International Power PLC (IPR.L,IPR), an independent power generation company, said Wednesday that it expects earnings per share in 2009 to be broadly in line with 2008. The company had previously said that it expects lower profitability in 2009, compared to 2008. In an interim management statement for the period between July 1 and November 10, the company said today that its performance in Europe and Australia are ahead of expectations, while the U.S. Markets remain challenging due to weak gas prices and a decline in demand.
The UK-based company's principal activities include the development, acquisition and operation of power generation plants. It also does activities such as desalination, retail and district heating. The company has operations in 21 countries across North America, Europe, Middle East, Australia and Asia.
Noting that the U.S. merchant markets remain challenging due to weak gas prices and lower demand, the company said in Texas it now expects 2009 spreads and load factors to be marginally down from the guidance given on August 11. However, expected 2009 spreads and load factors in New England remain in line with the previous guidance.
In August, the company said it expects Spark spread of $14/MWh for Texas (Hays), $13/MWh for Texas (Midlothian) and $26/MWh for Texas (Coleto Creek). Load factors for the three were then expected to be 55%, 35% and 95%, respectively.
In the UK, First Hydro benefited from higher margins in the short-term market and increased ancillary services revenue due to reduced plant availability in the system. Saltend continued its strong operational performance and the expected spark spread improved as a result of capturing lower market gas prices. Rugeley and Deeside continue to perform in line with the company's expectations, the utility said.
During the period, Australia continued to perform well and the expected spread and load factor for Hazelwood remain in line with the company's expectations. In the Middle East and Asia, the company's long-term contracted portfolio continues to operate well.
The company noted that Group profitability benefited from a weakening of sterling against the euro, the Australian dollar and the Czech koruna.
Among other events during the period, in October, the company completed the acquisition of AIM PowerGen Corporation, an independent wind farm developer in Canada, for a total cash consideration of C$119 million.
The company had said earlier that it is selling its Czech business to Czecho-Slovak investment firm J&T Group for GBP 738.3 million. The transaction received unconditional clearance from the Czech competition authorities on November 6 and is expected to complete later this month. Results of 2009 will include the benefit of a dividend received from Pražská Teplárenská, 49% owned by International Power, in July this year.
The company said it is actively evaluating new projects for potential developments in Morocco, Saudi Arabia, Oman, Indonesia, Thailand and Vietnam.
International Power noted that the Hazelwood refinancing of A$445 million and the US combined cycle gas turbine fleet refinancing of US$769 million are due next year in February and July, respectively. The company is considering various refinancing options.
Looking ahead, the company said forward margins in its U.S. and UK markets remain challenging, reflecting lower demand and weak gas prices. However, the company believes that the fundamentals of its business remain attractive with global demand for additional power generation driving growth, particularly in developing economies.
Philip Cox, CEO of International Power, said: "We continue to benefit from strong operational performance and our diversified international portfolio. We now expect 2009 EPS to be broadly in line with 2008, and free cash flow to be significantly ahead of last year."
In August, the company said that for the six months ended June 30, 2009, its profit before tax surged to GBP 579 million from GBP 2 million in the year-ago period, primarily reflecting a mark-to-market gain. Profit attributable to equity holders of the parent increased to GBP 402 million from GBP 8 million. On a per share basis, the company reported a profit of 24.6 pence, compared to a loss of 0.4 pence last year. Group revenue from continuing operations for the first-half increased to GBP 1.913 billion from GBP 1.066 billion in the first-half period of last year.
At that time, the company also maintained that it expects profitability in 2009 to be lower than in 2008 due to the absence of a significant improvement in pricing in the U.S. and the UK. This outlook was an affirmation of the forecasts given earlier in March and May.
IPR.L is currently trading at 269 pence, up 11.80 pence or 4.59%, on 2.67 million shares.
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