28th Jul 2015 11:55
LONDON (Alliance News) - Drax Group PLC shares rose on Tuesday after it said it swung to a pretax profit in the first half of 2015, leading to a higher interim dividend in line with its policy, but the electricity generator reiterated that it will be hit by changes to the UK climate change levy in the second half of the year.
The power plant operator also said it has launched a strategic review to evaluate the long term options for the company.
Drax shares were up 9.3% to 276.00 pence per share, the third biggest gainer on the FTSE 250.
The company reported a pretax profit of GBP53.0 million in the first half of 2015, swinging from a GBP10.8 million loss a year earlier, as revenue for the period rose to GBP1.24 billion from GBP1.05 billion. Earnings before interest, tax, depreciation and amortisation also rose to GBP119.9 million from GBP101.9 million.
Drax raised its interim dividend to 5.1 pence per share from 4.7 pence per share, which is in line with its policy to distribute half of its earnings before losses on derivative contracts of GBP3 million, which came in at GBP41 million compared to GBP38 million a year earlier.
"Drax has performed extremely well over the last six months and we are well advanced with our long-term strategy to become a predominantly biomass-fuelled power provider," said Chief Executive Dorothy Thompson.
"While there are elements outside our control, particularly regulatory challenges and weak commodity markets, the underlying fundamentals of the group remain strong," she added.
Drax generated 14.0 terrawatt hours of electricity output from Drax Power in the first half, increasing from 12.9 terrawatt hours. Within that total generation, biomass contributed 5.2 terrawatt hours, up from 3.0 terrawatt hours.
"This increased use of biomass confirms our position as Europe's single largest decarbonisation project and, as evidence of this, in the last few days we have abated our 20 millionth tonne of carbon," said Drax.
Drax's retail arm, Haven Power, also delivered more sales, totalling 6.8 terrawatt hours compared to 5.6 terrawatt hours, bringing in GBP629 million worth of sales compared to GBP513 million.
Drax reaffirmed that earnings before interest, tax, depreciation and amortisation would be GBP30 million lower in the second half due to the changes made to the climate change levy, and GBP60 million lower in 2016.
That suggests Ebitda in the second half of 2015 should be around GBP89.9 million.
On Tuesday, Chairman Phillip Cox said he was "disappointed and surprised" by the government's decision to change the climate change levy, and said Drax should be a "cornerstone of UK energy" as its the country's "single largest generator of renewable energy".
Drax has also launched a strategic review to "consider the long term options for the group" as it approaches the end of its long-running transformation to biomass energy.
"The underlying fundamentals of the group remain strong: we have confidence in our ability to generate affordable and reliable renewable energy with sustainable biomass; we have a resilient and diverse supply chain; and we play a strategic role in security of supply, which is more complex than meeting peak demand," said Thompson.
"With our third unit now modified to enable enhanced co-firing of biomass, our immediate priorities are: to complete the commissioning of our two pellet plants in the US; to work closely with the EU for a successful outcome to the state aid process; and to continue to strengthen our biomass supply chain," she added.
By Joshua Warner; [email protected]; @JoshAlliance
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