REO To Move Forward With Battersea Power Station Project

photo © Nick Weall

http://online.wsj.com/article/BT-CO-20110623-704303.html

By Sonya Flechon
Of DOW JONES NEWSWIRES
JUNE 23, 2011, 6:59 A.M. ET

LONDON (Dow Jones)--Real Estate Opportunities PLC (REO.LN), which invests in Irish and U.K. property, Thursday said it had completed a restructuring program, releasing funding for its long-delayed multibillion-pound redevelopment of London's iconic Battersea Power Station.

REO invested heavily in the Irish housing market during the property boom and was left deeply in debt after the collapse of the market there in 2008. Throughout the last fiscal year, it's been struggling to restructure its portfolio with the help of the National Asset Management Agency, set up by the Irish government to deal with risky loans threatening the banking industry.

Now its reoganization is complete, REO is showing signs of stability. Debt is expected to fall to GBP1.5 billion from GBP1.73 billion at the end of February and the company has reduced its losses after tax to GBP77 million from GBP828 million last year.

In Ireland, where REO remains one of the largest property investors, the company has acquired both long-term income cash flow and short-term funding, enabling it to continue making progress on its Irish portfolio. Recent examples include the sale to Google Inc. (GOOG) of a building in Dublin.

In the U.K., the main focus is on the Battersea Power Station project. In May, REO issued over 111 million shares to help fund the project, which has been delayed since 2007. Recent currency movements have also boosted the project as, when currencies such as the euro weaken, investors turn to stronger ones including sterling and, according to REO's director Rob Tincknell, that offers the "opportunity to sink quite a bit of cash into one project."

Plans include reusing the facility as a power station, fueled by biomass and waste, as well as developing housing, office and retail units. The construction has suffered from REO's debt situation but is still on track to begin in 2012.

REO's Tincknell said the situation is "complex, and could turn into a consortium." The next step involves choosing equity partners among a list of potential investors and it expects to have one on board by the end of the year, possibly from the Middle East.

The company reported a fall in property income to GBP34 million from GBP44 million for the 14 months ended in February 2010 and the value of its property portfolio, which amounts to GBP1 billion, has decreased by 8.5%.

"While there are satisfactory underlying trends with the operating performance, challenges do of course remain," said Chairman Rob Horney. "There remains the significant task, in a difficult trading environment, of realising or refinancing assets in order to repay the liabilities owed to NAMA and other creditors."

By Sonya Flechon, Dow Jones Newswires; 44-20-7842-9295; sonya.flechon@dowjones.com