AES to buy huge coal-fired plant in England

$3 billion purchase from National Power

August 19, 1999|By BLOOMBERG NEWS

ARLINGTON, Va. -- AES Corp., the No. 1 U.S. power-plant developer, agreed to buy the Drax plant in northern England, one of the world's biggest power plants, from National Power PLC for about $3 billion in cash, giving AES a larger share of the United Kingdom's deregulated electricity market.

The Drax plant is the biggest coal-fired plant in Western Europe, generating about 8 percent of the electricity used in England and Wales. It can produce 3,960 megawatts of power, enough to light nearly 4 million homes.

AES owns stakes in five power plants in the United Kingdom, and has sought to expand in Britain because of the potential for higher profit than it can earn at home. The Labor government, though, has imposed a moratorium on building natural-gas fired plants to support its ailing coal industry, and none of the nation's gas-fired units were for sale.

"Coal is the only way to get into the market and [AES] got about 7 percent market share with just one acquisition," said Jason Goddard, a utilities analyst at HSBC Securities in London.

National Power, Britain's second-biggest power producer, needs to sell Drax to allay antitrust concerns about its pending purchase of part of the United Kingdom's Midlands Electricity PLC.

Drax, which accounts for about 22 percent of National Power's U.K. generating capacity, fetched a better price than investors expected, said Marshall Whiting, an analyst with SG Securities in London.

AES stock rose $2.3125 to $57.3125 in trading of 1.24 million shares, about double the three-month daily average. National Power rose 22 pence to 448.25 in London.

Founded in 1981, AES has become one of the world's largest private owners of power plants, with revenue of $2.4 billion last year. It operates in 16 countries, owning generators and distribution businesses.

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