Drax can go it alone, insists new chairman

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The Independent Online

The chairman of the Drax power station insisted it is still viable even if no other operator steps in to replace AES - the US parent company that has walked away from the plant.

Gordon Horsfield, newly appointed chairman of Drax, said there were several companies interested in taking the place of AES, a US group that bought the station in 1999. The plant cannot service its £1.3bn debt and is controlled by its banks and bondholders.

"A restructuring is possible even if no other party emerged [to replace AES]. It would not be fatal for what needs to be done. The skills to run Drax are here," Mr Horsfield said.

AES had offered to pay the creditors £60m for a 20 per cent stake in Drax, Europe's biggest coal-fired station, and it would collect a management fee for running the plant. However, the creditors did not accept this offer by the 5 August deadline imposed by AES, with the result that the US group has now severed ties with Drax.

International Power has already made a more generous offer to the creditors, of £80m for a 35 per cent stake and no fee for running Drax, which is based in Yorkshire.

Mr Horsfield said there were others interested, though he did not name the companies involved. He said it was "preferable" if another operator stepped in but not necessary.

Innogy, the German-owned power group, that sold Drax to AES has said it might be a possible partner.

"There is no reason for Drax to go into an insolvency process. It is a very attractive asset. It is viable with substantial Ebitda [underlying earnings] and cashflow. It just needs to reschedule the debt," said Mr Horsfield.

Drax fell into crisis when its biggest customer, TXU Europe, went bust. Creditors put in place standstill agreements with Drax in November last year, which has been extended several times. It now runs out on 14 August. Mr Horsfield said he was "extremely confident" about getting it extended into the autumn. He said no debt write-off was required, simply a restructuring of the debt.

"Why wouldn't creditors want to [reschedule]? There's no rational reason for them to want to see the company fail," said Mr Horsfield.