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To: maceng2 who wrote (77)	10/14/2002 6:06:32 AM
From: maceng2	Read Replies (1) \| Respond to of 1417

US firm pulls plug in power crisis news.bbc.co.uk Closure looms for a number of UK power stations The crisis in the UK power sector came to a head on Monday morning as US utilities giant TXU said it was cutting off its UK and European units' cash supply. With the energy market in chaos following the misdeeds of Enron and other companies, valuations of power companies are at rock-bottom levels. The result for TXU, the company said, is that it will no longer give its European subsidiaries the $700m (£450m) it had promised. Instead, it will put them all up for sale. The company's 5.5 million UK customers - largely in the Northeast and East Anglia - will not be affected, the company promised. The Dallas-based TXU's dividend will also be slashed by 80%. "Today's actions are the direct result of rating agencies' concerns as to the company's liquidity and credit situation," said Erle Nye, the US company's chairman and chief executive. "Today's financial markets and concerns of the rating agencies have forced us to take this dramatic action." Search for a solution Regardless of whether customers immediately notice any change, the decision leaves TXU Energi, its UK energy trading arm, and its supply business scrabbling for a way out. Newspaper reports say the company is begging its suppliers and creditors to give it the space to avoid simply going bust. The situation presents a sharp contrast to TXU's purchase of the UK energy trading and supply unit in 1998. The business was then worth $10bn, and US power companies were buying up UK generators and suppliers all over the country to take advantage of deregulation. Now its UK operation is struggling to find £400m a year over the next four years to cover its contracts. The operation buys power from six generating companies at a fixed price and sells it on to 5.5 million consumers and businesses. Prices for wholesale electricity have fallen 40% since 1998. And the scandals surrounding US energy traders such as Enron, not to mention the more general worries about the probity of corporate results, have wrought severe damage to share prices for the sector. Musical chairs What happens now is partly down to the UK government. Recent state bailouts of more recently privatised entities, such as the National Air Traffic Service and British Energy, may offer a model although many experts believe the UK has a dose of overcapacity in the power market. British Energy, which is being kept afloat by a £650m government loan, may be forced to close two power stations in order to win European Commission approval for the state rescue package. The other options are a renegotiation of the deals it has signed, a strategy which TXU has promised to push forward as fast as possible, or perhaps a buyout by another player in the UK market. Powergen, one of its suppliers, is thought to be a possible suitor. Over the weekend, the Mail on Sunday reported that its chairman, Ed Wallis, warned the government that up to 10 power plants must be axed to end the turmoil within the sector. The company last week mothballed two stations.