Potential third bidder emerges in the contest to take over Drax

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The Independent Online

Drax, the cash strapped operator of Europe's largest coal-fired power plant, yesterday faced the encouraging prospect that a third bidder for its business might emerge.

Miller, McConville, Christen, Hutchison & Waffel, a New York-based energy investment company, indicated it was considering making an offer for the UK power plant which has been taken over by creditors after electricity prices plunged.

The move came after Drax bondholders held a meeting yesterday to consider their options. Goldman Sachs last week offered £130m for 21 per cent of Drax. International Power in July said it would pay up to £80m for 15 per cent of Drax's debt and 36 per cent of its equity. The two have said Friday is the deadline for their offers.

However, MMC, which is setting up a European fund to buy distressed power and gas assets, yesterday said Drax was a "target". Karl Miller, a partner in MMC, said it planned to combine the assets it buys through its fund into a single power producing company. "There can only be one independent and credible new independent power producer formed in the UK generation market," he told Bloomberg. "Otherwise the same situation will occur, substantially fragmented sector unable to pay its debts."

Drax is trying recover after a 40 per cent drop in power prices and the bankruptcy of its biggest client, TXU Europe, forced it to default on its £1.3bn debt. Close Brothers, which organised the bondholders' meeting, said it was currently sticking to the timetable of making a decision on which offer to take by the end of the week. Banks owed money by Drax will meet today and its board will meet later this week.

However, MMC has indicated it does not believe it has to make a move by that point, because the timetable was set up by Goldman and IP. There speculation that MMC might not yet have gathered sufficient funds to make its move.

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