July 24, 2018 / 6:23 AM / a month ago

Drax profits hit by biomass plant outages, shares fall

LONDON (Reuters) - British power producer Drax Group Plc (DRX.L) reported a 16 percent fall in first-half earnings on Tuesday, partly related to outages at its biomass plants, sending its shares down more than 6 percent.

FILE PHOTO: Electricity pylons are seen in London, Britain August 1, 2017. REUTERS/Neil Hall/File Photo

Drax, which generates about 6 percent of Britain’s electricity, has converted three of its former coal-fired plants to biomass wood pellets, often made from compressed sawdust.

Earnings were hit by two outages at some of the biomass facilities. A rail loading outage restricted deliveries of pellets at the beginning of the year cutting output at two of the plants, while one was also hit by a generation outage, the company said.

Will Gardiner, Drax chief executive said during a press briefing he expected the group’s full-year core profit (EBITDA) target to be met as a fourth biomass unit conversion will begin production later in summer.

He also expects the company to benefit from higher power prices.

Average British wholesale power prices in the first half of 2018 were around 20 percent higher than in the first half of 2017, Reuters data showed TRGBBD1.

Earnings before interest, tax, depreciation and amortisation (EBITDA) fell to £102 million for the six months to June 30, 16 percent down on the same period in 2017.

Overall electricity output was down by 17 percent compared with the first half of 2017, to 8.9 terawatt hours (TWh).

The company said its full-year EBITDA expectations were unchanged and upped its interim dividend to £22.4 million, or 5.6 pence per share, compared with 4.9 in the first half of 2017.

Analysts at Jefferies said the results were in line with expectations but that the dividend offering was slightly higher than consensus forecasts.

The shares were down 6.5 percent by 0901 GMT.

Reporting by Susanna Twidale; editing by Jason Neely, Louise Heavens and Jane Merriman

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