30th Jun 2006 07:01
Drax Group PLC30 June 2006 Drax Group plc (Symbol:DRX) Trading Update and Special Dividend Update - 30 June 2006 Prior to entering its close period on 7 July 2006, Drax Group plc ("Drax")announces the following trading update. Trading Update Since our preliminary results statement on 8 March 2006, we continue to trade inline with expectations and to follow our trading strategy of making steadyforward power sales with matching carbon and coal purchases. Our aim is todeliver market level or better dark green spreads across all traded marketperiods and, as part of this strategy, we retain power to be sold into theprompt (within season) power markets. As at 23 June 2006 the traded positions for 2006 and 2007 were as follows: +-------------------------------------------------+-------------+-------------+| | 2006 | 2007 |+-------------------------------------------------+-------------+-------------+|Output - percentage of expected annual | | ||production | 87% | 63% ||Average price achieved |at £47.9/MWh |at £49.9/MWh |+-------------------------------------------------+-------------+-------------+|Carbon - percentage of expected annual | | ||requirement (including UK NAP allocation, market | | ||purchases and structured contracts) | 87% | 73% |+-------------------------------------------------+-------------+-------------+|Coal - percentage of expected annual requirement | | ||at fixed price/hedged | 89% | 63% |+-------------------------------------------------+-------------+-------------+ The 2007 contracted position includes approximately 1.3 TWh of production underthe five and a quarter year baseload contract with Centrica which commences on 1October 2007. Under this contract Drax will supply power on terms which includeCentrica paying Drax for coal, based on international coal prices, anddelivering matching CO2 allowances. The power price for these contract volumeshas been estimated in the above table using the forward prices for coal andcarbon as at 23 June 2006 (for delivery in Quarter 4 2007) and the contractualfixed dark green spread for the period. Drax will provide the next update on its contracted position in the interimresults statement that will be issued on 12 September 2006. Special Dividend As indicated in our AGM statement on 12 May 2006, we are now providing furtherdetails of our intentions regarding the payment of a special dividend. Finalarrangements will be announced in our interim results statement. In future,guidance on any special distributions will be given with our preliminary andinterim statements. The Board expects to declare a special dividend in the range 75 pence to 80pence per share, being approximately £305 million to approximately £326 million.This expectation assumes the business will not be subject to unforeseencircumstances that might have a material adverse effect. The derivation of thisrange is discussed in more detail below. As is normal in such situations the declaration of the special dividend will beaccompanied by a resolution to effect a share consolidation to be considered byshareholders at an Extraordinary General Meeting ("EGM"). This EGM, which willbe called shortly after our interim results statement is made, will take placein early October 2006 with the shares becoming ex-dividend shortly thereafter. The intention is to pay the special dividend at the same time as the intendedinterim ordinary dividend of 4 pence per share (being approximately £16.3million). This is expected to be in late October 2006. In arriving at the range for the first special dividend the Board has takenaccount of: •the expected cash generation in the six month period to 30 June 2006 which benefits from the cash flows arising from four months of the Winter 05/06 season;•the additional debt facilities of £100 million announced at the Annual General Meeting which will be drawn down prior to payment of the special dividend;.the intention to make a payment in July 2006 into the employee pension scheme of £22.5 million to reduce the actuarial deficit of £44.7 million reported in the 2005 Report and Accounts;•the cash balance of £99 million as at 1 January 2006; and•the retention of £50 million of cash to meet short term working capital requirements including payment in July 2006 of a VAT payment and the first quarterly corporation tax payment, the group having exhausted its brought forward tax losses. It should be noted that, in addition to the impact of commodity price movementson uncontracted power sales and coal and carbon purchases, the net cashgeneration in the six month period to 31 December 2006 will be influenced by: •expected quarterly tax payments on account;•the settlement of costs associated with this summer's routine planned outage; and•the inclusion of only two months' cash flow arising from the Winter 06/07 season reflecting standard market payment terms. Dorothy Thompson, Chief Executive of Drax said: "This trading updatedemonstrates the continued progress of the business and evidences our commitmentto return excess cash to shareholders." Enquiries: Chief Executive: Dorothy Thompson Finance Director: Gordon Boyd +44 (0) 1757 618 381 Drax Investor Relations: Andrew Jones +44 (0) 1757 612 938 Media Drax External Relations: Melanie Wedgbury +44 (0) 1757 612 438 Tulchan Communications David Trenchard and Peter Hewer +44 (0) 20 7353 4200 Website: www.draxgroup.plc.uk -ENDS- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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