/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/020910.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 Tuesday, September 10, 2002, Vol. 3, No. 179 Headlines * C Z E C H R E P U B L I C * ELEKTRIM: Supervisory Board Meeting Set on September 19 KOMERCNI BANKA: S&P Upgrades Komercini's Debt Ratings * F I N L A N D * SONERA CORP: Russian Operation Plans to Raise US$200 Million * F R A N C E * FRANCE TELECOM: Chief Faces Pressure to Step Down FRANCE TELECOM: Schmid Pressures France Telecom Over MobilCom VIVENDI UNIVERSAL: Considers Selling U.S. Media Assets * G E R M A N Y * CARGOLIFTER: In Talks With ATG for Possible Collaboration DEUTSCHE TELEKOM: Mum on Voicestream and Cingular Merger Deal * I T A L Y * FIAT SPA: Chief Executive Sees Further Asset Sales TELECOM ITALIA: Sees No Need for Further Divestments * N E T H E R L A N D S * VERSATEL TELECOM: Announces Confirmation of Reorganization Plan * P O L A N D * NETIA HOLDINGS: Creditor Meeting Adjourned Until September 30 * S W E D E N * LM ERICSSON: Will Supply Orange Group With Multimedia Messaging SONG NETWORKS: Financial Restructuring Agreed in Principle U N I T E D K I N G D O M BRITISH ENERGY: Government Offers Financial Guarantees To BE BRITISH ENERGY: Fitch Downgrades Ratings to 'B+/B' BRITISH ENERGY: S&P Cuts British Energy's Debt Ratings to BB BRITISH ENERGY: Moody's Downgrades Credit Rating to Ba3 From Baa2 BRITISH ENERGY: Head May Face Ouster on Conflicting Statements CORUS: Presents Plans for Redevelopment of Corus Land INVENSYS PLC: Gates Rubber Implements e-Kanban Solution on Unit KINGFISHER: Names New Chief Exec, International and Development KINGFISHER: Details No Schedule for Review of Overseas Businesses MOTHERCARE: Terry Green May Launch Full Bid NTL: Combats Corporate Network Security Threat With Integralis UK COAL: Announces Interim Results for Six Months Ended June 30 =========================== C Z E C H R E P U B L I C ============================ ELEKTRIM: Supervisory Board Meeting Set on September 19 ------------------------------------------------------- The meeting of the Supervisory Board of Elektrim S.A. (http://www.elektrim.pl)had been planned for 19 September 2002. In respect of the decision of Elektrim's Management Board not to sign the agreement with the bondholders the Supervisory Board has decided to accelerate the date of its meeting which will be held on 9 September 2002 in Paris. Hubert Janiszewski Vice Chairman of the Supervisory Board of Elektrim SA Contact Information: Jacek Dabrowski Director Investor Relations Elektrim SA Phone: (+48 22) 432 87 75 Fax: (+48 22) 432 84 75 email: jacek_dabrowski@elektrim.pl KOMERCNI BANKA: S&P Upgrades Komercini's Debt Ratings --------------------------------------------------- International ratings agency Standard & Poor's upgraded the debt ratings of three Czech-based banks, a report from the agency says. The report reveals that Komercini Banka A.S.'s (KB) double-'B'- plus rating was raised to triple-'B'-minus, and Ceskoslovenska Obchodni Banka (CSOB) A.S.'s triple-'B'- minus rating was upped to triple-'B'. Moreover, Ceska Sporitelna A.S.'s (CS) double- 'B'-plus rating was also upped to triple-'B'-minus. In addition, S&P upgraded the CSOB's short-term counterparty credit and certificate deposit ratings to 'A-2' from 'A-3'. KS and CS ratings were also raised to 'A-3' from 'B', the report says. S&P says: "The rating actions reflect the improving economic and operating environment in the Czech Republic, which is enabling the banks to expand profitable business relationships." The ratings agency adds that the ratings also show "stronger financial profiles, in particular improving asset quality and profitability; the support and commitment from the foreign strategic shareholders of the three banks; and the preservation of the banks' strong market position. Between them, the three banks account for more than 50% of the Czech banking system's assets." CSOB, the largest bank in the Czech Republic, benefits from the support and commitment of the bank's foreign strategic owner-- Belgium-based KBC Bank N.V. (KBC; A+/Negative/A-1)--and the guarantees granted by the Czech government in connection with the acquisition of Investicni a Postovni Banka (IPB) in 2000. In August 2002, Austria-based Erste Bank der oesterreichischen Sparkassen AG increased its ownership stake in CS to 87.9% (voting rights 94.9%). CS, the second-largest bank in the Czech Republic, receives strong support and commitment from Erste Bank. In addition, CS benefits from its strong position in Czech retail banking, which provides it with outstanding liquidity. The bank also benefits from the assistance provided by the Czech government regarding the ringfencing and protection from loss from its portfolio of 'old' problem loans. KB, the third-largest bank in the Czech Republic, was the last of the major Czech banks to be privatized, when France-based Societe Generale (SocGen; AA-/Stable/A-1+) acquired a majority 60.35% stake in the bank in October 2001. Standard & Poor's expects SocGen to maintain the momentum of the restructuring of KB and to provide strong support and commitment in the future to improve the bank's competitiveness. KB also benefits from state assistance in respect of its 'old' problem loan portfolio, having received a Czech koruna (Ckr) 20 billion ($563 million at Ckr35.54 to $1) guarantee against loss on selected classified exposures up until the end of 2003. S&P further says: "The future direction of the ratings on the three banks depends on economic developments in the Czech Republic as it moves toward EU accession, improvements in the industry risks (especially creditor rights), the successful conclusion of each bank's restructuring and integration programs, the banks' ability to benefit from the potential growth in financial intermediation, and the sustainability of their improving financial profiles, in particular their ability to maintain good quality revenue growth." The rating agency says the factors, which might lead to downgrades of the three banks' ratings, are: an economic downturn with a resurgence of significant asset quality problems, which would negatively affect the banks' financial strength (that would not be timely supported by the banks' foreign strategic shareholders). ============= F I N L A N D ============= SONERA CORP: Russian Operation Plans to Raise US$200 Million ------------------------------------------------------------ Sonera Corp. managing director for Russia and Megafon chairman Martti Huttunen said Russian operator Megafon is planning to raise US$200 million to improve its mobile network in Russia. The Company's 26-percent owned Russian operator Megafon may issue shares offering to raise the amount, AFX reports. Although the alternative is not among the company's first options, Huttunen confirmed, the share issue "is one possible part of Megafon's financing structure." The schedule for raising the amount has not been set, but Huttunen assured it would not take a long time. The timetable will still depend on many factors according to Huttunen. In a February issue of TCR-EU, Sonic Duo, which is a GSM service provider operating under the MegaFon brand, was reported to receive US$138 million in loans and funding from the European Bank for Reconstruction and Development, International Finance Corp (IFC), HypoVereinsbank and Nordea PLC. The report also said that the four financial institutions expect that Sonic Duo will receive debts in excess of US$250 million in the next 4 to 5 years. MegaFon is owned by Sonera (26%), Telecominvest (31%), Central Telegraph Mobile (26%), Telia (8%), IPO Growth Fund (6%), Zao WestLink (1.5%) and ZAO Kontakt S (1.5%). Sonera is in the process of merging with Telia AB. =========== F R A N C E =========== FRANCE TELECOM: Chief Faces Pressure to Step Down -------------------------------------------------- The French government is urging Michael Bon to resign as head of France Telecom. President Jacques Chirac and Prime Minister Jean-Pierre Raffarin succeeded against finance minister Francis Mer in calling for Mr. Bon to step down. According to a Financial Times report, executives in the telecommunications company said that news of Mr. Bon's departure is likely to accompany a resolution on the company's financing crisis. The company's board is scheduled to meet Friday to discuss financing plans. The staff believes that the only solution for the Company's problems is a capital increase. Insiders are proposing for a capital increase of at least EUR10 billion (US$9.8 billion). Under the law, the increase would require the government to contribute EUR5.5 billion (US$5.4 billion), in order to maintain a 55.5 percent stake in the Company. The French government is considering other financing alternatives, including a EUR10-EUR15 billion debt swap. The French telecommunications company has around EUR61 billion (US$60 billion) in debt. Moody's rating agency foresees the company's net debt to reach EUR75 billion (US$73.6 billion) by year-end. The company's first-half results which will be released on Friday is expected to post large loss because of asset writedowns linked to its German mobile telecommunications partner MobilCom. The board's meeting on Thursday will also decide on the fate of Mobilcom. According to the Financial Times report, potential successors for Mr. Bon include Noel Forgeard of Airbus and Thierry Breton of Thomson Multimedia. FRANCE TELECOM: Schmid Pressures France Telecom Over MobilCom ------------------------------------------------------------- Embattled French company France Telecom faces pressure from MobilCom's founder and largest shareholder, Gerhard Schmid, as he recently requested the French government to force the telecom company to bid for the German mobile operator before it becomes bankrupt, a report from the Financial Times says. France Telcom, which is state-controlled, said it will reach a decision before MobilCom's debt of EUR4.7 billion is due by the end of the month. The French company owns 28.5% of the mobile group and has been helping it stay afloat through cash injections, the report says. The Financial Times report says Mr. Schmid commented that "[MobilCom's fate] will become a political issue in France." He added, "if the French government lets a German company with 6,000 employees down, it will have to face the consequences for its credibility and that of the companies it controls." The battle between MobilCom and France Telecom began when the French group forced Mr. Schmid to resign as chief executive of the German mobile firm in June. Mr. Schmid filed a suit versus France Telecom forcing it to purchase his 39.5% in the company, the report adds. In addition, Mr. Schmid commented that France's Telecom incapability to reach a decision immediately reflects the group's weakness in dealing with negotiations due to the financial woes it is facing. The French telecom empire has been struggling with a huge debt pile and an imminent liquidity crisis, the report says. Mr. Schmid said: "France Telecom is not paralysed because of MobilCom, but because it dramatically overpaid for Orange, because it has more than ?70bn of debt, and because it is stuck with minority investments in various countries without an exit route." On the other hand, some source close to MobilCom said the reason why France Telecom is delaying its decision is in order to push MobilCom's stocks ahead of a bid. The report adds, "under German takeover rules, a public offer must reflect at least the target company's average share price in the past 90 trading days." To this, Mr. Schmid disagrees saying that such strategy is futile. He said: "I am not interested in the 90-day rule. I will make a decision on what kind of an offer I accept independently of this. By trying to buy time, France Telecom has damaged itself far more than it has MobilCom," the report says. Mr. Schmid also cited that if France Telecom had agreed to pay EUR22 per share last March as a compromised agreement for his resignation, there is no reason why negotiations will fall outside a range of EUR11 to EUR17, the Financial Times report says. VIVENDI UNIVERSAL: Considers Selling U.S. Media Assets ----------------------------------------------------- Beleaguered French media conglomerate, Vivendi Universal is mulling over a possible sale of its U.S. media assets, the Financial Times reports. The assets include the company's Hollywood studio Universal Pictures, cable channels and several theme parks. The paper says the Vivendi's French management is planning a public offer, which is considered as the best way to sell all of the assets. Also, if a public offering will transpire, it is seen to happen in the first quarter of 2003. Earlier last month, Vivendi's U.S. managers told the Financial Times that they support plans of a spin-off. One manager commented, "not all of the businesses fit together and any expected synergies from the Internet had yet to emerge," the daily reports. Vivendi is currently trying to avoid a liquidity crisis. The company's chief executive Jean-Rene Fourtou has been spending his time undoing much of the media assets his predecessor has accumulated in a buying spree, the daily says. In reaction, a source familiar to the company's plans said that it is quite apparent that everything is almost for sale although the company had at first opted to retain some major assets, the Financial Times says. According to reports, the company is also planning to sell its publishing business including its U.S. publisher Houghton- Mifflin. ============= G E R M A N Y ============= CARGOLIFTER: In Talks With ATG for Possible Collaboration --------------------------------------------------------- The insolvency administrator of CargoLifter is negotiating for a possible partnership with UK airship manufacturer Advanced Technologies Group (ATG), Financial Times reports. The Company's recovery plan is due September 27, when creditors will decide the future of the German freight airship manufacturer. The combination of the production capacity of Cargolifter, the expertise of ATG and possible interest by Boeing in lighter-than- air technology is thought to possibly attract interest from investors, the report says. Germany's ministry for economic affairs confirmed it may support the collaboration. The scheme is designed after the company's previous recovery plan failed to attract investors from the private sector. Cargolifter had previously refused partnership with the UK-based competitor saying ATG itself has financial troubles of its own. The Company's shares, meanwhile, surged nearly 20 percent after reports of the talks came out. DEUTSCHE TELEKOM: Mum on Voicestream and Cingular Merger Deal ------------------------------------------------------------- Deutsche Telekom AG refused to comment on a Financial Times report that it is close to obtaining a merger deal for its US Wireless unit Voicestream and Cingular Wireleles, says AFX. According to a separate report, the deal is nearly closed but is just being delayed as Telekom seeks to assume greater control of the merged entity. A company spokesman emphasized that a review of their strategy is going on and that the Company cannot comment on media speculations. The result of the review is scheduled to come out at the end of November, the spokesman added. People close to the deal, however believes that the deal could be finished without the delaying issues. Interim chairman Sihler is currently conducting a review to find solution to fill some EUR4 to EUR7 billion gap on the Company's plan to reduce its debt to EUR50 billion by the end of 2003. The Company has EUR64.2 billion-debt at the end of June. The Company is scheduled to present the results of the debt cut by the end of November. Analysts believe that Telekom would need to issue rights offering to meet its target of cutting debt if it does not sell VoiceStream. Cingular Wireless is the second largest wireless operator with around 22 million clients. VoiceStream is the six largest wireless operator in the US, with around 8 million subscribers. Cingular Wireless is 60-40 percent owned by SBC Communications Inc and BellSouth Corp. ========= I T A L Y ========= FIAT SPA: Chief Executive Sees Further Asset Sales -------------------------------------------------- Fiat SpA chief executive Gabrielle Galateri di Genola said the Company may undertake further divestments as it continues to balance accounts, AFX reports. Meanwhile, the Company is negotiating talks with Unicredito Italiano SpA's leasing unit about selling its portfolio of Fiat's Sava Leasing. Locat is carrying out a drive for external growth by acquiring leasing portfolios. According to reports, Locat could buy Sava's portfolio by the end of the year. In August, Fiat SpA sold the profitable half of its Teksid components unit to private equity investors for EUR460 million in cash and assumed debts. The sale is the second major sale after banks imposed a restructuring plan to decrease the company's debt and prevent further downgrade of its bonds to junk status. The Company reported a second-quarter net loss of EUR34 million. Fiat Auto, its loss-making unit had an operating loss of EUR394 million and cash outflow of EUR700 million. TELECOM ITALIA: Sees No Need for Further Divestments ---------------------------------------------------- Telecom Italia SpA chairman Marco Tronchetti Provera said the Company has no plans for further divestments since it has already achieved objectives for reducing debts, AFX reports. Mr. Provera also said that ongoing projects on the property front will help in their drive to reduce debts. The Company is as well proceeding with share buy-back program but there are no plans to hasten purchases of its own share. The Company has recently sold its 97.5 percent stake in French fixed-line unit 9Telecom to LDcom, the telecoms arm of trading house Louis Dreyfus. Its stake in Telekom Austria will also be sold when market conditions would be favorable, Mr. Provera says. Meanwhile, News Corp., with which Telecom Italia has a Stream pay-TV venture, is also leading negotiations on acquiring Telepiu owned by Vivendi Univeral. The partners have plans of merging Stream and Telepiu. CONTACT: TELECOM ITALIA S.P.A. Corso d'Italia 41 00198 Rome, Italy Phone: +39-06-368-81 Fax: +39-06-368-83388 Home Page: http://www.telecomitalia.it ===================== N E T H E R L A N D S ===================== VERSATEL TELECOM: Announces Confirmation of Reorganization Plan --------------------------------------------------------------- Versatel Telecom International N.V. announced that the United States Bankruptcy Court for the Southern District of New York yesterday confirmed the Company's Chapter 11 Plan of Reorganization. Under the plan, approximately EUR 1.7 billion in Versatel's bonds will be exchanged for cash and approximately 80% of Versatel's common stock. Versatel's existing common shareholders will retain ownership of approximately 20% of the company and receive warrants to purchase up to approximately 4% of the Company's common stock. Versatel intends to seek approval for its restructuring by a court in Amsterdam later this month and to consummate its restructuring shortly thereafter. Versatel Telecom International N.V. (EURONEXT: VRSA) based in Amsterdam, is a competitive communications network operator and a leading alternative to the former monopoly telecommunications carriers in our target market of the Benelux and northwest Germany. Founded in October 1995, the Company holds full telecommunications licenses in The Netherlands, Belgium and Germany and has over 81,000 business customers and 1,168 employees. Versatel operates a facilities-based local access broadband network that uses the latest network technologies to provide business customers with high bandwidth voice, data and Internet services. Versatel is a publicly traded company on Euronext Amsterdam under the symbol "VRSA". News and information are available at http://www.versatel.com. =========== P O L A N D =========== NETIA HOLDINGS: Creditor Meeting Adjourned Until September 30 ------------------------------------------------------------- Netia Holdings S.A., Poland's largest alternative provider of fixed-line telecommunications services, today announced that the creditors' meeting to accept the composition plans of its three Dutch subsidiaries, Netia Holdings B.V., Netia Holdings II B.V. and Netia Holdings III B.V., was adjourned by the supervisory judge until September 30, 2002. The verification hearings by the court in the Netherlands have been provisionally fixed for October 9, 2002. Contact Information: Anna Kuchnio Investor Relations Netia Holdings Telephone: +48-22-330-2061 =========== S W E D E N =========== LM ERICSSON: Will Supply Orange Group With Multimedia Messaging --------------------------------------------------------------- Ericsson's strong position in Multimedia Messaging (MMS) has been further enhanced by being selected as supplier of MMS technology to Orange SA and its 22 member companies, and by signing its first MMS contract with Orange France. The framework agreement signed with Orange reinforces Ericsson's involvement in the development of new applications by Orange and further demonstrates its appreciation of Ericsson's MMS solutions. Today, the deal with Orange France - number one mobile operator in France - represents the first concrete result of this frame agreement. According to this contract, Ericsson will provide the MMS platform and related systems. It will also provide the services for integration to the Orange network, for example, interfaces to existing services such as WAP, SMS, and e-mail, as well as the services for implementation and support. MMS offers an increase in messaging capabilities by enabling color pictures, photographs, animations and audio clips to be sent along with text on GSM/GPRS/UMTS networks. MMS will become a key Mobile Internet service and will induce a significant increase of the traffic, thus making it possible for mobile operators and services providers to diversify their revenue streams by further building on the undisputed success of SMS. Ericsson (http://www.ericsson.com)is a forerunner in MMS. Ericsson has supplied more than 80 test systems worldwide, and has already secured over 30 orders to supply commercial MMS systems. "This agreement demonstrates the trust shown in our solutions by another major mobile operators in the world. We are pleased to be in a position to contribute with Orange Group to the success of MMS and Mobile Internet." "Moreover, the contract with Orange France reinforces Ericsson's position on the French market," says Guy Roussel, President of the Global Customer Unit France Telecom Group, Ericsson. "Advanced messaging is an integral part of the Orange strategy. Our customers will now be able to send and receive picture messages, combining image, color and sound. Ericsson's technology will be a key asset for the provision of these services to our customers," adds Benoit Eymard, Chief Technical Officer, Orange France. Ericsson is shaping the future of Mobile and Broadband Internet communications through its continuous technology leadership. Providing innovative solutions in more than 140 countries, Ericsson is helping to create the most powerful communication companies in the world. SONG NETWORKS: Financial Restructuring Agreed in Principle ---------------------------------------------------------- Song Networks Holding AB and Song Networks N.V. (http://www.songnetworks.net)announced that they have reached an agreement in principle on a financial restructuring of the Song group with an ad hoc group of bondholders, Vattenfall AB and Stena AB. The restructuring would be effected through a debt-for- equity swap of the bonds issued by Song Networks N.V., in combination with the new investors injecting additional capital and assets into Song Networks. The restructured Song will be a virtually debt free, fully funded company with new strong owners and an extended network. Song will be well positioned to fully concentrate on continuing to develop its high quality services to its customers. Capital injection Following a debt-for-equity swap of the outstanding bonds issued by Song Networks N.V. in return for equity in Song Networks, Vattenfall and Stena will invest a total of SEK 300 million in Song Networks. As part of the restructuring Song Networks will also conduct a SEK 100 million rights offering as well as an issuance of SEK 100 million of convertible bonds, in which also Stena also will participate for SEK 15 million. Acquisition of Arrowhead AB As part of the restructuring Song Networks will acquire 100% of Arrowhead AB from Vattenfall in exchange for new shares in Song Networks. The acquisition of Arrowhead AB will bring to Song a cost effective IP- and transmission network and improved coverage in Sweden. Following the combination, currently scheduled to occur in January 2003, Song will have increased market shares in the internet and data business areas as well as an improved service portfolio within these areas. Ownership Initially after the debt-for-equity swap, Bondholders will own 95% of the Company and Song Networks' current shareholders will own 5%. It is currently envisaged that, after the investment by Vattenfall and Stena, the acquisition of Arrowhead by Song Networks, full conversion of the convertible bonds and completion of the rights issue, the ownership of the Company will be approximately: Vattenfall 19.68%, Stena 7.22%, bondholders 60.0%, and current shareholders up to 13.11% (depending on the level of their participation in the rights offering and the issue of convertible bonds). "I am very satisfied with the restructuring of Song that we now can present. This will give us both the financial and the commercial strength to become the leading Nordic broadband operator. Our new strong owners will bring stability and credibility to the group and by joining forces with Arrowhead we will strengthen our competitiveness in the Swedish market" says Tomas Franz,n, CEO Song Networks. "The committee believes the restructuring provides strong ownership for Song and great possibilities for the Company to develop its business going forward" says James Terry of Bingham McCutchen LLP, legal advisors to the ad hoc bondholder committee. "After evaluating different restructuring alternatives presented to the Board and when comparing this proposal to similar restructurings made recently in our sector I consider this deal to be very favourable to our shareholders" says Lars Gr"nberg, Chairman of the Board, Song Networks Holding AB. "From Vattenfall's point of view, the merger of Arrowhead AB with Song Networks is commercially sound and creates good opportunities to further develop the business. A restructured Song together with Arrowhead will be a financially strong company, and I believe, a successful player in a difficult market. Customers will have access to a more complete service portfolio and our network investments will be better utilized," says Lennart �sander, Vattenfall, Chairman of the Board of Arrowhead AB. Conditions precedent The restructuring is subject to negotiation of definitive transaction documentation, and would have to be approved by Song Networks N.V.'s bondholders. The restructuring would also be conditional upon a number of events, including the receipt of all necessary approvals by Song Networks' shareholders at an Extraordinary General Meeting, successful completion of an Akkoord process in The Netherlands and appropriate board and regulatory approvals. Song Networks expects to conclude the Extraordinary General Meeting, conclude the Akkoord process in The Netherlands and complete the restructuring within the next three months. Song Networks, formerly Tele1 Europe, is a data and telecommunications operator with activities in Sweden, Finland, Norway and Denmark. The Company's business concept is to offer the best broadband solution for data communication, Internet and voice to businesses in the Nordic region. This means that Song Networks supplies communication solutions that are attractively customized for each corporate customer. Song Networks is currently the only pan Nordic operator investing in local access networks with broadband capacity. The Company has built local access networks in the largest cities in the Nordic region. The access networks, which are linked by a long-distance network is one of the fastest data and internet super-highways in Europe, with an initial capacity for customers of up to one gigabit. The Company was founded in 1995 in Sweden and has approximately 1,000 employees. The head office is located in Stockholm and there are an additional 34 offices located in the Nordic region. Contact Information: Tomas Franz,n, CEO Song Networks Holding AB Phone: +46 8 5631 0111 Mobile: +46 701 810 111 E-mail: tomas.franzen@songnetworks.net Song Networks Holding AB Jenny Moquist Investor Relation Manager Phone: +46 8 5631 0219 Mobile: +46 701 810 219 jenny.moquist@songnetworks.net =========================== U N I T E D K I N G D O M =========================== BRITISH ENERGY: Government Offers Financial Guarantees To BE ------------------------------------------------------------ Embattled U.K.-based nuclear generator, British Energy received financial assistance worth GBP450-500 million from the British government in order to prevent it from going into administration, a report from the Financial Times says. The financial guarantees will cover several weeks to give enough time for the company to search for a solution to its cash crisis, the report adds. According to the Financial Times report, British Energy's directors will convene on Sunday night to study the details of the interim offer. Moreover, insider experts commented that a deal must be reached by Monday to ensure that the company's shares will continue trading. Last week, British Energy had warned ministers that it needs an additional cash of GBP280 million annually to ensure its long- term survival as a public company. The amount is GBP100 million more than the company had needed before. The figure was increased upon the company's legal adviser Clifford Chance's advice, the report adds. British Energy currently faces financial problems blamed on low electricity prices at British power stations. Last week, it informed its bankers that will be unable to give financial guarantees to allow it to draw on existing bank facilities, the report says. Consequently, some electricity traders, customers and suppliers had refused to sign new contracts with the company. The report also says British Energy said it faces imminent insolvency with the lack of financial assistance from the government. The nuclear generator also said it had to release a formal statement following its failure to negotiate large reductions in its fuel costs with British Nuclear Fuels, the Financial Times report says. BRITISH ENERGY: Fitch Downgrades Ratings to 'B+/B' -------------------------------------------------- Fitch Ratings lowered the ratings of British Energy plc to 'B+/B' from 'BBB/F2' with a Rating Watch Evolving. The downgrade came after the company announced it sought "immediate financial support" from the U.K. Government and that it hopes to undertake a longer restructuring. Although the Company believes that discussions will be successful, it also warned that it might fail to meet obligations as they fall due if the discussions would not have favorable outcome, and that it "may have to take appropriate insolvency proceedings." The action was also prompted by the failure of the company's negotiations with state-owned company British Nuclear Fuels Ltd. The talks concern amendments to the index-linked fuel- reprocessing contract between the parties. Speaking with the government, Fitch gathered that although it is committed to find a solution to retain British Energy in the private sector, its support will be focused on safety and security of supply rather than preserving value of either equity or debt investors. The 'B+' ratings reflect the significant risk that the company is facing in refinancing a committed facility in January 2003 and an outstanding bond in March 2003. The rating agency puts a greater concern for the company's medium-term risks. It sees the restructuring term used by the Government and British Energy referring to a wider sense, incorporating contractual and structural elements of BE's current profile. Fitch foresees the process to be lengthy one. Fitch on the other hand noted that the company has modest debts by market standards. Gross debt in the U.K. business amounted to GBP958m at end-March 2002. According to Fitch, "this low level of indebtedness in absolute terms has positive implications for bond creditors, should a restructuring eventually place British Energy's cash flows on a level commensurate with their current market share and strategic significance to the country's power market." British Energy is U.K.'s largest electricity generator with a 21 percent market share. It operates six nuclear power stations in England and two in Scotland as well as the Eggborough coal-fired power station. BRITISH ENERGY: S&P Cuts British Energy's Debt Ratings to BB -------------------------------------------------------------- Standard & Poors Ratings Services downgraded the long-term corporate credit and senior unsecured debt ratings on British Energy PLC from BBB to BB. The ratings were placed on CreditWatch with developing implications, says AFX. According to S&P, the downgrade stems from a heightened risk that the company may default after it announced it might not meet financial obligations as they fall due, and that they may undertake appropriate insolvency proceedings. The board statement reduced capital market confidence. S&P Infrastructure Finance credit analyst Paul Lund said, the deterioration in investor confidence "could expose British Energy to considerable refinancing risk." Lund warns that bondholders of the nuclear power company "could be faced with a dramatic deterioration in credit quality." Lund on the otherhand confirmed that the company appears to have enough liquidity to meet obligations on maturing bonds and debts during fiscal 2003 and 2004. The assessment was based on information provided by the company. The ratings outlook meanwhile, reflects a lack of information as basis on the future direction or size of a ratings change. Lund suggested that hope may come from favorable negotiations with the U.K. government. BRITISH ENERGY: Moody's Downgrades Credit Rating to Ba3 From Baa2 ----------------------------------------------------------------- Moody's Investors Service downgraded the credit ratings for British Energy PLC from Baa2 to Ba3 following the company's announcement that it sought help from the government and that its bonds and shares were suspended from trading on the London Stock Exchange. The ratings were placed on review for downgrade depending on the success of the talks with the government. The ratings show that the company's credit lacks investment grade characteristic even if the negotiations become successful. If the talks on the replacement liquidity fail, Moody's predicts the company to become insolvent rapidly. The rating agency believes "the company's liquidity position is expected to worsen, due to the requirement to post collateral for the benefit of various parties, including trading counterparties in the U.K. and North America". Moody's also believes that the additional liquidity requirement is of the order of hundreds of millions of pounds. As to the various options that may permit a long-term future for the company, Moody's believes that the discussions of these with the government would take some time. The talks may also prompt the government to decide about the structure of the U.K. electricity trading arrangements, security of supply, environmental considerations and the overall future of nuclear power. With all these, Moody believes that the Goverment's main consideration would be the security of supply and safe operation of the nuclear power stations, and that it would not feel obliged to be interested in the company's existing funders. British Energy is the world's largest private sector nuclear energy company. In the UK, the company is the largest electricity generator with an installed capacity of 11.6GW. British Energy is also a partner in the AmerGen joint venture in the US and owns 82.4% of the Bruce Power nuclear plants in Canada. The Company has near term financial obligations of GBP110 million bond maturing in March 2003 and an expected refinancing of the C$225 million loan to Bruce Power from OPG. BRITISH ENERGY: Head May Face Ouster on Conflicting Statements -------------------------------------------------------------- British Energy chairman Robin Jeffrey may be ousted after assuring investors of the Company's financial position three weeks before it sought 300 million stg aid from the government, Reuters reports. The nuclear generator has recently been granted financial guarantees of between GBP 450 million and GBP500 million as emergency fund to prevent it from being taken over by the government. The Financial Services Authority will undertake an inquiry about the contradicting statements issued by British Energy as the declaration may have confused investors, the report says. CORUS: Presents Plans for Redevelopment of Corus Land ----------------------------------------------------- Corus (http://www.corusgroup.com)has agreed the sale (subject to contract) of 600 acres of land at Llanwern, Newport to a consortium of developers. The sale paves the way for a GBP750m redevelopment program, the largest of its kind in Wales since the regeneration scheme in Cardiff Bay, which started in the late 1980's. It is expected that 7,000 new jobs will be created as a result of this program, benefiting the sub-region as a whole, when it is completed. In just over a year since iron and steel making ended at the Llanwern site, Corus' discussions with a consortium led by Chepstow-based property developers, Broadhall Hampton Ltd., have resulted in plans being drawn up for future possible uses of the land. These plans, which have been the subject of an initial dialogue with Newport City Council, include the construction of premises for light industrial and commercial use, together with new housing, a primary school, and a range of sports & leisure facilities. Dr. Mark Carr, Managing Director, Corus Strip Products U.K., said: "Our intention has always been to ensure that the land being vacated by Corus was put to the best possible use. We have taken this responsibility seriously. The outcome of our discussions with the consortium is unquestionably in the best interests of the city of Newport." Mr. Michael Davies, Director of Broadhall Hampton, said on behalf of the consortium: "The site location presents fantastic opportunities. With council support and planning approval, our scheme has the potential to create a vibrant eastern suburb in Wales' newest city with unrivalled transport links. Corus wanted the best for this site and we look forward to delivering on that." The consortium also includes leading housebuilder, Barratt South Wales and AWG Development Ltd. (Commercial & Ireland), the commercial and residential arm of the Anglian Water Group. The consortium will work closely with the recently formed Newport Urban Regeneration Company (URC) - the first such unit in Wales - which will be a prime vehicle for driving forward development opportunities in Newport. The URC, established jointly by Newport City Council and the Welsh Development Agency will have the task of attracting new jobs and investment with a focus on the development of key sites. Corus has undertaken environmental audits at the site and work to clear the western parts of the site (the land nearest the Newport Retail Park) has already started and is progressively moving eastwards. It is expected that it will take up to three years to clear the entire site, although redevelopment of the cleared area on the western side of the site could commence in the New Year. Subject to a period of due diligence, contracts between Corus and Broadhall Hampton should be exchanged later this year. Other facts: 1. Corus, the international metals company, announced a restructuring of its U.K. operations on February 1, 2001 which resulted in the cessation of iron and steelmaking at Llanwern. 2. Ongoing Corus operations on the remainder of the Llanwern site include a hot strip mill, a cold strip mill, and a hot dip galvanising line processing 2 million tonnes of steel coil for automotive, construction and general engineering applications. 3. Broadhall Hampton Ltd. is a Chepstow-based commercial property development company that has been involved in developing in excess of 2.0 m sq. feet of commercial space in South Wales in recent years. The company also has more than 160 acres of commercial and residential land within its control. Further information available from www.broadhall.com 4. Barratt South Wales is a division of Barratt Development plc, one of the biggest names within the UK house building industry. The South Wales Division has been in existence for over 20 years and during that period has built over 8,000 new homes, many of them within the Newport area. They are currently working on 17 developments throughout the South Wales region. Further information available from www.barratthomes.co.uk 5. AWG Developments Ltd. (Commercial & Ireland) was formerly known as Morrison Developments. It is the commercial and residential arm of the Anglian Water Group, a FTSE 150 company with a market capitalisation of GBP1.8bn. The company specialises in all types of commercial property development, including projects such as the GBP100 million Great Northern mixed leisure and retail scheme in central Manchester and Broadway Plaza, an GBP80 million leisure, retail and residential development in Birmingham. Further information available from www.awgdevelopments.com Broadhall Hampton Ltd and AWG Developments Ltd are joint venture partners in the GBP100 million Celtic Springs high technology business park on the western outskirts of Newport. They are long- term partners on the development of the Gwent Euro Park, with over 1.5 million square feet already built and which stands at the Magor (eastern) end of the Llanwern site. They are also working together on Queensgate South, a GBP11 million hotel and leisure project at Cardiff Bay. Contact Information: Investor Relations Corus 30 Millbank London, SW1P 4WY United Kingdom Tel: +44 (0) 207 717 4504 Email: Investor@corusgroup.com INVENSYS PLC: Gates Rubber Implements e-Kanban Solution on Unit ----------------------------------------------------------------- Invensys Manufacturing Solutions, a business unit of Invensys plc (http://www.invensys.com),announced that Gates Rubber Co. has successfully implemented an e-Kanban solution built on Invensys Production Engine(TM) technology. Production Engine, Invensys' new application interoperability technology, provides users with the ability to manage manufacturing operations, materials and orders through graphically configured real-time workflows. The Invensys Manufacturing Solutions group makes this announcement as part of the Production Engine technology rollout at the annual Invensys Showcase user conference and expo Sept. 8- 12. The event will be held at the Gaylord Palms Resort and Convention Center in Orlando. Production Engine is being used to provide a Collaborative Manufacturing Network spanning two internal sites and an external supplier for Gates. Through this Collaborative Manufacturing Network, Gates is using demand signals, generated at the point of actual consumption, to drive the fulfillment process in real time. The Gates solution is an intelligent e-Kanban application designed by Invensys Manufacturing Solutions to more effectively control the level of inventory necessary to support the production of cord used in the manufacture of belts and hoses. The solution manages inventory fulfillment by linking raw materials and work-in-process inventories, with the scheduling and purchasing systems in its Columbia, Mo. cord plant. The individual applications are from different software providers, including a Gates-developed Scheduler. This solution links the Columbia facility with its external cord supplier, and its downstream customer, a Gates belt and hose manufacturing facility. This solution employs manufacturing workflows, which are the business rules that define how to respond to an event. A Kanban request is triggered by the release of inventory from a storage or work-in-process area. This solution goes beyond static Kanban signals by dynamically retuning the Kanban size based on delivery cycle time, demand, production and inventory indicators. When a Kanban is to be replenished, the workflow sends a request to the vendor after having validated the purchase order status and information from within the purchasing system. The upstream workflow is triggered when a bill of lading is created. The system transfers ownership and manages cost accountability for the inventory from finished goods at the sending location through in-transit stock to receipt at the destination. The increased visibility provided by this solution prevents duplication of orders that are already in transit. "Production Engine is a technology that we have adopted to synchronize the flow of information between plant floor applications and across our value chain," said Jim McGill, director of purchasing for Gates Rubber Co. "The Production Engine solution helps us more effectively manage our in-process inventory, and integrate suppliers into the manufacturing process." Business improvement consultants and engineers from the Invensys Manufacturing Solutions group worked with Gates corporate IT and plant personnel to design, configure and implement the solution. Gates is a long-time user of Wonderware FactorySuite(R) software and utilizes InTrack(TM) software as its manufacturing execution system for managing the production process. "Invensys has demonstrated at Gates that the company can extend the value of its own products, such as the InTrack software, and can derive significant value from the investment Gates has made in both Gates-developed applications and in competitors' products," explained Dave Westrom, senior vice president and general manager of Invensys Manufacturing Solutions. "Production Engine supports the Lean Manufacturing, Six Sigma and continuous improvement initiatives at Gates while helping to eliminate non-value-added activities within their manufacturing processes," Westrom said. The Invensys Showcase is expected to draw between 1,000 and 2,000 attendees from customer companies worldwide, including top management, manufacturing and plant management, maintenance/facilities management, corporate engineering groups, industry trade media and industry analysts. For more information on Invensys accelerator solutions, visit the Invensys Manufacturing Solutions' Web site at www.IMSaccelerator.com. Invensys plc is a global leader in production technology and energy management. The group helps customers to improve performance and profitability using innovative services and technologies and a deep understanding of industries and applications. KINGFISHER: Names New Chief Exec, International and Development ----------------------------------------------------------------- The Board of Kingfisher Plc is pleased to announce that Ian Cheshire has been appointed Chief Executive, International and Development, with immediate effect. Ian Cheshire joined Kingfisher in 1998 as Director of Strategy and Development and was appointed to the Board in June 2000. His new appointment follows Kingfisher's announcement that it has taken full management control of Castorama Dubois Investissements S.C.A. Contact Information: Ian Harding Director Investor Relations Telephone: +44 (0) 207 725 4889 KINGFISHER: Details No Schedule for Review of Overseas Businesses ----------------------------------------------------------------- Kingfisher PLC has no timetable yet for its planned review of overseas businesses as its chief executive has just been appointed, AFX reports citing a spokesman for the DIY retailing group. Ian Cheshire, the newly appointed executive will be facilitating the review in the months ahead, the spokesman said. There are suggestions however that any restructuring should be decided immediately. The company has announced divestments of businesses in areas where it sees it cannot be a market leader, says reports. Analysts foresee that the sale of the operations is seen to drive a merger between Kingfisher and Castorama. The spokesman did not name the businesses that would be sold, but analysts predict nearly 30 stores closing in Belgium, Brazil, Canada and Turkey. The businesses that will be retained is likely that in Poland, Taiwan and China. MOTHERCARE: Terry Green May Launch Full Bid ------------------------------------------- Retail entrepreneur Terry Green may post an offer to fully buy baby goods store Mothercare PLC, a company which recently refused his bid for chief executive. Mothercare PLC was worth 90 million stg (sic) in the region. Green was the former head of Bhs, a company acquired by Mothercare two years ago for 200 million stg. Green's application was rejected after his proposal to put in 5 million stg in Mothercare in exchange for a 12.5 percent stake was denied. Mothercare and Green however refused to confirm or deny the rejection, says AFX. Mothercare will name a new head to replace ex-chairman Chris Martin before the end of the month. Chris Martin stepped down as chief executive in mid-July after the group issued its third profits warning in a year. Mothercare has a workforce of 5,198. The company reported a net loss of GBP0.1 million for the first quarter of 2002. Its assets total GBP196.2 million for the same period with GBP70.8 million in total liabilities, TCR-EU reported on its July 17 issue. Mothercare has nearly 170 stores throughout Europe, Asia and the Middle East. NTL: Combats Corporate Network Security Threat With Integralis --------------------------------------------------------------- NTL Business, a leading national and local provider of integrated business communications, announced a strategic partnership with one of Europe's largest information security specialists, Integralis. The two companies will combine their expertise in network management and IT security respectively to offer UK businesses complete protection against internal and external security threats. The fully managed service includes a detailed analysis of the customer's network design and security needs, round-the- clock monitoring and rapid reaction to any threat. The partnership is a response to the growing wave of attacks from viruses, hackers and spam. According to the DTI*, nearly 50% of UK businesses suffered a serious, malicious security breach in the last twelve months, a figure that has more than doubled during the last two years. The total cost of IT security breaches to UK businesses is now estimated to be more than o18 billion a year. "Network security is one of the biggest issues facing corporates today. Whilst the threat from hackers, viruses and spam is rising, many companies still have little more than rudimentary security systems in place to protect themselves," explains Peter Booth, Marketing Director, Managed Network Services, NTL Business. "We've launched this new managed service to meet growing demands from our customers for more assistance in defining their security needs and looking after their anti-hacking systems. NTL Business has a proven track record of managing complex network solutions and by teaming up with a world-renowned security specialist like Integralis, we have the complete network security solution to offer our customers." At the start of each customer relationship, expert security consultants from NTL Business and Integralis will conduct a full analysis of the company's current network set-up, probing for weaknesses just as a hacker would. The review will cover both external IP devices and a network GAP analysis that crystallises the scope of the customer's information security requirements and outlines the technical safeguards that need to be implemented. "Despite a string of high-profile viruses and hacking attacks in the last 12 months, there is still a widespread feeling in many companies that 'it won't happen to me'. In the DTI's survey, whilst 73% of companies acknowledged that Cybercrime is rising, only 42% felt it could increase in their own business. This attitude is reflected in spending habits - with less than 25% of all companies spending more than 1% of their IT budget on security," explains Paul Godden, Managing Director at Integralis. "This new partnership combines NTL's 40-year pedigree in managed network services with Integralis' information security skills, already used by more than half the companies listed on the FTSE today. The result is a market-leading, fully-integrated network security service for UK companies." More on NTL: 1) On May 2, 2002, NTL announced that the company, a steering committee of its lending banks and an unofficial committee of its public bondholders had reached an agreement in principle on implementing a recapitalization plan. The members of the bondholder committee held in the aggregate over 50% of the face value of NTL and its subsidiaries' public bonds. In addition France Telecom and another holder of the Company's preferred stock have also agreed to the plan of reorganization. 2) On May 8, 2002, NTL and certain of its subsidiaries filed a Chapter 11 "prearranged" plan of reorganization under US law. 3) On May 24, 2002, NTL filed an amended plan of reorganization and a disclosure statement. 4) On June 21, 2002, an official committee of creditors, comprised of the members of the unofficial committee of public bondholders and three additional members, was appointed by the United States Trustee to oversee the Chapter 11 cases. 5) On July 2, 2002, the court in which the company's Chapter 11 cases are pending approved a $630 million credit facility for the Company including $500 million in new financing. 6) NTL offers a wide range of communications services to homes and business customers throughout the U.K., Ireland, Switzerland, France, Germany and Sweden. Contact Information: Pauline Gillan NTL Business Tel: 01256 753998 E-mail: pauline.gillan@ntl.com UK COAL: Announces Interim Results for Six Months Ended June 30 ---------------------------------------------------------------- UK Coal Plc, the U.K.'s leading coal-mining group, announces its Interim results for the six months ended 30 June 2002. -Profit before tax and exceptional redundancy costs GBP0.5 million (2001: Loss before tax and exceptional coal aid of GBP30.7 million) -Loss before tax of GBP12.5 million (2001: GBP10.8 million) -Cash inflow from operations of GBP25.5 million (2001: GBP96.0 million, includes GBP54.7 million of Coal Aid), and stock increased by GBP25.7 million (2001: stock decrease GBP12.9 million) -Dividend maintained at 5.0 pence per share (2001: 5.0 pence per share) -Sales volumes 9.6 million tonnes (2001: 10.4 million tonnes) -Deep mine and Surface mine production increased to 8.3 million tonnes (2001: 7.6 million tonnes) and 2.2 million tonnes (2001: 2.1 million tones) respectively in the UK -In depth Business Review (Project 105) now showing benefits, with reduction of unit costs despite difficult mining conditions at Daw Mill. Commenting on the results, Gordon McPhie, Chief Executive of UK COAL, said: 'Market conditions for coal have been adversely affected by several factors, including low gas prices, increased stocks at power stations and a recent drop in international coal prices.' 'We are encouraged by the progress made by Project 105 in terms of increased efficiencies and reduced costs and will continue to focus on costs and the review of high cost operations in order to create a profitable business embracing coal production and property interests.' Chairman's Statement: Results In the half year to 30 June 2002 the Group reported a profit before taxation and exceptional redundancy costs of GBP0.5 million (2001: Loss before taxation and exceptional coal aid, GBP30.7 million). After exceptional redundancy costs totaling GBP13.0 million incurred largely in relation to the Prince of Wales Colliery closure, loss before interest and taxation was GBP12.5 million (2001: GBP10.8 million loss after Coal Operating Aid of GBP19.9 million). Cash inflow from operations was GBP25.5 million (2001: GBP96.0 million, which included GBP54.7 million of Coal Operating Aid). Stock increased by GBP25.7 million (2001: stock decrease of GBP12.9 million). Dividends The Board has declared an interim dividend of 5.0 pence per share (2001: 5.0 pence per share). The level of dividend has been determined taking into account the net cash inflow from operating activities and the underlying cash generation in the period. Business Review The trading update published on 16 July explained that market conditions remain competitive with falling international prices and coal usage by the generators declining from the higher levels of 2001. Sales volumes in the first half-year were 9.6 million tonnes (2001: 10.4 million tonnes) which, together with increased output from both deep and surface mines, has resulted in an increase in stocks of 1.0 million tonnes (2001: reduction of 0.6 million tonnes). During the period spot sale contracts for 1.8 million tonnes have been agreed for delivery during the year. In addition, following our announcement in May to access further reserves at Ellington Colliery, we have agreed a one-year extension, to September 2003, of the contract to supply Alcan with coal from Ellington. Overall production unit costs in the first half-year have been reduced from GBP1.33 per gj to GBP1.21 per gj as some of the benefits of Project 105 take effect, in spite of difficult geological conditions affecting Daw Mill. Deep mine production in the period increased to 8.3 million tonnes (2001: 7.6 million tonnes). As previously reported, we have suffered a delay in achieving full production at Daw Mill where a section of the face is experiencing unforeseen geological features, creating difficult operating conditions. This has resulted in production being reduced to an average of 5,000 tonnes per week. Following further investigative work indications are that the difficult operating conditions will remain through the year-end. A number of initiatives are being tried to speed up progress through the area where the coal has been disturbed. On 30 January the Group announced the closure of Prince of Wales Colliery, which ceased operations on 30 August. It was announced on 16 July 2002 that the Selby mine complex would be phased out over a 20-month period, due to deteriorating geological conditions and continuing financial losses (during the first 6 months of 2002 the Selby group of mines made operating losses of GBP14.3 million). In order to maintain operations at Selby until the Spring of 2004, over 20 miles of development headings need to be driven to access and prepare replacement faces for production. The Group has set targets to achieve this objective. The closure date may be brought forward if targets are not met. The shaft treatment and pit top restoration costs for the Selby sites are provided for in the Group balance sheet. Redundancy costs totaling around GBP40 million, GBP10 million of which will be Government funded, will be treated as an exceptional cost in the second half-year profit and loss account for 2002, reflecting the date of the announcement. The cash flow during the closure period should be neutral, provided that performance targets are achieved. Surface mine operations produced 2.2 million tonnes (2001: 2.1 million tonnes). Planning approval was obtained for 2.6 million tonnes (2001: 1.9 million tonnes). Two new sites commenced production during April. The operations in Australia, Gloucester Coal (previously CIM Resources), produced sales of GBP17.0 million (2001: GBP17.7million) from 1.3 million tonnes of coal (2001: 1.3 million tonnes). The Australian activities produced an operating profit of GBP1.8 million (2001: GBP1.6 million), and made an overall profit of GBP0.3 million (2001: loss GBP1.2 million), after currency hedge costs of GBP1.5 million (2001: GBP2.8 million). The unfavourable hedge contracts terminate at the end of 2002 when overall profitability is expected to improve. Project 105 - Operational Review We are now one year into the two year Project which will reduce costs to our target of 105p per gj. The primary focus of the project has been improving performance in the Deep Mines. The four main pillars of the strategy are: productivity improvement; cost cutting; risk management; and a focus on mines that are economically viable in the long term. -Productivity: We have made fundamental changes to the process and practices we use to manage the mines and these are already having both an operational and a financial impact. -Costs: Savings have been obtained on material purchases with the full benefit of new contract arrangements flowing through in 2003. Capital spend has also been reduced by forward planning of equipment availability within the Group, looking at alternative options and as a consequence of negotiations with major suppliers. -Risk Management: Unforeseen geological risks have negatively impacted the Deep Mines performance in 2002. The Group is harnessing emerging technologies to improve geophysical information and further reduce geological risk. -Portfolio: The viability of the Deep Mines portfolio has been significantly strengthened through the closure of Prince of Wales; the announced closure of the uneconomic Selby Complex in first quarter 2004; our cessation of mining at Clipstone and its planned return to the Coal *Authority in 2003. These measures will reduce loss-making activities. We are continuing to look at the economic viability of all the mines, particularly in the light of current market conditions and the international market prices for coal. The Project 105 initiative has also focused on other elements of the business and has had a significant impact on the Surface Mining and Marketing areas. The implementation effort will continue over the next year with the major focus on embedding Project 105 initiatives for the long term, taking out unnecessary costs and reducing deep mining risk. Mines Gas Generation In March we were successful in bidding to join the UK Emissions Trading Scheme, designed to reduce the volume of greenhouse gases emitted to the atmosphere. We are committed to a phased reduction in annual emissions reaching 400,000 tonnes of carbon dioxide equivalent (CO2e) per annum reduction after five years, qualifying for over GBP21 million of the GBP215 million the Government is making available to help kick-start emissions trading over the next five years. UK COAL plans to qualify for annual payments under the scheme by installing engines to convert methane gas, extracted from mines for safety reasons, into electricity for use on site. Methane has a global warming potential of 21 times that of the carbon dioxide that is created when it is burnt. Twin state-of-the-art engines have been installed by UK COAL at Thoresby Colliery, near Mansfield, Notts and are now generating about a third of the electricity being used at the mine. Similar engines are to be installed at three other collieries to further reduce greenhouse gas emissions. Property Portfolio The rental income from properties in the first half-year, which is included in turnover, was GBP1.8 million (2001: GBP1.8 million), generating an operating profit of GBP0.7 million (2001 GBP0.9 million). We continue to dispose of properties where we consider we can achieve maximum added value. In the period we made a profit of GBP1.0 million, (2001 : GBP1.2 million) principally from the sale of land at Wimblebury for housing development. We anticipate further sales in the second half-year. The Property and Estates business has made further progress with outline planning permission being obtained for 80 acres at Tetron Point (former Nadins Surface Mine), near Burton-on-Trent comprising 1.5 million sq ft of offices, industrial and warehousing development. Outlook The market for coal has reduced this year as a result of low gas prices and increased coal stocks at power stations. In the last few months international coal prices have fallen to the low levels last experienced in August 1999, with the price per tonne into North West Europe falling from $34 at the beginning of the year to below $26 during August. Adverse exchange rates have further weakened the competitive position. The Group has a strong forward order book, amounting to some 49 million tonnes over the period to 2010, with a tapering profile of annual contract volumes. Although Daw Mill will incur losses in the second half of the year, we are confident that it will emerge as one of the Group's lowest cost producers. The work of Project 105 is providing benefits through increased efficiencies and reduced costs. This is demonstrated by the Group achieving a small operating profit despite difficulties in bringing new reserves at Daw Mill into production. The focus remains on driving down unit costs and continuing to review high cost operations to create a profitable business embracing coal production and property interests. To view table: http://bankrupt.com/misc/UKCoal2.pdf Post balance sheet event On 16 July UK COAL announced the closure of the Selby complex with production being phased out over the period to March 2004. IMC Group Consulting on behalf of the Department of Trade and Industry took this decision following the publication of an independent study. This study supported the views of UK COAL that the Selby complex of mines was not a viable operation due to deteriorating geological conditions. Contact Information: Gordon McPhie Chief Executive UK COAL PLC Tel: 020 7554 1400 ************* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter -- Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Kimberly MacAdam, Larri-Nil Veloso, Ma. Cristina Canson and Jean Claire Dy, Editors. Copyright 2002. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$575 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *