Shareholders have got off lightly

THANK god for that. International Power (IP) shareholders have been given a welcome reprieve, after the majority of the company was snapped up by GDF Suez. Truth be told, there was trouble ahead for IP if it decided to go it alone.

Cheer at the new investment grade credit rating belies the fact that IP’s debt pile was looking increasingly troublesome, with pressures mounting from 2012 onwards.

Debt was a particular worry at the Hazelwood brown coal powerstation in Australia. It had to restructure its £415m worth of non-recourse debt on unfavourable terms and with an uncomfortably close maturity date of June 2012, thanks to uncertainty over Australia’s carbon charging programme. IP should now be able to get more headroom when it renegotiates terms in two years’ time.

Similarly, its Italian wind power assets are looking less attractive, after the deficit-strapped government withdrew a subsidy for renewable energy providers.

So while investors might be underwhelmed by the amount of potential cost savings, the truth is that IP would have struggled to increase its share price to the post-merger talks level if it had rebuffed GDF. Investors really have got off lightly.