International Power yesterday ramped up the value of its UK coal-fired power station in Staffordshire after the rocketing cost of gas made other fuel sources more profitable.
The utility giant increased the value of its plant at Rugeley by £52 million - reversing a writedown in 2002 when the prospects for coal as a long-term answer to the UK's energy needs were bleaker.
The move comes a month after IP revealed that it would install new equipment at Rugeley to comply with an EU directive that aims to tackle the amount of greenhouse gases being pumped into the atmosphere.
The decision to fit Flue Gas Desulphurisation (FGD) equipment spares the plant from having to cut its operating hours from 2008 and shut by the end of 2015.
The rosy glow around Rugeley comes a week after UK Coal - the country's largest producer of the fuel - said rising demand and prices had nudged it back into profit.
IP yesterday credited a recovery in its core markets of the UK and United States for boosting annual profits to £501 million compared with £222 million a year earlier, while predicting a further 12 months of growth in 2006.
In addition to Rugeley, the company's footprint in the UK includes the First Hydro plant in Snowdonia and the Saltend station near Hull.
The revival in fortunes at Rugeley comes four years after IP wrote down the value of the plant by £58 million because of the poor outlook for generating electricity from coal.
Justifying the decision to reverse nearly all of this writ-edown, IP yesterday said the price of coal was now more stable than gas and the plant's prospects had improved.
This was reflected in its "spreads" - the difference between the price of power and the cost of fuel - where the improvement from coal was greater than gas over the past
year. IP tried to increase its exposure in this area last year by bidding for Drax - Europe's biggest coal-fired station - in partnership with Japanese miner Mitsui. But it abandoned the plan after balking at the price being demanded for the Selby, North Yorkshirebased asset.
Yesterday's results revealed that IP expects spreads for both coal and gas to rise over the next 12 months.
This helped IP shares move higher in a poor market, where sentiment was helped by the promise of an 80 per cent jump in the full-year dividend to 4.5p a share. Profits from Europe rose to £260 million last year from £97 million, enabling the region to pull away from Australia as its top performer.
The recovery in merchant markets in North America pushed that region back into the black last year, with IP reporting profits of £49 million compared with losses of £21 million in 2004.
IP, with interests in nearly 40 power stations in 18 countries, said it had not finished buying and that it might take on more in all key regions.
"We expect to be actively looking at opportunities in all our core five regions and in growth opportunities where we can see real value," said chief executive Phil Cox.
Richard Hunter, head of UK equities at stockbrokers Hargreaves Lansdown, said: "The ability of the company to make further acquisitions should continue to benefit the company's strategy."