The revival in fortunes of one of the UK's largest coal-fired power plants has continued as customers clamoured for cheaper fuels than gas.

International Power said its plant at Rugeley in Stafford-shire operated at 90 per cent capacity between January and March, capitalising on the strongest margins from generating power from coal for several years.

The high level of usage represented the latest positive swing in Rugeley's fortunes and appeared to justify the decision by IP in February to install "green" equipment and save the plant from enforced closure within a decade.

In contrast to this winter, Rugeley only operated at 60 per cent capacity during the whole of last year and 50 per cent in 2004 when the prospects for coal as a long-term answer to the UK's energy needs were bleaker.

Yesterday's news comes just two months after IP did a Uturn on how much it thought Rugeley was worth, ramping up its value by £52 million just four years after writing it down by a similar amount due to the poor outlook for generating electricity from coal back then.

In February, IP revealed that Flue Gas Desulphurisation (FGD) equipment would be fitted at Rugeley to comply with an EU directive that aims to tackle the amount of green-house gases being pumped into the atmosphere.

This spared the plant from having to cut its operating hours from 2008 and shut by the end of 2015.

In addition to Rugeley, which employs 160 people, the company's footprint in the UK includes the First Hydro plant in Snowdonia and the Saltend station near Hull.

Sir Neville Simms, chairman of IP, said: "First quarter earnings and cash flow are up significantly, primarily driven by a robust performance from the European portfolio where our business in the UK has delivered a strong increase in profitability."

Between January and March, IP generated pretax profits of £217 million before accounting for one-off items - up 63 per cent on the £133 million it banked during the same period of 2005.

IP told investors that its "spreads" - the difference between the price of power and the cost of fuel - were a third higher at Rugeley than last winter.

Profits in the UK were also boosted by high demand for power between January and March from First Hydro, which is used by the market to generate electricity quickly when there is a shortfall.

Gas-fired plant Saltend delivered "strong results" because of a long-term contract that enables it to buy cheaper gas than is available on the market.

In North America, IP returned to the black with profits of £4 million although its Australian operations were not faring as well as this time last year, notching £33 million in the first quarter compared with £38 million.

The global footprint of IP - formed in October 2000 by the demerger of National Power - extends to 37 power stations in 17 countries. The company was promoted to the FTSE 100 Index last year.

Chief executive Philip Cox said IP would consider buying good value, long term contracted power plants in its core regions in the US and in Europe, the Middle East and its other operating areas around the world.

He said: "We'll update the market when and if we transact."

A spokeswoman for the group later confirmed that it could still bid for the Drax coal-fired power station in North Yorkshire.

IP and Japanese group Mitsui & Co made an approach to Drax last year, but later withdrew their interest. ..SUPL: