US’s power major Constellation makes £1.9bn bid for Drax

US’s power major Constellation makes £1.9bn bid for Drax

	Published : Thu, 15 Sep 2005 06:05 By : Cedric Benson Print this Story

LONDON: The owners of Europe’s largest coal-fired power station Drax have received a £1.9 billion cash offer in a takeover bid by a US consortium comprising Constellation Energy and Perry Capital.

Constellation Energy is believed to be the US’s biggest wholesale power provider while joint bidder Perry Capital is a £6.5 billion hedge fund from New York. With the acquisition of Drax, Constellation hopes to establish an overseas operational base, sort of a beachhead. It is already a major provider of coal to the UK and has set up a marketing branch office with a staff of 20.

The takeover is expected to give Drax’s shareholders (a group of banks who were the company’s former creditors) an alternative to an IPO for a listing on the stock market. Its former owner AES Corp. from the US had retreated after energy prices in the UK dropped sharply in 2003 and its largest customer Texas-based TXU was declared bankrupt. It was only in the recent past that Drax’s fortunes seemed to revive after power prices resumed their upward move.

The management of this Yorkshire-based 4000MV power plant said they were "considering this approach" but also clarified that the offer is below their expectations and value of the company. In the meanwhile, they would also continue to pursue the option of a public offering - the proceeds of which would enable the company to repay the banks and other creditors.

Drax meets about 7 percent of the UK’s power needs.

In an another development in the industry, four nuclear reactors of British Energy were forced to shut down after inspections revealed potential for stress corrosion cracking. The downtime will mean a major setback for British Energy as it produces 25 percent of the nation’s electricity. The company refused to say when the reactors would be back in service.