Drax makes £83m loss amid coal asset depreciation

Drax Group CEO Dorothy Thompson

Shares of Selby, North Yorkshire-based power company Drax Group fell more than 3% on Wednesday after it said “increases to depreciation and amortisation costs and unrealised losses on derivative contracts” resulted in a loss before tax of £83 million in the six months to June 30 compared to a profit of £184 million for the same period last year.

Drax said the higher depreciation reflected “accelerated depreciation of coal-specific assets and amortisation of intangible assets associated with the acquisition of Opus Energy.”

EBITDA rose from £70 million to £121 million and revenue rose from £1.48 billion to £1.8 billion.

Drax said its generation business, Drax Power, is now a predominantly renewable electricity generator with 68% of its output being produced from biomass in the form of sustainable compressed wood pellets.

“As expected, our coal units ran less often but continued to play an important role providing a range of system support services to the UK electricity system with reliable, flexible and responsive capacity,” said Drax Group CEO Dorothy Thompson.

Thompson added: “We have made good progress with our strategy during the first half of 2017, acquiring Opus Energy and a third compressed wood pellet plant, in addition to refinancing and implementing a new dividend policy.

“Central to our strategy is the delivery of targeted growth through deploying our expertise across our markets and, in so doing, diversifying, growing and improving the quality of earnings whilst reducing exposure to commodity market volatility.

“Delivering reliable renewable electricity remains at the heart of our business.

“We continue to produce at record levels, helping to keep the UK’s electricity system secure and supplying our customers through our retail business.

“With the right conditions, we can do even more.

“We are progressing our four new rapid response gas power projects and our research and innovation work has identified potentially attractive options to repurpose our remaining coal assets.

“We continue to play a vital role in the UK’s energy infrastructure and our strategy is helping to change the way energy is generated, supplied and used for a better future.”

Drax also announced it appointed David Nussbaum as a non-executive director with effect from August 1, 2017.             

Nussbaum is chief executive of The Elders — an independent group of global leaders working together for peace, justice and human rights that was founded by Nelson Mandela in 2007.

Nussbaum is a former chief executive of the World Wide Fund for Nature UK (WWF-UK).