Drax directors call for extension as BHP tables offer

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The Independent Online

BHP Billiton tabled a bid for the Drax power station yesterday, raising the likelihood that the battle for control of Europe's largest coal-fired station will continue beyond today's deadline.

The coal-mining giant promised that the terms of its offer improves on bids from International Power and Goldman Sachs for Drax.

The move prompted Drax directors to call for an extension to the existing deadline set by the IP and Goldman "in order for the three offers to be properly considered".

Bondholders in Drax, which defaulted on £1.3bn debt earlier this year as energy prices slumped and its largest client, TXU Europe, went bankrupt, appointed independent directors to consider the rival restructuring offers. The power station's American owner, AES, walked away after the creditors rejected its restructuring plan.

The rival offers from Goldmans and IP offer bondholders about 65p. But Goldman Sachs has offered £130m for up to 21 per cent of Drax's debt and 25 per cent of its equity. International Power raised its offer to match earlier this week, while a New York-based energy investment company, Miller, McConville, Christen, Hutchison & Waffel could also table a bid.

The latest offer is conditional on Drax agreeing to take coal from BHP Billiton for 15 years, with BHP Billiton being Drax's exclusive supplier between 2006 and 2010, and supplying least 80 per cent of its coal up to 2018.

The BHP offer highlighted the potential from combining the power station and BHP Billiton Energy Coal division, which is the world's largest producer and marketer of sea-borne thermal coal. "We strongly believe that an integrated financial and commercial partnership between BHP Billiton ... and the company under which BHP Billiton provides coal supply and energy trading services adds significant value to the restructuring by increasing the certainty of operating cash flows and mitigating key commodity and operational risks," said BHP.

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