FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For November 19, 2002
AES DRAX HOLDINGS LIMITED
18 Parkshot
Richmond
Surrey TW9 2RG
England
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(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [_]
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes [_] No [X]
AES DRAX HOLDINGS LIMITED
INDEX
Item
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1. Recent Developments
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AES DRAX HOLDINGS LIMITED
Date: November 19, 2002 By: /s/ John Turner
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Name: John Turner
Title: Director
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ITEM 1.
Recent Developments
Since November 12, 2002, the following events have occurred:
o On November 14, 2002, TXU Europe Energy Trading Limited (TXU Energy)
was required to pay AES Drax Power Limited (AES Drax Power)
(pound)49,323,680 (including VAT) for power purchased in October 2002
(the "October Payment") under the Hedging Contract. TXU Energy failed
to make such payment despite having provided certain assurances that
payment would be made on time.
o As disclosed on November 12, 2002, AES Drax Power had been and was
continuing discussions with TXU Energy and TXU Europe Group plc (TXU
Europe), the guarantor under the Hedging Contract, regarding
settlement of a termination sum due under the Hedging Contract as
well as amounts owing for power already consumed by TXU Energy for
October and November 2002. AES Drax Power's willingness to continue
these discussions was dependent on receiving the October Payment on
time.
o On Friday November 15, 2002, TXU Energy sought an order from the
court to restrain AES Drax Power from presenting a petition to the
court for its winding up. A hearing was scheduled to hear the merits
for seeking such a restraining order. However, since an order for
administration was made in respect of TXU Energy and TXU Europe on
November 19, 2002, AES Drax Power and TXU Energy have agreed not to
proceed with such hearing since no creditor may present a winding up
petition against an English company which is in administration.
o During the weekend of November 16 and 17, 2002, TXU Energy, TXU
Europe and AES Drax Power continued their discussions regarding
payment of a termination sum as well as payment for power consumed in
October and November 2002. By the afternoon of Sunday November 17,
2002 a tentative agreement was reached pursuant to which TXU Energy
would pay AES Drax Power an aggregate of (pound)290 million (plus
VAT) as a termination sum and for power consumed in October and for
November, with delivery of power through November 22, 2002 and then
termination of the Hedging Contract.
o This tentative agreement was rejected by the Board of Directors of
TXU Energy in the early morning of November 18, 2002, with TXU Energy
significantly reducing the amount it was prepared to pay by (pound)30
million, which offer was immediately rejected by AES Drax Power.
Throughout the negotiations, TXU Energy was informed that if
agreement could not be reached, AES Drax Power would consider
exercising its right to terminate the Hedging Contract.
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o Although there were further discussions during the morning of
November 18, 2002 and AES Drax Power made numerous attempts to obtain
a written proposal from TXU Energy stipulating an amount it was
prepared to pay as a settlement sum and for power consumed in October
and November 2002, no offer capable of acceptance by AES Drax Power
was received and no agreement as to settlement was reached. AES Drax
Power then delivered to TXU Energy a notice of termination of the
Hedging Contract in accordance with the terms of the Hedging
Contract. As previously disclosed, AES Drax Power had the right to
terminate as of November 4, 2002, due to the failure by TXU Energy to
post a required letter of credit.
o The termination notice makes the following demands (but without
prejudice to any other rights or remedies which AES Drax Power
may have) of TXU Energy:
o payment of Capacity Damages in the amount
of(pound)266,482,876 plus VAT
o payment of(pound)49,323,679.86 (including VAT) for power
consumed in October 2002
o payment of approximately(pound)35,117,729 (including VAT)
for power consumed from November 1, 2002 to the termination
time (4:00 p.m. (London time)) on November 18, 2002; and
o withdrawal of all calls for power subsequent to the
termination time to permit AES Drax Power to begin selling
power in the market.
In addition to the notice of termination delivered to TXU Energy, AES Drax
Power also delivered a demand for payment to TXU Europe, as guarantor under the
Hedging Contract, for payment of all amounts then due under the Hedging
Contract. In accordance with the terms of the guarantee, payment is required to
be made within three business days of delivery of the demand for payment.
o The termination of the Hedging Contract is an event which will become
an event of default under the AES Drax Holdings Senior Bonds unless
AES Drax Holdings can obtain a ratings affirmation from all three
ratings agencies within 30 days of November 18, 2002. There is no
assurance that AES Drax Holdings will be able to obtain the requisite
ratings affirmation. In accordance with the AES Intercreditor
Agreement, although an event of default under the Indenture for the
Senior Bonds may occur on December 18, 2002, unless the Eurobonds
(which were financed by a syndicate of banks (the "Senior Lenders")
were to be accelerated, the Senior Bond holders will not be able to
accelerate payment of the Senior Bonds until 90 days following the
event of default.
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o Absent ratings affirmations, the termination of the Hedging Contract
may be an immediate event of default under the Drax Energy High Yield
Notes. Although the High Yield Noteholders may be able to accelerate
payment of the Notes immediately, pursuant to intercreditor
arrangements the high yield noteholders have no enforcements rights
until 179 days following such acceleration.
o AES Drax believes that there will be adequate cash flow to satisfy
AES Drax Power's operational needs through December 31, 2002. In
addition, the Debt Service Reserve Fund for payments on the Eurobonds
and Senior Bonds is fully funded although it may be necessary to
obtain certain waivers to permit such funds to be used to make
interest and principal payments due on December 30, 2002.
o AES Drax Holdings intends to seek certain waivers and consents from
its Senior Lenders and the Senior Bond holders to permit AES Drax
Power to access cash to facilitate its liquidity needs and permit
payments at year-end.
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Forward Looking Statements
Certain statements included in this report are forward-looking statements
as that term is defined in the Private Securities Litigation Reform Act of
1995. These forward-looking statements speak only as of the date hereof.
Forward looking statements can be identified by the use of forward-looking
terminology such as "believe," "expects," "may," "intends," "will," "should,"
or "anticipates," or the negative forms of other variations of these terms of
comparable terminology, or by discussions of strategy. Future results covered
by the forward-looking statements may not be achieved. Forward looking
statements are subject to risks, uncertainties and other factors, which could
cause actual results to differ materially from future results expressed or
implied by such forward-looking statements.
Under the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, we have identified some of these risks, uncertainties and
other important factors in this report and you should also review "Item 1. Key
Information - Risk Factors" in our Annual Report on Form 20-F for the year
ended December 31, 2001, ("2001 Annual Report") which is hereby incorporated by
reference herein.
You should also consider, among others, the following important factors:
o general economic and business conditions in the UK;
o changes in governmental regulations affecting the Drax Power Station
and the UK electric power industry generally, including the impact of
the New Electricity Trading Arrangements ("NETA") that were
implemented on March 27, 2001 on the market for electricity in the
UK;
o power prices and resource availability and pricing;
o general industry trends;
o changes to the competitive environment;
o changes in business strategy, development plans or vendor
relationships, in the market for power in the UK and that our
principal hedging arrangement relating to power sales has been
terminated and we will now be operating as a fully merchant plant;
o availability, terms and development of capital;
o interest rate volatility;
o changes in currency exchange rates, inflation rates and conditions in
financial markets; and
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o availability of qualified personnel.
These forward-looking statements speak only as of the date of this report. We
do not intend to publicly update or revise these forward-looking statements to
reflect events or circumstances after the date of this report, and we do not
assume any responsibility to do so.
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