Drax secures agreement with creditors on £1bn debts

The future of the Drax power station in Selby, North Yorkshire, has been boosted by a standstill agreement with creditors on the plant's £1bn debts.

The agreement gives Drax six months breathing space to enable it to adapt to a harsh new market following the collapse of its major customer, TXU Europe. The plant will still need to seek a financial restructuring.

Drax was bought by the American group AES Corporation in 1999 for £1.87bn. It is the largest coal-fired power station in western Europe, capable of generating up to 4,000 megawatts of electricity from its six generating units. However, 60 per cent of its output was to TXU Europe, which collapsed earlier this year when its US parent removed its financial support. Energy prices have fallen sharply since the TXU contracts were signed, leaving suppliers with heavy losses.

The standstill period expires on 31 May 2003 and gives AES Drax access to at least £30m of funds currently unavailable under its previous arrangements.

Garry Levesley, chief executive and station manager of AES Drax, commented: "Drax is the UK's largest and most efficient coal-fired power station and plays an important and strategic role in the UK's power supply. The signing of the standstill agreement allows Drax to continue to meet the UK's electricity needs in an environmentally sound manner and contributes to the country's fuel diversity for electricity generation.

"With the recent problems at British Energy and with the future increased dependence of the UK on imported gas it is important that coal plants like Drax are able to compete in a fair marketplace."