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BUSINESS

Dresdner Bank bails K2 out with $1.5 billion

Germany’s Dresdner Bank has extended $1.5 billion to one of its affiliated specialist investment funds, K2, to allow it to repay debt, the latest in a series of such bailouts amid a global credit crunch.

The funds were offered “with the intention of facilitating the repayment in full of all senior debt of K2,” Dresdner Bank said in a statement late Tuesday. Dresdner, owned by insurance giant Allianz, had said in February that it would have to support K2, what is known as a ‘structured investment vehicle’ (SIV) that has been badly mauled by the collapse of the US market for high risk, or subprime, mortgages.

Details of the aid were not provided at the time. K2 holds assets worth an estimated $19 billion. Dresdner said in February that the support measure would not affect its own capital base. Several major banks, including the US giant Citigroup, have had to cover the losses, running to billions of dollars, at such SIVs as the US property sector has gone from bad to worse.

SIVs are specialist funds set up to buy longer-term, higher-yielding assets but use short-term finance raised in the money markets to do so. As the credit markets have dried up due to the US property sector collapse, these funds have found it increasingly difficult to finance their business and meet their short-term loan obligations, forcing some to fail.

BUSINESS

France’s EDF hails €10billion profit, despite huge UK nuclear charge

French energy giant EDF has unveiled net profit of €10billion and cut its massive debt by increasing nuclear production after problems forced some plants offline.

France's EDF hails €10billion profit, despite huge UK nuclear charge

EDF hailed an “exceptional” year after its loss of €17.9billion in 2022.

Sales slipped 2.6 percent to €139.7billion , but the group managed to slice debt by €10billion euros to €54.4billion.

EDF said however that it had booked a €12.9 billion depreciation linked to difficulties at its Hinkley Point nuclear plant in Britain.

The charge includes €11.2 billion for Hinkley Point assets and €1.7billion at its British subsidiary, EDF Energy, the group explained.

EDF announced last month a fresh delay and additional costs for the giant project hit by repeated cost overruns.

“The year was marked by many events, in particular by the recovery of production and the company’s mobilisation around production recovery,” CEO Luc Remont told reporters.

EDF put its strong showing down to a strong operational performance, notably a significant increase in nuclear generation in France at a time of historically high prices.

That followed a drop in nuclear output in France in 2022. The group had to deal with stress corrosion problems at some reactors while also facing government orders to limit price rises.

The French reactors last year produced around 320.4 TWh, in the upper range of expectations.

Nuclear production had slid back in 2022 to 279 TWh, its lowest level in three decades, because of the corrosion problems and maintenance changes after
the Covid-19 pandemic.

Hinkley Point C is one of a small number of European Pressurised Reactors (EPRs) worldwide, an EDF-led design that has been plagued by cost overruns
running into billions of euros and years of construction delays.

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