EuropeEurope && MiddleMiddle EastEast Richard Lappin, Tony Concannon, Paul Turney & Ranald Spiers Contents

• European electricity market overview • Central & Northern Europe • United Kingdom • West Mediterranean • Middle East European Electricity Markets by Type & Hub Fully deregulated Deregulating Privatising

Slow/No Change

Nordpool

Island

Central Europe

Peninsular Markets

Main Interconnects

Planned Interconnects

Our strategy is based on a European electricity market which is, in fact, five subregional markets, modestly interconnected Electricity Market Size and Growth 2000/01

MarketMarket sizessizes inin TWhTWh GrowthGrowth ratesrates areare forfor 20022002-06-06 350 >3% growth p.a.

2.0%-2.9% p.a. 31 0%-1.9% p.a. 311 101 492 138 82 NordPool Total 63 26 424 49 56 38

38 194 300 Our priority is large, high growth markets, but selective acquisition opportunities exist in other markets Reserve Margins & Spark Spreads 2002

SparkSpark SpreadSpread rangerange shownshown inin €/€/MWhMWh

0-2* Gas – Coal Brackets denote negative spread Wide reserve margins 5-8 11-13 Moderate reserve margins (5)-3 0-8 Tight reserve margins (2)-15 3-20 5 (1)-2 8-6 19- *For whole Nordpool 27 15-24 Represents fuel price vs baseload power price 8-17 Our priority is high spark spread / low reserve margin markets but less sought after opportunities may also exist in other markets European Opportunities – IPR Target Markets Top priority Medium priority United Kingdom Distressed sellers Low priority Coal or Gas

Poland Privatisation Netherlands Genco acquisition Czech Republic Limited Greenfield CEZ Privatisation Slovakia SE Privatisation

Hungary Divestments Italy Iberia CCGT Greenfield Possible Incumbent divestment Genco acquisition CCGT & Wind development CentralCentral EuropeEurope Czech Republic – Market Fundamentals

Technical Characteristics Market Structure Installed Capacity Dec 2001 Transitional Market Size 63 TWh • CEZ dominates market IPPs Demand Growth 2% p.a 33% • 65% of generation, 100% of transmission, 50% of supply Coal Peak Demand 10.1 GW • End User Tariffs regulated. 42% Installed Capacity 15.9 GW • Bilateral contracts and new day ahead market Reserve Margin 57% • Liberalising market will be influenced by EU accession Temelin and June elections Baseload Price € 23/MWh Nuclear Spark spread € -2/MWh 12% Hydro Gas 13% Coal € 15/MWh Czech Republic Merit Order IPR Assets

20000 Plant EOP ET PT 18000 Capacity 16000 Hydro Peakers 360 330 138 Thermal Peakers (MW) 14000 Imports 12000 Sales IPPs 2000 1350 200 10000 CEZ Thermal (GWh) 8000 EOP Nuc lea r Heat Sales

MW Capacity 6000 4850 7200 15500 Aver age Demand (TJ) 4000 Peak Demand 2000 Market Seasonal baseload 0 Position Oligopolistic heating business 2002 At the ‘crossroads’ of European Energy Central Europe - 2002

TheThe EOPEOP GroupGroup • 2nd largest generator • Strong forward cover • Steady earnings (winter seasonal peak) Prague • Fully compliant with EU Czech Republic environmental legislation • Low cost operation

EOP Assets • Cost effective skill base • Bordering German & Polish markets (large export potential) • First wave EU accession

Profitable and low cost business Central Europe Strategy – Medium Term

Opportunities: >20,000MW • Czech Republic: CEZ Privatisation • Slovakia: SE Privatisation • Poland: Plant privatisation • Hungary: Disposals • Slovenian privatisation

Outlook: • Gas becoming prominent • Capacity margins tightening • Spark spreads encouraging new-build • Preference for mine-mouth plant with export potential Top priority Plant Targets • Embryonic asset backed trading Medium priority Plentiful opportunities to grow and to access the Low priority German market even without an actual presence UKUK England & Wales – Market Fundamentals

Technical Characteristics Market Structure Installed Capacity Dec 2001 Fully-Liberalised Other Market Size 311 TWh 7% Oil • Supply market liberalised; customers choose supplier Demand Growth 1.5% p.a 6% Coal • Fragmented generation market, over 20 players Peak Demand 53 GW 39% • Large degree of generation & distribution/supply integration e.g. Installed Capacity 67 GW Innogy (RWE) and Scottish Power Gas Reserve Margin 25% • NETA launched 27 March 2001, (dominated by bilateral 30% contract framework) Baseload Price € 26/MWh • Key players Innogy (RWE), PowerGen (EoN), TXU, Centrica, Hydro Spark spread # € 5/MWh Scottish and Southern, Scottish Power and EdF. Nuclear 3% Gas 15% Coal € 8/MWh IPR Assets England & Wales Merit Order Plant Deeside Rugeley 80000 Capacity (MW) 500 1000 70000 P umped Storage Type Gas CCGT Coal 60000 Oil Gas & Coal 50000 Sales (GWh) 1,200 6,500 Interconnector 40000 CHP Contract Cover Merchant (1 Medium Term Nuclear 30000 Hydro unit tolling agmt 20000 Average Demand mothballed)

Gross MW Capacity MWGross Peak Demand 10000 Market Position Baseload/Mid- Mid-Merit 0 merit 2002 UK Portfolio

Rugeley Why Rugeley? • Acquired in Jul 01 • Contracted forward in a • 2 x 500MW coal-fired, difficult market; Commissioned 1970 • Fuel diversity; • 38% efficiency • Tolling agreement with • Gas prices expected to Deeside TXU remain high; coal • 140 IPR staff, 93 full-time competitive with gas; contractors • Proven plant Rugeley • Tight reserve margin Deeside anticipated in the • 500MW CCGT medium term • 13E2 ABB design • Commissioned Nov 1994 • 52.7% efficiency • Merchant operation • 56 staff including traders Forward curves . . .

Gas / Coal spark spread comparisons (£ per MWh) • Spark spread (coal Baseload and Peak and gas) not £25 sustainable Gas baseload spark • Coal competitive £20 Gas peak spark with gas Coal baseload spark spread £15 Coal peak spark spread • Increasing volatility in day ahead market £10 • Gas arbitrage likely in winter £5 • No recognition of environmental £0 constraints 2 3 4 5 6 ad d 02 0 03 0 04 0 05 0 06 0 07 e ea r r r r r h h r e r e r e r e r e r A e t e t e t e t e t e A m in m in m in m in m in m y k m m m m m m a e u W u W u W u W u W u D e S S S S S S W Sources: Heren report 27 May 2002 API#2 coal price 47.6% HHV gas 38% efficiency for coal England & Wales market - outlook

• Very limited new build of fossil fired plant • More contracts (fuel and electricity) lapse. More capacity withdrawn. Increased pressure for market correction • Tightening environmental constraints • Govt reliance on renewables: expect to slip – continued reliance on fossil fired generation • Reserve margin will reduce • Gas prices expected to remain relatively high • Combined heat and power projects stalled • NETA remains complex and demanding IPR position in the UK

• Opportunities to buy assets selectively at reduced prices • Has fuel diversity (coal and gas) • Two complementary businesses in place • Proven performance under NETA • Can exploit near term volatility ItalyItaly andand IberiaIberia Italy and Iberia 2002

• Iberia – liberalised oligopoly • Italy – monopoly in transition • Population 49 M, highest growth • Increasing per capita electricity rate of major EU countries consumption • Tight reserve margins • Very tight reserve margins • Limited interconnects • Limited interconnects • Second highest spark-spreads in • Highest spark-spreads in Europe Europe (€8-€24)– incumbents (€19-€27)– incumbents need to need to maintain these maintain these • Good fuel diversity • Over dependence on oil and gas • Acquisitions frequently limited to • Larger deal-flow than Spain incumbents and greenfield first- • IPR amongst first-movers in mover difficult to secure greenfields • One of better markets in EU • Best market for IPR in Europe Italy – Market Fundamentals

Technical Characteristics Market Structure Installed Capacity Dec 2001 Transition to a pool market Market Size 300 TWh Natural • Currently in the process of liberalisation. Gas Coal Demand Growth 3% p.a 9% 12% • ENEL must divest an additional 2,611 MW to reach the 15,000 Peak Demand 49 GW MW stated in the Bersani Decree. Hydro Installed Capacity 79 GW • Maximum production after January 2003 per company will be GasOil 27% 50%. 31% Reserve Margin* 33% • High number of new-build requests. Baseload Price €45 /MWh Renewable • Large portion of divested plant to be repowered with gas. 2% Spark spread Gas €19 /MWh Fu el Oil • Market share at December 2000 as follows: 19% Coal €27 /MWh ENEL 56% EDISON 17% Italian Merit Order* ENDESA 8%

80000 Pumped Storage INTERPOWER 3% 70000 Oil SONDEL 3% Natural Ga s 60000 Coal OTHERS 13% 50000 Interconnectors Renewables 40000 Hydro 30000 Average Demand IPR is currently developing new CCGT and considering 20000 Peak Demand medium sized acquisitions. Gross MW Capacity 10000 Key areas of focus are off-take and fuel supply. Careful 0 *Adjusted for management of local relationships. 2002 Hydro ROR availability Italian Greenfield Programme

IPR’s greenfield development: • Well positioned around demand centres in north, (800MW) and high demand growth

(800MW) in south • Located in regions of power deficit • Will be heavily forward contracted • Focus on local concerns with strong local partners • First mover advantage (permitting process ahead of many competitors) • Main commercial issues are off-take and fuel Portugal – Market Fundamentals

Technical Characteristics Market Structure Transition Installed Capacity Dec 2001 Market Size 38 TWh Gas • Players have Long Term PPAs with grid owner, REN. Coal 11% Demand Growth 3% p.a 20% • Market largely dominated by EDP. Peak Demand 7 GW • January 2003 - single market with Spain, although constrained

Oil Installed Capacity 9 GW due to interconnector capacity between Spain and Portugal 23% 2003-2006. Reserve Margin 22% Baseload Price € 42/MWh EDP 75% RWE 10% Hydro Spark spread Gas € 15/MWh 46% IPR 7% Coal € 24/MWh OTHERS 8% Portuguese Merit Order 8000 Pumped Storage Plant Pego 7000 Oil 6000 Gas Ownership share 45% Coal 5000 Hydro Capacity (MW) 600 4000 Average Demand Peak Demand Type Coal 3000 2000 Sales (GWh) 4,022 Gross MWGross Capacity 1000 Contract Cover Long Term PPA agreement 0 *Adjusted for Market Position Baseload/Mid-merit 2002 Hydro ROR availability Spain – Market Fundamentals Technical Characteristics Market Structure Installed Capacity Dec 2001 Liberalised-Oligopoly Specia l Market Size 194 TWh Renewabl • Pool market governed by bilateral contracts. Regime es Coal 8% Demand Growth 3.6% p.a 6% 23% • End users will choose supplier by January 2003. Gas Oil Peak Demand 35 GW • Incumbents vertically integrated acting as an oligopoly. 7% Installed Capacity 51 GW • Market share is as follows: Fuel Oil Reserve Margin* 22% 9% Endesa 43% Baseload Pr ice € 35/MWh Hydro Iberdrola 30% 32% Spark spread € 8/MWh Union Fenosa 13% Nuclear Gas 15% HidroCantabrico 7% Coal € 17/MWh Spanish Merit Order* Others 7%

45000 Pumped Storage Oligopolistic market structure. Because of this, 40000 Oil 35000 Coal incumbents dominate most major acquisition Nuclear 30000 opportunities and greenfield first-move position Interconnector 25000 Special Regime difficult to secure. Pending integration of 20000 Renewables Hydro Portuguese and Spanish markets will provide 15000 Average Demand new opportunities for IPR. 10000 Peak Demand Gross MWGross Capacity 5000 Currently pursuing CCGT development 0 *Adjusted for opportunities and several renewable projects in 2002 hydro ROR availability the peninsula. Conclusion

• Well placed in attractive European markets • Assets provide steady earnings • Substantial opportunity for growth • Quality growth opportunities in medium term horizon • Selective approach to growing the business MiddleMiddle EastEast Rational for investment in Middle East

• High growth markets with substantial demand for new capacity and opportunity to take advantage of privatisation of incumbent generation • Long term contract cover on financeable terms available from power purchases backed by investment grade sovereign guarantees • Opportunities to realise effective US dollar- denominated returns well in excess of our weighted average cost of capital • Potential for investment in ‘associated’ assets such as desalination plant or natural gas infrastructure Where are the opportunities in the Middle East ?

MoroccoMorocco Credit Rating: BB Capacity: 3,750 MW (2002) 4,600 MW (2007) Potential Opportunity 1,800 MW (new build & secondary market) Where are the opportunities in the Middle East ?

TunisiaTunisia Credit Rating: BBB Capacity: 2,190 MW (2002) 4,000 MW (2007) Potential Opportunity 2,500 MW (new build & secondary assets) Where are the opportunities in the Middle East ?

EgyptEgypt Credit Rating: BB+ Capacity: 17,150 MW (2002) 22,000 MW (2007) Potential Opportunity 15,000 MW (new build/privatisation/ secondary assets) Where are the opportunities in the Middle East ?

Credit Rating: JordanJordan BB- Capacity: 1,500 MW (2002) 2,000 MW (2007) Potential Opportunity 1,000 MW (new build/privatisation) Where are the opportunities in the Middle East ?

TurkeyTurkey

Credit Rating: B- Capacity: 26,200 MW (2002) 35,000 MW (2007) Potential Opportunity 10,000 MW (new build/TORs/asset sales secondary assets) Where are the opportunities in the Middle East ?

SaudiSaudi ArabiaArabia Credit Rating: Aaa3 Capacity: 23,500 MW (2002) 35,000 MW (2007) Potential Opportunity 15,000 MW + 500 MIGD (new build/privatisation) Where are the opportunities in the Middle East ?

Credit Rating: KuwaitKuwait A+ Capacity: 6,900 MW (2002) 9,400 MW (2007) Potential Opportunity 2,500 MW (new build) Where are the opportunities in the Middle East ?

Credit Rating: BahrainBahrain A3 Capacity: 1,300 MW (2002) 1,800 MW (2007) Potential Opportunity 500 MW (new build) Where are the opportunities in the Middle East ?

Credit Rating: A- QatarQatar Capacity: 1,950 MW (2002) 3,100 MW (2007) Potential Opportunity 1,150 MW + 75 MIGD (new build/secondary assets) Where are the opportunities in the Middle East ?

Credit Rating: A2 UAEUAE Capacity: 8,300 MW (2002) 11,800 MW (2007) Potential Opportunity 4,000 MW + 250 MIGD (new build/privatisation/ secondary assets) Where are the opportunities in the Middle East ?

Credit Rating: BBB OmanOman Capacity: 2,260 MW (2002) 3,000 MW (2007) Potential Opportunity 1,200 MW + 80 MIGD (new build/privatisation/ secondary assets) Shuweihat S1 Power and Water Project, Abu Dhabi

• 1,500 MW of power, 100 million

Typical Combined Cycle Power & Water Plant imperial gallons per day (Multistage Flash technology) - Block Flow Diagram • Siemens V94.3A2 GTs and Fisia Gas Turbine He at Re co ve ry Po ta ble W ate r Generators Steam Generators Out

Steam Turbine Pr od uct Italimpianti desalinisation distillers Generators Water MSF D istillers Treatment • 20 year Power and Water Purchase Fuel Agreement signed in August 2001 • Financial close achieved on 1 December 2001

By pa sse s Supplementary Firing • $1.6 bn combined Islamic and High Pressure Low Pressure Steam Main Steam Main

Du mp Seawater Se aw ate r Condensers Supply conventional 20-year term loans 102 Outfall • $355m equity bridge loan until PCOD (15 August 2004) • Partners CMS Energy of USA (20%) and ADWEA (60%) Desalination opportunities worldwide

12,000 MIGD

7,500 5,500 MIGD 3,000 MIGD MIGD MIGD 1,200 800 MIGD MIGD

AmericasAmericas MiddleMiddle East/East/ RestRest ofof EuropeEurope WorldWorld

20022002 20202020 5,000 MIGD in 2002 – 60% in Middle East 44% of all desalination plant is by distillation 25,000 MIGD by 2020 – 50% in Middle East Fewer competitors since the mid 1990s

• Total, Tractabel and AES are main regional competitors BidsBids forfor AbuAbu DhabiDhabi PrivatisationPrivatisation ProjectsProjects • Exit of several US developers after September 11/ Enron debacle • Large size of power/water EnronEnron 7 CMSCMS opportunities means that partnering PSEGPSEG CMS/IPRCMS/IPR is desirable to share risk or to keep MarubeniMarubeni 4 Tractabel/Mitsui/Tractabel/Mitsui/ below market cap Intergen/Bechtel TEPCO Intergen/Bechtel TEPCO • The structural nature of RFPs, TractabelTractabel AESAES combined with existing in-country NationalNational PowerPower PSEG/MarubeniPSEG/Marubeni experience of competitors, means AlAl TaweelahTaweelah ShuweihatShuweihat that low capital costs and innovative A2A2 S1S1 O&M is essential for success 19981998 20012001 • CMS Energy are partners in Shuweihat; Mitsui / TEPCO are current partners on Umm Al Nar bid in Abu Dhabi Our vision for 2007

• Broad portfolio across the region, with a mix of operating projects under construction, and new development • Secure cash flows underpinned by long-term contracts, with development funded by high deal flow/closed projects • Bringing assets together (including Pakistan) for potential monetisation; harness local capital / investment funds / IPOs • ‘Horizontal’ integration into related infrastructure (desalination, natural gas, regasification, etc) • Build up semi-autonomous indigenous operation with complete range of skills (O&M, financing, technical, legal etc)