20 November 2002 – Electricity supplier TXU Europe yesterday petitioned to go into administration raising question marks over the financial impact the collapse will have on related power traders.
Previously one of the UK’s biggest power suppliers, TXU Europe had lost the backing of its US parent after low UK wholesale power prices pushed operations into the red. In order to meet obligations TXU Europe has been forced to sell power generation and retail assets which Powergen acquired last month for £1.6bn.
KPMG and Ernst & Young were yesterday appointed administrators after AES, owner of Britain’s biggest power station at Drax in Yorkshire, terminated a long-term contract to supply 60 per cent of its output to TXU. The contract was ended after TXU failed to pay £50m ($78.6m) for October’s supplies.
Fears are growing that Drax will no be able to meet debt commitments following the loss of the contract. Interest payments on Drax’s bonds are due in February, but Jan Willem Plantagie at Standard & Poor’s said: “There are no signs that a payment can be made.”
The repercussions of the collapse could also fall on International Power whose Rugeley power plant is reliant on a tolling agreement with TXU as well as trade creditors Scottish & Southern. Yesterday, International Power said it accepted that there was doubt over the contract but could operate the plant under merchant conditions. The company’s CEO, David Crane, said that he would be seeking buyers for the contract.