13th Dec 2006 07:01
Drax Group PLC13 December 2006 13 December 2006 Drax Group plc Symbol: (DRX) Trading Update Prior to entering its close period on 7 January 2007, Drax Group plc ("Drax")announces the following trading update. Contracted Position for 2006, 2007 and 2008 Since issuing the 2006 Interim announcement on 12 September 2006, Drax hascontinued to trade in line with its expectations and to follow the statedtrading strategy of making steady forward power sales with corresponding carbonand coal purchases. Drax's aim is to deliver market level or better dark greenspreads across all traded market periods and, as part of this strategy, Draxretains power to be sold into the prompt (within season) power markets. As at 6 December 2006 the contracted position for 2006, 2007 and 2008 were asfollows: +------------------------------------+-------------+-------------+-------------+| | 2006 | 2007 | 2008 |+------------------------------------+-------------+-------------+-------------+|Output - percentage of expected | | | ||annual production hedged | 99% | 68% | 53% |+------------------------------------+-------------+-------------+-------------+|comprising: | | | || - Fixed price power sales at | 99% at | 62% at | 31% at || an average achieved price | £48.8 | £49.9 | £49.2 || per MWh | | | |+------------------------------------+-------------+-------------+-------------+| - Fixed margin power sales | - | 6% | 22% |+------------------------------------+-------------+-------------+-------------+|CO2 emissions allowances - | | | ||percentage of expected annual | | | ||requirement (including UK NAP | | | ||allocation, market purchases and | | | ||structured contracts) | 100% | 73% | 67% |+------------------------------------+-------------+-------------+-------------+|Coal - percentage of expected | | | ||annual requirement hedged | 100% | 64% | 58% |+------------------------------------+-------------+-------------+-------------+ Fixed margin power sales include approximately 1.3TWh in 2007 and 5.3TWh in 2008under the five and a quarter year baseload contract with Centrica whichcommences on 1 October 2007. Under this contract Drax will supply power on termswhich include Centrica paying Drax for coal, based on international coal prices,and delivering matching CO2 emissions allowances amounting to approximately 4.7million tonnes per annum. The contract provides Drax with a series of fixed darkgreen spreads. Drax will provide the next update on its contracted position in its 2006Preliminary Results Statement expected to be issued on 8 March 2007. 2006 EBITDA and Closing Cash Position Guidance Drax expects that EBITDA for year ending 31 December 2006 will be in the range£578m to £585m (Note 1). It further expects that the closing cash position as at31 December 2006 will be in the range £150m to £155m. In arriving at the range for the 2006 EBITDA and the closing cash position as at31 December 2006 Drax has taken account of: •Market prices, as at 6 December 2006, for the uncontracted portion of power sales, and coal and carbon purchases for the period to 31 December 2006; and •Management's assumption that there will be no significant unplanned outages for the period to 31 December 2006. Special Dividend The Board expects to declare a special dividend in respect of the six monthsending 31 December 2006 at the 2006 Preliminary Results. The intention is to paythe special dividend at the same time as the intended final ordinary dividend of9.1 pence per share (being approximately £33.7 million). This is expected to bein mid May 2007. Final arrangements will be announced in our Preliminary ResultsStatement. Turbine re-blading Further to our interim presentation in September, Drax is pleased to report thatit has decided to proceed with the turbine re-blading project and is now infinal stage negotiation with the preferred supplier. Using proven technology Drax expects each unit, following installation, toachieve a baseload efficiency (Note 2) approaching 40%. This represents a 5%improvement on current baseload efficiency of 38%. Installation, which will beundertaken during the planned outage programme, is expected to take placebetween 2008 and 2011. Total costs of approximately £100 million are expected tobe incurred on this project over the next five years. When complete, the projectis expected to deliver annual savings of approximately one million tonnes of CO2emissions allowances and approximately half a million tonnes of coal. Dorothy Thompson, Chief Executive of Drax said: "I am very pleased with thecontinued strong performance which builds on the robust results delivered in thefirst half of the year. The decision to go ahead with the turbine re-bladingproject demonstrates our commitment to invest in the future of the business andimportantly to tackling climate change, through an annual saving in CO2emissions equivalent to taking 275,000 cars off the road." 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 Notes:(1) EBITDA is profit before interest, tax, depreciation and amortisation, exceptional items and unrealised gains/losses on derivative contracts. (2) Baseload efficiency is the ratio of energy out to energy in when operating at full capacity. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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