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

Mark WilliamsonChief Financial Officer, International Power plc

Leaders in Energy June 2008 International Powerpage3

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

Agenda

Leaders in Energy June 2008 International Powerpage4

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 geography

IPR portfolio by contract type*

*Rolling one year average

International Power overview

All charts are presented based on net operating MW

Leaders in Energy June 2008 International Powerpage5

Free cash flow (£m)

£456m

£285m

£104m

2004 2005 2006 2007

£653m

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.

Share price

Growth profileG

W (

Net)

*

Pen

ce

Leaders in Energy June 2008 International Powerpage6

UK1. Deeside 2. Derwent 3. First Hydro4. Rugeley5. Saltend6. Indian Queens Sub-TotalRest of Europe 7. IP Opatovice8. ISAB9. Tejo Energia (Pego) 10. Turbogas 11. Spanish Hydro 12. Unimar (Marmara)13. IPR European

Wind PortfolioSub-Total

GRAND TOTAL

500214

2,0881,0501,200

1405,192

585562628

1,00886

4881,153

4,510

9,702

75%23%75%75%75%75%

100%34%50%60%67%33%

100%

WalesEngland Wales EnglandEnglandEngland

Czech RepublicItalyPortugal Portugal Spain TurkeyGermany/Italy/France/Netherlands

GasGasPumped Storage CoalGasOil

Coal/GasGasCoalGasHydroGasWind

Plant namePlant name CountryCountry StatusStatusGross

MWGross

MWNetMWNetMW

IPRown %

IPRown %

FueltypeFueltype

Merchant PPA 2010 Merchant MerchantMerchantMerchant

ContractedPPA 2020PPA 2021PPA 2024Tariff 2030-65PPA 2020Regulated Tariff

37549

1,566788900105

3,783

585193314605

57162

1,153

3,069

6,852

Over 50% of portfolio in UK merchant market

Rest of Europe – contracted or regulated tariffs

12

DeesideSaltend

DerwentFirst Hydro

RugeleyIndianQueens

PegoTurbogas

SpanishHydro

IPR European Wind Portfolio

IP Opatovice

Unimar

ISAB

123

4

5

6 7

9

1011

13

8

International Power in Europe

13

Leaders in Energy June 2008 International Powerpage7

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

Deeside

Saltend

DerwentFirst Hydro

RugeleyIndianQueens

123

4

5

6

UK - overview of operations

IPR UK portfolio by fuel type

Chart presented based on net operating MW

Leaders in Energy June 2008 International Powerpage8

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 pricesNotes:• 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

UK Reserve Margin

0

5

10

15

20

25

30

2008 2010 2012 2014 2016

Reserve margin without early LCPD retirements

Target Reserve

%Reserve marginwith early LCPD retirements

UK - market fundamentals

Leaders in Energy June 2008 International Powerpage9

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

UK merchant assets

UK - key investment considerations

Leaders in Energy June 2008 International Powerpage10

2002 2003 2004 2005

Demand Portugal

2006

25,000

30,000

35,000

40,000

45,000

50,000

GWh

40,667

45,500

49,18847,945

43,061

Generation Portugal (%)

0%

20%

40%

60%

80%

2003 2004 2005 2006

100%

Imports

Hydro

Gas

Oil

Coal

Wind

Co-Gen & mini hydro

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

20,000

4.2%

Portugal - market fundamentals

50,050

20072007

Leaders in Energy June 2008 International Powerpage11

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

ElecgasLisbonOffice

Asset in operation

Under construction

Pego

Portugal - overview of operations

Leaders in Energy June 2008 International Powerpage12

Contracted assets in Portugal

Portugal - key investment considerations

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

Leaders in Energy June 2008 International Powerpage13

New plant

ExistingPlant

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

Leaders in Energy June 2008 International Powerpage14

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

Leaders in Energy June 2008 International Powerpage15

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

Renewable assets in Europe

Renewables - key investment considerations

Leaders in Energy June 2008 International Powerpage16

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

Strong growth in renewables

Canunda

Levanto Organic Growth

Maestrale

1,199

407

Wind generationyear-on-year growth

2006

March 2008

1,2009006003000

Europe - renewables

Leaders in Energy June 2008 International Powerpage17

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

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