1st Apr 2016 09:46
LONDON (Alliance News) - Drax Group PLC on Friday said it expects to deliver 2016 earnings at the top end of market expectations as it revealed it has been awarded a new contract from London-listed power grid operator National Grid PLC.
Power generator Drax said earnings before interest, tax, depreciation and amortisation are now anticipated to be at the higher end of expectations in 2016 after it reviewed its revenue and cost estimates, as well as the recent weakness in commodity markets, it said.
That suggests the company is progressing its commitment to have a "laser sharp" focus on cost control this year and to optimise its revenue.
Drax said that, based on a range of current market forecasts, Ebitda will be toward the top end of the GBP132.0 million to GBP161.0 million range.
However, even if Ebitda hits the very top of that range this year, it will still be lower than the GBP169.0 million reported in 2015, which in turn was down more than 26% from 2014.
Drax said its 2015 Ebitda was hampered by the removal of levy exemption certificates, as part of the UK government's changes to the climate change levy, alongside the deterioration in commodity prices - problems that will persist in 2016.
The company's earnings took a GBP30.0 million hit in 2015 from the changes to the climate change levy, and Drax has previously warned that impact would double to GBP60.0 million in 2016.
Drax also revealed it has won a 12-month contract from National Grid to supply ancillary services starting this month.
The fact Drax has raised hopes of hitting the top end of expectations so early on in the financial year, which will run to the end of 2016, suggests the contract from National Grid could be a big earnings driver this year.
"We are pleased to have agreed this contract with National Grid. At a time when many power stations are closing, this contract recognises the supportive role Drax continues to play in providing secure and dependable electricity to the UK," said Chief Executive Dorothy Thompson.
Drax shares were up 1.5% to 276.10 pence per share on Friday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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