Drax profits hit by unplanned outages

Drax profits have fallen after the company suffered two unplanned outages at its power station in Yorkshire – one caused by a fire at the biomass rail unloading facility at the end of 2017.

Earnings before interest, tax, depreciation and amortisation (EBITDA) for the six months to the end of June were down 16 per cent when compared to the same period last year at £102 million. Underlying earnings fell 22 per cent to £7 million.

However, the company also moved from an operating loss of £61 million to an operating profit of £12 million – partly due to a £24 million gain on derivative contracts following a corresponding loss of £86 million in the first half of 2017. Pre-tax losses fell from £104 million to £11 million.

EBITDA from the power generation business plunged 36 per cent to £88 million after the aforementioned outages reduced electricity output by 17 per cent to 8.9TWh. Of this, 71 per cent came from biomass generation. Earnings from the provision of ancillary and balancing services fell by a quarter to £36 million owing to a reduction in the value of a black start contract.

The company began converting a fourth former coal unit to run on biomass during the period and also launched a feasibility study on its plans to trial carbon capture and storage on one of the three existing biomass units.

The group’s pellet supply business performed better, with EBITDA up £14 million to £10 million and pellet production up 80 per cent at 0.7 million tonnes. EBITDA from its business retail arm also grew by a quarter to £16 million after increasing the number of supply points it serves by 9 per cent to 387,000.

Drax Group chief executive Will Gardiner, said: “Full year EBITDA expectations remain unchanged. However, first half EBITDA was lower, principally due to two specific generation outages.

“We made excellent progress with our pellet production business, driving down costs while producing at record levels and our B2B energy supply business continues to increase customer numbers. We also remain on track with our investment projects: the conversion of a fourth unit to biomass and the development of our [open-cycle gas turbine] and coal-to-gas repowering options.

“We remain focused on safe and efficient operations and returns to shareholders and expect to declare a full year dividend of £56 million for 2018.”

His assurances clearly failed to soothe the fears of investors. At the time of publication, the group’s share price stood at 340p having initially fallen more than 6 per cent to 334p in the opening hours of trading this morning (24 July).