UK Drax loses coal supply

18 October 2002 – UK coal, the supplier of coal to the Drax power station in North Yorkshire, yesterday suspended supplies to the AES-owned plant – the largest in the UK. The action follows the failure of TXU Europe to make a à‚£20m ($30.96m) payment for electricity it takes from Drax.

UK Coal has temporarily suspended coal deliveries to AES Drax and has agreed to re-scheduling of the à‚£12m owed by AES to the loss-making company.

TXU uses 60 percent of Drax’s electricity to feed its 5.5 million customers in eastern and northwest England. Analysts believe both AES Drax and TXU Europe may be close to insolvency.

On Wednesday Standard & Poor’s downgraded AEX Drax Holdings Ltd’s bond issues after TXU had failed to make the required payment. This followed deterioration in the credit quality of TXU Europe’s parent company and the parent’s decision not to furnish funding towards power contract renegotiations.

The threatened insolvency of British Energy and the difficulties of UK power produces has its routes in the collapse of wholesale electricity prices which have fallen 40 per cent since 1998.

“In view of the current situation in the power market, which has been widely reported, UK Coal has agreed with AES Drax a short-term rescheduling of the current debt, and has also agreed a temporary suspension of coal deliveries,” UK Coal said in a statement.

It added that trading with our other generator customers, including TXU, remained “within normal contractual terms.” TXU also owns power stations of its own.

The Drax power station has enough coal to operate normally for two and a half months. “This arrangement is mutually beneficial to both of us,” said Garry Levesley, station manager.

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