International turns on the power

INTERNATIONAL Power, the UK-listed global energy generator, shrugged off a turbulent year in world electricity markets to deliver a 48% leap in underlying profits for 2001 today.

Despite the shock waves of the California energy crisis at the start of the year and the collapse of Enron at the end of 2001, IP produced profits before tax, interest and exceptional items of £326m. At the pre-tax line it reported profits of £204m against a pro forma loss of £53m in 2000, the year it split from National Power.

But the company, which does a quarter of its £1.1bn turnover in the US, warned: 'In the near term, we continue to face weak prices in selected wholesale markets, principally Texas and the UK. The price environment continues to be driven by concerns on the economy, cyclical supply/demand imbalances and by recent mild weather patterns.

'These prevailing market conditions should improve as a result of the enhanced prospect for economic recovery and the substantial contraction in project development and new construction activity.'

Positive cashflows of £333m helped reduce debt by 16% to £897m. The shares hit a high of 327p last summer before diving after the 11 September terrorist attacks on the US. However, they have come back from a low of 173p and opened today at 193p. In line with company policy of conserving cash, IP is paying no dividend.

At its third-quarter results in November, IP chief executive Peter Giller, the only senior British company boss to pay himself solely in shares, said: 'Current power and financial markets are causing some generation sector participants to re-evaluate their business strategy and realign their asset position. Our strengthened balance sheet enhances our ability to pursue these opportunities.'

Assets that have come on to the market include 4,500 megawatts of assets in the portfolio of failed energy trader Enron. Some of that plant is in Italy, where IP is already developing greenfield sites.

In the Enron portfolio is also the massive gas-powered station at Teesside. IP all but exited the UK market when it demerged from Innogy 18 months ago but has since reentered with the £200m acquisition of Rugeley power station in Staffordshire.