London, July 26, 2001 International Power is pleased to announce an agreement with Union Electrica Fenosa (UEF) to sell back its 25% equity ownership in Union Fenosa Generacion (UFG) to UEF for Pts100.5 billion in cash (�372 million at current exchange rates). The sale gives UEF 100% equity ownership in its subsidiary.
The sale will result in an estimated profit on disposal in excess of �30 million and we expect that the transaction will be earnings (profit after tax) neutral in the current year.
The agreement reinforces International Power’s “three pillar” growth strategy by freeing capital and increasing its flexibility to pursue opportunities in Europe and elsewhere that better meet our investment criteria for economic return and operating control, the company said in a release.
The transaction will increase International Power’s net megawatts under development in Europe since UEF will withdraw from the Italian greenfield programme it jointly launched with Ansaldo Energia.
The sale terminates the formal International Alliance Agreement between International Power and UEF although both the relationship between the companies, and the possibility of working together in the future, remain strong.
Since the demerger of National Power in 2000, International Power’s strategy has been to capitalise on the interrelationship between superior power plant operation where it has operational control, and trading. The sale of its minority stake in UFG (which was acquired by National Power in 1999) is therefore a natural consequence of implementing this strategy.
This sale will reduce International Power’s installed generating capacity by 1,350 MW (net) to 8,850 MW (net), but will increase the proportion of operating assets over which the company has full or joint control from 77% to 90%.
Furthermore, in twelve months time when the 2,225 MW of wholly owned power plant currently under construction have entered commercial operation, 92% of International Power’s portfolio will be under its full or joint control.
The UFG sale will also increase its net megawatts under development in Europe as UEF will end its participation in the 8,800 MW greenfield programme it launched in Italy with Ansaldo Energia.
“The sale is fully consistent with our strategy of focusing on assets where we can create value via operational control,” said Peter Giller, International Power’s Chief Executive Officer. “It means we can retain full value from our development expertise in Southern Europe for International Power shareholders,” he added.
Following completion of the transaction, Jos�aria Amus�gui will resign as a director of International Power and International Power’s representatives on the boards of UEF and UFG will also resign. International Power will retain its Madrid office as headquarters for the West Mediterranean region.
During the nine-month period ending 31 December 2000, International Power’s share of the profit in UFG was �11 million pre-tax and �5 million after tax. At 31 December 2000, the carrying value of the investment in UFG was �360 million.