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International Energy

International Energy develops, operates and manages power generation facilities, and engages in sales and marketing of electric power and natural gas outside the U.S. and Canada. It conducts operations primarily through DEI and its activities target power generation in Latin America.

During 2003, International Energy sold its interest in P.T. Puncakjaya Power in Indonesia as well as decided to exit the European market and sell its Australian assets. As a result, these operations are not included in International Energy's results but have been reclassified to discontinued operations for current and prior years. As of December 31, 2003, the European and Australian assets and liabilities are classified as Assets Held for Sale, and Liabilities Associated with Assets Held for Sale, respectively, on the Consolidated Balance Sheet. (See Note 12 to the Consolidated Financial Statements, "Assets Held for Sale and Discontinued Operations" for further discussion.)

From its platform of assets, International Energy provides customers with energy supply at competitive prices, manages the logistics associated with power and natural gas delivery, and offers services that allow customers to improve energy efficiency and hedge their commodity price exposure. International Energy's customers include retail distributors, electric utilities, independent power producers and large industrial companies. International Energy is committed to building integrated regional businesses that provide customers with a full range of innovative and competitively priced energy services.

International Energy's current strategy is focused on maximizing the returns and cash flow from its current portfolio of energy businesses by creating organic growth through its sales and marketing efforts in all regions in which it currently does business, optimizing the output and efficiency of its various facilities, controlling and reducing costs and divesting selected assets.

International Energy's continuing operations owns, operates or has substantial interests in approximately 4,121 net MW of generation facilities. The following map shows the locations of International Energy's facilities, including projects under construction. The capacities shown in the map are gross MW values (for net MW values see "Properties—International Energy").

Competition and Regulation

International Energy's sales and marketing of electric power and natural gas competes directly with other generators and marketers serving its market areas. Competitors are country and region-specific but include government owned electric generating companies, LDC's with self-generation capability and other privately owned electric generating companies. The principal elements of competition are price and availability, terms of service, flexibility and reliability of service.

A high percentage of International Energy's portfolio is base-load hydro electric generation facilities which compete with other forms of electric generation available to International Energy's customers and end-users, including natural gas and fuel oils. Economic activity, conservation, legislation, governmental regulations, weather and other factors affect the supply and demand for electricity in the regions served by International Energy.

International Energy's operations are subject to international environmental regulations. (See "Environmental Matters" in this section.)