July 24, 2019 / 6:38 AM / in 7 months

Drax first half profit boosted by Iberdrola deal

(Reuters) - British power generator Drax Group Plc (DRX.L) on Wednesday reported a 35% jump in adjusted core earnings for the first half and affirmed its forecasts for the year, helped by a recent purchase of gas, hydro and pumped storage power plants.

Drax, which has the capacity to provide electricity for around 13 million homes, also said it would raise its dividend 12.5% to 15.9 pence per share this year. Shares of the company rose 4.3% in early afternoon trade.

Drax said adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the first half rose to 138 million pounds from 102 million pounds in the year earlier period.

That included a contribution of 36 million pounds from the new power generation assets from Spain’s Iberdrola SA (IBE.MC).

The figures exclude 34 million pounds of revenue it expects from the government under Britain’s capacity market - a back-up power scheme to avoid electricity shortages.

Last November, the government was forced to halt payments under the scheme pending an investigation by European Union regulators.

CEO Will Gardiner said he is hopeful the scheme will be reinstated by October when a new contract year is set to start.

“If it doesn’t our units will still be running and making money, but there could be issues for any new projects yet to be built that had contracts,” he said in an interview with Reuters.

The company said its full year EBITDA and net debt expectations were unchanged but were subject to the re-establishment of the capacity market.

Drax also plans to build new gas-fired power plants and earlier this year won approval to build a nearly 300 megawatt so-called peaking plant - a facility that only fires up for operation during times of peak demand.

The plant could be generating electricity by 2022 but this would be subject to it securing a capacity market subsidy.

Britain last month became the first G7 country to set a target to reach net zero emissions by 2050, which will require a huge increase in low-carbon electricity such as wind, solar and away from fossil fuels.

However, Drax said new, efficient gas plants would be needed while the country makes the transition to more renewable electricity.

By Susanna Twidale, additional reporting by Muvija M in Bengaluru; editing by Shounak Dasgupta and Jason Neely

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