Intercreditor Agreements
Under the Intercreditor Deed the senior bondholders share security with the bank lenders,
including security and guarantees from various AES-related entities, assets and intellectual
property related to the Drax power station, bank accounts, and hedging agreements.
Group Account Agreement
The Group Account Agreement defines the Cash Flow Waterfall, described below, and
requires all of Drax’s revenues be paid into a Proceeds Account except for physical damage
and expropriation compensation.
Cash Flow Waterfall
The order of payments according to the Cash Flow Waterfall is as follows:
- payment of administrative costs, fees, expenses and taxes;
- payments under interest rate and currency hedging arrangements and interest due on
Original Bonds; - deposits required to maintain Debt Service Reserve Account at Required Balance;
- deposits required to cover exposure to balancing charges under new balancing and set-
tlement code to take effect under NETA; - deposits required to maintain required Liquidity Account balances; and
- assuming all ratio requirements have been satisfied, transfers to Distributions Account.
Payments are made from the Distributions Account in the following order:
- distributions required to cover interest, principal or any expenses related to the bonds or
notes; - required payments to the Currency Collateral Account; and
- distributions to the sponsors.
Reserve Accounts
The initial Senior Debt Service Reserve Account was required to be the greater of six months’
debt service or £50 million. That amount increases in equal semiannual steps to the greater of
12 months’ debt service or £100 million on the 15th semiannual repayment date. It is then
reduced in equal steps to the original balance on the 20th repayment date, provided that the
adjusted debt service coverage ratio over the next 10 repayment dates is greater than a ratio
between 1.4 and 1.75 times, the exact level depending on the level of hedged capacity. The
absolute levels of the Debt Service Reserve Account are reduced by any voluntary prepay-
ments of the senior debt. The account can be applied immediately to any debt service oblig-
ations that become due and payable.
There are no maintenance reserve accounts. In its initial credit rating analysis Standard
& Poor’s noted that the operations and maintenance (O&M) budget includes £18 million in
capital expenditures for 2000–04 and £5 million per year after that.
POWER PLANT