Unplanned power outages impact half-year results for Drax Group
Drax Group, which operates Drax Power Station in North Yorkshire, has reduced its pre-tax losses but its EBITDA levels dropped after two unplanned outages during the first half of the year.
Reporting on the half year results to June 30, Drax Group said EBITDA was £102m, down from £121m for the same period in 2017, which it said was due to the two outages in Q1. Its pre-tax losses stood at £11m, significantly reduced from £104m for H1 2017; which it said was due to a £27m asset write off of coal-specific assets relating to the conversion of unit 4 from coal to biomass, which is currently underway and expected to complete in late summer.
Drax said increased profits also included unrealised gains on derivative contracts of £24m (2017: loss £86m).
Speaking to TheBusinessDesk.com this morning, CEO of Drax Power, Andy Koss said that while Q1 had been heavily impacted by a loss of production due to the two outages, Q2 had very good availability for energy production. He added: “Despite the challenges in Q1, we are in good shape for the rest of the year,” he added.
Koss announced that the group was looking to invest £400,000 in a trial relating to carbon capture and biomass, which, if rolled out on a commercial scale could see Drax become the first carbon negative plant in Europe. He added: “That would have the potential to preserve the life of the plant.”
Koss said along with the trial, conversations with government needed to take place around the plans and how the technology is supported.
During the period, Drax submitted its planning application to re-power coal units to gas; it is also due to complete its coal to biomass conversation in the late summer. It generated 11.5% of power for the UK during the period; 71% of which was renewable – a rise from 65% at the firm’s annual results.
During the period, the listed firm completed a refinancing, swapping a floating for fixed rate debt with 7.5-year maturity. The group has increased its 2018 interim dividend to £22.4m (5.6 pence per share) (H1 2017: £20) and expects the 2018 full year dividend of £56m to be realised. The ongoing £50m share buy-back programme stood at £13m at 30 June 2018.
During the period, £46m was spent on capital investment and full year investment remains unchanged, with expenditure planned to be between £100-£110m.
This includes £50m being spent on core maintenance, £20m-£30m on improvement and optimisation projects and £30m on the conversion of a fourth biomass unit. Its net debt stood at £366m (31 Dec 2017: £367m), including cash on hand of £245m.
Will Gardiner, chief executive of Drax Group, said: “Drax continues to be at the heart of decarbonising UK energy, securing government support to convert a fourth unit to biomass and piloting a Bioenergy Carbon Capture and Storage project, supporting the UK Government’s carbon capture and storage ambitions.
“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.””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 OCGT and coal-to-gas repowering options.”
