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Preliminary Results

Preliminary Results. Year ended 31 December 2008. Philip Cox. Chief Executive Officer. 2008 highlights. Strong financial performance profit from operations of £1,050m (2007: £904m) EPS of 32.4p (2007: 27.1p) free cash flow of £513m (2007: £653m)

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Preliminary Results

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  1. Preliminary Results Year ended 31 December 2008

  2. Philip Cox Chief Executive Officer

  3. 2008 highlights • Strong financial performance • profit from operations of £1,050m (2007: £904m) • EPS of 32.4p (2007: 27.1p) • free cash flow of £513m (2007: £653m) • full-year dividend of 12.15p per share proposed - up 20% • Profit from operations up in all regions • strong growth in Australia and North America • good performance of European assets offsets Rugeley outage • consistent performance from Middle East and Asia • Continued growth • 3GW (net) of capacity additions announced in 2008 • acquisitions: US peaking plants, Turbogás, Uch • greenfield: Elecgas, T-Power, wind

  4. Financial Review Mark Williamson Chief Financial Officer All numbers in this presentation exclude exceptional items and specific IAS 39 mark to market movements, unless stated otherwise

  5. Income statement % change 2008£m 2007£m Constantcurrency Reported Year ended 31 December North America Europe Middle East Australia Asia Corporate costs Profit from operations Interest PBT Tax Minority interest Profit for the year EPS DPS 177 581 69 168 104 (49) 1,050 (368) 682 (123) (69) 490 32.4p 12.15p 136 574 68 82 96 (52) 904 (308) 596 (113) (77) 406 27.1p 10.16p 30% 1% 1% 105% 8% (6%) 16% 19% 14% 9% (10%) 21% 20% 20% 9% 13%

  6. North America • Improved contribution from Hays • higher south zone demand in Q2 2008 • congestion in south zone • outage in 2007 • Reduced load factor at Midlothian • mild weather in H1 2008 • Coleto Creek higher load factor • dust emissions control equipment installed 2007 • Reduced load factor at New England • lower off peak running and cooler summer • capacity payments underpin PFO • IPA Central first time contribution • capacity payments underpin PFO • Milford PPA expired January 2009 • exceptional charge of £37m Profit from operationsup 30% £177m £148m £136m £108m £29m £28m 2007 2008 Subsidiaries Share of JVs and associates

  7. Europe Significant reduction in Rugeley’s earnings record achieved dark spreads in 2007 extended outage and delayed FGD in 2008 Saltend – high load factor Strong performance at First Hydro and Deeside benefiting from low plant availability in the UK record performance from First Hydro* Profit from operationsup 1% £581m £574m £521m £500m £81m £53m 2007 2008 Subsidiaries Share of JVs and associates * First Hydro Holdings reports PBIT of £176m (2007: £133m) under UK GAAP

  8. Europe Maestrale first full-year contribution – acquired August 2007 low wind levels in 2008 ISAB benefited from a rise in oil prices limited impact of major incident in October 2008 CIP6 tariff step down in November 2008 Czech Republic strong performance as power prices tracked high German power prices All other European assets delivered a consistent performance

  9. Middle East Strong operational performance across Middle East portfolio Completed construction at Ras Laffan B in June 2008 Hidd achieved full commercial operation in May 2008 2007 benefited from development fee for Fujairah F2 Profit from operationsup 1% £69m £68m £44m £43m £26m £24m 2007 2008 Subsidiaries Share of JVs and associates

  10. Australia Significantly improved contributions from Hazelwood and Loy Yang B Synergen able to capture high spot prices Simply Energy 100% owned additional route to market Other assets performed well Stamp duty agreed on Loy Yang B £20m exceptional charge Profit from operationsup 105% £168m £164m £82m £83m (£1m) £4m 2007 2008 Subsidiaries Share of JVs and associates

  11. Asia Malakoff sold in May 2007 Strong performance from Paiton Acquisition of additional 31% of Uch Pakistan overdue receivable is US$149m no earnings impact Profit from operationsup 8% £104m £96m £15m £14m £89m £82m 2007 2008 Subsidiaries Share of JVs and associates

  12. Interest cover and effective tax rate 2008 2007 £m £m Year ended 31 December PFO JVs and associates Interest Tax PBIT Total interest Subsidiaries JVs and associates Interest cover Profit before total tax Total tax Subsidiaries JVs and associates Effective tax rate Profit after tax 1,050 99 31 130 1,180 (368) (99) (467) 713 (123) (31) (154) 559 904 91 60 151 1,055 (308) (91) (399) 656 (113) (60) (173) 483 2.5x 2.6x 22% 26%

  13. Free cash flow 2008 2007 £m £m Year ended 31 December Operating cash flow from subsidiaries Dividends - JVs and associates Capex - maintenance Cash generated from operations Net interest paid Tax paid Free cash flow 971 135 (108) 998 (399) (86) 513 992 145 (71) 1,066 (312) (101) 653 • 2007 free cash flow enhanced by: • one-off timing benefit of working capital reductions (including early US cash receipts) • lower than average maintenance capital expenditure in 2007 • 2008 free cash flow impacted by: • build up of coal stock at Rugeley (£70m) • interest increased – FX and acquisitions • Maintenance capital expenditure for 2009 estimated at £160m

  14. Movement in net debt 2008 2007 Year ended 31 December £m £m Free cash flow Growth capex Acquisitions and investments Disposals Dividend paid FX & other Net receipts from / (payment to) minorities Change in net debt Opening net debt Debt acquired Closing net debt 513 (156) (680) - (166) (1,193) 28 (1,654) (4,662) (2) (6,318) 653 (160) (842) 418 (160) (250) (35) (376) (3,575) (711) (4,662) • 2008 closing net debt at 2007 FX rates £4,998m

  15. Balance sheet 31 December 2008 30 June 2008 £m £m Non-current assets Goodwill and intangibles PP&E Investments Other long-term assets Net current liabilities Non-current liabilities Net debt Net assetsGearing Debt capitalisation 1,137 7,318 1,803 1,943 12,201 (137) (1,611) (6,318) 4,135 153% 60% 991 5,961 1,480 1,626 10,058 (644) (1,473) (4,934) 3,007 164% 62% • Net debt of JVs and associates £1,820m (30 June 2008: £1,336m)

  16. Net debt structure JVs and associatesoff-balance sheetnet debt Project cash/(debt) IPRCorporate Total Maturity Maturity As at 31 December 2008 £m £m £m £m Cash and cash equivalents Recourse debt Convertible bond (2023) Convertible bond (2015) Convertible bond (2013) Non-recourse debt IPM - acquisition debt North America Europe Middle East Australia Asia Total net debt 775 - - - - (306) (1,457) (3,227) (410) (1,103) (44) (6,547) (5,772) 354 (149) (560) (191) (900) - - - - - - - (546) 1,129 (149) (560) (191) (900) (306) (1,457) (3,227) (410) (1,103) (44) (6,547) (6,318) 2023 2015 2013 2012 2010-2015 2010-2026 2016-2025 2010-2019 2020 - (197) (297) (864) (68) (394) (1,820) (1,820) 2010-2019 2009-2035 2021-2030 2009 2011-2018 • Notes • Project debt is secured on the assets and cash flow of the related project (non-recourse) • The convertible bonds are shown at their final maturity date although they can be converted earlier

  17. 2008 project debt financings PelicanPoint Elecgas IPA Central T-Power Month February March July December Region Australia Europe North America Europe Merchant/PPA Merchant PPA Merchant PPA Project debt A$190m €494m US$400m term €391m Tenor 10 year term 27 year term 7 year term 23 year term Margin 115 – 140bp 65 – 100bp 325bp 170 – 220bp Fixed underlying swap rate 7.4% 4.6% 3.5-5.0% 4.0%

  18. T-Power case study Financial close 19 December 2008 420MW CCGT power plant in Belgium €391m of non-recourse debt raised with margin of 170 – 220bp and underlying swap rate of 4.0% achieved given: full turn-key EPC contract 15-year (option for five year extension) tolling agreement with Essent Trading International S.A. Success factors strong relationship with banks reputation for operational excellence high quality partners – Siemens Project Ventures (33%) and Tessenderlo Chemie (33%)

  19. Project refinancings No material refinancings in 2009 Corporate revolver renewable in October 2010 Projectrefinancing Amount (local currency) Due Comments 2009 • Infrastructure project with contracted income SEA Gas A$140m December 2009 2010 • Low leverage • Previously refinanced in challenging times US CCGT US$769m July 2010 Hazelwood A$445m February 2010 • Awaiting details of CPRS

  20. Financial summary PFO (£m) Free cash flow (£m) £1,050m £904m £653m £773m £513m £456m £536m £285m £222m £104m 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Earnings per share (pence) Dividendper share (pence) 12.15p (1) 32.4p 10.16p 27.1p 7.9p 22.4p 14.6p 4.5p 8.6p 2.5p 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 (1) Proposed dividend

  21. Philip Cox Chief Executive Officer

  22. Significant decline in spot and forward prices since H2 2008 economic downturn rapid decline in gas prices reduced trading liquidity Long-term market fundamentals attractive TXU filed to retire an additional 3,836MW of capacity south zone supply and transmission constraints limited new-build wind generation – low load factors 2009 contracted position gas plant lightly contracted Coleto Creek highly contracted in 2009 quoted spreads for 2009 assume no recovery in forward market Market update - Texas ERCOT reserve margin 20 % Downside case Base case 15 10 Target reserve 5 0 2009 2010 2011 2012 2013 2014 2015 2016 Downside case reflects demand reduction in 2009 and 2010

  23. Market update - New England Capacity payments - an important and secure income stream capacity payments accounted for some 50% of Blackstone and Bellingham 2008 PFO payment levels fixed through May 2012 Reserve margin increasingly dependent on demand side management cumulative demand side management 3GW represents 9% of reservemargin reliance on older, less efficient capacity increased volatility on high demand days majority of new-build in Connecticut limited impact on our plants could lead to shut down of 2,660MW RMR plants CO2 – RGGI auctions held latest auction cleared at $3.38/ton IPR portfolio well positioned New England reserve margin 40 Including demandresources % 30 20 Excluding demandresources 10 Target reserve 0 2009 2010 2011 2012 2013 2014 2015 2016 Reserve margin reflects reduced demand growth and additional supply following latest capacity auction

  24. Market update - PJM 1,857MW modern portfolio of peaking plants acquired in 2008 all assets integrated into existing portfolio and delivering a good operational performance PJM capacity auction expected to reflect lower demand growth forecasts however impact to be offset by 3,300MW of Duquesne demand which rejoined PJM anticipated approval of higher Cost of New Entrant (CONE) level by FERC Overall, smaller impact of weaker market conditions on peaking plants due to low load factors - generally <5% Returns largely underpinned by capacity payments fixed until mid 2012

  25. UK market update Very tight market conditions in 2008 driven by significant plant outages delays in fitting FGD to coal plants Record performance at First Hydro, strong performance at Deeside in 2008 Supply constraints expected to ease in 2009 nuclear and coal plant on outage in 2008 returns to service additional new capacity comes online Longer-term - general plant availability/reliability concerns remain Plant Availability 80 GW Headline availability 70 Week ahead availability 60 50 Weekdaypeak demand Outturn availability 40 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2008

  26. UK 2009 commercial summary Reduction in forward market spreads significant capacity returned to service late 2008/early2009 but First Hydro and Deeside well positioned to benefit from short-termmarket volatility Rugeley 2009 expected clean spread revised from £18/MWh to £15/MWh (£20/MWh pre-carbon) delay in FGD installation the primary factor higher costs through extended use of ultra-low sulphur coal impact significantly offset by reduction in carbon price output and availability maintained despite FGD delay some reduction in gas hedge profitability – reduced spark spreads gas hedges primarily used when liquidity is low in forward power market 2010 clean spread now expected at £21/MWh includes some benefit from rescheduling of coal deliveries Saltend continues to benefit from high availability and favourable gas contract

  27. Attractive long-term market fundamentals increasing unreliability of aging fleet restricted running of opted-out 8GW coal plant and 4GW oil fired plant potential closure well before 2016 ongoing retirement of nuclear capacity wind generation – limited contribution to reserve margin forward spreads do not provide economic signal for new-build Our flexible, diverse portfolio will maximise value in the UK UK market long-term outlook UK reserve margin 40 % 30 Including firm new-build, approved & applied projects 20 Including firm new-build 10 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Forecast reserve margin updated to reflect reduced demand growth

  28. Europe - continental assets Strong performance in Czech Republic 2008 achieved prices up on previous year 65% of 2009 output contracted - at price levels largely similar to 2008 carbon - sufficient allocations for phase II phase III – derogation for Czech Republic, full auctioning may not apply Iberia strong operational performance from Turbogás and Pego benefit of increased ownership at Turbogás FGD and SCR at Pego complete construction of Elecgas on track Wind good operational performance lower than expected load factors new Italian decree underpins CV prices confirms government drive to maintain attractive economics for renewable generation

  29. Europe - update on growth T-Power • Backed by long-term offtake contract, secure contracted earnings and cash flow stream • Attractive return on investment 420MW, CCGT under construction in Belgium • Third major asset in attractive Portuguese market • Excellent example of growth opportunity sourced from existing asset • Construction programme on track • Secure offtake contract with Endesa 830MW, CCGT under construction in Portugal Elecgas • Increased ownership of existing asset • High quality asset with strong operational and financial track record 1,008MW, CCGT acquisition in Portugal Turbogás 81MW brought online in Italy, Germany, France 30MW under construction, Italy • European wind portfolio now at 1,179MW • Leveraging acquired skills and relationships to drive organic growth Wind 840MW, CCGT under development in the Netherlands • Financing discussions proceeding well • Tolling contract still under negotiation Enecogen

  30. Middle East Strong operational performance across portfolio average commercial availability of 97.3% 100% commercial availability at Umm Al Nar, UAE Construction completed at Ras Laffan B, Qatar 1,055MW power, 60MIGD water; IPR ownership 40% desalination capacity commissioned ahead of schedule can deliver 26% of Qatar’s peak power demand and 29% of peak water demand 60MIGD desalination expansion completed at Hidd, Bahrain total desalination capacity now 90MIGD; IPR ownership 40% Hidd supplied 50% of Bahrain’s total water demand in 2008 Construction programme on track at Fujairah F2, UAE 2,000MW power; 130MIGD desalination; IPR ownership 20% first gas turbine, generator and desalination unit delivered to site full commercial operation expected Q3 2010

  31. Middle East - market backdrop Limited impact of global financial crisis IPR present in stronger markets – UAE (Abu Dhabi & Fujairah), Oman, Qatar, Saudi Arabia, Bahrain Power/water demand growth rates still attractive, driven by continued economic and population growth diversification of economies Substantial new power and water capacity required over the next 6-8 years 50GW power and 2,000MIGD desalinated water Expected bids in 2009: Potential IPRshare % Project Country Capacity Marafiq 2 - Yanbu SEC IPP2 (Riyadh) Ras Tanura IWSPP Taweelah C/Shuweihat S3 Tarfaya (Wind Farm) Safi Saudi Arabia Saudi Arabia Saudi Arabia Abu Dhabi Morocco Morocco 1,700MW, 35 MIGD 2,000MW 1,000MW 1,500MW, 100 MIGD 300MW 1,320MW 30% 20% 60% 20% 50% 37.5%

  32. Significant improvement in results across the portfolio Forward prices holding up impact of severe heat wave in Q1 2009 demand exceeded total supply on two occasions trading liquidity post mid 2010 remains low Overall, no major change in supply/demand fundamentals Australia market update Victoria and South Australiareserve margin 30 % 20 10 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 With new-build Without new-build

  33. Australia - carbon legislation White Paper published in December 2008 with further details on emissions trading scheme scheme to be launched in July 2010 proposal to reduce CO2 emissions between 5% and 15% by 2020 (from 2000 levels) White Paper recognised importance of brown coal generation A$3.9bn assistance package announced Hazelwood and LYB eligible to receive emission permits with no charge applied CPRS - draft legislation published yesterday no obvious change to principles in White Paper final legislation targeted mid 2009 Major uncertainties remain final target and trajectory for reduction of CO2 auction design for emission permits quantum and term of permits with no charge applied forward price curves – very limited trading

  34. Asia - performance and growth Assets in Indonesia and Thailand continue to perform well Pakistan good operational performance – high load factors overdue receivables $149m majority of current receivables being paid significant support package to clear overdues key IMF condition for Government to implement plan to clear energy sector overdue receivables Indonesia - Paiton 3 development project progressing well financial close expected Q2 2009 Vietnam Nghi Son II (1,200MW – coal-fired IPP) and other coal-fired opportunities

  35. Summary and outlook Strong performance in 2008 EPS of 32.4p up 20% full-year dividend of 12.15p proposed - up 20% continued growth with 3GW (net) of capacity additions announced in 2008 2009 long-term contracted assets continue to perform well absent significant recovery in the US and the UK, profitability in 2009 likely to be lower than in 2008 expect to deliver strong free cash flow in 2009 Strong financial position with robust capital structure

  36. Appendix

  37. Analysis of net debt £m 2008 2007 £m % % Net debt By currency US dollar Euro Australian dollar Czech koruna Other Foreign currency Sterling Total 2,026 2,517 1,038 167 43 5,791 527 6,318 32% 40% 16% 3% 1% 92% 8% 100% 1,427 1,651 978 103 30 4,189 473 4,662 31% 35% 21% 2% 1% 90% 10% 100% • Closing net debt at 2007 FX rates £4,998m

  38. Exceptional items and specific IAS 39 MTM 2008 2007 SpecificIAS 39MTM SpecificIAS 39MTM Exceptional Items Exceptional Items Total Total Year ended 31 December £m £m £m £m £m £m North America Europe Middle East Australia Asia Regional total Corporate PFO Disposals - Malakoff sale - disposal to Mitsui Net finance income / (expense) Profit /(loss) before tax Income tax (charge) / credit Profit for the period 16 77 (1) 71 - 163 - 163 - - 127 290 (92) 198 (37) - - (20) - (57) - (57) - - - (57) 59 2 (21) 77 (1) 51 - 106 - 106 - - 127 233 (33) 200 (21) (135) - (173) (1) (330) - (330) - - (16) (346) 96 (250) - (56) - - - (56) - (56) 115 174 - 233 63 296 (21) (191) - (173) (1) (386) - (386) 115 174 (16) (113) 159 46

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