1. International Financial Reporting Standards - IFRS

2. 2 Introduction  All UK listed companies required to report under IFRS from 1 January 2005  International Power plc’s first results reported under IFRS will be Q1 2005  To assist with the transition to IFRS, International Power plc is presenting its 2004 results as they would appear under IFRS  The amounts presented for the Group’s 2004 IFRS results are unaudited  2005 reporting under IFRS will include the relevant 2004 IFRS results as comparatives

3. 3 The Group results under IFRS have been prepared from the UK GAAP results through the application of the appropriate IFRS adjustments. The Group will continue to monitor future developments in IFRS reporting and any further guidance issued by the IASB prior to full adoption. The transitional arrangements for the Group’s implementation of IFRS reporting and the valuation of the adjustments presented here will be finalised upon full adoption of IFRS reporting. The amounts presented for the Group’s 2004 IFRS results have not been audited. In due course 2004 results under IFRS will be subject to audit and will take into account further developments and guidance in the practical implementation of IAS 39. Basis of preparation

4. 4 The Group intends to implement IFRS using the following transitional options as provided under IFRS 1 and the numbers presented have been prepared on this basis:  IFRS 3 Business Combinations will not be applied to combinations before 1 January 2004  IAS 16 Fixed Assets will be recognised at existing netbook values on adoption of IFRS  IAS 39/32 Derivatives, including convertible bonds, will not be retrospectively marked to market in 2004  IAS 21 Cumulative Foreign exchange differences in reserves will be deemed to be zero on adoption of IFRS In addition, an assessment of the impact of IAS 39 and 32 on the 2004 results is also included in the presentation. These impacts are separately presented for clarity and to provide an indication of the volatility experienced in 2004. Basis of preparation (continued)

5. 5 Summary of impact of IFRS Converting from UK GAAP to IFRS does not have a significant impact on our 2004 results. Further developments and guidance 0n IFRS reporting may impact the 2004 results shown above although we do not anticipate a material change. Year ended 31 December 2004 UK GAAPIFRS £m excluding IAS 32/39 including IAS 32/39 Excluding exceptional and non recurring items Profit before interest and tax287288289 Profit for the financial year108112107 EPS (basic) 8.3p8.6p8.2p Including exceptional and non recurring items Profit before interest and tax302303304 Profit for the financial year949894 EPS (basic) 7.2p7.5p7.2p Shareholders' equity1,8251,8331,799 Presented under UK GAAP format – detail shown in the appendix Proforma

6. 6 Main standards impacting on IPR Main areas impacted by IFRS in 2004  Employee benefits (IAS 19) - Pensions  Income taxes (IAS 12) - Deferred tax  Impairment of assets (IAS 36) - Goodwill  Share based payments (IFRS 2)  Events after the Balance Sheet date (IAS 10) - Dividends Other standards which impact future reporting  Financial instruments: recognition and measurement (IAS 39) - derivatives  Financial instruments: disclosure and presentation (IAS 32) - convertible bonds

7. 7 Pensions (IAS 19) UK GAAP  SSAP 24 accounting  FRS 17 disclosure IFRS  Pensions surpluses and deficits recognised in full on 1 January 2004  Corridor method elected  Future actuarial gains and losses recognised to the extent they exceed the greater of 10% of gross assets and gross liabilities  Amount recognised in the following year is the excess amortised over the remaining average service lives of the employees in the schemes Impact on IPR in 2004  Reduction in pension charge of £1m  Net liabilities of £11m recognised on adoption

8. 8 Impact on IPR in 2004  Deferred tax credit of £1m in respect of movements in temporary differences arising from Rugeley acquisition  Net deferred tax liabilities of £31m recognised on adoption in relation to Rugeley  Net deferred tax liabilities increased to £281m at end 2004 due to acquisitions in the year Deferred Tax (IAS12) UK GAAP  Deferred tax provided on timing differences  Deferred tax assets and liabilities are not discounted by choice IFRS  Deferred tax provided on temporary differences with a corresponding adjustment to goodwill  No option to discount available  Deferred tax assets and liabilities recognised on fair value adjustments on acquisition

9. 9 Impact on IPR in 2004  Reversal of UK GAAP amortisation of £2m in the year  Negative goodwill of £6m written back on adoption Goodwill (IAS 36) UK GAAP  Goodwill amortised over useful life, assumed to be no greater than 20 years IFRS  No amortisation of goodwill permitted  Goodwill assessed for impairment each year and where there is indication that the carrying value may not be recoverable

10. 10 Share based payments (IFRS 2) UK GAAP  No profit and loss account charge for ESOP schemes  Cost of share schemes is based on cost of shares purchased to meet grants under the schemes IFRS  Charge for ESOP schemes based on actuarial valuation of the fair value of the option at the time of granting  Charge for share schemes based on actuarial valuation of the fair value of the scheme at the time of granting Impact on IPR in 2004  No significant impact on operating profit  £1m deferred tax credit derived from option year end market value  Net assets of £2m recognised on adoption

11. 11 Dividends (IAS 10) UK GAAP  Dividends accrued when proposed by the Board IFRS  Dividends accrued when approved by the AGM  No accrual of proposed final dividend in Annual Report and Accounts Impact on IPR in 2004  2004 proposed dividend of £37m not accrued under IFRS

12. 12 Derivatives (IAS 39) UK GAAP  Speculative transactions marked to market each year and the period movement taken through the profit and loss account  Hedge derivatives recognised in the same period as the hedged transaction affects earnings. Off balance sheet hedges are disclosed under FRS 13 IFRS  All derivatives are recognised on the balance sheet and marked to market each year  Movements in derivatives qualifying for cash flow hedge accounting are taken to reserves and are transferred to the profit and loss account in the same period as the hedged transaction affects earnings  Movements in derivatives not qualifying for hedge accounting are taken through the profit and loss account in the current year Impact on IPR in 2004  No impact on 2004 if IAS 39 is not implemented retrospectively  Estimated retrospective impact of IAS 39 is a £2m decrease in profit as a result of the amortisation of US facility fees written off under UK GAAP but reinstated under IFRS. In addition, there would be an exceptional increase in profit of £21m, as the exceptional charge, taken in 2004 under UK GAAP, would have crystallised in 2003 under IFRS.  Net assets of £1m recognised on adoption including the impact of the convertible bond

13. 13 UK GAAP  Accounted for as debt  No mark to market Impact on IPR in 2004  No impact on 2004 if IAS 39 is not implemented retrospectively. IAS 32 is implemented alongside IAS 39  Estimated retrospective impact of IAS 32 is a £20m exceptional charge resulting from mark to market changes on an embedded derivative in the convertible bond. In addition there is a charge of £4m due to accretion of the discounted value of the debt.  The embedded derivative option of the convertible bond was closed out in January 2005 and no future mark to market is required as the bond is now debt with an equity component Convertible bonds (IAS 32/39) IFRS  Split accounting of instrument as debt, options and other embedded derivatives  Non debt element marked to market if any embedded derivatives present

14. 14. In summary  Impact on 2004 results is minimal  Additional deferred tax and goodwill recognised on the balance sheet under IFRS. However, impact on net assets is minimal  2005 earnings guidance confirmed at 11.0 - 12.5p under IFRS

15. Appendix

16. 16 Group profit and loss account under IFRS Exceptional and non recurring items included to aid comparability with UK GAAP presentation. Appropriate presentation will be considered for 2005 results. Consolidated Profit and Loss Account Year ended 31 December 2004 UK GAAP as presented in IFRS format IAS 12 Income IAS 19 Benefits IFRS 2 Share Payments IAS 10 - Post Balance Sheet Events Others including IAS 36 Impairment IAS 32/39 Financial InstrumentsIAS 32/39 Revenue: Group and share of associates and joint ventures 1,267 1,268 Less: share of associates and joint ventures revenue (499) Group Revenue 768 - - - 1769 Cost of sales (672) Gross profit 96 - - - - - 197 Other operating income 56 Other operating expenses (42)1(2)(43) Exceptional and non recurring items 15 Profit from operations 125 -1 - -(2)124 1125 Share of results of associates and joint ventures 114 2 116 Profit from operations and fixed asset investments 239 -1 - - -240 1241 Net financing costs (77) (6)(83) Exceptional and non recurring items (31) 1(30) Profit before tax 131 -1 - - -132(4)128 Income tax expense (28)111(25) Profit after tax 1031111107(4)103 Minority interest (11) Exceptional and non recurring items 2 2 2 Net profit for the year 94111 -198(4)94 Dividends (37)37 Retained profit for the year 5711137198(4)94 EmployeeBased IFRS including IAS 32/39 IFRS excluding Tax - - - 1 Proforma £m

17. 17 Opening balance sheet under IFRS Consolidated Balance Sheet As at 31 December 2003 UK GAAP as presented in IFRS format IAS 12 Income IAS 19 Benefits IFRS 2 Share Payments Others including IAS 39/32 Financial InstrumentsIAS 32/39 EmployeeBased IFRS including IAS 32/39 IFRS excluding Tax Assets Non-current assets Property, plant and equipment 2,048 Goodwill and intangible assets 1899 Investments 536 (8)528 Long term receivables - - Derivative financial instruments 22 Deferred tax assets 4152025 Total non-current assets 2,585-4182,598342,632 Current assets Inventories 65 Receivables and prepayments 160 (5)155 Derivative financial instruments 70 Cash and cash equivalents 743 Total current assets 968 - - - - 651,033 Total assets 3,553-4183,566993,665 Equity and Liabilities Total shareholders’ equity (1,521)3111(2)(5)(1,486) Minority interest (39) (1)(40) Non-current liabilities Loans, bonds and other creditors (909) 40(869) Retirement benefit obligation (15) Derivative financial instruments (62) Deferred tax liabilities (205)(31)(236)(32)(268) Provisions (33) Total non-current liabilities (1,147)(31)(15) - -(1,193)(54)(1,247) Current liabilities Loans, bonds and other creditors (760)1(3)(762) Derivative financial instruments (44) Tax liabilities (86) Total current liabilities (846) - -1(3)(848)(44)(892) Total equity and liabilities (3,553)-(4)(1)(8)(3,566)(99)(3,665) Some balance sheet captions have been combined for this presentation. A more detailed balance sheet will be prepared for the 2005 results - - - - - - - IAS 36 Impairment - - - - Proforma £m

18. 18 Consolidated Balance Sheet As at 31 December 2004 UK GAAP as presented in IFRS format IAS 12 Income IAS 19 Benefits IFRS 2 Share Payments IAS 10 - Post Balance Sheet Events Others including IAS 36 Impairment IAS 39/32 Financial InstrumentsIAS 39/32 EmployeeBased IFRS including IAS 39/32 IFRS excluding Tax Closing balance sheet under IFRS Assets Non-current assets Property, plant and equipment 3,654 Goodwill and intangible assets 22398249 Investments 1,2511,253(9)1,244 Long term receivables 581 Derivative financial instruments 14 Deferred tax assets 24431322153 Total non-current assets 5,48826343 -115,769265,795 Current assets Inventories 87 Receivables and prepayments 234 (3)231 Derivative financial instruments 48 Cash and cash equivalents 612 Total current assets 933 - - - - - 45978 Total assets 6,42126343 -116,702716,773 Equity and Liabilities Total shareholders’ equity (1,825)3010(5)(37)(6)(1,833)34(1,799) Minority interest (237)12(225)3(222) Non-current liabilities Loans, bonds and other creditors (3,384) 157(3,227) Retirement benefit obligation (15)(14)(29) Derivative financial instruments (207) Deferred tax liabilities (354)(305)(659)(18)(677) Provisions (35) Total non-current liabilities (3,788)(305)(14) - - -(4,107)(68)(4,175) Current liabilities Loans, bonds and other creditors (488)237(5)(454) Derivative financial instruments (40) Tax liabilities (83) Total current liabilities (571) - -237(5)(537)(40)(577) Total equity and liabilities (6,421)(263)(4)(3) -(11)(6,702)(71)(6,773) Some balance sheet captions have been combined for this presentation. A more detailed balance sheet will be prepared for the 2005 results - - - - - 2 - - - - Proforma £m

19. 19 Reconciliation of profit and loss account to summary Year ended 31 December 2004 UK GAAPIFRS £m excluding IAS 32/39 including IAS 32/39 Profit before interest and tax (pre exceptional)287288289 Exceptional and non recurring items15 Profit before interest and tax (post exceptional)302303304 Share of associates and joint ventures interest(46) Share of associates and joint ventures tax(17) Profit from operations and fixed asset investments239240241 Profit for the financial year (pre exceptional)108112107 Exceptional and non recurring items - Operating15 - Financing(31) (30) - Minorities22 Profit for the financial year (post exceptional)949894 Weighted average number of ordinary shares (million)1305.5 EPS (basic) - pre exceptional8.3p8.6p8.2p EPS (basic) - post exceptional7.2p7.5p7.2p 2 Proforma