TXU up for sale?
SHAREHOLDERS in the troubled energy company TXU suffered another blow today as it revealed its dividend was being cut by 80 per cent.The news comes as the American parent company of TXU Energi confirmed the Ipswich-based European branch of the organisation was up for sale.
By Paul Geater
SHAREHOLDERS in the troubled energy company TXU suffered another blow today as it revealed its dividend was being cut by 80 per cent.
The news comes as the American parent company of TXU Energi confirmed the Ipswich-based European branch of the organisation was up for sale.
And the future of the new headquarters in Russell Road – which the company said it was "fully committed" to yesterday – was today shrouded in uncertainty.
The "for sale" notices were hoisted after TXU in America withdrew a $700 million lifeline to its European subsidiary at the weekend.
A spokesman for TXU Europe said today that the only certainty with the company at present was that consumers would continue to be supplied with power.
- 1 Paul Cook sacked by Ipswich Town
- 2 Cycle wands being removed from Ipswich roads
- 3 Former BBC DJ to go live with new station
- 4 Things you should know before visiting Spoon World Buffet and Bar
- 5 Gang jailed for 'horrific' torture attack on man in Ipswich home
- 6 Jailed in Suffolk: The criminals put behind bars this week
- 7 Delays likely on major Ipswich road as 12 days of roadworks planned
- 8 Matchday Recap: A replay awaits as Town fail to beat Barrow
- 9 'Dedicated and devoted' - tributes paid to retired teacher Annick Smith
- 10 Harsh or fair? Here's what Town fans are saying about Paul Cook sacking
"That is absolutely guaranteed – but there are absolutely no other certainties in this business at present," he said.
TXU is in talks with potential buyers for all or part of the European division of the company.
Names suggested for buying the business include German energy company Eon, which owns Powergen and Scottish Power.
However no firm offers have yet been received.
The future of the new headquarters in Russell Road also looks much more uncertain than it did 24 hours ago.
Yesterday the company dismissed suggestions that work on the new building may stop.
Today a company spokesman was much less certain. "I haven't heard that work has stopped," he said. "But I'm in our London office."
Workers were clearly visible on the half-finished building – it is due to be completed next summer – but there was no guarantee it would be completed by then.
"Everything is up for discussion at present. The only certainty is the continuity of supply for our customers," said the spokesman.
ANALYSIS OF TXU CRISIS
TXU employs about 1,000 people in the Ipswich area.
The first indications that the company was in trouble came at the start of the months when it said it would be looking to cut the number of employees significantly.
Early indications were that 200 jobs could be lost, but late reports suggested up to 400 posts were at risk. One of those leaving the company is retail chief Roger Partington.
Last week it became clear that the situation for the company was very serious as its share price tumbled on the New York stock exchange.
During October TXU has seen its value crumble by two thirds – from $40 a share to less than $13 a share.
The cause of the problem is long-term energy contracts agreed with generators in Britain.
TXU signed long-term deals before a major change in the energy market last year.
New trading arrangements were introduced by the government aimed at making the market more competitive. Its main effect was to cut the price of wholesale electricity dramatically.
This left TXU having to buy electricity above the market price and selling it at a loss.
The company's retail business – selling electricity and gas to homes and businesses – is seen as a highly successful and it has more than 5.5m customers in Britain.
It is the long-term contracts that are effectively weighing TXU down.
The firm is hoping to re-negotiate these – and the suppliers may reluctantly conclude they have to agree to this.
The retail side of the business, without the contracts, could be sold off to another company leaving TXU as a shell company "owning" only unattractive energy contracts.
This could then be put into administration and the suppliers would know they would get little, if anything, from their contracts.
They may decided it is better to renegotiate the contracts at a lower price and get something from them rather than risk getting nothing at all if the company goes into administration.