/raid1/www/Hosts/bankrupt/TCREUR_Public/000518.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Thursday, May 18, 2000, Vol. 1, No.9
Headlines
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B E L G I U M
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ENVIPCO HOLDING: Revises 1999 Figures for 12.5 Million Euro Loss
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F I N L A N D
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POHJOLA: Under Review by Moody's for Possible Downgrade
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F R A N C E
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EUROTUNNEL: Directors Set to Face Questions over Shares
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G E R M A N Y
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BAT GMBH: To Undergo Consolidation Phase
DRILLISCH AG: Poorly Performing Unit to Undergo Restructuring
VEAG AG: Troubled Energy Group Seeks to Clarify Ownership
ZLU: Pixelpark Buys Logistics and Corporate Consultancy
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I T A L Y
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TECNOST SPA: Moody's Reviews Ratings for Possible Downgrade
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N E T H E R L A N D S
=====================
LEEDS GROUP: To Sell Lossmaking Campo Business
WORLD ONLINE: Lawyer Sues Internet Service Provider
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R O M A N I A
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COMCEH CALARASI: Italian Mill to Acquire Majority Stake
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S W E D E N
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IF PROPERTY & CASUALTY: Under Review by Moody's for Downgrade
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S W I T Z E R L A N D
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TELENOR AS: Moody's Place's Ratings on Review for Downgrade
===========================
U N I T E D K I N G DO M
===========================
BOO.COM: On the Brink of Collapse; Fails to Secure Addt'l. Funds
BOOKHAM TECHNOLOGY: Posts a 6.4 M Pre-Tax Loss for First Qtr.
DANKA BUSINESS: Unlucky 13 Again for Ofc. Eqpt. Supplier
EARBY LIGHT: Company Under Receivership Sold to Its Mgt. For 7 M
GRANADA PLC: Fitch IBCA May Cut Ratings
LADY IN LEISURE: Troubled Fitness Club in Urgent Cash Call
NATIONAL POWER: Remains on RatingAlert Negative
NATIONAL POWER: Undergoing Major Financial Surgery
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B E L G I U M
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ENVIPCO HOLDING: Revises 1999 Figures for 12.5 Million Euro Loss
----------------------------------------------------------------
Belgian environmental firm Envipco Holding NV said on Monday it
had revised its unaudited 1999 figures to show a 12.5 million
euro loss compared to a previously posted 7.0 million euro loss.
Reuters reports the company said in a statement it had decided to
record an additional 5.5 million euros in provisions related to
the book value of its U.S. Reverse Vending Machines business.
"The adjustments do not have any negative impact on cash and on
the company's future business prospects," the company said in a
statement.
Envipco's final audited figures will be delayed accordingly and
are now due by the first week of June, it said.
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F I N L A N D
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POHJOLA: Under Review by Moody's for Possible Downgrade
-------------------------------------------------------
Moody's Investors Service said today that it maintains under
review for possible downgrade its A1 insurance financial strength
rating on both If Property & Casualty Insurance Ltd ('If P&C',
based in Sweden) and Pohjola Non-Life Insurance Company Ltd
('Pohjola', the Finnish insurer).
In an Extraordinary General Meeting held today, Pohjola's
shareholders decided not to transfer the company's non-life
insurance business to If P&C. Both ratings were put under review
for possible downgrade on 10 April 2000 following the publication
by Pohjola's Board of Directors of a report questioning the
merger of its non-life business with If P&C.
Moody's said that the decision made by Pohjola's shareholders is
a material change to the project agreed in June 1999, when
Pohjola joined Sweden's Skandia and Norway's Storebrand to create
a leading pan-Nordic non-life insurance company.
Moody's also noted that uncertainty remained on the implications
for both parties.
The rating agency said that it would assess the impact of
Pohjola's decision on the financial strength of both companies as
the financial and strategic implications of today's decision
become clearer.
Based in Stockholm, Sweden, If Property & Casualty Insurance Ltd
had full-year proforma 1999 premiums earned of SEK 20 billion and
December 1999 total assets of SEK 78 billion, including Pohjola.
Based in Helsinki, Finland, Pohjola reported 1999 non-life
insurance gross premiums written of EUR 569 million.
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F R A N C E
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EUROTUNNEL: Directors Set to Face Questions over Shares
-------------------------------------------------------
Executives at Eurotunnel are set for a rough ride from
shareholders at the company's annual general meeting amid
mounting controversy over a 1994 share issue, according to
Ananova.
The Eurotunnel board, headed by chairman Patrick Ponsolle, is
expected to face questions over the share issue, which raised
o858 million for the company, but which is now subject to an
investigation by French authorities.
French magistrates are investigating the forecasts of financial
performance made by the company in the prospectus promoting the
share offer.
The company's estimates of future profits and traffic proved over
optimistic and the value of shares bought by investors fell
sharply soon after they were issued.
The forecasts suggested operating profits at Eurotunnel would
reach o480 million by 1999. Last year's operating profits were
just o210 million.
The prospectus also said the Eurostar service would open in the
summer of 1994, but soon after the share issue closed, French
rail company SNCF announced the service would be delayed by six
months.
Shareholders on both sides of the channel have argued the company
must have known its forecasts were too optimistic. In total the
group has more than 780,000 private investors.
Mr Ponsolle took over as chairman at Eurotunnel after the share
issue. His predecessor was Sir Alastair Morton, now chairman of
the UK's shadow Strategic Rail Authority.
The French authorities, spurred by angry investors in France,
launched their investigation last week and both Mr Ponsolle and
Sir Alastair are expected to face questions from the French
magistrates.
The authorities are also investigating a number of investment
banks involved in the share issue.
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G E R M A N Y
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BAT GMBH: To Undergo Consolidation Phase
----------------------------------------
2000 will be a year of consolidation for British-American Tobacco
(Industrie) GmbH (BAT), its chief executive Georg Domizlaff said
Tuesday. The group incorporates the German subsidiaries of the
British tobacco group BAT.
Domizlaff said since the merger of BAT and Rothmans, his group
had been feeling the effects of the poorly performing Rothmans
brands on the German market. Handelsblatt reports he said he
expected the brands to lose around 0.5 to 0.6 percentage point in
market share.
In 1999, BAT held an 18.6% share of the German market; Rothmans a
5.4% share. Excluding Rothmans, BAT lifted cigarette sales by 1.4
billion units, or 5.5%, to 26.3bn units last year.
The company's foreign affiliates performed less successfully. The
Polish subsidiary, which falls under the managerial control of
the German unit, will have to cut 700 of the existing 900 jobs.
The reserves set aside for the job cuts were booked on the 1999
balance sheet. The group's Ukrainian subsidiary posted a DM20m
loss, which it hopes to halve this year with the help of the
launch of a new cigarette.
DRILLISCH AG: Poorly Performing Unit to Undergo Restructuring
-------------------------------------------------------------
German regional telecoms carrier Drillisch AG will plans to
change its focus to mobile telecoms and the Internet.
Handelsblatt reports Chief executive and majority shareholder
Marc Brucherseifer plans to transform Drillisch into a holding
company with three units - mobile telephony, fixed telephony, and
Internet. In addition, he intends to spin off the poorly
performing fixed unit, which lost DM14m in 1999. This move will,
he hopes, bring the group back into profit. Negotiations are
already underway with three interested parties.
Also for sale is the group's broadband cable division, which is
based in Munich and has 8,000 subscribers. Its sale is expected
to bring in DM8m to Drillisch's coffers.
According to Handelsblatt information, rivals Mobilcom and
Debitel are interested in taking over Drillisch as a whole.
However, Brucherseife said that so far there has been no concrete
offer "that we would be interested in pursuing". In the first
quarter of 2000, Drillisch quintupled its operating profit to
DM5.8m, while sales came in at DM84.2m, up 50.6%. For full-year
2000, Drillisch is in line for sales of DM300m and "much, much
higher profit".
VEAG AG: Troubled Energy Group Seeks to Clarify Ownership
---------------------------------------------------------
Troubled east German energy group Veag AG on Tuesday said it was
going through the most difficult period in its ten-year history
and called for a speedy resolution to the question of its
ownership structure.
Handelsblatt says Chief executive Jrgen Stotz, speaking at
Veag's results conference in Berlin on Tuesday, urged Veag's
existing shareholders as well as the antitrust authorities and
the government to secure a sale of the group as quickly as
possible.
"We cannot afford to hang in the balance for much longer," he
stressed.
Veag, which operates lignite-based power plants, has been
encountering difficulties for some time as a result of falling
electricity prices and high investments it had to make in
outdated east German power plants and networks.
Some 81.25% of Veag's capital is shared among four west German
utilities - RWE, VEW, Veba and Viag. The sector is undergoing
consolidation at present: RWE plans to merge with VEW, and Veba
plans to merge with Viag. As a condition for the granting of
approval for both mergers, German and EU antitrust authorities
are expected to order the divestment of all shares in Veag.
Reports have been circulating that Schr"der told Stotz he favored
a sale of Veag to one of two consortia that are said to have
expressed interest. One consortium is made up of Southern Company
of the US in association with Berlin utility Bewag; the other
comprises Hamburg utility HEW, Sweden's Vattenfall and NRG Energy
of the US. The Chancellor's office on Tuesday would not confirm
the reports. The project remained in the domain of economics
minister Werner Mller, a spokesman said.
Stotz, for his part, called on Tuesday for a quick merger of Veag
with east German lignite producer Lausitzer Braunkohle AG. It was
conceivable that a merged group would also take in Anglo-American
consortium Mitteldeutsche Braunkohle (Mibrag), he added.
Stotz said that Veag was going through the most difficult period
since it was founded in 1990. Forecasts made last spring
suggested that it would be in a position to make a dividend
payout of DM200m. These proved to be wildly optimistic. The group
on Tuesday reported losses of just under DM2bn for 1999.
The negative result was attributed mainly to higher reserves set
aside to cover potential losses in the coming years. The expected
losses could reach as much as DM1.7bn, Veag said. Overall, the
group still expects financing needs of DM4bn over the next five
years. This year, operating losses were forecast to reach DM550m.
A break-even result is expected by 2004.
ZLU: Pixelpark Buys Logistics and Corporate Consultancy
-------------------------------------------------------
German Internet service provider Pixelpark AG said Tuesday it is
to acquire logistics and corporate consultancy ZLU. Handelsblatt
says Pixelpark chief executive Paulus Neef declined to give
details of the transaction, but said his company was paying with
both cash and shares. ZLU is said to have been highly profitable
since its inception ten years ago, with operating profit
representing 20% of sales. Neef said that the purchase of ZLU
meant that Pixelpark was the only ISP in Europe that could
provide consultancy services on all aspects of the e-commerce
experience, from online launch to logistics processes. In
1999/2000, Pixelpark lifted sales 168% to 36.3m euros, well above
its own forecast. Profitability is expected in the coming
business year.
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I T A L Y
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TECNOST SPA: Moody's Reviews Ratings for Possible Downgrade
-----------------------------------------------------------
Moody's Investors Service Tuesday placed the A3 senior unsecured
debt ratings of the Euro 9.4 billion floating rate notes issued
by Tecnost International NV guaranteed by Tecnost Spa (100
percent owner of Tecnost International NV) and the Euro 10
billion MTN program of Tecnost International Finance NV
guaranteed by Tecnost Spa on review for possible downgrade.
=====================
N E T H E R L A N D S
=====================
LEEDS GROUP: To Sell Lossmaking Campo Business
-------------------------------------------
Textiles supplier Leeds Group has sold its lossmaking Campo
business in Holland for guilders 8 million (o2.2 million) to its
management team, according to Citywire.
Campo prints paper for use in the fabric transfer printing
industry. Another 2 million guilders may be paid by the buyout
team depending on future performance.
The proceeds will be used to reduce Leeds' debt. Shares were
unchanged at 49.5p this afternoon.
WORLD ONLINE: Lawyer Sues Internet Service Provider
-------------------------------------------
A Dutch lawyer filed suit on Monday against World Online, its
former chairwoman Nina Brink and ABN AMRO, a lead manager of the
Internet service provider's now infamous flotation.
Lawyer Bob van der Goen said that in his suit, he was demanding
answers to 30 questions surrounding the ISP's initial public
offering on behalf of more than 1,000 clients.
Reuters says those answers would be used as a basis for a further
suit for damages, he told Reuters.
Van der Goen alleged that the IPO prospectus omitted key details
such as Brink's involvement in five bankruptcies, including one
still active in Belgium.
"The ultimate goal is to get the whole IPO nullified for my
clients...to declare the IPO null and void," he said.
World Online said it had so far not answered the questions, and
would await the decision of the court, expected next Monday.
The ISP listed on the Amsterdam bourse at 43 euros on March 17,
but the shares plummeted after revelations that Brink sold the
bulk of her stake in the company prior to the IPO.
The stock, which hit a low of 11.20 euros on May 5, ended on
Monday at 15.60 euros, down 3.7 percent on Friday's close.
Van der Goen said he was particularly concerned about new
revelations that A-Line Data Belgium, a company he said was
chaired until recently by Brink, was currently in Belgian
bankruptcy proceedings.
There was no mention of this bankruptcy in the prospectus.
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R O M A N I A
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COMCEH CALARASI: Italian Mill to Acquire Majority Stake
-------------------------------------------------------
Italian paper company Faper Mill signed a contract with Romania's
main privatisation agency, the FPS, to acquire a majority stake
in local pulp mill Comceh Calarasi, the agency told Reuters on
Tuesday.
Faper Mill, part of the Italian group Perini, will acquire the
State Ownership Fund's (FPS) full stake of 94.18 percent in
Comceh in a 9.107 million euro ($8.2 million) deal including 12-
month investments, FPS executive manager Alin Giurgiu said at the
signing ceremony.
Faper Mill will also take over Comceh's debts, totalling around
30 billion lei ($1.5 million).
Comceh, based in the Danube port of Calarasi, has a share capital
of about 60.7 billion lei. Other shareholders include individuals
with 5.8 percent and the manager owning the rest.
The pulp mill reported losses of around 3.4 billion lei at end-
March 2000. Data for full year 1999 were unavailable.
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S W E D E N
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IF PROPERTY & CASUALTY: Under Review by Moody's for Downgrade
-------------------------------------------------------------
Moody's Investors Service said today that it maintains under
review for possible downgrade its A1 insurance financial strength
rating on both If Property & Casualty Insurance Ltd ('If P&C',
based in Sweden) and Pohjola Non-Life Insurance Company Ltd
('Pohjola', the Finnish insurer).
In an Extraordinary General Meeting held today, Pohjola's
shareholders decided not to transfer the company's non-life
insurance business to If P&C. Both ratings were put under review
for possible downgrade on 10 April 2000 following the publication
by Pohjola's Board of Directors of a report questioning the
merger of its non-life business with If P&C.
Moody's said that the decision made by Pohjola's shareholders is
a material change to the project agreed in June 1999, when
Pohjola joined Sweden's Skandia and Norway's Storebrand to create
a leading pan-Nordic non-life insurance company.
Moody's also noted that uncertainty remained on the implications
for both parties.
The rating agency said that it would assess the impact of
Pohjola's decision on the financial strength of both companies as
the financial and strategic implications of today's decision
become clearer.
Based in Stockholm, Sweden, If Property & Casualty Insurance Ltd
had full-year proforma 1999 premiums earned of SEK 20 billion and
December 1999 total assets of SEK 78 billion, including Pohjola.
Based in Helsinki, Finland, Pohjola reported 1999 non-life
insurance gross premiums written of EUR 569 million.
=====================
S W I T Z E R L A N D
=====================
TELENOR AS: Moody's Place's Ratings on Review for Downgrade
-----------------------------------------------------------
Moody's Investors Service has today placed the Aa2 long-term debt
ratings of the $2 billion Euro Debt Issuance Program, EMTN,
Eurobonds, floating rate notes, subordinated floating rate notes
and Swiss bonds of Telenor AS (Telenor) on review for possible
downgrade.
The Prime -1 short-term rating was confirmed.
The long-term rating review was prompted by the announcement that
Telenor has entered into an agreement to acquire up to a 30%
stake in Total Access Communication Public Company Limited (TAC)
rated B2, and up to a 25% stake in TAC's parent company, United
Communication Industry Public Company Limited (UCOM), a major
telecommunications group in Thailand. The investment will amount
to approximately US$720 million.
The review will focus on the financial and business risk
implications of this transaction in the context of the fact that
Telenor will soon be partially privatized and that management has
signaled that they are willing to step-up their international
investment strategy which could include greater financial and
business risk for bondholders. Telenor will acquire TAC primary
and secondary shares for US$530 million at $3.75 per share.
In addition, Telenor will acquire UCOM secondary shares for
US$189 million at US$1.75 per share. Proceeds from the
transactions will be used by TAC and UCOM to reduce existing debt
obligations and fund capital expenditures. The agreement is
subject to certain conditions, including approvals from
authorities in Thailand and Singapore. These investments in TAC
and UCOM are one of Telenor's most significant international
investments to date.
Moody's will review the extent to which this transaction is
consistent with Telenor's continued international expansion
strategy and the extent to which it exposes the company to high
growth opportunities but also higher business risk. Total Access
Communication PCL (TAC) is the second largest mobile
communications operator in Thailand with approximately 1,100,000
subscribers and an approximate 45% market share as of March 31,
2000.
The Company had revenues of Baht 18.17 billion (approx. US$ 480.0
million) in 1999. TAC operates a nationwide GSM 1800 and AMPS 800
network.
Telenor AS, headquartered in Oslo, Norway, provides local, long
distance, international and value added telecommunications
services through its 3 million telephone lines.
In addition, Telenor operates the largest mobile and Cable-TV
networks in the country. In 1999, Telenor had a turnover of NOK
33.5 billion (US$ 4.3 billion) and net profit of NOK 2.0 billion
(US$256 million).
Telenor's mobile operation had a market share of approximately 73
percent with 2,060,000 subscribers as of March 2000. Telenor has
an equity interest in 15 mobile operators in 12 countries
throughout the world.
===========================
U N I T E D K I N G DO M
===========================
BOO.COM: On the Brink of Collapse; Fails to Secure Addt'l. Funds
----------------------------------------------------------------
Boo.com, the online sportswear retailer, was on Tuesday night on
the brink of collapse as attempts to secure additional funding
from investors seemed doomed to failure.
The Financial Times reports people close to the company conceded
that unless it secured the $30m of extra funding needed to take
the business forward within 48 hours it would be forced to call
in receivers.
If Boo fails to win a last-minute reprieve, it will be the
highest profile casualty among European e-tailing start-ups.
It would be another blow to confidence among business to consumer
internet companies, many of which are heavily loss-making and
have seen their valuations plunge in recent weeks.
It is believed the company has developed a radical restructuring
plan, which would be implemented immediately on receipt of any
new funding. This would include the closure of a number of
offices and redundancies.
When it raised about $120m last year, Boo was one of the best-
funded European start-ups. It planned to sell fashion sportswear
in 18 international markets. But it was plagued by a series of
technical problems that delayed the launch of its website by five
months to November.
Two months later it was forced to discount some of its products
by 40 per cent and lay off about 90 staff in an attempt to turn
around its performance.
It is understood that trading has improved since the beginning of
the year. It had net sales of $657,000 in February, compared to
$680,000 in the three months to January 31. There were about
500,000 unique users of the site in February.
But this may have failed to convince existing investors -
including Europ@web, Bernard Arnault's internet investment
vehicle, and 21 Investimenti, a vehicle owned by the Benetton
family - as Boo's costs remain too high. Even after the
redundancies it employs 300 staff, mainly in London, but it also
has offices in Stockholm, Munich, Paris, New York and Amsterdam.
BOOKHAM TECHNOLOGY: Posts a 6.4 M Pre-Tax Loss for First Qtr.
--------------------------------------------------------------
Bookham Technology, the telecoms equipment company that turned
Andrew Rickman, its founder, into Britain's first Internet
billionaire, yesterday reported a .4 million pre-tax loss for
the first quarter from sales of 2.5 million.
The Times says the company, which manufactures components for the
high-tech telecom equipment made by companies such as Cisco
Systems and Marconi, said revenues were up by 22 per cent on the
previous quarter and 563 per cent on the same quarter last year.
Pre-tax losses were almost double that of the previous year.
Shares jumped 337p to 39.12p, valuing the company at 4.7
billion.
DANKA BUSINESS: Unlucky 13 Again for Ofc. Eqpt. Supplier
--------------------------------------------------------
Office equipment supplier Danka Business produced a 13 million
loss in the final quarter of its year to 31 March, just as it did
in the same quarter last time, according to Citywire.
However, results for the full year saw Danka in profit to the
tune of 19.4 million compared with a massive loss of 336.2
million in 1998-9 when Danka was clobbered by 213.8 million
worth of exceptional costs.
The battered shares, worth over 800p three years ago, gained 0.5p
to 83p.
The good news is that Danka has settled the $16 million lawsuit
brought against it by Wasserstein Perrella, its former financial
adviser, for $4.3 million (2.7 million).
EARBY LIGHT: Company Under Receivership Sold to Its Mgt. For 7 M
-----------------------------------------------------------------
A subsidiary of TransTec, the engineering company that went into
receivership in January, has been sold to its management for 7
million. The Times reports Earby Light Engineers makes precision
components for the aerospace, automotive and gas turbine
industries.
GRANADA PLC: Fitch IBCA May Cut Ratings
-------------------------------------------
Fitch IBCA, the international rating agency, has placed Granada
PLC's ratings of "A-minus" (A-minus) Senior unsecured and "F2"
Short-term on RatingAlert Negative pending resolution of merger
discussions underway with Compass Group Plc.
While a definitive agreement has not yet been signed, a
successful merger between Granada, a UK-based media and
hospitality business, and Compass Group Plc, a contract caterer,
would be followed by a demerger of the combined group's
hospitality and media businesses.
Because the transaction being discussed at this stage does not
include a cash component, there is uncertainty over how existing
debt would be allocated between the hospitality and media
businesses as part of the demerger process.
There is also, therefore, uncertainty over the financial profile
of the successor entities relative to the debt they would be
supporting.
Further, current market speculation is that the demerger of the
media business might occur in conjunction with another media
acquisition, which could affect the financial profile of Granada
or the successor media entity.
Fitch IBCA will continue to monitor these developments and will
meet with management should a formal agreement be signed for
clarification of the structure and timing of the proposed
transactions. The outcome of the agency's RatingAlert will then
be commented on accordingly.
LADY IN LEISURE: Troubled Fitness Club in Urgent Cash Call
----------------------------------------------------------
Troubled health and fitness club owner Lady in Leisure announced
a share placing today, described by directors as `essential for
the group to continue to trade in the short-term'.
Citywire reports nearly 2.5 million shares at 22p will be issued,
subject to shareholder approval at the forthcoming EGM, designed
to raise around 545,200 before expenses.
The money will be used to strengthen the working capital position
of the group and also to repay loans of 100,00 made by chief
executive Graham Forrest and non-executive chairman John Pither.
Pither and Forrest, who between them own nearly 14% of the
current share capital, have subscribed for 1.5 million shares in
aggregate.
The directors stressed the importance of the placing, as well as
the need to raise further cash in the future.
Last week Lady in Leisure(LLG) posted interim pre-tax losses of
631,000 after new memberships fell below expectations.
The group also faces 28 summonses issued by the Borough of Wirral
relating to several adverts placed by the group.
Lady in Leisure shares were unchanged this morning at 25p. They
have slumped from a six-month high of 65p reached on 18 January.
NATIONAL POWER: Remains on RatingAlert Negative
-------------------------------------------
Fitch IBCA is maintaining the 'A' Senior Unsecured and 'F1'
Short-term ratings of National Power PLC ("NP") on RatingAlert
Negative following today's further announcement on the plans to
demerge the company into two successor entities. These latter two
- Npower plc ("Npower"), an integrated generator and trader of
electricity and gas in the UK, and International Power ("IP"), a
major IPP operator on a worldwide basis - are scheduled to begin
trading independently at the beginning of October 2000, subject
to LSE, SEC and EGM shareholder approval.
Today's announcement took a substantial step towards resolving
the RatingAlert by addressing the likely future initial capital
structures of the successor entities, notably the division of
outstanding capital markets debt. NP is tendering to purchase
existing US dollar and Australian dollar capital markets debt,
which will involve an exceptional cost for the group in FY01. The
outstanding bond issues are listed below - in summary, NP will
tender for c.GBP526m worth (at today's exchange rates) of
foreign-currency bond debt, while holders of the existing GBP700m
in sterling-denominated debt will be requested to approve a
change in obligor from National Power PLC to Npower plc. A
transfer agreement is required, as Npower will technically be
demerged from NP, which will then change its name to
International Power plc. The demerger of Npower will be achieved
through a dividend in specie issue of one share in Npower for
each share held in NP.
As at YE00, Npower operations accounted for net debt of
c.GBP200m, while IP accounted for debt of c.GBP300m. The latter
figure is expected by IP management to rise to closer to GBP500m
by the time of the demerger in October. Both companies face
further costs related to their growth. For Npower, this includes
the completion of Staythorpe CCGT plant in England, and in
meeting the anticipated GBP215m further cash cost in
restructuring a long-term power purchase agreement acquired with
the supply business of Midlands Electricity plc. A further supply
business acquisition in the UK is also a possibility. For IP, new
management has announced that they will be expanding the
international operations and expect to leverage up their initial
capital structure as opportunities arise.
Otherwise, a satisfactory operating performance for the existing
NP group was masked by large exceptional gains and charges. Power
station disposals yielded GBP2.8bn of net proceeds, and an
exceptional profit of GBP1.31bn. NP took advantage of the
accounting windfall to make "deck-clearing" provisions totalling
GBP1.37bn, breaking down as GBP495m on UK retail gas contracts,
GBP334m on further UK gas contract restructuring, GBP496m on
power station value write-downs (thereof GBP246m, or roughly
half, on overseas plants), and GBP47m on demerger and
restructuring costs up to April 2000. Further exceptional charges
relating to the long-term power purchase agreement with Teeside
(mentioned above) and with the eventual cost of premature bond
redemption will affect the FY01 figures.
Ongoing profitability from the UK generation business increased
on a like-for like basis (excluding disposals), though the
outlook for UK wholesale prices in general remains negative, and
the group's supply operations were again thinly profitable. NP
did, however, show success in maintaining its generation contract
premium against a declining pool price. Fuel costs also fell, as
the fruits of major contract restructuring took hold. The
international operations posted substantially higher profits,
particularly from a cash flow perspective, greatly helped by
income from the GBP381m purchase of a 25% stake in Union Fenosa
Generacion, and by operational start-up at Marmara in Turkey.
Importantly, business and development costs were down to GBP57m
from GBP79m. Despite higher profits at Hazelwood, Australia
continues to be a difficult market, with prices slow to recover,
and IP has taken a GBP 90m/15% write-down on Hazelwood's balance
sheet valuation. The troubled Pakistan investment also saw a
GBP131m write-off (50% of the book value), as progress with
Pakistani authorities remains slow.
Fitch IBCA expects to meet with management in the next few weeks
to discuss the key parameters for resolution of the RatingAlert,
and will publish new ratings upon completion of the demerger in
October 2000. The bond issues affected by today's announcement
are:
USD350m 7.125% notes due 2001 - Subject to NP tender
USD300m 6.25% notes due 2003 - Subject to NP tender
AUD250m 8.00% notes due 2007 - Subject to NP tender
GBP200m 10.675% notes due 2001 - Subject to vote on transfer to
Npower plc
GBP300m 8.365% notes due 2006 - Subject to vote on transfer to
Npower plc
GBP200m 8.125% notes due 2022 - Subject to vote on transfer to
Npower plc
NATIONAL POWER: Undergoing Major Financial Surgery
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National Power, the UK-based electricity group, has undergone
major financial surgery ahead of its proposed demerger later in
the year, according to the Financial Times.
The group - which on Tuesday announced a 10 per cent dip in pre-
tax profits for the year to March 31 - has written down the value
of its UK and international businesses by 1.37bn ($2.05bn).
The two businesses are due to separate on October 2 pending
shareholder and regulatory approval.
The fall in pre-tax profits for the year, from 571m to 514m,
was lower than expected.
Shares were 16p higher at 310p in early trading on Tuesday.
As previously announced, National Power cut its total dividend
from 28.6p to 15p. The demerged international business is not
expected to pay a dividend for the foreseeable future.
Shareholder payments by the British arm will be in line with that
of other UK utilities, said National Power.
UK profits fell from 645m to 515m, partly due to the sale of
power stations, which raised 2.8bn.
International profits, however, more than doubled to 191m. These
were helped by the group's purchase of a 25 per cent stake in
Union Fenosa the Spanish power group.
National Power is in talks about taking a share in Union Fenosa's
$2.5bn offer for rival Spanish power supplier Hidrocantabrico.
The British group, meanwhile, is clearing the decks ready for the
separation of its two businesses. Write downs, mainly in the UK,
are to cover the cost of renegotiating long term gas contracts
and in "recognition of falling power prices and excess UK
generation capacity."
The group has written down the value of its international
operation by 246m, mainly to reflect the political row over
power contract terms in Pakistan.
The charges wiped out exceptional gains of o1.31bn from the sale
of UK power stations.
These have reduced the group's share of domestic generation from
20 to about 12 per cent.
National Power said it had contracted to sell the bulk of its
reduced power output for the next two years "at prices higher
than those currently available in the market."
Prices have fallen ahead of new British electricity trading
arrangements due to be introduced this Autumn.
Sir John Collins, chairman, said: "Through disposals and the
negotiation of forward contracts, we have repositioned our UK
generation portfolio to cope with more difficult market
conditions."
The UK businesses would have net debt of about 200m at demerger.
The international company, after paying last year's dividend and
meeting demerger costs, would have net debt of about o500m all of
it non-recourse project finance.
Meanwhile, The Times reports National Power is expected to ignite
new anger over executive pay when it publishes demerger plans in
the summer.
International Power, which will be spun off from the domestic
npower, will place much importance on giving incentives to
directors and staff and will repeat claims that the all-share
package for Peter Giller, chief executive, is ground-breaking.
Although National Power has said that the three-year deal for Mr
Giller, the former head of ABB Energy Ventures, will be in line
with an average 350,000 salary, it is believed that potential
bonuses and the prospect of share price rises will deliver one of
the highest salaries in the industry.
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Copyright 2000. All rights reserved. ISSN 1529-2754.
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