International Power plc Ordinary 50p Shares (IPR)

Company overview

International Power plc is a major electricity generating company with 34,408MW gross (20,949MW net) in operation and 4,502MW gross (1,393MW net) under construction. International Power has power plants in operation or under construction in Australia, the United States of America, the United Kingdom, Belgium, Canada, France, Germany, Italy, the Netherlands, Portugal, Spain, Turkey, Bahrain, Oman, Qatar, Saudi Arabia, the UAE, Indonesia, Pakistan, Puerto Rico and Thailand. The company which began life as part of the privatised National Power group was created following its demerger from National Power in October 2000. The group is listed on the London Stock Exchange and is a constituent of the FTSE-100 index.

HL Comment (8 February 2012)

Against a backdrop of economic weakness in many developed economies, International Power reported  higher full year profits helped by continued strength in its international markets, and said it was on track to deliver more growth in 2012. The company stated this would principally be driven by full year contributions from new plants that became operational in late 2011 where new capacity is expected to come on line during 2012. The group added that its construction programme was progressing well and it expected a further 6.3GW gross (3.5GW net) of capacity to become operational by 2014. Preliminary results for the year ended 31 December 2011 saw net income of €1.38 billion, higher than €613 million a year earlier. Revenue grew to €16.17 billion from €11.38 billion in the prior year.

Negative Points:

• Management warned that its target of delivering core earnings of 1 billion euros from projects under construction in 2013 could prove challenging without a recovery in prices for hydro generation in Brazil.
• Concerns persist over the group's largest new project in Jirau, Brazil prompted by issues such as labour relations, delays to new transmission lines and environmental issues causing the project to overrun by 20%.
• Growth will be impacted by contracts rolling off in North America and fewer expected Liquefied Natural Gas (LNG) diversions, said the company.
• The group is exposed to adverse legislation changes on issues such as carbon emissions.
• Volatile commodity markets in places such as North America and Australia are an ongoing concern.
• The group operates in areas such as the Middle East and Asia, where there is greater than average risk of political/economic instability that could place contracts under threat.

Positive Points:

• Group results benefited from strong organic growth in Latin America.
• The company confirmed that cost synergies of €135 million were delivered in 2011, 50% ahead of the original target.
• In a deal announced in 2010, and completed in February 2011, International Power combined with French utility GDF Suez (who became majority shareholders with a 70% stake) to create the world's largest independent power producer.
• There is a significant pipeline of development projects in Emerging Markets backed by strong competitive position.
• The Board is proposing a final dividend of 6.6 cents per share, bringing the full-year dividend to 11.0 cents per ordinary share.

Consensus:
On balance, market consensus indicates a buy.

All yield figures are variable and not guaranteed.

Fundamental Data

Values are quoted in the stock's local currency: Euro.

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS (€)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
31-12-2011	16,167.00	2,371.00	0.28	14.40	n/a	(8.00)	0.11	2.70
31-12-2010	11,382.00	1,224.00	0.29	17.10	n/a	(17.00)	0.13	2.40
31-12-2009	4,155.53	1,458.89	0.73	10.10	1.30	8.00	0.14	3.80
31-12-2008	3,998.29	1,206.50	58.08	8.40	n/a	(8.00)	12.71	5.30
31-12-2007	3,165.25	657.56	0.46	14.60	0.40	38.00	0.14	2.60