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Fire sale

01 November 2002

Looking for bargains in the UK power market? There may be legal obstacles to overcome. A guide to purchasing power assets from distressed sellers by Tony Hawkins and Bruce Johnston, LeBoeuf, Lamb, Greene & MacRae.

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There are likely to be sales of power assets within the European electricity market over 2002-2003 as a result of:

? downgraded credit ratings for many energy companies;

? low electricity prices in many jurisdictions (especially the UK and Germany);

? competition pressures arising from increasingly liberalised energy markets across Europe; and

? the likelihood of insolvency or the appointment of receivers to manage some electricity companies.

Some of the sales will be at distressed prices.

Set out below are some key legal issues to be addressed in a sale or acquisition of power assets with a particular emphasis on issues associated with a ?distressed? sale.

Consideration and speed

A distressed seller will need cash fast so an astute buyer will often offer:

? cash instead of shares or other forms of consideration; and

? the ability to close a transaction quickly (i.e. conducting only high level due diligence and assembling a team with experience...

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