key investment considerations UK merchant assets • Stable regulatory framework • Clarity on environmental legislation • phase III of EUETS and beyond • Supply / demand balance • uncertain reserve margin • trending to new-entrant • future of nuclear / new technologies • Availability of long-term offtake contracts • Stability of input costs • volatile cost of fuel – gas, coal and oil • uncertain cost of carbon • Rising Engineering Procurement and Construction (EPC) costs • new generation capacity needed worldwide • positive for incumbent generation • Capital availability – optimal leverage

  10. Portugal - market fundamentals Demand Portugal Generation Portugal (%) GWh 4.2% 50,050 100% 50,000 49,188 47,945 Imports 45,500 45,000 80% 43,061 Hydro 40,667 40,000 Gas 60% 35,000 Oil 40% 30,000 Coal 20% 25,000 Co-Gen &mini hydro Wind 20,000 0% 2003 2004 2005 2006 2007 2002 2003 2004 2005 2006 2007 • High demand growth • Lowest per capita consumption in EU15 • Strong dependence on thermal plant • hydro generation varies year-on-year • Iberian market in operation since July 2007

  11. Portugal - overview of operations • Interests in three long-term contracted assets – coal and gas • Pego, coal fired, 628MW (gross) • Turbogás, gas fired, 1,008MW (gross) • additional 40% acquired in 2008 • Elecgas, gas fired, 830MW (gross) under construction • Long-term presence in attractive market • strong demand growth • Strong performance • financial underpinned by technical • re-financings at very good terms • major investment for long-term environmental compliance Turbogás Pego LisbonOffice Elecgas Asset in operation Under construction

  12. Portugal- key investment considerations Contracted assets in Portugal • Stable regulatory framework • Environmental legislation • carbon costs pass through • Supply / demand balance • Availability of secure long-term offtake contract • Security of fuel supply • ability to pass through fuel cost • Rising Engineering Procurement and Construction (EPC) costs • industrywide trend • ability to pass on increased cost • Capital availability • high leverage

  13. Elecgas, Portugal • 830MW CCGT, Portugal • Located adjacent to existing Tejo coal plant • benefits from shared services • Commissioning scheduled for 2011 • IPR and Endesa 50:50 partnership • 25 year tolling contract with Endesa • EPC contractor – Siemens • £443m project financing complete • IPR equity investment £34m • Excellent organic growth opportunity from: • existing market presence • available site • access to finance ExistingPlant New plant

  14. Europe - renewables • Fastest growing sector in the European generation market • 52GW installed since 2000 • Growth driven by EU target of 20% contribution from renewables to energy mix by 2020 • Key mechanisms for meeting CO2 targets: • EU Emissions Trading Scheme • high renewable targets • underwritten by legislated support mechanisms • Development has been dominated by specialist renewable energy companies • Fragmented market – consolidating with power companies

  15. Renewables- key investment considerations Renewable assets in Europe • Stable regulatory framework • Transparency of incentive schemes • Commitment to high targets for renewable generation • Wind regime / historic performance • Rising EPC costs • industry-wide trend • positive for incumbent generation • Source of further growth opportunities • fostering relationships with developers and equipment suppliers • Capital availability • high leverage

  16. Europe - renewables Strong growth in renewables • Significant scale in wind generation • 1,199MW now operational worldwide - 660MW of operational wind capacity acquired in 2007 - 132MW under construction brought online in 2007 • now a leading global wind generator • Established market positions provide strong platform for growth • improved access to developers and turbine manufacturers • Current focus • growth opportunities across our core European markets • deliver benefits of scale Wind generationyear-on-year growth 407 2006 March 2008 1,199 0 300 600 900 1,200 Canunda Maestrale Levanto Organic Growth

  17. Investment backdrop in Europe Tightening reserve margins across Europe Further liberalisation in certain markets Impact of carbon unclear Rapidly rising cost of equipment Debt available for high quality projects International power focus Multiple markets for capital allocation Selected markets in Europe for growth wide appetite for renewables new build – long-term contracts required further expansion in existing markets Financial discipline is paramount Summary

  18. Leaders in Energy 2008 Power: Bridging Europe’s Generation Gap

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