Profits shock at Drax power station

1:17pm Wednesday 5th March 2008

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LAST winter's warm weather coupled with falling electricity prices and surging costs combined to hit profits hard for Drax power station, near Selby.

Latest figures show pre-tax profits slumped by 29 per cent to £449 million in 2007.

Drax said average electricity prices fell to £45.30 per megawatt hour in 2007 compared with £48.90p the previous year.

Strong demand from China and India as well as production problems in Australia saw coal prices almost double to US$127 (£63.90) a tonne over the year.

Drax burned 9.8 million tonnes of coal last year and has six generators capable of producing 4,000 megawatts - twice the size of the next largest coal-fired power station - and about seven per cent of the UK's electricity needs.

The company saw weaker wholesale electricity prices in an unusually warm winter at the beginning of last year, which also lowered the price of its forward contracts.

The mild weather and higher UK supplies hit wholesale gas costs, lowering Drax's electricity prices in turn. Gas prices have since climbed higher following surging crude oil costs in the latter half of 2007, prompting hikes from five of the UK's "big six" energy firms.

The company said it had made "good progress" with improving its environmental performance and upgrading its turbines under a £100 million investment programme.

Meanwhile, the group proposed a final ordinary dividend of 9.9 pence per share and a special dividend of 7.8 pence per share. It will bring the total stockholders' payout to £657 million since 2005