Drax presses on with flotation plan after last bidder pulls out

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The Independent Online

The owner of Europe's biggest power station, the 4,000 megawatt Drax coal-fired plant in North Yorkshire, is to press ahead with a stock market flotation next month after ending takeover talks with the only remaining trade buyer.

Drax Group said it intended to list as planned on 15 December after negotiations with a consortium made up of Constellation Energy of the US and three private-equity firms were terminated.

The BCHP consortium had offered to pay £2.23bn for Drax but the company argued that this undervalued it. Drax, which is owned by its banks and bondholders, said yesterday a "significant majority" of its investors remained committed to flotation after meeting BCHP to listen to its proposals.

BCHP, which had private-equity backing from Blackstone Group, Hellman & Friedman and Perry Capital, first approached Drax two months ago with a £1.9bn cash offer. In recent weeks it sweetened its proposals by increasing the price and offering existing investors the chance to retain a 40 per cent interest in Drax even after a sale. But this was not enough to persuade them to abandon the listing option.

Two other consortia - one made up of the private-equity groups Apollo, Texas Pacific and Towerbrook and the other a partnership between International Power and Mitsui - had already withdrawn rival bids for Drax after failing to get the backing of its management.

The management and staff of Drax stand to make more than £100m when the company floats, with the chairman Gordon Horsfield set to net about £35m. Mr Horsfield, a former chartered accountant, chose to take share options in lieu of a salary when he joined the company.

Estimates of the value of Drax vary, with some analysts suggesting it could be worth between £2.3bn and £2.6bn. But its value is highly dependent on wholesale energy prices, which have soared in the current climate of rising gas costs and fears of supply shortages this winter.

Draxoriginally belonged to the Central Electricity Generating Board. When the electricity industry was privatised in 1990, ownership passed to National Power, which sold Drax to AEP, the US energy company. Drax's lenders took it over when AEP went bust.

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