21 May, 2002 – An increase in profits from North American operations of 131 per cent was the main contributor to the 32 per cent rise in pre-tax profits for the quarter ended 31 March announced by power group International power today.
Formally part of national Power before it demerged, the UK-based International Power has grown its generating capacity to 9100 MW worldwide with 2015 MW under construction and a further 6000 MW in advanced development.
Today’s first quarter figures showed PBIT up to £107m from £81m in QI 2001. Earnings per share rose 1.1p to 4.6p and operating cash flow was up from £49m to £106m.
Profits from North American operations were £31m compared to £12m in the comparative quarter last year reflecting 845 MW of additional capacity in commercial operation this year, together with compensation receivable from Alstom (the prime contractor) for lost income relating to the late commissioning and performance recovery of International Power’s US CCGT construction programme.
Alstom continues to make progress with the GT24 performance recovery program and 8 of the 14 GT24 units have now successfully completed the first phase on time.
International Power reported continued progress on its US construction programme, with another 1375 MW scheduled to enter commercial operation for the 2002 summer peak.
Commenting on market conditions in the US the company said, “In general, the US wholesale electricity markets remain weak. However, in Texas summer peak spark spreads have shown some recovery since the beginning of the year. In addition, prices in north Texas are higher than in the south due to transmission constraints and we have contracted forward to take advantage of this differential. In New England, we are substantially hedged for the remainder of 2002.”
In its Europe and Middle East operations, operating profit decreased by 15 per cent to £41m from £48m in Q1 2001. This was principally driven by the sale of interests in UFG in July 2001, partially offset by the acquisition of Rugeley. Profit after interest and tax increased marginally in the region.
In the UK, output from our 500 MW gas fired Deeside plant was fully contracted through to 31 March 2002. On 1 April, as a consequence of uneconomic wholesale electricity prices, International Power mothballed half the capacity at its Deeside power plant. The remaining capacity has been sold forward for the summer.
Assets under longer-term offtake agreements, namely Rugeley, Pego and Unimar, achieved high levels of availability and continue to deliver solid financial performance. In addition, EOP delivered good financial results, which were attributable to high output and a continuing focus on cost control.
In Abu Dhabi, construction work on the Shuweihat project has commenced. The Al Kamil plant that is under construction in Oman has entered the commissioning phase. Full commercial operation at this plant is now expected to commence in Q3 2002.
In Italy, the company is undertaking a greenfield development programme and has submitted seven projects for approval under the new permitting process. It is working towards commencing construction on the first of these projects in the first half of 2003.
In Australia, Hazelwood, Pelican Point and Synergen all performed well during the quarter, delivering an increase in operating profit of 16 per cent to £29 million from £25 million in Q1 2001. As a result of forward contracting positions in Victoria and South Australia, group profitability increased despite relatively lower pool prices resulting from a very mild summer.
International Power has lodged an expression of interest in buying Victoria state electricity and network company Citipower, according to industry sources. The company has already been short-listed as a potential buyer of Victorian electricity retailer Pulse Energy.
Citipower is being sold by American Electric Power and is expected to sell for up to A$1.5bn ($832m).
Activities elsewhere in the world generated profits of £13m.
In its statement, International Power said that although wholesale electricity prices in some merchant markets remain depressed, signs of some recovery in key markets like Texas were encouraging, particularly when coupled with the pricing differential in the region. Given its geographic spread and the mix of contracted and merchant plant, it said it remained confident of meeting overall targets in 2002.
“Conditions in our industry continue to create opportunities for growth through additions to our portfolio, which should allow us to deliver additional shareholder value in the future,” said the statement.