Member Article

Switch to biomass proving costly for Selby’s Drax Group

Selby’s Drax Group, the electrical energy firm and owners of Drax power station, have reported significant pretax losses despite successfully converting 20% of their output to biomass.

The group recently won a legal challenge against a UK Government decision not to support the conversion of one of its coal-burning units to biomass under a new subsidy scheme.

They reported a loss before tax of £10.8 million for the 6 months ended June 30 2014, compared to a pretax profit of £205.6 million in the same period last year.

EBITDA for the six months ended 30 June 2014 was £102 million, compared to £120 million for the six months ended 30 June 2013.

In support of the group’s biomass transformation, continued investment at Drax Power Station combined with the development of pellet plant and port facilities in the US are reflected in capital expenditure of £123 million in the first half of 2014 (2013: £138 million).

In May this year Drax agreed a new £100 million private placement with M&G Investments, providing additional liquidity to the Group.

This results in total loans outstanding of £325 million and net debt at 30 June 2014 of £38 million.

Dorothy Thompson, chief executive of Drax, said: “We are pleased to have delivered another good operating performance across our biomass and coal generation business. However, as expected, in the short term the increasing cost of the UK carbon tax drove EBITDA down year on year.

“We have been investing significant capital to transform Drax into one of Europe’s largest renewable power generators, burning sustainable biomass, thereby improving the long term value proposition for the Group.

“The regulatory landscape still presents uncertainties, but positive progress is being made and we hope that most of the key issues will be clarified in the coming months.

“Our underlying business case remains strong. In 2016, half of Drax Power Station will be fuelled by sustainable biomass, delivering 4% of the UK’s electricity. Through this transformation we will provide cost-effective, low carbon and reliable renewable power to the UK consumer.

“At the core of the Group is a very high quality power station, hugely important to the security of electricity supply in the UK. We will remain critical to UK infrastructure for a very long time to come.”

This was posted in Bdaily's Members' News section by Clare Burnett .