Drax mulls £1.9bn offer from US

14 September 2005 – Drax Power, owners of Europe’s largest power station, has received a £1.9bn ($3.46bn) bid approach from Constellation Energy and Perry Capital. Higher wholesale electricity prices have resulted in a dramatic turnaround of fortunes for the 4000 MW coal fired plant, which former owners AES Corporation relinquished to creditors in 2003.

The Board of Drax said it was considering the approach but noted that the indicative value proposed is below the enterprise value of the Company as implied by current trading of its A2/A3 debt and equity.

Drax had been planning a public listing by the end of this year and this cash offer provides a potentially quicker exit route for creditors and equity holders. A Drax representative said that the company might consult shareholders next week about the US bid.

Constellation Energy is a utility based in Baltimore, Maryland, with an equity capitalisation in excess of US$10 billion. It supplies electricity to large commercial and industrial customers in the US and the nation’s largest wholesale power seller. Constellation is also a major generator of electricity with approximately 12 000 MW of power generating assets throughout the US, including 2 827MW of coal fired generation.

Perry Capital is an investment fund manager with approximately $12bn under management and offices in New York, London and Hong Kong.

Constellation Deutsche Bank AG London Branch (‘Deutsche Bank’), which is regulated by the Financial Services Authority for the conduct of designated investment business in the United Kingdom, is acting for Drax and Perry Capital have hired Lazard as an advisor and would use Credit Suisse First Boston to arrange any debt financing required while Deutsche Bank AG is acting for Drax.