Are you sure?

Court approves Vértesi Erőmű deal with creditors

Troubled power plant Vértesi Erőmű, a unit of state-owned Hungarian power company MVM, on Monday said the Komárom-Esztergom County Court approved an agreement made with its creditors while under bankruptcy protection.

"The company will soon start paying its liabilities under the deadlines outlined in the agreement," said chairman-CEO József Magyari. "Operations can return to normal," he added.

Vértesi said on January 31 it reached the agreement after more than five months under bankruptcy protection.

Vértesi’s proposal, to pay back about HUF 5.6 billion in a lump sum, was approved by all of the company's secured creditors and 90% of its unsecured creditors.

Vértesi can only pay the amount with a HUF 4 billion loan from its parent company. The loan was approved by a general meeting of MVM shareholders after earlier talks with creditors failed.

Vértesi will have until 2014 to repay the loan to MVM.

The agreement and the loan from MVM give Vértesi time to reorganize and return to profitable operation. If successful, Vértesi could continue its coal mining activities until the end of 2012 and continue to operate its power plant until the end of 2014 without any subsidies, as originally planned.

János Bencsik, state secretary in charge of energy affairs, said the government package in which the power plant remains open until 2014 and the nearby Márkushegyi Mine operates until 2012 was an acceptable compromise.

Resources for the plant to operate profitably could not be guaranteed forever, and the plant's technical condition did not allow its long-term operation, but the solution had to take into account the company's 1,200 workers and their children.

Vértesi’s former management signed contracts on the purchase of electricity worth more than HUF 10 billion in 2008. System Consulting, a company controlled by László Kapolyi, Hungary's industry minister in the 80s, was behind the purchases.

A fall in electricity prices and shutdowns among its clients forced the company to break the contracts. The company filed for bankruptcy protection after it piled up almost HUF 20 billion in debt on damages approved to its clients by the court.