Drax ‘ahead of the curve’ as it reports EBITDA profits across all divisions for the first time
Drax Power has reported profits across all of its divisions for the first time, with a 64% EBITDA increase to £229m, but made an overall statutory loss of £183m due to foreign currency hedging losses of £156m.
Selby-based Drax said its EBITDA for Pellet Production stood at £6m, due to a 35% growth in production, while its Power Generation division rose £64m to £238m, which it attributed to the contribution from biomass generation, and its B2B Energy Supply was reported at £29m, following the acquisition of Opus Energy in 2017.
However, the Group reported a pre-tax loss of £183m – a drop from statutory pre-tax profits of £197m in 2016 – which Drax said was principally driven by unrealised losses related to foreign currency hedging of £156m.
Drax said the recorded statutory loss “reflects unrealised losses on derivative contracts” and the accelerated depreciation on coal-specific assets, as well as amortisation of newly-acquired intangible assets in Opus Energy.
Andy Koss, CEO of Drax Power, spoke to TheBusinessDesk.com this morning, and said he was very pleased the group had achieved EBITDA profits across all divisions for the first time. He added: “We always focus on underlying profits so we tend to look at that rather than the profits with all the accounting adjustments as it’s a more realistic look at the performance of the business overall.”
“The move to biomass we have made recognises that coal will become a fuel of the past. We were ahead of the curve with biomass and the results reflect that this was the right thing to do,” said Koss.
He added that Drax had delivered a 65% renewable energy output in 2017, which will grow in 2018 and beyond. Koss added that the group was moving towards delivering responsive, flexible energy and later this year will submit a planning application for the re-powering project; a decision on which will be announced in 2019.
During 2017, Drax acquired Opus Energy and it says the group remains on course to hit the £425m EBITDA target by 2025. During the year, Drax increased biomass self-supply through acquisition and commissioning of third biomass pellet plant, LaSalle Bioenergy, and received Government support for a fourth biomass unit conversion at Drax Power Station.
Will Gardiner, chief executive of Drax Group, added: “We continued to transform the business in 2017, delivering a strong EBITDA performance, in line with expectations. This was delivered by all parts of the business making positive contributions for the first time.
“We also made good progress delivering our strategy, which is clear and unchanged. We are increasing biomass self-supply, developing projects to diversify our generation mix and growing our B2B energy supply business.
“The UK is undergoing an energy revolution, starting with a significant reduction in carbon emissions, and to support that we are helping to change the way energy is generated, supplied and used.”
Drax Power Station generates 7% of the country’s electricity and now has three of its generators fuelled by low-carbon biomass; with a fourth due to be converted to this method in the summer.
This will leave the power station with two coal-fired generators, which the government has set out must be offline by 2025.
The station, which employs 900 people, earlier this year launched its ‘re-power project’, setting out planning proposals which need to be approved by the Secretary of State for Business, Energy and Industrial Strategy.
Drax Group is proposing to build two gas-powered generators on the north of the station’s site; which would, when combined, generate 3,600 megawatts of power – each one would have the capacity to produce nearly three times as much of the power generated by one coal-fired generator. Each coal unit has 645MW and each gas generator would produce 1,800MW.
