U.K. power producer International Power (IPWG) Wednesday said it was selling EUR500 million worth of convertible bonds in order to fund "a number" of acquisitions, including the remaining 40% stake in Portuguese gas-fired power plant company Turbogas.
International Power will be the 100% shareholder of Turbogas, after buying the 40% stake from Portuguese utility EDP-Energias de Portugal SA (EDP.LB).
The company said in a statement that the bond issue will also help fund investments in Maestrale wind farms in Italy and Germany, and the Elecgas investment in Portugal - an 830 megawatt gas-fired power plant in which International Power has a 50% stake.
International Power said the bond issue would also "provide additional flexibility for other growth opportunities which (it) is currently considering".
Analysts said the bond issue was likely to be seen as negative for the company's share price.
"The convertible issue is likely to be taken as a negative by the market, given expectations that growth was more likely to be funded by internal cash generation, rather than equity issue, albeit deferred, despite a reasonable cost of equity," Evolution Securities said in an investor note.
Evolution Securities added that International Power's performance is in line and the Turbogas acquisition is "mildly positive".
International Power shares traded down 1.4%, or 6 pence lower, at 428 pence as at 0820 GMT, in a higher overall U.K. market.
A London-based analyst who asked not to be named said that while the bond issue was negative, the drop in the share price on Thursday was largely a result of technical trading from hedge funds.
"Hedge funds are trading long on the convertible bonds and trading short on the stock, it's a technical issue," he said.
The company added that it expects load factors for 2008 to be lower than its March guidance in Texas and New England, but that load factors in the U.K. and Australia are set to remain in line with expectation.
The company attributes the drop in expected load factors in the U.S. states on weaker off-peak spreads but said that overall the company's financial performance of its portfolio in North America in 2008 is set to remain in line with expectation due to higher peak spreads.
Spreads are the cost the company sells its electricity for, minus fuel costs.