International Power will make £45m less than expected this year because of a series of unexpected problems at Rugeley, its coal-fired power station in Staffordshire.
The company, which has power generation interests in 20 countries, and had been expected to make full-year profits of £700m in 2008, is suffering difficulties with both of its generators at Rugeley, it said yesterday. One unit is now expected to remain completely offline until the end of September with the failure of a key component stalling a restart of the plant, which was taken out of service for recommissioning earlier this year. International Power said the second unit was operating at limited capacity because it does not yet comply with new emissions regulations.
Philip Cox said such outages, which have also hit its Hazelwood plant in Australia, were very difficult to plan for. "These one-offs are very frustrating," Mr Cox said. "The underlying business is strongly profitable." International Power made a profit of £495m in the first half of the year, a 19 per cent increase on the first six months of 2007. It is also expanding: it paid £432 for four US power plants last month. In May, it announced a €500m (£395m) bond issue to finance further deals.
"We can grow by building additional capacity on existing sites, increasing ownership in other assets, or by new build, such as in the Middle East and South-east Asia," Mr Cox added. Despite increases in the cost of building new electricity stations and International Power's short-term problems with outages, analysts believe it is well placed as demand for power soars.
Edmund Reid, of JP Morgan Cazenove, said: "The market may be disappointed by the issues at Rugeley, but we believe the key is the outlook for the business, which remains strong."
International Power also announced an increase, by almost a third, in its interim dividend yesterday. Nevertheless, the company's warning on profits hit its shares, which fell 3.3 per cent to close at 407p last night.