DRAX reduces its 2014 full year dividend by 32%

DividendMax Ltd.

DRAX reduces its 2014 full year dividend by 32%

Financial and Operational Highlights

2014 EBITDA marginally ahead of expectations

Good operational performance at Drax Power Station

Delivering strong retail sales growth at Haven Power

Biomass investments protecting the business from increasing carbon costs

Current earnings outlook for 2015 reflects major deterioration in commodity markets, following oil market decline

Biomass Transformation Highlights

Significant increase in biomass generation - now one third of plant generating capacity

US pelleting and port facilities to become operational in H1 2015

Third unit to be high biomass from Q3 2015

EU State aid clearance process underway for Early CfD for third unit conversion, but awaiting clarity on outcome

Carbon saved with two units converted - c.8 million tonnes per annum

Dorothy Thompson, Chief Executive of Drax, said:

"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. We will deliver our biomass transformation plans, converting three units to sustainable biomass, on time and on budget.  

"We are delivering Europe's largest decarbonisation project whilst producing 8% of the UK's electricity. Renewable electricity from sustainable biomass is flexible and available 24/7, providing low carbon electricity, whenever it is needed.

"At the core of the Group is a very high quality power station, hugely important to the security of electricity supply in the UK."

2014 Group Financial Review

EBITDA for 2014 at a similar level to last year

Underlying earnings per share decreased 33% to 23.7 pence

- Higher depreciation and finance costs, reflecting biomass investment and associated financing

Effective tax rate on underlying profits of 20%

- Low effective tax rate on underlying profits in 2013 reflects impact of lower corporation tax rates on deferred tax liability and research and development relief

Capital investment: on track to complete biomass transformation in line with original cost guidance of £650 - £700 million (3 unit conversions, US supply chain investments and IED(4) compliance)

- 2014 total capital investment of £201 million

- 2015 total capital investment guidance of c.£150 million

Continuing to assess options for value enhancing investments, including potential third US Gulf pellet plant

Final dividend of 7.2 pence per share, or £29 million (2013: 8.9 pence per share,
or £36 million), in line with policy to distribute 50% of underlying earnings

Robust balance sheet with net debt of £99 million

Companies mentioned