Drax pleased with operations despite earnings plunge

Electricity generation company Drax Group posted its preliminary results for the 2016 calendar year on Thursday, reporting a “good operational performance”, with 65% of electricity generated from renewable biomass during the year and progress made with its strategic initiatives.

The FTSE 250 firm saw its EBITDA fall to £140m from £169m, with underlying earnings less than half what they were in 2015, at £21m against £46m.

Underlying earnings per share stood at 5p, down from 11.3p, although net debt narrowed to £93m from £187m.

Total dividends were also less than half those in the prior year, at 2.5p compared to 5.7p per share.

On a statutory basis, profit before tax improved to £197m from £59m, while basic earnings per share were 48p compared to 14p in 2015.

Drax said the 2016 EBITDA figure was in line with guidance, with the year-on-year reduction driven by “challenging commodity markets” and the loss of levy exemption certificates.

It said those issues were mitigated by growth in system support, improving retail and pellet supply profitability.

“We are playing a vital role in helping change the way energy is generated, supplied and used as the UK moves to a low carbon future,” commented chief executive Dorothy Thompson.

“With the right conditions, we can do even more, converting further units to run on compressed wood pellets.

“This is the fastest and most reliable way to support the UK's decarbonisation targets, whilst minimising the cost to households and businesses.”

Thompson said that in a challenging commodity environment, Drax had delivered a “good operational performance” with 65% renewable power generation.

“The acquisition of Opus Energy and rapid response open cycle gas turbine projects are an important step in delivering our strategy, diversifying our earnings base and contributing to stronger, long-term financial performance across the markets in which we operate.”