AES withdraws interest from British power plant

Two independent directors took control of the Drax power plant after its creditors rejected the financial restructuring plan proposed by its parent, AES Corp. AES of Arlington, Va., withdrew its four directors from Drax after banks and bondholders missed a midnight deadline for accepting the plan. AES had proposed slashing Drax's 1.3 billion pound ($2.1 billion) debt by offering to pay 47 pence for every pound the plant owes.

AES has now given up on Drax and is writing off its investment, Drax said. The U.S. company paid $1.9 billion for Drax in 1999.

It was not clear if AES still would be liable for any of Drax's debts. AES staff at the company's Arlington headquarters did not immediately respond to calls seeking comment.

Drax is the largest coal-fired power station in Western Europe. Located near Selby in North Yorkshire, the plant ran into difficulties last year after its biggest customer, the electricity supplier TXU Europe, failed to pay a 50 million pound ($80 million) bill. TXU was later put into financial administration, a step toward bankruptcy.

TXU had contracted to buy 60 percent of Drax's electricity output at rates that proved to be well above current market prices. Electricity prices have dropped 40 percent since 1998, due to increased competition and excess production capacity.

Drax's troubles mirror those of other British electricity providers. Britain's largest electricity company, British Energy PLC, has had to restructure and write off much of its 1.3 billion pound debt to avoid bankruptcy. It has blamed its financial losses largely on declining electricity prices.

Gordon Horsfield, one of Drax's independent directors, said the plant was continuing talks with ``a number of parties'' interested in its restructuring.

``The plant is largely self-sufficient and will continue to operate normally,'' said Horsfield, a former executive at financial services group PricewaterhouseCoopers.

AES provided just four of Drax's 480 staff.

International Power PLC offered in July to buy a stake in Drax, assume some of its debt and manage the plant. The offer expires on Aug. 22.