Drax earnings drop amid weak commodity markets

In the six months ended 30 June, underlying earnings came in at £17m from £41m in the first half of last year, while earnings before interest, taxes, depreciation and amortisation slumped to £70m from £120m.

As a result, the company declared an interim dividend of 2.1p, down from 5.1p the year before.

Statutory pre-tax profit rose to £184m from £53m even as revenue dropped to £1.49bn from £1.51bn as the company booked £163.4m in unrealised gains on derivative contracts.

Chief executive Dorothy Thompson said: “Drax delivered a good operational performance over the last six months, a period during which around 70% of our electricity generation was renewable - enough to power Leeds, Manchester, Sheffield and Liverpool combined - truly a renewable northern powerhouse.

"Whilst we have seen signs of power and commodity prices improving, our financial performance was impacted by the challenging environment in which we operate.”

Drax said full-year EBITDA remains subject to the timing of the contracts for difference award and is now expected to be around the low end of the consensus range of £146m to £185m.

RBC Capital Markets said the results and the reduced guidance are a minor negative. “Over the longer term we reiterate our underperform recommendation as we continue to see Drax as a limited life asset with no cash flow visibility beyond 10 years.”

At 1026 BST, Drax shares were down 1.1% to 348.50p.