AES withdraws support for Drax restructuring

26 August 2003

AES Corp, the owner of Drax, in Yorkshire, Britain's biggest coal fired power station, has withdrawn its support for its AES Drax rescue package proposed at the end of June because of what it describes as lack of co-operation from the plant's creditors.

AES will not increase its offer and is not willing to continue without the participation of the creditors. Drax faces insolvency following the loss of its biggest customer and the drop in UK power prices. During the first half of 2003 it made an operating loss of £89 million. AES has been trying to negotiate a rescue restructuring with banks and bondholders since the power station's biggest customer, TXU Europe, collapsed last year. But AES has now stated that despite its best efforts to operate the plant to best advantage and maintaining shareholder value as best it can, it is faced with intransigence on the part of creditors. AES Corp has already written off its investment in Drax.

International Power has put in a bid of £80 million for 15% of Drax 's £1.3 billion debt and a 36% stake in the company. This amounts to 55p in the £ for A2 senior secured debt bondholders and improves by 8p the offer made under the AES rescue bid. IP would also want a fee for operating Drax. IP is the overseas arm of National Power, a former owner of Drax which sold it to AES in 1999 for £1.87 billion. AES has urged creditors to reject the offer.

The Wall St investment bank Goldman Sachs, itself a creditor, has entered the bidding late in the day with a £130 million bid for 21 % of Drax debt, a bid which if accepted would make it the largest shareholder. The offer amounts to 64p in the £ for A2 debt. and GS says it will safegurad the future of the plant and its workforce, but creditors will not find it easy to compare the two bids, because of crucial differences in the offer to C debt owners. Under the NP bid, C debt holders would have the option to become owners of the equity.

l Centrica, the UK's biggest household energy supplier, is to buy the 230 MW Barry power station from AES for a sum reported to be just short of £40 m.

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