International Power has won control of the debt-laden Drax power station in a deal that looks set to secure the future of the Yorkshire-based station's 480-strong workforce.
International Power, which has interests in 28 power stations in 12 countries around the world, is keen to beef up its operations in the UK, where it already operates two plants. The £130m deal gives it increased capacity ahead of the key winter period when electricity supplies are expected to come under pressure and wholesale prices could recover some of the ground lost in recent years.
Drax confirmed over the weekend that it had entered into an "exclusive arrangement" with International Power that will see it pay up to £130m for a stake of up to 38 per cent. A formal proposal is expected to be tabled in the coming weeks which Drax's banks and bondholders will vote on at the end of this month.
The station is also set for another shake-up once its rescue has been secured, in a move that will see the appointment of a chief executive. The chairman, Gordon Horsfield, who along with finance director Gerald Wingrove joined the board at the end of July to oversee Drax's restructuring, is expected to move into the role of non-executive chairman.
Mr Wingrove was confident yesterday that a deal with International Power would not encounter any last-minute hitches. "At this point, the expectation is that it will all move smoothly and that it will all be buttoned up by the end of the year," he said.
The deal, once complete, will entitle International Power to appoint one non-executive director onto the Drax board and give it a say in the appointment of a chief executive.
International Power saw off rival bids from the US investment bank Goldman Sachs as well as from the mining group BHP Billiton. Mr Wingrove said: "Goldman Sachs made a very, very strong proposal. It was very finely balanced, there wasn't really very much in it. BHP wanted to link in a coal contract which we decided was too complicated." An offer from the US private equity fund Miller McConville, Christen, Hutchison & Waffel [MMC] was dismissed as "not serious", he said.
Drax ran into trouble last year when its largest consumer TXU went into receivership. The station has around £1.3bn of debt, two-thirds of which is bank debt. International Power's £130m proposal, which will see it try to buy some of the debt, will leave it owning up to 38 per cent of the business. The final figure will be known in early December when the take-up of its offer by banks and bondholders will be decided.
If International Power walks away from the deal, it will have to pay Drax £5m, while if not enough banks and bondholders take up the offer, then Drax will have to pay International Power £2m.
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