Chairman's Statement

Introduction

I am pleased to report that Aggreko has delivered another strong set of results. Reported revenue in 2010 grew by 20% to £1,230 million (2009: £1,024 million) and trading profit¹ grew by 23% to £312 million (2009: £252 million). Trading margin² increased to 25.4% (2009: 24.7%), while profit before tax increased by 25% to £304 million (2009: £244 million) and earnings per share increased by 27% to 79.37 pence (2009: 62.67 pence). Return on average capital employed improved by 3.4pp to 32.4%.

Amongst our businesses, International Power Projects grew revenue in constant currency and excluding passthrough fuel³ by 8%, and recorded the highest level of order intake in its history. Our Local business saw revenue grow by 24% on a constant currency basis over 2009, helped by three major sporting events (the Vancouver Winter Olympics, FIFA World Cup and the Asian Games). Excluding revenues from these events, and in constant currency, Local business revenues grew by 11%.

Strategy

Aggreko's strategy has remained broadly unchanged since it was developed in 2003. Our goal is to deliver attractive and growing returns to shareholders, excellent service to customers and rewarding careers to our employees by being the leading global provider of temporary power and temperature control. We focus on growing our business organically, supported by fleet investment and geographic expansion, but we will also make acquisitions where they can add value. We continued to invest heavily in the business in 2010, with fleet capital expenditure increasing by £105 million to £254 million, which is 1.7 times depreciation. In addition, on 3 December 2010 we completed the acquisition of Northland Power Services, a leading provider of power solutions for the oil and gas exploration and production market in the Rocky Mountains region of North America, for a maximum consideration of £16.7 million; and on 7 March 2011 we announced an agreement to acquire N.Z. Generator Hire Limited in New Zealand for £12.7 million.

In March 2010 we reported on the result of our biennial strategy update. In this update we reiterated our belief that the business could deliver, on average, double-digit revenue and earnings growth over the period 2007-2012, with fleet capital expenditure expected to be around £1 billion over the same period. I am pleased to report that we are ahead of plan, having delivered compound annual growth over the first three years, in constant currency, of 13% in revenue and 20% in operating profit. Fleet capital expenditure over the period has averaged £220 million per annum – which is slightly above our original forecast; in 2011 we expect to invest around £320 million, due to an increase in the rate of investment in our gas fleet and in the expansion of our Local business service centre network. We believe that our strategies for both the Local and International Power Projects businesses are working well, and that our aspiration of delivering double-digit revenue and earnings growth on average over the five years to 2012 remains achievable, although, as we have repeatedly said, there may be peaks and troughs along the way.

Funding

The business delivered a strong cash performance in the year. Net cash inflow from operations during the year increased by 9% to £468 million (2009: £431 million). This funded capital expenditure of £269 million, which was £108 million higher than in 2009. The strong cashflow resulted in a reduction of net debt during the year of £43 million, to stand at £132 million at 31 December 2010.

Our financial position continues to be very strong with net debt to EBITDA (Earnings before Interest Tax Depreciation & Amortisation) of 0.3 times (2009: 0.4 times) at 31 December 2010 compared to our bank covenant of 3 times. Interest cover, measured on an EBITDA basis, is at 47.1 times (2009: 22.8 times), far ahead of our covenant of 4 times. Towards the end of 2010, we refinanced £459 million of bank facilities, putting in place new facilities with maturities of 3 and 5 years. In addition, since the year end, we have for the first time raised funding in the US private placement market, securing US$275 million (£177 million), with maturities ranging between 7 and 10 years and with the same financial covenants as our banking facilities. Drawdown of these funds will take place in mid March 2011.

Dividend

In view of the strong performance of the business, and as announced at the time of the Interim results, the Board is recommending a 50% increase in the dividend for the year as a whole; this will comprise a final dividend of 12.35 pence per ordinary share which, when added to the interim dividend of 6.55 pence, gives a total for the year of 18.90 pence (2009: 12.60 pence). At this level, the dividend would be covered 4.20 times. Subject to approval by shareholders, the final dividend will be paid on 19 May 2011 to ordinary shareholders on the register as at 15 April 2011, with an ex-dividend date of 13 April 2011.

Return to shareholders

The Board has carried out a review of the Group's balance sheet structure, and I am pleased to say that, in addition to the 50% increase in the dividend referred to above, we plan to make a return of capital to shareholders.

The review of the balance sheet structure concluded that our strong trading performance and confidence in the outlook allows us to increase the returns which the Group makes to its shareholders, while sustaining investment in the long-term growth of the business. The Board believes gearing of around 1 times net debt to EBITDA, which is close to the average level the Group has had since demerger, is an appropriate level for the business. Absent some particularly large demand on our resources (such as a major acquisition or investment in a new product line), such a level will allow us to support our strategic priority of investing as fast as we prudently can in the organic growth of the business, while at the same time continuing to grow the ordinary dividend appropriately.

The current level of net debt to EBITDA is 0.3 times, and we plan to move back to a level of around 1 times net debt to EBITDA over the next two to three years. Subject to shareholder approval, we propose to start this process with an initial return to ordinary shareholders of approximately £150 million, to be effected by way of a return of value of around 55 pence in respect of each existing ordinary share in issue at the relevant record date (which is likely to be in early July 2011). The return will be made by way of a B share scheme, which will give shareholders some choice as to when, and in what form, they receive their proceeds from the return of value. Notably, it should allow most individual UK taxpayers to receive the return in the form of a capital receipt, if they so wish. The B share scheme will be accompanied by a share consolidation designed to maintain comparability of share price and return per share of the ordinary shares before and after the creation of the B shares.

A circular will be sent to shareholders setting out the details of these proposals in early May 2011.

Employees

On behalf of the Board, I wish to express my sincere thanks to all our colleagues across the Group for their commitment and support throughout another very busy year.

Ethics Committee

Integrity and honesty in all our business dealings are central to Aggreko's reputation and long term success. For many years the Group has had a clear and robust ethics policy, and strong related procedures; the Board has now taken the further step of establishing a committee chaired by myself along with David Hamill and Ken Hanna whose principal tasks are to advise the Board on the development of strategy and policy on ethical matters, and to oversee Aggreko's policies and procedures for the identification, assessment, management and reporting of ethical risk. The Ethics Committee had its first meeting in February 2011 and I look forward to including a full report on its activities in our 2011 Annual Report.

Board changes

Nigel Northridge retired as a Director on 31 August 2010. Nigel joined the Board in February 2002, and we have benefitted enormously from his advice and experience. David Hamill has now succeeded him as Senior Independent Director, and Russell King as Chairman of the Remuneration Committee.

On 21 October 2010 we were delighted to announce the appointment of Ken Hanna as a Non-executive Director. Ken is Chairman of Inchcape plc and a Non-executive Director of Tesco plc. A Chartered Accountant, during his career he has worked in a number of general management and financial roles, including Chief Financial Officer of Cadbury plc from 2004 to 2009. His significant international experience and financial expertise will add further strength to the Board.

Outlook for 2011

The current instability in some countries in the Middle East and Africa makes the task of predicting the outcome for the year more than normally difficult; our global scale and diversification of risk exposures will be helpful as we manage through this period of uncertainty. We currently anticipate that for the year as a whole trading profit in 2011 will be at a similar level to 2010. Allowing for currency movements and the £87 million of major events revenue in 2010 which will not recur in 2011, this would represent underlying growth of around 15%. We expect both International Power Projects and our Local businesses to deliver good growth on an underlying basis in 2011, and to support this, fleet capital investment is expected to increase by 26% to a record £320 million.

In International Power Projects, the business will benefit from the strong order-intake seen in 2010, and the order book is now some 60% higher than the prior year as a consequence of signing several large multi-year contracts. The off-hire rate has fallen sharply in recent months, and the business started the year with nearly 14% more capacity on rent than at the beginning of 2010; as a consequence we expect the business to deliver strong growth in 2011.

Amongst the Local businesses, we are expecting all of our businesses to deliver underlying growth. In North America, we expect the recovery seen in the second half of 2010 to continue into 2011. In Europe and the Middle East, we also expect to see growth in 2011, albeit at more modest levels than North America. In Aggreko International's Local business, we are continuing our programme of geographic expansion, and expect to open several new service centres during the year; we expect this business to deliver strong underlying revenue growth in 2011.

Philip Rogerson
Chairman
10 March 2011

¹ Trading profit represents operating profit before gain on sale of property, plant and equipment.
² Trading margin represents trading profit over reported revenue.
³ Pass-through fuel relates to contracts in our International Power Projects business where we provide fuel on a pass-through basis.