Drax Group plc (LON:DRX), operator of the UK’s largest power station in North Yorkshire, swung to a pre-tax loss in the first half as the value of its coal assets fell.
Shares fell 3.18% to 334.50p in morning trading after the company reported a pre-tax loss of £83mln in the six months ended 30 June, compared to a profit of £184mln the corresponding period a year ago.
READ: Drax plans £50mln dividend this year and expects to grow its payout, as it forecasts strong underlying earnings growth
The company blamed the loss on a depreciation of its coal assets and a £65mln loss from currency hedging.
Still, underlying earnings (EBIDTA) rose £121mln from £51mln last year, boosted by its acquisition of business-to-business supplier Opus Energy.
Drax increased its customer base in its retail division with strong performances in its Opus Energy and Haven Power businesses. The group also delivered an increase in the production of biomass to 366,000 from 251,000 tonnes.
Drax submits planning application to convert another coal fired unit to gas
Chief executive Dorothy Thompson said Drax has submitted a planning application to convert one of its three remaining coal-fired units to gas.
Drax is working to diversify its business and move away from coal to burning compressed wood pellets or biomass after the government said the last coal power station will be forced to close in 2025 to meet its climate change commitments.
The group generates 68% of its power from burning wood pellets and has been lobbying the government for funding to support further conversion of its plants to biomass.
Drax has so far converted three of its six units to biomass and has been trialling burning wood pellets in its fourth unit this year.
"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,” said Thompson.
“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.”
Drax raises interim dividend, leaves full year guidance unchanged
Net debt rose to £372mln at the end of the first half from £83mln at 31 December following a refinancing in May. Net cash from operating activities rose to £197mln from £151mln.
The interim dividend was raised to 4.9p from 2.1p last year, representing a payment of £20mln and 40% of its expeceted full year dividend of £50mln.
Drax expects full year underlying earnings (EBITDA) to be in line with market forecasts.