The company said pre-tax profits in the six months to the end of June were just �96m compared to �141m in the same period last year.

The power generating firm, which won the recent bidding battle for the giant Drax power station, in North Yorkshire, blamed the fall on a slide in electricity prices in its main markets.

In the UK, it said wholesale prices over the short term have shown some signs of improvement.

But the firm said it believes it is "still too early to make any solid assumptions regarding prices in 2004".

The company also warned prices were set to remain low in North America.

Chairman Sir Neville Sims said: "While these uncertain conditions prevail in two of our key markets, we continue to focus on maximising value from our existing asset base and pursuing a wide range of new investment opportunities within our existing markets."

Last week, the group entered into an exclusive arrangement with AES Drax Holdings Limited to participate in the power station's restructuring in order to acquire debt and equity, for maximum total cash cost of �130m.

Sir Neville added: "We look forward to a successful conclusion of this process and our eventual participation in the ownership and management of Drax."

Shares in International Power stood at 143.15p at 0817GMT after opening at 142p.