Drax wants biomass to ‘keep the lights on’

YORKSHIRE power generator Drax is to return a further £35m to shareholders and will continue to push the Government after the General Election to incentivise the uptake of biomass technologies within its industry.

Charles Berry, chairman of Drax, the operator of Britain’s biggest power station, based at Selby in North Yorkshire, told shareholders at the company’s annual general meeting that although Drax hadn’t been “immune to the economic recession”, it had delivered earnings “marginally above” market expectations.

A resolution of payment of a final dividend of 9.6p per share was passed, meaning an extra £35m will be returned to shareholders in May.
 

When added to the dividends paid last October, total return to shareholders for 2009 are £50m.

However the final dividend in 2008 was 38.3p.

Drax’s 2009 pre-tax profits fell to £158m from £443m in 2008.

Mr Berry said: “During the year, we took actions to help protect shareholder value. We strengthened our capital structure through a share placing raising £106m of equity which we used to prepay part of our term debt, we then refinanced the remaining term debt, extending its maturity date to December 2012.
 
“With a focus on strong financial management across the entire business we set ourselves the target to save £10m of operating expenses. We were pleased to report that we exceeded that target and delivered £14m in savings.”

Mr Berry said Drax continued to work on its two major strategic carbon abatement projects at the power station to upgrade its high and low pressure turbines and to construct the largest biomass co-firing facility in the world.

“Both projects remain on schedule, and will give us the capability to deliver significant savings in CO2 emissions of up to 17.5% by 2011, compared to 2006 levels,” he said.

Mr Berry added: “Throughout 2009 we made steady progress on our dedicated biomass-fired generation business and we remain very encouraged by the value potential of developing this aspect of the business and we expect to be able to prove the long-term investment case for the first dedicated biomass-fired generation plant towards the end of 2010.
 
“We believe biomass has much to offer the energy sector, and as far as electricity generation is concerned it’s not only a sustainable fuel source, but it’s a reliable one which means it can make an important contribution to security of supply or keeping the lights on.

“We’ve therefore continued to press for the appropriate regulatory regime to incentivise the uptake of biomass technologies. Over the last few months we’ve been raising our concerns with Government and have advocated the case for biomass. This engagement will continue after the General Election.”

Mr Berry said Drax had begun 2010 with “more certainty” over its earnings for the year following action taken last year to accelerate its forward sales.
 
Non-executive director Jamie Dundas stepped down from Drax#s board following the AGM.