PowerGen on course to cut debt

Financial Times

December 08, 2000

PowerGen, the gas and electricity group, said yesterday it hoped to make at least one more divestment before Christmas as it announced a deal to sell majority power plant stakes in Asia and Australia.

It is understood that Rye House, a 700 MW gas plant in Hertfordshire, could be its next disposal.

PowerGen is also looking to sell a gas plant at Connah’s Quay, near Chester, and three plants in continental Europe.

Ed Wallis, chief executive, said he was confident the company would hit its target of reducing debt by à‚£1bn ($1.4bn) by the end of the month.

It has cut debt by à‚£890m since February.

The company wiped à‚£458m of debt from its balance sheet yesterday when it sold its Australian, Indian and other Asian assets to CLP Power International, a unit of Hong Kong’s CLP Holdings, for à‚£286m.

PowerGen divested a 88 per cent stake in a power station in Paguthan in Gurjurat, after becoming a majority shareholder in July 1999.

The company also divested its stake in Yallourn, an Australian brown coal-fired power station, at a loss on its book value.

In addition, it sold its 50 per cent stake in BLCP, a Thai company, and secured rights to sell its interest in PT Jawa Power, an Indonesian project, over the next five years.

PowerGen said in March that it would consider offers for its UK and global assets to help meet the costs of the company’s $3.2bn purchase of LG&E Energy, the Kentucky-based power concern.

Directors said that purchase was cleared by the U.S.Securities and Exchange Commission on Wednesday.

Wallis said the purchase of LG&E Energy had given the company “a hell of a lot of work to do”, but added that PowerGen had not ruled out further acquisitions if suitable companies were put up for sale.

Wallis said the company had realised value for the assets even though they were sold for à‚£242m less than book value. One analyst said: “It is at least a fair price, these are bad assets.”

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