Drax falls as stock market debut gives chairman £35m windfall

Drax shares fell yesterday as Europe's biggest coal-fired power station made its stock market debut, although the value of the company remained comfortably above the offers made by a number of private-equity bidders before the flotation.

The shares opened at 500p and closed down 10p at 490p, giving Drax a stock market valuation of just under £2bn. However, including the £500m of debt in the business, Drax has an enterprise value of £2.5bn. That compares with the £2.23bn bid from the BCHP consortium which the Drax board rejected in November.

The flotation will produce huge windfalls for the Drax management, led by the chairman Gordon Horsfield, whose stake in the company is worth about £35m. In total, the senior management team of 47 directors have a combined holding worth almost £100m.

They have agreed to retain at least half their shares for a minimum of 12 months. Most of the Drax directors will have to cash in a portion of their holdings to pay capital gains tax which falls due after the flotation.

Out of the 406.9 million shares in circulation, a total of 145 million - just over a third - were traded yesterday although it is not known how many were bought by external investors. The company was previously owned 100 per cent by its banks and bondholders who took control of Drax after its previous owner AES ran into financial trouble and withdrew support.

Mr Horsfield said the listing would enable Drax, which owns a 4,000 megawatt station in North Yorkshire, to take part in consolidation in the power sector. But the company's chief executive Dorothy Thompson said it had no specific plans.

Drax, which supplies about 7 per cent of the British market, is one of the newest coal-fired stations in the UK and has been fitted with environmental clean-up equipment which will enable it to meet strict new sulphur emission standards which come into force in 2008. In the nine months to the end of September, it made a pre-tax profit of £26m.