Next owner of Battersea may need to commit €815m

BATTERSEA Power Station’s next owner may have to commit £700 million (€814.8m) to the derelict London development site before any construction work can be started.

Creditors, led by the National Asset Management Agency and Lloyds Banking Group Plc, will try to recover the entire £502m owed by the project’s owner by selling the site or the debt, according to two people familiar with the matter. The existing plan also includes a commitment to contribute more than £200m toward extending a London Underground subway line.

The development is effectively up for sale now, because NAMA and Lloyds want to avoid the cost of putting the owner into administration, said the two people, who asked not to be identified because the information isn’t public. On November 29, the creditors called in loans to the project’s owner, Battersea Power Station Shareholder Vehicle Ltd. They are scheduled to ask a judge on December 12 to appoint an administrator to sell the site.

“At the right price, the world and its dog will put its hat in the ring and see what happens,” said Charlie Murphy, an analyst at Matrix Corporate Capital LLP. “It’s got planning, they’re talking about enterprise zoning and it’s got political support.”

Lloyds and NAMA last week rejected a £262m bid from Malaysian developer SP Setia Bhd. because they were holding out for full repayment of the £324m they are owed, according to the people. Another £178m is owed to Oriental Property Ltd, controlled by former power station owner and Hong Kong entrepreneur Victor Hwang.

“If they’re going to hang their hat on getting par for it, I think they’ll be very disappointed,” said Mike Bessell, an analyst at Evolution Securities in London.

“They might choose to have a partner come to manage the assets on a profit-sharing arrangement so they can sell bits off as the planning comes through.”

The 38-acre (15-hectare) site was valued at £500m, controlling shareholder Real Estate Opportunities Plc said on October 26. REO was given planning consent a year ago for a £5.5bn redevelopment of the site.

Any future development will incur millions of pounds in additional costs linked to the restoration of the heritage-protected building, the largest made of brick in Europe. The structure has no roof and REO planned to demolish and replace the four 350-foot tall smokestacks in the planning consent it obtained.

On November 30, REO said that it was still in talks to sell its 54% stake in Battersea Power Station Shareholder Vehicle, although it didn’t identify the potential buyers. Chelsea Football Club Ltd, owned by Russian billionaire Roman Abramovich, said it has hired developer Almacantar SA to help it find a site for a new stadium and one of the options is located at the Battersea site.

Qatari Diar, the real estate arm of the Gulf state’s sovereign wealth fund, has had discussions to acquire the site, the Sunday Times and Evening Standard reported.

“We are totally confident that new investors will also come forward and take over the Battersea Power Station development,” the office of London Mayor Boris Johnson said in a statement Thursday, citing the government backing for the subway link.

British Chancellor of the Exchequer George Osborne announced on November 29 that the government will support an extension to the Northern Line subway to the Nine Elms area, where the US is also scheduled to open a new embassy in 2017.

Engineering consultant Parsons Brinckerhoff estimated the cost of the project three years ago at £380m to £633m, depending on the route taken and number of stations to be built.

London Mayor Johnson and Osborne visited Berkeley Group Plc’s St James’s Riverlight project next to the power station site on November 28 to highlight plans to regenerate the Nine Elms area south of the River Thames. In his budget statement the next day, the chancellor also announced a plan to create an enterprise zone to ease planning restrictions for businesses.

The site’s likely administration shows the “flimsy basis” on which Johnson and Osborne pledged to deliver two new Underground stations, said Maria Eagle, a lawmaker who is opposition Labour Party spokeswoman for transport.