Drax reported its 2014 earnings at £229 million, in line with its 2013 results and ahead of consensus expectations of £219 million. Meanwhile net profit also beat expectations at £96 million compared to the £87 million anticipated by analysts.
In addition, the company’s final dividend of 7.2 pence per share was ahead of Bloomberg forecast of 6.2p.
The generator’s results were bolstered by higher sales through its Haven Power retail arm at £1.1 billion compared to £751 million the year before, but chief executive Dorothy Thompson added that internal cost efficiencies have also helped.
“External factors have been challenging, with regulatory headwinds in 2014 exacerbated by the recent major deterioration in commodity markets. In these conditions we are placing particular focus on business efficiencies and cost control measures. However, I am pleased that the key activities within our direct control have gone very well indeed,” Thompson said.
Despite these results, management says that the outlook for 2015 remains challenging due to the commodities markets’ downward pressure on coal-fired power profits.
As wholesale gas and power prices remain at depressed trading levels the UK’s carbon tax is set to rise, further eroding coal generator profits. From 1 April the Treasury-mandated carbon price floor is set to move from its current rate of £9.55 a tonne of carbon to £18.08 a tonne.
The company continues to make steady progress on its goal to transition from coal-fired power to biomass generation, saying it is on track and on budget to complete its biomass transformation of 3 unit conversions in line with original cost guidance of £650 – £700 million. In 2014 total capital investment of £201 million made while 2015 will see total capital investment guidance of around £150 million.
“We are delivering Europe’s largest decarbonisation project whilst producing 8 per cent of the UK’s electricity,” Thompson said.