Regional Review - Asia

strong operational
performance contributes
to results in asia

Profit from operations in Asia was up to £96 million compared to £91 million in 2006. Performance in this region benefited from higher load factors as a result of continued demand growth, and strong operational performances at all our assets in Asia, although the expiry of the tax holiday at KAPCO did result in lower post-tax earnings at this asset. Our investment in Malakoff was sold in May 2007 to MMC Corporation for £249 million, generating an exceptional profit on disposal of £115 million.

Results – Asia
  Year ended
31 December 2007
£m		 Year ended
31 December 2006
£m
Profit from operations 95 91
Exceptional items and specific IAS 39 mark to market movements – losses 1 -
PFO (excluding exceptional items and specific IAS 39 mark to market movements) 96 91

In December 2007, International Power agreed to acquire an additional 31% shareholding in Uch (572 MW plant located in Pakistan) for a total cash consideration of US$85.5 million (£44 million). The acquisition from affiliates of Tenaska Holdings (L) Corp, will take International Power’s total holding in Uch to 71%. The entire output of the plant is sold to WAPDA under a long-term PPA until 2023. The acquisition will be funded from current liquid resources, and is expected to complete in the first half of 2008.

We continue to actively pursue the 800 MW Paiton 3 expansion, and the 1,320 MW West Java (renamed from Tanjung Jati A) coal fired greenfield opportunities in Indonesia. Tariff and PPA negotiations with the offtaker are continuing in parallel with discussions on the EPC contracts for both projects.

Market environment and growth prospects

Demand for power in Asia is forecast to grow significantly, typically at rates between 5% and 10% per annum, in line with the strong economic (GDP) growth in the region. Through our successful operation over the past several years, we have developed a good reputation and strong long-term relationships with key state owned customers and key stakeholders in the region. Given the strength of our presence, we are well placed to expand our portfolio in the region both organically and via acquisition.

We are actively pursuing growth projects in Indonesia, Pakistan, Thailand, and selected new markets. We have organic growth opportunities in Indonesia, namely, Paiton 3 (800 MW), and the West Java project (1,320 MW), and in Thailand where we are working on a 100 MW expansion. All three of our Pakistan projects, namely HUBCO, KAPCO and Uch are working on expansion projects totalling 1,075 MW. We are also considering projects in new markets, such as Vietnam where the power demand is estimated to grow strongly at average rates in excess of 17%. Overall, the growth opportunity for International Power in Asia is considerable, and we have an experienced and focused business development team to review opportunities in both our existing and new selected markets.

Snapshot – regional market
Asia
9% of International Power’s portfolio is located in Asia
Total collective installed capacity in International Power’s existing markets in Asia: 70 GW
  • Market type: regulated markets – all long-term contracted assets
  • Fuel mix: various
  • Peak demand season: summer
  • Revenue primarily linked to plant availability
  • Typically fuel and other major costs passed through to offtaker
  • International Power’s current installed capacity in the market 1,590 MW (net)
    – 948 MW gas, 423 MW coal and 219 MW oil
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Uch, Pakistan
Uch,
Pakistan
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HUBCO, Pakistan
HUBCO,
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