Drax Group has seen a rise in earnings despite the loss of £5 million due to a fire at its Yorkshire power station which led to the temporary shut-down of two biomass units.
The firm has released its preliminary financial results for 2017 which show a 64 per cent increase in earnings, before interest, tax, depreciation and amortisation (EBIDTA) to £229 million.
However, Drax also reported an operating loss (earnings before interest and tax) of £117 million, mainly due to a £156 million write-down on the value of currency hedging contracts following the strengthening of the pound over the year.
By comparison, the company posted an operating profit of £204 million in 2016, having made a £170 million gain on the contracts as the pound weakened following the Brexit vote. It similarly went from a pre-tax profit of £197 million to a loss of £183 million.
For the time first time ever all three of its divisions made a positive contribution to earnings.
The power generation business saw a 37 per cent rise in EBITDA to £238 million after its third biomass unit began operating under a Contract for Difference (CfD) in late 2016.
In December 2017, Drax revealed it had been forced to shut down two biomass units due to a “significant incident” at its biomass rail unloading facilities, including a small fire on a section of conveyor. At the time, the company estimated the impact on EBITDA at £10 million. The units were returned to operation in January.
The acquisition of Opus Energy for a total of £367 million in February last year had an “immediate and significant” effect on EBITDA from business energy supply, which grew to £29 million following a loss of £4 million. Haven Power also hit its target of breaking even.
EBITDA from the pellet supply business went from a £6 million loss to a £6 million gain. There was a 35 per cent rise in production following the completion of expansions at the Amite and Morehouse plants and the acquisition of the new LaSalle Bioenergy plant, which was commissioned in November.
Group revenues were up by a quarter at £3,685 million. Renewable Obligation Certificates earned by its first two biomass units generated £368 million of sales, whilst the third biomass unit, supported by a CfD, contributed £248 million.
Revenues from ancillary services and balancing, a touted area of growth for the firm, swelled from £47 million to £88 million. After winning contracts for two-coal-fired units in the recent four-year-ahead (T-4) capacity auction, the group has now secured capacity payments of £90 million for 2017 to 2022.
The company said it remains on course to increase EBIDTA to at least £425 million by 2025.
Drax chief executive Will Gardiner, said: “We continued to transform the business in 2017, delivering a strong EBITDA performance, in line with expectations. This was delivered by all parts of the business making positive contributions for the first time.
“We also made good progress delivering our strategy, which is clear and unchanged. We are increasing biomass self-supply, developing projects to diversify our generation mix and growing our B2B energy supply business.
“The UK is undergoing an energy revolution, starting with a significant reduction in carbon emissions, and to support that we are helping to change the way energy is generated, supplied and used.”