Capital Structure and Project Finance Mark Williamson and Peter Barlow

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1 Capital Structure and Project Finance Mark Williamson and Peter Barlow

2 Capital structure overview Very secure capital structure strong liquidity at parent cash of 357m at 30 June 2008 low debt at parent 88% of total debt nonrecourse at asset level Debt maturity profile extends over considerable period for assets, debt term matches length for merchant assets, shorter repayment schedule no outstanding commitments for 2008 and very limited in m to be refinanced in 2010 US CCGT fleet and Hazelwood Corporate capital available for opportunities that meet our investment criteria Parent company m Total debt 12% 88% Nonrecourse project debt Project Debt Bullet Repayments

3 Net debt structure As at 30 June 2008 Project cash/ (debt) (1) m JVs and associates IPR offbalance sheet Corporate Total Maturity net debt (1) m m m Maturity Cash and cash equivalents Recourse debt IPR facility (revolver) Convertible bond (2023) (2) Convertible bond (2015) (2) Convertible bond (2013) (2) Non recourse debt IPM acquisition debt IPM Mitsui preferred equity North America Europe Middle East Australia Asia 1,129 (243) (151) (888) (2,927) (305) (1,120) (34) (5,668) 357 (29) (117) (453) (153) (752) 1,486 (29) (117) (453) (153) (752) (243) (151) (888) (2,927) (305) (1,120) (34) (5,668) (145) (210) (604) (68) (309) (1,336) Total net debt (4,539) (395) (4,934) (1,336) (1) Project debt is secured solely on the assets and cash flow of the project concerned (non recourse) (2) The convertible bonds are shown at their final maturity date although they can be converted earlier

4 Hedging strategy Interest rate fixed rate for approximately 70% of gross debt a 100 basis points change in interest rates ~ 0.4p change in EPS credit rating of IPR does not impact cost Foreign exchange transaction exposure hedge exposures once committed translation exposure match balance sheet assets with borrowings in local currency % % of debt fixed* * Shows subsidiaries & corporate at 100% and excludes JVs and associates

5 Funding of growth Growth funded from: nonrecourse project debt strong free cash flow project partners convertible bonds equity market Nonrecourse project finance debt at the asset level is primary source Revolving credit facility of $850mm used for working capital and to bridge fund ( m) 1,600 1, m Free cash flow ( m) 285m 456m 653m Corporate Debt Project Finance Debt (IPR share) Debt raised ( m) (Debt defined as 100% of subsidiaries and pro rata share of JV and associate debt)

6 Nonrecourse debt funding growth Nonrecourse debt is secured against the cashflows of a project, with no obligation to support from the sponsor(s) Project Finance isolates individual project risk does not generate cross defaults Compared to corporate debt clearly defined risk profile funding costs are lower tenors are longer enables higher leverage

7 The project financing process at IPR Valuation and risk analysis Develop financial structure Arrange finance Continuous performance assessment Debt optimisation Preproject completion Post completion Highly experienced in Project Finance Develop optimal structure Excellent relationship with wide range of banks (both local and international) Full capability to undertake due diligence Proactively manage the process

8 Case study: Fujairah F2 UAE Fujairah F2, greenfield 2,000MW / 130MIGD project: senior debt of US$2.1bn PreBid Request for bids November 2006 Japanese cosponsor provides access to low cost JBIC debt Commercial bank market best source for balance of project finance debt Competitive process leads to selection of Calyon, SMBC, Citi as MLA s Key terms agreed : 23 year tenor, 80% leverage, commercial debt pricing 60120bps over LIBOR Experienced sponsors and 20 year PWPA (from COD) backed by sovereign guarantee attractive to lenders : debt terms on a par with the best achieved to date Detailed terms & conditions negotiated MLA s obtain credit approval: US$2.1bn Senior Debt split 60:40 between JBIC & MLA s Bid submitted April 2007 complete with MLA commitments PostBid August 07 PWPA signed Sept Oct 07 Finance documentation negotiated Nov 07 JBIC s formal approvals completed Syndication of MLA debt launched Dec 07 Financing signed Interest rate hedging

9 A varied approach delivering solutions Key parameters: vs Cash flow volatility Leverage levels Tenors Covenants Cash sweeps Universe of banks Greenfield vs Acquisition Construction risk increases pricing Proven EPC contractor is key Contractor LDs / bonding required Standby facilities / contingencies required Renewables Leverage levels medium Tenors medium Regulatory framework is key, if no

10 Exceptional track record Project Project finance raised US$m / Year Project Project finance raised US$m / Year ANP Funding 1 1, Pego Al Kamil Rugeley Shuweihat 1, Hidd 1, Hazelwood Coleto Creek 1, SEAgas 355 Contracted 2002 Tihama Umm al Nar 1, Maestrale 1,920 Renewable 2007 EME Portfolio 865 / 2004 Fujairah F2 2, TNP Pelican Point Ras Laffan B Elecgas Saltend US Peaking plants * Original term loan financing amounts at the 100% asset level

11 Continued growth in the current market Project finance market not substantially impacted by credit crunch Project finance assets still considered attractive by lenders Banks becoming more selective favouring strong sponsors and well structured projects Some increase in pricing and reduced underwriting appetite club deals more prevalent Project finance market remains open some regional variations

12 Need for strong Bank relationships Banks want: Strong sponsors with excellent operational track record Proven technologies Simple structures Longterm offtakes / forward hedging Transparent regulatory regime Need for strong relationships with key project finance banks: Drives confidence Born out of past success Key competitive advantage

13 Terms of recent deals Fujairah F2 (December 2007) Pelican Point (February 2008) Elecgas (March 2008) US Peakers (July 2008) Amount US$2,140m A$190m 494m US$400m term/ US$108m revolver Tenor 23 year term 10 year term 27 year term 7 year term Margin 65110bp bp bp 325bp Fixed underlying LIBOR 5.1% 7.4% 4.6% % / 13

14 Optimise value from refinancing and improve IRR s Example Tihama IPP, Saudi Arabia 1,076MW Greenfield Cogeneration project Originally financed February 2004 in an amount of US$510m Refinanced June 2007, post construction Term debt increased by US$90m which resulted in an increased distribution of US$45m to IPR Debt tenor increased by 2 years to 20 Margins reduced by average 40bps Significantly improved the equity IRR Finding the right solution at the right time

15 Corporate debt funding equity and liquidity Revolving Credit Facility increased from US$640m to US$850m in October 2007 expires October banks, including most major Project Finance lenders Bilateral deals i.e. with a single bank, are limited due to the financial environment Convertible bond market open and highly receptive to IPR High Yield market presently almost closed and very expensive

16 Convertible Bond financing Highlights of existing bonds US$252m issued 2003, due 2023 Conversion premium 50%, 3.75% coupon, current exchange price 165p 230m issued 2006, due 2013 Conversion premium 35%, 3.25% coupon, current exchange price 374p 700m issued 2008, due 2015 Conversion premium 35%, 4.75% coupon, current exchange price 561p Attractiveness of convertibles to IPR Low cash cost finance High conversion premia Speed of execution Favourable market conditions capturing share price volatility

17 Summary Optimised and robust capital structure continued access to capital underpinned by strong cash flow Project Finance is a core capability and gives us competitive edge wealth of experience and excellent track record Key driver of shareholder value

18 Five parallel Q&A presentations Group 1 Guide: Aarti Singhal Project Finance & O&E Australia Europe North America Middle East & Asia Group 2 Guide: Anna Hirst Australia Europe North America Middle East & Asia Project Finance & O&E Group 3 Guide: Beth Akers North America Middle East & Asia Project Finance & O&E Australia Europe Group 4 Guide: James Flanagan Middle East & Asia Project Finance & O&E Australia Europe North America Group 5 Guide: Melony Nichols Europe North America Middle East & Asia Project Finance & O&E Australia

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