AES buys Drax in $3bn deal

US power company AES is to acquire Drax power station in the UK from National Power for £1.875bn ($3bn). The acquisition boosts AES` presence in the UK and reduces National Power`s market share in generation to 12 per cent.

The 3960 MW plant is the largest coal fired power station in western Europe, and accounts for eight per cent of electricity generation in England and Wales. Drax will be divested through the sale of shares in National Power Drax Ltd., a newly formed company. AES has also entered into a 12 month coal supply contract with National Power, a transitional contract for differences for part of Drax`s output, and several other short-term technical and IT contracts.

The price that AES will pay is at the higher end of analysts` expectations and was probably buoyed by the `gas moratorium`. The company has dismissed concerns over the impact on electricity prices of the trading review and other regulatory pressures. The book value of the assets transferred to National Power Drax, including 580 staff, is approximately £1264m. In the last financial year, Drax produced an operating profit of £205m on a turnover of £656m.

Analysts have speculated that National Power may embark on an international spending spree with revenue from the sale.