Capital Structure and Project Finance Mark Williamson and Peter Barlow

Capital Structure and Project Finance Mark Williamson and Peter Barlow

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 2009 550m to be refinanced in 2010 US CCGT fleet and Hazelwood Corporate capital available for opportunities that meet our investment criteria Parent company m 700 600 500 400 300 7 200 100 Total debt 12% 88% Nonrecourse project debt Project Debt Bullet Repayments 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

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) 2023 2015 2013 2012 2008 20102013 20102026 20172025 20102019 2020 (145) (210) (604) (68) (309) (1,336) 20132019 20092020 20212030 20092012 20082018 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

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 % 100 80 60 40 20 % of debt fixed* 0 2007 2008 2009 2010 2011 2012 * Shows subsidiaries & corporate at 100% and excludes JVs and associates

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 1,200 800 400 104m Free cash flow ( m) 285m 456m 653m 2004 2005 2006 2007 Corporate Debt Project Finance Debt (IPR share) Debt raised ( m) 0 2004 2005 2006 2007 2008 (Debt defined as 100% of subsidiaries and pro rata share of JV and associate debt)

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

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

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

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

Exceptional track record Project Project finance raised US$m / Year Project Project finance raised US$m / Year ANP Funding 1 1,376 2001 Pego 930 2006 Al Kamil 99 2001 Rugeley 262 2006 Shuweihat 1,636 2001 Hidd 1,204 2006 Hazelwood 993 2002 Coleto Creek 1,165 2006 SEAgas 355 Contracted 2002 Tihama 550 2007 Umm al Nar 1,777 2003 Maestrale 1,920 Renewable 2007 EME Portfolio 865 / 2004 Fujairah F2 2,140 2007 TNP 70 2005 Pelican Point 160 2008 Ras Laffan B 697 2005 Elecgas 730 2008 Saltend 495 2005 US Peaking plants 400 2008 * Original term loan financing amounts at the 100% asset level

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

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

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 115 140bp 65 100bp 325bp Fixed underlying LIBOR 5.1% 7.4% 4.6% 3.5 5.0% / 13

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

Corporate debt funding equity and liquidity Revolving Credit Facility increased from US$640m to US$850m in October 2007 expires October 2010 22 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

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

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

Five parallel Q&A presentations Group 1 Guide: Aarti Singhal 14.00 Project Finance & O&E 14.30 Australia 15.00 Europe 15.30 North America 16.00 Middle East & Asia Group 2 Guide: Anna Hirst 14.00 Australia 14.30 Europe 15.00 North America 15.30 Middle East & Asia 16.00 Project Finance & O&E Group 3 Guide: Beth Akers 14.00 North America 14.30 Middle East & Asia 15.00 Project Finance & O&E 15.30 Australia 16.00 Europe Group 4 Guide: James Flanagan 14.00 Middle East & Asia 14.30 Project Finance & O&E 15.00 Australia 15.30 Europe 16.00 North America Group 5 Guide: Melony Nichols 14.00 Europe 14.30 North America 15.00 Middle East & Asia 15.30 Project Finance & O&E 16.00 Australia