international power plc prepared by: burakova anna kukina elizaveta kush konstantin smirnova evgenia...
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INTERNATIONAL POWER PLC
Prepared by:Burakova Anna
Kukina ElizavetaKush Konstantin
Smirnova Evgenia
Moscow 2009
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2
Summary
Buy!
International Power PLC presents an effective object for shareholder investments.
The company has a great potential in value creation for investors.
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Contents
Description of the company Financial policy analysis Operational efficiency Investment efficiency Market performance Expectations
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International Power PLC is an international energy company
It operates in 34 countries. The main region of its presence is Europe.
Activities: Electricity generation from traditional and inexhaustible
resources; Mining coal; Transporting gas. In 2004 it made investments in additional
capacity by making acquisitions in core regions of its operations
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Financial policy: company saves tries to have stable capital structure
D/E dynamics
0,00%
20,00%
40,00%
60,00%
80,00%
100,00%
120,00%
140,00%
160,00%
180,00%
200,00%
Dec-04Dec-03Dec-02Dec-01Dec-00
D/E
% D/E
In 2004 company financed its investments with both debt and additional shares.
High portion of debt belongs to the acquired company.
At the same time the other part of debt is restructured and secured by operations of the companyDynamics of interest coverage ratio presents strong position in the costs of debt
Risks are under control!
Interest covered ratio dynamics
0,000
0,500
1,000
1,500
2,000
2,500
Dec-04Dec-03Dec-02Dec-01Dec-00
po
ints
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Operational efficiency
Company controls its liquidity; Operational indicators
Positive tendencies in Holding except US’s capacities We believe, that company’s expectations will come
true by 2009-2010 years Otherwise the debt is non-recourse and the company
will continue without US portfolio
Assume client’s equity position will allow him to influence such decisions
Existing investments are managed effectively!
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Investments of 2004 will improve efficiently
North America;
77,7
Europe & Middle
East; 118,4Australia;
83,8
Asia;
Rest of world; 106,3
Asia; 98,7
Rest of world;
North America;
56,5
Europe & Middle
East; 99,6Australia; 70,5
Sales/Capacity, F’000/MW
2001 2004
Company changed its area of allocation;
Deals in 2004 will improve its investments efficiently;North America is still a problem region and presents a risk for the company. Its future stability is secured by the long contractors and recourse long term debt.
New investments are being chosen thoroughly!
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Multiples dynamics shows that Markets already takes into accountchanges in 2004 but financial statements do not.
Multiples dynamics
0
0,5
1
1,5
2
2,5
3
3,5
4
20042003200220012000
P/B
, P
/S,
po
ints
-15,00
-10,00
-5,00
0,00
5,00
10,00
15,00
20,00
25,00
P/E
, p
oim
ts
P/B P/S P/E
Market prices include investors’ expectations connected with acquired targets in 2004
Market anticipates changes positively!
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Expectations based on Simple Valuation Model show that P2005 =19.5$
Assumptions Risk free rate=5% Beta=0.9 Risk premium=4% Cost of capital=8.6% Sales in 2005=$2060m Net margin=12% Dividend repayment=40% Expected growth
rate=5.16%
gk
DivEP
2005
%payoutDivginmarNetSalesDivE
P=$19.55 by the end of 2005
Base scenario (the highest probability)
Market Value will anticipate future success!
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Attachment 1.Sensetivity analysis
######## -2% 0% 2% 4.00% 5.0% 5.2% 6.0% 6.5%
11% 5.17 6.11 7.47 9.61 11.21 11.62 13.45 14.9410% 5.60 6.72 8.41 11.21 13.45 14.05 16.81 19.219% 6.11 7.47 9.61 13.45 16.81 17.77 22.42 26.908.6% 6.34 7.82 10.19 14.62 18.68 19.87 25.86 32.028% 6.72 8.41 11.21 16.81 22.42 24.15 33.62 44.837% 7.47 9.61 13.45 22.42 33.62 37.67 67.25 134.49
Growth Rate
Re