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Troubled power plant reaches agreement with creditors

Troubled power plant Vertesi Eromu, a unit of state-owned Hungarian Electricity Works (MVM), has reached an agreement with its creditors after more than five months under bankruptcy protection, the company said on Monday.

Troubled power plant Vertesi Eromu, a unit of state-owned Hungarian Electricity Works (MVM), has reached an agreement with its creditors after more than five months under bankruptcy protection, the company said on Monday.

The agreement will be closed after approval by the court of Komarom-Esztergom County.

Vertesi'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. Vertesi 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. Vertesi will have until 2014 to repay the loan to MVM.

The agreement and the loan from MVM give Vertesi time to reorganize and return to profitable operation. If successful, Vertesi 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.

Vertesi's former management signed contracts on the purchase of electricity worth more than HUF 10 billion in 2008. System Consulting, a company controlled by Laszlo 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. (Econews)