(Corrects paragraph 1 to say company produced less power, not
By Karolin Schaps and Esha Vaish
Feb 18 Drax Group, operator of Britain's
biggest power station, reported 2013 core earnings ahead of
analysts' estimates on Tuesday despite generating slightly less
electricity from its power production fleet.
However, core earnings before interest, tax, depreciation
and amortisation still slumped 23 percent to 230 million pounds
($384 million) due to the rising costs of its carbon emissions
and the company warned of a tougher year ahead on the back of
tighter profit margins due to the mild winter.
Analysts on average had been expecting EBITDA of 221.52
million pounds, according to Thomson Reuters I/B/E/S Estimates.
Drax cut the final dividend to 8.9 pence a share from 10.9
pence last year, making 17.6 pence per share for the year, short
of the average forecast given by analysts of 18.13 pence and
down 30 percent on the payout for 2012.
Underlying earnings per share were down 32 percent at 35.3
By 1113 GMT Drax's shares were down nearly 2 percent at 790
The company, which is gradually converting half of its
coal-fired generating capacity to burning biomass in a 700
million-pound ($1.2 billion) project, said it was confident it
would receive government support to convert the next two units,
having successfully switched over the first unit in April last
But it does not expect to make further conversions until
2015 and in the meantime has to pay a UK carbon tax levied on
emissions, which is increasing again this year.
At the same time, the FTSE-250 company also needs to pay for
carbon emissions through the EU's Emissions Trading System and
since last year Drax no longer benefits from free carbon
allowances and therefore faces higher costs.
Drax is expected to sign a government contract this spring
which guarantees a minimum electricity price for the biomass
power plant, an agreement that guarantees future returns and
which is essential for the firm's conversion plan.
"In 2016, we expect half of Drax to be fuelled by
sustainable biomass, some 4 percent of the UK's electricity,"
Chief Executive Dorothy Thompson said in a statement.
Drax expects to convert the second unit in April 2015 and
the third in the fourth quarter of 2015 at the earliest.
To fuel its future biomass units the company said it was
looking at increasing wood pellet production facilities in the
United States, without elaborating on specific plans.
Drax will open two production plants in the United States in
the first and second quarters of 2015, it said.
($1=0.5983 British pounds)
(Editing by Greg Mahlich)