IP struggles under US debt burden

THE shadow of £500m of American debt is continuing to loom large at International Power as the troubled energy group told investors that the US and British electricity markets are still giving it a major financial headache.

IP, the international arm of the privatised former National Power group, today reported continuing losses at its US electricity generating plant for the first quarter of the year and said it cannot make proper returns in the UK either.

Its operations in New England and Texas, written down by £400m a couple months ago, made a £4m loss in the three months.

The City has speculated that IP could yet walk away from the US market although insiders say the company is intent on refinancing or restructuring the $890m it owes banks led by Citigroup and Deutsche Bank, which funded its US expansion.

But that process remains slow, says chief executive Phil Cox, who has imposed a summer deadline of sorting a situation in which it is struggling to meet its US interest payments.

The debt is non-recourse, meaning that it is ring-fenced from its profitable operations elsewhere in the world.

IP's interest in the UK market, mainly at its Rugeley plant in the West Midlands, also remains a problem. UK prices, say the company, 'remain well below levels required to enable plants to generate sound financial returns'.

First-quarter pre-tax profit was £51m, up 6% from last time, and that was before an £11m windfall from the sale of interests in Spain.

Although the company has spent much of its recent history lurching from crisis to crisis and is on its third chief executive in 18 months, the shares were today up 1 1/4p at 145 1/2p, close to a two-year high as the company reiterated its forecast of earnings per share for the year of between 7p and 9p. First-quarter earnings were 2.9p.

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