Centrica weighs up £1bn bid for Drax power station

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The Independent Online

Centrica is considering launching a £1bn bid for Drax, the UK's largest power station, which is controlled by over 100 creditors.

Centrica is considering launching a £1bn bid for Drax, the UK's largest power station, which is controlled by over 100 creditors.

The FTSE 100 energy company is keen to diversify its electricity generation, which is skewed towards gas, and a swoop on the coal-fired Drax facility is one of the favoured options.

A move could come in the spring, when the power station is expected to go up for sale. Drax's banks and bondholders took over the Yorkshire facility in August 2003 when its former owner, the US energy company AES, abandoned it after failing to agree a financial restructuring package with creditors.

The creditors subsequently rejected offers from Goldman Sachs, BHP Billiton and International Power, believing they undervalued the facility. But over the past 18 months, wholesale electricity prices have risen and the banks and bondholders now believe that they will get a decent price if they sell. They have appointed Dresdner Kleinwort Wasserstein to report by March on their options, which could also include a flotation.

One possible stumbling block to a sale is Drax's complex ownership structure. As a result, the investment bank will advise on how this can be tidied up.

As well as increasing its exposure to coal, Centrica wants to generate more electricity itself, which it then sells on to its domestic and business customers. Currently it buys 45 per cent of its electricity on the wholesale market, but hopes to reduce this to 25 per cent by 2010.

A Centrica spokesman refused to comment on Drax.

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