Bloomberg News

Drax Sees Full-Year Profit at Top of Forecast on Power Sales

November 16, 2011

(Updates with earnings estimate in second paragraph.)

Nov. 15 (Bloomberg) -- Drax Group Plc, owner of the U.K.’s largest coal-fired power station, expects to report full-year profit near the top end of analyst estimates after selling electricity at higher prices.

Earnings before interest, tax, depreciation and amortization will approach 331 million pounds ($525 million) in 2011, the Selby, England-based company said today in a statement. Analysts estimated a range of 292 million pounds to 331 million pounds, the utility said.

Drax, whose plant is about 200 miles (320 kilometers) north of London, makes its profit largely from the difference between the price of power and the cost of coal, after excluding expenses for buying emission permits. The company sells its electricity forward as a safeguard against price volatility.

So-called clean dark spreads for the month ahead, a measure of profitability for burning coal, have more than doubled since August to about 13 pounds a megawatt-hour, according to data compiled by Bloomberg.

As of Nov. 7, the generator had 25.8 terawatt-hours of power under contract for 2011, including 24.9 terawatt-hours at an average achieved price of 56.20 pounds a megawatt-hour, it said in the statement. Power contracted for 2012 totaled 18.9 terawatt-hours, the company said.

Drax sold 4.7 terawatt-hours for 2013, compared with 10.1 terawatt-hours at this time last year for 2012.

Purchases of future emission allowances fell, even taking into account the free permits granted through 2012. Drax bought permits to cover 4.9 terawatt-hours of generation for 2013, the first year that free allowances won’t be granted. That compares with 20.8 terawatt-hours this time last year for 2012.

--With assistance from Catherine Airlie in London. Editors: Amanda Jordan, Stephen Cunningham

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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