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 September 2, 2003
Commission File Number: 333-13096
AES DRAX HOLDINGS LIMITED
Drax Power Station
PO Box 3
Selby
North Yorkshire
Y08 8PQ
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
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Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1):
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Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7):
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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
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If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):82-
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AES DRAX HOLDINGS LIMITED
INDEX
ITEM
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1 Press Release dated August 30, 2003, entitled "AES Drax Holdings Ltd enters
exclusivity with International Power plc"
2 Copy of the revised offer letter dated August 30, 2003 from International
Power plc to the Directors of AES Drax Holdings Limited, with attachments
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: September 2, 2003 By: /s/ Gordon Horsfield
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Name: Gordon Horsfield
Title: Director
ITEM 1
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PRESS RELEASE
AES DRAX HOLDINGS LTD ENTERS EXCLUSIVITY
WITH INTERNATIONAL POWER PLC
30 August 2003
AES Drax Holdings Ltd ("Drax") has today announced that, following a period of
intensive discussions with International Power plc ("IPR"), BHP Billiton plc and
Goldman Sachs International, and having noted the letter received yesterday from
MMC, and following discussions with the senior creditors of Drax, it has now
entered into an exclusive arrangement with IPR on the basis of a revised offer
received from IPR yesterday to participate in the restructuring of Drax. Details
of the offer are attached.
The intention is to finalise the detailed terms of the restructuring in order to
complete the restructuring by the end of this year.
David Crane, CEO of IPR, said: "We are pleased to have advanced to this very
important stage in the restructuring process and we look forward to a successful
conclusion of negotiations. An interest in Drax represents a good opportunity
for us to create value for the future benefit of our shareholders and all the
stakeholders in Drax."
Gordon Horsfield, Chairman & Director of Drax, commented: "We are delighted with
the level of interest which has been shown by parties wishing to participate in
the restructuring of Drax and the confidence in its long term future which this
implies. We thank BHP Billiton and Goldman Sachs for their interest, and are now
working expeditiously with International Power in order to conclude the
restructuring as quickly as possible."
Gerald Wingrove, Finance Director of Drax, commented: "We look forward to a
strong ongoing commercial relationship between Drax and International Power,
which we believe will bring significant benefits to both companies."
FOR FURTHER INFORMATION PLEASE CONTACT:
Drax Media Contact:
Buchanan Communications
Judith Parry / Sophie Morton / Kelly-Ann French
+ 44 (0)1943 883990
International Power Media Contact:
Aarti Singhal
+44 (0)20 7320 8681
NOTES TO EDITORS:
International Power plc is a global independent power producer with interests in
28 power stations in 12 countries around the world. The Company's net generation
capacity in operation and under construction totals 11,600 MW. Among the
countries where International Power has facilities in operation are Australia,
the United States, the United Kingdom, the Czech Republic, Oman, the UAE,
Portugal, Turkey, Malaysia, Pakistan, and Thailand. International Power was
created in October 2000 and its shares are traded on the London Stock Exchange,
and as ADRs on the New York Stock Exchange under the ticker symbol "IPR".
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FORWARD-LOOKING STATEMENTS
Certain statements included in this document 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 that they were made.
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, including the projections, 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 herein and you should also review "Item 3. Key Information -
Risk Factors" and "Item 5. Operating and Financial Review and Prospects" in our
Annual Report on Form 20-F for the year ended December 31, 2002.
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"). NETA was implemented on March
27, 2001;
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;
o that our principal hedging arrangement relating to power sales has been
terminated and we are currently operating as a fully merchant plant;
o that since December 12, 2002, we are operating under standstill
arrangements with, among others, certain of our senior creditors, initially
under the "ORIGINAL STANDSTILL AGREEMENT", and, after expiry thereof on May
31, 2003, under the "FURTHER STANDSTILL AGREEMENT", and, after expiry
thereof on June 30, 2003 under the "THIRD STANDSTILL AGREEMENT" which
became effective July 11, 2003, and after expiry thereof on August 14,
2003, under the "FOURTH STANDSTILL AGREEMENT", which became effective
August 22, 2003 and expires on September 30, 2003, unless terminated
earlier or extended in accordance with its terms. A conformed copy of the
Fourth Standstill Agreement was furnished to the US Securities and Exchange
Commission on a Form 6-K, dated August 22, 2003;
o availability, terms and deployment of capital;
o interest rate volatility;
o changes in currency exchange rates, inflation rates and conditions in
financial markets;
o availability of qualified personnel; and
o changes in the interpretation of tax law.
We do not intend to publicly update or revise these forward-looking statements
to reflect events or circumstances after the date hereof, and we do not assume
any responsibility for doing so.
To: The Directors
AES Drax Holdings Limited
C/o Kempson House
Camomile Street
London EC3A 7AN
FAO: Gordon Horsfield and Gerald Wingrove
Date: 30 August 2003
THIS REVISED OFFER ("OFFER") IS MADE BY INTERNATIONAL POWER PLC ("IPR") ON THE
TERMS AND CONDITIONS SET OUT BELOW AND IN THE 30 JUNE 6K (AS HEREINAFTER
DEFINED) AND IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE 30 JUNE 6K AND THE
TERMS AND CONDITIONS SET OUT BELOW, THE LATTER SHALL PREVAIL. ANY CAPITALISED
TERM USED (BUT NOT OTHERWISE DEFINED) IN THIS OFFER SHALL HAVE THE MEANING GIVEN
TO IT IN THE FORM 6K FILE DATED 30 JUNE 2003 (SEC FILE #: 333-13096) ( THE "30
JUNE 6K").
1. If the cash out option described in section 1.4 of the 30 June 6K (the "A
CASH OUT OPTION") is exercised, IPR will replace AES (and any affiliate of
AES) as the provider of non Project Funds payable to the Secured Creditors.
2. IPR's Offer in respect of the Cash Out Options (as defined below) is as
follows:
2.1 IPR will provide up to (pound)100,000,000 (one hundred million pounds
sterling) ("IPR FUNDS") for the purposes of funding the A Cash Out Option
and any taxes and duties payable by IPR in connection with the exercise
thereof;
2.2 The discount price for a Secured Creditor's participation in the A-2 Debt
will be 71% of its principal amount;
2.3 To the extent that the A Cash Out Option is funded by IPR Funds, IPR will
become a Secured Creditor holding the A-2 Debt and the A-3 Debt (described
as "C DEBT" in 30 June 6K) and will have the option to become the owner of
the Equity corresponding to the amount of the A3 Debt purchased by IPR
consistent with the proposal set out in section 1.4 of the 30 June 6K;
2.4 Two sources of funds will be available to make payments to Secured
Creditors who elect to accept the A Cash Out Option ("CASH OUT FUNDS"):
(a) the amount which will be available to the AES Drax Companies (after
taking into account fees and expenses in connection with the
Restructuring and working capital requirements (up to a maximum of
(pound)50,000,000 (fifty million pounds sterling), subject to the
cashflow cycle)) is that amount of cash (the "PROJECT FUNDS") in
excess of funds required to make payment in full of amounts in the
Cash Flow Waterfall down to, and including, A-2 Debt interest on 31
December 2003 and, therefore, is yet to be finally determined; and
(b) the IPR Funds;
2.5 A Cash Out Option
(a) The Cash Out Funds for the A Cash Out Option will be made available as
follows:
(1) first, by the AES Drax Companies from Project Funds up
to(pound)30,000,000 (thirty million pounds sterling); and
(2) second, any additional amounts that are required will be funded
from IPR Funds until IPR Funds are exhausted.
(b) If, as part of the exercise of the A Cash Out Option, less than
(pound)10,000,000 (ten million pounds sterling) of IPR Funds are used,
then upon our demand (which demand may only be made at any time after
the Completion Date) you shall pay to IPR an amount of
(pound)2,000,000 (two million pounds sterling) (exclusive of VAT).
(c) IPR will request that a meeting of its board of directors is convened,
on or before the later of (i) 30 September 2003, (ii) the date falling
two weeks after the date on which the documentation (to include the
restructuring plan and equity and debt term sheets) for soliciting the
irrevocable undertakings from the Senior Banks and the holders of the
Senior Bonds (the "SENIOR CREDITORS") to vote in favour of the
Restructuring (as defined in paragraph 15) (such documentation being
the "RESTRUCTURING PACKAGE") is received by IPR and the Secured
Creditors and (iii) the date by which the Senior Creditors are
required to deliver such irrevocable undertakings, at which meeting
the Restructuring Package shall be tabled. If the Restructuring
Package is duly approved by the board at such meeting, IPR shall,
during the next following business day, procure the issuance of a
letter of credit in favour of AES Drax Holdings Limited from a bank
which possesses a current A rating or better awarded by Standard &
Poor's Rating Group (a division of The McGraw Hill Companies, Inc.) or
its successor or a current A2 rating or better awarded by Moody's
Investors Services, Inc. or its successor, in respect of its most
recent unsecured (and unsubordinated) long term debt issued on any
capital market. Such letter of credit shall (x) be in a maximum amount
of(pound)100,000,000 (one hundred million pounds sterling) to support
IPR's obligations under paragraph 2.1, (y) be capable of stepping down
to such lower amount as is actually required to fund the A Cash Out
Option with IPR Funds and (z) only be callable on notice delivered
after an IPR failure to comply with such funding obligations under
paragraphs 2.1 and 2.5.
2.6 B Cash Out Option
The Offer includes a cash out option on the B Debt (the "B CASH OUT
OPTION", together with the A Cash Out Option, referred to as the "CASH OUT
OPTIONS"). In particular, IPR offers Secured Creditors the opportunity to
cash out of the B Debt at a discount price of 55% of the principal value.
The option is only available to a Secured Creditor if the Secured Creditor
also tenders its pro-rata interest in the A-2 and A-3 Debts (and the
Equity) at the price indicated in paragraph 2.2 above. IPR will provide up
to (pound)30,000,000 (thirty million pounds sterling) of cash to support
its commitment with respect to the B Cash Out Option; and
2.7 The IPR Offer is neither subject to, nor contingent upon, any third party
financing or due diligence.
3. IPR will within 7 business days of the date on which your acceptance of
this Offer is received (the "ACCEPTANCE DATE"), pay (pound)5,000,000 (five
million pounds sterling) (the "DEPOSIT") into an escrow account. It is
IPR's intention that the Deposit would be non-refundable to IPR, save in
limited circumstances. The core terms of the escrow agreement, subject only
to the addition of the standard requirements of the escrow bank chosen, are
attached as Schedule 1. IPR acknowledges, for the purposes of this
paragraph 3, that time is of the essence.
4. Debt Structure
4.1 The Offer increases the margin on the A-2 Debt to 400bps. The margin on:
A-1 Debt is 250bps; A-3 Debt is 500bps; and B debt is 200bps. Interest on
A-2, A-3 and B Debt may be deferred (but not capitalised) if no funds are
available under the cash flow waterfall (as set forth in Schedule 2, the
"CASH FLOW WATERFALL") (and interest will be incurred on any deferred
interest). No interest will be paid in respect of the debt to be
compromised in the Restructuring that is held by the Senior Banks and the
holders of the Senior Bonds for the period from and including 1 July 2003
to the completion of the Restructuring. However, interest will accrue in
respect of the Restructured Debt as from 1 July 2003 as if such debt had
been issued on such date, and will be paid in accordance with the Cash Flow
Waterfall. In respect of those Secured Creditors who exercise the A Cash
Out Option, interest on the A-2 Debt which would otherwise be payable in
respect of the period from 1 July 2003 to the date of the receipt of Cash
Out Funds will be paid to them on 31 December 2003, but only to the extent
that it is paid in cash by the company and not deferred. For the Secured
Creditors exercising the Cash Out Options, no interest will be paid for
such period in respect of the A-3 Debt or the B Debt.
4.2 The Offer changes the terms and ranking of the B Debt and the A-3 Debt as
follows: the A-3 Debt will rank behind the A-2 Debt, but ahead of the B
Debt, in the Cash Flow Waterfall and with respect to its security over the
Principal Drax Assets. The A-3 Debt therefore will have fourth ranking
security over the Principal Drax Assets. The B Debt will have first ranking
security over the TXU claims (and rights to the proceeds of the realisation
thereof) as described in Section 1.8 of the 30 June 6K (the "TXU CLAIM")
(without any deduction for corporation tax thereon), as well as a fifth
ranking security over the Principal Drax Assets.
4.3 The holders of the B Debt, however, will not have any voting rights with
respect to the release of their security over the Principal Drax Assets,
the sale of the company, or a re-capitalisation of the balance sheet. The B
Debt holders may (by an appropriate majority) agree to compromise the TXU
Claim or vote the interest of the AES Drax Companies in any insolvency in
respect of the TXU Claim.
4.4 The B Debt holders and the A-3 Debt holders shall have the right of first
refusal to purchase all (or materially all) but not part of the Drax
Principal Assets, if the A-1 Debt holders and/or A-2 Debt holders have
resolved to sell such assets.
4.5 Interest on A-1 Debt will be payable on a semi-annual basis. A-1 Debt will
have the benefit of certain prepayment rights, as well as a debt service
reserve account ("DSRA") (to be established immediately on the completion
of the Restructuring). The DSRA will be funded at completion of the
Restructuring to an amount equal to the interest payments falling due on
the two interest payment dates following the Restructuring and, thereafter,
funded in accordance with the Cash Flow Waterfall to a level equal to the
interest payments and scheduled principal repayments on the A-1 Debt
falling due on the two interest payment dates following the relevant
interest payment date.
4.6 A-2 Debt Interest Reserve: There will be a six month (18 months on or
before 31 December 2006) look-forward test for A-2 Debt interest on a 1.0 x
debt service cover ratio and, to the extent such test is not passed, an
amount equal to the shortfall will (in accordance with the Cash Flow
Waterfall) be placed in a reserve account (the "A-2 DEBT INTEREST
RESERVE"). Amounts standing to the credit of the A-2 Debt Interest Reserve
would be used to make payments of interest and scheduled principal on the
A-1 Debt before making payments of interest on the A-2 Debt, if there are
insufficient funds available in the Cash Flow Waterfall for such purpose
and if the DSRA had been fully utilised.
4.7 A-3 Debt Interest Reserve: There will be a six month (18 months on or
before 31 December 2006) look-forward test for A-3 Debt interest on a 1.0 x
debt service cover ratio and, to the extent such test is not passed, an
amount equal to the shortfall will (in accordance with the Cash Flow
Waterfall) be placed in a reserve account (the "A-3 DEBT INTEREST
RESERVE"). Amounts standing to the credit of the A-3 Debt Interest Reserve
would be used to make payments of interest and scheduled principal on the
A-1 Debt or the A-2 Debt before making payments of interest on the A-3
Debt, if there are insufficient funds available in the Cash Flow Waterfall
for such purpose.
4.8 B Debt Interest Reserve: There will be a six month look-forward test for B
Debt interest on a 1.0 x debt service cover ratio and, to the extent such
test is not passed, an amount equal to the shortfall will (in accordance
with the Cash Flow Waterfall) be placed in a reserve account (the "B DEBT
INTEREST RESERVE"). Amounts standing to the credit of the B Debt Interest
Reserve would be used to make payments of interest and scheduled principal
on the A-1 Debt, the A-2 Debt or the A-3 Debt before making payments of
interest on the B Debt, if there are insufficient funds available in the
Cash Flow Waterfall for such purpose.
5.
5.1 In the shareholders' agreement and in consideration of the obligations to
be undertaken by IPR under this Offer, IPR shall be entitled to receive a
"support fee" provided that at least (pound)10,000,000 (ten million pounds
sterling) of IPR Funds have been used for the A Cash Out Option. Such
"support fee" shall be that specified in the two options below and the AES
Drax Companies shall notify IPR by the Completion Date which option they
select:
(a) "OPTION A": a fixed non-refundable "support fee" for the four (4)
years from the Completion Date of (pound)5,000,000 (five million
pounds sterling) (exclusive of VAT) in aggregate, to be paid in full
within two (2) months of the Completion Date; or
(b) "OPTION B": an annual "support fee" for each of the four (4) years
from the Completion Date of (pound)1,500,000 (one million, five
hundred thousand pounds sterling) per annum (exclusive of VAT) payable
monthly in arrears (based on 1/12th of the fee for each calendar
year).
5.2 IPR will be obliged in the shareholders' agreement in favour of the
shareholders (and in consultation with the Board) to carry out annual and
quarterly equity holders investment reviews of the business (in relation to
the annual review, at the time of the planning round agreed in the
shareholders' agreement), IPR will be compensated for undertaking the
reviews through the "support fee" set out in paragraph 5.1.
5.3 In the event of a Change of Control, either IPR or the shareholders (by way
of ordinary resolution) may by one (1) month's written notice terminate the
"support fee" arrangement (under paragraph 5.1) and IPR's obligation (under
paragraph 5.2) and if the AES Drax Companies have selected Option B, IPR
shall be paid, promptly upon such termination notice being issued, an
amount in pounds sterling equal to the net present value of the fee which
otherwise would have been payable to IPR for the remainder of the four year
period discounted back to the date of the notice of termination at the rate
of 10% (ten percent) without any deduction for any taxes.
5.4 "CHANGE OF CONTROL" means following the Completion Date:
(a) any change in the Control of a parent undertaking or a subsidiary
undertaking of Drax Power; or
(b) any sale of all or part of the Principal Drax Assets to a third party,
in either case, other than in relation to a solvent restructuring or
re-organisation of Drax Power or any parent undertaking or subsidiary
undertaking.
"CONTROL" in this context means a person who, in relation to another
person:
(a) holds a majority of the voting rights in the other person; or
(b) is a member of the other person and has the right to appoint or remove
a majority of its board of directors; or
(c) has the right to exercise a dominant influence over the other person:
(i) by virtue of provisions contained in the other person's
memorandum or articles or association; or
(ii) by virtue of a control contract, or
(d) is a member of the other person and controls alone or together with
others, pursuant to an agreement with other shareholders or members, a
majority of the voting rights in the undertaking.
5.5 This Offer is subject to the terms of the restructuring arrangements
providing that payment of (a) the "support fee" shall, at all times, rank
at the same level as payment of operating expenditure at the top of the
cashflow waterfall and (b) the sum referred to in paragraph 2.5(b) shall,
at all times, rank at the same level as the payment of all restructuring
fees payable on closing of the Restructuring.
6. Save as expressly contemplated herein, the terms of the restructuring
arrangements are not to differ from those described in the 30 June 6K and
this Offer in a manner which is materially adverse to the interests of IPR
in connection with the matters and transactions contemplated by this Offer.
7. Restructuring Documentation
7.1 The definitive documentation required for the restructuring (and the
conditions precedent to such documentation) that have received final
sanction (or are subject to any other equivalent order or decision) by the
court in each relevant jurisdiction (together, the "RESTRUCTURING
DOCUMENTATION"), shall not have any commercial term or condition that
departs from the commercial terms and conditions of the Restructuring
Package, the 30 June 6K and this Offer in a manner that is materially
adverse to the interests of IPR in connection with the matters and
transactions contemplated therein. Further, completion of the Restructuring
is to be achieved with all such conditions precedent met on a date (the
"COMPLETION DATE") that is no later than the Proposed Restructuring Date.
7.2 The "PROPOSED RESTRUCTURING DATE" shall be 31 December 2003 (and, subject
to IPR not having frustrated the process, shall be extended automatically
on an ongoing basis thereafter).
8. IPR proposes a corporate governance structure as described in Schedule 3,
which shall be reflected in a shareholders' agreement. In particular, IPR
shall, subject as provided in Schedule 3, be entitled to nominate one
director to the board of each of the AES Drax Companies who shall be
appointed by the shareholders and shall be, at the option of the
shareholders, either a non-executive director or an executive director.
9. Dealing with the Equity and debt:
9.1
(a) In relation to Secured Creditors' rights to control the time at which
any sale of either (i) the whole of the Equity may occur, as
contemplated in section 1.6.3 of the 30 June 6K, or (ii) a material
part of the Principal Drax Assets, then, (x) in the event of an offer
being received for the whole of the Equity or a material part of the
Principal Drax Assets, IPR requires notice of such receipt, and (y) in
the event of any process or negotiations for the sale of the Equity or
a material part of the Principal Drax Assets commencing, IPR requires
notice of such commencement, and, in either case, the Secured
Creditors and each of the AES Drax Companies shall procure that IPR is
afforded equivalent rights to those of
the other person, in order to allow IPR to prepare and submit an offer
for such Equity or a material part of the Principal Drax Assets, for
consideration by the relevant company and/or the Secured Creditors and
acceptance of the offer shall be subject to shareholders' approval.
Any director nominated by IPR to the board of any of the AES Drax
Companies considering any such sale or possible sale shall not be
entitled to attend that part of any meeting of such board (or any
relevant committee thereof) that is considering offers for such sale,
unless IPR has confirmed in writing to the relevant board that it does
not intend to participate in such sale and, having made any such
confirmation, IPR shall not make any offer in respect of such sale
without the prior written consent of the relevant board.
(b) The shareholders' agreement and/or articles shall contain tag rights
for the benefit of minority shareholders, including IPR, on a sale of
the majority of the Equity and drag rights for the sale of the whole
of the Equity.
9.2 The shareholders' agreement shall specify that each shareholder shall be
subject to a cap on the voting rights attaching to the Equity held by it at
a level which is 1% below the percentage of the votes cast, from time to
time, that would allow that shareholder itself (or with another person
acting together or in concert) to veto a special resolution of the relevant
class(es) of shares in issue.
9.3 IPR shall waive its voting rights in respect of any proposed resolution on
a matter in which IPR has a direct conflict of interest with the relevant
company (e.g. a director's vote on any bid by another person for any sale
as described in paragraph 9.1 (if IPR itself makes a competing offer)).
9.4 Except as provided in paragraphs 9.2 and 9.3 above, IPR's Offer is subject
to there being no restriction on IPR exercising any voting rights in
respect of Debt and/or Equity held by IPR.
9.5 Prior to the Senior Creditors voting in relation to approving the
Restructuring, IPR shall not acquire any of the debt which is subject to
the Restructuring without the prior consent of the Bank Steering Committee
(in relation to Bank debt) or the Ad-Hoc Bond Committee (in relation to the
Senior Bonds), as appropriate.
10. IPR's Offer assumes that the Credit Support Facility contemplated in
section 1.3.1 of the 30 June 6K would have a term of at least 3 years in
tenor with the intention that this facility should continue or should be
replaced by one or more substantially similar facilities for an aggregate
period equal to the term of the A-1 debt. The Credit Support Facility would
not be subject to any cash collateralisation.
11. IPR's Offer assumes that (a) the requisite corporate governance covenants
and cure rights are put in place to ensure that cash flows for A-2 and A-3
debt service cannot be unreasonably diverted or held back for other
purposes, and (b) cure rights are available to the holders of A-2 and A-3
Debt in the event of prospective acceleration and/or enforcement of A-1
Debt.
12. This Offer is subject:
(a) to there being in IPR's opinion (acting reasonably) no change in the
expected level or accuracy of the forecasts (the "FORECASTS") with
regard to capital and operating expenditure contained within the Form
6K file dated 16 July 2003 (SEC file #:333-13096) which might
reasonably be expected to have a material adverse effect on the cash
available for debt service of A-2 Debt, provided that the Offer is not
subject to any such change relating to:
(i) power or coal prices;
(ii) changes in the condition of any entity which is currently an
affiliate (such as The AES Corporation) which are, in our
reasonable view, not relevant to the financial condition of the
AES Drax Companies; and
(iii) any information which has been fully, fairly and promptly
disclosed to us by you in writing (save that in respect of any
information disclosed after the date hereof, IPR may during the
period of four (4) weeks from IPR receiving such disclosure from
you (or if shorter, during the period between such disclosure and
the Posting Date (as defined below)) notify you that such a
change has occurred); and
(b) to such Forecasts not being, or becoming, misleading in any respect by
reason of their having been prepared (i) other than in good faith
and/or (ii) on the basis of assumptions (other than in respect of coal
or power prices) which were unreasonable at the time the Forecasts
were made such that they might reasonably be expected to have a
material adverse effect on the cash available for debt service of A-2
Debt,
in each case, at any time prior to the date which is the latest date
on which the documents containing the schemes of arrangement are
posted (or any other equivalent procedure) to the Secured Creditors
(such date being the "POSTING DATE"), assuming for the purpose of this
paragraph that such forecasts had been made by reference to the
circumstances existing at such time. Thereafter, to the extent that
irrevocable undertakings to vote in favour of the schemes of
arrangement have been executed by any of the Senior Creditors IPR
shall be entitled to exercise on an independent basis and by reference
to IPR's proposed participation in the Restructuring, any rights which
are capable of being exercised by any of the Senior Creditors pursuant
to such irrevocable undertakings.
13. This Offer is subject to (a) satisfactory legal and regulatory approvals
and clearances that are necessary or desirable to effect the Restructuring
and the terms of this Offer in the manner described in the 30 June 6K and
this Offer having been obtained by the time necessary or desirable, and (b)
IPR Board approval of the Restructuring Package circulated to IPR and the
Secured Creditors for their approval, currently proposed for September
2003, being received.
14. Only IPR and a person who has duly accepted this Offer will be entitled to
rely on or enforce its terms. No term of this Offer is enforceable under
the Contract (Rights of Third Parties) Act 1999 by a person who is not a
party to this Offer. The sole remedy for any expense, loss or liability in
connection with this Offer or your acceptance of it shall
be the payment of the Deposit to you or IPR in accordance with the escrow
agreement referred to above.
15. Exclusivity
15.1 From the Acceptance Date, you will not, and you shall procure that your
directors, officers, agents, advisors and employees (each, a
"REPRESENTATIVE") do not, directly or indirectly:
(a) enter into or continue any negotiations with any person other than
IPR, InPower, BondPower, Harich or any Secured Creditors (or their
respective advisers) (but excluding any person who has or intends to
make an alternative proposal to this Offer) with respect to the
restructuring of the senior secured debt and other contractual
arrangements of the AES Drax Companies on the terms and conditions set
out in this Offer (the "RESTRUCTURING");
(b) solicit or encourage any other person except IPR to make any proposal
with regard to the Restructuring, or entertain any such proposal or
offer from any other person except IPR (whether solicited or not);
(c) enter into any agreement or arrangement with any other person which
would have the effect of preventing you from completing the
Restructuring with IPR in accordance with this Offer; and
(d) subject to all applicable legal, accounting and regulatory
requirements, give or make available to any person except IPR, your
Representatives, your shareholders, the members of the Senior Creditor
Committees and their advisors any information (not being information
publicly available, whether so available at this time or in the
future) relating to any of the AES Drax Companies (except in the
ordinary course of business or with a view to achieving the
Restructuring as contemplated by this Offer),
and you shall procure that each of your Representatives and shareholders
shall be bound by the terms contained in this paragraph 15 as if such
Representative or shareholder were party to this Offer, provided that:
(i) nothing in this paragraph 15 constitutes an agreement to negotiate; and
(ii) nothing in this paragraph 15 shall restrict your ability to negotiate with
any other person in connection with the supply of coal or trading of
electricity.
Such exclusivity shall cease on 31 January 2004 subject to extension on a
monthly basis unless at the time of the proposed extension there is no
reasonable prospect of the Completion Date occurring on or before 30 June
2004 provided that such exclusivity shall cease on written notice given by
either party to the other, if such notice is given within three business
days of:
(A) 10 October 2003, if on or before such date irrevocable undertakings to
vote in favour of (i) the AES Drax Holdings Limited Scheme have not
been executed by 75% in value of those creditors who are entitled to
vote on such Scheme and
(ii) the InPower Limited Scheme have not been executed by 75% in value
of those creditors who are entitled to vote on such Scheme; or
(B) 15 November 2003, if on or before such date the scheme documents
relating to the Schemes referred to in (A) above have not been posted
to the Secured Creditors.
15.2 During the period of exclusivity determined by this paragraph 15, the
parties shall act at all times in good faith with the intent of
facilitating (so far as it is in their respective powers) the occurrence of
(a) the events described in paragraph 15.1(A) above by 30 September 2003
(or as soon as reasonably practicable thereafter); (b) the events described
in paragraph 15.1(B) above by 8 November 2003 (or as soon as reasonably
practicable thereafter); and (c) the Completion Date by 31 December 2003
(or as soon as reasonably practicable thereafter).
15.3 If the Completion Date has not occurred on or before 30 June 2004, either
party may terminate its participation in the process.
15.4 In the event that exclusivity ceases pursuant to a written notice served in
accordance with paragraph 15.1 or pursuant to paragraph 15.3, this Offer
shall lapse and neither party shall (without prejudice to paragraph 14) be
liable to the other save for any antecedent breach of its obligations
hereunder.
16. IPR's Offer assumes:
16.1 IPR shall have the right, in accordance with Schedule 3, to make a
nomination to the Board for the appointment/replacement of the positions of
production director and head of trading, to facilitate business continuity
at Drax. For the avoidance of doubt, IPR shall not have any veto right on
any unfettered decision taken by the Board during this period);
16.2 In a manner similar to that granted to the Secured Creditors and to
optimise business and operational aspects, IPR shall have reasonable access
for IPR's management to the plant and staff, including, without limitation,
to allow us to assist the board in the forward station planning cycle
process for the business and operational aspects thereof; and
16.3 IPR will be entitled to receive the same information, analyses, reports and
advice in relation to the restructuring and the business as is provided by
any of the AES Drax Companies to the Secured Creditors generally, unless
the same is legally privileged or there is a clear conflict of interest in
IPR receiving the same or disclosure of the same is prohibited pursuant to
any confidentiality agreement binding on such AES Drax Company,
in each case, from the Acceptance Date to the Completion Date.
17. In respect of the Restructuring and IPR's involvement therewith, no press
announcements shall be made by either party without the prior written
consent of the other party (such consent not to be unreasonably withheld or
delayed) and any regulatory filing shall be made by a party following
reasonable consultation with the other party.
This Offer is governed by English law and the courts of England shall have
exclusive jurisdiction to settle any dispute arising out of or in connection
with this Offer.
Please indicate your acceptance of the terms and conditions of this Offer by
signing, dating and returning on behalf of AES Drax Holdings Limited the
enclosed copy of the Offer to me.
Signed for and on behalf of INTERNATIONAL POWER plc
David Crane
Chief Executive Officer
International Power plc
We confirm that we have been authorised by AES Drax Holdings Limited to accept
this Offer and to confirm that AES Drax Holdings Limited has the right and
power, and has taken all action necessary, to accept this Offer..
Agreed and accepted on 30 August 2003 for and on behalf of AES Drax Holdings
Limited
..............................................................
Name :
Position:
..............................................................
Name :
Position:
SCHEDULE 1
CORE TERMS OF THE ESCROW AGREEMENT PROPOSED IN PARAGRAPH 3 OF IPR'S OFFER
This schedule forms part of IPR's Offer dated 30 August 2003.
PARTIES: IPR, AES Drax Holdings Limited and the Escrow Bank.
ESCROW BANK: the London office of a bank to be mutually agreed, being a bank
which does not have an actual or likely future interest in the Restructuring.
ESCROW ACCOUNT: an interest bearing account held on trust for the Parties (other
than the Escrow Bank). Interest shall be paid monthly and be credited to the
balance of the account forming part of the Deposit. The account shall not be
subject to any encumbrance, counterclaim, set-off or other deduction.
ESCROW BANK'S FEES: to be agreed with the Escrow Bank and borne equally by,
first, IPR, and secondly, AES Drax Holdings Limited. All other fees, costs, or
expenses etc. incurred in connection with the escrow agreement to be for the
account of the relevant party.
PAYMENT OF THE DEPOSIT TO THE ESCROW ACCOUNT: Assuming the Escrow Agreement has
been executed, IPR shall pay (pound)5,000,000 into the Escrow Account within 7
business days of the Acceptance Date.
PAYMENT OF THE DEPOSIT FROM THE ESCROW ACCOUNT: Irrevocable payment instructions
shall be given by an authorised representative of each of IPR and AES Drax
Holdings Limited on behalf of the other parties collectively for the Deposit
(including any accrued interest) to be paid to:
(a) IPR on (i) the Completion Date, or (ii) if the Completion Date has not
occurred before the Proposed Restructuring Date, on that date unless, in this
latter case, it is as a direct result of IPR having frustrated the process for
the Completion Date to occur by the Proposed Restructuring Date; or (iii) IPR
terminating its participation or otherwise exercising its rights, in respect of
paragraphs 6, 12, 13, 15.3 or 15.4; or
(b) AES Drax Holdings Limited on the Proposed Restructuring Date if the
Completion Date has not occurred before such date as a direct result of IPR
having frustrated the process for the Completion Date to occur by the Proposed
Restructuring Date; or
(c) either IPR or AES Drax Holdings Limited, with the consent of all the Parties
(excluding the Escrow Bank).
DISPUTE RESOLUTION: the parties submit to the exclusive jurisdiction of the
English Courts.
GOVERNING LAW: English law.
OTHER TERMS: save as otherwise described in the Offer, customary for such an
escrow arrangement.
SCHEDULE 2
AMENDED CASH FLOW WATERFALL
On any interest payment date, the order of payments in respect of the
Restructured Debt from cash available for debt service, after any payment
required to be made in relation to the Credit Support Facility and taking into
account working capital requirements, restructuring costs and expenses
(including reasonable costs and expenses of the Senior Creditors Committees and
the fees of the external legal and tax advisers of IPR (up to a maximum of
(pound)500,000 (five hundred thousand pounds sterling)), to the extent not paid
at the closing of the Restructuring), and tax, is:
(a) first, to make payments of interest on the A-1 Debt and hedging of A-1 Debt
interest;
(b) second, to make scheduled repayments of principal on the A-1 Debt;
(c) third, to make a deposit to the DSRA of the amount required so that funds
standing to the credit of the DSRA are equal to the interest on A-1 Debt
falling due on the next two interest payment dates;
(d) fourth, to make payments of interest on the A-2 Debt (including deferred
interest and hedging of A-2 Debt interest);
(e) fifth, to fund the A-2 Debt Interest Reserve to the required amount;
(f) sixth, to make a deposit to the DSRA of an amount so that the balance on
the DSRA is equal to the scheduled amortisation of principal on A-1 Debt
falling due on the next two interest payment dates;
(g) seventh, to make payments of interest on the A-3 Debt;
(h) eighth, to fund the A-3 Debt Interest Reserve to the required amount;
(i) ninth, to pay interest on the B Debt;
(j) tenth, to fund the B Debt Interest Reserve to the required amount;
(k) eleventh, to make prepayments and repayments as follows:
(i) at any time after the principal amount outstanding of the A-1 Debt is
(pound)200,000,000 (two hundred million pounds sterling) or more, to
prepay the A-1 Debt, with prepayments of A-1 Debt being applied to the
amortisation profile of the A-1 Debt in inverse order of maturity; and
(ii) at any time after the principal amount outstanding of the A-1 Debt is
less than (pound)200,000,000 (two hundred million pounds sterling) to
prepay A-1 Debt and prepay A-2 Debt on a pro rata basis as to the
outstanding principal amount of A-1 Debt and A-2 Debt immediately
prior to the prepayment. Prepayments of the A-1 Debt will be applied
to the amortisation profile of the A-1 Debt in inverse order of
maturity;
(l) twelfth, if the A-1 Debt and the A-2 Debt have been repaid in full, to pay
A-3 Debt deferred interest;
(m) thirteenth, if the A-1 Debt and the A-2 Debt have been repaid in full, to
prepay principal on the A-3 Debt;
(n) fourteenth, if the A-1 Debt, the A-2 Debt and the A-3 Debt have been repaid
in full, to pay B Debt deferred interest; and
(o) fifteenth, if the principal of the A-1 Debt, the A-2 Debt and the A-3 Debt
have been repaid in full, to prepay principal on the B Debt. Proceeds
received in respect of the TXU Claim will be excluded from the Cash Flow
Waterfall. If any amount is paid in respect of the TXU Claim, such amount
(net of related VAT, but not net of a withholding on account of UK
corporation tax) will be applied to prepay the principal of the B Debt.
SCHEDULE 3
CORPORATE GOVERNANCE
Overall, IPR's role in performance of its obligations under the shareholder's
agreement is to support the directors and management of each AES Drax Company,
whilst recognising the duties of (a) the management to the Board and (b) the
Board to each such AES Drax Company.
IPR assumes that the shareholders' agreement will reflect the following model
for the management organisation/governance structure at the Plant from the
Completion Date:
1. BOARD OF DIRECTORS
1.1 A Board, headed by a non-executive Chairman and with a combination of
executive and non-executive directors who together possess all of the
skills needed to run the business. The directors shall comprise: 3 (three)
executive directors (namely a Chief Executive Officer, Finance Director and
another executive director), and 2 (two) non-executive directors.
1.2 An executive team, headed by the CEO with a Production Director for all
plant matters, Trading, Finance, HR, HS&E. Some but not all of these
executives (for instance, the Production Director) may be on the Board (at
the shareholders' option).
1.3 Provided that at least (pound)10,000,000 (ten million pounds sterling) of
IPR Funds have been used for the A Cash Out Option, IPR shall have the
right to nominate one appropriately qualified non-executive director,
provided that, if the shareholders and IPR agree that the Production
Director nominated by IPR should be appointed as an executive director on
the Board, that person shall be IPR's one nominee to the Board. If IPR's
nominee is a non-executive director, IPR acknowledges that he shall not be
responsible for the day to day operations at the plant.
1.4 The shareholders shall give effect to any nomination by IPR for the
position of non-executive director.
2. PRODUCTION DIRECTOR
2.1 The Production Director should be appointed by the shareholders (if he is a
director of the company) or the Board (if he is not a director) and will be
responsible solely to the Board.
2.2 The process for the appointment/replacement of the Production Director
shall be that a committee comprising the CEO, HR director and the
IPR-nominated director shall be established and shall undertake the
following tasks:
2.2.1 creation of a job description for the Production Director;
2.2.2 determination of the process for the selection of the Production
Director;
2.2.3 interview of all potential candidates for the position of Production
Director; and
2.2.4 determination of a short list of candidates for the position of
Production Director to be considered by the Board or the
shareholders (as the case may be),
provided that such short list shall include the person nominated by
IPR for the position of Production Director.
2.3 The Production Director shall be the best person for the role regardless of
whether or not such person is an IPR nominee.
2.4 Remuneration and incentives for the Production Director are to be set by
the Board and paid by the Company and are solely based on Drax performance.
2.5 The shareholders (if he is a director of the company) or the Board (if he
is not a director) can replace the Production Director at their option and
IPR shall have the right to make a nomination for the replacement of that
position in accordance with the above procedures.
2.6 If the Production Director is seconded by IPR, then IPR cannot re-assign
the Production Director without the Board's approval.
3. HEAD OF TRADING
3.1 The head of trading is to be appointed/replaced by the Board. The process
for the appointment/replacement is to be the same as applies to the
Production Director and IPR shall have the same right to have its nominee
shortlisted for the appointment/replacement for that position as set out in
paragraph 2 above.
4. INFORMATION
IPR recognises that agreed steps shall be taken to "ring-fence"
information, which information shall be provided to the IPR nominated
director, any management nominated by IPR and IPR personnel undertaking the
periodic reviews.
ITEM 2
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To: The Directors
AES Drax Holdings Limited
C/o Kempson House
Camomile Street
London EC3A 7AN
FAO: Gordon Horsfield and Gerald Wingrove
Date: 30 August 2003
THIS REVISED OFFER ("OFFER") IS MADE BY INTERNATIONAL POWER PLC ("IPR") ON THE
TERMS AND CONDITIONS SET OUT BELOW AND IN THE 30 JUNE 6K (AS HEREINAFTER
DEFINED) AND IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE 30 JUNE 6K AND THE
TERMS AND CONDITIONS SET OUT BELOW, THE LATTER SHALL PREVAIL. ANY CAPITALISED
TERM USED (BUT NOT OTHERWISE DEFINED) IN THIS OFFER SHALL HAVE THE MEANING GIVEN
TO IT IN THE FORM 6K FILE DATED 30 JUNE 2003 (SEC FILE #: 333-13096) ( THE "30
JUNE 6K").
1. If the cash out option described in section 1.4 of the 30 June 6K (the "A
CASH OUT OPTION") is exercised, IPR will replace AES (and any affiliate of
AES) as the provider of non Project Funds payable to the Secured Creditors.
2. IPR's Offer in respect of the Cash Out Options (as defined below) is as
follows:
2.1 IPR will provide up to (pound)100,000,000 (one hundred million pounds
sterling) ("IPR FUNDS") for the purposes of funding the A Cash Out Option
and any taxes and duties payable by IPR in connection with the exercise
thereof;
2.2 The discount price for a Secured Creditor's participation in the A-2 Debt
will be 71% of its principal amount;
2.3 To the extent that the A Cash Out Option is funded by IPR Funds, IPR will
become a Secured Creditor holding the A-2 Debt and the A-3 Debt (described
as "C DEBT" in 30 June 6K) and will have the option to become the owner of
the Equity corresponding to the amount of the A3 Debt purchased by IPR
consistent with the proposal set out in section 1.4 of the 30 June 6K;
2.4 Two sources of funds will be available to make payments to Secured
Creditors who elect to accept the A Cash Out Option ("CASH OUT FUNDS"):
(a) the amount which will be available to the AES Drax Companies (after
taking into account fees and expenses in connection with the
Restructuring and working capital requirements (up to a maximum of
(pound)50,000,000 (fifty million pounds sterling), subject to the
cashflow cycle)) is that amount of cash (the "PROJECT FUNDS") in
excess of funds required to make payment in full of amounts in the
Cash Flow Waterfall down to, and including, A-2 Debt interest on 31
December 2003 and, therefore, is yet to be finally determined; and
(b) the IPR Funds;
2.5 A Cash Out Option
(a) The Cash Out Funds for the A Cash Out Option will be made available as
follows:
(1) first, by the AES Drax Companies from Project Funds up
to(pound)30,000,000 (thirty million pounds sterling); and
(2) second, any additional amounts that are required will be funded
from IPR Funds until IPR Funds are exhausted.
(b) If, as part of the exercise of the A Cash Out Option, less than
(pound)10,000,000 (ten million pounds sterling) of IPR Funds are used,
then upon our demand (which demand may only be made at any time after
the Completion Date) you shall pay to IPR an amount of
(pound)2,000,000 (two million pounds sterling) (exclusive of VAT).
(c) IPR will request that a meeting of its board of directors is convened,
on or before the later of (i) 30 September 2003, (ii) the date falling
two weeks after the date on which the documentation (to include the
restructuring plan and equity and debt term sheets) for soliciting the
irrevocable undertakings from the Senior Banks and the holders of the
Senior Bonds (the "SENIOR CREDITORS") to vote in favour of the
Restructuring (as defined in paragraph 15) (such documentation being
the "RESTRUCTURING PACKAGE") is received by IPR and the Secured
Creditors and (iii) the date by which the Senior Creditors are
required to deliver such irrevocable undertakings, at which meeting
the Restructuring Package shall be tabled. If the Restructuring
Package is duly approved by the board at such meeting, IPR shall,
during the next following business day, procure the issuance of a
letter of credit in favour of AES Drax Holdings Limited from a bank
which possesses a current A rating or better awarded by Standard &
Poor's Rating Group (a division of The McGraw Hill Companies, Inc.) or
its successor or a current A2 rating or better awarded by Moody's
Investors Services, Inc. or its successor, in respect of its most
recent unsecured (and unsubordinated) long term debt issued on any
capital market. Such letter of credit shall (x) be in a maximum amount
of(pound)100,000,000 (one hundred million pounds sterling) to support
IPR's obligations under paragraph 2.1, (y) be capable of stepping down
to such lower amount as is actually required to fund the A Cash Out
Option with IPR Funds and (z) only be callable on notice delivered
after an IPR failure to comply with such funding obligations under
paragraphs 2.1 and 2.5.
2.6 B Cash Out Option
The Offer includes a cash out option on the B Debt (the "B CASH OUT
OPTION", together with the A Cash Out Option, referred to as the "CASH OUT
OPTIONS"). In particular, IPR offers Secured Creditors the opportunity to
cash out of the B Debt at a discount price of 55% of the principal value.
The option is only available to a Secured Creditor if the Secured Creditor
also tenders its pro-rata interest in the A-2 and A-3 Debts (and the
Equity) at the price indicated in paragraph 2.2 above. IPR will provide up
to (pound)30,000,000 (thirty million pounds sterling) of cash to support
its commitment with respect to the B Cash Out Option; and
2.7 The IPR Offer is neither subject to, nor contingent upon, any third party
financing or due diligence.
3. IPR will within 7 business days of the date on which your acceptance of
this Offer is received (the "ACCEPTANCE DATE"), pay (pound)5,000,000 (five
million pounds sterling) (the "DEPOSIT") into an escrow account. It is
IPR's intention that the Deposit would be non-refundable to IPR, save in
limited circumstances. The core terms of the escrow agreement, subject only
to the addition of the standard requirements of the escrow bank chosen, are
attached as Schedule 1. IPR acknowledges, for the purposes of this
paragraph 3, that time is of the essence.
4. Debt Structure
4.1 The Offer increases the margin on the A-2 Debt to 400bps. The margin on:
A-1 Debt is 250bps; A-3 Debt is 500bps; and B debt is 200bps. Interest on
A-2, A-3 and B Debt may be deferred (but not capitalised) if no funds are
available under the cash flow waterfall (as set forth in Schedule 2, the
"CASH FLOW WATERFALL") (and interest will be incurred on any deferred
interest). No interest will be paid in respect of the debt to be
compromised in the Restructuring that is held by the Senior Banks and the
holders of the Senior Bonds for the period from and including 1 July 2003
to the completion of the Restructuring. However, interest will accrue in
respect of the Restructured Debt as from 1 July 2003 as if such debt had
been issued on such date, and will be paid in accordance with the Cash Flow
Waterfall. In respect of those Secured Creditors who exercise the A Cash
Out Option, interest on the A-2 Debt which would otherwise be payable in
respect of the period from 1 July 2003 to the date of the receipt of Cash
Out Funds will be paid to them on 31 December 2003, but only to the extent
that it is paid in cash by the company and not deferred. For the Secured
Creditors exercising the Cash Out Options, no interest will be paid for
such period in respect of the A-3 Debt or the B Debt.
4.2 The Offer changes the terms and ranking of the B Debt and the A-3 Debt as
follows: the A-3 Debt will rank behind the A-2 Debt, but ahead of the B
Debt, in the Cash Flow Waterfall and with respect to its security over the
Principal Drax Assets. The A-3 Debt therefore will have fourth ranking
security over the Principal Drax Assets. The B Debt will have first ranking
security over the TXU claims (and rights to the proceeds of the realisation
thereof) as described in Section 1.8 of the 30 June 6K (the "TXU CLAIM")
(without any deduction for corporation tax thereon), as well as a fifth
ranking security over the Principal Drax Assets.
4.3 The holders of the B Debt, however, will not have any voting rights with
respect to the release of their security over the Principal Drax Assets,
the sale of the company, or a re-capitalisation of the balance sheet. The B
Debt holders may (by an appropriate majority) agree to compromise the TXU
Claim or vote the interest of the AES Drax Companies in any insolvency in
respect of the TXU Claim.
4.4 The B Debt holders and the A-3 Debt holders shall have the right of first
refusal to purchase all (or materially all) but not part of the Drax
Principal Assets, if the A-1 Debt holders and/or A-2 Debt holders have
resolved to sell such assets.
4.5 Interest on A-1 Debt will be payable on a semi-annual basis. A-1 Debt will
have the benefit of certain prepayment rights, as well as a debt service
reserve account ("DSRA") (to be established immediately on the completion
of the Restructuring). The DSRA will be funded at completion of the
Restructuring to an amount equal to the interest payments falling due on
the two interest payment dates following the Restructuring and, thereafter,
funded in accordance with the Cash Flow Waterfall to a level equal to the
interest payments and scheduled principal repayments on the A-1 Debt
falling due on the two interest payment dates following the relevant
interest payment date.
4.6 A-2 Debt Interest Reserve: There will be a six month (18 months on or
before 31 December 2006) look-forward test for A-2 Debt interest on a 1.0 x
debt service cover ratio and, to the extent such test is not passed, an
amount equal to the shortfall will (in accordance with the Cash Flow
Waterfall) be placed in a reserve account (the "A-2 DEBT INTEREST
RESERVE"). Amounts standing to the credit of the A-2 Debt Interest Reserve
would be used to make payments of interest and scheduled principal on the
A-1 Debt before making payments of interest on the A-2 Debt, if there are
insufficient funds available in the Cash Flow Waterfall for such purpose
and if the DSRA had been fully utilised.
4.7 A-3 Debt Interest Reserve: There will be a six month (18 months on or
before 31 December 2006) look-forward test for A-3 Debt interest on a 1.0 x
debt service cover ratio and, to the extent such test is not passed, an
amount equal to the shortfall will (in accordance with the Cash Flow
Waterfall) be placed in a reserve account (the "A-3 DEBT INTEREST
RESERVE"). Amounts standing to the credit of the A-3 Debt Interest Reserve
would be used to make payments of interest and scheduled principal on the
A-1 Debt or the A-2 Debt before making payments of interest on the A-3
Debt, if there are insufficient funds available in the Cash Flow Waterfall
for such purpose.
4.8 B Debt Interest Reserve: There will be a six month look-forward test for B
Debt interest on a 1.0 x debt service cover ratio and, to the extent such
test is not passed, an amount equal to the shortfall will (in accordance
with the Cash Flow Waterfall) be placed in a reserve account (the "B DEBT
INTEREST RESERVE"). Amounts standing to the credit of the B Debt Interest
Reserve would be used to make payments of interest and scheduled principal
on the A-1 Debt, the A-2 Debt or the A-3 Debt before making payments of
interest on the B Debt, if there are insufficient funds available in the
Cash Flow Waterfall for such purpose.
5.
5.1 In the shareholders' agreement and in consideration of the obligations to
be undertaken by IPR under this Offer, IPR shall be entitled to receive a
"support fee" provided that at least (pound)10,000,000 (ten million pounds
sterling) of IPR Funds have been used for the A Cash Out Option. Such
"support fee" shall be that specified in the two options below and the AES
Drax Companies shall notify IPR by the Completion Date which option they
select:
(a) "OPTION A": a fixed non-refundable "support fee" for the four (4)
years from the Completion Date of (pound)5,000,000 (five million
pounds sterling) (exclusive of VAT) in aggregate, to be paid in full
within two (2) months of the Completion Date; or
(b) "OPTION B": an annual "support fee" for each of the four (4) years
from the Completion Date of (pound)1,500,000 (one million, five
hundred thousand pounds sterling) per annum (exclusive of VAT) payable
monthly in arrears (based on 1/12th of the fee for each calendar
year).
5.2 IPR will be obliged in the shareholders' agreement in favour of the
shareholders (and in consultation with the Board) to carry out annual and
quarterly equity holders investment reviews of the business (in relation to
the annual review, at the time of the planning round agreed in the
shareholders' agreement), IPR will be compensated for undertaking the
reviews through the "support fee" set out in paragraph 5.1.
5.3 In the event of a Change of Control, either IPR or the shareholders (by way
of ordinary resolution) may by one (1) month's written notice terminate the
"support fee" arrangement (under paragraph 5.1) and IPR's obligation (under
paragraph 5.2) and if the AES Drax Companies have selected Option B, IPR
shall be paid, promptly upon such termination notice being issued, an
amount in pounds sterling equal to the net present value of the fee which
otherwise would have been payable to IPR for the remainder of the four year
period discounted back to the date of the notice of termination at the rate
of 10% (ten percent) without any deduction for any taxes.
5.4 "CHANGE OF CONTROL" means following the Completion Date:
(a) any change in the Control of a parent undertaking or a subsidiary
undertaking of Drax Power; or
(b) any sale of all or part of the Principal Drax Assets to a third party,
in either case, other than in relation to a solvent restructuring or
re-organisation of Drax Power or any parent undertaking or subsidiary
undertaking.
"CONTROL" in this context means a person who, in relation to another
person:
(a) holds a majority of the voting rights in the other person; or
(b) is a member of the other person and has the right to appoint or remove
a majority of its board of directors; or
(c) has the right to exercise a dominant influence over the other person:
(i) by virtue of provisions contained in the other person's
memorandum or articles or association; or
(ii) by virtue of a control contract, or
(d) is a member of the other person and controls alone or together with
others, pursuant to an agreement with other shareholders or members, a
majority of the voting rights in the undertaking.
5.5 This Offer is subject to the terms of the restructuring arrangements
providing that payment of (a) the "support fee" shall, at all times, rank
at the same level as payment of operating expenditure at the top of the
cashflow waterfall and (b) the sum referred to in paragraph 2.5(b) shall,
at all times, rank at the same level as the payment of all restructuring
fees payable on closing of the Restructuring.
6. Save as expressly contemplated herein, the terms of the restructuring
arrangements are not to differ from those described in the 30 June 6K and
this Offer in a manner which is materially adverse to the interests of IPR
in connection with the matters and transactions contemplated by this Offer.
7. Restructuring Documentation
7.1 The definitive documentation required for the restructuring (and the
conditions precedent to such documentation) that have received final
sanction (or are subject to any other equivalent order or decision) by the
court in each relevant jurisdiction (together, the "RESTRUCTURING
DOCUMENTATION"), shall not have any commercial term or condition that
departs from the commercial terms and conditions of the Restructuring
Package, the 30 June 6K and this Offer in a manner that is materially
adverse to the interests of IPR in connection with the matters and
transactions contemplated therein. Further, completion of the Restructuring
is to be achieved with all such conditions precedent met on a date (the
"COMPLETION DATE") that is no later than the Proposed Restructuring Date.
7.2 The "PROPOSED RESTRUCTURING DATE" shall be 31 December 2003 (and, subject
to IPR not having frustrated the process, shall be extended automatically
on an ongoing basis thereafter).
8. IPR proposes a corporate governance structure as described in Schedule 3,
which shall be reflected in a shareholders' agreement. In particular, IPR
shall, subject as provided in Schedule 3, be entitled to nominate one
director to the board of each of the AES Drax Companies who shall be
appointed by the shareholders and shall be, at the option of the
shareholders, either a non-executive director or an executive director.
9. Dealing with the Equity and debt:
9.1
(a) In relation to Secured Creditors' rights to control the time at which
any sale of either (i) the whole of the Equity may occur, as
contemplated in section 1.6.3 of the 30 June 6K, or (ii) a material
part of the Principal Drax Assets, then, (x) in the event of an offer
being received for the whole of the Equity or a material part of the
Principal Drax Assets, IPR requires notice of such receipt, and (y) in
the event of any process or negotiations for the sale of the Equity or
a material part of the Principal Drax Assets commencing, IPR requires
notice of such commencement, and, in either case, the Secured
Creditors and each of the AES Drax Companies shall procure that IPR is
afforded equivalent rights to those of
the other person, in order to allow IPR to prepare and submit an offer
for such Equity or a material part of the Principal Drax Assets, for
consideration by the relevant company and/or the Secured Creditors and
acceptance of the offer shall be subject to shareholders' approval.
Any director nominated by IPR to the board of any of the AES Drax
Companies considering any such sale or possible sale shall not be
entitled to attend that part of any meeting of such board (or any
relevant committee thereof) that is considering offers for such sale,
unless IPR has confirmed in writing to the relevant board that it does
not intend to participate in such sale and, having made any such
confirmation, IPR shall not make any offer in respect of such sale
without the prior written consent of the relevant board.
(b) The shareholders' agreement and/or articles shall contain tag rights
for the benefit of minority shareholders, including IPR, on a sale of
the majority of the Equity and drag rights for the sale of the whole
of the Equity.
9.2 The shareholders' agreement shall specify that each shareholder shall be
subject to a cap on the voting rights attaching to the Equity held by it at
a level which is 1% below the percentage of the votes cast, from time to
time, that would allow that shareholder itself (or with another person
acting together or in concert) to veto a special resolution of the relevant
class(es) of shares in issue.
9.3 IPR shall waive its voting rights in respect of any proposed resolution on
a matter in which IPR has a direct conflict of interest with the relevant
company (e.g. a director's vote on any bid by another person for any sale
as described in paragraph 9.1 (if IPR itself makes a competing offer)).
9.4 Except as provided in paragraphs 9.2 and 9.3 above, IPR's Offer is subject
to there being no restriction on IPR exercising any voting rights in
respect of Debt and/or Equity held by IPR.
9.5 Prior to the Senior Creditors voting in relation to approving the
Restructuring, IPR shall not acquire any of the debt which is subject to
the Restructuring without the prior consent of the Bank Steering Committee
(in relation to Bank debt) or the Ad-Hoc Bond Committee (in relation to the
Senior Bonds), as appropriate.
10. IPR's Offer assumes that the Credit Support Facility contemplated in
section 1.3.1 of the 30 June 6K would have a term of at least 3 years in
tenor with the intention that this facility should continue or should be
replaced by one or more substantially similar facilities for an aggregate
period equal to the term of the A-1 debt. The Credit Support Facility would
not be subject to any cash collateralisation.
11. IPR's Offer assumes that (a) the requisite corporate governance covenants
and cure rights are put in place to ensure that cash flows for A-2 and A-3
debt service cannot be unreasonably diverted or held back for other
purposes, and (b) cure rights are available to the holders of A-2 and A-3
Debt in the event of prospective acceleration and/or enforcement of A-1
Debt.
12. This Offer is subject:
(a) to there being in IPR's opinion (acting reasonably) no change in the
expected level or accuracy of the forecasts (the "FORECASTS") with
regard to capital and operating expenditure contained within the Form
6K file dated 16 July 2003 (SEC file #:333-13096) which might
reasonably be expected to have a material adverse effect on the cash
available for debt service of A-2 Debt, provided that the Offer is not
subject to any such change relating to:
(i) power or coal prices;
(ii) changes in the condition of any entity which is currently an
affiliate (such as The AES Corporation) which are, in our
reasonable view, not relevant to the financial condition of the
AES Drax Companies; and
(iii) any information which has been fully, fairly and promptly
disclosed to us by you in writing (save that in respect of any
information disclosed after the date hereof, IPR may during the
period of four (4) weeks from IPR receiving such disclosure
from you (or if shorter, during the period between such
disclosure and the Posting Date (as defined below)) notify you
that such a change has occurred); and
(b) to such Forecasts not being, or becoming, misleading in any respect by
reason of their having been prepared (i) other than in good faith
and/or (ii) on the basis of assumptions (other than in respect of coal
or power prices) which were unreasonable at the time the Forecasts
were made such that they might reasonably be expected to have a
material adverse effect on the cash available for debt service of A-2
Debt,
in each case, at any time prior to the date which is the latest date on
which the documents containing the schemes of arrangement are posted (or
any other equivalent procedure) to the Secured Creditors (such date being
the "POSTING DATE"), assuming for the purpose of this paragraph that such
forecasts had been made by reference to the circumstances existing at such
time. Thereafter, to the extent that irrevocable undertakings to vote in
favour of the schemes of arrangement have been executed by any of the
Senior Creditors IPR shall be entitled to exercise on an independent basis
and by reference to IPR's proposed participation in the Restructuring, any
rights which are capable of being exercised by any of the Senior Creditors
pursuant to such irrevocable undertakings.
13. This Offer is subject to (a) satisfactory legal and regulatory approvals
and clearances that are necessary or desirable to effect the Restructuring
and the terms of this Offer in the manner described in the 30 June 6K and
this Offer having been obtained by the time necessary or desirable, and (b)
IPR Board approval of the Restructuring Package circulated to IPR and the
Secured Creditors for their approval, currently proposed for September
2003, being received.
14. Only IPR and a person who has duly accepted this Offer will be entitled to
rely on or enforce its terms. No term of this Offer is enforceable under
the Contract (Rights of Third Parties) Act 1999 by a person who is not a
party to this Offer. The sole remedy for any expense, loss or liability in
connection with this Offer or your acceptance of it shall
be the payment of the Deposit to you or IPR in accordance with the escrow
agreement referred to above.
15. Exclusivity
15.1 From the Acceptance Date, you will not, and you shall procure that your
directors, officers, agents, advisors and employees (each, a
"REPRESENTATIVE") do not, directly or indirectly:
(a) enter into or continue any negotiations with any person other than
IPR, InPower, BondPower, Harich or any Secured Creditors (or their
respective advisers) (but excluding any person who has or intends to
make an alternative proposal to this Offer) with respect to the
restructuring of the senior secured debt and other contractual
arrangements of the AES Drax Companies on the terms and conditions set
out in this Offer (the "RESTRUCTURING");
(b) solicit or encourage any other person except IPR to make any proposal
with regard to the Restructuring, or entertain any such proposal or
offer from any other person except IPR (whether solicited or not);
(c) enter into any agreement or arrangement with any other person which
would have the effect of preventing you from completing the
Restructuring with IPR in accordance with this Offer; and
(d) subject to all applicable legal, accounting and regulatory
requirements, give or make available to any person except IPR, your
Representatives, your shareholders, the members of the Senior Creditor
Committees and their advisors any information (not being information
publicly available, whether so available at this time or in the
future) relating to any of the AES Drax Companies (except in the
ordinary course of business or with a view to achieving the
Restructuring as contemplated by this Offer),
and you shall procure that each of your Representatives and
shareholders shall be bound by the terms contained in this paragraph
15 as if such Representative or shareholder were party to this Offer,
provided that:
(i) nothing in this paragraph 15 constitutes an agreement to negotiate; and
(ii) nothing in this paragraph 15 shall restrict your ability to negotiate with
any other person in connection with the supply of coal or trading of
electricity.
Such exclusivity shall cease on 31 January 2004 subject to extension on a
monthly basis unless at the time of the proposed extension there is no
reasonable prospect of the Completion Date occurring on or before 30 June
2004 provided that such exclusivity shall cease on written notice given by
either party to the other, if such notice is given within three business
days of:
(A) 10 October 2003, if on or before such date irrevocable undertakings to
vote in favour of (i) the AES Drax Holdings Limited Scheme have not
been executed by 75% in value of those creditors who are entitled to
vote on such Scheme and
(ii) the InPower Limited Scheme have not been executed by 75% in value
of those creditors who are entitled to vote on such Scheme; or
(B) 15 November 2003, if on or before such date the scheme documents
relating to the Schemes referred to in (A) above have not been posted
to the Secured Creditors.
15.2 During the period of exclusivity determined by this paragraph 15, the
parties shall act at all times in good faith with the intent of
facilitating (so far as it is in their respective powers) the occurrence of
(a) the events described in paragraph 15.1(A) above by 30 September 2003
(or as soon as reasonably practicable thereafter); (b) the events described
in paragraph 15.1(B) above by 8 November 2003 (or as soon as reasonably
practicable thereafter); and (c) the Completion Date by 31 December 2003
(or as soon as reasonably practicable thereafter).
15.3 If the Completion Date has not occurred on or before 30 June 2004, either
party may terminate its participation in the process.
15.4 In the event that exclusivity ceases pursuant to a written notice served in
accordance with paragraph 15.1 or pursuant to paragraph 15.3, this Offer
shall lapse and neither party shall (without prejudice to paragraph 14) be
liable to the other save for any antecedent breach of its obligations
hereunder.
16. IPR's Offer assumes:
16.1 IPR shall have the right, in accordance with Schedule 3, to make a
nomination to the Board for the appointment/replacement of the positions of
production director and head of trading, to facilitate business continuity
at Drax. For the avoidance of doubt, IPR shall not have any veto right on
any unfettered decision taken by the Board during this period);
16.2 In a manner similar to that granted to the Secured Creditors and to
optimise business and operational aspects, IPR shall have reasonable access
for IPR's management to the plant and staff, including, without limitation,
to allow us to assist the board in the forward station planning cycle
process for the business and operational aspects thereof; and
16.3 IPR will be entitled to receive the same information, analyses, reports and
advice in relation to the restructuring and the business as is provided by
any of the AES Drax Companies to the Secured Creditors generally, unless
the same is legally privileged or there is a clear conflict of interest in
IPR receiving the same or disclosure of the same is prohibited pursuant to
any confidentiality agreement binding on such AES Drax Company,
in each case, from the Acceptance Date to the Completion Date.
17. In respect of the Restructuring and IPR's involvement therewith, no press
announcements shall be made by either party without the prior written
consent of the other party (such consent not to be unreasonably withheld or
delayed) and any regulatory filing shall be made by a party following
reasonable consultation with the other party.
This Offer is governed by English law and the courts of England shall have
exclusive jurisdiction to settle any dispute arising out of or in connection
with this Offer.
Please indicate your acceptance of the terms and conditions of this Offer by
signing, dating and returning on behalf of AES Drax Holdings Limited the
enclosed copy of the Offer to me.
Signed for and on behalf of INTERNATIONAL POWER plc
David Crane
Chief Executive Officer
International Power plc
We confirm that we have been authorised by AES Drax Holdings Limited to accept
this Offer and to confirm that AES Drax Holdings Limited has the right and
power, and has taken all action necessary, to accept this Offer..
Agreed and accepted on 30 August 2003 for and on behalf of AES Drax Holdings
Limited
..............................................................
Name :
Position:
..............................................................
Name :
Position:
SCHEDULE 1
CORE TERMS OF THE ESCROW AGREEMENT PROPOSED IN PARAGRAPH 3 OF IPR'S OFFER
This schedule forms part of IPR's Offer dated 30 August 2003.
PARTIES: IPR, AES Drax Holdings Limited and the Escrow Bank.
ESCROW BANK: the London office of a bank to be mutually agreed, being a bank
which does not have an actual or likely future interest in the Restructuring.
ESCROW ACCOUNT: an interest bearing account held on trust for the Parties (other
than the Escrow Bank). Interest shall be paid monthly and be credited to the
balance of the account forming part of the Deposit. The account shall not be
subject to any encumbrance, counterclaim, set-off or other deduction.
ESCROW BANK'S FEES: to be agreed with the Escrow Bank and borne equally by,
first, IPR, and secondly, AES Drax Holdings Limited. All other fees, costs, or
expenses etc. incurred in connection with the escrow agreement to be for the
account of the relevant party.
PAYMENT OF THE DEPOSIT TO THE ESCROW ACCOUNT: Assuming the Escrow Agreement has
been executed, IPR shall pay (pound)5,000,000 into the Escrow Account within 7
business days of the Acceptance Date.
PAYMENT OF THE DEPOSIT FROM THE ESCROW ACCOUNT: Irrevocable payment instructions
shall be given by an authorised representative of each of IPR and AES Drax
Holdings Limited on behalf of the other parties collectively for the Deposit
(including any accrued interest) to be paid to:
(a) IPR on (i) the Completion Date, or (ii) if the Completion Date has not
occurred before the Proposed Restructuring Date, on that date unless, in this
latter case, it is as a direct result of IPR having frustrated the process for
the Completion Date to occur by the Proposed Restructuring Date; or (iii) IPR
terminating its participation or otherwise exercising its rights, in respect of
paragraphs 6, 12, 13, 15.3 or 15.4; or
(b) AES Drax Holdings Limited on the Proposed Restructuring Date if the
Completion Date has not occurred before such date as a direct result of IPR
having frustrated the process for the Completion Date to occur by the Proposed
Restructuring Date; or
(c) either IPR or AES Drax Holdings Limited, with the consent of all the Parties
(excluding the Escrow Bank).
DISPUTE RESOLUTION: the parties submit to the exclusive jurisdiction of the
English Courts.
GOVERNING LAW: English law.
OTHER TERMS: save as otherwise described in the Offer, customary for such an
escrow arrangement.
SCHEDULE 2
AMENDED CASH FLOW WATERFALL
On any interest payment date, the order of payments in respect of the
Restructured Debt from cash available for debt service, after any payment
required to be made in relation to the Credit Support Facility and taking into
account working capital requirements, restructuring costs and expenses
(including reasonable costs and expenses of the Senior Creditors Committees and
the fees of the external legal and tax advisers of IPR (up to a maximum of
(pound)500,000 (five hundred thousand pounds sterling)), to the extent not paid
at the closing of the Restructuring), and tax, is:
(a) first, to make payments of interest on the A-1 Debt and hedging of A-1 Debt
interest;
(b) second, to make scheduled repayments of principal on the A-1 Debt;
(c) third, to make a deposit to the DSRA of the amount required so that funds
standing to the credit of the DSRA are equal to the interest on A-1 Debt
falling due on the next two interest payment dates;
(d) fourth, to make payments of interest on the A-2 Debt (including deferred
interest and hedging of A-2 Debt interest);
(e) fifth, to fund the A-2 Debt Interest Reserve to the required amount;
(f) sixth, to make a deposit to the DSRA of an amount so that the balance on
the DSRA is equal to the scheduled amortisation of principal on A-1 Debt
falling due on the next two interest payment dates;
(g) seventh, to make payments of interest on the A-3 Debt;
(h) eighth, to fund the A-3 Debt Interest Reserve to the required amount;
(i) ninth, to pay interest on the B Debt;
(j) tenth, to fund the B Debt Interest Reserve to the required amount;
(k) eleventh, to make prepayments and repayments as follows:
(i) at any time after the principal amount outstanding of the A-1 Debt is
(pound)200,000,000 (two hundred million pounds sterling) or more, to
prepay the A-1 Debt, with prepayments of A-1 Debt being applied to the
amortisation profile of the A-1 Debt in inverse order of maturity; and
(ii) at any time after the principal amount outstanding of the A-1 Debt is
less than (pound)200,000,000 (two hundred million pounds sterling) to
prepay A-1 Debt and prepay A-2 Debt on a pro rata basis as to the
outstanding principal amount of A-1 Debt and A-2 Debt immediately
prior to the prepayment. Prepayments of the A-1 Debt will be applied
to the amortisation profile of the A-1 Debt in inverse order of
maturity;
(l) twelfth, if the A-1 Debt and the A-2 Debt have been repaid in full, to pay
A-3 Debt deferred interest;
(m) thirteenth, if the A-1 Debt and the A-2 Debt have been repaid in full, to
prepay principal on the A-3 Debt;
(n) fourteenth, if the A-1 Debt, the A-2 Debt and the A-3 Debt have been repaid
in full, to pay B Debt deferred interest; and
(o) fifteenth, if the principal of the A-1 Debt, the A-2 Debt and the A-3 Debt
have been repaid in full, to prepay principal on the B Debt. Proceeds
received in respect of the TXU Claim will be excluded from the Cash Flow
Waterfall. If any amount is paid in respect of the TXU Claim, such amount
(net of related VAT, but not net of a withholding on account of UK
corporation tax) will be applied to prepay the principal of the B Debt.
SCHEDULE 3
CORPORATE GOVERNANCE
Overall, IPR's role in performance of its obligations under the shareholder's
agreement is to support the directors and management of each AES Drax Company,
whilst recognising the duties of (a) the management to the Board and (b) the
Board to each such AES Drax Company.
IPR assumes that the shareholders' agreement will reflect the following model
for the management organisation/governance structure at the Plant from the
Completion Date:
1. BOARD OF DIRECTORS
1.1 A Board, headed by a non-executive Chairman and with a combination of
executive and non-executive directors who together possess all of the
skills needed to run the business. The directors shall comprise: 3 (three)
executive directors (namely a Chief Executive Officer, Finance Director and
another executive director), and 2 (two) non-executive directors.
1.2 An executive team, headed by the CEO with a Production Director for all
plant matters, Trading, Finance, HR, HS&E. Some but not all of these
executives (for instance, the Production Director) may be on the Board (at
the shareholders' option).
1.3 Provided that at least (pound)10,000,000 (ten million pounds sterling) of
IPR Funds have been used for the A Cash Out Option, IPR shall have the
right to nominate one appropriately qualified non-executive director,
provided that, if the shareholders and IPR agree that the Production
Director nominated by IPR should be appointed as an executive director on
the Board, that person shall be IPR's one nominee to the Board. If IPR's
nominee is a non-executive director, IPR acknowledges that he shall not be
responsible for the day to day operations at the plant.
1.4 The shareholders shall give effect to any nomination by IPR for the
position of non-executive director.
2. PRODUCTION DIRECTOR
2.1 The Production Director should be appointed by the shareholders (if he is a
director of the company) or the Board (if he is not a director) and will be
responsible solely to the Board.
2.2 The process for the appointment/replacement of the Production Director
shall be that a committee comprising the CEO, HR director and the
IPR-nominated director shall be established and shall undertake the
following tasks:
2.2.1 creation of a job description for the Production Director;
2.2.2 determination of the process for the selection of the Production
Director;
2.2.3 interview of all potential candidates for the position of Production
Director; and
2.2.4 determination of a short list of candidates for the position of
Production Director to be considered by the Board or the
shareholders (as the case may be),
provided that such short list shall include the person nominated by
IPR for the position of Production Director.
2.3 The Production Director shall be the best person for the role regardless of
whether or not such person is an IPR nominee.
2.4 Remuneration and incentives for the Production Director are to be set by
the Board and paid by the Company and are solely based on Drax performance.
2.5 The shareholders (if he is a director of the company) or the Board (if he
is not a director) can replace the Production Director at their option and
IPR shall have the right to make a nomination for the replacement of that
position in accordance with the above procedures.
2.6 If the Production Director is seconded by IPR, then IPR cannot re-assign
the Production Director without the Board's approval.
3. HEAD OF TRADING
3.1 The head of trading is to be appointed/replaced by the Board. The process
for the appointment/replacement is to be the same as applies to the
Production Director and IPR shall have the same right to have its nominee
shortlisted for the appointment/replacement for that position as set out in
paragraph 2 above.
4. INFORMATION
IPR recognises that agreed steps shall be taken to "ring-fence"
information, which information shall be provided to the IPR nominated
director, any management nominated by IPR and IPR personnel undertaking the
periodic reviews.